Dr. Christian Koch is the Director of the Gulf Research Center Foundation in Geneva, Switzerland. Dr. Koch’s work at the GRC involves analysis of the GCC states on pertinent foreign and security issues with a focus on GCC-EU Relations. He is particularly interested in better understanding the dynamics driving regional security issues in the critical Gulf region and promoting aspects of co-operative security among regional and international actors. In this context, he co-authored Establishing a Regional Conference on Security and Cooperation in the Gulf Region,in 2015. Dr Koch received his PhD from the University of Erlangen-Nürnberg, Germany and also studied at the American University in Washington, DC and the University of South Carolina.
The dramatic decline in oil income since the beginning of 2015 has led to a wide-ranging debate about the economic future and viability of the oil-producing states, with some pundits even predicting the end of the so-called rentier state. For the Middle East as a whole, the economic prospects have dimmed significantly. While the six GCC states have seen their oil revenue decline by $360 billion in 2015 alone, resulting in mounting budget deficits after a decade of fiscal surpluses, other Middle Eastern states are mired in conflict and widespread instability that have left their economies devastated and their governments unable to provide basic services. All of this is happening in a region where more than half of the population is under the age of 25.
In a period of declining economic fortunes, it is clear that something will have to give. In Saudi Arabia alone, government expenditure
in the past 10 years has risen from $53 billion to $160 billion, a 300 per cent increase. And, while the average GCC budget surplus for 2008 to 2012 came to 10.3 per cent, in 2015 those same countries were faced with an average fiscal deficit of 13 per cent. With the overall assessment being that oil prices will not recover significantly at least over the next few years, it is clear that unrestrained government spending simply cannot be maintained.
Governments have already started to react by introducing subsidy cuts in water and electricity, as well as adjusting petrol prices to reflect better its real costs. In addition, a number of tax increases have been put forward for consideration and all GCC states have agreed to introduce a 5 per cent value-added tax (VAT) by 2018. Economic diversification projects, seen as essential to curb the rising problem of national youth unemployment, have taken on a new sense of urgency.
What makes the current developments even more interesting is that governments are being forced to undertake many of these measures at the same time that the first wave of youth is coming of age in terms of the economic, social and political demands they are placing on the existing governing system. Today’s youth in the Middle East are better educated, better connected through all of the tools of information technology, and more aware of the developments around them than ever before. Youth in Saudi Arabia, for example, are the most active per capita users of Twitter and have the highest per capita consumption of YouTube videos.
Throughout the Middle East, social media has emerged as a replacement for the lack of public space. This is not a complacent and subservient youth that feels constrained by the governing practices of the past. Rather, it is a youth that actively seeks a broader and deeper role for itself in shaping its own environment and the societies in which they live.
Governments will have to adjust to the fact that today’s youth seek not only economic but also political opportunities. In this context, the youth see the role of government changing. Whereas in the past, people were ready to trade political participation for their economic well-being, the equation has shifted to government being seen as providing the framework under which the population can prosper. This includes the maintenance of entitlements –78 per cent of those interviewed for the 2016 ASDA’A Burson-Marsteller Arab Youth Survey expect energy subsidies to continue. Given the resources at their disposal, governments are still very much seen as having a duty to ensure their society’s
wealth and prosperity.
In the GCC states, the debate is now one of active citizenship in which people genuinely contribute to the development of their society. This is not to suggest that the youth are ready to challenge and overturn the system. Given the current volatility that characterises much of the present-day Middle East, one might see a new bargain struck between the governors and the governed. As the UAE commentator Sultan al-Qassimi recently stated in an article for the Middle East Institute: “Taxation in exchange for ensuring the security of citizens in an increasingly dangerous neighborhood might be the new accepted social contract.”
That new social contract would still be a short-term fix, however. What governments really need to do is recognise that the region’s youth represent a tremendous opportunity, who should be fully integrated in the reform process that all states in the region need to undertake. The GCC states have been in a privileged position in the past, but under the new generation of rulers, the realisation is growing that far-reaching economic and political reforms are essential if these countries want to remain stable and prosperous. In this sense, the end of the rentier state may, indeed, be nigh.