The GCC region could emerge as one of the largest markets in the world through removing its existing intra-regional trade and investment barriers. Lengthy border checks and lack of regulatory alignment are making the GCC a weak link in global supply chain, global advisory firm EY noted yesterday.

Foreign investors are still unable to treat the GCC as one large market. Due to existing regulations , the companies still need multiple strategies for the six GCC markets. Foreign investment flows to the GCC as a whole have halved since 2010, despite the advances in integration. With Iran fast emerging as an investment target for the region, it is crucial that the GCC moves quickly to close loopholes, streamline regulations and align them across the region. EY’s latest Growth Drivers report ‘Strength in unity’ said.

EY, that has developed an integration model to measure the economic impact of removing the remaining non-tariff barriers (NTB) to hold back trade, investment and productivity, noted that removing obstacles to trade and investment could boost the GCC economy by $36bn — with 96% of the gain coming from the removal of bureaucratic barriers to efficiency. The benefits would be spread across all six economies. The most significant impact comes not from boosting intra-GCC trade, but from making the region’s trade and investment relations with the rest of the world easier”.

“There are signs that serious change has begun. However, these reforms could be less disruptive and more effective as part of a wider push towards rekindling and modernizing the drive towards a single GCC market. That would bring the benefits of scale and efficiency to the diversification drive, and strengthen the most productive parts of the private sector by introducing more competition and more jobs”, said Gerard Gallagher, MENA Advisory Leader, EY. (Source)

EY’s research suggests that, if the GCC continues to grow at an average of just over 3 percent for the next 15 years and overcomes its fragmentation, it could become the sixth largest market in the world by 2030. A single market without bottlenecks and red tape that currently fragment the region would be a significant lever to help sustain growth at this level.

GCC economies are facing a decisive moment. With oil price falling, they have to accelerate the creation of growth drivers that do not rely on oil revenues. To do that, they need to make multiple changes simultaneously-overhauling laws and regulations, shifting incentives and removing bottlenecks-while developing new revenue sources for the long term.

“Governments are already responding to the challenge, introducing measures that would have been unthinkable just a few years ago. But the GCC is missing one lever that could help boost the private sector, create jobs and attract serious levels of foreign investment-creating an open and competitive GCC single market.

The report recalled that it was in the depths of the oil price crisis of the 1990s that GCC governments first decided it was vital to strengthen their economies by integrating them economically. Within less than a decade they had launched both a customs union and a common market, introducing a solid framework for the free movement of goods, and of labour and capital for GCC nationals. However, implementing the details of that framework dragged out, as a s steady boom in oil price reduced the sense of urgency for economic integration. “The urgency is back-but GCC Governments are still focusing on how best to use their reserves to diversify their own economies… it is time to take a fresh look at the power of GCC integration to strengthen the region’s economies.”

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