Sunday, May 15, 2005

Does the GCC have a manufacturing edge? - Gulf News

I'm scratching my head trying to make sense of the discussion of the UAE textile industry that is in this article. The discussion is confused or confusing.

But this seems flat wrong:
As China does enjoy high levels of competitiveness in the labour-intensive industries, including the readymade garment industry through which it was able to invade world markets, we do have significant advantages in the capital-intensive industries that rely on cheaper energy sources. Such industries can enable us to invade world markets.

It seems that there are some initiatives in some Gulf countries, which initiatives need to be enhanced and developed for keeping abreast of international developments. With such process, significant gains could be achieved to put the GCC states on the world's economic map in the post-oil era.
First, oil is no cheaper here than in the rest of the world. Oh, it may be cheaper to the final user, but the opportunity cost is the same - because oil is mobile around the world. Thus, any advantage is merely due to a subsidy from the publicly-owned oil sector. In other words, the appearance of profitable opportunities in energy-intensive sectors is really a reflection of a transfer of oil profits to prop up manufacturing.

Second, the author contradicts himself by advocating investment in oil-intensive manufacturing in one paragraph and then implying in the next that the post-oil era is approaching. Putting yourself "on the world's economic map" has no economic meaning.

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