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GULF COOPERATION COUNCIL (GCC)

THE COOPERATION COUNCIL FOR THE ARAB STATES OF THE GULF

On 25th May 1981, the leaders of the United Arab Emirates, Kingdom of Bahrain, Kingdom of Saudi Arabia, Sultanate of Oman, State of Qatar and State of Kuwait met in Abu Dhabi, United Arab Emirates, where they reached a cooperative framework joining the six states to effect coordination, integration and inter-connection among the Member States in all fields.

THE GULF ECONOMIES EMERGING PARTNERSHIPS

ESTABLISHMENT

Article 4 of the GCC Charter emphasized the achievement of unity, the deepening and strengthening of relations, links and areas of cooperation among their citizens. The underpinnings which are clearly provided for in the preamble of the GCC Charter, confirm the special relations, common qualities and similar systems founded on the creed of Islam, faith in a common destiny and sharing one goal, and that the cooperation among these states would serve the sublime objectives of the Arab nation.
The purpose of the GCC is to achieve unity among its members based on their common objectives and their similar political and cultural identities, which are rooted in Islamic beliefs. Presidency of the council rotates annually.
All GCC members are also members of the Arab League. Qatar, Saudi Arabia, Kuwait and the United Arab Emirates are prominent members of OPEC.
Presently it encompasses a total area of 2,672,700 sq.km. The official language is Arabic.

COOPERATION SECTORS

Political Affairs
Military Cooperation
Security Cooperation
Legal and Judicial Cooperation
Media Cooperation
Economic Cooperation
Cooperation in the field of Human and Environment Affairs
Consultative Commission of the Supreme Council
Cooperation in the Field of Auditing
Cooperation with the Republic of Yemen
Economic Relations with the Other Countries and Economic Groupings

DEMOGRAPHY OF THE AREA

The GCC countries tend to have young and relatively fast-growing populations, although the circumstances differ from member to member. All states rely on large expatriate communities that have swelled in recent decades as the GCC economies have grown, an influx that is causing internal tensions in some GCC states.
The majority of expats are low level workers but significant minorities of white collar workers also exist, with the ratio differing from country to country.

DEMOGRAPHY OF GCC COUNTRIES
ECONOMY

The GCC’s vast energy reserves and subsequent wealth have always been a key bargaining chip with the outside world, and the grouping regularly uses these to co-opt varying internal pressure groups. Over the last decade, however, a rapid depletion of oil and gas reserves and big rises in populations for many GCC countries has seen the latter attempt to diversify away from energy into sectors such as tourism, construction and finance. These efforts have only been partially successful and certain GCC members were hit hard by the 2008 financial crisis.
There have been various attempts to further align the GCC economies, with a customs union being implemented in 2003 and a common market coming into force in 2008 aimed at encouraging cross-boundary investment. In 2009 Saudi Arabia, Kuwait and Qatar went a step further and announced the formation of a Monetary Council, designed to be a precursor for a common GCC currency although little progress has since been made.
Despite the heel dragging, GCC countries do tend to stick together on economic matters and the wealthier states have proven very willing to bail out their poorer GCC neighbours. Saudi and UAE cash is for now propping up Bahrain and to a lesser extent Oman, while internally Abu Dhabi is the wealthiest emirate and has provided a series of cash injections to its poorer peers like Dubai. (1)

