Foreign Policy Blogs

Investing in a Gulf Free of Oil Dependence

AbuDhabi

The daunting reality for the United States and close allies in the Persian Gulf is that their economy has not transitioned away from oil dependency yet. This poses a great concern, as the Gulf is the heart of the anti-ISIS coalition and to whom we are placing great responsibilities and decades of reliance on. Military and political approaches can only go so far without a comprehensive consistent third dimension, a sustainable economic front.

At the moment, the U.S. is dealing with a region heavily dependent on imports and external actors calling the shots. The driver of all economically successful countries is trade, production and innovation, which is yet to see in considerable amounts. In this time of great Middle East instability, the United States needs to ensure their partners can economically endure for not only the time being but in the long haul. A significant amount of security is rooted in successful economic ventures. A secure country will have a greater capacity and confidence to commit to new militaristic and political pursuits. The United States’ partnership with the Gulf states should be a healthy one that focuses on meeting their interests and building trust. Additionally, successful U.S. leadership in the Middle East requires a comprehensive and cooperative relationship with the Gulf states.

The Gulf States have served the U.S. admirably since the 2000s: UAE assisted U.S. troops in Afghanistan; Saudi Arabia worked alongside the U.S. in 2003 proposing the Arab Peace Initiative, reaching out to Israel in pursuit of peace; and in 2011 Qatar’s Air Force has upheld U.N. Security Council Resolution 1973, protecting Libyan citizens from Qaddafi. Because they have proven that they are reliable friends with the capacity to maintain stability, the U.S. should not neglect mentoring their economy. Of particular concern is infrastructure, as a strong economy bolsters military capabilities and internal stability; it will be the motor that drives sustainability in the Middle East.

It is evident that had Gulf States not been inundated with wealth and the blessings of oil, the coalition would not be as effective.  Yet oil depletion is in the foreseeable future, and we are already seeing the foreshadow of economic damages. This past week, many Gulf market stocks fell sharply due to investors “panic selling” from the slipping oil prices. The reality is that oil is the dominant motive for foreign investors to stay in the Gulf region, and it is the United States’ duty to make the Gulf’s transition from economies built on natural resources to knowledge-based and sustainable economies.

Investment, if appropriated wisely, will augment countries, both politically and militaristically. However, the world has focused their efforts on just one investment — oil — reducing the Gulf’s potential to just the oil they have, which is but one of many entities shaping the Gulf. Indeed, the rise of technology and impact of globalization has had a paramount effect on the region, leading to a multitude of promising investments.

Christopher Schroeder, an American entrepreneur and author of Startup Rising — The Entrepreneurial Revolution Remaking the Middle East says, that despite the common journalistic narrative of the region being “in flames,” Middle East start-ups are enduring that fight and are even succeeding.

Schroeder notes that the Gulf states have proven they have more to offer than just their natural resources, particularly oil. “Not only does everyone have at least one mobile phone, but in most Gulf countries smart phone usage exceeds 70 percent. This means two-thirds of the region has a super computer in their pocket, enabling unprecedented collaboration, connectivity, sharing of innovation and cheap access to markets.  This means unprecedented opportunity to create new services in Arabic, extend the reach of education, open up multiple channels of e-commerce, solve more quickly and discretely challenges in health and wellness and beyond,” he says. The rising generation is linked to technology, online platforms and international communication already, it is in every actor’s interest to tap into this and exchange ideas with this new connection.

“The last decade has been about oil, trade, real estate, banking — the next decade will leverage this success to focus on innovation and the knowledge economy,” says Schroeder.

The Gulf States already have the advantage of wealth and human resources — now they must manage it properly to strengthen their human capital. Secretary of State John Kerry, in an address delivered at the U.S. Chamber of Commerce Foundation’s Middle East Commercial Center Leadership Dinner in Washington D.C., emphasized the need to capitalize on the Middle East and Gulf’s rising economic concern. He noted: “Aside from petroleum, MENA countries right now simply don’t produce enough of what the rest of the world wants; they don’t trade efficiently even among themselves. Overall the Middle East has the lowest share of intra-regional, non-oil commerce in the world.”  If the Gulf States can pivot their economy away from oil dependency and rely on other means to wealth, then they can be used as an invaluable model for the greater Middle East. The Gulf States share a similar culture and identity with the broader Middle East region; thus, their system, once they are sustainable, can be transferrable.

The United States has proved successful in developing their own private sectors in the region; however, the task at hand is to advance Middle East-based businesses. The United States should not only posture themselves as a mentor in their infrastructure but also as an attentive partner learning about the lessons the Gulf has to teach on technology, experiments and application.

“In this new era of connectedness, there is great power in co-authorship.  This is not about America or the West ‘teaching’ others, top down, about the knowledge economy — though our strengths here are significant.  It’s about sharing expertise, understanding local application of existing technologies, and collaborating in new innovation which will often come progressively from new parts of the world,” Schroeder emphasizes.

Direct funding should not be the only paradigm in the Middle East; investment entails a healthy dialogue, exchange of technologies, follow-up funds, consistent mentorship and effective feedback information.

The most relevant economic challenge in the region’s “pivot” to sustainable economies is accommodating the youth, the victims of an outdated system that does not cater to their twenty-first century demands. The rising generation, aged 15–29, makes up 30 percent of the Middle East today. This generation is also a globalized one — a demographic that has been propelled into the world of social media, technology and advanced communication. They are exposed to international models of businesses, ideas, and crave to participate.

The youth bulge has become a double-edged sword, as Middle East economies have failed to absorb such a pivotal innovative force. According to the World Economic Forum, Middle East youth unemployment is the highest in the globe with a growing 27 percent unemployment rate. This percentage is damaging as ages 25 and under is a body of 2.8 million people. These statistics have the capacity to breed further regional inequality, leaving many alienated and occupied with resentment to their governments. We are all aware of the consequences of systemic alienation and what backstreets that can lead to. In terms of instability, the Gulf States are the least affected, and they cannot afford to lose this.

Successful U.S. leadership in the Middle East would require a commitment to the Gulf states’ older generation in giving lenience to the new generation’s ideas, releasing start-up barriers, absorbing genders equally and to reconstruct localization policies without neglecting non-nationals — all while taking into consideration their cultural and political integrity. Kerry remarked in his address, “Civil society has a duty to voice new ideas and advocate for reform. And the international community, including the United States of America, can help by giving a hand up to the region’s builders and healers.”

It is evident and present that as technology, a rising generation, globalization and new unified political relationships are reshaping the Gulf, the U.S. just cannot be inattentive and reduce the Gulf to its oil. If the U.S. continues to hold this reductionist view, the Gulf will lose in the long-run, the Arab people will not be plugged in, a model cannot be transferred to the greater Middle East, and we would have lost a valuable partner in this transforming region.

 

Author

Sarah Elzeini
Sarah Elzeini

Sarah recently returned from Qatar where she worked in the Center for International and Regional Studies (CIRS), contributing to multiple projects, from the Changing Security Dynamics of the Persian Gulf, Arab Youth, to Cyberspace and Digital Communication in the Middle East.

Sarah holds a BSFS in International Politics from Georgetown University School of Foreign Service. She comes from a multi-cultural American family, which has led to her open understanding of Middle East Affairs and U.S. foreign policy. She is also a passionate supporter of international development and women and youth empowerment.

Additionally, she has worked as Coordinator of Cultural Affairs for a music organization based in NYC, branched in Doha, Qatar; bringing together East and West cultures and stressing the importance of the cultural narratives that art and music brings.

Follow her on Twitter @SarahElzeini

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