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Special Economic Cities in the GCC

Special Economic Cities in the GCC. The Way Forward…Maybe CPT Kyle Phillips, USA NS3041. Introduction. Thesis Rentier States Special Economic Cities Case Studies Dubai Oman Saudi Arabia Conclusion. Rentier States of The GCC. Characteristics of GCC States:

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Special Economic Cities in the GCC

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  1. Special Economic Cities in the GCC The Way Forward…Maybe CPT Kyle Phillips, USA NS3041

  2. Introduction • Thesis • Rentier States • Special Economic Cities • Case Studies • Dubai • Oman • Saudi Arabia • Conclusion

  3. Rentier States of The GCC Characteristics of GCC States: • States rely on oil rent to take care of populations • Expectation for Nationals to be given public sector jobs • Women were excluded from the workplace • Expatriates were brought in to fill less desirable jobs

  4. Problems for Rentier States • When the first oil boom ended states saw negative effects, and felt a need for diversification of economies • Need to diversify their economies to lessen future negative effects • Need to privatize their economies to share burden and participate internationally

  5. Special Economic Cities • Used to stimulate economies • To dampen the effects of changing oil prices • Todraw in Foreign Investment • Increasetourism & service industries

  6. Dubai and Free Zones • Dubai is an emirate of the UAE and has faced problems of a relative lack of oil from early on • Ruling family was always a trading and entrepreneurial family, took a risk dredging Dubai Creek to create a world class port • Took initiative to draw investment with tourism and the creation of free zones

  7. Economic Free Zones • Areas within cities that offer partial or complete foreign ownership • Drastically reduced or no corporate taxes for a set period of time • No requirement for repatriation of profit Generally attractive to foreign investors and therefore usually drive real-estate values up

  8. Oman • Small ruling family means that rulers are not as well entrenched as in other GCC state • Economic diversification, privatization, and Omanization are the cornerstones of the 6th 5 year plan • 7th 5 year plan includes reduced reliance on oil

  9. OmanizationBringing Omanis Back in the Workforce • Omanization is only happening at a modest level in higher end jobs • Minimum wages are still drastically different between Omanis and expatriate workers • Setting quotas often leads to hiring of Omani workers that don’t work but are just on the books • Appealing to nationalism has yielded little to no results

  10. What is Going Right • Creation of cities like the Knowledge Oasis Muscat which are not only free zones but also help to build business and train people • Infrastructure has grown exponentially (12 hospital beds in 1970s to top ten healthcare systems in the world) • Focus on education has dropped illiteracy in Oman from 45% in 1990 to 25% in 2002

  11. Foreign Direct Investment FlowsIn Millions and As a Percentage of Fixed Capital Formation

  12. Saudi Arabia • Success of economic cities in UAE and Oman have lead to other countries replicating them • Saudi Arabia plans to build the biggest of all of them King Abdullah City

  13. King Abdullah City • City will be divided into 6 distinct sections • Huge seaport and airport will allow for: • 300,000 more pilgrims to enter Saudi Arabi for the Hajj • Allow largest ships in the world to dock and have seemless transition from rail to sea • Industrial District • Indigenous Saudis will be trained for opening jobs • Financial Island • 60000 professional jobs • Education Zone • Resorts • Residential Area

  14. Developing Tourism • Helps to sustain economy • Skyrocketing land values lead to huge land reclamation projects • Construction in places like Dubai have allowed to others like Oman to offer more pristine experiences

  15. Conclusion • Cities survival and growth are still based largely on oil revenues • Indigenization of the workforce is an acknowledged problem but solutions are not yielding desired results • Explosions in tourism industries have helped to diversify economy but are still just another form of rent

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