- Increased oil costs helped Center Japanese international locations return to development in 2021
- However the rebound, some governments rolled out fiscal rationalisation plans
- Enterprise-friendly and social reforms had been carried out to enhance competitiveness
- Main gamers stepped up funding in a variety of renewable vitality options
On the again of upper oil costs and a stronger international financial atmosphere, the Center East returned to development in 2021, with a lot of governments taking the chance to implement long-term plans aimed toward diversification and modernisation.
Following a yr during which economies within the Center East contracted as a result of fallout of Covid-19, the area skilled a constructive financial rebound in 2021, with the IMF predicting in October that the area as a complete would develop by 2.7%.
Wanting extra intently on the GCC, the World Financial institution estimated in December that the six-member bloc would report an mixture development price of two.6% for the yr. Bahrain is forecast to have grown by 3.5%, adopted by Qatar and Oman (3%), the UAE (2.7%), Saudi Arabia (2.4%) and Kuwait (2%).
A key issue on this development was the rise in oil costs.
After beginning 2021 at simply over $50 a barrel, the worth of oil elevated to yearly highs of greater than $85 in October. In the direction of the top of the yr costs fell once more, nevertheless, because the omicron variant dampened gas demand, earlier than closing out 2021 at round $77 a barrel.
However, the sooner enhance supplied an financial boon to Gulf international locations all through a lot of the yr.
Lengthy-term fiscal reforms
Whereas larger oil costs helped enhance revenues throughout the area, a lot of governments sought both to implement or to increase long-term fiscal rationalisation methods.
In April Oman launched a 5% value-added tax (VAT), turning into the fourth Gulf nation – behind Saudi Arabia, the UAE and Bahrain – to take action, following the GCC’s 2018 pledge to implement the surcharge.
The tax is predicted to assist ease fiscal strain by producing OR400m ($1bn) yearly, equal to round 1.5% of the nation’s GDP.
In the meantime, Bahrain just lately introduced that it will double its VAT price to 10% as of 2022; on this it follows Saudi Arabia, which elevated its VAT to fifteen% in 2020.
The choice kinds a part of Bahrain’s technique to deliver the funds again to surplus by 2024.
“Whereas the Covid-19 pandemic resulted in prolonging fiscal steadiness targets to past 2022, the federal government’s self-discipline in curbing expenditure raises expectations that it’s going to slender the fiscal deficit hole and obtain a fiscal steadiness within the coming years,” Yaser Alsharifi, group chief technique officer of the Nationwide Financial institution of Bahrain, advised OBG.
“Moreover, amid the financial restoration pattern in 2021 and the next oil value atmosphere, one might count on a sturdy financial efficiency in 2022, which is able to additional help the federal government’s fiscal state of affairs.”
FDI key to diversification
Quite a few Gulf international locations additionally launched modern reforms designed to incentivise international funding and bolster competitiveness.
A frontrunner on this regard was Saudi Arabia, which continued its diversification efforts by way of a sequence of initiatives aimed toward attracting international direct funding (FDI).
FDI was already up 33% year-on-year within the first six months of 2021, in keeping with authorities officers, constructing on the pandemic-affected return of $5.5bn in 2020.
Then in October the nation launched its Nationwide Funding Technique, which goals to assist the nation obtain the formidable aim of attracting $100bn in FDI yearly by 2030.
The technique consists of plans to develop particular financial zones, a programme to switch key provide chains to the nation and a diversification of financing choices for personal sector operations.
These initiatives are being accompanied by efforts to enhance the overall enterprise atmosphere, equivalent to a brand new legislation permitting specialised international professionals to realize Saudi citizenship and a brand new platform easing the method of establishing a enterprise for international buyers.
Modernisation and bettering competitiveness
Elsewhere, the UAE has additionally carried out a lot of eye-catching reforms to enhance its competitiveness globally.
In an effort to encourage international funding, in June the nation amended legal guidelines to permit 100% international possession of Emirati corporations in all however a couple of restricted sectors, up from the earlier restrict of 49%.
This was adopted in November by the most important authorized reforms within the nation’s historical past, when a slew of 40 legal guidelines protecting commerce, on-line safety, copyright, residency, narcotics and different social points was carried out.
They embrace measures that strengthen private knowledge rights, copyright for these in artistic industries and on-line safety. In the meantime, a sequence of social reforms, such because the easing of restrictions on cohabitation earlier than marriage, the implementation of extra protections for ladies and longer-term visas, are designed to draw expert migrants to the nation.
