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Gulf 2013: The Constant and the Changing - Executive Summary

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This work focuses on developments in the GCC over the past two years. It has been written in its entirety by more than 20 experts from the GCC, and its intended audience is the people of the GCC

How does the strategic water reserve in Bahrain -just one day- compare to the rest of the region? Why has the barrel price of crude oil needed to balance the budget in a small and nominally rich county like the UAE exceeded USD 85? What are the social and political consequences of Qatar’s citizens dropping to below 15% of the state’s population?  How does the presence of more than fifty thousand foreign military troops in the gulf affect issues of national security? And what are the latest developments regarding political prisoners in each of the constituent countries?

Exploring these questions is the main aim of this work, where we focus on monitoring, analysing, and evaluating developments in the GCC countries during 2011 - 2013

Nation-building  in the GCC is still severely hindered by several chronic disorders that plague all its constituent countries without exception, and which have persisted for more than four decades. Taken together, these chronic disorders present a unique mixture of problems that these nations have to face. There is no other region in the world where non-citizens consistently make up half of the population, and where oil revenues constitute more than 80% of the public revenue after more than thirty years of diversification talk. Furthermore, eyebrows are certain to be raised about the political situation when a growing number of people are imprisoned solely due to a “retweet”. This report takes its main focus as outlining these chronic disorders facing the region of the GCC and monitoring their developments over the past two years


We find it useful to summarize the chronic disorders plaguing the region into four: the political, the productive-economic, the demographic, and the security disorder.


The Productive-Economic Disorder

The root of this disorder lies in the over-dependence of economic activity on the rent of selling a depletable natural resource (crude oil and natural gas) in the international energy markets. It is no secret that public income depends nearly exclusively on the rent proceeds from crude oil and natural gas sales in international markets, due to the large difference  between the low cost of producing oil and the its high selling price. This production disorder is then reflected in the composition of GDP and all other national accounts of the region, since the main source of income is the proceeds of oil exports and not the productivity of the economy. To understand the extent of this disorder we need only imagine the economic, social and political repercussions on the region if  oil export revenues were to cease for any particular  reason.

This production imbalance manifests itself within the external and internal dynamics of the GCC’s relations. As a result of an unwillingness and perhaps inability to adopt a national oil policy - under which oil exports are subject to national developmental considerations -  the GCC’s external oil policy has been reduced to catering to the vagaries of global oil demand swings, with little regard to any internal developmental plans, local economic capacity or the depletable nature of the oil wealth. Internally, this has resulted in an increasing dependence on oil revenue for public finances, with the proceeds of oil becoming the source of revenue for the general budget, the balance of payments, public investments, and all other national accounts.

This chronic disorder in economic production and the associated lack of financial transparency has resulted in a blurring of the line between public and private purses. State revenue accounts, oil reserves and sovereign funds are  tightly guarded secrets in most countries of the GCC. This report shows that there exists a difference of more than 750 billion USD in the estimates of actual oil and gas export revenues  vs. declared public oil and gas revenues between the years 2002 and 2011. These astronomical figures require an explanation as to the huge discrepancy.

As would be expected, this transparency deficit in public finances has led to a significant amount of leakage, wastage and misappropriation of oil revenues for current consumption instead of direct investment, as well to the adoption  of questionable policies when it comes to the investment of oil revenues both internally and abroad. With the exception of Kuwait, no country in the  region publishes independently audited final accounts of public finances that include all aspects of income and public expenditure, as well as audited accounts of general reserves.

It is no surprise then that the GCC countries have gained the status of rentier-states par excellence, that policies have failed miserably to diversify sources of income, and that the sanctity of public revenues is habitually violated. This has been coupled with a dramatic ballooning of consumption patterns at the expense of investment for the benefit of the current and future generations. In essence, a chronic economic production disorder came to characterize the countries of the GCC.


The Demographic Disorder

The demographic disorder is characterized by a society in which non-citizens constitute a high proportion of the population and the economic, cultural and social capacity of society - over an extended and continuous period of time. Migration and the exchange of people has been a vital component of the history of humanity, and no one can deny the enormous benefits both the GCC and sending states have enjoyed from the presence of expatriates in the gulf over the past five decades. However, in most societies, the presence of expatriates tends to either diminish overtime as migrants returns home, or otherwise they are incorporated in the host society as new citizens with full and equal rights. GCC states are unable to fulfill either scenario currently, as the number and proportion of expatriates in society continue to grow over time, while a strong legal, political and economic segmentation between citizens and expatriates continues to exist in parallel. In this unsustainable contradiction lies the root of the demographic disorder. This  disorder has relentlessly expanded over the past four decades, with the proportion of  expatriates increasing from 22% in 1975 to 48% in 2011, according to official statistics. Concurrently, the proportion of citizens in the labor forced dropped from 61% to 31% in the same period.

