The Gulf: Not All That’s Gold Glitters (JMD in Middle East Perspectives)
The Gulf: Not All That’s Gold Glitters
By James M. Dorsey
Gleaming glass skyscrapers, state-of-the-art technology, and wealthy merchant families have replaced the Gulf’s muddy towns and villages populated by traders and pearl fishers that once lacked electricity, running water or modern communications. The region’s modern day projection of a visionary cutting- edge, 21st century urban environment masks however the fact that some things have not changed.
Gulf states continue to be ruled by the same families, generation after generation. The families have become what an Emirati regime critic, Yousif Khalifa al-Yousif, termed “an institution of entitlement.”1 Alongside autocrats, the region also remains home to holy warriors and modern-day pirates. The principle of governance that what is good for business is good for the village-turned-nation still guides rulers who rank among the region’s foremost businessmen.
If, however, the region’s physical transformation speaks to an almost unitary vision of modernity, its politics tell a very different story, one of deep-seated social conservatism despite concessions in some states to cultural attributes of expatriate communities, resistance to political change, and a clinging to the status quo at whatever price.
Close tribal ties, intermarriage between ruling families and an intertwining of tribal economic relations compensate for weak institutionalization. Concepts of conflict of interest are moreover blurred with little distinction between the economic and commercial interests of the state and those of ruling families. Dubai’s foremost governing institutions, ruler Sheikh Mohammed bin Rashid Al Maktoum’s Executive Office, his private staff, and his Executive Council or Cabinet operate in obscurity with no clear legal anchor.
“The problem in discussing concepts like leadership and vision is that the Gulf and its Western partners use the same terms but understand them very differently. There is no institutionalized decision-making in the Gulf. Leadership in the Gulf amounts to a few members of a family taking decisions in private. The need for greater efficiency and demands for more transparency are balanced with the region’s traditional method of consensus,” said a Western diplomat.2
Demands for institutionalization and transparency reflect far more fundamental changes that Gulf leaders have to come to grips with. Those changes are driven by populations that in majority are under the age of 30, oil and gas revenues that in the medium term will be unable to sustain rulers’ cradle-to- grave social contract with their populations, and communication technologies that render censorship and non-transparency increasingly meaningless. They guide former US ambassador Gary A. Grappo’s description of the environment that ailing Omani Sultan Qaboos bin Said’s successor will encounter, but are equally true for all Gulf leaders.
“Qaboos’ successor will confront challenges nearly as great as those Qaboos faced in the first years of his reign in the early 1970s. Omanis today are much better educated and more engaged, and will want to see change. They will want to play a role in determining the direction of their country. They will also want and need to see a transformation in the country’s economy away from dependence on comparatively sparse hydrocarbon reserves to other areas that will ensure the country’s continued prosperity and standard of living and, most important, produce jobs for a rapidly growing population… Vision will be the defining challenge of Qaboos’ successor,” Grappo said.3
That vision, Grappo argued, would have to involve gradual liberalization including a greater devolution of decision-making authority to a consultative council, allowing it to prepare and approve budgets; greater press freedom and transparency; lifting of restrictions on civil society organizations; economic diversification; and inclusion of minority cultures in the preservation of Omani culture. Grappo’s prescriptions are applicable across the Gulf. His list is easily expandable to include notions of a gradual transition from absolute to constitutional monarchy, decriminalization of non-violent opposition activity, and social and economic policies that are inclusionary.
Grappo’s vision entails the kind of boldness and risk taking that has become the trademark of Dubai’s ruling Al Maktoum family in the last two centuries but has yet to be applied to the challenges facing today’s rulers in the region. For now, Gulf rulers have sought to fine tune the status quo by casting themselves in the role of protectors of national and tribal identity, traditions and heritage; projecting themselves as agents of the transition from energy-driven to post-oil and knowledge-based economies and of greater independence by asserting themselves politically and militarily; and seeking to enhance their countries’ international status by hosting mega events like the 2020 Expo in Dubai and the 2022 World Cup in Qatar.
To be sure, the need to prepare for a post-oil era in the Gulf is immediate. Newly born in all Gulf states with the exception of Qatar and Kuwait are expected to witness their countries running out of fossil energy resources within their lifetimes.4 That gives rulers at best several decades to diversify their economies – a transition that involves more than simply developing new economic sectors. It will require revamping education systems to match labour supply and demand; motivating citizenry to depend less on government jobs, handouts and subsidies; streamlining bureaucracies; and rewriting social contracts already threatened by fiscal tightening.
