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A trip to the Kingdom 18, January 2013

Posted by thegulfblog.com in Saudi Arabia.
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I am currently in the Kingdom of Saudi Arabia at a conference to discuss the region in light of these ever so changing times. It’s always interesting to come to the Kingdom and even better when you’re here with leading academics and the most erudite and informed of Saudis. Some thoughts:

– It’s been at least six months since I visited another GCC country so it’s nice to go to Riyadh to be reminded of the differences between the states (or at least two of them). Everyone knows that Riyadh is a huge city but only flying over it and driving through it do you see the level of sprawl with the city forever splurging into the desert in a low-rise tide of villas. Doha it is not.

– We visited the Saudi National Museum. I had no idea that Saudi’s history was as extensive as it appears to be; a true ‘crossroads of civilization’ as one Saudi put it. As yet it seems that much of this history going back thousands of years has barely begun to be uncovered and the Kingdom must be one of the least touched but richest countries on earth for archaeologists.

– The discussions that I attended in the Saudi capital were of the highest caliber  The Saudi academics and attendees – all Western educated – were hugely impressive. They were articulate, erudite and intelligent which is – of course – no surprise given how long Saudi has been sending its best students abroad. Qatar cannot and can never hope to compete; it just doesn’t have the critical mass of people to engage in this kind of education. Indeed, I am happy to be corrected, but I suspect that there were more political science PhDs in the conference room alone than political science PhDs earned by all Qataris in the last decade.

– There was staunch Saudi support for Bahrain. The arguments were nuanced and far more erudite than the usual ‘it’s Iran’, though this refrain was used too. Two trends of argument were interesting in particular.

Firstly was the notion of ‘what do you expect?’ If there were a popularly elected government via perfect elections then this would be Shia-led given the population dynamics and such a government would be – so the argument went – intrinsically disposed to the Iranian government creating some kind of a Shia bastion just off KSA’s coast. The analogy of the Cuban Missile Crisis was used to illustrate this point. I don’t agree with this logic, but it makes a certain sense.

Secondly, it was interesting how the West’s worst activities were used as cover for Bahrain’s worst activities. The Patriot Act, Guantanamo Bay and Abu Ghraib were used as a calling out of the West’s double standards. ‘Look at the things you [sic] do when your ‘national security’ is at risk. It is the same in Bahrain’. While I don’t agree with this – one should hardly use the atypical, controversial and maligned activities of the West as a model or the most base excuse – this is a powerful argument in its own right and reminds one of how easily eroded the theoretical moral high ground can be.

– The talks were attended by a senior Saudi Prince. He came for the opening evening lecture and the subsequent dinner. Much to my surprise he came back the day after for the 12 hour day of presentations and talks and came for dinner again that evening. He was erudite, engaging, open, witty, and substantively contributed to every panel discussion. There was no ceremony about his presence and he took the bus in the evening to the second dinner. For a variety of reasons I just can’t imagine the same happening almost anywhere else in the Gulf.

– Saudi itself was the center of much of the discussions. A UK based academic gave an excellent if familiar ‘Saudi is in financial peril’ talk and it is impossible to disagree that going forward a decade or so the combination of increasing salaries in the increasing Government sector, the struggling private sector, the surging domestic energy demands of the Kingdom and a range of structural issues such as industry’s dependency on cheap fuel mean that the Kingdom is facing huge challenges. He also noted that Saudi’s Gini coefficient (a measure of inequality) was staggeringly high.

