Two years on from the Arab Spring that so impacted the Middle East, many countries in the region are now seeking out new growth and sustainable economic success. The many political, social and economic challenges inherent to the region remain, and good economic performance in 2012 was enjoyed mainly by the traditionally-strong oil nations.
Recent economic performance has been very much influenced by the Arab Spring, with those countries experiencing the most social change naturally feeling the biggest financial impact. Growth in the Middle East remains largely centred around the oil-rich Gulf states, which contribute a significant proportion of the region’s activity.
These states form the Gulf Cooperation Council (GCC), which comprises Bahrain, Kuwait, Qatar, Oman, Saudi Arabia and the UAE. In 2012 the Middle East and North Africa (MENA) region boasted a combined GDP of around $2.9 trillion, much of that figure coming from the GCC members. Of that $2.9 trillion, around 78% of it came from the region’s natural resources, primarily oil and gas.
GCC states staying strong
Research estimates that the GCC nations will continue to enjoy good economic health and remain relatively untainted by the effects of the Arab Spring. Saudi Arabia continues to expand its infrastructure to drive economic growth, and investors are keen to back not just the traditional export-driven oil sector, but also internal development projects. The UAE, home to the thriving commercial hub that is Dubai, is reaping the benefits of its protected status away from the region’s political unrest. Dubai’s property market is now back on track following an ill-fated period of boom-and-bust, and the Emirate’s debt problems have been turned around. Investors are again looking at Dubai’s real estate market.
Kuwait continues to attract investment based on its robust oil reserves – oil is responsible for around 96% of its revenues – and its economy looks healthy enough for 2013 and beyond. Oman is another GCC state focusing heavily on infrastructure, but the country is optimistic about the immediate future.
Qatar, with its huge recent bonus of being awarded the hosting of the 2022 FIFA World Cup, represents perhaps the fastest-growing economy in the GCC. Qatar’s political structure remained unaffected by the Arab Spring, giving it a level of stability unlike much of the region, and today its economy is being driven forward by non-oil infrastructure industries. Manufacturing, construction and financial services are all ripe for investment in Qatar.
building on the region’s resources
At a macroeconomic level, the GCC nations have continued to benefit from high oil prices. A mixture of steadily high oil prices, increased oil production, forward-looking economic policies and low interest rates have helped to keep growth at least consistent and in some cases push it upwards.
Oil prices averaged out at around $110 per barrel throughout 2012, up from $107 in 2011, this average being underpinned by increased demand from the USA.
investing in infrastructure
GCC countries are also at the forefront of infrastructure investment and development throughout the Middle East, with rail, road, technology and public transportation projects all being focused on. The region is set to invest around $120 billion in assorted infrastructure initiatives by 2020, with rail projects receiving a huge chunk of the outlay. Saudi Arabia alone is ploughing $25 billion into a state of the art rail network while the UAE has committed $7.6 billion to enhancing the metro system in Dubai.
Investment in infrastructure continues apace as the region looks to strengthen non-oil related industries; one strong example of this diversification is retail, with recent research forecasting the GCC retail sector to exceed $220 billion in 2015, at a CAGR of 7.9%.
the technology landscape
The GCC countries continue to drive technology and communications forward in the region, thanks to high internet availability and huge smartphone penetration levels. The UAE boasts the world’s highest smartphone penetration, with 73.8%, while Saudi Arabia sits close behind in third position. This smartphone growth is set to continue as Middle East nations double their mobile device usage by 2017.
The UAE is at the forefront of technology investment in general, with its ICT spend between 2013 and 2015 set to hit $40 billion. Around three-quarters of this investment will be in communications, helping to further connect the Emirates with the outside world and giving multinationals further incentive to set up operations in the region.
Investment in technology is further driven by the number of major global sporting events being hosted throughout the region now and in the future. Abu Dhabi and Bahrain today both play host to Formula 1 Grand Prix, helping them showcase all that is impressive and advanced about their infrastructure, and also ensuring that their communications systems must be of high quality and reliability. The FIFA World Cup taking place in Qatar in 2022 ensures continued investment in that country’s network infrastructure and communications backbone.
Technology is being further powered forward throughout the region thanks to shifting demographics. The Middle East is home to more than 350 million people, almost double the population of Brazil. Disposable income is on the rise and it is also a young market full of consumers who like their technological toys. More than 100 million of those citizens are under 15 and it is they who are driving the ICT and mobile revolution throughout the region.
looking to the future
Thanks to the high investment, infrastructure throughout the Middle East is fast becoming world class, and the region’s commitment to sustained economic prosperity can be felt throughout the GCC nations. Projects such as the Burj Khalifa in Dubai – the world’s tallest building – and the nearby Burj Al Arab, the world’s only 7-star hotel, demonstrate the ambition and desire to lead on the world stage on show throughout the region.
Do you think that the Middle East will become as prominent on the global stage as plans to? Will its natural resources continue to allow it to invest in world-class infrastructure to help it grow?
This post is also available in French here.
image © Sergii Figurnyi - Fotolia.com
I’ve been writing about technology for around 15 years and today focus mainly on all things telecoms - next generation networks, mobile, cloud computing and plenty more. For Futurity Media I am based in the Asia-Pacific region and keep a close eye on all things tech happening in that exciting part of the world.