Since 2014 GCC governments have each responded to lower world oil prices by means of a similar sets of measures announced with great fanfare, including: promotion of private-sector growth through enhanced incentives for businesses and foreign direct investment; reductions in state subsidies and government spending; implementation of labour market reforms, including some tentative amendments to the sponsorship system; privatization of some state-owned enterprises, health and education services and other government facilities (such as electricity, transport and water provision); and increased taxation, beginning with the introduction of value-added tax (VAT). While some of these strategies stand out for their comprehensiveness – as in the case of Saudi Arabia’s Vision 2030 – more often such adjustments are arguably a case of déjà vu.11 Diversification has been the stated economic policy of all the Gulf monarchies since at least the 1970s. Furthermore, earlier such plans (Bahrain’s Economic Vision 2030, Abu Dhabi’s Economic Vision 2030 and Qatar National Vision 2030, all launched in 2008, and Kuwait Vision 2035, inaugurated in 2010), usually inspired by the same source,12 have either not been fully implemented, as some of the political and social costs have been regarded as too problematic, or have resulted in increased inequalities and concentration of wealth in the hands of a few, thus further stoking popular frustration – as observed in Bahrain and Oman in 2011 (and more generally across the Middle East). In the current context, there is no reason why similar measures – i.e. the privatization of education and health services, and the introduction of regressive taxes disproportionately impacting the poorer sectors of society (in the form of VAT) – would not be expected to produce similar social and economic impacts.
Given this track record, there are reasons to take a circumspect approach towards the recent reform plans, especially in the context of the fundamentally competing demands of the Gulf monarchies’ business elites – including royals – and ordinary people who would rather see businesses taxed than personal incomes. In particular, the structural rivalry between the business elites and the wider population means that it is increasingly difficult for the government to promote and justify large-scale austerity measures, for the sake of sustainable development, while merchant and royal elites preserve their own privileges and a secured flow of rents. True, mounting internal pressures and increased contestation of the established order has been a source of growing anxiety among the region’s ruling families, particularly since 2011. However, rather than rulers seizing the opportunity to promote a new social contract that would offer a more equitable distribution of wealth from natural resources and a more participatory decision-making process, the experience of the past decade points in the direction of a deepening concentration of wealth and power, and the evidence would suggest that no scenario of inclusive reform is on the horizon.13 Indeed, if the Gulf monarchies do pursue the top-down, neo-liberal reforms that have been announced, these are likely to foster tensions related to the definition of the new social contract. They could provoke renewed frustrations among the people most affected and herald considerable medium-term turmoil, albeit to different degrees in the six monarchies.
11 Kinninmont, J. (2016), ‘Saudi Arabia Faces its Future in Vision 2030 Reform Plan’, Chatham House Expert Comment, 29 April 2016, https://www.chathamhouse.org/expert/comment/saudi-arabia-faces-its-future-vision-2030-reform-plan#.
12 Saif, S. (2016), ‘When Consultants Reign’, Jacobin, 9 May 2016, https://www.jacobinmag.com/2016/05/saudi-arabia-aramco-salman-mckinsey-privatization/.
13 Kinninmont, J. (2015), Future Trends in the Gulf, Chatham House Report, London: Royal Institute of International Affairs, https://www.chathamhouse.org/sites/files/chathamhouse/field/field_document/20150218FutureTrendsGCCKinninmont.pdf.