GCC INFRASTRUCTURE MARKET OUTLOOK 2016

Construction in the GCC infrastructure sector is driven by major infrastructure projects being developed in Saudi Arabia, the UAE and Qatar. As per BNC project intelligence database, the GCC infrastructure market has an estimated value of over USD 400 billion. Some of the notable projects in these countries include the Madina Metro in Saudi Arabia (USD 8.0 billion), the Midfield Terminal Building in the UAE (USD 3.6 billion) and the Gold Line Underground Doha Metro Network in Qatar (USD 3.5 billion). The GCC infrastructure market is expected to undergo positive growth over the next few years as the GCC region prepares to host global events such as Dubai Expo – 2020 and FIFA – 2022. Executive Summary This report begins with an overview of the GCC infrastructure market, looking at the market size of each country. It also looks at the pipeline of projects at different stages of the construction life cycle (i.e., concept, design, tender, on hold and under construction). The report then discusses some of the growth drivers supporting a healthy infrastructure market before turning to specific infrastructure market segments such as aviation, rail, marine and road development projects. The final section highlights a series of mega infrastructure projects at different stages of the construction life cycle.
The main construction activities in the GCC are happening in the UAE, Saudi Arabia and Qatar. A high number of infrastructure projects are in the initial stages of construction, which is an indication of future growth. According to the BNC project intelligence database, there are over 1,500 infrastructure projects that have a combined estimated value of USD 407.9 billion. The main growth is coming from Saudi Arabia, Qatar and the UAE. The total value of infrastructure projects in these three countries is estimated at USD 317.3 billion and makes up approximately 74% of all infrastructure project values in the GCC.

GULF COOPERATION COUNCIL (GCC)

KEY GROWTH DRIVERS

A number of growth drivers are supporting a positive outlook in the infrastructure market. These drivers include urbanization, tourism, global events and long term government planning.

1. URBANIZATION

Urbanization is one of the important factors driving infrastructure development in the GCC. The total population of the GCC is estimated at 47 million people in 2015, and is expected to reach 53.5 million people over the next five years. The majority of residents in GCC countries are concentrated in a few major cities. Residents of Saudi Arabia are primarily located in Jeddah, Riyadh and Dammam as well as the holy cities of Makkah and Medina. Similarly a high portion of the population in the UAE resides in Abu Dhabi, Dubai and Sharjah. The population in Oman mainly resides in the northern cities with a small concentration of people living in the south of the country. The majority of residents in Qatar, Bahrain and Kuwait are in or around the capital city of each country.

2. TOURISM

The fact that GCC governments are committed to reduce their dependency on oil is causing them to invest in other sectors, such as tourism. GCC countries are promoting either luxury tourism or religious tourism in order to attract visitors. The expected rise in the number of visitors and transit passengers at airports creates a need to increase airport capacity in order to account for a higher number of travelers. Massive airport expansion and upgrades are underway in order to meet the expected growth of tourism in most GCC countries.
The 18 million tourists that visited Saudi Arabia in 2014 made up only 2.5% of the country’s GDP. This is much lower than that of the neighboring UAE, which reported in April 2016 that the contribution of tourism to GDP is expected to reach 8.5% by the end of this year. Saudi Arabia will have to double the number of religious visitors to increase the contribution of religious tourism to the country GDP. However, the spend per visitor will still remain significantly lower than the spend by tourist in Dubai.
The UAE offers an experience that meets the luxury and lifestyle needs of visitors. It is also a strategic transit point, a major destination and a gateway to the GCC for many international travelers. Dubai can often times be seen as the tourist hub of the region. The number of visitors to Dubai has steadily increased over the last few years, reaching just over 78 million passengers in 2017. By 2020, Dubai is expecting to reach 100 million passenger. It remains as a convenient and active destination spot for many business and holiday travelers. Last year Dubai welcomed 14.2 million overnight visitors, and is on track to reach 20 million in 2020.

TOURIST ARRIVALS IN THE GCC
3. GLOBAL EVENTS

The infrastructure market in both Qatar and the UAE has tremendous growth potential. Hosting global events is a major driver of construction activities in both countries. Qatar is expected to spend anywhere upwards of USD 200 billion on new infrastructure projects to host FIFA 2022, an amount almost equivalent to the country’s GDP, which stood at approximately USD 227 billion in 2015. Similarly in the UAE, the total spend on infrastructure projects related to Expo 2020 can reach up to USD 18 billion with estimated development costs of the Dubai South Area, which is where the event will be held, to be between USD 8.1 billion and USD 8.7 billion.