There is no answer to these challenges but the numerous Saudis around the table were somewhat weary of these concerns having heard very similar versions of these ‘Saudi is ok now but in 5 years…’ for decades now. Of course those around the table were the elite in the Kingdom and are unrepresentative of the Saudi population as a whole. Nevertheless in defence of the Kingdom, so to speak, they made some good points. 1) The Kingdom has proven to be surprisingly resilient before. 2) There is a staggering amount of waste – ‘fat’ as one contributor put it – in the Government sector that can be seen as an area for streamlining as and when budget pressures necessitate. 3) The Saudi Government controls up to 75% of the economy and could privatize industries if the buffers really were approaching giving them a potentially huge windfall. Of course none of this is straight forward – the modern age, as an American contributor pointed out, has a raft of unique, new and resilient structural changes (media openness etc) and cutting fat is not necessarily that easy – but these were, I thought, interesting points. I still think that Saudi is facing catastrophic challenges in the next 15 years but the issue demands a lot more thought that I’ve been able to give it thus far.

Other random points:

– The Ottomans legalised gay marriage [CORRECTION] decriminalised homosexuality in 1876

– Istanbul is the biggest Kurdish city

– Apparently the US Embassy Ministry in Baghdad has approximately 1000 Americans working there but only 7 Americans who speak Arabic. Good stuff.

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Free food & over $3500 for Kuwaitis 17, January 2011

Posted by thegulfblog.com in Kuwait.
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Sometimes it can be tricky to come up with a definition of the rentier state; sometimes not.

On the occasion of Kuwait’s 50th anniversary of its independence from the British and its 20th anniversary of its liberation from Iraq, the Emir Sabah al Sabah is giving every Kuwaiti 1000 dinars or $3560 as well as 13 months of free food rations.

Several points now come to mind:

– Given that Kuwait is arguably on the brink (again) of serious issues in its Parliament, this may be a wise decision to try to placate all sides for a (short period of) time.

– I don’t quite understand the food stamps. Aside from simply being given 1000 KD, Kuwaitis have one of the most generous welfare states on earth (guaranteed jobs, ‘free’ loans then loan forgiveness, no taxes, no bills etc etc). Why would such a population who are – let’s be blunt here – very rich need food stamps? Perhaps it is some traditional-paternal ritual that the Emir wants to keep alive.

– Overall, I fear very greatly that these kinds of handouts are harmful for the longer term. Instilling in Kuwaitis more so than is already the case that they are owed free money, food and opportunities simply because they are Kuwaitis and not because of anything that they have done is a grim precedent to set. Emir after Emir will be forced to follow suit dishing out these bonuses for (again) nothing. Eventually, as Kuwait’s oil whittles down and it has to rely ever more on its (substantial) financial investments [for there is no meaningful sign of industrial diversification yet], such bonuses will become costlier and costlier for the Government to give out. Yet a population weened on such gifts will not give them up readily. Essentially, I see Sabah giving out this cash now as storing up huge problems for his great-grandchildren when they come to rule.

 

Qataris ‘can retire at 40’ 5, January 2011

Posted by thegulfblog.com in Qatar.
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A mooted new pension law in Qatar will allow Qataris with 15 years of government service to retire at 40.

 

If a state employee has, for instance, put in 15 years of service and his basic salary was QR10,000 and social allowance was QR3,000 at the time he retired, he would be entitled to a monthly pension of QR9,750. In case an employee is not able to continue in the job due to poor health conditions he would be entitled to full pension.

If anyone ever needs an example of the rentier state…I can scarcely think of a better one.

And in other ground-breaking news, a survey reports that Qatari men ‘shun housework’. No! You don’t say? Who’d have thought?

 

Gulf rentier expectations 16, August 2010

Posted by thegulfblog.com in Saudi Arabia, The Emirates.
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Further to my post yesterday about Kuwait and their pernicious rentier state mentality, just so people don’t think that I’m being overly mean to Kuwait, I thought it best to share out the loftily biting remarks. And as luck would have it, two articles popped up in my Reader that allow my to lecture the UAE and Saudi too.

A recent study undertaken by a Dubai based market research firm found – shockingly – that Emirati teenagers spend nearly four times the international average per week: some $71 compared to $21. [Interestingly only Norwegian teenagers spent as much, though I suppose that this has more to do with higher tax and prices in Norway.]

