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Arab countries exported US$50.4 billion worth of crude oil in the first quarter of the year, local media report. This is US$24 billion less than the value of crude exports by OAPEC in the first quarter of 2015 and reflects the sharp drop in oil prices, which tanked below US$30 in early 2016.
OAPEC noted in its monthly bulletin that Arab oil producers are facing serious challenges as a result of the oil price decline and that these challenges have spiraled out of the energy sector, affecting a range of other industries and facets of their national economies. As a consequence, consumption and public spending have both been affected, OAPEC said.
Measures taken to limit the damage included using public reserves to compensate for budget deficits, and cutting capital expenditure on public projects. Current expenditure, however, has so far remained untouched, as have most subsidies on basic consumer products.
The organization points out that the full effects of these measures may not be felt before the medium to long term, and that there is still urgent need for further measures to prop up the local economies and ensure their sustainable growth. Focus is put on privatization for a range of sectors, from tourism to telecoms, in hopes of increasing government revenues from these industries while reducing the burden that comes with the responsibility of managing these sectors.
In addition, OAPEC members UAE, Qatar and Kuwait are increasingly counting on their sovereign funds, and Saudi Arabia is now planning to join their ranks by setting up the largest sovereign fund in the world.
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The Gulf Cooperation Council members are also working on a common tax reform envisaging a unified VAT framework for the organization.
All in all, OAPEC concludes, its members have progressed well along the path of reforms prompted by falling oil prices, but there is still a long way to go, and many obstacles remain, including legislation that needs updating and the need to borrow more, which is not something OAPEC members are comfortable with.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.