Gulf Arab countries are moving [Illegible Text] the private sector a bigger role in [Illegible Text] state-dominated economies, but Dubai [Illegible Text] Arab Emirates continues to be very [Illegible Text]. Julian Taylor reports on how privatisation is coming slowly in the Gulf with signs that countries of the region are more receptive than ever to reform their public enterprises, but argues that Dubai has no immediate plans to privatise government companies.
It is estimated that the Middle East region will need to spend around $350 billion on its infrastructure over the next 10 years, of which nearly $50 billion will be in private participation. The region is moving away from subsidised, public sector-led economic strategies, and investments from the private sector have now overtaken those of the state.
The recent oil price shock has left a dent in the region's economic development and put more pressure on governments to go ahead with privatisation plans. The era of low oil prices is expected to accelerate privatisation, analysts say. Sinking world oil prices have proved that petrodollar revenues remain at the heart of the GCC states' economic fortunes. OPEC estimates that the 11-member group's total first-quarter revenue was some $8 billion lower than in the same period of 1997.
As a result, GCC states are showing signs that they are willing to allow the private sector a bigger role in their oil-led and state-dominated economies. However, they continue to be cautious on privatisation. "Although privatisation has come slowly in the Gulf, there are signs that countries of the region are more receptive than ever before to reforming their public enterprises," Abdul Hafeez Shaikh, the World Bank's representative in Saudi Arabia, was quoted as saying last October.
But when governments want to privatise, one of the key factors ensuring success is the existence of efficient local stockmarkets. In the case of Gulf countries, most stockmarkets are still off limits to non-GCC citizens.
IN THE ABSENCE OF FINANCIAL PRESSURES
The UAE has no official stock exchange and analysts doubt that the federation will soon act to set one up. The country has been considering privatisation since the early 1990s, but having a sound financial position it is in no rush to implement the process.
Humaid bin Nasser al-Owais, Federal Minister for Electricity and Water, explains: "There are no financial pressures for the state to divest ownership of its assets". At the...