Looming in the back of the minds of Gulf leaders is the memory of Algeria where a collapse in oil prices in the 1980s put an end to the social contract. Protests erupted as incomes dropped and inflation and unemployment increased. The country slipped into civil war that ultimately ended with a revival of the social contract on the back of rising oil prices.
Unlike Algeria, Gulf leaders have the financial muscle to weather a storm for some time. But more fundamentally as The Economist recently noted, Gulf states "may have learned many lessons from the past but there is one that remains largely undigested. Despite innumerable warning and innumerable failed attempts to diversify their economies away from oil, nearly all of them still rely on the sticky stuff to get by. With relentlessly growing populations and public expectations, it is still only a matter of time before the crunch comes."5
The Singapore model
Gulf leaders look to Singapore, a city state that has developed within a matter of decades from an impoverished island with no resources into a first world state and global hub with a highly diversified economy, as their model. It is a model that combines authoritarianism with empowerment. Delegations from the Gulf travel to Singapore to discover the secret of its success and enlist Singaporean institutions to assist them in developing for example education systems.
“Singapore is an authoritarian success story. It is everything the Gulf wants to be and never will be,” said a long-standing observer of both Singapore and the Gulf states. “It has the three key attributes the Gulf lacks: a high degree of institutionalization; transparent rule of law; and a population that despite restricted freedoms is empowered,” the observer said.6
The UAE, home to 200 nationalities, unlike countries like Saudi Arabia and Bahrain has adopted one aspect of Singapore, traumatized by its expulsion from Malaysia in the 1960s and race riots at the time that few analysts have focused on: the building of a society that sees diversity as an asset and respects different cultures and faiths. Like Qatar, the UAE recognized that tight political control did not preclude the building of a society whose cultural and racial tolerance is steeped in Islam in an effort to ensure domestic stability and counter extremism. Up to a third of the UAE’s population is non-Muslim.
Amid mounting international criticism that Gulf states have failed to pull their weight in welcoming refugees from the mayhem in Syria, Gulf News reported that some 100,000 Syrians had been allowed into the UAE since 2011. In an official statement, the UAE declared in mid-September the Syrian refugee crisis a foreign policy priority that it was tackling “in a sustainable and humane fashion together with its regional and international partners.”7
Emirati writer Maria Hanif recently compared the UAE to Al Andalus, the Islamic empire in Iberia established in the 8th century that has become a reference point for Muslim tolerance, pluralism and the productive and harmonious interaction of Arabs, Jews and Christians.
“The UAE, just like Al Andalus…is home to hundreds of nationalities and various religions and sects, each free to practise their religious beliefs so long as they do not attack or undermine the other. It has also become a target for constant criticism by extremists for that very reason. Most recently the UAE came under attack after having announced allocation of a plot in the capital Abu Dhabi for the construction of a Hindu temple to serve the Hindu population of the country (which makes up 25 per cent of the population)… The UAE stands strong against the preachers of discrimination and intolerance, with an unwavering conviction that pluralism is the very foundation that built this country,” Hanif argued in Gulf News.8
Politics on the other hand weaves a tale of regional rivalries and leaders’ different visions of how to balance modernity with social and political conservatism and how to ensure regime survival and maintain a regional security environment which is dependent on a US defence umbrella that is increasingly perceived by Gulf states as unreliable.
Compounding the region’s leadership challenge is the progressive breakdown of a social contract based on a cradle-to-grave welfare state that assists citizens even in the cost of getting married in exchange for surrender of political rights. For more than a decade Gulf leaders starting with the late King Abdullah of Saudi Arabia have been nibbling away at the welfare state in a bid to rationalize government finances and foster national identity. The International Monetary Fund (IMF) has urged Gulf states to rationalize spending that has ballooned with increased military budgets and billions of dollars in handouts designed to pacify potentially restless populations. 9
“Cuts in social spending and subsidies are a difficult proposition given populations who expect to receive rather than give,” said a Gulf analyst.10
Cloaked in elegant traditional flowing robes and head dresses, Gulf leaders project an image of conservatism and adversity to risk. Yet, risk is at the core of their varied leaps towards modernity fuelled by phenomenal oil and gas revenues and a bid to fend off pressure for change that informs Saudi, Emirati and Qatari visions of the future rooted in late 18th and early 19th century tribal leadership.
Some risks and threats are inevitable in the drive for modernity such as the influx of expatriates and migrant labour that has turned the region’s demographics upside down and raised questions of societies’ sustainability and viability for which there are no good answers. Others are the immutable result of restrictive and discriminatory policies that have transformed popular revolts into battles ranging from inflexible attitudes towards naturalization, low-intensity conflict in Bahrain to civil war in Syria; given holy warriors like the Islamic State a new lease on life; driven sectarian tensions that have sparked wars in Iraq and Yemen; and fuelled discontent among majority and minority populations alike.
