The income per capita to surge 80pc
The nominal GDP of Gulf Cooperation Council countries is projected to soar threefold from $773 billion to roughly $2.3 trillion by 2020 at an average oil price of $70 per barrel, a leading global management consulting firm said.
This enormous growth will raise the average per capita income in the region by over 80 per cent: from less than $20,000 to more than $35,000 in today’s prices -roughly equivalent to the current incomes in Germany and Japan, said Kito De Boer, Managing Director of McKinsey & Company Middle East.
"Indeed, if prices are sustained at $70 per barrel by 2050, the GCC will have a combined GDP equivalent of Germany or Japan," he said.
Serving this region should be an essential factor in the global strategy of many companies, particularly to capital-intensive industries and financial services, he said while discussing the topic entitled "Opportunities and challenges for Gulf economic development."
De Boer said if present trends are sustained, the accumulation of wealth in the GCC will be of dramatic global importance. "Looking ahead to the year 2020, trends suggest that the GCC will be unrecognisable compared to what it is today. Considering just oil income alone, the next 14 years will dwarf the past 14. At an oil price of $70 per barrel, oil export revenues will add up to $6.2 trillion by 2020 -more than triple the amount earned since 1992."
"The past five years has shown that what is happening in the Gulf is not simply a “flash in the pan” -a momentary spike of exuberance. Today’s trends look increasingly sustainable. The region’s economies seem poised to become more than just oil economies," he said. The six GCC countries are the economic engine of the Middle East. Its 23 million citizens, along with 14 million expatriates, account for roughly 10 per cent of today’s MENA population -yet its GDP of $773 billion accounts for more than 50 per cent of the MENA region’s economy. This is equivalent to the population of California or Poland, with a GDP roughly equivalent to Australia or the Netherlands. The GCC states control 40 per cent of the world’s proven oil and 23 per cent of the gas reserves, and thus their economies are buoyed by the currently high price of oil.
However, the phenomenal growth will pose a number of challenges, he cautioned. "There is a need to upgrade the region’s software from “Gulf v1.0” to “Gulf v2.0” -and there’s no time to delay installing the latest update."
The first version was simple, De Boer pointed out. "The private sector imported a high volume of low-cost labour, mainly from South Asia, for such labour-intensive tasks as construction, tourism and industrial work. Capital from oil income was abundant. Locals mainly worked in jobs created by the government sector. Labour productivity levels were relatively low, compared to other regions – but this did not seem to matter, because of the low cost of the labour."
According to De Boer, this old model has run its course. Government leaders in areas where oil is less abundant, such as Dubai, were the first to recognise the urgency of change. Now, even in oil-rich Saudi Arabia, the leadership recognises that oil income alone will not keep up with the region’s dominant demographic factor: the dramatic growth of young people in the Gulf states -where 42 per cent of the population is under 15 years old.
"Unless the region’s job growth is fast enough to accommodate the coming demographic surge, unemployment among locals will continue to rise, disparities in wealth will grow, and further imports of foreign workers will place enormous pressure on the most vulnerable members of the local population. Every society needs a middle class, with its plumbers and mechanics as well as it knowledge workers," he said.
"In this upgraded version, the Gulf will move from labour-intensive to capital- and knowledge-intensive industries. Productivity levels will need to increase substantially. Instead of taking public-sector jobs, locals will need to play a greater role in building the private sector —which, in turn, will need to employ a far higher proportion of the local population," said De Boer. Source
This enormous growth will raise the average per capita income in the region by over 80 per cent: from less than $20,000 to more than $35,000 in today’s prices -roughly equivalent to the current incomes in Germany and Japan, said Kito De Boer, Managing Director of McKinsey & Company Middle East.
"Indeed, if prices are sustained at $70 per barrel by 2050, the GCC will have a combined GDP equivalent of Germany or Japan," he said.
Serving this region should be an essential factor in the global strategy of many companies, particularly to capital-intensive industries and financial services, he said while discussing the topic entitled "Opportunities and challenges for Gulf economic development."
De Boer said if present trends are sustained, the accumulation of wealth in the GCC will be of dramatic global importance. "Looking ahead to the year 2020, trends suggest that the GCC will be unrecognisable compared to what it is today. Considering just oil income alone, the next 14 years will dwarf the past 14. At an oil price of $70 per barrel, oil export revenues will add up to $6.2 trillion by 2020 -more than triple the amount earned since 1992."
"The past five years has shown that what is happening in the Gulf is not simply a “flash in the pan” -a momentary spike of exuberance. Today’s trends look increasingly sustainable. The region’s economies seem poised to become more than just oil economies," he said. The six GCC countries are the economic engine of the Middle East. Its 23 million citizens, along with 14 million expatriates, account for roughly 10 per cent of today’s MENA population -yet its GDP of $773 billion accounts for more than 50 per cent of the MENA region’s economy. This is equivalent to the population of California or Poland, with a GDP roughly equivalent to Australia or the Netherlands. The GCC states control 40 per cent of the world’s proven oil and 23 per cent of the gas reserves, and thus their economies are buoyed by the currently high price of oil.
However, the phenomenal growth will pose a number of challenges, he cautioned. "There is a need to upgrade the region’s software from “Gulf v1.0” to “Gulf v2.0” -and there’s no time to delay installing the latest update."
The first version was simple, De Boer pointed out. "The private sector imported a high volume of low-cost labour, mainly from South Asia, for such labour-intensive tasks as construction, tourism and industrial work. Capital from oil income was abundant. Locals mainly worked in jobs created by the government sector. Labour productivity levels were relatively low, compared to other regions – but this did not seem to matter, because of the low cost of the labour."
According to De Boer, this old model has run its course. Government leaders in areas where oil is less abundant, such as Dubai, were the first to recognise the urgency of change. Now, even in oil-rich Saudi Arabia, the leadership recognises that oil income alone will not keep up with the region’s dominant demographic factor: the dramatic growth of young people in the Gulf states -where 42 per cent of the population is under 15 years old.
"Unless the region’s job growth is fast enough to accommodate the coming demographic surge, unemployment among locals will continue to rise, disparities in wealth will grow, and further imports of foreign workers will place enormous pressure on the most vulnerable members of the local population. Every society needs a middle class, with its plumbers and mechanics as well as it knowledge workers," he said.
"In this upgraded version, the Gulf will move from labour-intensive to capital- and knowledge-intensive industries. Productivity levels will need to increase substantially. Instead of taking public-sector jobs, locals will need to play a greater role in building the private sector —which, in turn, will need to employ a far higher proportion of the local population," said De Boer. Source
No comments:
Post a Comment