Diversification, increasing skills among youth key drivers to GCC economic growth

As the traditional economic drivers of oil and government investment struggle to keep up with youth entering the job market, current estimates by the World Economic Forum place youth unemployment in Gulf Corporation Council (GCC) nations as high as 27 percent.

Ernst and Young, one of the four largest professional services firms in the world, recently said that GCC countries have the potential to add an additional $17.7 billion through diversifying traditionally oil-dependent economies.

Diversifying their economies – and putting unemployed youth to work – are a clear path to economic growth, the company said.

The firm said GCC members are uniquely poised to capitalize on transport, financial services, tourism, telecommunications, and research and development. Several economic and financial developments in the region mean global investors have greater opportunities and access.

The nations’ youth are an important economic force as economies move past their traditional strengths, Gerard Gallagher, Middle East and North Africa advisory leader with Ernst and Young, said in emailed remarks to Gulf News Journal.

“There is currently an urgent need to create more private sector jobs for the growing number of unemployed GCC nationals,” he said. “The old model of relying on public sector employment for nationals will no longer be sufficient as the public sector cannot accommodate nor afford the number of labor force entrants. Unless the private sector grows and diversifies sufficiently, youth unemployment will continue to increase.”

Ernst and Young said governments in the region must move away from being the primary driver of development and growth.

They do have a large arsenal of tools to achieve this, Gallagher said: corporate tax cuts, encouraging public-private partnerships, reducing bureaucratic obstacles and making foreign investment easier.

He noted, however, that while foreign investment is very important, GCC nations will need to encourage entrepreneurship from within.

“Entrepreneurship needs to be seen as a viable business option for young people in the region, but this won’t be possible if potential entrepreneurs don’t have ready access to information, funding and investors,” Gallagher said. “Governments need to focus on encouraging entrepreneurship, and supporting small and medium-sized businesses. There are a myriad of ways to do this, but the key is to coordinate support into an ecosystem that allows small companies to thrive into bigger ones."

The region must also think about the future, and ensure young people have the appropriate education, tools and ambition to take advantage of the new economies that will arise from diversification.

“Diversifying the GCC economies will stimulate private sector job creation, but diversification alone is not enough," Gallagher said. "This must be teamed with strategies to increase skills and appetite for employment among young nationals so they are work-ready for the opportunities being created through diversification."