This is not exactly ground-breaking news. Nor is it, in and of itself, a problem. However, speak to Emiratis of an older generation and I’d bet that their reaction would be exactly the same as those in Kuwait: they fear that the younger generations that were brought up in such luxury simply do not have the same values or work ethic as their forefathers.

This conclusion was mirrored in an op ed on unemployment in Saudi Arabia by Abdul Rahman Al-Rashed, the former head of Al Arabiyya.

However I was informed that this unemployment is not all as a result of a scarcity of jobs. I was told that there are a huge number of jobs available, but that job-seekers reject these because they do not meet certain specifications with regards to the nature, location, or salary, of the jobs desired. These job seekers want to be employed in air-conditioned offices or in the military, and they consider service industry or manual labour jobs to be shameful. The other issue is that these job seekers want to be employed in their city of residence, and refuse to take jobs that require them to move to a different location. They also want to start any job in question with a high position and a good salary. This is why the vast majority of companies prefer to employ foreigners, which prompted the government to open the door to foreign employment.

This kind of rentier mentality is well documented. As oil goes, as Bahrain is finding, these kinds of indulgences and inefficiencies need to go. Yet Bahrain ‘suffered’ from some level of a rentier society for, say, half a century. What will happen to the Emirates and Emiratis when they too realise that they need to alter their parameters of what is acceptable after another few generations of the rentier lifestyle? How will they make the transition?

A Rentier Coup in a Rentier State 28, June 2010

Posted by thegulfblog.com in American ME Relations, The Emirates.
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The following article was published in the Daily News Egypt.

The quickly declining health of Ras Al Khaimah’s ruler is precipitating a round of intrigue and succession stories in the northernmost Emirate of the UAE. Sheikh Saqr Al Qasimi, 92, one of the longest ruling leaders in the world having ascended to the throne in 1948, has been in hospital for at least the past month.

His son and Crown Prince, Sheikh Saud, has been in charge of the Emirate for some time but his official assumption of the throne faces a serious challenge from the former Crown Prince Sheikh Khalid who was deposed in 2003. The reasons for his removal from power are not wholly clear. It is believed that Khalid was forced into exile by his half-brother Saud for his staunch anti-Iranian rhetoric in addition to leading anti-Iraq war protests during which an American flag was apparently burned. It is even alleged that his ‘pro-woman’ attitude in the conservative emirate contributed to his downfall. Either which way, when he was deposed the UAE central government needed to send tanks to RAK to restore order after protests erupted. Saud has lived in exile since in Oman and London.

None of this, however, is anything new. Succession challenges are the norm in Gulf States. Overall, the majority of transitions of power in the past two centuries have involved some violence in the form of a coup or, at the very least, the successor has been challenged for the title.

What is different in this case is the 21st century manner in which Khalid has gone about resuming his place in line to the throne. Much like the Emirates’ economy is described as a ‘rentier’ in nature with their income (or rent) largely derived from oil and gas with an exceedingly heavy reliance of foreign workers, this appears to be a rentier coup. Specifically, Khalid hired Californian Strategies, an American public relations firm to devise a plan to return him to power. Some members of the PR staff even reportedly get a $250,000 bonus if they succeed.

Cognisant of exactly what will grab the attention of America and the world at large, the PR agency — paid some $3.7 million to date according to The Guardian — began to formulate an image of Khalid as a Western-orientated, modern, pragmatic, facebook and twitter-friendly leader. They even arranged meetings and photo opportunities with, for example, US Secretary of State Hillary Clinton. Saud, in stark contrast, was depicted as either fostering or at least harbouring terrorist elements including Al Qaeda. The decision of the America’s Cup yachting team not to stop off in RAK due to alleged terrorist concerns was one strand of this ploy. Moreover, RAK’s close links to Iran and their Revolutionary Guards (IRGC) were highlighted. RAK was portrayed as an offshore sanctions-busting Mecca for Iran; a ‘rogue state’ within the UAE.

