Monday, September 26, 2022

How did a US$3 billion economy become a US$46 billion economy in 50 years? The case of Dubai & lessons for Guyana

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By Joel Bhagwandin – OilNOW

Background

Since becoming a petroleum producing country, public commentators often reference Guyana as the next Dubai in the Caribbean in terms of whether Guyana has what it takes to mirror Dubai’s success as an oil rich country.

The question is: how did Dubai, once a mere US$3 billion economy or less, become a US$46 billion economy in fifty years and regarded one of the richest nations in the world.

Dubai’s Political system

First, let’s reflect on the country’s political system. Dubai is a monarchy where its people have had confidence in this system for more than some 300 years and they continue to this day to have the same level of confidence. As a result, Dubai enjoyed uninterrupted political stability for more than 100 years and it continue to so do within the same political framework.

It is important to note that in order for a country to experience rapid development and economic transformation, paramount to achieving this is political stability.

Guyana’s Political System

In the case of Guyana, it’s been 50+ years since Guyana became an independent State from British rulership. Almost half of this era (post-independence) Guyana was a ‘centrally command’ State, an era characterized by politically inflicted social and economic stress, leading ultimately to a bankrupt economy.

The latter half (post-1992) Guyana transitioned to a free market economy – that is, the birth of and /or the legitimization of the private sector commenced in 1992: the beginning of a new era with a different political and economic system.

During this time, however, Guyana faced almost two decades of political instability, which largely stymied its development and economic transformation. Arguably, Guyana only enjoyed eight years of stability out of 25 years in the latter half of its 50+ years post-independence.

Dubai’s Economic System and Structural Transformation

Second, prior to Dubai’s oil discovery the country was largely a fishing economy. In other words, the main economic activity by its people was fishing (in fact, Dubai was described as a small fishing village). With its newfound wealth some 50 years ago, the monarch at the time understood from the very outset that the oil resource would NOT last forever. Hence, with this notion in mind, the monarch made it clear to his people that the resources will be used to invest in building a new Dubai economy that will be sustainable in the long-term and that when the oil is depleted, Dubai will not be solely dependent oil.  This means that the future of the economy would naturally change which means the peoples’ future would also change to one that is prosperous in more ways than one.

To achieve this goal fifty years ago, Dubai had to import labor because the skills of its people were not enough to help build the infrastructure to support its future growth and transformation at that time which is history today.

In so doing, Dubai sought to invest heavily in infrastructure, this is visible today as evidenced by the sophisticated and naturally beautiful physical landscape of the country. Dubai’s economy today thrives on international trade, shipping, tourism, and a huge chunk of the country’s GDP is driven by the service industry. This is essentially what structural change means, transition from a fishing village to a fundamentally diverse economic model – now one of the richest nations on the planet.

Lesson for Guyana

The fishing industry in Guyana up to 2019 was a $16 billion industry and is now down to a $7.7 billion industry, representing a loss of 52% in just two years. Notwithstanding this reality, given where Guyana is heading for the next 50 years, the fishing industry will have to naturally evolve and integrate into the new economy of the future where the foundational works is being built today by the current Administration. The reality is such that the faster this is recognized for what it is, the better for all stakeholders and the country at large.

It is imperative for Guyanese to prepare for the new economy of the future especially the fishing industry; learn new skills, develop new competencies and capabilities, learn new trade, invest in self-development, take advantage of all the support and initiatives in these respects.

With respect to the future of the fishing industry in an oil economy like Guyana, operators in this sector now need to start examining innovative and sustainable aquaculture (fish farms) scaled to commercial levels – as traditional fishing may not be sustainable and commercially viable in the future.

Finally, it took Dubai 50 years to amass the economic status it has today, Guyana can also achieve similar successes in 50 years provided that the country continues in the current trajectory and continue to build upon the foundation being built by the Administration of the day. And more importantly, political stability is paramount to achieving this outcome.

About the Author

Director, Business Intelligence & Analytics | Financial and Economic Analysis | SPHEREX Professional Services | JB Consultancy & Associates

Joel Bhagwandin is a financial and economic analyst, an academic researcher and writer, a junior business executive, and thought leader. Joel is actively engaged in providing insights and analyses on a range of public policy, economic and macrofinance issues in Guyana for the past 5+ years. In this regard, he has authored more than 300 articles covering a variety of thematic areas in public policy and macrofinance. Joel has more than fourteen years’ experience in banking, corporate finance, management, consulting, and academic research. Academically, Mr. Bhagwandin is the holder of a master’s degree in business management with specialization in banking and finance from Edinburgh Napier University. His specialties and skills include Corporate Finance, Banking, Capital Markets & Securities, Business Intelligence & Data Analysis.

 

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