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Mutual Necessity Relationship between the Gulf  and India

Mutual Necessity Relationship between the Gulf and India

In the World Economic Forum’s Global Agenda, stories on Migration and Workforce and Employment abound. This one on India‘s record-breaking diaspora is the latest. It is doubly interesting because of a) the significant presence of more than 8 million NRIs (non-resident Indians) in the Gulf and b) it is reflective of a mutual necessity relationship between the Gulf and India.

In 2019, remittance flows to low- and middle-income countries are expected to reach $550 billion, becoming their largest source of external financing. ‘Indians abroad sent back $80 billion, making the country the leading recipient of funds from overseas.’ Per Image above: REUTERS/Pawan Kumar.

Katharine Rooney, Senior Writer, Formative Content, the Indian diaspora elsewhere seem to be not that dissimilar to that of the GCC’s.

Excerpts of the WEF article:

India’s record-breaking diaspora in numbers

When Indian Prime Minister Narendra Modi visits the United States, he is among compatriots – 4.4 million of them.

India has the largest diaspora in the world, with around 18 million of its citizens living in other countries. The US is their top destination: in 2017, people of Indian descent made up 1.3% of the American population, and they are the most successful immigrants in the country.

As economist Nirvikar Singh says in an interview with the University of California Santa Cruz, “Indian entrepreneurship is a very important engine of economic growth.” The co-author of a book on the Indian diaspora in the US notes that 8% of the founders of high-tech companies are Indian. With Sundar Pichai running Google and Satya Nadella the CEO of Microsoft, Indians play a prominent role in some of America’s biggest tech firms.

Indian-Americans watch Narendra Modi in Madison Square Gardens in New York. The US is a key destination for Indian emigrants.
Image: Reuters/Lucas Jackson

Economic factors lure large numbers of Indians to the Persian Gulf, particularly the United Arab Emirates (UAE), which is home to 3.1 million Indians. The number of Indians living in the UAE and other countries in the region such as Saudi Arabia and Oman increased fourfold in the space of a decade, from 2 million in 2005 to more than 8 million in 2015.

It’s a numbers game

Despite a sizeable outflow, India is still home to 1.39 billion people – and by 2027, it’s set to overtake China as the world’s most populous country. While there has been progress in reducing extreme poverty levels, there are still 176 million people living in poverty in India, and money remitted by expatriates is an important part of economic development and growth. In 2018, Indians abroad sent back $80 billion, making the country the leading recipient of funds from overseas.


According to the Reserve Bank of India, inward remittances helped to finance 43% of the country’s trade deficit in 2017-18. They also help to meet the needs of the poor by covering the cost of daily living expenses and allowing people to invest in business and education.

Countries with the largest diasporas – India has the world’s biggest, with nearly 18 million people living abroad.
Twenty countries or areas of origin with the largest diaspora populations (millions) Image: UNDESA

The ever-changing direction of migration

With a significant spike in emigration since 2015, India has overtaken other countries that once represented significant migrant populations – many escaping political upheaval or conflict.

But there has been a huge jump in migration from Syria, with more than 5.6 million fleeing the country since war broke out in 201, and a steady rise in the number of people leaving Pakistan, where the government has encouraged outward migration as a way to combat unemployment, reduce poverty and earn foreign exchange through remittances.

Migration Explore the latest strategic trends, research and analysis This article is part of the India Economic Summit

Become a Member or Partner to participate in the Forum’s year-round annual and regional events. Contact WEF now.

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Why the Middle East Is More Combustible Than Ever

Why the Middle East Is More Combustible Than Ever

Robert Malley in this article titled The Unwanted Wars published in September / October 2019 of Foreign Affairs gives some answers to this question that has been marauding everyone for millennia. Why the Middle East Is More Combustible Than Ever, would, sarcasm apart, be a good start to try to understand the multi-layered mess of all past and passing powers. Here are some excerpts of the article.

