The aim of the research is to study changes in the economic policies of GCC countries in the era of low oil prices, and to suggest policy implications for economic cooperation between Korea and Middle East countries. We conduct a review of economic policies, including case studies, divided into the areas of industrial, employment, trade and investment policies. Then, corporate risk factors and implications are drawn for Korean companies aiming to consolidate their market position in the Middle East.
   Chapter 2 analyzes the oil-dependent economic structure of GCC countries and the long-term economic plans being pursued to diversify this structure. As the economic structure of GCC countries heavily depends on oil and natural gas exports, volatility in international oil prices poses the greatest risk to economic stability in those countries. The drop in international oil prices reduces export performance in the oil and natural gas sectors, which in turn results in a decline in the stability of fiscal revenue. Accordingly, the six GCC countries have established new mid- to long-term economic plans with a focus on diversifying their economies, improving the quality of human capital and expanding local production and procurement. They are diversifying their industrial structure by fostering high-tech manufacturing industries such as aerospace and life sciences, and knowledge service industries such as finance, logistics and tourism, and strengthening policies in areas including technology development related to the fourth industrial revolution, digital transformation and startup support.
   Chapter 3 examines industrial policies focusing on strengthening technological innovation capabilities and digital transformation. Although the level of innovation in GCC countries is still considered to be below expectations, technology innovation policies are continuously being pursued to strengthen innovation capabilities in Saudi Arabia and the UAE. In addition, digital transformation is being actively promoted by digitizing government services and establishing various digital service platforms. Digital transformation is also becoming more important in the oil sector as it can increase operational efficiency and workplace safety and minimize environmental impact. State-run oil companies are employing cutting-edge technologies in the form of robots, drones, AI and big data to conduct real-time analysis and management of their industrial facilities. Smart cities, tourism, logistics, space and life sciences are areas where the introduction of digital technology is accelerating, and government-level fostering policies are being strengthened. Meanwhile, Saudi Arabia and the UAE recognize technology-based startups as key factors that will lead the nation’s innovation and are pushing for policies to vitalize the startup ecosystem by expanding support programs for startups.
   Chapter 4 touches upon recent changes in the employment policies of GCC countries, focusing on expanding employment for national workers and enhancing their job competencies. Through the introduction of the Nitaqat system, Saudi Arabia has strengthened the management and supervision of the quota system for national workers and subdivided its application criteria by industry and business size. Furthermore, in recent years, quota systems have been applied to jobs that require relatively high levels of technology, such as engineers, while foreign fees have also been introduced. The UAE is implementing systems that take into account the relatively small size of its national workers, with the Absher Initiative, in which the government covers the cost of vocational training for national employees, and the Tawteen Gate, in which companies that want to hire foreigners are mandated to review national job seekers first. In addition, GCC countries are taking measures to improve the employment environment of the private sector by introducing a minimum wage system, wage protection system and maternity leave. Regulations to expand the employment opportunities of national workers can lead to certain negative consequences, such as industrial development being hindered, outflow of excellent foreign workers, and reduced inflow of foreign investment. In preparation for such a situation, GCC countries are trying to increase vocational training support for national workers, eliminate restrictions on women labor and foster cooperation with companies and educational institutions in advanced countries.
   Chapter 5 surveys the GCC’s trade and investment policy changes. The GCC’s tariff rate remained low at around 5 percent as it launched a customs union in 2003, but has been rising slightly since 2015. Saudi Arabia, in particular, has raised its own tariff rate by up to 20 percent in June 2020 in order to secure the government’s non-oil revenue. The GCC also drew up a “Common Law on Anti-Dumping, Countervailing and Safeguard Measures” in 2004 and has been imposing safeguard and anti-dumping duties on imported goods such as steel products, car batteries, whose domestic production have increased. In addition, the GCC has tightened regulations on food imports for the purpose of health and safety for its citizens by increasing the number of sanitary and phytosanitary measures (SPS) notifications. The GCC Standardization Organization (GSO), a joint body of GCC countries, is increasing standards and technical regulations, while each GCC member country is introducing its own certification system and tightening labeling policy as well. Regarding investment policies, GCC countries are relaxing various regulations and offering incentives to support foreign investors. In particular, Saudi Arabia, the UAE and Qatar are removing regulations restricting foreign ownership, expanding various support measures, including granting permanent residency to foreigners, tax exemption and allowing the transfer of profits overseas. On the other hand, these GCC countries are also strengthening localization policy so that overseas bidders can further contribute to investment, production and job creation in the region by granting additional points to local employment and local production of the bidders.
   Chapter 6 examines online surveys and in-depth interviews to identify major troubles Korean companies are facing in the GCC countries, and their requests for the government. According to the surveys, lack of market information (26.7%), local regulations (23.3%), cultural gaps (20.0%), and lack of skilled workers (10.0%) are the main difficulties in conducting investment in GCC countries. In the area of government support policies, the respondents requested for better legal services, the latest investment information, and financial assistances. In light of the above findings, this research presents the following policy recommendations. First, a digital cooperation platform should be established for infrastructure build-up, technology development and industrial development based on a shared vision of digital transformation. Second, vocational education and training (VET) systems should be strengthened to enhance productivity of local workers employed by Korean companies. Korea and GCC countries need to cooperate in sharing programs between their VET institutions. Third, corporate support programs of diverse institutions such as Korean embassies and KOTRA should be unified under “one team one goal.” This would help Korean companies share market information, networks, and new local regulations.