Since 2011, GCC macroeconomic performance has been robust, characterized by strong GDP growth, significant creation of job opportunities, and large surpluses in the fiscal and balance of payment positions. This has drawn much attention to the GCC economies, not only because of the rise in international oil prices but also the nature of economic growth that has taken more of a vertical route. Global investors and key trade partners such as the EU, the US, and China have vested interests in the GCC economies, particularly in the energy sector; hence, they are keen to develop free trade and investment agreements with the GCC to maintain their access to such important markets. The capacity of the GCC countries to take advantage of such extensive foreign interest in their economies and the huge capital surplus from oil and gas revenues (estimated at $1.5 trillion in 2013) to achieve economic diversification is still a matter of debate. This workshop aims to provide a forum for participants from both inside and outside the GCC to discuss and exchange views on a variety of issues considered to be important for sustainable economic growth in the GCC, with a particular focus on economic diversification challenges. The plan is to have a two-day workshop, which will include three themes, each addressed by four papers. The following are the proposed themes for the workshop: 1. The Role of the Private Sector in Economic Diversification The private sector plays a minimal role in the GCC economies and, for the most part, continues to be dependent on the performance of the hydrocarbon sector (Hertog 2010 and 2013). Though it is the engine of growth in most advanced economies, in the GCC countries the private sector has remained relatively small and heavily financed by oil revenues (Hertog 2014). If the private sector is to play a greater role in the development process of the GCC countries, structural changes should aim at creating conditions favorable for the private sector vis-à-vis the public sector in terms of limiting the role of the government to strategic guidance and diverting production activities away from the public sector to the private sector, which is often characterized by efficient allocation of resources and high productivity. Such changes should also produce an appropriate system that liberalizes the regulatory framework, supports the development of the banking sector 4 to enable SMEs access to finance, and encourages private investment in the nonhydrocarbon sectors. A balance should also be struck between the nationalization of the labor markets and the requirements of the private sector in the context of high unemployment and low labor productivity among the national workforce (Al Qudsi 2005). Such a balance could reduce the risk of low competitiveness in the GCC markets due to low levels of productivity and efficiency. This underscores the close link between the quality of the education system and entrepreneurship and the performance of workers and the ability of entrepreneurs and SMEs executives to competently utilize the financial and technical support provided by organizations such as Al Khalifa Fund in UAE and Sanad in Oman. Although the performance and share of the private sector in GDP has improved, and the sector is no longer entirely overshadowed by the dominant public sector, the GCC private sector continues to be hampered by the patronage system in privatizing state-owned enterprises, lack of education and training that impacts on productivity, high cost of borrowing and its fragmented nature which prevents SMEs from achieving economies of scale as well as limiting its role in economic diversification. 2. Policy Challenges and Conditions for Successful Economic Diversification This theme will focus on the importance of designing a specific strategy for economic diversification, to be translated into an action plan with proper indicators and a monitoring and evaluation system. It will also tackle the issue of the establishment of an institutional structure for the implementation of the strategy and elaborate on some of the main conditions for a successful economic diversification strategy. Of course, there is no uniform policy advice that would suit all GCC countries, but a common approach can be developed to enable these countries to realize their economic diversification aims. Among the key policy areas to be examined are completing the process of trade liberalization, simplifying the tax and regulatory system, ensuring that the financial system delivers adequate funding for investments, and improving the infrastructure. These policies could result in creating an enabling business environment, developing well-functioning and quality government institutions, and integrating skills development into sectoral policies, particularly in priority sectors that have the potential to contribute to economic diversification. This theme is also expected to explore ways through which new policy measures can break the vicious circle and interplay between low productivity and competitiveness and poor economic diversity in the GCC countries. Analysis will focus on the capacity of public institutions and government policies to create the appropriate environment and conditions conducive to economic diversification. This will be examined broadly in the context of the regulatory and institutional environment in the GCC (Sun 2002) and what needs to change to divert capital and human resources from the hydrocarbon sector to other sectors such as manufacturing, finance, services, and tourism. 5 3. Global Best Practices and the Need for a New Mode of Diversification in the GCC This theme focuses on how the global forces and best practices facilitate economic diversification in the GCC countries. Recent data indicates that the GCC has become more integrated with the global economy than ever before, contributing 5.9 per cent of total global trade and importing 80-90 per cent of its food and goods from international markets (IIF 2014). It is also estimated that GCC global assets managed by sovereign wealth funds are approaching $1.5 trillion in 2014, with Saudi Arabia, UAE, and Qatar now major destinations of capital inflows and outflows (UNCTAD 2013). However, the potential gains from such integration have not yet been realized since the region has failed to reap tangible benefits from globalization and multilateral trade arrangements, particularly in attracting FDI and enhancing non-oil exports. Given the nature of the economic system in the GCC and comparing it with other countries of comparable size and experiences, the premise of this theme is to underscore the need for a new model of diversification that enables the GCC countries to benefit from global trade and FDI in their economic diversification and reform. Comparative analysis and lessons from best practices in economic diversification will be drawn from other emerging economies. Particular attention will be given to the experiences of South Korea and Taiwan, which represent a model of industrial economy, and Singapore and Hong Kong that represent a model of service economy. Indeed, there are huge differences between these models, but they simultaneously share some general features such as government intervention in directing the path of the national economy, clarity and stability of investment policies, and support for export-based activities. The lessons learned from such practices could help the GCC countries in increasing the flexibility and attractiveness of their policies and laws relating to foreign trade and investments; developing attractive incentive packages; and enhancing advantages to the investment environment (Sun 2002). All of these contribute positively to economic diversification.