ABU DHABI — Saudi Arabia’s future prosperity can be built around a three-point strategy of national economic development as Middle East governments take robust action to flourish in a new post-oil era, according to a new market analysis issued recently by PA Consulting Group.
It said the key for Saudi and other GCC countries will be in developing human capital, developing economies and reforming the business of governments.
The report noted that the Saudi and the other GCC governments have already taken steps to combat the threat of low oil prices by committing to develop their nations through focusing on human resources and attracting investors.
The market analysis, issued from PA’s MENA regional headquarters in Abu Dhabi, emphasized that a growing focus on national economic development is needed for Saudi to survive the oil price crisis and move forward to becoming one of the largest economic hubs in the region.
“The region is moving towards a new post-oil era, and the UAE and other GCC governments, particularly Saudi and Qatar, have started to review their economic ecosystems and have begun to decrease their dependency on oil revenues to focus on non-oil revenue sources,” said Jason Harborow, Head of PA Consulting Group Middle East and North Africa.
“Among the major successes in Saudi have been the establishment of Riyadh as a business center, the development of the eastern region, and major joint ventures such as the one between the Dow Chemical Company and the Saudi Arabian Oil Company which invested $20 billion to build and operate a world-scale, fully integrated chemicals complex in Jubail Industrial City.
“These are all great indicators of what is coming next for Saudi, and like other GCC countries it must focus on developing human capital, starting by reforming educational programs.
“Governments must plan and implement a highly intellectual educational infrastructure that will help grow and develop resources to become globally recognized leaders and drive towards excellence. Roughly 70% of Saudis are under 30, meaning there is an urgent need for economic reform even before the oil money to fund it dries up.”
The PA report further said Saudi Arabia and the other GCC countries should invest in their citizens, develop them, and support them to become the next generation of leaders to drive innovation of economies and market the nation’s success. This will have a major impact on the social and economic agenda.
Ibrahim Komati, economic and government services expert at PA Consulting Group, added: “Regional governments need to increase foreign direct investments, and diversify spending into global investments across different sectors, with the main focus on education, healthcare and travel, transport and logistics. Governments should also invest in non-profit organizations serving as a backbone to a nation’s development, whether in education, social affairs, healthcare or human development.”
PA, which works with businesses and governments worldwide, said priority government actions should include a review of strategies and operating models to ensure agility to adapt to the new normal.
“A priority for governments is to develop contingency plans, and slashing costs is not the only solution. They must focus on their strengths and competitive advantages, and embed the culture of excellence and innovation in order to reach their ambitions and drive transformations in the most innovative and unique way,” said Komati.
“Innovation is the best way to hit the ground running for the region should oil prices remain low.
Governments should focus on human capital development, economic development and on transforming their businesses to cope with changes.”
The PA report moreover noted that regional governments should plan a “War on Waste”, minimizing inefficiencies by focusing on targeted reductions. They must review funding plans and consider raising cash in the debt markets such as PPPs and sukuk, and keep enough cash as a buffer to back up contingency plans. — SG
