After the Sheikhs: The Coming Collapse of the Gulf Monarchies (11 page)

Significantly, despite all of these new Gulf homes being part of official government spending, the keys are usually handed out to recipients in a more traditional setting—often by a ruling family member at some sort of cultural gathering. An incident heavily reported in the UAE’s state-backed media provides a particularly good example: in 2008 the ruler of Dubai was apparently touring the eastern province of Abu Dhabi in his role as UAE prime minister when he came across a 99 year old UAE national. Upon seeing cracks in the walls of the man’s house Muhammad asked him if he needed anything. Replying simply that he ‘wished for a long and happy life’, Muhammad reportedly replied ‘here we will build for you a very comfortable home’ before ordering the construction of a new villa for the man, and new accommodation for all the man’s grandsons. Three years later, in 2011, the local reaction to Muhammad’s earlier visit was understandably positive, with the elderly man explaining that ‘there are no words to describe the generosity and care [Muhammad] shows towards his people’ and with the district’s governor being similarly enamoured of the sheikh.
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As well as houses, the government-led granting of land for agricultural and commercial use to citizens has also proved popular—a straightforward resource for many Gulf monarchies to exploit given that in most cases the state or even the ruler himself owns all land unless specifically re-assigned. For citizens still dwelling in rural or hinterland areas, many have been provided with plots of land to develop into working farms. And in the wealthier Gulf monarchies, especially Abu Dhabi—where Zayed bin Sultan Al-Nahyan had a particular keenness for ‘greening’ the emirate with trees and vegetation—many nationals have been provided with grants to purchase the necessary farming equipment and hire expatriate workers. Alternatively, and sometimes in addition to agricultural land, citizens have also been provided with plots of land in urban or industrial areas—either to be developed as retail outlets, workshops, or simply to build blocks of apartments to then rent out to expatriates. In
some instances these plots of land have never been developed, serving simply as car parks or rest areas for lorries—but either way, they still generate rent for their respective landlords. As with the allocation of houses, the process is usually linked directly to key members of ruling families, despite being a part of official government spending. In Abu Dhabi, for example, the Khalifa Committee for Social Services and Commercial Buildings—named after and chaired by Zayed’s eldest son and Abu Dhabi’s current ruler, Khalifa bin Zayed Al-Nahyan—has dispensed over $10 billion in such property or grants since its inception in 1981.
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Undoubtedly its popularity helped bolster Khalifa’s status as Abu Dhabi’s long-serving crown prince. Similarly in Qatar, all citizens are eligible to receive a plot of land ranging from 700 to 1,500 square metres, and an interet-free loan of about $250,000 towards its development. In order to claim these plots an application must be made directly to the ruler’s court—a process through which ‘the Emir’s patronage is reinforced both symbolically and practically’.
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In addition to social security benefits for unemployed citizens—which are very generous, about $3,000 per month in the wealthier Gulf monarchies,
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and modest in all but the poorest Gulf monarchies of Bahrain and Oman—the welfare states that have been set up since the 1970s also include free healthcare and education. Again there is marked disparity between the quality of services offered in the wealthiest and poorest of the six states. In Qatar, for example, a new $2.4 billion hospital is being established in cooperation with Cornell University,
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while the state-sponsored Qatar University is believed to operate with a massive endowment. In the UAE and Kuwait, similarly well-equipped hospitals have been in place for years, and students at state sector schools and universities can usually expect to receive free textbooks and in some circumstances even free laptop computers. In Saudi Arabia, a new public research university—the King Abdullah University of Science and Technology—was launched in 2009 at great expense. Comprising eleven faculties and already educating several hundred students, the university even offers stipends of several thousand dollars per year to its students. While Bahraini and Omani state sector hospitals, schools, and universities clearly lack the same level of attention and funding as in their neighbours, they are nevertheless far in advance of facilities available elsewhere in the developing world and are still easily among the best facilities available in the Arab world. Oman’s Sultan Qaboos University—established in 1986—enjoys
a long and distinguished history in the region, as did Bahrain’s Salmaniya Hospital until recently.

