Concept Note & Call for Proposals: The GCC at Cross-roads: Responding to New Economic Order Conference, 8 – 9 December 2019, Muscat, Sultanate of Oman

Call for Proposals for Conference on: The GCC at Cross-roads: Responding to New Economic Order   8 - 9 December 2019, Muscat, Sultanate of Oman Hosted by Sultan Qaboos University   Context Since the early 1970s, successive economic development plans in each of the six members of the Gulf Cooperating Council have emphasized economic diversification as the major path towards achieving long-term sustainable growth. Oil revenues were used to realize investments in infrastructure, provision of services and in particular education and health as well as to build up savings in sovereign wealth funds and other external saving instruments. The oil revenues were also used to provide for transfers and jobs to nationals in the public sector with relatively higher wages and benefits than is offered in the private sector. Thus, growth in the GCC economies became increasingly driven by public spending which, in turn, tilted the production structure towards non-tradable goods and services at the expense of tradables. Importantly, no GCC country has managed to create the required human capital to generate sophisticated exports and drive economic diversification forward. The decline in oil prices that began in 2014, combined with increasing demands on governments’ purses led the GCC economies to shift their attention to structural reforms designed to promote productivity and encourage the private sector to assume a larger role in the economy. Efforts at structural reforms should focus on:

• Building a robust human capital base and develop the institutional capacity for effectively deploying it in order to affect the orientation toward the knowledge economy
• Following a “rules-based” economic policy framework rather than “discretionary” processes
• Steering the structure of incentives in the economy towards skill- intensive tradable sectors that could also provide attractive jobs for nationals
• Engineering a much more sophisticated industrial policy that encourages productivity growth