The situation is particularly striking in the smaller states of the GCC. In the UAE and Qatar for example,  the percentage of citizens has decreased to below 15% of the population and make up only 6% of the labour force.  Citizens have become a minority within most countries of the GCC, while the majority of the population came to be composed of a segmented group of expatriates with unequal social and economic privileges, a situation which can often manifest itself in some cases of exploitation. It is noteworthy that the demographic disorder emerged as an established phenomenon with the oil boom in the 1970s, showing the strong association between the demographic and productive-economic disorders.  

Recently,  a curious phenomenon of  “mega real estate projects ” mainly directed towards international buyers has emerged in the GCC. This phenomenon has taken centre stage in 4 countries of the council (Bahrain, Oman, Qatar, the UAE), where the policies and actions of decision makers have been squarely directed towards making these projects the primary engines of growth in the economy. These mega real estate projects signal a qualitative shift in the manner that decision makers and the private sector view the issue of the “demographic disorder”. While the overreliance on expatriates was previously seen as a necessary byproduct of economic growth that had to be tolerated and regulated to fulfill the dictates of production, migrant inflow of a very narrow and peculiar kind has now been adopted as a central goal required to fill these newly built cities and to boost economic demand and consumption in the region. Figures show that there is an intention to build at least 1.3 million units  of “international mega real estate” type, with the potential capacity to accommodate more than 4.3 million inhabitants , a figure larger than the citizen population of these 4 countries combined.


The Security Disorder

The heart of the external security disorder lies in the inability of the GCC states to provide adequate military self-protection, leading them to seek security “alliances” with western super-powers by providing military facilities in exchange for protection. This relationship should not be seen as purely confrontational or one of complete dependency.  Rather, it is one of mutual interests, interests that sometimes intersect and occasionally can also undergo a period of discord.

The Western –mainly American with some British - military presence in the region  is not simply a matter of providing security and protection for local regimes. These are important roles, but not more important than securing the strategic location of the oil fields. If there were a scenario where the oil fields no longer played a critical role (due to the depletion of oil, for example), then  the “strategic location” of the gulf would be  largely diminished. Hence the incentive for such a large western military presence would also decrease, at least from its current intensive form.

Western military presence is not simply limited to the interests derived from securing the oil fields, however. We cannot overlook the significant role played by the arms trade – where  the United States and its allies profit from securing most of the arms purchases in the region, in addition to the contracts of  security systems and companies.  This is in addition the enormous cost bore by the host countries in contributing to constructing and maintaining the military bases in the region.

It is very obvious that the main victim of this external security disorder is the sovereignty of the GCC countries, as their external security is ultimately determined beyond their borders. There is no doubt that the GCC states face real threats and challenges in an unstable region, as the 1990 Iraqi invasion of Kuwait and the continued Iranian occupation of the UAE islands show. However, in order to address the heart of this security disorder, one has to inquire regarding the reasons of the inability of the GCC to independently provide adequate military self-security and self-protection, instead having to seek alliances with western superpowers to provide such protection. Statistics show that there are more than 30 thousand foreign troops based in the GCC countries in 2012, in addition to another 20 thousand based in aircraft carriers and other naval ships patrolling the seas of the Gulf.

The second dimension of the security disorder are internal, revolving around the challenges of securing the region’s basic resources, including water, food, energy and the natural environment.  It is no secret that the region is considered one of the poorest areas globally in terms of the availability of water and food, and that it is entirely dependent on a depletable resource to provide its energy needs. In contrast, the GCC’s water, food and energy consumption are one of the highest in the world, and it continues to grow at a rapid pace. This combined situation of  excessive consumption and scarce resource availability provides a worrying trend for the region in the medium to long term horizon.


Political Disorder

Last but not least is the political disorder, which has probably grabbed most of the headlines over the past two years. This political disorder manifests itself in the lack of democratic systems and full and equal application of the principles of active citizenship. Indeed the absence of effective popular participation in political decision-making in most countries of the GCC has become a well established source of concern. A lopsided relationship between society and the state has emerged, with the previous able to display a strong dominance over the latter in political, security, economic and social matters.

The longevity and severity of these disorders have become strongly established factors in the GCC landscape over the past four decades. However, the region still lacks local studies that systematically monitor the developments and changes within these disorders, and this constitutes the main aim of  this work. It is rarely disputed nowadays that change has become an urgent requirement for the region, but questions regarding the nature of this change and how best to implement it still remain unclear. The lack of systematic local monitoring and analysis of developments is one of the main hindrances to clarifying this picture, and this is a gap that this work aims to fill.   

We focus on analyzing the developments in each of the disorders, both at individual country level and  the GCC as a whole. The aims from this methodology are multiple. It is essential to outline developments and unique traits within each country, but it is equally essential to recognize that the challenges and disorders are similar and interconnected across all the GCC states.

