How to create an import and export company in Germany

Alfonso Llanes, Master Degree in International Development

Answered just now

Company formation in Germany is a 9-stage process, as follows according to:

· Check the company name at the local chamber of industry and commerce.

· Notarize the articles of association and foundation agreement.

· Deposit capital in a company bank account.

· Applicants must submit the articles of association to the Commercial Register.

· All new start-up companies must notify the Office of Business and Standards of their existence.

· After establishing the business, register with the relevant professional association.

· Notify the local labor office of the company's establishment, who then issue the company with an eight digit number, enabling the company to report social security.

· Register the employees for health and social insurance.

· After the trade office is notified of the company's activity, the Tax Office will mail a questionnaire to the company in request of the company's business data, which needs to be completed and mailed back to the Tax Office.

A few formalities and registration with the following authorities:

1. The Tax office (Finanzamt) - If you are offering a professional service, you only need to apply for a tax number from the tax office.

2. The Trade Office (Gewerbeamt) – Any other business must register with the Trade Office of the municipality in which the firm is situated. Registration requires:

3. Valid ID or passport

4. Residence permit

5. A Craft Card (Handwerkskarte) if you are setting up in business in the crafts sector.

6. The trade office will inform the corresponding authorities.

7. The Health Office (Gesundheitsamt) – If the enterprise is going to provide businesses services ssociated with catering or sale of foodstuffs. In the case of childcare, the Health Office and the Trade Supervisory Office will also examine the standards of hygiene of the workplace.

8. A Certificate of Good Conduct from the constabulary, and confirmation from the Chamber of Industry and Commerce that the start-up company has satisfactorily completed a program on hygiene and the handling of food.

9. The Construction Office (Bauamt) - If you wish to use spaces/locations previously used for other purposes than your future operations room, you will need to apply for a 'change in use', available from the relevant Construction Office. The planning of rebuilding work and of new buildings for commercial purposes must also be coordinated in good time with the construction office.

10. The Trade Supervisory Office (Gewerbeaufsichtsamt) - Find out in good time before operations commence whether the rooms you plan to use meet legal requirements.

11. The Occupational Accident Insurance Fund (Berufsgenossenschaft) -Is the statutory accident insurance fund for staff members and also - depending on the sector - for the self-employed. If you employ staff, you must insure them at the relevant BG. Depending on the sector; you may be required to insure yourself there as well. If not, you can insure yourself on a voluntary basis. Enquire at the Association of Occupational Accident Insurance Funds (Hauptverband Der Gewerblichen Berufsgenossenschaften - HVBG).

12. The Commercial Register (Handelsregister) - Unlike smaller businesses and companies organized as a GBR (Gesellschaft Burgerlichen Rechts), all companies must be enrolled in the commercial register at the local court (Amtsgericht). The commercial register is public and provides information about the company (name of company, name of owner, etc.).

13. The Chamber of Crafts (Handwerkskammer) – If the company is a member of the EU, there is facilitation and freedom to set up a business in the craft sector. The requirements for documentation of qualifications are based on EU law.

If self-employed and can’t produce experience documentation you can still register as a craftsman in Germany if you have obtained a qualification equivalent to the German master-craftsman certificate (Meisterprufung). One could also validate skills with a diploma, examination certificate or other proof from your country of origin. If the foreign certificate lacks evidence of required skills and knowledge, you can obtain these in an adaptation course or an aptitude test. Occupational experience alone is not sufficient for craft occupations within the health sector.

What's your biggest pain point in business? Could software or a new app help with that?

Alfonso Llanes, studied at Florida International University

Answered just now

The rise of cloud computing has spearheaded an era of unprecedented productivity for developers over the past several years. With the use of this point technology, gone are the days of long lead times for hardware procurement and installation, and architecture defined slow-moving hardware upgrades. As the barriers between development and delivery dissolve, new challenges have emerged that can disrupt the lives of developers and slow down conveyance of new products and features, giving back some of the efficiency gains that the Software-Defined Data Center has developed.