The above suggested development strategy entails undertaking a coherent set of institutional and policy reforms at both the micro and macroeconomic levels as well as critical assessing the social consequences of the current and potential economic programs. First, the GCC growth model has so far been driven by an accumulation of factors of production, mostly unskilled and semi-skilled migrant labor and to a lesser extent physical capital. Certainly, this growth model has served the GCC well, as manifested by its fast-economic growth over the last four decades. Nevertheless, the model was associated with low productivity growth underpinned by economic diversification patterns into low productivity sectors, such as construction and real estate. The dominance of the low productivity sectors made it difficult for the GCC economies to provide attractive private sector jobs for nationals, who have grown to expect high reservation wages (e.g.: http://erf.org.eg/publications/uae-escaped-oil-curse/). Second, naturally, the labor market must be at the heart of any credible GCC economic transformation in the future.   This is because the capacity of the economy to deliver productivity-driven diversifying growth and absorb an expanding national labor force requires major labor market reforms. The latter should be aiming at reducing the weight of citizen employment in the public sector, cutting wage differentials between the public and private sectors, and improving citizen education. However, such reforms entail complex interactions between growth strategies and political economy considerations.  Moreover, the appropriate balance between national and foreign labor will likely differ across the GCC, depending on the size of population and the level of resource rents per capita (e.g. http://erf.org.eg/publications/the-political-realities-of-economic-reform-in-the-gulf-monarchies/). Third, at the macroeconomic policies level, and under the emerging “new normal” in global oil markets, declining oil prices since 2014 have hit GCC economies leading to significant internal and external macroeconomic imbalances. The latter required both fiscal reforms and assessing the optimality of continuing with the de facto “hard currency peg” under the envisaged new oil order.  On the fiscal side, recent literature has emphasized the need for rule-based fiscal institutions for promoting effective stabilizing counter-cyclical fiscal policy in the short-to-medium runs; and for mobilizing longer term savings and investment.  And, on monetary and exchange rates, the literature discusses alternative exchange rate regimes, deemed to be appropriate for oil and mineral-dependent economies, ranging from more flex exchange rate regimes to the currency-plus-commodity basket (CPC), where the national currency is pegged to a basket that includes both the currencies of major trading partners and the export commodity (e.g.: http://erf.org.eg/publications/the-currency-plus-commodity-basket-a-proposal-for-exchange-rates-in-oil-exporting-countries-to-accommodate-trade-shocks-automatically/;  and, http://erf.org.eg/publications/oil-economic-diversification-and-development-in-the-arab-world/ ). Fourth, GCC efforts at diversification and transition to a knowledge-based economy could very well benefit from a deeper structural reform agenda. While a lot has been achieved since the signing of the GCC Customs Union Agreement in 2003, much remains to be done if the 2008 declared goals of the GCC Common Market are to be attained and the potential benefits fully realized. The GCC Common Market has indeed led to the creation of a unified economic space where GCC citizens enjoy in any member state equal rights and privileges as in their own state. This include, inter alia, the free movement across borders of people and capital and the rights to settle, work, own property, invest in various economic activities and services, and receive social protection and social services (health and education). However, a number of structural and technical challenges stand in the way of fully realizing the benefits from these freedoms. Realizing the full benefits from the GCC Common Market requires the resolution of a number of border-related issues including agreement on the mechanism to collect and distribute tariff revenues, and the full harmonization of product standards and technical regulations (sanitary and phyto-sanitary regulations or SPS and technical barriers to trade or TBT). Behind the borders, achieving a level-playing field for GCC nationals requires reform efforts to focus on, among others, government procurement policies, competition policy, subsidy policy, financial market regulations, and investment procedures and facilitation measures. More research should also focus on governance-related issues and in particular the role of supranational institutions in moving forward the integration agenda and ensuring local buy-in of agreed measures. Fifth, at the financial level, two main developments have been noticed: Islamic finance and fintech. On the one hand, the global Islamic finance industry has witnessed a steady double-digit growth in assets over the past few years. Moreover, Islamic financial assets are estimated to surpass the USD 3 trillion and further growth is expected. The appeal for the Islamic finance is its simplicity in concept and risk sharing. While there was not any major collapse in the Islamic banking industry, it is argued that Islamic banking sector was not systemically big enough to be affected by the economic shocks during that period. Yet, the growing systemic importance of Islamic banks present important problems for policy makers, regulators and practitioners in the areas of risk management, regulations and supervision in the interconnected and integrated global financial system.  