Many countries in the Middle East have been struggling for years, if not decades, to achieve a greater level of economic prosperity. Many have tied a majority of their economy to the fate of oil, which while always in demand, has seen many ups and downs. It is currently facing another down due to the recent increase in drilling throughout the U.S. thanks to the new technology of fracking which has created a crude oil glut.
When the demand in oil greatly decreases this makes the economy far more volatile and if the government continues trying to sell more oil at the reduced price they then face the issue of generating less revenue per barrel. Of course they could try to limit the amount of oil available and drive the price up, but this only works if other countries work with them. If other countries refuse to cooperate in this scheme then the first country loses a percentage of its market share.
This is why countries such as the UAE, and more recently Saudi Arabia, have made efforts to increase the economy’s diversification. In the UAE, Hussain al Nowais has helped create the Khalifa Fund which has been working for a long time now to help promote small & medium enterprises (SMEs) in Abu Dhabi. Now, the UAE government decided on Sunday of this past week that they were ready to increase the support of SMEs throughout the country with the creation of the National Programme for Small and Medium Enterprises. The cabinet endorsed it and the aim is to increase the success rate of SMEs to 50%. The current rate is 25-30%.
Yasin says “There are a lot of UAE graduates and the public sector is not able to absorb them. SMEs is an area where a lot of UAE nationals can do something useful to contribute to the economy than wait for public sector jobs.” Current data says there are approximately 300,000 SMEs in the UAE which represent 92% of companies and this makes up 86% of jobs in the country. Despite these very high statistics, SMEs non-oil economic output only accounts for 60% of the economy’s GDP. The country’s goal is to increase that to 70% by 2021.
This expansion of non-oil GDP will protect the UAE in the future from unexpected drops in demand of oil or price decreases which could cause oil revenue for the country to decrease or become less profitable. For countries such as Saudi Arabia they are finally realizing the value and importance of economic diversification and will hopefully have a smooth and effective transition.