The cloud also bringing new challenges that emerge and can make troubleshooting applications more difficult.

There are four commonly recognized pain points:

Fluctuating Ownership

Adopting the cloud with limited support from an operations team. This is one of the growing numbers of areas where teams find themselves bridging both the operations and development worlds and life can become complicated.

The ability to spawn one’s own architecture without physical devices is refreshing and far more efficient. But, as developer tools, deployment tools, and cloud operations tools become inseparably linked to one another, the old boundaries between who is a developer and who is an operator become blurred or even removed altogether. The more time spend in the operations realm, especially, when it comes to troubleshooting an application or cloud resources the less time one is able to invest adding new value through code.

Burden of Responsibility

An old familiar buzzword when something went wrong with an app in production was for the responsibility to rest with the operations team that needed to prove the hardware was working and the network was healthy. That model has been reversed with the cloud: now the burden of responsibility is on the development team, because what is really hard is finding a problem that originates with someone else’s complex, abstracted, in a virtual data center.

Free Software Downloads

Such as database, queues, cache and the like, there is no any visibility into health other than the cloud provider’s status page and whatever you can directly observe. It’s either working correctly or it isn’t; if it isn’t, life gets a lot harder. On the other hand, servers can be monitored, but one can’t really tell why a virtual resource’s performance is lagging and if it is something environmental causing it and is out of any control.

Complexity and Temporality

Compounding the challenge of sorting through infrastructure issues vs. code issues is the simple fact that applications are becoming far more complex, and in many cases, portions of the overall architecture may be temporary in nature. Combine complexity with temporality and a recipe for investigative skills are borne to solve a real mystery at times.

The incredible thing about the cloud is that if one can imagine it, one can build it. Moreover if one needs to hug together .NET, Java, PHP, Node.js, Ruby, Database-as-a-Service for SQL and NoSQL, Message-Queues-as-a-Service, and Search-as-a-Service from a cloud deployment perspective is doable. This package has been made easy to get started and to deploy. But, a multilingual approach and a heavy reliance on software-defined services comes a new set of challenges:

Each of these new services comes with its own set of tricks for gaining insight into performance and availability, and each one may be different on how to monitor and troubleshoot.

Learning how to support a variety of different technologies creates a drag on delivery. It’s hard enough to learn the performance and reliability tricks of new technologies and trying it for a wide variety of goals; as well as, for adding new value and making the business more successful.

Dynamic resources, such as scale-on-demand servers, are likely to lose critical data that might be needed when troubleshooting a problem if prevention thought is not given to preserve critical insights that disappear with the server when it’s de-activated.

More Frequent Change

The increased agility that the cloud brings, especially when coupled with development tools that are integrated into the delivery cycle code can flow to production smoothly with greater frequency, and architecture changes can be made swiftly and easily. Unfortunately, with more frequent code releases and architecture changes that follow more frequent opportunities for error and break down occur.

There’s no denying that the cloud has impacted the life of many developers, mostly in a very positive way. Of course, with new technologies and capabilities always comes a new set of challenges for a learning curve. In the case of cloud-hosted applications, this includes challenges to effectively and efficiently support those applications in their new environments so that the gains in productivity aren’t given back in support of the application.

There are some basic steps that every development team should take to make supporting cloud-based applications easier.

Once an application is in production, there are several common questions that will need answers at a moment’s notice about this new application. For example, are users satisfied with the performance? Is anything silently failing and frustrating users without setting off alarms? If something failed, who is impacted, and what is the cause of the issue?

Closing Remarks

There’s no doubt that the cloud brings incredible capabilities to the lives of developers and operators alike: speed, agility, flexibility, scalability, and more. As with any new, disruptive technology, novel challenges also come for the ride. By applying some basic strategies on application management, monitoring and troubleshooting, one can have the advantages of the cloud without many of its inconveniences.

What happens if NAFTA is cancelled?

