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Gulf countries face new challenges in economic transformation, but digital economy injects new vitality

Gulf countries face new challenges in economic transformation, but digital economy injects new vitality : Google
  • Gulf News

The Gulf countries face new challenges in implementing their strategic visions of economic transformation and diversification amid the shadows of the COVID-19 pandemic and lower oil prices in 2020, but the digital economy has injected unprecedented vitality into the region.


Experts said that the cooperation between Gulf countries and China is promising in the fields of developing digital economy and new technologies, as those countries seek ways to tackle the new challenges.

DUAL CHALLENGES

Some Gulf countries launched long-term visions for economic development between 2016 and 2017 to reduce their traditional dependence on oil revenues and realize economic diversification.

Saudi Arabia, for example, announced Vision 2030 in April 2016, which included the construction of a new city named NEOM, as well as the creation of an international logistics center and an international innovation center.

Faced with high unemployment, Saudi Arabia has also taken measures to create more jobs and strengthen professional skills training.

However, the dual challenges of the COVID-19 pandemic and the lower oil revenues have casted a heavy shadow over the finances of the Gulf countries since the beginning of this year, said Zou Zhiqiang, associate researcher at the Middle East Studies Institute of Shanghai International Studies University.

Disposable incomes have plummeted, fiscal deficits and public debt have continued to rise as a share of GDP, and sovereign wealth funds and foreign exchange reserves have shrunk significantly in the Gulf countries.

According to the estimates by the Institute of International Finance, the assets of sovereign wealth funds of the Gulf countries may shrink by 296 billion U.S. dollars by the end of this year.

The coronavirus pandemic has severely hit the tourism, hotel, aviation, and logistics industries in the Gulf countries, thus hindering the implementation of their economic transformation plans.

Many Gulf countries have tried to broaden the sources of incomes while trying to cut expenditures. For example, several oil and gas projects in Kuwait have been postponed or shelved this year.

In Saudi Arabia, some major projects have been suspended, and the saved funds were redistributed to medical care and corporate assistance.

Since June, the payment of the cost of living allowances for government civilians and military personnel has been halted and the value-added tax rate has been increased to 15 percent since July in the kingdom.

NEW IMPETUS

On bright side, the digital economy has shown great potential amid the COVID-19 pandemic in the Gulf countries, as more people resort to online shopping or entertainment as they reduced outdoor activities.

The total amount of online shopping in Saudi Arabia jumped by 400 percent from February to April, the Saudi daily Arab News reported, citing the statistics released by the Saudi Ministry of Commerce and Investment.

The proportion of consumers who purchased consumer goods online in the kingdom soared from 6 percent to 55 percent in about five months during the pandemic, according to the statistics.

“Currently, Saudi Arabia is implementing a series of projects that will contribute to its digital transformation of economy,” said Ma Xiaolin, an expert on the Middle East affairs at Zhejiang International Studies University, adding that the Gulf countries still have broad space for innovation.

E-commerce development technology and experience from Chinese companies are creating new value and increasing market influence on the Gulf states.

Founded in 2012, China’s Zhejiang Zhiyu Information Technology Co., Ltd, an e-commerce start-up, currently has 50 million users in the Middle East with the bulk coming from the Gulf Cooperation Council countries.

The company, with considerable number of internet users in the United Arab Emirates, Oman, Bahrain, Qatar, Kuwait and Saudi Arabia, has become one of the top e-commerce companies in the Gulf region.

Since the beginning of this year, Zhiyu has improved its supply chain and products’ quality while boosting investment in local logistics and payment infrastructure in Saudi Arabia.

Meanwhile, it has expanded the radius of self-operated delivery by more than 400 km during the pandemic, covering 150 Saudi cities, up from more than 60 previously.

PROMISING COOPERATION

China’s cooperation with the Gulf countries has been strengthened in the fields of digital economy and new technologies in 2020.

The bilateral scientific and technological cooperation aims at modernizing national governance and driving connotative development through technological innovations, Sun Degang, professor of political science at the Institute of International Studies of Fudan University, told Xinhua.

On Oct. 22, the Saudi Data and Artificial Intelligence Authority signed a memorandum of understanding with Chinese tech giant Huawei, under which Huawei will support the Saudi government enterprises and research institutions to enhance the talent pool in the field of the artificial intelligence (AI).

There are great opportunities and potentials for the Gulf countries to collaborate with China in the AI field, as the Chinese companies’ achievements in AI and big data technology are gradually recognized by the international community, said Ma, the expert from Zhejiang International Studies University.

“China’s cooperation with Gulf states in digital technology will play a unique and important role in enhancing the mobile payment, activating business vitality and development potential, and improving the digital ecosystem of many Gulf countries,” said Bao Chengzhang, an associate researcher at the Middle East Institute of Shanghai International Studies University

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Category: #Gulf News | 2020/12/12 latest update at 1:00 PM
Source : Xinhua | Photocredit : Google
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