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(originally published by Booz & Company)


A Growth Strategy for the Long Term

Two other lessons seem clear. First, the growth of a country’s GDP is not the best way to evaluate how well a single-resource nation’s economy is performing. Rather, it’s important to measure the risk-adjusted real activity performance, taking into account such factors as growth volatility, exposure to exogenous shocks, and excessive economic concentration. These indicators can offer a more accurate measurement of sustained performance.

Second, governments seeking to make their GDPs more evenly distributed need to understand that it is not strictly an economic challenge. Rather, they need to look at their policies regarding labor force development, education, and health care, and determine the implications of those policies for their economic strategy. They also need to examine their financial regulations, capital efficiency, and overall macroeconomic stability; indirect and portfolio investments must flow smoothly, while the overall system remains disciplined, robust, and immunized against excesses, shocks, and abrupt corrections. They will have to develop export markets for the products they hope to manufacture and the innovation engines that will create the products these markets need. In sum, instigating true economic diversification and sustainable development, and thus entrenching economic resilience, requires achievement of a long and exhaustive checklist of initiatives.

If the leaders of the Gulf states understand what is involved in true diversification, they have a better chance of creating clusters of economic activity or whole industries that are capable of innovation. To be sure, the creation of innovation-based economies cannot be forced and should come as a natural phase in an economy’s transformation. But that is the key to creating long-term, sustainable growth in their economies and ensuring stability and a high standard of living for their people. In so doing, they could serve as an example to other single-resource economies around the world and become paragon states of economic resilience.

Author Profiles:

Rabih Abouchakra is a principal with Booz & Company based in Abu Dhabi. He focuses on public administration modernization, public policy, large-scale transformation, and organizational development and change management.

Mazen Ramsay Najjar is an associate with Booz & Company based in Beirut. He focuses on public policy, socioeconomic development plans, macroeconomic policy and governance frameworks, and turnaround and transformation projects.

Richard Shediac is a vice president with Booz & Company based in Abu Dhabi. He specializes in financial services and public sector projects and has led and participated in various strategy, operations improvement, and organization projects in the Middle East, Europe, and Asia.

Also contributing to this article were Booz & Company Principal Chadi N. Moujaes and Consultant Carla Khoury.
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  1. Rabih Abouchakra, Chadi N. Moujaes, Mazen Ramsay Najjar, and Richard Shediac, “Economic Diversification: The Road to Sustainable Development,” Booz & Company white paper, February 2008: The article on which this piece was based provides more detail on diversification initiatives in the Middle East.
  2. Stefania Bianchi, “Dubai’s Next Big Niche: Theme-Park Destination,” Wall Street Journal, June 24, 2008: One facet of the emirate’s plans to develop as a tourist attraction. Subscription required.
  3. Natasha Brereton, “Bahrain Fund Looks Abroad for Growth,” Wall Street Journal, July 10, 2008: Analysis of sovereign wealth funds in the Gulf and their plans to invest abroad. Subscription required.
  4. Nabih Maroun, Hatem Samman, Chadi N. Moujaes, and Rabih Abouchakra, “How to Succeed at Education Reform: The Case for Saudi Arabia and the Broader GCC Region,” Booz & Company white paper, March 2008: Examines how the education sector in the Gulf must be revamped to meet the region’s needs for growth.
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