Special Economic Cities in the GCC

1
Special Economic Cities in the GCC

• The Way ForwardMaybe
• CPT Kyle Phillips, USA
• NS3041

2
Introduction

• Thesis
• Rentier States
• Special Economic Cities
• Case Studies
• Dubai
• Oman
• Saudi Arabia
• Conclusion

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Rentier States of The GCC

• Characteristics of GCC States
• States rely on oil rent to take care of
  populations
• Expectation for Nationals to be given public
  sector jobs
• Women were excluded from the workplace
• Expatriates were brought in to fill less
  desirable jobs

4
Problems for Rentier States

• When the first oil boom ended states saw negative
  effects, and felt a need for diversification of
  economies
• Need to diversify their economies to lessen
  future negative effects
• Need to privatize their economies to share burden
  and participate internationally

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Special Economic Cities

• Used to stimulate economies
• To dampen the effects of changing oil prices

• To draw in Foreign Investment
• Increase tourism service industries

6
Dubai and Free Zones

• Dubai is an emirate of the UAE and has faced
  problems of a relative lack of oil from early on
• Ruling family was always a trading and
  entrepreneurial family, took a risk dredging
  Dubai Creek to create a world class port
• Took initiative to draw investment with tourism
  and the creation of free zones

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Economic Free Zones

• Areas within cities that offer partial or
  complete foreign ownership
• Drastically reduced or no corporate taxes for a
  set period of time
• No requirement for repatriation of profit

Generally attractive to foreign investors and
therefore usually drive real-estate values up
8
Oman

• Small ruling family means that rulers are not as
  well entrenched as in other GCC state
• Economic diversification, privatization, and
  Omanization are the cornerstones of the 6th 5
  year plan
• 7th 5 year plan includes reduced reliance on oil

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OmanizationBringing Omanis Back in the Workforce

• Omanization is only happening at a modest level
  in higher end jobs
• Minimum wages are still drastically different
  between Omanis and expatriate workers
• Setting quotas often leads to hiring of Omani
  workers that dont work but are just on the books
• Appealing to nationalism has yielded little to no
  results

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What is Going Right

• Creation of cities like the Knowledge Oasis
  Muscat which are not only free zones but also
  help to build business and train people
• Infrastructure has grown exponentially (12
  hospital beds in 1970s to top ten healthcare
  systems in the world)
• Focus on education has dropped illiteracy in Oman
  from 45 in 1990 to 25 in 2002

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Foreign Direct Investment FlowsIn Millions and
As a Percentage of Fixed Capital Formation
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Saudi Arabia

• Success of economic cities in UAE and Oman have
  lead to other countries replicating them
• Saudi Arabia plans to build the biggest of all of
  them King Abdullah City

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King Abdullah City

• City will be divided into 6 distinct sections
• Huge seaport and airport will allow for
• 300,000 more pilgrims to enter Saudi Arabi for
  the Hajj
• Allow largest ships in the world to dock and have
  seemless transition from rail to sea
• Industrial District
• Indigenous Saudis will be trained for opening
  jobs
• Financial Island
• 60000 professional jobs
• Education Zone
• Resorts
• Residential Area

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Developing Tourism

• Helps to sustain economy

• Skyrocketing land values lead to huge land
  reclamation projects
• Construction in places like Dubai have allowed to
  others like Oman to offer more pristine
  experiences

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Conclusion

• Cities survival and growth are still based
  largely on oil revenues
• Indigenization of the workforce is an
  acknowledged problem but solutions are not
  yielding desired results
• Explosions in tourism industries have helped to
  diversify economy but are still just another form
  of rent