More than half of respondents (57 per cent) believe that tourism will become the leading industry spearheading economic diversification in the Middle East, according to a survey of regional business executives by London Business School.

Trade, transport and logistics ranked a close second (55 per cent), while technology ranked third (46 per cent).

The majority of people surveyed (86 per cent) would like to see increased collaboration between states, policy makers and enforcers in order to achieve the aims of national strategies.

Andrew Scott, professor of Economics, London Business School, said: “It is encouraging to see that in the face of real threats to globalisation the Middle East remains committed to greater integration. Given these global threats it is all the more important that the region coordinates its efforts to make this part of the world as attractive and as vibrant as possible.”

Efforts in this direction already seem to be afoot. Dr Sultan Ahmed Al Jaber, the UAE’s Minister of State and Abu Dhabi National Oil Company (Adnoc) Group CEO, has recently called on GCC petrochemical producers to explore avenues for collaboration to capitalise on market access, in order to become a global industry powerhouse. The GCC petrochemicals industry has been growing at over 10 per cent every year since 2000.

Following the significant fall in oil prices in 2014, Middle Eastern economies are focusing on diversification with renewed vigour. Traditional oil-based economies could soon be replaced by the ‘T- economy’: tourism, trade and technology, the survey indicates.

The region’s business executives are equally clear about the main challenges facing the region when it comes to diversification.

More than a third of those surveyed (36 per cent) view a dominant public sector as the main barrier to diversification, over and above other issues such as complex processes to set up growth projects (29 per cent) the existing quality of education and vocational training (29 per cent), access to direct lending and credit (24 per cent) and current allocation of oil revenues (20 per cent).

The survey results support that human capital is one of the main contributors to the economic progress of a country - 77 per cent of those surveyed agreed that incubating national talent contributes to economic diversification strategies in the Middle East.

“Crucial for economic development is strong education, and those with education working in productive and innovative sectors,” said Professor Scott. “The need for skilled workers has become all the more important in the face of globalisation and developing technology. With Artificial Intelligence widely seen as about to usher in a Fourth Industrial Revolution, the need for knowledge workers is set to become even more important.”

Nationalisation, or the policy of bringing more citizens into the workplace, forms part of the vision of all GCC countries. Substantial efforts are being undertaken by governments in the region to equip and nurture local talent, in order to facilitate sustainable economic growth.

The survey shows support for Small and Medium size Enterprises (SMEs) is important for economic diversification. More than two-thirds of the business executives surveyed (68 per cent) agree that the SME sector will help GCC countries to achieve their wider strategic aims of diversity, innovation, employment and leadership.

“SMEs and starts-ups are crucial for innovation. Incumbent firms tend to be important in terms of investment, but developing new ideas and finding new ways of working come heavily from smaller firms and new start-ups,” said Professor Scott.“A healthy start-up culture promotes innovation across an economy.”

More than200 members of the London Business School community, including alumni, Executive Education past participants, Executive MBAs based in Dubai and the School’s Middle East Club, participated in the survey. London Business School’s Dubai Centre has been offering the international education and development to the region’s business leaders for the last ten years.

Key findings of the survey:

•    87 per cent respondents believe that cooperation between countries in the Middle East is key to achieving economic diversification

•    77 per cent of business leaders surveyed believe that incubating national talent contributes to economic diversification strategies

•    68 per cent of business leaders surveyed believe that SMEs and start-ups will contribute significantly towards economic diversification of the region

•    63 per cent respondents believe that a rise in oil prices would threaten commitment to economic diversification programmes

•    Supportive regulatory and institutional frameworks (37 per cent) along with macro-economic stability (26 per cent) are top requirements for economic diversification in the Middle East

•    Tourism (57 per cent), transportation, trade and logistics (55 per cent), and technology (46 per cent) will lead the Middle Eastern economies away from their reliance on oil – TradeArabia News Service