4. LONG-TERM GOVERNMENT PLANNING

GCC countries are faced with a common challenge of managing sustainable growth over the long term. This inevitably involves reducing their dependency on oil. Each country has announced plans to target “high potential” sectors through state-led initiatives. Most countries have translated long term plans into specific economic and social objectives with measurable targets that can be linked to various development projects.
Most infrastructure development in the GCC is coming from rail, road, tunnel and bridge projects. The combined estimated value of these projects is USD 336.8 billion and constitutes 83% of all infrastructure project values in the region. (2,3)
The complete and detailed report on the GCC infrastructure market can be found here:
http://www.justthorit.com/FormBuilder/Attachment/1075_GCC%20Infrastructure%20Market%20Outlook.pdf

GULF COOPERATION COUNCIL AND THE EUROPEAN UNION
POLITICAL RELATIONS

The EU established bilateral relations with the GCC countries through the 1988 Cooperation Agreement, intended to:
•strengthen stability in a region of strategic importance;
•facilitate political and economic relations;
•broaden economic and technical cooperation;
•broaden cooperation on energy, industry, trade and services, agriculture, fisheries, investment, science, technology and environment.
The Agreement provides for annual joint councils/ministerial meetings between the EU and the GCC foreign ministers and for joint cooperation committees at senior official level. The Agreement allowed for the development of closer cooperation on issues such as energy, transport, research and innovation, and the economy.
The 25th session of the Joint Council and Ministerial Meeting of the European Union (EU) and of the Cooperation Council for the Arab States of the Gulf (GCC) was held in Brussels, Belgium, on 18 July 2016. The EU delegation was led by H.E. Federica Mogherini, High Representative of the European Union for Foreign Affairs and Security Policy and Vice President of the European Commission, and the GCC delegation was led by H.E. Adel Al-Jubeir, Minister of Foreign Affairs of the Kingdom of Saudi Arabia as GCC rotating Presidency. The GCC Secretariat was represented by H.E. Dr. Abdul Latif bin Rashed Al-Zayani, GCC Secretary General.
In a challenging regional environment, EU and GCC Ministers underlined the importance of further strengthening their ties, to serve as a solid and effective foundation for sustainable regional and international stability and security. Both sides expressed their wish to further enhance their political dialogue and cooperation, notably through the holding of regular EU-GCC Senior Officials meetings, noting in particular the most recent one, held in Brussels on 14 April 2016.

gulf-cooperation-council
TRADE RELATIONS

The GCC is the EU’s fifth largest export market (€111.6 bn of exports in 2015, +15% year on year), and the EU is the grouping’s biggest trading partner, with trade flows totaling €155.5 billion, or 14.7% of the GCC’s global trade. In return, the GCC represents 4.4% of the EU’s total trade.
The 1988 Cooperation Agreement contained a commitment from both sides to enter into negotiations on a free trade agreement. Negotiations have started and been suspended several times since 1990. Negotiations resumed in March 2002, but were suspended by the GCC in 2008. Further informal contacts have taken place ever since. The EU remains committed to concluding the agreement.

COOPERATION INSTRUMENTS

Until recently the Industrialized and High-Income Countries Instrument (ICI) had been used as the main instrument for financial cooperation between the EU and the Gulf region (and other high-income countries). Amongst other projects, the ICI financed the EU-GCC Clean Energy Network for cooperation among various players in the EU and GCC on clean energy, and the EU-GCC Trade and Business Cooperation Facility. In 2014, the ICI has been replaced by the Partnership Instrument which provides a new framework for cooperation between GCC and the EU in multiple areas, including security, social, economic, educational, cultural and scientific fields, as well as human rights. The Partnership Instrument is inter alia supporting the 2nd phase of the EU-GCC Clean Energy Network. (4)

DATA RECEIVED FROM:
https://www.britannica.com/
https://www.mofa.gov.bh/
(1) http://www.middleeasteye.net
(2) https://www.thebig5hub.com/
(3) https://www.thebig5hub.com/
(4) https://eeas.europa.eu/

Kallirroi Pavlakou
International News and Markets

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