Gulf leaders’ hopes that violence and brutality that followed most of the 2011 revolts coupled with their determined counterrevolutionary strategies at home and abroad would cow restless populations were dashed this summer. Mass anti-government demonstrations erupted in Lebanon and Iraq demanding an end to corruption and improved services and lowly paid policemen and tax authority officials protested in Egypt, a mainstay of the Saudi and UAE-backed regime of general-turned-president Abdel Fattah Al Sisi.
Similarly, there is little reason to assume that Gulf states despite successful co-optation and repressive policies are immune to anti-government protest. Bahrain, Oman, Kuwait and Saudi Arabia witnessed mass demonstrations in recent years. Gulf youth have said in surveys that democracy was a top priority for them even though recent developments have dampened their hopes.11 Financial muscle has allowed several Gulf states to buy precious time with generous handouts but reduced oil revenues forcing economic rationalization spotlight the fragility of such safety valves.
Nothing highlights the need to broaden the focus of vision and leadership in the Gulf like the region’s lack of inclusiveness, incapability and unwillingness to address what some analysts describe as a ticking time bomb: the Bidoun or Without, hundreds of thousands of predominantly Gulf Arabs who are denied citizenship despite having often populated the rank of file of national armies. Most are Bedouin from the region with a sprinkling of migrants from Iran, Iraq and Pakistan who destroyed their documents in a failed bid to ensure that they would be granted citizenship as Gulf states achieved independence.
In the UAE, Bidoun are denied benefits enjoyed by Emiratis such as free education, health care, and housing allowances. Finding employment is difficult because they lack passports needed to obtain work permits. Demanding their rights puts them at risk of arrest or deportation as writer and activist Ahmed Abdul Khaleq found out in 2012 when he was deported to Thailand for campaign online for Bidoun rights.12
The worst fears of Kuwaiti politicians who have called on the Kuwaiti government for the past 30 years to solve the Bidoun problem became reality in June when the driver of a car that took a Saudi to a Shiite mosque where his suicide bomb killed 26 worshippers and wounded 200 others turned out to be a Bidoun.13
Kuwaiti media reported that 13 of the 29 people arrested in the wake of the attacks were Bidoun. The Islamic State claimed responsibility for the attack.14 Afraid to single out the Bidoun, Kuwaiti officials and analysts were quick to identify Bidoun involvement as part of a broader process of radicalization among Sunni Muslims.
Vision with pitfalls
Gulf leaders face identical problems and share similar visions of their place in the international community. Yet, their strategies to get from A to B, approaches to notions of national and regional security, perceptions of development, and responses to domestic and international criticism vary widely. The differences in vision range from the economic and commercial brashness of Dubai, to Qatar’s well thought through but poorly executed soft power strategy, to Saudi Arabia’s high-risk use of financial and military muscle supported by the UAE’s increasing projection of itself as a regional military power. In projecting itself militarily, the UAE benefitted from having participated in virtually every U.S.-led coalition campaign since 1991. Beyond demographics, other limitations of the varying visions are also becoming increasingly obvious. Abu Dhabi had to bail out Dubai’s real estate driven model when the emirate in 2008 suffered the world’s steepest property slump with home prices dropping 50 percent and had to reschedule some $120 billion in debt.
The bail out together with the collapse in 2013 of low budget airline Bahrain Air also raised long-term questions about the Gulf’s fundamental business model in which the state is the primary economic driver. Gulf airlines have emerged as major players in aviation benefitting from the region’s geography as well as its ability to profit from changing patterns in international trade and politics.
“In a part of the world where almost every other airline is subsidized…it was always going to be difficult to be truly profitable. There is not enough point-to-point traffic, and regional connecting traffic yields are too low to sustain an airline. So it was always going to struggle by traditional measures,” Bahrain Air CEO Richard Nutall told The Aviation Writer.15
The Dubai bail out highlighted the different visions of the emirate and Abu Dhabi visions and the dynamics of the power relationship between the two key states in the UAE. Rather than opting for Dubai’s brashness, relative autonomy and commercial drive, Abu Dhabi relies on the creation of a military-industrial complex, nuclear and renewable energy programs, and its wealth to cement its dominant position in the federation, and ensure its ability to project regional and international power.
Meanwhile, Qatar’s successful effort to host the 2022 World Cup has with US and Swiss legal investigations into the integrity of its bid and widespread criticism of the Gulf-wide migrant labour kafala or sponsorship system that puts employees at the mercy of their employers turned into a public relations nightmare.