Why the Middle East Is More Combustible Than Ever
Rifles and rifts: Houthi rebels in Sanaa, Yemen, December 2018 Hani Al-Ansi / Picture Alliance / dpa / AP Images

The war that now looms largest is a war nobody apparently wants. During his presidential campaign, Donald Trump railed against the United States’ entanglement in Middle Eastern wars, and since assuming office, he has not changed his tune. Iran has no interest in a wide-ranging conflict that it knows it could not win. Israel is satisfied with calibrated operations in Iraq, Lebanon, Syria, and Gaza but fears a larger confrontation that could expose it to thousands of rockets. Saudi Arabia is determined to push back against Iran, but without confronting it militarily. Yet the conditions for an all-out war in the Middle East are riper than at any time in recent memory. 

A conflict could break out in any one of a number of places for any one of a number of reasons. Consider the September 14 attack on Saudi oil facilities: it could theoretically have been perpetrated by the Houthis, a Yemeni rebel group, as part of their war with the kingdom; by Iran, as a response to debilitating U.S. sanctions; or by an Iranian-backed Shiite militia in Iraq. If Washington decided to take military action against Tehran, this could in turn prompt Iranian retaliation against the United States’ Gulf allies, an attack by Hezbollah on Israel, or a Shiite militia operation against U.S. personnel in Iraq. Likewise, Israeli operations against Iranian allies anywhere in the Middle East could trigger a regionwide chain reaction. Because any development anywhere in the region can have ripple effects everywhere, narrowly containing a crisis is fast becoming an exercise in futility. 

When it comes to the Middle East, Tip O’Neill, the storied Democratic politician, had it backward: all politics—especially local politics—is international. In Yemen, a war pitting the Houthis, until not long ago a relatively unexceptional rebel group, against a debilitated central government in the region’s poorest nation, one whose prior internal conflicts barely caught the world’s notice, has become a focal point for the Iranian-Saudi rivalry. It has also become a possible trigger for deeper U.S. military involvement. The Syrian regime’s repression of a popular uprising, far more brutal than prior crackdowns but hardly the first in the region’s or even Syria’s modern history, morphed into an international confrontation drawing in a dozen countries. It has resulted in the largest number of Russians ever killed by the United States and has thrust both Russia and Turkey and Iran and Israel to the brink of war. Internal strife in Libya sucked in not just Egypt, Qatar, Saudi Arabia, Turkey, and the United Arab Emirates (UAE) but also Russia and the United States.

There is a principal explanation for such risks. The Middle East has become the world’s most polarized region and, paradoxically, its most integrated. That combination—along with weak state structures, powerful nonstate actors, and multiple transitions occurring almost simultaneously—also makes the Middle East the world’s most volatile region. It further means that as long as its regional posture remains as it is, the United States will be just one poorly timed or dangerously aimed Houthi drone strike, or one particularly effective Israeli operation against a Shiite militia, away from its next costly regional entanglement. Ultimately, the question is not chiefly whether the United States should disengage from the region. It is how it should choose to engage: diplomatically or militarily, by exacerbating divides or mitigating them, and by aligning itself fully with one side or seeking to achieve a sort of balance.

ACT LOCALLY, THINK REGIONALLY

The story of the contemporary Middle East is one of a succession of rifts, each new one sitting atop its precursors, some taking momentary precedence over others, none ever truly or fully resolved. Today, the three most important rifts—between Israel and its foes, between Iran and Saudi Arabia, and between competing Sunni blocs—intersect in dangerous and potentially explosive ways.

Israel’s current adversaries are chiefly represented by the so-called axis of resistance: Iran, Hezbollah, Hamas, and, although presently otherwise occupied, Syria. The struggle is playing out in the traditional arenas of the West Bank and Gaza but also in Syria, where Israel routinely strikes Iranian forces and Iranian-affiliated groups; in cyberspace; in Lebanon, where Israel faces the heavily armed, Iranian-backed Hezbollah; and even in Iraq, where Israel has reportedly begun to target Iranian allies. The absence of most Arab states from this frontline makes it less prominent but no less dangerous.

