GCC could generate $114bn by promoting private sector

The Gulf Cooperation Council (GCC) economies could generate $114 billion in revenues and avoid $165 billion in capital expenditures by 2021 by effectively promoting the private sector, said a report. 
By increasing private sector involvement (PSI), the GCC countries can achieve operational efficiencies of 10 to 20 percent, reducing budget deficits.
The report was issued by the Ideation Center, a think tank for Strategy& in the Middle East.
The report said that the Gulf countries could generate up to $287 billion from sales of shares in public-listed companies. By doing so, the report added, the GCC countries could narrow the innovation gap with other countries, enhance the delivery of and access to government services and improve their existing infrastructure.
Around 70 percent of global innovations stemmed from the private sector versus 13 percent from the nonprofit sector and only 8 percent from the public sector.
Amid long-term challenges to sustainable economies like dependence on oil and a lack of diverse workforce etc., increasing PSI through the establishment of public-private partnerships (PPP) and privatization of government assets appear to be an ideal response, the report suggested.
Most GCC countries, including Kuwait, Dubai, Oman and Bahrain, recognize the importance of PSI and have incorporated plans to boost PPP in their respective national plans. 
However, there is a lack of a dedicated policy and legal framework, as well as an effective institutional set up.
Salim Ghazaly, partner at Strategy& in Beirut, said that in the past PSI in Gulf countries occurred on an ad-hoc basis and without strong commitment from stakeholders primarily due to high oil prices. “However, currently, we are witnessing a serious approach to this issue supported by well-defined national programs, proper regulatory frameworks and institutional models. If properly implemented, these programs could yield significant benefits to the region, including increased job creation, enhanced quality of services, faster localization of industries, better innovation, foreign direct investment and government expenditure rationalization,” he said.
Having an institutional framework with a clear governance model would facilitate the implementation of PSI. In many cases, this requires setting up new units such as PPP units or privatization units that fill existing gaps within government. These units’ roles range from promoting PPPs to investors and guiding PPP policies and plans to providing technical support to projects.
Hilal Halaoui, partner leading the Public Sector practice at Strategy& in the Middle East, said: “PSI would enable the GCC states to refocus their efforts on the essential tasks of government, which means
becoming more ‘fit for service’ ... Instead of being the leading provider of services and employer of people, for example, government entities would refocus on their roles as facilitators and regulators.”
According to Karim Aly, partner with Strategy& in Dubai, “A holistic, long-term plan to increase private sector participation will reap greater returns for the GCC countries in the long term.”

Source: Arab News