Abstract
This chapter explains the general economic characteristics of the Gulf countries and strategic problems and challenges confronting economic development in the Gulf countries. This chapter discusses the impacts of oil and the Dutch disease in the structure of the labour markets and economies in the Gulf countries, discusses the strategic problems facing the labour market in the Gulf and highlights the need for skill upgrading and technological development in these countries. This chapter explains that oil has contributed to economic development in the Gulf countries. However, the heavy dependence on oil leads to serious challenges since oil is an exhaustible resource and also, because of the instability of oil prices, the revenue from oil is uncertain and volatile. Hence, economic growth and the sustainable development strategy in the Gulf depend on economic diversification, which is contingent upon availability of adequate and appropriate skills and technologies. The findings in this Chapter support the first hypothesis that the Gulf countries need to promote the local skill and local technologies to face the challenges created by the depletion of oil resources. They also need to implement the three strategies of diversification, building local technological capacity and restructuring the labour market. The results confirm part of the second hypothesis that in the short and medium term, the Gulf countries will be unable to rely on local skill and local technologies and remain heavily dependent on both foreign skills and foreign technologies at the macro level.
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Notes
- 1.
Fasano and Iqbal (2003) indicate that the Gulf region accounts for about 45 % of the world’s proven oil reserves and 25 % of crude oil exports (Saudi Arabia is the largest oil exporter). The region possesses at least 17 % of the proven global natural gas reserves (Qatar has become the fourth-largest exporter of liquefied natural gas).
- 2.
“The Dutch Disease is a process in which the discovery of natural resources causes a country to experience a ‘change in the group of reference’ from one that aim at generating a trade surplus in manufacturing to one that able to generate a trade surplus in primary commodities. The country experiencing this disease also shows differences between employment in manufacturing. The process of de-industrialisation due to the discovery of natural resources, mainly natural gas apparent from the case of Holland”. (cf. Palma, 2003, p. 21)
- 3.
Expect in Bahrain, which shows decreasing trends with respect to both total oil and natural gas reserves.
- 4.
The share of oil sector refers to the total share of crude oil and oil industries, including refineries, downstream processing and petrochemical, etc. Fasano and Iqbal (2003) indicate that oil contributes about one-third to total GDP and three-fourths to annual government revenues and exports. See also Fasano (2002).
- 5.
Except in the case of Bahrain, where the share of oil in GDP declines from 26 % in 1975 to 18 % in 1995.
- 6.
According to the World Bank classification of world regions the Middle East and North Africa (MENA) region is composed of 14 countries, including Algeria, Djibouti, Egypt, Iran, Iraq, Jordan, Lebanon, Libya, Morocco, Oman, West Bank and Gaza: Occupied Palestine Territories, Syrian Arab Republic, Tunisia and Yemen.
- 7.
The exports diversification index is a measure of products diversification -it assigns a value of zero to the most diversified economies and a value of one to the least. It aims to widen the range of the exports products, to expand exports base and reduce the concentration in a few commodities such as agricultural or raw materials and minerals. For the Gulf countries, the exports diversification index especially defines the move away from primary exports or the dependency on oil exports (ERF, 2002a, p. 53).
- 8.
During 1975–1995, the percentage of national to total manpower has decreased in all Gulf countries except in Bahrain. “Available data indicate that the number of expatriate workers is about 7.8 million in 1999, of whom 3.5 million are Arabs (or about 45 %) and 4.3 million are Asians. The former group is dominated by workers from Egypt and, to a lesser extent, Palestine and Sudan. The latter group is made up primarily of workers from India and Pakistan and to a much lesser extent, Iran.” ERF (2000, Chap. 5).
- 9.
See Khorshid (1997, 2000), Gray (1999), Haan (1999) and Cohen (2000) respectively. Gray (1999) finds that the UAE is more dependent on non-national workers than its neighbours, particularly in the private sector. Private sector employers in the UAE are distinctive in their dependence on importing ready-made skills, rather than investing in training nationals in the requisite skills, the sector is currently staffed almost entirely by expatriate workers, with nationals comprising only 2 % of its workforce (Gray, p. 5). The UAE Population Census data (1995) indicates that the non-national constitutes about 75.6 % of total population and 90.9 % of total work force.
- 10.
Similar to other developing countries, the Gulf countries have low skill levels. The more specific feature of the Gulf countries is the low skill levels in a majority of foreign workers.
- 11.
