The great recalibration of the Gulf countries | Arab News

The great recalibration of the Gulf countries

After the triumphant march of globalization in the years preceding the financial crisis of 2008-2009, increasingly divisive tones have come to question the idea of ​​shared prosperity based on economic integration.

The relationship between the world’s two largest economies – the United States and China – has been strained in recent years, and there are signs of deliberate decoupling. Add to this the ongoing military conflict in Eastern Europe, and the echoes of Churchill’s 1946 speech in Fulton, Missouri, come to life.

Whether it’s the new Iron Curtain or something akin to the Cold War, “de-globalization” is a reality today. The prospect of a more explicitly stormy relationship between two or more blocks is no longer impossible to imagine.

These realities present a challenge for the Gulf economies, which have been among the main beneficiaries and leaders of globalization. The Gulf Cooperation Council countries are exceptionally open economies, highly dependent on foreign markets for their exports of energy and manufactured goods, and systematically dependent on a wide range of imports.

Moreover, openness remains a unique strategic opportunity as a tool for regional economies to grow by transcending their national constraints, which even after decades of rapid and transformative development remain acute.

The region’s population has increased 25 times over the last century but, at around 60 million, remains relatively modest by international comparison. While economic diversification adds to local productive activities, the Gulf, in many ways, remains more of a region of brokers and traders rather than producers. The local natural resource base is exceptional but narrow and heavily dominated by hydrocarbons.

By contrast, openness is something that Gulf economies are able to significantly influence through policy, regulation and infrastructure development. This is an area that has delivered impressive achievements.

The Gulf has transformed itself, with extraordinary success, into a leading and dynamic hub for a multitude of international flows – people, goods or capital. It has positioned itself thanks to world-class connective infrastructures and an attractive regulatory framework in the heart of the Old World.

These attributes constitute a compelling value proposition in a globalized world. They gave the Gulf economies great flexibility in their external economic relations; evidenced by, for example, the eastward shift during the global financial crisis and the westward pivot of energy trade over the past year.

Proactive opening is at the heart of the Gulf countries’ future economic plans and ambitions. Saudi ambitions to develop its transport and tourism sectors as part of Vision 2030 are a good example. All regional economies are moving more aggressively to attract and retain talent through supportive regulation and a focus on lifestyle.

Continuing on this path unequivocally offers the region the greatest opportunities for economic progress. The region could make the world its oyster and achieve growth and diversification much faster than it could with a purely national approach.

A “deglobalized” or divided world challenges the inherently global value proposition of the Gulf region if it restricts the scale or optionality with which these unique assets can be utilized.

Barriers to global mobility, whether administrative or caused by increased risk or cost, threaten to limit the use of these assets and the returns on investment. For example, the adoption of sanctions may increase the costs and practical challenges of interacting with particular jurisdictions to such an extent that the costs, real or perceived, including reputation, may outweigh the benefits.

Realpolitik is a concept favored by former US Secretary of State Henry Kissinger. It refers to a foreign policy driven by practical considerations and interests rather than ideology.

In the context of the Gulf, realpolitik implies strategic neutrality. A posture that pursues pragmatic economic relations in multiple directions is the logical choice for the Gulf region, given its drivers of competitiveness and strategic aspirations.

Wherever possible, these ties should be developed beyond the bare minimum, especially in strategic cases enshrined in formal treaties or economic partnerships. But it’s important to accept that one size won’t fit all, and perhaps not consistently over time.

The Gulf countries are likely to make the most of their economic strengths and opportunities through a flexible balancing act, seizing strategic opportunities when possible and mitigating risks when necessary.

In an increasingly volatile and uncertain world, bipolar or not, such a posture cannot lead to total continuity in the direction or composition of external economic relations.

Moreover, it will inevitably involve constant vigilance and reactivity. But it will also ensure an economic policy that aims to preserve competitiveness through continuous innovation and adaptation. This approach is the ultimate recipe for agility, resilience and dynamism, a good foundation for sustainable prosperity.

Disclaimer: The opinions expressed by the authors in this section are their own and do not necessarily reflect the views of Arab News

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