The PR agency collated these charges into a report (with similar visual similarities to official US Congressional Research Service reports) which opens with the line “Closest to Iran and furthest from UAE central authority is the Emirate of Ras Al Khaimah, which lies some 60 miles from the Iranian port of Bandar Abbas and enjoys excellent deep-water ports.” From the very beginning, therefore, insinuation and nefarious implications abound.

The true extent of these charges is not clear. Certainly, RAK is a conservative Emirate but evidence of their harbouring terrorists is sparse and unconvincing. There was an alleged plot against the Khalifah Tower in Dubai, but this centred more on the Emirate of Ajman not RAK. As for their Iran links, these must be understood in the Emirati context. Dubai, for example, according to a recent Bloomberg article, has 8,000 Iranian businesses, at least 1,200 trading companies, 400,000 Iranians living there and trade rose to $12 billion in 2009. In short, it would be miraculous if RAK, the closest Emirate to Iran, did not have significant trade with Iran.

The success of this quasi-coup depends on Abu Dhabi. The most powerful of the Emirates, their ruler and Emirati President, Khalifah bin Zayad Al Nayhan, will have a significant say in the decision. He has a vested interest in assuring stability in RAK; any security concerns could quickly end up 80km down the road in Dubai or 120km further on in Abu Dhabi. Installing the (now) clearly pro-American Khalid in power would not only please the Americans but fit in more with Abu Dhabi’s harsher anti-Iranian stance as compared to, for example, Dubai. Nevertheless, interfering in succession issues is always a dangerous business, even more so if there is the suggestion that it was done under foreign (American) pressure. Lastly, if Saud is ousted and Iranian trade does consequently dip, as it surely would under Khalid’s premiership, then the Iranian sized hold in RAK’s economy will have to be filled — quickly — by Abu Dhabi lest they wreck the fragile rentier bargain.

RAK: a rentier coup in a rentier state 8, June 2010

Posted by thegulfblog.com in The Emirates.
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Gone are the days when a son embraced his father only to – et tu Brute? style – jab him with a knife and assume the throne. In 1995 the Qatari Emir just waited until his father was on his holidays (not very long judging by the amount of time he was out the country) and assumed the throne. Not very eventful, not very interesting, not much blood; perhaps Middle Eastern coups were beginning to lose some of the panache of the past.

From this sublime example we go to the more ridiculous modern-day coup currently occurring in Ras Al Khaimah. In the past when Brits have been involved in such coups, they had invariably been ex-SAS types. Hired and exceptionally well-trained guns to take out the Presidential guard and put their paymaster on the throne (if they didn’t get caught at the airport, that is). Yet today it seems that the British connection is a slightly portly lawyer from Farnham in (perfectly legal) cahoots with a high-end PR form from Washington D.C. How times have changed, yet how utterly unsurprising; they can’t even be bothered to get their hands dirty offing the rival: the rentier coup for the rentier state.

Seven years ago Shiekh Khalid bin Saqr Al Qasimi was ousted from power in Ras Al Khaimah, the northern most Emirati state, with little more than a shove and limited use of a water cannon. Khalid went into exile in Oman and London and plotted corporate revenge.

For his $15000 per week, his PR  agency – California Strategies – put together a whole media 2.0 package to Facebook him back into power. A swanky website and twitter feed was the beginning. Now, after photos and support from one or perhaps both Clintons and assorted concerted lobbying, Khalid is on the verge of returning to power, with the Emirate’s President seemingly about to do a spot of deposing and reimposing.

The back story to this stems from RAK’s geographical location. At the very northernmost tip of the Emirates it is closest to Iran and the Straits of Hormuz and devoid, just about, of oil and gas. This is the basis for wild claims put forth by the PR agency that RAK is little more than – you guessed it – a haven for Al Qaeda and for Iran to do its best sanctions busting. I confess that I am no expert on this particular topic, but I think that we can safely take everything spouted forth by the PR agency with, as they say, a pinch of salt. It’s not like, after all, Iranian relations are a strange thing for the Emirates: Dubai is at times little more than a glitzy Iranian spur-city. There are persistent rumours, spread by the PR agency, I’d have thought, that RAK was involved somehow in a plot to blow up the Burj Dubai Khalifah and attack the America’s cup team. Whilst I thought that the former was the work of people from Ajman, I could be wrong.