On the other, Fintech is significantly disrupting the banking and financial systems. Indeed, while fintech in helping banks deliver enhanced risk assessment, reduce transaction costs, make operational back offices more efficient, lower fixed asset investment requirements, and enter new markets, there are several challenges related to the future of fintech in terms of management of information, information sharing and big data, as well as regulatory compliance. This is why more evidence-based research is needed for both Islamic finance and Fintech in order to assess their effect on GCC economies. At the trade policy level, little work has been done. Three research areas might be policy relevant and have a significant on both the industrial and trade policies. First, helping GCC countries develop exportable products intensive in high-technology will be indispensable to diversify their economies. Second, attracting foreign direct investment (FDI) in the manufacturing sector can develop global value chains to facilitate technology transfer and enhance their production capabilities. Third, addressing non-tariff measures a crucial determinant of exports performance as several products rely on imported intermediate inputs. Realizing the full benefits from the GCC Common Market require the resolution of a number of border-related issues including agreement on the mechanism to collect and distribute tariff revenues, and the full harmonization of product standards and technical regulations (sanitary and phyto-sanitary regulations or SPS and technical barriers to trade or TBT). Behind the borders, achieving a level-playing field for GCC nationals require reform efforts to focus on, among others, government procurement policies, competition policy, subsidy policy, financial market regulations, and investment procedures and facilitation measures. Sixth, little is known about inequality in the GCC economies. There is an important gap in the different aspects of inequality literature. In GCC labor market; diverse workforces increased wage gap between the nationals, concentrated in the public sector, and non-nationals in private sector. Even between non-nationals, wage inequality is observed with westerns workers gaining more than workers from Arab and Asian countries. Moreover, with the technological change and skills development, higher growth may be achieved by moving towards high-skills and high-productivity sectors. But such growth may yield to increase in inequality between those employed in low skills sectors and their counterparts in the high skilled sectors. Additionally, gender gap is observed in the GCC workforce with low female labor force participation, instead of the gains achieved by women in education at all levels. Concerning the inequality and growth nexus, there is no conclusion about the impact of inequality on growth. While inequality negatively affects growth in Saudi Arabia, it has positive impact on growth in Kuwait and UAE (e.g.: https://mpra.ub.uni-muenchen.de/70564/1/MPRA_paper_70564.pdf). Another scope of research consists on studying the effect of change in taxation system on inequality in the GCC economies (e.g.: https://doi.org/10.1142/S1793812009000139). Both Income and indirect taxes are known to be effective redistribution tools to reduce inequality, in addition to its role as main source of governments revenue. But, GCC governments depend more on rents from natural resources, than on taxes for public spending on social programs as marriage allowances, publicly funded hospitals and schools and other public services. Recently, GCC countries agreed on collectively applying a Value Added Tax (VAT). Some countries, as Saudi Arabia and the UAE implemented already the VAT in 2018, while for others it will take one or two years. The VAT is known as a useful government tool to increase revenue; however, it is a regressive tax that may yield to rising inequality (e.g.: https://www.wider.unu.edu/sites/default/files/wp2015-111.pdf). Hence, it is necessary to study the impact of the VAT and any change in taxation system in GCC countries on income inequality.  However, it is worth noting that income and taxation data used for computing inequality are scarce if not existent for GCC. Finally, building indigenous human capital and enhancing the capacity to manage the transition to a much more complex knowledge economy requires a robust and relatively advanced research capacity in science, engineering, management and economics.  Against this backdrop, the Economic Research Forum (ERF) and a consortium of GCC universities have recently launched the “GCC Economic Research Initiative” that promotes capacity building for GCC researchers and policy relevant high quality research.     Conference Objectives Subscribing to the above overview, the ERF and a consortium of GCC universities have recently launched the GCC Economic Research Initiative (GCCeRI), which is aimed at building a network for GCC researchers where they can interact with each other and the wider ERF research community to share ideas and collaborate on policy-oriented research.  In this context, the GCCeRI would provide a platform for GCC researchers and policy makers to discuss research and policy issues as well as regional and global developments; and, disseminate research outcomes to the public through means of publications, newsletters, conferences and workshops. This conference is designed to be the major inaugural event of the GCCeRI. The conference is organized jointly by the Economic Research Forum and the several GCC universities. It will convene around 70 researchers from the region and outside it and will last for two days, covering a rich agenda of plenary and parallel sessions and social events. Conference participants will be self-sponsored; however, the organizers will grant partial sponsorship for a limited number of participants. The organizers welcome submissions of proposals or completed draft papers on any topic of relevance to the GCC economic development and public policy issues, most notably the following:  

