Economic reform in the Gulf: Who benefits?

Economic reform in the Gulf: Who benefits?



5-2-2019

For Gulf leaders, long-awaited economic reforms will not be easy. The leaders of the Kingdom of Saudi Arabia and the United Arab Emirates, Mohammed bin Salman and Mohammed bin Zayed, have found that replicating China's economic growth model with tightening political control is already difficult and difficult, They realized that reshaping the social contracts financed by the oil wealth was more difficult because the Gulf Arabs had to lose much more than ordinary Chinese. Social contracts in the Gulf countries succeeded in ways that social programs in China did not succeed, Between the state and the citizen in the Gulf, which means abandoning its political and social rights in exchange for providing prosperity on both sides.

Moreover, Gulf leaders, who face increasing criticism of the Saudi-led war in Yemen and the consequences of the killing of journalist Jamal Khashoggi, also lack the political and economic influence that has allowed China to silence or marginalize its critics over its crackdown on Turkish Muslims in the province. Northwestern Xinjiang.

The absence of a social contract based on social welfare in China has allowed the government to grow economically, lift millions out of poverty and provide public goods without harming ordinary citizens.

As a result, China has been able to continue economic reforms without worrying that a reduction in social welfare benefits could trigger a general backlash and possibly threaten the system.

Saudi businessmen and consumers, three years after Mohammed bin Salman's plan to see 2030 on diversification of the economy, complain about the rise in public service prices and the 5% VAT imposed recently.

There is considerable doubt about the government's commitment to reducing reform costs through multi-billion dollar annual grants since the reforms were announced and the social contract rewritten.

Unlike China, local or regional investment in the Gulf comes from the financial, technological or weapons industries, which in turn focuses on providing services, developing infrastructure and strengthening the capabilities of the state rather than focusing on industrial development and the private sector.

The bulk of Gulf investments - with the exception of national oil companies and airlines - are files run by state sovereign funds or investments designed to strengthen the country's status and soft power.

By contrast, China and India have used investment as a means to fight poverty, nurture the middle class and create an industrial base. Because of a small population, Gulf states are likely to ensure sustainability in services and oil and gas derivatives rather than manufacturing and industry.

The $ 1 trillion Chinese belt and road initiative may be the Asian exception closest to some soft power investments in the Gulf, but this initiative will contribute to China's domestic growth as well as to reduce excessive domestic consumption of energy by state companies that are not subject to requests. Shareholders.

Asian countries managed to manage investors' expectations in an environment of relative political stability. On the contrary, Saudi Arabia has damaged confidence in its ability to diversify its oil-based economy by halting its plans to include 5% of its national oil company, Saudi Arabian Oil Company (SAOC) or Aramco, as the world's largest bid.

There is no doubt that China is no less despotic than the Gulf States, and there is a consensus between Hindu nationalism in India and the rising global trend towards urbanization, populism and non-liberal democracy. But what distinguishes a large part of Asia from the Gulf region and affects its economic success is the policies that ensure a relatively stable environment. For its part, these policies focus on social and economic development rather than keeping order. This may be Asia's lesson for the rulers of the Gulf.


Author: James Dorsey American writer specializing in the Middle East

Publisher: Al-Furat Center for Development and Strategic Studies

Translated by Heba Abbas Mohamed Ali

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