Deputy Managing Director of the International Monetary Fund (IMF) Min Zhu will be visiting Kuwait on April 30 to participate in the high level conference on “Economic Development, Diversification and the Role of State,” which is co-hosted by the Fund and Kuwait’s Ministry of Finance.
In an exclusive interview with (KUNA) ahead of his visit to Kuwait, Zhu shed light on the importance of economic diversification in the GCC states, affirming that economic diversification is “very important” for the GCC countries.
He noted that diversification “would help reduce the reliance on oil revenues and would increase employment opportunities for nationals in the well-paying jobs in the private sector.” He added that “the labor market structure in the GCC, with the majority of nationals employed in the public sector and the private sector reliant on an elastic supply of low-skilled expatriate workers, has enabled the region to develop rapidly so far, and keep inflation relatively low.” “However, the costs of this model, low productivity and a low responsiveness of the employment of nationals to economic growth, are becoming an increasing issue and economic diversification becomes more of a policy priority,” he stressed.
He emphasized that “fostering a business-friendly environment to improve confidence and increase private investment is crucial, but this needs to be accompanied by efforts to change the existing incentive structure in the economies.” He noted “at present, nationals tend to want to work in the public rather than the private sector, and firms cater to the domestic market rather than looking to export.” He believes “the emphasis needs to be on improving competitiveness of national workers and creating long-lasting employment in the private sector.” He indicated that “this can be achieved in a number of ways, including through developing small and medium-sized enterprises, broadening training programs and other forms of skill acquisition,improving education, and increasing opportunities for employment of women.” He affirmed that “many such initiatives and reforms to increase the employment of nationals in the private-sector are under way in all countries, but an increased focus on controlling public sector employment, raising educational quality, and making nationals more competitive in the private labor market are needed.” In reply to a question on the long-term outlook for the energy market in the GCC states, Zhu stressed that there are “considerable uncertainties about the likely future path of the oil market given the rapid growth of production in North America, ongoing supply disruptions in key exporting countries, and risks to the global growth outlook that would affect oil demand.” He added “however, there is a risk that GCC producers will face an oversupplied market in the next few years, and financial markets are suggesting that oil prices will ease in the next few years.” “In the long term, most forecasters expect demand for OPEC oil to pick up again, but the shale gas boom could help slow oil demand growth, creating another headwind for Middle Eastern producers,” he predicted.
“These uncertainties underscore the need for structural reforms to facilitate diversification,” the IMF official reiterated.
During his visit to Kuwait, Zhu will also be meeting with Kuwait’s Minister of Finance Anas Al-Saleh, “who will deliver the opening address at the conference” and with Dr. Mohammed A-Hashel, Governor of the Central Bank of Kuwait.
Source : KUNA Kuwait News agency