Why the Middle East Is More Combustible Than Ever
Israeli Prime Minister Benjamin Netanyahu near the Syrian border in the Israeli-occupied Golan Heights, March 2019 Ronen Zvulun / Reuters

For those Arab states, the Israeli-Palestinian conflict has been nudged to the sidelines by the two other battles. Saudi Arabia prioritizes its rivalry with Iran. Both countries exploit the Shiite-Sunni rift to mobilize their respective constituencies but are in reality moved by power politics, a tug of war for regional influence unfolding in Iraq, Lebanon, Syria, Yemen, and the Gulf states.

Finally, there is the Sunni-Sunni rift, with Egypt, Saudi Arabia, and the UAE vying with Qatar and Turkey. As Hussein Agha and I wrote in The New Yorker in March, this is the more momentous, if least covered, of the divides, with both supremacy over the Sunni world and the role of political Islam at stake. Whether in Egypt, Libya, Syria, Tunisia, or as far afield as Sudan, this competition will largely define the region’s future. 

Together with the region’s polarization is a lack of effective communication, which makes things ever more perilous. There is no meaningful channel between Iran and Israel, no official one between Iran and Saudi Arabia, and little real diplomacy beyond rhetorical jousting between the rival Sunni blocs.

Read more on the original document.

5 steps to reshape economic geography and rejuvenate the MENA

5 steps to reshape economic geography and rejuvenate the MENA

The Brookings’ FUTURE DEVELOPMENT elaborated these 5 steps to reshape economic geography and rejuvenate the MENA this Friday, September 20, 2019, as a demonstration that it is possible to do so. The story is by Somik V. Lall and Ayah Mahgoub. Here it is.

5 steps to reshape economic geography and rejuvenate the Middle East and North Africa

The destinies of people in the Middle East and North Africa are shaped more by accidents of where they were born than in any other part of the world (Figure 1). This is considered a problem by governments in the region, and it should be. They have tried many ways to respond to the needs of people in lagging areas; much money has been spent on investment in these places. Thus, to add jobs in poorer areas, policymakers have tried to strong-arm new production facilities into these areas. To meet the need for decent homes and amenities in poor urban neighborhoods, money has been poured into massive housing projects.

People shop for food in Djemaa El Fna square in Marrakesh July 8, 2010. REUTERS/Lucy Nicholson (MOROCCO – Tags: SOCIETY TRAVEL) – GM1E67L0L0U01

Even so, spatial disparities continue to grow, or are closing more slowly than would be expected given the volume of investment directed to these locations. The main reason: the causes of spatial exclusion are not locational and physical but are economic and institutional.

Figure 1: With a few exceptions such as Jordan, spatial inequality is higher in MENA

With a few exceptions such as Jordan, spatial inequality is higher in MENA

WHY IS MENA SO FRAGMENTED?

Why is territorial convergence so difficult? In a report that we just completed at the World Bank, we identified four reasons.

  1. Most lagging areas in MENA have not been able to leverage the full returns to their endowments because the business environment and infrastructure in their cities and towns makes it hard for new firms to start and grow (Figure 2). One reason is that outside the capital city in MENA countries, smaller cities invariably lack the authority to raise their own revenues and to manage local service provision.
  2. Most residents in lagging areas are “stuck in place,” unable to take full advantage of jobs that more vibrant urban economies offer. Credentialist education systems may be most to blame for making people immobile.
  3. In leading areas, rigid and outdated regulations distort land markets and stymie development. For example, regulations in Tunisia prohibit residential buildings more than three stories high, and regulations in Jordan impose a minimum lot size of 100 square meters—restricting the supply of affordable formal housing.
  4. MENA’s governments have created formidable obstacles to trade and migration. The main barriers are limits on news and information and practical constraints on travel and trade (visa difficulties, weak infrastructure, logistics hurdles).

Figure 2: It’s tough for firms outside MENA’s capital cities

Figure 2: It’s tough for firms outside MENA’s capital cities

Notice that while they result in spatial inequalities of opportunity, the reasons for fragmentation are not themselves spatial.