Hence we divide this work into four main sections, with each focusing on one of the chronic disorders and its developments over the past two years. Within each section, we present in-depth files that focus on a particular aspect of the disorder under the spotlight.  Thus, in the political section we devote two in depth files to reviewing the constitutions as well as the status of trade unions in the GCC. In the security section, there are files on foreign military presence in the region and  another discussing water security. The state of oil revenues and their expenditure make up the in-depth file within the economic section. Last but not least, we discuss the consequences of the “mega real estate” phenomenon on the demographic disorder. We also focus on the most important developments over the past two years at the individual country levels, focusing on the particular events within each of the six countries under considerations.

We have been very conscious of certain crucial pitfalls that are necessary to avoid when utilizing such a framework. Firstly, it would be misleading to view and treat these four disorders as separate issues that are non-interrelated. Instead we choose to analyze the disorders as inter-connected and cross-feeding, treating them as an interrelated web of factors.

It would also be simplistic to treat the disorders as rigidly fixed phenomena that are immune to change. Indeed we choose to label them as “disorders” precisely because they are not sustainable in their present form in the long run.The chronic and continuously expanding nature  of these disorders make it very likely that change  could manifest itself in a sharp and unpredictable nature when it does occur. Recent events within the wider Arab world attest to the possibility of such scenarios.

This is why we have entitled this work “The Constant and the Changing”.[1] Our framework revolves around deconstructing what has remained relatively constant over the past decades in the gulf, versus the new developments that have taken centre stage over the past few years.

It is also equally important to take into account how the different parties with vested interests  - whether local regimes, the diverse population segments, or international powers – interact within these chronic disorders and changes within them. As developments exit the ordinary and the expected, the various parties find themselves stepping out of what they are accustomed to, paving the way for unplanned and fluid reactions.  Thus rapid change opens the door for unprecedented mobility at the grassroots level, while official state apparatus find themselves out of their comfort zone. Hence it becomes important to identify and deconstruct trends within this dialectic between “the constant” and “the changing”.


And although it does not do justice to all of the diverse parts of this work, we highlight below some of our main findings:


Political Disorder: The constant is the continued monopolization of political power within the royal families of the GCC, and the absence of effective citizenship and democratic institutions. The changing is the emergence of political movements and protests in all of the GCC countries at a level not witnessed for decades. In addition to Kuwait and Bahrain, who have a long history of organized political opposition, these movements have appeared  in Saudi Arabia and Oman, and there are even shooting buds in the UAE and Qatar. The question remains open, however, on the nature and future trajectory of these movements, and whether they are able to put forward and achieve a cohesive democratic and developmentalist vision, or whether they will become mired in identity-based conflicts. This becomes a pertinent question, particularly with the rise in sectarian and ethnic tensions within the GCC states and the wider Arab world.


Economic Disorder: The gulf continues to play the role of the major oil producer in the world, and it continues to rely heavily on oil revenues as the backbone of the local economy. The changing factor is the emergence of strong internal economic spending pressures that are becoming increasingly difficult to address, despite the continuous rise in oil prices. Particularly worrying are the rising deficit and debt levels in some countries of the region, most notably Bahrain.  In this respect, there are questions regarding a discrepancy of more than 750 billion USD in the estimates of actual oil and gas exports when compared to officially declared public oil and gas revenues between 2002-2011.

Population Disorder: The constant is the continuous over- reliance on expatriates for productive and economic activity in society, with expatriates reaching half the population of the region (48%) for the first time in its history. The changing factor has been the newly emerging economic role of expatriates as a main source of economic demand and purchasing power in the region, especially in the “mega real estate market”, as opposed to their former traditional role as mainly a source of productive labor.


Security Disorder: “The constant” is the continuous reliance on western powers  for military and security protection. “The changing” stems from the uprisings and protests engulfing the regions surrounding the GCC, from Iran in the East to Egypt in the West. There are also emerging signs, too early to take for granted, that there are pressures in the west to review the size and nature of their military and security relationship with the region. Within the GCC regimes, these factors have led to a growing discourse of unity and integration in the face of the perceived security threats faced by them.

While working on this study, it was important to create an integrated team that possesses the required knowledge, specialization and experience in the different areas of interest. More than twenty people from the GCC played a role in drafting its content, and it was important that this work remained independent of any governmental or externally based parties, which tend to dominate most what is written and said about the region today. I can only thank each and every one of those who worked on this study, and I hope that it proves to be as illuminating and interesting to you as a reader, as it was for us in its preparation.


Omar Hesham AlShehabi

The above was an executive summary of the new publication Gulf 2013: The Constant and the Changing from the Gulf Centre for Development Policies, which was prepared by more than 20 researchers from the Gulf. For more please visit the centre’s website www.gulfpolicies.com or on twitter @gulfpolicies


 [1] We borrow the title from Adonis’s seminal work with the same name. It is clear, though, that we employ a different meaning to the terms “constant” and “changing” here.