We use many indicators to measure skill levels. For instance, the Harbison Myers Index is sum of secondary enrolment and tertiary enrolment times 5, both as % of age group. Technical enrolment index is tertiary total enrolment (times 1,000) plus tertiary enrolment in technical subjects (times 5,000), both as % of population, Engineering skills index is the same as previous index, with tertiary enrolment in engineering instead of enrolment in technical subjects (Lall, 1999, p. 52). In addition, we use school life expectancy as another measure of skill; according to the UNESCO technical specifications, school life expectancy is one indicator on access to schooling, and is defined as “the total number of years of schooling which a child of a certain age can expect to receive in the future, assuming that the probability of his or her being enrolled in school at any particular age is equal to the current enrolment ratio for that age”- cf. the UNESCO web site. This indicator shows the overall level of development of an educational system in terms of the number of years of education that a child can expect to achieve. We observe that the data used for the estimation of the UNESCO school life expectancy refers to enrolment by age at all levels of education. For that reason, these figures are higher than those of Barro and Lee (2000), which have been used in the UNDP (2001) figures on mean/average years of schooling and refer to age 15 and above. For instance, the UNESCO school life expectancy accounts for 13 and 8.7 in both Bahrain and Kuwait respectively, while Barro and Lee (2000) and the UNDP (2001) mean years of schooling accounts for 6.1 and 6.2 in both Bahrain and Kuwait respectively. However, we use the UNESCO figures in our analysis because Barro and Lee (2000) and the UNDP (2001) figures are available only for Bahrain and Kuwait.
- 12.
In recent years there is a growing body of literature focusing on technological capability building in the developing countries, for early references, see e.g. Fransman and King (1987), Lall (1987), Enos (1991), Hillebrand, Messner and Meyer-Stamer (1994), United Nations Conference on Trade and Development [UNCTAD] (1996) and Romijn (1999). Early studies on Trinidad and Tobago, Costa Rica and Iran have brief observations indicating that technological capability building is related to current resources based industries, and that governments work only on static capability building. Another earlier study on the Andean countries in 1979 contains a brief remark on multinationals discouraging capability building.
- 13.
Several indicators have been used to measure the technological distance between nations. Such as the number of patent registrations; per capita expenditure on R&D, or its share in GDP; the number of skilled persons engaged therein; or the ability of the country to master ‘frontier’ technologies such as, electronic, informatics, new materials, biotechnology, etc.). These measures are useful for indicating weaknesses in specifically defined areas and determining the need for new policies in specific sectors, but they have shortcomings in reflecting the differences in the degree of technological intensity, or of the efficiency of technological inputs. A broader indicator for a multi-dimensional analysis of technological transformation includes the rate of growth of GDP, per capita GDP and productivity that also reflect changes in the structure of production and trade; domestic production of machinery; availability of advanced education; literacy rate, etc. (Patel, 1995).
- 14.
As in most other developing countries, the Gulf countries show poor technological performance. In view of their high GDP per capita income, which is comparable to high-income countries, one would have expected a better performance in the Gulf.
- 15.
For early references to R&D expenditure target setting, cf. United Nations (1970)“United Nations Science and Technology for Development, Proposals for the Second United Nations Development Decade,” New York, 1970.
- 16.
The concept of full – time equivalent researcher is adopted by UNESCO statistics on R&D personnel.
- 17.
See the OECD Second European Report on S&T (1997).
- 18.
FDI stimulates the development and dispersion of technology as foreign investors transfer techniques and skills to their local affiliates. These skills then generally spill-over to other companies and institutions in the local markets, and are often the missing resource that countries need to expand their access to international markets and to develop areas in which they have a comparative advantage. FDI also leads to the transfer of important capital goods and intermediate inputs. It can help a country develop new comparative advantages, as was the case with the electronic industry in Southeast Asia. In addition it also contributes to increasing output and/or productivity (Hafasi, 2001, p. 41).
- 19.
This phenomenon of dependence on foreign technologies is similar to most other developing countries. The Gulf countries, however, are also highly dependent on the import of technical skills to operate them.
- 20.
According to the UNDP (2001), the technology achievement index (TAI) focuses on four dimensions of technological capacity that are important for reaping the benefits of the network age. TAI includes: (1) Creation of technology as measured by the number of patents granted per capita and receipt of royalty and licenses fees from abroad; (2) Diffusion of recent innovations as measured by diffusion of Internet and export of high and medium technology products as a share of all exports; (3) Diffusion of old innovations as measured by diffusion of telephone and electricity; and (4) Human skills as measured by mean years of schooling and gross enrolment ratio of tertiary students enrolled in science, mathematics and engineering (UNDP, 2001).
- 21.
Since the recent data from the WDI is available only for Kuwait and Oman, we therefore use an alternative set of indicators from GOIC in Table 2.13. Alternatively, we multiply the manufactures/GDP ratio from Fig. 2.3 above by investment in fabricated metal, machinery and equipment/manufactures and we get investment in fabricated metal, machinery and equipment/GDP. This measure may have the advantage of increasing the consistency between supply and demand measures. However, it has a limitation and may also be inaccurate for our analysis since it does not reflect machinery and transport/GDP separately. Rather, it tends to somewhat overestimate the actual value as the figures include fabricated metal in addition to machinery and equipment, which are combined together in one category. This is most probably because the only available data is based on the International Standard Industrial Classification of all economic activities according to ISIC 1968 rather than ISIC Rev 3.
- 22.
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Nour, S.M. (2013). Economic Development Challenges in the Gulf and the Need for Skill Upgrading and Technological Development. In: Technological Change and Skill Development in Arab Gulf Countries. Contributions to Economics. Springer, Cham. https://doi.org/10.1007/978-3-319-01916-1_2
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