The Middle East constitutes of a significantly diverse economy attributed to the variety of economies in individual countries, which include exportation of oil and hydrocarbons, socialist and free-market economies. The thriving oil industry in the Middle East has greatly transformed the overall economic growth rate of the region, which analysts estimate to be about four times the average growth rate in the world.
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The major oil-producing countries such as Saudi Arabia, Iraq, Kuwait, UAE and Qatar have benefited directly from the increase in oil prices while the non-oil producing states have taken advantage of the increase in job opportunities due to the expanding economies. Although the Gulf economies have attained significant levels of per capita income and standards of living, states such a Jordan and Yemen exhibit high levels of poverty.
Major oil-producing states such as Saudi Arabia and Syria have lower rates of unemployment in comparison to states such as Lebanon, West Bank and Gaza, which have an unemployment rate of about 40 percent. Despite the economic boom in the Middle East, there is an observable difference in the income gap between the oil-producing and non-oil producing states due to the difference in the rate of accumulation of national wealth.
An analysis of about 20 states in the Middle East illustrates that Saudi Arabia, which boasts of about 20 percent of the world oil reserves, has the leading economy in the region followed by the United Arab Emirates (UAE) whose GDP was about 282.4 billion US dollars by 2012. However, UAE has the most diversified economy in the Middle East and supersedes economies in developed countries such as Australia, New Zealand and Russia.
Efforts towards economic diversification in UAE focus on reducing the high level of dependence on oil and natural gas, which are the main inputs into the regional economy. In this regard, the country is focusing on expanding its goods and services industries by creating free trade zones that have been successful in wooing foreign investors through offers such as full ownership and zero taxes.
In addition, the UAE government has significantly increased its expenditure on job creation and expansion of infrastructure to promote investments. Dubai and Abu Dhabi form the two major centers of commercial and economic activities in UAE with the two states investing billions of dollars in tourism, aviation, banking and finance. Diversification efforts by Abu Dhabi are evident in the recent initiatives to harness nuclear power and establish ICT and zero-carbon cities such as Masdar City.
Dubai has taken advantage of its strategic location and historical reputation on the Persian Gulf to market itself as a major port city and is developing large port facilities and luxury hotels. An analysis of the ranking of UAE based on the World Competitiveness Index shows that the country has made tremendous progress towards the realization of its non-oil GDP goals with a notable growth of about 10 percent in the manufacturing sector.
Concerns regarding declining oil reserves and fluctuation of oil prices remain the center of focus for diversification programs in the Middle East as leaders seek to establish the region as a world economic hub. Economic analysts expect a continued economic growth in the Middle East though at an uneven rate due to the diversity in the available resources in various states, which influence exports, investment and enhancement of human resources and technology.