Michael Gannon
University of North Carolina at Pembroke mrg011@bravemail.uncp.edu
Working under: Dr. Bishwa Koirala, Director of Economic and Business Research koiralabs@uncp.edu
Dr. Lydia Gan, Economics and Decision Sciences Department Chair lydia.gan@uncp.edu
The growth and future prospects of GCC countries represent the application of developmental strategies to resource based economies. This paper is a panel analysis of variables that may be causal to the GDP growth rate, to include: military spending, education investment, healthcare investment, tourism, Oil rent, reserves, and export revenue, among ten others. The survey of the empirical analyses focuses on Oman within the context of similar economies in the GCC, and unique geopolitical and demographic conditions shared by those countries are thereby controlled. The panel analysis uses World Bank data run on a several regression models in STATA. Conclusions are that sustained growth is best achieved via investment in transitioning economies through education, healthcare, development of a middle class, limiting corruption, and opening the economy to entrepreneurship and FDI that is not centralized on resource extraction. Government investment in education has been statistically relevant to positive GDP growth rates, as have other variables. Also of note has been the role of Natural gas developments and the differences between those and oil reserves in the future. During the past fifteen years Oman and its sister GCC countries have all been investing in more extraction infrastructure as well as some of the highest military spending (as a percentage of GDP) in the world. These countries also have a large foreign-worker population that is a currently a problem for economic growth, and impedes development of a middle class and transition to a modern economy in the future. In Oman oil reserves are listed to deplete in sixteen years, though that timeline will be extended to some small degree as advanced extraction technology is used and oil prices rise to make employment of that technology profitable. Given that Oman has the smallest reserves in the GCC, and it is not a member of OPEC and therefore will produce above the quotas set (this is especially relevant in light of OPEC's November 30 announcement), it will most likely be studied as the first middle east economy to transform from petroleum based to either stability or failure. Lastly, the leader since 1970, Sultan Qaboos, is in poor health, and the transition of power will complicate the tenuous peace and prosperity of the country, which is greatly held together by generous civil programs funded by oil revenue. These conditions position the understanding of Oman's GDP growth as an invaluable case study for the the GCC countries, developing economies, and the global economy as world oil reserves decrease. This analysis has attempted to measure the significance of the above effects with mixed results.
The results and conclusions will be informed by supplementary meetings
with highly ranked Omani economic ministers during a school-financed
trip to Oman in December. The author has made arrangements to discuss during these meetings the opportunity for comparing current results with government data.