Alfonso Llanes, Master Degree in International Development

Answered just now

There’s widespread consensus among legal scholars that it would trigger a period of uncertainty, followed by court challenges between the White House, industry, state governments and perhaps even the Congress of the United States.

Trump is nothing more than a cowboy that is all hat and no cow. He thrives on flexing his muscle on what he perceives to be a weaker opponent throwing his reptilian instincts ready to pounce on smaller pray. However, the reality is that a NAFTA disruption will bring chaos to agriculture and the supply chain of many companies that depend on parts or finish products to conduct their business that will result in numerous lawsuits from all three countries. Cancelling NAFTA does not mean any country is going to disappear only that it would be major disruption to the existing supply chain and economies of well established businesses.

Moreover, there will be a political and legal price to pay on the question of powers of the presidency, which include foreign affairs, control over tariffs delegated through various laws, and the provision in NAFTA that allows him to cancel the deal on six months' notice.

But on the other side is Congress, which has constitutional authority over international commerce and duties and when it passed a law to implement NAFTA a president's withdrawal would violate the law passed in 1993. There are landmark cases such as the Youngstown steel case of 1952, which established the limits of presidential power and all Trump could really do is re-institute tariffs on Mexico and Canada averaging 3.5 per cent as established by WTO standard which the US is a signatory member.

Politically, Trump is already in very hot water and his authority will be nullified with impeachment proceedings that are coming at him in a two prone approach: One is director’s Mueller criminal investigation on financial misfeasance and abuse of power and two, his political fray that many call treason resulting from his solicitation of Russian assistance to win the presidential election. Therefore, one should not pay much attention to what comes out of his viral mouth which is mostly hot air, with no substance and lacking intellectual value.

When negotiating anything, what are 5 legitimate points, in mapping-out an agreement?

Alfonso Llanes, Master Degree in International Development

Answered just now

Take control of the negotiation at the beginning. Experienced negotiators often think and take for granted that flexing value onto the table carries lots of leverage.

· Start by negotiating process prior to substance.

· Every perspective must be considered in order to culminate a successful deal.

· Control the frame of reference of all present at the table. Everyone must be on the same page.

· Emphasize value instead of price.

· Your bottom line and alternatives versus the other side.

In The Art of War, Sun Tzu places the importance on the subject that “every war is won or lost before it even begins.”

Most big deals are built on a series of smaller ones. That’s true for a small projects, and even some UN resolutions. These deals are the culmination of many periods of intense and centered negotiations on the subject at hand among the various parties, each with its own concerns. Deal-making tactics addresses how to choose the right approach for each piece of the puzzle.

Each component part of a deal presents a tactical challenge at the negotiating table. However, less familiar to negotiators is how to address the more strategic challenge that reveals itself away from the table.

Issue 1 is educating the audience on the importance of new technologies.

Issue 2 should be assessing the inter dependencies among all participant businesses.

Issue 3 is identifying the government agency that would need to get involved for a given project. Determine whether and when to combine teams. In complex situations with a large number of teams dealing separately with each other might be an effective way to organize the discussions.

Issue 4 what kind of public reaction is going to be and the follow up public relations initiative to frame the message to the media and the wider public. Any negotiation must have a sequence such as knowing which parties to approach in what order within a front that can make or break a deal. If it is a critical new partner position that focuses on finance, for instance, concentrate first on the financial front.

Issue 5 learn and adapt to changing circumstances as executing decisions are inherently iterative and your counterparts will react to events, and alignments and circumstances that might change. Also, determine how much information to share and when. Your sequencing choices often determine the extent to which you reveal your activities to opponents or to various fronts.

What will happen to Canada if Trump terminates NAFTA?