Amidst the spin, non-existant Emirati investagative reporting and wholesale media crackdown on these stories, I genuinely do not know the extent of the truth in these charges. Do let me know if you do. I’d have thought that there is, as I said, naturally a fair bit of Iran trade in RAK. As for the terrorist bit…who knows?

The unusually thorough report from the Guardian also includes the great nucta that some of the PR staff were on a $250,000 ‘get me back on the throne’ bonus.

70% pay rise for Emiratis 23, December 2009

Posted by thegulfblog.com in The Emirates.
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The National reports that public sector Emirati workers will be receiving a 70% pay rise. I only have a few thoughts on this:

  • Do you think that Emiraiti in the ‘ministries’ will work harder for this pay now, or will the legendary* caricature of the four and a half day a week, 2 hour lunch break taking, late starting and early finishing Gulfie carry on as usual?
  • This is the rentier bargain in a nut-shell. ‘Yes, dear citizen, Dubai has huge issues, but don’t worry about it. Here’s some more cash…off you run to the shops now…’
  • There’s only so far that these salaries can rise. Not for a very long time given Abu Dhabi’s oil and gas wealth, but eventually these economies will have to face up to economic realities of ludicrously high wages and equally ludicrously low levels of productivity throughout the state sector. Decisions today are creating the mother of all rods for the backs of their grandchildren’s generation of rulers. It easy to give out cash like this but to take it back?…that’s not going to be pretty.

* The notion of ‘the national’ working in ‘a Ministry’ is a loaded concept in the Gulf. I’ve spoken to countless people about this in industries ranging from education to oil and gas to security to research in Kuwait, the Emirates and Qatar and I have unanimously heard stories of woefully under-productive workers with little to do (if anything at times), little motivation to do anything and no coercive measures to make them do anything. Needless to say, this doesn’t apply to all workers, but arguably the majority. I’ve heard these stories from nationals themselves and from ex-pats.

Technically, I could, of course, have been speaking to people with an agenda to push. However, given the numerous different settings in which I’ve talked to these people I doubt this and overall I do not really think that anyone with any serious experience of the region would argue with this premise. The only argument to have, as far as I see it, is over the question of how bad/prevalent it is. You can draw your own conclusions, but, as far as I see it, it is a chronic problem soundly based in rentier theory, which, as I explain above, poses a real threat to these societies.

Hat tip: UAE Community Blog

Bahrain contemplating the T word 6, November 2009

Posted by thegulfblog.com in Bahrain.
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Despite being an economic inevitability the fact that Bahrain’s Minister of Finance has publicly said that the Manama government will have to consider imposing taxes in the near future is still somehow surprising.

“Here in Bahrain, the government cannot afford to continue to pay for everything and subsidise everything so at some point taxation is inevitable.

Is there a rational argument against imposing taxes? Or indeed any argument that doesn’t essentially boil down to the stamping of the foot and bleating ‘I just don’t wanna!’…I can’t think of one.

Two quick thoughts: First, it seems to me that by putting the topic of taxes off as the Gulf rentier states clearly are, they are simply passing the problems onto their children. By ‘their’ children I am referring the future Crown Princes who, given that lineage guarantees power in the Gulf, will be in  power and will have to deal with the problems that current rulers do not want to deal with. Second, at the moment, most of the Gulf States (not Bahrain, though) are, I’d suggest, roughly at the apex of their earning a capacity. Of course, for decades to come, they will continue to earn huge amounts of foreign rent for oil and gas, but with this enormous fiscal largess stretching in front of them, is not now the best time to introduce taxes: i.e. when everybody is rich? It will surely be harder to do this when gas and oil is dwindling and the public purse is no longer as bulging.

Hat tip: Suq al Mal