: GCC (Lower Oil Prices and Economic Cooperation between Korea and the Middle East)

Abstract

Korean Abstract: 본 연구는 최근 국제유가 하락에 따라 한ㆍ중동 경제협력이 위축될 것이라는 우려가 있지만, 유가 하락이 중동 산유국에는 오히려 경제 체질을 개선할 수 있는 기회가 될 수 있고, 우리는 이러한 기회요인을 적극적으로 활용하여 향후 한ㆍ중동 동반성장을 위한 지속적인 경협관계를 만들어나가야 한다는 점을 제시한다는 데 의의가 있다. English Abstract: The aim of the research is to suggest economic cooperation framework between Korea and the Middle East in the times of lower oil prices. A rapid decline of oil prices since the second half of 2014 has negatively impacted on economy of the GCC(Gulf Cooperation Council) countries which heavily depend on oil and gas sector. GCC countries are facing economic recession with the worsening of the financial situation, lack of liquidity and decrease of investment. The sharp drop in oil revenues due to lower oil prices caused government fiscal distress and made the GCC countries use accumulated foreign exchange reserves and sovereign wealth fund. They also prioritize projects focusing on social infrastructure including education and public services, leading to decrease of number of project contracts awarded in the GCC region. In response to the economic slowdown and fiscal burden, GCC countries have strengthened policy measures for economic diversification. They have promoted various supporting policies to nurture their strategic industries - most notably the renewable energy sector - and competitive small and medium-sized enterprises in the region. In order to regain fiscal soundness, GCC countries have been trying to cut their energy subsidies and revise the tax system, expanding government loans and privatization of their state-owned companies than the past. Moreover, they are making more efforts to increase foreign direct investment inflows with improvement of business environment and PPP(Public-Private Partnership) procedures. The economic difficulties facing the GCC countries due to lower oil prices is causing a significant concern over dwindling economic cooperation between Korea and the GCC countries. In response to this, a new cooperation framework is needed to strengthen bilateral ties for shared growth. Four fields of cooperation can be identified as follows. First, industrial cooperation should be reinforced to expand economic diversification and job creation in the GCC countries. Second, energy cooperation should be broadened into the fields of renewable energy development and energy efficiency technology other than energy trade. Third, investment cooperation need to be strengthened to facilitate joint investment in the region including joint ventures. Fourth, institutional cooperation between governments is needed to share Korean institutional reforms in the fields of tax, subsidy, privatization, FDI and so on, deepening mutual understanding of economic partners for co-development.