World Economy

Fewer Jobs, Subsidy Cuts Greet (P)GCC Arab States

Fewer Jobs, Subsidy Cuts Greet (P)GCC Arab StatesFewer Jobs, Subsidy Cuts Greet (P)GCC Arab States

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 Persian Gulf Arab countries.

Yet what previously was taken for granted in the oil-rich Arab 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, Bloomberg reported.

Kuwait had its first walkout by oil workers in two decades last week, which cut its crude output by more than 60%, 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.

  Reality Dawns

People aged under 30 make up more than half of the 44 million population living in the six Persian Gulf monarchies (Saudi Arabia, Kuwait, the United Arab Emirates, Qatar, Bahrain, and Oman). 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.

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.

  Blessing in Disguise 

There is an unwritten agreement in the Persian Gulf Cooperation Council Arab countries 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.

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.”

Even talking about austerity would have seemed incredible as recently as a few years ago as Persian Gulf Arab 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 Persian Gulf sheikhdoms.

The International Monetary Fund forecasts a budget deficit of 12.3% of economic output this year for the six members of the (P)GCC, led by Saudi Arabia. Before last year, when oil prices sank 35%, one would have to go back to the 1990s to find anything other than a surplus.

  Restless Youth

Responses vary between countries, but all the monarchies are aware of the dangers of discontented youth. 

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. 

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, its 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.”