## Press Release: The IMF Middle East Center for Economics and Finance, Jointly with the Arab Fund for Economic and Social Development, held a Symposium that Discussed the Path to Economic Diversification in Kuwait and Other GCC Countries

_IMF News, May 16, 2016_

## Source details

**Canonical URL:** [Press Release: The IMF Middle East Center for Economics and Finance, Jointly with the Arab Fund for Economic and Social Development, held a Symposium that Discussed the Path to Economic Diversification in Kuwait and Other GCC Countries](https://www.imf.org/en/news/articles/2015/09/14/01/49/pr16223)

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## Bibliographic details
- Published: May 16, 2016

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### Event summary
- Press Release No. 16/223
- Date: May 16, 2016
- Organizers: The IMF Middle East Center for Economics and Finance (CEF) jointly with the Arab Fund for Economic and Social Development (AFESD)
- Venue: Arab Fund’s Headquarters
- Moderator: CEF Director Dr. Oussama Kanaan
- Panelists: Professor Ha-Joon Chang (Cambridge University), Dr. Reda Cherif (IMF), Dr. Fuad Hasanov (IMF)

### Context and urgency
- Immediate policy impetus: decline in oil prices from above $100 to about $40 per barrel today.
- Historical reference: risk of a return of the oil slump of the 1980s–1990s, which previously led to unemployment, falling living standards, and heavy indebtedness in affected oil-exporting countries.
- Challenge emphasized: addressing low oil prices in the current context of high government spending and rising expectations about the provision of jobs and income transfers.

### Findings from the panel discussion
- Core ingredients of successful economic diversification strategies:
  - Infrastructure investments conducive to private sector growth.
  - Human capital investments conducive to private sector growth.
  - Development of sophisticated non-oil export industries.
- Comparative experience:
  - Past diversifiers cited: Brazil, Korea, Malaysia, Singapore.
  - Lessons: countries must experiment and learn from others; incentives for firms and workers need realignment to develop technologically sophisticated export-oriented industries.
- Nature of diversification:
  - Diversification does not need to build on existing economic activities; new, often unrelated activities can emerge.
  - When related to traditional industries, diversification requires products to become increasingly sophisticated and move to more advanced stages of manufacturing.
  - Choice between service-sector versus manufacturing-led diversification depends on potential productivity gains.
  - The frontier between services and manufacturing is fading; service sectors more strongly linked to manufacturing can yield greater productivity gains.

### Policy recommendations and strategic guidance
- Fundamental change required: oil exporters must change the prevailing economic model toward becoming innovative economies.
- Policy actions:
  - Address government failures and market failures that hinder movement toward dynamic sectors.
  - Realign incentives for firms and workers to move into more dynamic, technologically sophisticated sectors.
  - Focus on developing dynamic export markets; diversification can begin with a limited set of industries.
  - Facilitate entrepreneurship.
  - Prioritize education and social development as central pillars of diversification.
  - Implement a highly selective industrial policy tailored to the country’s particular economic and social conditions.

### Discussion and participants
- Audience composition: participants from the public sector, the banking and business community, academia, and representatives from international and donor organizations.
- The floor was opened for audience discussion, reflecting a broad range of interests.

*IMF Communications Department; Media Relations: E-mail: media@imf.org; Phone: 202-623-7100*

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## Content in this bundle

- [Pr16223apdf (PDF)](/-/media/websites/imf/imported/external/arabic/np/sec/pr/2016/pr16223apdf.pdf){rel="external" type="application/pdf"}

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## References

- [Kuwait and the IMF](http://www.imf.org/external/country/KWT/index.htm)
- [Kingdom of Bahrain and the IMF](http://www.imf.org/external/country/BHR/index.htm)
- [Oman and the IMF](http://www.imf.org/external/country/OMN/index.htm)
- [Qatar and the IMF](http://www.imf.org/external/country/QAT/index.htm)
- [Saudi Arabia and the IMF](http://www.imf.org/external/country/SAU/index.htm)
- [United Arab Emirates and the IMF](http://www.imf.org/external/country/ARE/index.htm)
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_Source: https://www.imf.org/en/news/articles/2015/09/14/01/49/pr16223_