Alfonso Llanes, Master Degree in International Development

Answered just now

Trump is nothing more than a cowboy that is all hat and but no cow. He thrives on flexing his muscle on what he perceives to be a weaker opponent to his reptilian instincts to pounce on smaller pray. However, the reality is that a NAFTA disruption will bring chaos to the supply chain of many companies that depend on parts or finish products to conduct their business and this will result in numerous lawsuits from all three countries. Cancelling NAFTA does not mean any country is going to disappear only that it would be major disruption to the existing supply chain of established businesses.

Moreover, there will be political and legal price to pay on question about the powers of the presidency, which include foreign affairs, control over tariffs delegated through various laws, and the provision in NAFTA that allows him to cancel the deal on six months' notice.

But on the other side is Congress, which has constitutional authority over international commerce and duties and when it passed a law to implement NAFTA a 

Is it valid to say that a business can only be practiced and not studied theoretically at all?

The study and understanding of a business entity begins with a definition:

Business definition by www.businessdictionary.com/definition/business.html

“An organization or economic system where goods and services are exchanged for one another or for money.”

With this definition at hand visiting history will serve well any student planning to study business, commerce or trade because by definition that what a business is. Business in antiquity was in many ways, surprisingly similar to that of today. The comparison provides a relatively simple model showing the dynamics that affect business prosperity. Here are a couple of examples:

· The Iron Age, around 1000 B.C. Iron dramatically reduced the cost of tools, armor, and weaponry. A cooking tripod was worth three women or twelve oxen to Bronze Age Achilles, but only a small fraction of that in the Iron Age.

· Around 200 BC The Silk Road or Silk Route was an ancient network of trade routes that were for centuries the dominant cultural interaction through regions of Eurasia.

· The Phoenicians, based on a narrow coastal strip of the Levant, used their excellent seagoing skills to create a network of colonies and trade centers across the ancient Mediterranean. By the 9th century B.C., the Phoenicians had become one of the greatest trading powers of the ancient world.

· In the 12th Century Marco Polo, is probably the most notorious Italian who traveled on the Silk Road. This merchant of Venice reached further than any of his forerunners, beyond Mongolia to China.

In 1974 Donald J. Harris and David P. Levine of Stanford University published a private paper about the theory of capital which is available online.

In this paper they describe the meaning and measurement of “capital,” in its underlying and far-reaching issues of economic theory which appeared in various scholastic literature and in many forms going back to the era of Classical economics.

The debate that continues today over the nature of capital is virtually a defining characteristic of the development of economic analysis. The issue has rarely been accepted as a solid theory because of its surrounding and problematic conceptual foundations. Nevertheless, a coherent meaning must be assigned to the idea of "capital" which remains to this day as the source of dissonance within the generally inexpressive structure of modern economic theory.

The idea of “value-exchange” has been, since the original parsing of economics, the starting point for a theory which incorporates and expands into exchange, production, and distribution concepts. The analysis of production, which requires essential distinctions within the social world, brings conflict in the analysis of exchange for the only distinctions between members of the market economy are singularly bound to the specific "use-value" which individuals bring to the market.

Economic theory teaches a connection between the domains of exchange and production which is a critical juncture to the consistency of an economic system as a whole where equalizing and differentiating at equivalent exchanges and exploitation, converges. It is at this juncture that the economic analysis faces directly the problem of capital’s precise definition.

In this light, the first role of capital is to mediate the two spheres of production and consumption. The theory of capital formation which is what a business entails constitutes an economic process as a whole and in this process of exchange is where capital as value contradicts the neo-classical theory of capital formation.

Within this theory of capital the value of a commodity is ultimately grounded and expressed on the manner in which that commodity relates to the consumption of individuals. With this in mind, the foundation of capital must begin with the notion of consumption as the goal of an economic process. The crucial difference is between the "circulation of commodities" and the circulation of capital. In the circulation of capital as value is added to capital when it passes through a commodity form happens only in order to expand it into an increased stock of value. This is the most general conception of capital and is common in this form to all theories of capital. There can be no independent measure of value, no self-generation of value as all expressions of it are directly related to commodities and consumption as the goal of the entire economic process that is consumption. The Theory of an exchange-economy in its simplest terms involves only the direct exchange of utilities one against the other.