1. GCC Growth and Development Strategies:

• Sources of growth and productivity
• Structural transformation, industrialization and growth strategies
• Human capital and Growth
• Industrial policy, Economic diversification, economic transformation and growth
• Trade, financial Development and growth
• GCC-wide Infrastructure, economic cooperation and growth

2. GCC Macroeconomic Institutions:

• Sovereign Wealth Funds and FDI
• Sovereign wealth Funds and domestic macro stabilization
• Fiscal institutions and counter-cyclical policies
• Internal and external imbalances
• Exchange rate regimes and macroeconomic stabilization
• Exchange rate regimes and macroeconomic competitiveness

3. Finance:

• The macro and microeconomic effects of e-finance.
• Crypto-currencies and classical banking systems.
• The role of blockchains and recent development in the financial markets.
• Macro/micro prudential regulatory framework supporting financial stability
• Systemic risks: Measurement Approaches for Islamic banks
• Regulatory framework for Islamic vis-à-vis conventional banks
• Contemporary risks to financial stability arising from Islamic banking model in an integrated financial system

 

4. Labor Market:

• Economic development in labor-exporting countries and implications for the GCC
• Labor market strategies and economic transformation
• Labor market characteristics

5. Realizing the GCC Common Market and its Full Benefits:

• The effect of trade wars on GCC trade
• The political economy of trade protection
• The effect of trade policies on labor market
• The determinants of integrating into global value chains
• The effect of non-tariff measures on exports and imports
• The role of supranational institutions in supporting economic integration efforts
• Structural impediments to trade and economic integration in the GCC
• The role of trade and economic integration in the drive towards diversification and transition to a GCC knowledge-based Economy

6. Inequality:

• Inequality- of opportunity, access to resources …etc.
• Inequality and skills premium.
• Diverse workforce and inequality in the GCC labor force.
• Gender inequality in GCC labor force.
• Inequality, taxation system and growth in the GCC.

7. Food security in the GCC

The GCC countries without exception have one of the world’s most comprehensive plans to address food security, but much can be done to improve its resilience and sustainability. Food security requires a functioning and sustainable food system, which encompasses many variables. Under food security, the proposed research papers and research proposals may address the following issues:

• The production of food and the relationship between investment, allocation of resources and utilization of food
• The supply chain financing approach and technology-based food processing industries —Innovative financing.
• Diplomatic relations and investment pattern in food production.
• The challenges that threaten the food security in the GCC countries.

    GUIDELINES FOR SUBMISSIONS Authors should submit an original proposal of a maximum length of ten double spaced pages [excluding appendices, tables, figures and references]. Authors of the selected proposals will be self-funded, however, the steering committee of ERF and the GCC consortium of universities and policy research institutions might grant some limited funding for few cases. Proposals should be structured so as to contain sections in the following format. ERF reserves the right to exclude proposals that are not consistent with these guidelines:

1. Statement of the research problem: A clear and concise description of the nature and importance of the proposed research, its scope and boundaries, its general context, and its objectives, with explicit reference to feasibility and policy relevance.
2. Value Added: A selective and analytical review of the relevant literature, with a view to both demonstrating knowledge of prior theoretical and empirical work, as well as identifying the knowledge gap that the proposed research seeks to address.
3. Conceptual Framework and Research Methodology: A clear statement of the conceptual framework should be provided, elaborating on the set of specific, identifiable and concrete questions for which the proposed research intends to answer. This is to be followed by an elaboration of the research methods to be employed and why they are best suited to answer the research questions. This section should also indicate the nature of the information required and the data collection techniques, whether primary or secondary or a combination of the two. Finally, it should explain how the information will be analyzed and interpreted using quantitative and/or qualitative methods.

    Important note: The proposal/ paper can be submitted in English or Arabic. The proposal/paper should NOT include the authors’ names, as it will undergo a blind review process. ELIGIBILITY

• Researchers should have expertise in the topic being researched.
• At least one of the main researchers should be a GCC national or working at a GCC-based university or economic policy research institution.
• Researchers from disciplines other than economics may apply.

SELECTION CRITERIA

• The value added of the project in terms of contribution to existing knowledge.
• The methodological rigor, be it econometric methods or a qualitative research design for a within or cross-case comparison.
• Policy relevance of the proposed project.

  APPROVAL PROCESS

• All proposals and outputs will be peer reviewed. Authors of accepted proposals will be requested to respond to comments of the reviewers.

IMPORTANT DATES

• Deadline for submission of the research proposals/papers: September 20, 2019
• Announcement of accepted research proposals: September 30, 2019
• Submission of final papers: November 15, 2019
• Conference to present the papers: December 8- 9, 2019

Submit your proposal/paper online: https://bit.ly/2Pljmmn    For queries, please contact Faiza Jafar at fjafar@erf.org.eg