Another important and highly visible feature of the Gulf monarchies’ allocative states has been the provision of public sector employment to most citizens, provided that they meet the most basic of qualifications. In the 1970s and 1980s almost all citizens who graduated from university were guaranteed jobs in the civil service, in ministries, or in other government departments. Moreover, citizens invariably enjoyed higher salaries than their expatriate counterparts, along with generous pensions, relaxed working hours, and good promotion prospects. Although something of a taboo subject in the region, it remains fair to say that citizens—especially at this period—were not required to work to international standards, with very few ever being fired from their positions. Put politely, with reference to Saudi Arabia ‘…royals have on many occasions used their fiscal authority to…employ veritable armies of idle bureaucratic clients’.
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In recent years it has become harder for the Gulf monarchies, especially those with declining resources or larger populations such as Bahrain, Oman, and Saudi Arabia, to keep creating and funding such generously paid and well-protected jobs. But in the smaller, wealthier monarchies it undoubtedly remains a central strategy, with public sector salary increases usually being tied to important political events. In the UAE, for example, within days of Khalifa bin Zayed’s succession as Abu Dhabi ruler and UAE president in late 2004 it was announced that all nationals working in the public sector would receive an immediate 25 per cent pay increase: understandably a popular decision.
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Even more dramatically, in December 2009—just days after Dubai’s economic crash was reported in the international media and many UAE nationals were questioning their real estate investments in the emirate—the federal government announced that all citizens in the public sector would receive a 70 per cent pay rise, including all staff employed by the giant ministries for health and education. Emiratis interviewed by state-backed newspapers were understandably impressed, with one remarking ‘I would like to thank the Government for making it easier for Emiratis to live in the city, and for helping provide for their future plans,’ while another claimed ‘this increase will help me live more comfortably, buy property, and increase the limit on my spending’.
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Significantly, as with most such salary hikes in the region, expatriates were excluded.

As discussed later in this book, in those Gulf monarchies where public sector employment can no longer be guaranteed for citizens, it has been harder for the ruling families and governments to rely continuously on salary increases to boost popularity. Nevertheless, steps have been taken to make sure that those who end up working in the private sector can still benefit from their nationality. In Saudi Arabia and Kuwait, for example, many jobs that appear to be in the private sector are very often in large, government-backed parastatals such as the Saudi Basic Industries Corporation or the Kuwait Projects Company (KIPCO). In this sense, employment conditions for citizens differ very little from those working in ministries or government departments. Similarly, in Abu Dhabi, which has recently streamlined the number of civil service jobs from 65,000 to 28,000, and has plans to trim the number to 8,000,
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many new pseudo-public sector jobs have been created by giant government-backed companies and the many joint ventures they have sponsored. The aforementioned Mubadala Development Company is particularly noteworthy, as together with its many offshoot projects it now employs thousands of young UAE nationals.

Where genuine private sector employment opportunities for nationals do exist, for example in Bahrain and Dubai’s export-processing free zones it is far more difficult to earmark jobs for citizens or to offer them different rewards from expatriates. Nevertheless, efforts have been made—though not always successfully—by some Gulf monarchies to encourage companies to help indigenise the labour force, either by imposing quotas or by introducing legislation that offers citizens greater job protection or better working hours than their expatriate peers. In 2004, a report conducted by Tanmia—the UAE’s National Human Resource Development and Employment Authority—recommended that the ‘system introduced by the Government of applying minimum quotas for employment of UAE nationals needs to be applied to more economic sectors to ensure jobs for nationals’ and that private sector firms should contemplate introducing training programmes specifically for citizens.
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Moreover, in late 2009, with concerns over the credit crunch growing, the UAE’s federal government resorted to blatant protectionism, announcing that it would be illegal for employers to make UAE nationals redundant from their jobs, except in the most extreme cases.
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Other aspects of the wealth distribution strategy of the Gulf monarchies include the regular cancelling of debts, and the dispensing of ‘government
charity’ to the minority of indigent citizens who somehow slip through the free housing and welfare state net. The former mechanism, much like the periodic public sector salary increases, tends to be deployed during economic or political crises as a means of reinforcing the loyalty of citizens. Kuwait provides the best example of this, with the government having revoked most personal debts and stock market losses following the 1982 Souq al-Manakh crash—named after the informal, unregulated bourse that had been set up in an air-conditioned garage. Thousands of Kuwaiti nationals had bought into the market, in many cases their first experience of personal investments, before having their stocks wiped out. In 1991, following Kuwait’s liberation from Iraq, the government again moved to abrogate most personal debts, allowing citizens more quickly to resume their pre-war lifestyles. And in 2008 the government set up an $18 billion emergency fund, specifically to assist Kuwaiti nationals with debt problems. As the effects of the credit crunch on Kuwait’s economy intensified, this was extended in 2009 following the government’s purchasing of over $23.3 billion of consumer loans—this being financed from the annual interest accrued on foreign assets held by the Kuwait Investment Authority.
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As discussed later in this book, widespread debt cancellation has re-emerged in Kuwait 2011 and in many other Gulf monarchies, as all grapple with the aftermath of the Arab Spring.