This specification of need of individuals to consume is essential to the derivation of a consistent price system and at the same time incapable of any legitimate theoretical derivation for in its nature sits arbitrary assumptions. At this time, a connection must be made to the concept of time which it is not, in itself, the basis of the transformation from the theory of exchange into the theory of capital formation and production for any form of business activity. The business occupation is therefore, the allocation of scarce resources over time and maximization of temporal utility. In this case the measure of capital value must be derived from consumption to the return on investment. The determination of price in an exchange economy rests in the interaction of a system of individuals in need of consumption.

It follows that in the absence of production each individual receives an “income” of a given shape from nature which, is equivalent to the initial endowment in the theory of exchange. The theory of capital and interest considers the optimal rearrangement of that income stream that such arrangement yields a return on capital. In this way, the individual either combines his labor or business effort with that of nature and the income this individual receives is consumed.

In conclusion, the occurrence of inter-temporal consumption in an economy it simply reduces to the exchange of commodities without capital and interest. However, the date of consumption becomes a characteristic which affects the utility gained in consumption.

This is the first and most general condition which is introduced in the concept of capital and interest where a business entity must exist.

The second condition on the theory of capital which directly connects to businesses is that choice of an income stream expresses a preference for present over future consumption that results in present and future value in a time frame of reference. Any shift of consumption from one period to another, from present to future, must involve the receipt of a greater amount of consumption in the future than is inevitable in the present.

On one side of the neo-classical behavior of capital seems to require time-preference which favors present over future consumption. Without this specification a positive rate of return could not arise and a business entity could not succeed.

How long does it take for an investment banker underwriting process?

Alfonso Llanes, studied at Florida International University

Answered just now

In the world of underwriting companies and governments hire investment bankers to help them raise money from private third parties or from the financial market.

The Issuer is known as the “Client” and the investment banker the “Underwriter. “ The underwriter must assess the value and risk of the issuer, as well as the market conditions at the time of issuance.

Some of the factors to be reviewed by underwriter include:

· What is the issuer’s business profile?

· Does this business generate positive cash flows?

· How will the capital be invested?

· What is the creditworthiness of the business?

· Is the profile of the management team strong?

· What are the business assets?

· Will a second round of raising capital be needed?

Market assessment:

· Is the sector of the market favorable or not?

· Is the equity or debt being offered standard or unconventional?

· Can the market take in the offering size proposed?

· Can the offering be sold in international markets?

Once these factors and issues are considered and resolved, the underwriter next determine the price range for equity or debt being offered. If the issuer agrees with all the terms and conditions of the underwriter they can then proceed to sign a letter of intent.

If a firm commitment is reached the investment banker must buy and sell the entire offering in a best tender method where the underwriter does their best to sell the equity or debt. In exchange for this commitment, the Issuer agrees to pay the investment bank a fee. Many a time, the issuer will hire multiple underwriters to spread the risk of getting the money wanted and also to access a broader market base.

Due Diligence by the underwriter

The Underwriters must meet with the business management team and review the issuer's accounting information to ensure that all material facts are presented clearly in the issuer’s offering document or “Prospectus”.​ The offering and all related filings are sent to the pertinent officials. The regulators may have questions or comments that the investment bank and issuer must respond to as part of the procedure to incorporate. Once the governmental agency approves the offering, the marketing process can begin. ​​

During the marketing phase both the issuer and the underwriters meet with potential investors and present the prospectus in order to generate interest in the securities being offered known in the industry as a “roadshow” because they travel from place to place, presenting the offering and introducing the issuer. As Interested begin to accumulate the underwriters inform the prospects how much of the offering they would need to purchase and the price levels at which their orders are valid. There is no set time line to complete all transactions as it will depend mostly on the demand and interest of the investors for the investment product being offered.

How complex is international trade?

