The importance of economic diversification in the Middle East
The recent attacks on Saudi Arabia’s oil facilities have highlighted the role of the world’s largest oil exporter and of the overall Middle East as cornerstones of global energy. They also underlined the persistent risk of volatility in oil prices and the importance of economic diversification in the Middle Eastern petrostates to cover the large budget deficits caused by falling export revenues and to create non-oil jobs. In the region’s various diversification plans, the development of SMEs has a central role to play. But for SMEs to develop in the Middle East, its financial sectors must change. There are two possible and complementary approaches to unlock financing for SMEs in Middle Eastern petrostates. The first concerns the development of the domestic banking sector, the second concerns sovereign wealth funds (SWFs).