LONDON: The energy transition will be at the core of the Gulf region’s strategy to continue to fuel its growth, Saudi Arabia’s investment minister said on Tuesday at the World Economic Forum in Davos, Switzerland.
“The most important thing is political stability, long-sighted vision and consistency,” Khalid Al-Falih told a panel titled “Gulf Economies: All In.”
He added: “Saudi Arabia is very committed to working with our GCC (Gulf Cooperation Council) partners … and our private sector companies are fully embedded in each and every nation of the GCC as we create value to each other.”
Al-Falih said the region will “transition more to a decarbonized, environmentally suitable mix of energy that will have oil and gas continuing for a long, long time, but of course will bring the green, blue and other forms of energy that’s emerging.
“That’s a huge growth potential for the Kingdom, but I believe it’s going to be done at a regional level.
“We’ve seen Saudi companies invest heavily in the Emirates, in Bahrain, in Kuwait and in Oman as we built this sector of renewable energy and hydrogen.”
Al-Falih also noted the progress being made elsewhere as Gulf economies seek to diversify away from fossil fuels to strengthen their economies.
“The other trend, of course, is digital transition. With everything from cloud computing, AI (artificial intelligence) recently, and all of the capabilities that digitization brings, I think that the region is going to continue to lead in this area,” he said.
“I think connectivity, speed and what have you (are) all big enablers for industries, for logistics, for travel and tourism to come to the Kingdom — and to the region — and take advantage of this digital platform.”
Al-Falih touched upon the Gulf’s location at the crossroads between Europe, Asia and Africa, coupled with its rapidly improving infrastructure, as reasons to remain bullish on GCC prosperity, adding: “We have the infrastructure to allow global value chains to be reengineered.”
Bahrain’s Finance Minister Salman bin Khalifa Al-Khalifa said the GCC’s growth is opening up numerous economic possibilities.
The GCC “is moving towards being a $3 trillion per annum GDP (gross domestic product) economic zone by 2030, and moving towards being a $6 trillion per annum economic zone by 2050. That’s the macro trend at conservative numbers,” he added.
“Saudi Arabia is 50 percent of that GDP and a big driver of that growth, and that growth across the region is being driven by sound policy, by excellent execution, and by making sure that we’re simplifying doing business and having a very rapid decision-making process, and we’re seeing the results in that growth.”
He said Bahrain, like Saudi Arabia and others, is diversifying its income streams and investments as it looks towards its future.
“There are six sectors that we’re focused on, and those six sectors are banking, telecoms and digital services, manufacturing, logistics, oil and gas, and tourism, and we’re putting everything into those sectors,” he added.
“Today in Bahrain, 83 percent of GDP is non-oil, and the largest sector in the economy is banking and finance.
“What we’ve found is that whenever you simplify procedures, whenever you go in and get government out of the way and allow the private sectors to move at the pace that they want to move … things thrive.”
Al-Khalifa rejected suggestions that the Gulf states could be hampered by competition between each other, saying: “The pie currently is growing so fast that competition isn’t even on the table. Everybody is trying to grow their service sectors, grow their participation, grow their GDP, and there’s a lot of synergistic benefits.”
Kuwait’s Finance Minister Ali Ahmed Al-Kuwari noted the role that sovereign wealth funds have to play in driving growth across the Gulf, calling them “powerhouses” and “one of the examples of the strength of the GCC countries.”
He said they are vital for the future of Gulf economies as “they’re able to invest and co-invest in the private sector” in areas where investment could perhaps be deemed unattractive in the short-to-medium term to drive growth over lengthier periods.
Al-Kuwari equated this to the various national development strategies of states such as Saudi Arabia and Bahrain, saying this “long view” is key to continued success.
However, he warned that regional insecurity poses a threat to this prosperity, citing the current conflict in Gaza as a cause for concern.