Alfonso Llanes, Master Degree in International Development

Answered just now

In order to learn the level of heterogeneity of merchandise trade, its financial aspects and its potential as a driver of international commerce, three general transactional areas can be derived from multidimensional trade complexity.

1. The quality and amount of the traded products, direction of trade, transportation from origin-destination, storing, handling and ports of entry technology and accessibility.

2. Banking, finance, trade facilitation, insurance credit, currency exchanges, futures.

3. Regulations governmental agencies, trade organizations Custom Unions and international treaties.

The volume dimensionality of trade complexity is related to the operational and organizational costs sustained by a firm entering a trade activity, and it is agency in the number of countries where its products are traded.

the quality assurance of trade complexity is linked to the costs of contracting for specific products which need to be screened for quality and insured against the risk of a faulty delivery for the buyer, or the monetary risk of not being paid for the seller

Technology plays an important role in trade complexity deals that have different costs between domestic inputs when compared with foreign ones and developing a way of measuring or gauging the average number of countries from which a specific product is imported or exported.

In order to analyze these dimensions of complexity in its many layers having hundreds of data points the system network must be must placed in an artificial neural network (ANN) and run recursively until minimum cost values converge. There are many software packages in the market today but for a small sample a common spreadsheet program such as Excel will be adequate for an ANN analysis.

Quantity, quality and technology and other supporting layers of trade can be bundled up and reviewed for behavior and correlation in a mix batch of import and export transactions that a firm might engage in its process of production. Many of the trade volume and value today is due to inter-industry trade by manufacturers and assemblers of finished products for domestic or international sale.

The downside of trade however, has always been attributed to a displaced labor force when a country engages in trade. Consumer benefit with better quality products at lower prices in the a domestic economy. A loud sounding solution to worker’s displacement resulting from trade has been retraining of the affected labor force which has been widely accepted by economist and governments intending to participate in global trade. Moreover, educating people with the skills that allow handling complex processes, such as languages, communication, engineering, legal services, and management in the service sector can alleviate some of the dis-functionality in the manufacturing sector from trade. This new focus on service skills is likely to be more effective in fostering a better integration into global value chains.

What are some of the apps which exporters use?

Alfonso Llanes

Sample of Inventory Management Software and the tools designed to control and track inventory from either hard drives or smartphones.

For industries that need to receive, store, and ship products and materials, the process of inventory management can be intimidating. Properly managing, and tracking inventory is a crucial function of the industries that rely on employees to handle their goods and materials. Inputting inventory items quickly and accurately occurs with mobile bar code scanning and this technology integrates well with inventory management and software platforms.

The question is then, which of these platforms are the best for a given organization’s needs? Here are three companies selected at random. In general, this a sample of some of the platforms in use today that include integration features, scale able features as well as implementation-- installation, and reporting capabilities.

(As advertised on each website)

3PL Warehouse Manager http://3plcentral.com/features/

Core Functionality

· Maintain total visibility across the business

· Full order management with direct EDI support, web service API, order imports from Excel, or manual data entry

· With 4PL Plus manage 4PL and partner warehouses for full supply chain visibility

· Direct FedEx & UPS integration to streamline operations

· International dates and time zones, currency, metric dimensions and weight support

Advanced Technology & Integrations

· Cloud-based WMS solutions

· EDI protocols

· Retailer UCC-128 Label Printing

· ERP integration with QuickBooks, SAP, Oracle, Microsoft Dynamics, and more

· Mobile Barcode Scanning

· e-Commerce shopping carts

Fishbowl Inventory Control Solution https://www.fishbowlinventory.co...

Inventory Control Solutions

There are several ways to maintain inventory control in your business. You can use:

· A pen and paper, which is quick, but easy to lose notes and nearly impossible to data mine and use to plan for future inventory needs.

· Excel spreadsheets, which are great for storing information. But they can’t be automatically updated, so they have to be updated by hand by someone with specialized knowledge of a custom inventory system.

