Imagine it is 2030. The six GCC states of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE have a combined population of 80 million people, more than double the 2007 figure. The Arabian peninsular has seven cities with more than 5 million residents each: Riyadh, Jeddah, Mecca, Medina, the Dhahran/ Dammam/ Al-Khobar conurbation,
Kuwait City, and the Abu Dhabi/ Dubai/Sharjah conurbation. The GCC has a combined GDP at 2007 prices of $2 trillion, making it the sixth largest regional economy in the world after China, the US, the EU, India and Japan. Hydrocarbons continue to drive the Gulf economy. The Gulf in 2030 will produce more than 30 million barrels a day (b/d) of oil, almost one-third of the world total, compared with 16 million b/d in 2006. But energy in 2030 accounts for a fraction of the region’s economy. Logistics is the biggest employer.
Gulf oil corporations have amalgamated into the world’s most valuable firm. Saudi Basic Industries Corporation (Sabic) has merged with other Gulf petrochemicals, fertiliser and metal producers to form Gulf Basic Industries Corporation (Gulfbic), the world’s largest manufacturing company.
The Gulf Commercial Bank (GulfBank), the result of mergers among leading Gulf financial institutions, has assets of more than $3 trillion. The integration of the Gulf financial system was accelerated by the creation of a Gulf central bank and the Gulf Stock Exchange (GSE), one of the world’s big five share markets. The Gulf has accumulated the world’s richest portfolio of international financial assets.
But it is not all work. The 2016 Olympics, held in Doha, set the scene for the 2022 FIFA World Cup finals in the Gulf. Across the sports spectrum, Gulf teams are challenging for world honours. The arts are flourishing. Arabia is the heart of a prosperous Middle East.
This vision of the future flies in the face of conventional wisdom. But the facts on the ground are already plain to see. A new Gulf is rising, and with it a new civilisation.
The cornerstone remains the oil and gas sector. The consensus is that oil prices will remain above $40 a barrel for a generation and that demand will grow by 1 million b/d or more for the indefinite future. No region is better-placed to benefit than the six countries of the GCC, which own more than 40 per cent of world oil reserves.
Six other factors will drive the regional economy: gas exports, heavy industries using low-cost energy inputs, manufacturing based on the products of those heavy industries, population growth, the service industry boom and globalisation.
A new Gulf middle class society is emerging, which is property- owning and individualistic. Sharia-compliant banking is its most distinctive emblem.
Gulf modernisation has been facilitated by generational leadership. Qatar’s ruler, Sheikh Hamad bin Khalifah al-Thani, replaced his father in 1995 and set his country on the modernisation track. Sheikh Isa al-Khalifa’s death in 1999 cleared the way for Bahraini political reform. UAE president and Abu Dhabi ruler Sheikh Zayed was succeeded in 2004 by his son, Sheikh Khalifa bin Zayed al-Nahyan, who is pursuing the modernisation agenda.
King Fahd’s death in August 2005 has had a similar impact in Saudi Arabia. In January 2006, Sheikh Mohammad bin Rashid al- Maktoum, the most energetic of the region’s modernisers, succeeded his late elder brother to become ruler of Dubai.
These changes have been echoed in political modernisation. In the past three years, women have voted for the first time in Kuwait, national elections have been held in Saudi Arabia and seats in the UAE’s Federal National Council have been contested. The trend towards greater formalisation of traditional Arabian systems of consultation looks irreversible.
New leaders, new policies and new economic opportunities are combining to produce farsighted thinking. Co-operation is accelerating among GCC states. There are plans for a rail link along the western Gulf coast, power and water connections among the Gulf- 6 and currency union in some form in 2010.
The new Gulf is well-placed to play its proper role as engine of the Arab economic locomotive and catalyst for progress throughout the Middle East. Is this all a dream? Or is there substance in the 2030 vision of the Gulf? What is certain is that the opportunity has never been larger and the potential rewards never greater than now.
By Steve Brice, regional head of research, Standard Chartered Bank