ENGINEERING A CONVERGENCE MACHINE

Increasing the pace of integration and convergence will require fixing these problems. Governments in the region can reduce territorial disparities quickly and effectively by doing five things:

  1. Strengthen coordination and complementarities across initiatives. Development strategies are more likely to succeed if they are multidimensional, including access to energy, transport, land, and markets—in the same place, whether sequentially or concurrently. A good place to start is by anchoring investments in and around cities. Complementary reforms that help get the prices right—for energy and for land—can go a long way in creating the conditions for job creation in lagging areas. The good news is that governments don’t have to pay more to see better results, because spatial coordination will generate cost savings in the medium to longer term.
  2. Redistribute roles and responsibilities across tiers of government. Citizens in different parts of the country have varying needs, and local conditions require flexible service delivery models. Redistributing responsibilities for local revenue generation and local service provision to local governments can make them better equipped and more accountable.
  3. Enable mobility of people between lagging and leading areas. On average, people in MENA are half as mobile domestically as people in other parts of the world (Figure 3). Our research shows that living standards of people moving internally to major cities can increase by an average of 37 percent in the region. Women are more likely to move and find jobs in urban areas, but they need support to do so. Education systems across the region need to be reoriented toward marketable skills.
  4. Build dense and connected cities. Well-functioning cities offer a wide variety of jobs—for women and men. Making land markets in cities more efficient is critical for agglomeration and specialization—two dynamics that enhance job creation and economic prosperity. Whether in larger or in smaller (secondary) cities, agglomeration and specialization require the benefits from high economic density, which concentrates economic activity geographically. For this, the fabric of cities needs to be spatially connected, dense with people, and transit-oriented—not sprawling that perpetuates the dispersion of people and jobs. Planners and regulators can attract firms to invest in cities by reducing frictions such as zoning regulations, impediments to property acquisition and new construction (costs, height limits, density limits), challenges to local business registration and licensing, limits on news and information, and obstacles to developing local business networks.
  5. Enhance market access nationally and regionally. Historically, MENA’s cities were part of economically important global trade networks. Many of these cities persisted into modern times as large urban areas. But governments in the region have managed to shrink the networks from global to local. These networks have, at a minimum, to be expanded to national and regional dimensions. A good place to start would be to improve the links across national borders—reducing tariffs, improving logistics, and facilitating trade, and instituting migration protocols. Such efforts will grow the economies, providing much-needed resources to redistribute in areas left behind.

Figure 3: Just 14 percent of MENA’s people have left their place of birth, compared with 28 percent in countries elsewhere

Just 14 percent of MENA’s people have left their place of birth, compared with 28 percent in countries elsewhere

In other words, MENA’s governments have to start putting together a modern convergence machine. The main parts of the machine are institutions that integrate and infrastructure that connects. MENA is no longer a poor place: Last year, the region’s GDP per capita was nearly $7,000 placing it comfortably in upper middle-income levels. Its people should have access to quality basic services such as education, clinics, sanitation, and public security. Well-chosen infrastructure initiatives—roads, railways, ports and communication facilities—can provide its entrepreneurs access to the region’s sizeable markets (the region’s GDP is $3 trillion) and even bigger nearby markets to MENA’s north and east. Spatially targeted interventions might also be needed, but they are not the main components of the machine.

Perhaps the biggest mistake that governments have been making is to regard these interventions—programs to push economic activity into lagging areas while simultaneously favoring capital cities—as the mainstay of the machine. It’s time to stop these self-defeating measures that exacerbate fragmentation in MENA, and speed up efforts to engineer integration.

Authors:

  • Somik V. Lall, Global Lead on Territorial Development Solutions and Lead Economist for Sustainable Development in Middle East and North Africa – World Bank. somikcities
  • Ayah Mahgoub, Senior Urban Development Specialist – World Bank
Saudisation, job cuts leading to Deportation

Saudisation, job cuts leading to Deportation

Dhaka Tribune published on September 19th, 2019, this story on Saudization, job cuts leading to deportation of Bangladeshi workers by Kohinur Khyum Tithila that is definitely worth reading.

