The Middle East ramps up export diversification
A new index from Standard Chartered, which reveals the 20 economies that are most rapidly improving their trade potential, highlights that Oman, the UAE and Bahrain are all showing positive progress in trade due to the diversification of their exports.
The research by Standard Chartered ranks 66 global economies by the improvements they have made in the last decade across three pillars: economic dynamism (foreign direct investment, export and GDP growth), trade readiness (infrastructure, e-commerce, and ease of doing business) and export diversity, (the range of exports).
The Trade20 ranks the three countries high on export diversity. All three have successfully moved away from an over-reliance on oil and, as a result, have become important trading hubs.
In an era of low oil prices, many Middle Eastern governments are working hard to diversify their exports and upgrade their infrastructure. Trade20 points to the Middle Eastern markets that are doing this most successfully, making their economies more robust and less vulnerable to oil price volatility, and putting them in a better position to attract foreign direct investment (FDI).
Oman, the UAE and Bahrain rank at number nine, 12 and 15, respectively, in the Trade20 index.
Driving diversification and readiness
Overall, several Middle Eastern markets are showing impressive trade readiness momentum, bolstered by infrastructure investment and an ecommerce market that is rapidly gathering steam.
Bahrain is a leader in terms of improving diversification, indicating that long-term efforts to move its economy away from a reliance on oil and develop its manufacturing, finance and services sectors are paying off.
The UAE is ahead in terms of trade readiness, showing swifter progress than any other Middle Eastern nation, a result of the government’s energetic focus on infrastructure improvements. Its ambitious Vision 2021 focuses on enhancing the country’s infrastructure, providing grants for road, bridge, harbour and dam development and increasing investments in water and electricity projects.
Over in Oman the success story is powered by its improvements to export diversity as well as trade readiness. The country’s shift away from oil reliance comes from a focus on manufacturing, logistics, tourism, fishing and mining.
Qatar – despite not making it into the Trade20 – also performs well in terms of economic diversity, suggesting progress towards its Vision 2030, which aims to achieve “a diversified economy that gradually reduces its dependence on hydrocarbon industries”.
Khurrum Zaeem, Trade Head UAE & MENA and Transaction Banking Head UAE & MENA, Standard Chartered said: “There are tremendous opportunities arising from the modernisation and diversification that we are seeing throughout the Middle East, all of which will help to improve the region’s bid to become a financial and investment hub.
The UAE’s position in the middle of Asia and Africa helps to connect these important financial and trade corridors with the Middle East. Substantial opportunities are on the horizon, including those arising from the closer relationship between the UAE and China through the Belt & Road initiative.”
Does the Middle East lack dynamism?
Except for Saudi Arabia, all the Middle Eastern markets in the index perform relatively poorly for their economic dynamism, due to limited GDP growth and a lack of inward FDI momentum.
However, the region’s weakness in dynamism is in stark contrast to its performance in export diversity and trade readiness – both of which are indicators of future potential. It’s clear that the Middle East is laying the foundations for future trade performance improvements, whether in the form of Oman and Bahrain’s diversification away from oil, or the UAE and Jordan’s all-round improvements to trade readiness.