Next level GCC (Gulf Cooperation Council)–Philippine relations



The Gulf Cooperation Council (GCC), the political, social and economic bloc of six countries (Saudi Arabia, United Arab Emirates, Qatar, Kuwait, Oman and Bahrain) in the Arabian Gulf is home to more than 2 million Overseas Filipino Workers (OFWs). GCC-based OFWs are the biggest source of remittances (after those based in the US) fueling the consumption-driven economic growth story of the past decade.

Outside of labor issues that make it to mainstream media in the Philippines, there is limited coverage and perspective on the multiple dimensions and potential directions of GCC-Philippine relations. The reason being, that for the past half century, the bilateral equation has remained constant: GCC’s oil and gas-led economy as the primary driver of demand for Filipino labor. However, from my vantage point on the ground, advising senior government and corporate leaders in the GCC, now is the perfect opportunity to reevaluate and reframe the Filipino proposition to the region.

A number of crucial macroeconomic and geopolitical shifts have taken place that shall alter and reshape the traditional GCC-Philippines bilateral equation of oil and labor:

First, the persistence of low oil prices has placed the highest priority on economic diversification across all GCC nations. Diversifying the economy beyond oil is a cornerstone of Saudi Arabia’s Vision 2030, under the stewardship of His Royal Highness, the Deputy Crown Prince, Mohammad Bin Salman. Under this program, investments and initiatives are being launched to localize and enhance thriving industries in: manufacturing, technology, tourism and leisure, mining, healthcare and defense. Therefore, as GCC nations generate a more robust economic portfolio, in which parts of the respective industry value chains can Filipino labor contribute? Do we have the sufficient depth and breadth of skills to fulfill potential demand down the line? How do we change domestic policies today in labor, education and industry to enable us to compete in a more sophisticated GCC (and global) talent market in the future?

Second, as the “new normal” of low interest rates and lackluster growth continues to extend itself, GCC capital will seek yields outside of mature, low growth Western markets. Here is an opportunity to extend GCC-Philippine relations beyond labor and into investments. With about 7 percent quarterly growth in the first two quarters of 2016, the Philippines is poised to be an investment destination and a high-growth alternative to China. GCC sovereign wealth funds can explore opportunities around a consumption-led growth thesis in addition to opportunities in infrastructure, Asean expansion, and other strategic sectors in the Philippines. Given this opportunity, what FDI policies can be enhanced to facilitate the flow from GCC investors? How do we score on ease of doing business recently? Will Philippine enterprises be ready to accommodate GCC investment and adhere to investment governance and performance requirements?

Third, a prolonged low oil price regime shall put increased pressure on capital spending in the GCC. Thus, private investment and funding into large scale GCC projects in the form of public-private-partnerships are expected to open up to address potential funding gaps. Perhaps this will be an opportunity to again extend the Filipino proposition beyond labor and can be an opportunity for Filipino conglomerates to participate in and deploy their resources, leveraging their track record in delivering capital-intensive projects. However, this will be completely green-field for Filipino corporates since outside of food, fast-food and basic services; no inward investment into the GCC by a Philippine conglomerate has been made to date. Should attractive GCC opportunities emerge, how could this be facilitated going forward?

Finally, the changing global geopolitical landscape has led GCC nations to pursue a more diversified set of international alliances. Since legacy alliances with the United States, United Kingdom and Europe are under increasing stress from multiple directions; GCC nations have increased engagement with other nations such as China, Japan, Korea, Russia and India. As both GCC nations and the Philippines adopt a more independent foreign policy, is there scope for a broader international relations agenda? Can the Philippines support GCC member nations’ positions in international bodies such as the United Nations? Are there joint declarations that can be made to advance mutually beneficial interests?

As the Philippines becomes more proactive in international engagement under President Rodrigo Duterte, redefining GCC-Philippine relations deserves to be next on the agenda. This time around, enriching it and taking it to the next level beyond OFW labor. The subsequent impact locally is very significant and will trigger improvements across a range of enablers from enhancing and up-skilling Filipino human capital, generating a more favorable foreign investment environment, offering growth and expansion opportunities for local companies, and enhancing our national position through a more robust foreign policy.

Mark Serrano is an alumnus of the Harvard Kennedy School’s Executive Education program on “Leading Economic Growth” (2012). He is a Principal (Associate Partner) with Oliver Wyman, a blue chip, international management consultancy, based in its Dubai office. This article was written in his personal capacity, as a member of the Harvard Kennedy School Alumni Association of the Philippines.


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1 Comment

  1. You would rather shift to GCC countries our already depleting human capital and financial capital for their further economic development and progress. Forsaking the economic development and progress of our own country, our beloved Philippines. In my book, very unpatriotic thought.