Saudi Arabian authorities opted some time ago for the whole and/or part nationalisation of its 9 million-strong manpower, kickstarted and still is going through a programme labelled Saudisation that recently ended up by excluding non-domestic contracting of governments jobs.

Saudisation, job cuts leading to Deportation
160 Bangladeshi workers have returned from Saudi Arabia yesterday amidst a crackdown on undocumented workers in the kingdom Syed Zakir Hossain/Dhaka Tribune

On September 16, Jahangeer was deported to Bangladesh along with other Bangladeshi workers.

Jahangeer Hossain was heading to his factory along with other workers in a vehicle around 7:30 am in Riyadh on September 2 like every other day.

Soon, a police patrol car blocked their vehicle and detained them. It never occurred to him even in his dreams that he would be then kept at a Deportation Camp in the Saudi Arabian capital for 15 days without any knowledge of the future.

On September 16, Jahangeer was deported to Bangladesh along with other Bangladeshi workers.

“I had a valid Iqama [work permit for foreign nationals] in Saudi Arabia. It’s still valid for three more months. I have no idea why I was arrested and sent back home,” said the man, who is currently at his village home in Jhenaidah.

He told Dhaka Tribune that about 120 to 150 people were kept in each room at the Deportation Camp.

Jahangeer has no idea how he is going to provide for his family now. On top of that, he still has to pay back Tk1 lakh (more than GB£945) he had taken in loans to travel to Saudi Arabia.

Jahangeer said he could not even ask the Riyadh police why he was being held because he was afraid of getting beaten.

He said an official of the Bangladesh Embassy in Saudi Arabia visited the Deportation Camp, but he said he was not authorized to talk to them.

A total of 389 Bangladeshi workers like Jahangeer were sent back home by Saudi Arabia Arabian authorities in last three days following a crackdown on undocumented workers there.

Of them, 160 arrived in Dhaka on Tuesday night. Most of them complained that they were forced to return despite having valid documents.

What govt says

Government official and experts say the number of migrants is way more than the number of jobs over there, and the recent Saudization policy, officially known as Saudi nationalization scheme or Nitaqat, has led layoffs of Bangladeshi migrant workers.

Rownak Jahan, secretary of the Expatriates’ Welfare and Overseas Employment Ministry, told Dhaka Tribune: “We have asked the Bangladesh Embassy to Saudi Arabia to look into it.

“We will be able to comment after they give us a report on it. Our minister is also visiting Saudi Arabia. He will discuss this issue.”

She said migration does not remain static and recently Saudi Arabia is being very strict about undocumented migrants.

She told Dhaka tribune that more people are migrating to countries like Saudi Arabia for jobs. There are more jobseekers than vacancies, she said and added that sometimes migrants have valid papers but there are no jobs for them.

The Saudization policy of hiring Saudi nationals over migrant workers could be another reason because of which Bangladeshi migrants’ job contracts are not being renewed, the secretary added. 

She said every country has its own law and other countries cannot intervene in their internal issues.  

13,000 deported in 2019 alone

Shariful Hasan, the head of Brac’s Migration Program, told Dhaka Tribune that at least 13,000 Bangladeshi workers have so far been deported from Saudi Arabia in 2019 alone.

Some recruiting agencies and brokers are luring migrants saying they can go to Saudi Arabia with “free visa,” but there is no such thing, he said.

Shariful said the recruiting agencies and brokers are still sending people abroad without ensuring a secured job because the more they can send, the more money they will make.

As per the law, migrant workers are not allowed to work under any employer they want. They have to work under the employer they signed a contract with. If they leave the job and work under another employer, they will become undocumented.

Shariful recommended solving the problem bilaterally.

