A cushy government job, cheap fuel, a mortgage-free home and a bit of five-star travel and luxury shopping were never too much to expect in the Gulf.
Yet what previously was taken for granted in the oil-rich region is being replaced by something more familiar to the western world: spending cuts, taxation, a scarcity of jobs and even strikes. There’s discontentment among young populations rarely seen before as the countries come to terms with the collapse in energy prices blowing holes in budgets.
Kuwait had its first walkout by oil workers in two decades last week as 13,000 employees protested cuts to pay and benefits. Disgruntled Saudis, presented on Monday with a royal blueprint for life after oil, are complaining about the cost of water. Even in Qatar, the world’s richest country, locals were told on Tuesday their gasoline subsidies were being scrapped.
“There’s a period of austerity necessary for long-term economic stability,” said Ghanem Nuseibeh, founder of London-based consulting firm Cornerstone Global Associates. “The challenge is to balance the rate of change while convincing the population that any pain will be part of a better future.”
Reality Dawns
People aged under 30 make up more than half of the 44 million population living in the six Gulf monarchies. While wealth has barely been dented in Qatar or the United Arab Emirates, more of them elsewhere are having to get used to a future with less abundance than that of their forebears.
In Oman, marketing graduate Tumadher Allawati, 22, has completed two unpaid internships, applied for two-dozen jobs and even went for interviews at nurseries and schools. After applying for posts in several government ministries, she was told not to bother because there’s a hiring freeze this year.
“I’m not optimistic at all,” she said. “I applied in so many places I’ve lost count and the fact no one in my graduating class has secured a permanent job is scaring me even more.”
Allawati, whose husband earns 800 Omani rials ($2,078) a month, said that after paying the rent and bills, the newlyweds are left with around $210 of disposable income. “Everything is getting more costly and no one is willing to give you a chance,” she said.
More Fragile
There is an unwritten agreement in the Gulf where populations agreed to delegate the running of the state to ruling families so long as there was no tax and they shared the spoils, United Arab Emirates commentator Sultan Al Qassemi wrote in February.
That’s now under threat, he said. “The traditional Gulf social contract has never been more fragile,” he said.
At the same time, falling oil prices have made more room to cut fuel subsidies while Saudi Deputy Crown Prince Mohammed bin Salman said in a recent interview with Bloomberg that the time has come for a complete overhaul of the economic model, including the creation of the largest sovereign wealth fund in the world.
Oil’s slump could be “a blessing in disguise” to drive social change, said Kuwaiti business owner Lubna Saif Abbas, 52. It will push more Kuwaitis to become productive, ambitious and hardworking as they experience “real jobs,” she said.
“Many in government jobs are just clocking in and out and not really doing jobs that are needed by the economy,” she said. “It’s just a way for the government to pay them.”
Draining Budgets
Even talking about austerity would have seemed incredible as recently as a few years ago as Gulf sheikhdoms used their vast oil wealth to remake their region. They have built man-made islands, financial centers, airports and ports that turned the Arabian desert into a banking and travel hub and the host of soccer’s showpiece World Cup in 2022.
Money was also deployed to ward off social unrest that spread through the Middle East during the Arab Spring uprisings, some of which were funded by the Gulf.
The International Monetary Fund forecasts a budget deficit of 12.3 percent of economic output this year for the six members of the Gulf Cooperation Council, which is led by Saudi Arabia. Before last year, when oil prices sank 35 percent, you have to go back to the 1990s to find anything other than a surplus.
Economic growth is also slowing, and based on the latest IMF projections, governments and private businesses in Middle East oil exporting countries would be able to create 7 million jobs, about 3 million short of the expected number of labor market entrants.
Restless Youth
Responses vary between countries, but all the monarchies are aware of the dangers of discontented youth. An ASDA’A Burson-Marsteller survey of 3,500 young people in 16 Arab countries published on April 12 found that a majority wants subsidies to continue, while nearly half thought that any higher prices should apply only to expatriates.
The Saudis, who recorded a budget deficit of nearly $100 billion last year, are planning a “restructuring of subsidies” while also developing a mechanism to provide cash to low- and middle-income Saudis who rely on them, the deputy crown prince told Bloomberg. King Salman fired the minister in charge of water after a bungled subsidy reduction led to astronomical bills.
“We don’t want to change the life of the average Saudi,” the prince said. “We want to exert pressure on wealthy people, those who use resources extensively.”
In Kuwait, parliament voted to raise utility costs for foreigners and businesses for the first time in half a century. The homes of Kuwaitis would be exempted as more people feel the squeeze, at least compared with what they were used to.
Mohamad Al Kharsan has worked for the Kuwaiti state for about seven years. Aged 32, he still lives with his parents because moving into his own home would shrink his monthly disposable income to just over 200 dinars ($663).
For many of his generation, it’s tough “making ends meet on a government job salary,” he said. “The golden years when we used to spend the summers in Europe and most people owned two homes instead of one are long gone.”-Bloomberg
