Ghassan Barrage of Booz & Company, reveals why GCC states must ramp up their response to the downturn.
Ghassan Barrage, senior executive adviser at management consultancy Booz & Company, reveals why GCC states must ramp up their response to the global financial crisis.
How badly has the GCC region been hit by the financial crisis?
Where I come from in Saudi Arabia, the crash has had relatively less impact than in other countries in this region. The main challenge for GCC countries is to maintain their long-term growth agenda. If it's not implemented, the impact would be much more devastating than the initial effects of the crisis.
GCC countries will have to absorb some five million young people into the workforce in the next 10 years, and the Arab world overall will have to absorb 50 million in the next 20 years. The crisis needs to be managed so GCC countries can maintain their long-term growth agendas and deliver on goals.
What can the GCC states do to halt the economic slide?
The first step is to focus on industries that operate in the energy industry, and to some extent that is being done. A lot is being done in terms of chemicals and fertiliser, and there are opportunities in downstream areas that could absorb more labour. Another option, which was discovered by Dubai 30 years ago and has now become obvious, is logistics.
Dubai has Jebel Ali [a logistics hub] and an open skies policy for the air transport sector, which has generated a lot of economic activity for the emirate. There is much that can be done in other parts of the GCC to benefit from this location in terms of trade, logistics and shipping.
The third, and perhaps most important area, is to develop the knowledge industry because it is best suited to absorb the young people entering the labour force for white collar jobs. We're talking about rich populations in the GCC that can afford to educate people.
Governments have identified these problems, but the speed of execution is too slow. If we are further delayed we are going to have a major problem in terms of absorbing the youth into the workforce. Governments must redouble their efforts.
Aren't government funds equally hampered by the downturn?
Even with a slowdown for a year or two, it doesn't mean you shouldn't be working on the infrastructure, environment, laws and regulations, education and training. This burden, for the most part, is taken by the governments and today they have the money. When a good investment opportunity comes along there is no reason why it shouldn't be considered.
If there is a need to underwrite some of the risk by the government, then that should be done. But you cannot sit back and say ‘no one knows what the future looks like and we don't know what to do next'. It's very dangerous. Steps need to be taken and I don't blame governments for finding it difficult because they have a heavy political agenda. My suggestion to them is to assign some of their best people to execute the economic growth agenda. We cannot sit back and just twiddle our thumbs.
Should the GCC governments fail to take decisive action, what will the long-term impact be?
You'll have many people looking for jobs. Even during boom times we have high unemployment rates here; north of 10 percent on average - for the youth it's 20 percent and for women the figure is north of percent. Already, we're in a situation where unemployment is huge.
In the private sector, the easiest way out is by importing talent from abroad. When you have a crisis you can immediately reduce the workforce and when you need people you can tap into the world market and attract them. It's the easy way out and you shouldn't expect countries to take the hard way.
This is another issue where the government needs to support the development of its nationals and make it more attractive for local businesses to hire them. The problem is this issue is not being addressed fast enough.For all the latest banking and finance news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.