“Our embassy should ask the Saudi Arabian government why they are deporting Bangladeshi migrants [even though they had valid documents], and then they can work on the solution based on their response,” he said.

Marina Sultana, program director of Refugee and Migratory Movements Research Unit, said many Bangladeshi workers in Malaysia are not being regularized and as a result, they are being deported.

She also pointed finger at Saudization for the layoffs and eventual deportation of the migrant workers. 

According to a Saudi Press Agency report, the Saudi authorities have so far arrested around 3.8 million foreigners as it continues the crackdown on labour and residency violations.

The latest figures indicate that 544,521 people have been arrested since early June.

Bahrain tops region for expat living

Bahrain tops region for expat living

The MENA’s Gulf area is home, though temporarily to numerous people from around the world, with nationals being a minority for decades now.  All the neighbouring countries to Bahrain rely heavily on this imported manpower to not only get things done but mainly to keep the respective economies going. Life and above all its quality aspect, therefore of the various expat communities in the different countries does, unlike in the recent past, account for much in the socio-political stratosphere of the various work environments. And, Bahrain tops region for expat living.

However, while the populations in the area are recently noticed to be somewhat slowing, especially if compared to the boom years that started around the early 2000s, there are varying differences in the communities’ growths. But that’s a different story.

Bahrain remains the best place for expatriates to work and live in the Middle East, even as it dropped to the seventh place globally from being on top of the list last year in the InterNations Expat Insider survey. 

With more than 20,000 respondents, it is one of the most extensive surveys about living and working abroad, sharing insights into expat life in 64 destinations. The survey offers in-depth information about expats’ satisfaction with the quality of life, ease of settling in, working life, personal finance, cost of living, and family life in their respective country of residence. 

Despite Bahrain losing ground in terms of working abroad and family life, expats are still generally happy with both aspects of life abroad. They also keep finding it easy to settle in this country, the survey said.  

Taiwan, Vietnam, and Portugal are the best expat destinations: all of them attract expats with their ease of settling in and good personal finances. While expats in Taiwan and Portugal are also extremely satisfied with the quality of life, those in Vietnam appreciate their great work life.  

At the other bottom of the ranking, Kuwait (64th out of 64), Italy, and Nigeria are the worst destinations for expats in 2019. While Kuwait is the country where expats find it hardest to settle in, Italy offers the worst work-life, and Nigeria the worst quality of life in the world, the study found, it said. 

After a first place in the Expat Insider survey in 2018 and 2017, Bahrain loses six places in 2019 (7thout of 64). These results may be affected by its sudden drop of 17 places in the Working Abroad Index(from 1st to 18th).  While Bahrain is still in the top 10 countries for career prospects and job satisfaction (10th), expats seem to be less satisfied with their working hours (3rd in 2018 to 27th in 2019) and their job security (5th to 19th). In fact, 62% are happy with the state of the economy, which is just about the global average (63%). Expat parents are also slightly less happy, ranking Bahrain 13th out of 36 countries in the Family LifeIndex (vs. 7th out of 50 countries in 2018). Still, more than nine in ten parents (93%) rate the friendly attitude towards families with children positively (vs. 81% globally), and expats keep having no issues with settling in in their new country (2nd): more than four in five respondents (82%) say it is easy to settle down in Bahrain (vs. 59% globally). They find it easy to make friends (68% vs. 54% globally) and to live in the country without speaking the local language (94% vs. 45% globally). 

Taiwan: Coming first out of 64 countries and territories in the Expat Insider 2019 survey, Taiwan stands out for its great quality of life (3rd place). Taiwan is rated best in the world for the affordability of healthcare, with almost nine in ten respondents (89%) satisfied with this factor (vs. 55% globally). Expats in Taiwan are also happy with the quality of medical care (92% vs. 65% globally) and their personal safety (96%vs. 81% globally). In addition to that, 78% agree that it easy to settle down there (vs. 59% globally), and88% find the locals generally friendly (vs. 68% globally). 