Saudi Arabia’s harsh justice system with its public beheadings, its war in Yemen that is bombing the Gulf’s poorest nation into even greater abject poverty, and its puritan interpretation of Islam that deprives women of basic rights has made it all but a pariah state tolerated because of its financial largess and geo-strategic importance.
Compounding the downside of the varying visions are the budgetary consequences of expensive hard and soft power strategies at a time of dropping oil prices that raise the spectre of budget deficits and are forcing Gulf states to nibble at the edges of the cradle-to-grave welfare state that underwrites relative social peace. The IMF estimates that falling global oil prices will cost the Gulf an estimated $380 billion in export earnings this year. Dubai’s vision is in your face. Superlatives are its trademark. Its skyline boasts its rulers’ long-standing knack for bold decisions and an insatiable and unashamedly ambitious drive to implant itself in the mind of every one of the world’s 7 billion inhabitants developed by Sheikh Rashid bin Saeed, the current ruler, Sheikh Mohammed Bin Rashid’s father.
“Rashid wanted the name of his town, Dubai, on the lips of every person on earth. When a family sat down to dinner in America, Rashid wanted them to discuss the happenings of Dubai. And when two Englishmen paused for a glass of beer, it was Dubai he wished them to talk about. Farmers in China, bankers in Switzerland, and generals in Russia: all of them must know about Dubai,” wrote Jim Krane, author of City of Gold: Dubai and the Dream of Capitalism.16
The list of Dubai’s biggest, best, the richest, newest, most luxurious, most over the top, and most expensive projects is long. It includes the world’s biggest mall, indoor ski slope, artificial islands, the world’s tallest building and largest man-made port, the largest ever New Year’s fireworks and LED screen, the world’s only seven-star hotel, the Middle East’s top financial centre and plans for the world’s largest amusement park and even larger indoor ski facility. Nothing seems to bold or outrageous as long as it fulfils Sheikh Rashid’s vision of keeping Dubai Inc. in the global public eye. Catchy slogans and slick advertising and public relations put Dubai on the world map.
“Dubai and the Gulf states are very good at projecting. On paper, they look like they are responding to modernity and the obsessions of the international community. It’s all the product of having hired good communication companies,” said a Western official with long-standing experience in the Gulf.17
Sultan Sood Al Qassimi, a UAE businessman, author and art collector who is a critical member of Sharjah’s ruling family, quipped last month when Qatar announced for the umpteenth time in response to international criticism of its labour regime that it was introducing major reforms: “Every few months a Gulf state issues a similar statement.”18
Much of Dubai's contemporary model is rooted in history. Sheikh Rashid's bold notion of 'build and the will come' anticipated British tycoon Richard Branson's principle of 'screw it, let’s do it.' In doing so, Rashid set a template for development that has been to a large degree adopted by the Gulf flush with oil money after the 1973 oil crisis.
For Sheikh Mohammed, the metaphor was trees. Answering a question about the source of his vision by someone close to him, Sheikh Mohammed replied Bedouin style by recounting a story. He described how he planted trees when he was building a house in Armoun in the desert. Sheikh Mohammed noticed that birds interrupted their migration to spend a few days in his trees. So he planted more trees and more birds came. Eventually they settled instead of continuing their migration.19
“In Sheikh Mohammed’s mind, the way to do things is by nature and by natural law. Things take their natural order. If he planted trees in Dubai, if he offered opportunity, people would stop in Dubai. Sheikh Mohammed came from a large family. He had to find his own place and did that with natural opportunity,” the person close to Sheikh Mohammed said.
Comparing differing approaches between Abu Dhabi and Dubai, people close to the rulers of both emirates noted that Abu Dhabi’s geography of islands meant that they ensured that their forts were looking inwards. Sitting on the Creek, Dubai was forced to look outwards so that it could attract the attention of passing merchant vessels and fend off pirates. “The difference in attitude of the two families is reflected in how they approach everything,” one person said.20
The very presence in Dubai of the Maktoums signalled their knack for bold gambles that more often than not have paid off over the past two centuries. Unhappy with internecine tribal infighting initiated by their cousins and later rulers of Abu Dhabi, the Al Nahayans, the Maktoums decamped in the first half of the 19th century from their ancestral oasis of Liwa and headed for an forlorn fishing village on the coast.21 There was then little reason to assume that Dubai would serve as a useful base, let alone become a 21st century, hyper-modern global hub. The Maktoums took their bold gamble a step further when in the late 1890s and early 1900s they laid the foundations for Dubai as a free port by abolishing customs, tariffs and vessel licensing in a move that was also designed to ensure that Dubai would serve as the anchor for Britain's colonial presence in the Gulf. The moves gave Dubai an edge over Iranian-controlled ports on the Arab side of the Gulf that had imposed taxes to provide revenue for a cash-strapped Iranian administration.