· Simple inventory control software, which is designed to automate some inventory processes, but that doesn’t have all the features companies need as they grow and thus has to be replaced every few years.

· Advanced inventory control software, which is inexpensive enough to be in small and midsize businesses’ price range, but also scalable so that it can meet a company’s needs as it grows and requires more complex features.

IntelliTrack https://www.intellitrack.net/

Web based, cloud storage solution, using handheld mobile devices for accurate physical counts

· Centralized data storage

· Efficient physical inventories

· Real time updates for receiving and issuing

Accurate, cost effective inventory software particularly useful for high turnover supplies

· Accurate inventory control of essential items

· Track usage

· Manage reorder points

What is the potential impact of the NAFTA renegotiation on the flow of water resources between Canada and the US?

NAFTA in the age of Trump is a wait and see attitude as the administration tries to muscle through and modify/cancel previous agreements or treaties. The chaotic nature of the Trump White House that is conducting international relations with issues that concerns the entire planet not just the U.S. or NAFTA has many world leaders and constituencies wondering when Americans are going to pull the leash on Trump and stop him from affecting our Planet Earth. This global issue becomes one of world politics between “Real Politiks” in the age of Trump and the rest of the world.

In any case, water exports from Canada are extensible covered by a public paper which can be found on this link:

http://publications.gc.ca/Collec...

BULK WATER REMOVALS,

WATER EXPORTS AND THE NAFTA

Prepared by:

David Johansen

Law and Government Division

20 February 2001

What challenges do countries with GDPs dominated by exports face?

http://www.theglobaleconomy.com/rankings/Exports/

The old adage of not “putting all your eggs in one basket” applies to individual investors in the financial markets as well as countries depending on a one-commodity-export such as the Middle Eastern countries. The issue for these countries is not only bad economics but also political suicide to depend on an exhaustible resource without parallel non-oil financial and economic trade markets whether domestic or international. Japan’s deflationary economy arisen from an export oriented GDP would be like a walk in the park compared with the disastrous consequences of current Middle Eastern politics and economic policies.

Below is a partial executive summary of the Annual Meeting of Arab Ministers of Finance April 2016 Manama, Bahrain

Prepared by Staff of the International Monetary Fund

EXECUTIVE SUMMARY FROM THE INTERNATIONAL MONETAR FUND (IMF)

“Despite their diversity in size, demographics and wealth, most oil-exporting Arab countries face similar challenges to create jobs and foster more inclusive growth. The current environment of likely durable low oil prices has exacerbated these challenges.

The non-oil private sector remains relatively small and, consequently, has been only a limited source of growth and employment. While some countries have made more headway than others in diversifying their economies, the energy sector, typically highly capital intensive remains dominant in many economies. However, it creates few jobs directly, while oil revenue is often used to finance an oversized public sector. Still, the employment situation varies greatly across countries: some GCC economies rely on foreign labor to fill private-sector jobs while other Arab oil exporters need to meet the needs of a fast-growing domestic labor force.

Because oil is an exhaustible resource, new sectors need to be developed so they can take over as the oil and gas industry dwindles. While some countries have ample reserves, hydrocarbon resources in a number of Arab countries could be depleted in the foreseeable future. However, even non-oil activities in many oil-exporting Arab countries are to some extent dependent on funding from oil revenues. The challenge therefore is to grow truly self-sufficient non-oil sectors that will provide a sustainable source of growth and employment even when oil resources are depleted. Moreover, even countries with large proven reserves need to save a larger share of their current oil income to promote greater intergenerational equity.

Over-reliance on oil also exacerbates macroeconomic volatility. When oil prices drop, as is presently the case, the related decline in fiscal revenue often requires cuts in public spending, which dampen growth in the non-oil sector and strain the sustainability of public employment.

Greater economic diversification would unlock job-creating growth, increase resilience to oil price volatility and improve prospects for future generations. It would also broaden the base for government revenue thereby reducing the reliance on oil and making the economy more resilient to oil price shocks”.