Vietnam: After ranking 14th out of 68 destinations in 2018, Vietnam is voted the second-best country for expats in 2019. Expats there are particularly happy with their career prospects (68% satisfied vs. 55% globally)and their jobs in general (74% satisfied vs. 64% globally). However, Vietnam is not only the highest ranking country when it comes to working abroad, it is also the best destination for personal finance(1st out of 64). In fact, 81% of expats are happy with their financial situation (vs. 64% worldwide), and75% state that their disposable household income is more than they need to cover daily costs (vs. 49%globally). 

Portugal: According to the Expat Insider 2019 survey, Portugal offers an excellent quality of life (1st worldwide) and a “relaxed lifestyle”, as a British expat highlights. It is one of the world’s best countries for leisure options (2nd): more than four in five expats (83%) are happy with the socializing and leisure activities available to them (vs. 65% globally), and almost every expat (95%) rates the climate and weather positively (vs. 61% globally). Moreover, Portugal ranks among the top 5 expat destinations where it is easy to settle in for the third year in a row (4th in 2019).

TradeArabia News Service
Gulf wealth: all that glitters is not gold

Gulf wealth: all that glitters is not gold

Gulf wealth: all that glitters is not gold

Gulf wealth: all that glitters is not gold. Little suggests that fabulously wealthy Gulf states and their Middle Eastern and North African beneficiaries have recognized what is perhaps the most important lesson of this year’s popular uprisings in Algeria and Sudan and the 2011 Arab revolts: All that glitters is not gold.

Gulf wealth: All that glitters is not gold

by James M. Dorsey, Sep 5

Saudi Arabia, the United Arab Emirates and to a lesser extent Kuwait have in the last decade invested billions of dollars in either reversing or hollowing out the revolts’ achievements in a bid to ensure that political change elsewhere in the region does not come to haunt them.

Qatar, in a counterintuitive strategy that has earned it the ire of the rulers of Saudi Arabia and the UAE, has sought to achieve the same goal by attempting to be on the right side of the region’s forces of change.

The irony is that both approaches, despite also involving huge investments at home in economic diversification, education, and healthcare, could produce the very result Gulf states seek to avoid: a region that has many of the trappings of 21st century knowledge states but that is incapable of catering to the aspirations of a youth bulge expected to annually increase the work force by a million people over the next 12 years.

UNICEF, the United Nations Children’s Fund, concluded earlier this year, that the region’s youth bulge was a double-edged sword. It could either pose a threat to regional stability or be an asset for development.

Turning the youth bulge into an asset “requires urgent and significant investment to create opportunities for meaningful learning, social engagement and work, all of which are currently limited, particularly for young women and the most vulnerable,” the UN agency said in a report entitled MENA (Middle East and North Africa) Generation 2030.

UNICEF arrived at its conclusion even though Gulf states have adopted grandiose plans that envision them becoming within a matter of a decade or two diversified, knowledge-driven economies that enact the social reforms needed to create opportunity for all segments of society.

The group’s conclusion applies as much to the wealthy Gulf states as it does to the Arab beneficiaries of their politically motivated financial largesse.

The problems with the flexing of the Gulf states’ financial muscle as well as the implementation of reform plans are multi-fold.

They relate as much to quality of the upgrading of services such as education as they are about how political intent shapes development efforts and how high domestic debt in countries like Egypt, where 27 percent of government expenditure goes to interest payments, and Lebanon, which spends 38 percent of its budget on debt servicing, benefits Gulf banks and stymies social and economic development.

Credit rating agency Fitch recently downgraded Lebanon’s credit rating to CCC from B- because of “intensifying pressure on Lebanon’s financing model and increasing risks to the government’s debt servicing capacity.”

Gulf scholar Rohan Advani notes that Gulf institutions account for most of the financial sector investment in countries like Algeria, Egypt, Jordan, Iraq, Tunisia, Libya, Syria, and Yemen.

“In Lebanon, just over 50 percent of the country’s bank assets are held by GCC-related banks, in Palestine this figure is 63 per cent, and in Jordan it is as high as 86 percent,” Mr. Advani wrote in a review of political economist Adam Hanieh’s study of Gulf finance, Money, Markets, and Monarchies.

