Lecture notes

1. Foundations of the UAE and GCC Economies with Covid-19:
The Need for a Collaborative Approach for Socio-Economic Growth
Professor Ali M. Al-Khouri
Lecture Notes, 12 January 2022 – National Defense College – Abu Dhabi, United Arab Emirates

3. Building the human capital must be the primary
focus of any development endeavor; as the development
process by nature is dependent on skills, competencies and
human capabilities. The wise leadership of the UAE has
been a strong believer that this should always remain a
cornerstone to sustainable development, which in turn
enabled it to occupy first positions in global competitiveness
of its social, economic, cultural and political systems.

4. • Current Economic Crisis
• GCC Economy Foundations
• UAE Economy
• Digital Economy as an Engine
to Accelerate Development
• Opportunities in the
Large GCC/Arab Market
• Recommendations for
Policymakers
Outline:

5. Global economy was in a
wobbling state for decades
until it received its hardest
hit by the recent pandemic.
The global view
Top 5 Global Concerns
https://www.weforum.org/agenda/2020/06/coro
navirus-unemployment-top-global-worries-ipsos

6. • Reports signpost Losses
including lost potentials,
to exceed $20 trillion
of global GDP
• Other studies estimate the
set back to exceed $80
trillion
Global losses

7. • Wide socio-economic
impact with Job cuts
reaching (225 million
full time jobs);
amplified global
unemployment rate
(200 million) people;
Industry Impact

8. • Enormous effect on
global supply chain
• Restrictions and ‘go-slow’
approach caused higher
inflation on producers
• A challenging situation for
developing economies
Covid Impact on
Supply and Demand

9. Restrictions and
declining
consumption rate
affected the economic
cycle and created a cash
crunch situation
Dual Shock: Lower
Oil Prices and Covid
spread & Restrictions

10. • Calamitous effects as a
result of Covid-19
• Limited growth
capacity likely to
continue in 2022 in non-
oil countries
Arab Economy

11. The impact of pandemic on
Arab economies had double
the effect due to previously
declining economic
performance, and chronic
socio-economic challenges
e.g., unemployment,
poverty, etc.
Arab Economies

12. Baseline
Foundations of
GCC Economies

13. • GCC has around 65
million population
• Represent 0.8% of
global population
• Contribute around
1.7% to global GDP
GCC Demographics

14. Challenges
Foundations of
GCC Economies

15. • 80% of the population
of GCC Countries are
expatriates
• 60% are under 30s;
meaning a challenge in
jobs market!
Demographic and
Social Changes

16. • Unemployment challenge
likely to escalate in Arab
countries
• Youth unemployment in ME
is 27.2% and 29% in NA (World
Bank)
• Ripple effect on national
economies e.g., demand,
consumption, social costs, etc.
Unemployment
Country Youth Youth
Unemployment
Qatar 25% 1.5%
Oman 50% 20%
UAE 34% 10%
Bahrain 35% 20%
Kuwait 40% 20%
Saudi Arabia 46% 28.7%

17. • 2% of Arab region is
covered by wetlands and
94% are vulnerable to
climate change
• GCC is among most water-
scare nations in renewable
fresh water; which might
force human migration
Resource scarcity
and climate change

18. • GCC is considered among
the more food-secure
(Global Food Security
Index)
• However, GCC countries
import 85% of food
Food security

19. The pandemic revealed
serious vulnerability
Global Supply
Chain Disruption

20. Covid-19 and low
oil prices impacted
GCC economies..
Countries dependent
on oil and travel
economy got a more
bleak impact
Economic
Performance

21. Oil revenues
share of the
economy is
still oversize!
Oil Contribution

22. Oil revenues
share in GCC
economies is still
oversize!
Oil Dependency

23. Oil Dependency
• GCC economy was built
based on Oil; which is
still a major contributor
• UAE is little lesser
dependent due to
diversification into
Logistics / trans-shipment
hub and tourism sector

24. Impact of the
Double Shock:
Lower Oil Prices
and Covid 19

25. Estimated GCC
losses in 2020:
$270 billion
(IMF)
GCC Oil Losses

26. Clean Energy
Changing energy
preferences will have long
term effects on oil producing
countries…
e.g., electric vehicle
adoption, clean and
sustainable energy including
hydrogen, renewables
energy sources etc.

