In tabular and paragraph forms, compare the business environment of any two GCC member countries. Highlight their strengths and weaknesses as they participate in the GCC trade agreement.
The Gulf Cooperation Council (GCC) is a political and economic union of Arab states bordering the Gulf.
its 2 members are the Saudi Arabia, and Bahrain. The GCC’s prime geographical location is at the crossroads of the major Western and Eastern economies. The established and efficient air and sea connections and developed infrastructure make it a great place to establish and expand business.
Comparing the business environment of Saudi Arabia, and Bahrain:
audi Arabia has an oil-based economy with strong government controls over major economic activities. It possesses about 17% of the world’s proven petroleum reserves, ranks as the largest exporter of petroleum, and plays a leading role in OPEC. The petroleum sector accounts for roughly 80% of budget revenues, 45% of GDP, and 90% of export earnings. Saudi Arabia is encouraging the growth of the private sector in order to diversify its economy and to employ more Saudi nationals. Diversification efforts are focusing on power generation, telecommunications, natural gas exploration, and petrochemical sectors. Over 5 million foreign workers play an important role in the Saudi economy, particularly in the oil and service sectors, while Riyadh is struggling to reduce unemployment among its own nationals. Saudi officials are particularly focused on employing its large youth population, which generally lacks the education and technical skills the private sector needs. Riyadh has substantially boosted spending on job training and education, most recently with the opening of the King Abdallah University of Science and Technology – Saudi Arabia’s first co-educational university. As part of its effort to attract foreign investment, Saudi Arabia acceded to the WTO in 2005. The government has begun establishing six “economic cities” in different regions of the country to promote foreign investment and plans to spend $373 billion between 2010 and 2014 on social development and infrastructure projects to advance Saudi Arabia”s economic development.
Bahrain has taken great strides in diversifying its economy and its highly developed communication and transport facilities make Bahrain home to numerous multinational firms with business in the Gulf. As part of its diversification plans, Bahrain implemented a Free Trade Agreement (FTA) with the US in August 2006, the first FTA between the US and a Gulf state. Bahrain’s economy, however, continues to depend heavily on oil. Petroleum production and refining account for more than 60% of Bahrain’s export receipts, 70% of government revenues, and 11% of GDP. Other major economic activities are production of aluminum – Bahrain’s second biggest export after oil – finance, and construction. Bahrain competes with Malaysia as a worldwide center for Islamic banking and continues to seek new natural gas supplies as feedstock to support its expanding petrochemical and aluminum industries. In 2011 and 2012, Bahrain experienced economic setbacks as a result of domestic unrest, however, several factors indicate that the economy is beginning to recover, such as the return of the formula one race and tourist cruise ships to Bahrain. Economic policies aimed at restoring confidence in Bahrain’s economy, such as the suspension of an expatriate labor tax and frequent bailouts of Gulf Air, will make Bahrain’s foremost long-term economic challenges – youth unemployment and the growth of government debt – more difficult to address.
Strengths and weaknesses:
The Gulf Cooperation Council (GCC) was established in 1981. The six rich oil-producing Gulf States formed the council; they are Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and United Arab Emirates (UAE). The council was originally formed to combat military threats coming from the Islamic Revolution of Iran, Iraq’s Saddam Hussein, and Soviet Union. Nonetheless, the council had quickly transformed into an economic bloc, where the GCC free-trade area was established in 1983. This allowed the free flow of goods and labor across the boundaries of the
region. In 2003, the GCC had developed a common customs union, thus having a common external tarif.
To utilize the Strength, Weakness, Opportunity and Threat (SWOT) evaluation technique to evaluate the current scenario of Arab Gulf countries. The SWOT analysis is extensively used to analyze business environment. We will treat the whole region as a unit and try to find its attributes. The importance of this topic lies in emphasizing the vital necessity of building a self-sufficient GCC and demonstrating that a strong GCC must be built on a firm economic foundation. If GCC countries want to reveal themselves as a strong player in geopolitical landscape then they have to have a resilient economic foundation. Such foundation should include all GCC countries together leading towards self-sufficiency.
The GDP per capita and evaluate the impact of revenues generated from oil exports on the GDP per capita for each of the Gulf States. Are all the GDP per capita moving along the same path? The argument is that if the economies of the Gulf States are somewhat integrated, then they should share a somewhat similar trend over the long run. We
will also try to measure the impact of the oil revenues on the standard of living of the Gulf citizens.