‘Copycat’ infrastructure projects and competing ‘hub’ ambitions among the six countries comprising the Gulf Cooperation Council (GCC) bring the risk of cannibalisation at best, or failure for some at worst, Standard Chartered bank says in a recent note.
The GCC countries have eight separate stock exchanges between them with a combined market capitalisation of just $720bn at the end of September 2010. This, says the bank, is “too many” bourses in a region with “roughly 40mn people, less than half the population of Egypt".
“Fierce competition between GCC countries also threatens to undermine common regional goals,” according to the StanChart note co-authored by Philippe Dauba-Pantanacce, Senior Economist; and Nancy Fahim, Economist; at the bank’s Dubai branch.
“This is happening across a wide range of sectors, including entertainment (the region now has two Formula 1 Grand Prix), tourism, financial services (several GCC countries are vying to become regional financial hubs), downstream oil-sector expansion, and knowledge-based industries,” the authors say.
“In logistics and trade, for example, competition is heightened by Dubai’s first-mover advantage. It is now the world’s third-largest re-export hub, making it difficult for other regional centres to compete and catch up in this sector. While most GCC countries have sufficiently high public revenues to fund such endeavours, they would likely gain higher returns over the long term by spending on more coordinated regional projects,” the bank suggests.
The bank has called for “closer coordination” between the economies of the six-country bloc. “This would allow them to reach critical mass and become more relevant both regionally and globally,” the note says.
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