By Staff writer
EY analysis says removing obstacles to trade and investment would boost the GCC GDP by $36bn
The combined economies of the Gulf Cooperation Council (GCC) acting as a single market could become the world's sixth largest by 2030, according to a new report.
According to EY's latest Growth Drivers report, the GCC as one single market is the ninth largest economy in the world today - similar in size to Canada and Russia.
The report said that if it is able to keep growing at an annual average of 3.2 percent for the next 15 years, it could become the sixth largest economy, just below Japan.
EY analysis illustrated that removing obstacles to trade and investment would boost the GCC GDP by 3.4 percent or $36 billion, with 96 percent of the gain coming from the removal of bureaucratic barriers to efficiency.
It said the benefits would be spread across all six economies, with the strongest gains in the UAE, Saudi Arabia, Bahrain and Oman, with increases in GDP between 3.5 and 4.1 percent.
The report highlighted that the next phase of GCC integration needs to address and facilitate change in three key areas - trade, foreign investment and institutions.
EY said a fully functioning single market would reduce overall trade costs in the GCC, boost productivity and encourage higher levels of intra-regional trade.
"The far greater effect, however, would be to boost long-term productivity levels by increasing competition in the private sector, attracting significantly higher levels of foreign investment and creating more streamlined and effective institutions to enable world-class business," it added.
Gerard Gallagher, MENA advisory leader, EY, said: "GCC governments are facing a decisive moment. With oil price falling, they have to accelerate the creation of growth drivers that do not rely on oil revenues.
"They are now exploring options and taking decisions such as opening up to foreign investors, ending subsidies, introducing taxation, optimizing costs and cutting jobs in the public sector. There are signs that serious change has begun.
"However, these reforms could be less disruptive and more effective as part of a wider push towards rekindling and modernizing the drive towards a single GCC market. That would bring the benefits of scale and efficiency to the diversification drive, and strengthen the most productive parts of the private sector by introducing more competition and more jobs."
Phil Gandier, MENA transactions leader, EY, said: "There are immediate steps that the GCC could take that would optimize the existing levels of cooperation, bringing significant economic gains to each of the member countries, while allowing them to focus separately on creating the incentives that will make them most attractive as investment locations.
"Pinpointing and resolving these barriers might not sound like integration but it would be a major step forward to leveraging the GCC's common strengths to the benefits of each country. A first step would be to work with the private sector to identify the top ten barriers to doing business across the GCC."