Mr Hanieh argues that the bulk of the debt payments are to financial establishments whose major shareholders include Gulf institutions in a process in which “the Arab state…increasingly mediates the transfer of national wealth to large Gulf-related banks.”

Mr Advani warned that “indebted governments are compelled to intensify a politics of austerity, further trapping these societies in cycles of debt. Investments in social programs or infrastructural developments are often stalled. Popular movements are unable to realize their demands at the state level due to the requirements of foreign creditors and domestic capitalists. The ensuing scenario is one where alternative politics are asphyxiated and increasingly circumscribed by an atrophied status quo.”

That may well be the purpose of the exercise with economic diversification efforts in the Gulf being driven more by the need of autocracies to upgrade their autocratic style and create opportunity for a restive youth in a bid to ensure regime survival rather than by the acknowledgement of a government’s responsibility to serve the people.

The result is a flawed approach to all aspects of reform.

In Saudi Arabia, Crown Prince Mohammed bin Salman’s Vision 2030 economic and social reform plan that calls for greater private sector involvement has turned into a top down effort that emphasizes state control with the government’s Public Investment Fund (PIF) as the key player.

A combination of depressed oil prices and the recent replacement of energy minister Khalid al-Falih as chairman of the board of Aramco by PIF head Yasir al-Rumayyan, a close associate of Prince Mohammed, raises questions about the state oil company’s positioning in advance of a much-touted initial public offering.

Ellen Wald, an energy analyst and author of a history of Aramco, the kingdom’s main source of revenue, noted that at PIF Mr. Al-Rumayyan had overseen investments more geared towards speculative gains than the sustainable growth of Saudi wealth.

Ms Wald said that raised the question whether Mr Al-Rumayyan’s objective with Aramco would be to serve the company’s long-term interests or those of the PIF.

Aramco this year bought a 70 per cent stake in petrochemicals maker Saudi Basic Industries Corp for US$ 69 billion in an effort to raise funds for PIF and delay the Aramco IPO that had originally been scheduled for 2018 but has since been delayed until 2020 or 2021. The megadeal is expected to boost the oil company’s downstream growth plans.

Nonetheless, Ms Wald cautions that Mr Al-Rumayyan’s appointment “doesn’t necessarily bode well for Aramco, which is a different kind of company. It has to make stable decisions for the long term,” she said.

By the same token, UNICEF warned that poverty, violent conflict, restrictive social norms, patriarchy, rights violations and lack of safe spaces for expression and recreation were limiting opportunities as well as civic adolescent and youth engagement.

Gulf emphasis on geopolitical dominance, regime survival and return on financial investment produces short term solutions that often exacerbate conflict, produce little trickle-down effect and few prospects for long-term stability.

“As a result, adolescents and youth in MENA (the Middle East and North Africa) feel disillusioned, with girls and young women, refugees, those with disabilities and the poor being particularly marginalised and underrepresented,” the UNICEF report said.

“Youth unemployment in the region is currently the highest in the world. Education systems are failing to prepare adolescents and youth for the workplace, and markets are not generating urgently needed jobs,” the report warned.

Gulf wealth glitters but if the UNICEF report is anything to go by, it has yet to demonstrate that it can produce the gold of a development that is sustainable and benefits not only all segments of Gulf societies but also of those across the region that have become dependent on it.

Gulf wealth: all that glitters is not gold

James M. Dorsey

Written by James M. Dorsey, an award-winning journalist covering ethnic and religious conflict. He blogs using soccer as a lens on the Middle East and North Africa’s fault lines. The Turbulent World of Middle East Soccer

Dr James M. Dorsey is a senior fellow at Nanyang Technological University’s S. Rajaratnam School of International Studies, an adjunct senior research fellow at the National University of Singapore’s Middle East Institute and co-director of the University of Wuerzburg’s Institute of Fan Culture.

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