With regards to ‘government charity’, much like the free housing projects, the organisations involved tend to remain very closely tied to the state and are invariably patronised or very publicly subsidised by key members of the ruling families. In the UAE for example, there exists the Khalifa bin Zayed Al-Nahyan Foundation in Abu Dhabi which donates to a wide range of causes, and the Emirates Foundation which is chaired by the crown prince and has recently focused on distributing grants for nationals with special needs. In Dubai and the other emirates there exist similar, albeit less well-endowed, bodies. Qatar also provides a good example of this strategy, with its largest domestic charitable body—Qatar Charity—providing a range of funds to help less well off Qatari families and to support Qatari orphans. Crucially, although it styles itself as a non-governmental organisation and is headed by a general manager,
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rather than a member of the Al-Thani ruling family, Qatar Charity is nonetheless inextricably linked to the establishment. It receives financial and logistical support from government bodies including the Ministries
for Civil Service Affairs and for Housing, Foreign Affairs, Finance, Economy and Trade, Islamic Affairs, and Education. It is also assisted by the Supreme Council for Family Affairs and the Planning Council—both of which are key social policy vehicles for the Qatari government. As such, it has been argued that Qatar Charity’s various efforts are fully in line with state policies and objectives.
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Ironically, it is now difficult for citizens of Gulf monarchies to give money directly to the poor and thereby bypass such state-sanctioned charities. And in some cases such private charitable acts are frowned upon by the establishment. In recent years in the UAE, for example, in advance of Ramadan—the holy month during which all practising Muslims have a duty to be charitable—the Ministry for Interior has been issuing statements that beggars should not be tolerated, and that those caught would be arrested, deported, and blacklisted from returning to the UAE, meeting the cost of the deportation themselves. In 2007 it was reported that over seventy such beggars, mostly of Arab origin, were arrested and deported in this manner, with any nationals caught having been directed to official charities and threatened with punishment if they repeated their behaviour in the future.
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An important corollary of the Gulf monarchies’ allocative states is the visible lack of taxation, or at least any obvious extractive practices. It is often assumed that the region has no real history of tax, and that hydrocarbon exports and the resulting rentier structures have allowed states to avoid such unpopular measures. This is partly true, as there has never been a system of direct taxation in any of the Gulf monarchies. However, prior to the oil era there were a substantial number of indirect taxes, licence fees, and other charges levied by the old, traditional governments. Taxes were levied on the size and quality of pearls that merchants attempted to sell and sales of camels, dates, and fish were taxed too. Payments also had to be made to sheikhs for all fishing or trading vessels that were moored in their ports. In some cases these indirect taxes—or more modern variations—have been reintroduced, especially in those Gulf monarchies that have faced declining hydrocarbon resources. In Dubai there are now significant charges levied for parking cars, crossing bridges, purchasing alcohol, and waste removal. Government fees have also been added to utility bills. In the near future value added taxes may start to appear in the Gulf monarchies, but it is far from certain. In 2008 all six of the Gulf monarchies began planning to introduce a modest VAT, but despite IMF recommendations to press ahead,
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in late 2011
the plans were delayed until at least 2013 given the tense political situation in the region.
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Nevertheless, there remain no plans to introduce income tax in any of these states, as this continues to be regarded as deeply unpopular among citizens and thus politically unpalatable for the ruling families and their governments. A recent study on Saudi Arabia puts this well, describing the ‘large-scale fiscal obligations’ owed by the state to its ‘various clients in society’, and demonstrating that ‘over time this paternal largesse has proved difficult to reverse’.
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