27. UAE Economy

28. • Ranks 1st in Arab world in
global competitiveness
• Region’s most diversified
economy
• 2nd Largest Arab economy
• 3rd among 27 emerging global
economies and 23 globally
among 123 countries (Future
Readiness Index)
UAE Economy

29. • 6.1% GDP contraction in
2020, 2.2% in 2021 (IMF)
• UAE non-oil industries
got impacted severely
• With world’s fastest
vaccination program,
UAE restarted businesses
and recovery of vital
sectors
Covid impact

30. UAE non-
hydrocarbon
exports
• UAE is a region’s hub in
entrepot trade,
warehouse and
distribution
• Value-add export is still
low

31. • Despite wide investment in
non-oil sector, it is still
lagging!
• Oil is still remains the
largest portion of
exports
UAE’s Economy :
Sectors that contribute
to GDP

32. UAE Hydrocarbon
Exports
• Hydrocarbon exports in
2019 represented 57% of total
exports
• Non-oil exports estimated
around 43%; more than 46%
of it was re-exports
• Value-add export is still low

33. Competing economic
goals in the region is
triggering geo-
economical and
political conflicts
Regional
Competition

34. With current economic
models in GCC, sovereign
wealth fund will deplete,
and turn countries into
net borrower states to
sustain the economy
What’s the
Challenge?

35. Arab countries are
compelled to make more
bold and courageous
decisions to address
transformation needs
in their economic models

36. Digital Economy
as an engine
to accelerate
development and
build resilient
growth models

37. Digital economy has
the capacity to build
resilient economic models
with potential to uplift key
economic indicators up to
40% when foundational
pillars are put in place
Arab Digital Economy Framework

38. Arab digital economy in
its highest rage is around
6% compared to over
35% in China..
This should be seen as a
biG potential for growth!
Arab Digital Economy Index 2020

39. Arab Vision for Digital
Economy announced in 2018
is designed to support the efforts
of joint Arab action plans to tackle
digital economy requisites, with
focus on: digital infrastructure,
smart government, and
education, e-commerce, financial
services, healthcare, production
and inter-trade..

40. Arab Digital Economy
Vision video

41. Current
Opportunities
in GCC and
Arab Market

42. • Transactions and users
are key variables for digital
economy to work and
create the 'added value'
• Current Arab market is
around 450m population
Digital Economy
Enablers

43. The GCC Free Trade
(2001) and Arab
Free-Trade
Agreement (1998)
are still far the original
goals and aspirations
Collaborative
Economic Model

44. Digital
transformation in
Arab countries varies in
the extent and depth
of planned socio-economic
development; and not
geared to take advantage
of digital economy

45. Recommendations
for Policymakers

48. • The world is changing
rapidly; job markets, geo-
politics/economics
• Traditional approaches can’t
fit the new global economy
nor will provide same levels
of effect
World
Uncertainty

49. Concluding
Remarks

50. Changing global and
regional geo-political
landscapes, prompt
Arab countries to
reconsider
collaborative
economic models to
address national needs
and challenges

51. Many Arab countries
continue to use traditional
development models that
are further leading to
economic stagnation and
higher annual deficits;
countries need to rely on
regional and
international
integration

52. Practical frameworks are
needed to manage project
phases and provide focus on
outcomes and measure
progress through citizens
perceptions

53. Need to adopt holistic
economic models and plans
with emphasis on digital
transformation
Digitalization by nature
opens up rooms for innovation
and creativity that need to
embraced to bring increased
growth capabilities in different
sectors

54. Re-visit GCC/Arab Free
Trade Agreement to
cover digital economy
and enable SMEs

55. Ensure legislation is in
pace with global
developments, with
focus on expediting local
and international trades,
seamless government
services
+ dimensions related to
security, privacy, citizen
rights, and business needs

56. Rework current laws to
incentive investment and
engage private sector in
digital developmental plans

57. Professor Ali M. Al-Khouri
Advisor, Arab Economic Unity Council
Chairman, Arab Federation for Digital Economy
League of Arab States
Thank you
www.arab-digital-economy.org | alkhouriali@gmail.com | @DrAliAlKhouri | www.slideshare.net/alkhouri