Specifically, the emphasis positioned on social components has been a key focus for the nation. Final yr a broad-based reform bundle was carried out that included the MENA area’s first provision of paid parental go away within the personal sector – out there to each feminine and male staff – whereas labour laws was amended to make sure equal pay for work of equal worth.
These measures had been then topped by the December announcement that authorities entities within the UAE would shift to a four-and-a-half-day week from January 1, 2022, with many personal corporations shortly following go well with.
The change prolonged the weekend to run from Friday afternoon by way of until Sunday – as an alternative of the earlier Friday-Saturday schedule. This places the nation according to many of the world’s developed economies and, in keeping with the federal government, is designed to “improve its international competitiveness throughout financial and enterprise sectors, and to maintain tempo with international developments”.
These makes an attempt to incentivise funding into the UAE come as Dubai hosts Expo 2020, which opened in October and can run till March 31. Greater than 190 international locations are represented on the occasion, with greater than 7m international vacationers visiting the nation between its launch and late December.
Bolstering home capability
Whereas attracting international funding stays a key goal for all international locations within the Gulf, some – amongst them Qatar – have additionally targeted on growing self-sufficiency in sure areas.
“The blockade made us realise that we had been relying an excessive amount of on others in a lot of fields,” Ziyad Eissa, CEO of S’hail Holding Group, advised OBG. “Good relationships with neighbours are essential, however Qatar wanted a plan to function independently in any situation, and we shortly constructed up the mandatory capabilities to keep up operations in all sectors, together with main and industrial.”
Along with efforts to enhance meals safety by investing in high-tech agricultural options, Qatar has additionally established important industrial recycling amenities domestically.
Recycling is seen as key to decreasing the carbon footprint of heavy trade, which accounts for an estimated 27% of worldwide emissions.
“By the top of 2022, we count on Qatar to grow to be the primary nation on this planet to recycle 100% of its home stable steel waste regionally, together with lead, copper, aluminium, metal, brass and zinc,” Eissa mentioned.
Investing within the vitality transition
Regardless of the area being house to among the world’s largest hydrocarbons-exporting international locations, a lot of markets within the Center East have sought to capitalise on the shift in direction of renewable vitality all through 2021.
Certainly, the UAE has set a net-zero emissions goal for 2050, whereas Saudi Arabia and Bahrain each hope to realize this aim by 2060.
To succeed in its goal, the UAE goals to extend renewables’ contribution to its vitality combine from the present degree of 13% to 31% by 2025.
All through 2021 the nation continued to make progress on the Al Dhafra Photo voltaic Plant. As soon as it’s accomplished later this yr, it is going to grow to be the most important single-site photo voltaic plant on this planet, able to offering sufficient electrical energy for 160,000 properties and mitigating 2.4m tonnes of carbon emissions yearly.
To additional assist meet its targets, the nation has additionally invested in carbon seize and storage (CSS) know-how, which works by capturing after which storing carbon emissions from main industrial initiatives earlier than they’re launched into the ambiance.
Though the know-how continues to be very a lot in a nascent stage and doesn’t but exist at scale, the UAE is taking a number one function in its improvement, alongside Qatar and Saudi Arabia.
Along with the nation’s first CSS undertaking, a facility which processes the emissions from a metal manufacturing facility in Mussafah, Abu Dhabi, the Abu Dhabi Nationwide Oil Firm just lately signed a memorandum of understanding with French vitality main Whole to collectively discover the event of CSS know-how.
This has been complemented by the event of inexperienced hydrogen. Created by splitting water by way of a course of known as electrolysis, it’s thought of essentially the most environmentally pleasant gas for the long run.
A world chief on this discipline, the UAE is growing seven hydrogen initiatives, and goals to seize 25% of worldwide demand by 2030.
In the meantime, in Saudi Arabia April noticed the launch of the 300-MW Sakaka solar energy plant, the nation’s first utility-scale renewables undertaking. This was adopted in August by the announcement that Saudi vitality firm ACWA Energy had finalised financing for the 1.5-GW Sudair Photo voltaic Plant, slated to be one of many world’s largest upon completion.
This kinds a part of the nation’s plans to speculate some SR380bn ($101bn) in renewable vitality initiatives by 2030.
The measures replicate a broader pattern within the Center East in direction of low-carbon vitality options.
Whereas Qatar itself has not but introduced a net-zero emissions goal date, in October state-owned Qatar Petroleum mentioned that it had modified its identify to Qatar Vitality, as a part of an try to higher replicate the corporate’s renewables-focused technique.
Though it is going to proceed to export gasoline for many years to return, the corporate’s new technique will deal with energy-efficient applied sciences equivalent to CSS.