Sustainable Economic Cooperation between Korea and the Middle East in Times of Lower Oil Prices

Abstract

A global oil price decline since the second half of 2014 has negatively impacted the economies of GCC countries, which heavily depend on the oil and gas sector. This led to a decline in trade surpluses and undermined current account balances, resulting in a slowdown of economic growth in these countries. GCC countries are carrying out several policies, as they face slowing economic growth, deepening budget deficits, diminishing foreign investment and shrinking construction project markets due to lower oil prices. In response, a new cooperation framework is required to strengthen bilateral ties for shared growth. First, industrial cooperation should be reinforced to expand economic diversification and job creation in GCC countries. Second, energy security is one of the most significant rationales for bilateral cooperation between Korea and the Middle East, since Korea imports more than 60% of the oil it uses from GCC countries. Third, investment cooperation should be strengthened to facilitate joint investment in the region, including joint ventures. Fourth, institutional cooperation between governments is needed to share experiences and know-how obtained in the process of Korea's institutional reforms in the fields of tax, subsidies, privatization and FDI. Civil servant exchange programs will also contribute to deepening mutual understanding in the bilateral economic partnership.