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April 26, 2016 No.
6400

Writers In Gulf Press: Gulf States Must Not Rely Exclusively On Oil Profits

Following the drop in global oil prices and the subsequent harm done to the economies of oil-producing countries, columnists in the Gulf states called on their countries to diversify their sources of income rather than rely solely on petrodollars.

In an article in the Bahraini daily Al-Wasat, Bahraini columnist Yousef Maki argued that the reason for his country's economic crisis is the flawed economic policy it adopted in the past four decades, which relied solely on petrodollars as a source of income and failed to leverage the profits to develop and diversify the Bahraini economy. According to him, this is why Bahrain experiences a financial crisis every time there is a drop in the global price of oil. Maki warned that the global and local economic crises will only get worse, and claimed that in order to emerge from it, Bahrain must adopt a new economic policy and diversify its sources of income, which requires political decisions that are taken in partnership with the citizens and are made transparently.

Similarly, Saudi columnist Khaled Al-Suleiman wrote in the daily 'Okaz that Saudi discourse should now focus on diversifying the kingdom's sources of income in preparation for the post-oil era, and that the Saudi regime is currently seriously examining this matter. He called to invest in human resources, since they are "the most important foundation for creating a productive environment" that can adapt to the changing times.

The following are excerpts from the two articles:


(Image: englih.alarabiya.net)

Bahraini Columnist: Bahrain's Economic Policy During The Past Four Decades Was Flawed

Bahraini columnist Yousef Maki wrote in Al-Wasat: "We are faced with a paradox: [while the price of] oil around the world is in unprecedented steady decline, in our local market [the price of fuel] is rising. The stated reason for the rising cost for citizens is the desire to compensate for [losses due to] the drop in global [oil] prices, because the state needs to get its income somewhere. Even if this [rise in the local price is really] due to the decline in [global] oil prices... it stems from the policy of national reliance on a single source of income, which is oil. This is nothing new - it is an old policy based on the belief of relevant parties [at the time] that oil and its profits would last forever, and that it could overcome any economic, social, or political upheaval.


Yousef Maki (Image: Alwasatnews.com)

"The state we are in today is not just about oil or the current period, but also stems from the way we have invested and exploited our oil [revenues] over the past four decades - meaning since the price of oil shot up in 1973. This brings us to analyze the rising costs and austerity measures we are experiencing these days through the lens of political economy - that is, our economy and resources, including oil, and their relation to the social powers and classes acting in our country and their methods of investment in recent decades.

"From this perspective, oil should have provided a prime opportunity to diversify our [sources of] income,  that is, [provide] prospects for economic development as opposed to economic growth. [However], despite the development of other industries, oil continued to provide a large portion of our national income, compared to other sectors. Furthermore, there are sources of income that we could have developed by means of our oil revenues. An example is the marine resource, which is crucial, but it is sadly neglected and lacks economic weight compared to [other] national income sources. Additionally, the agricultural sector was ruined and other economic sectors were not developed, and were therefore weakened, due to our reliance on oil as the main source [of income] in social and economic development and in our GDP.

"The policy of investing petrodollars was not constructed on a solid foundation, and today we are reaping the fruits [of this]. This policy is the real main reason for the [current] economic crisis, while declining oil profits is the alleged reason. This is the nature of strategic goods such as oil and others, and this could have been taken into account and predicted at any given moment. Had we had an integrative economic structure, as well as a long-term policy of diversifying sources of income, then we would not have reached the situation we are in today. A robust economy with diverse and complementary sources of income becomes a position of power, since it is unaffected by negative changes to some source of income or another, and even if it is affected, then only to a limited extent, since such an economy is strong and productive... This is why declining oil prices do not have the same effects in all [oil-producing] nations, while in our country they have substantial, dangerous, and fateful effects...

"This economic crisis, as seen on both the local and global levels, is predicted to deepen further, and therefore there is no choice but to salvage matters by involving the citizenry in the debate on the situation and its implications and in taking the appropriate decisions.

"So what is the solution? Or in other words, what sources of income are appropriate for the economic situation in our country? The economic situation and all its aspects... is also a political matter, and therefore the political arena is the proper stage on which to solve the economic crisis. This is because when economic steps are directly related to the everyday affairs of the citizens, this requires a public policy that [is decided] in partnership with the citizenry... Therefore, we must begin [adopting] an economic policy based on three-pronged development - economic, political, and social - and rely on the principle of transparency in managing public economic matters. Additionally, we must set priorities regarding public expenditure... so that expenses and investments are conducted on a logical basis.

"Without taking [the necessary] political and economic steps, we cannot emerge from this stifling economic situation, which will exacerbate the future suffering of the citizens. And ultimately, what have we done with the oil? The answer is that we did not make the best use of it. And what has the oil done to us? The answer is that it is taking its vengeance upon us for exploiting it [so] poorly in our development programs." [1]

Khaled Al-Suleiman: Saudi Arabia Should Invest In Human Resources To Prepare For Post-Oil Era, Adapt To Rapid Global Changes

Saudi columnist Khaled Al-Suleiman wrote in 'Okaz: "Talk of diversifying sources of income in preparation for the post-oil era is not new. I have been hearing it since the dawn of my youth after every five-year plan, but it is usually nothing but aspirations that have little bearing on reality. Today there are signs that serious deliberation of the post-oil era has begun, as expressed in the 'National Turning Point' plan[2] and the [plan to] found a sovereign wealth fund.[3] We could be seeing a rebirth of a Saudi Arab kingdom...

"When we speak of the post-oil era, we do not necessarily mean that the oil will run out, since [the oil] could last forever. We mean that its importance as a valuable staple energy source could decrease with the appearance of alternative energy sources, as has happened with other such sources throughout history...

"The post-oil era is not only about money, since man is the true resource, and his enrichment with knowledge and professional training are the only guarantee for success in dealing with future challenges and in meeting changing demands. Talented people are the most important foundation for creating a productive environment that eliminates poor management, cleans up corruption, and founds a social culture that is rooted in respect for rules and regulations and in an understanding of duties and rights.

"The world is rapidly changing, and only those who change can adapt to its upheavals."[4]


Khaled Al-Suleiman (Image: 'Okaz, Saudi Arabia)

 

Endnotes:

[1] Al-Wasat (Bahrain), January 18, 2016.

[2] Saudi  five-year development plan, formulated in 2015 by the Council of Economic and Development Affairs led by Prince Muhammad bin Salman.  See: Al-Hayat, London, December 18, 2015.

[3] Saudi Arabia plans to create a new sovereign fund to manage part of its oil wealth and diversify its investments. Reuters.com, December 22, 2015.

[4] 'Okaz (Saudi Arabia), April 10, 2016.