VIABILITY OF INDUSTRIAL INTEGRATION WITHIN THE GULF COOPERATION COUNCIL: THE CASE OF PETROCHEMICAL INDUSTRIES (MIDDLE EAST)

• Main Author: AL-SABBAN, MOHAMMAD SALEM
• Format: Dissertation
• Language: English
• Subjects: economics, general

The formation of the Gulf Cooperation Council (GCC) in 1981 among six Arab Gulf countries--Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates--was an essential step toward the comprehensive economic development of the region. These countries, with their great though declining financial capability arising from oil as the main source of income, had already tried individually to diversify their economies in order to decrease their total reliance on crude oil income in the wake of the world oil glut. Their limited base of natural resources other than oil is a major constraint. Industrialization, and specifically, industrialization through oil-based industries, seems to be the most viable approach they have toward their successful economic development.
The GCC economic agreement started with the creation of a customs union, a step which will have little impact through foreseen gains. This is because of the limitations of the region's market size as well as because of the great similarities existing in the countries' factor endowments. The viability of the GCC as an industrial integration scheme rests on regionalizing the diversification process through pooling the available resources, on coordinating the countries' plans, and on adopting joint action to solve present and future obstacles.
This study concentrates on the issues of regional economic and industrial development as the main factor for economic gain that may result from the GCC scheme. The experience of different integration schemes provides some beneficial lessons for the GCC.
The GCC region has a comparative advantage in petrochemical industries, which suit the region's factor endowments, arising from the availability of cheap energy feedstock. Al-Jubail and Yanbu, the well-planned new industrial towns in Saudi Arabia, could serve as industrial bases for GCC joint petrochemicals. As a workable example of the viability of GCC industrial integration, GCC petrochemicals are to concentrate not only on joint production, but also on adopting joint solutions to marketing, to their dependence on expatriate labor, and to environmental problems that may affect the development of these industries in the GCC region.