Sheikh Maktoum bin Hasher similarly embraced the need to import people to bolster Dubai’s sparse population. They first targeted disgruntled Gulf merchants hit by Iranian tax increases. Next was the Iranian business community that was offered free land and easy access to the ruler and promised that the government would not intervene in their affairs. Merchants were later enticed and co-opted with government contracts and monopolistic trade licenses.22
In contrast to today, the Maktoums like other Gulf Arabs at the time embraced the Bedouin ritual of hospitality for strangers irrespective who they were. Migrants, unlike modern day expatriates and migrant labour, were encouraged to make Dubai their permanent home rather than accept an arrangement that ended with their departure once they had fulfilled their contractual obligations.
At the time, the Maktoums recognized the multiple benefits of migration. It was a lesson they had learnt from their own migration from Liwa. Migrants were the stuff that would make Sheikh Rashid's dream a reality. They were an asset, one that Dubai was eager to hold on to, not the necessary evil utility that the Gulf tolerates today because it has no choice but sees as a threat to the region's identity and ultimately to rulers' hold on power.
Dubai and with it the Gulf, however, owes a debt to the Iranians whose outward looking worldview, African and Asian networks, and modern technology, helped set the remote fishing village on an unparalleled path to modernity. Later waves of migration were welcomed but offered less benefits, foremost among which the option of legally secured, permanent integration into society.
Dubai benefitted from both pre- and post-revolution IranIan policies. Its economy thrived on its competitive free-wheeling, free market policies as opposed to the red tape and financial burdens imposed by Iran. Since the Iranian revolution, Dubai has become home to more liberal Iranians seeking to escape the strictures of the Islamic republic.
Iranians today rank among Dubai's foremost merchant families, largest developers and major investors while Iran is one of the emirate's foremost trading partners. Much like today’s migrant workers, the Iranians and the next wave of migrants, the Indians, fulfilled economic roles that Dubai's local population was too proud to embrace.
Walking the walk
The Gulf’s different styles of leadership are reflected in the way states project themselves. Saudi Arabia wears secrecy and conservatism on its sleeve. Brash and aggressive, Dubai trumpets its status of being a modern, forward looking global city. It boasts being a multicultural metropole. Qatar basks in controversy over its idiosyncratic, counter intuitive foreign policy that forges relations with friend and foe alike, yet squirms when it is cast under the spotlight.
For much of their recent history as independent states, Gulf nations expressed leadership in employing vast amounts of oil and gas revenues to build relations anchored on their alliance with the United States with countries across the globe; turn their backwaters into architectural landmarks and business hubs through investment in infrastructure and exploitation of their geostrategic location; high profile investments in Western real estate and global brands; and the creation of a limited number of world class global businesses that include Saudi Arabia’s national oil company Aramco and Sabic, its petrochemical industry; Qatar Gas and Qatar Airways; Dubai’s global port manger DP World, Emirates Airlines and Etisilat telecommunications company; and Abu Dhabi’s Ettihad airline.
Increasingly however, concepts of leadership particularly in the smaller Gulf states have been challenged by regional threats such as the 1990 Iraqi invasion of Kuwait, the fallout of the 2003 US invasion of Iraq, the more recent wave of popular revolts that in 2011 toppled four Arab leaders and sparked a civil and proxy war in Syria, the rise of political Islam, and the emergence of the Islamic State that with its eradication of the borders between Iraq and Syria and pan-Islamist ideology that threatens the notion of the nation state as the basis for regional order in the Middle East. Leadership concepts have also been challenged by a wearing thin of the strategy of talking the talk but not walking the walk. Restless populations have for now been cowed by the crushing or reversal of most of the successful revolts and intimidated by violence engulfing the region and harsh crackdowns on domestic dissent. Yet, discontent simmers at the surface while minorities chafe at continued discrimination and disenfranchisement. The rise of Islamic State and the wave of violence and brutality has moreover focused international attention on root causes that include sectarian and intolerant ideologies as well as a lack of inclusiveness and public space for dissenting political expression. The downside of autocratic visions of leadership that have yet to come to grips with the shadow side of break speed development have further been brought into sharp relief with the Gulf’s restrictive labour regime moving centre stage with Qatar’s successful bid for the 2022 World Cup hosting rights. The World Cup represented Qatari vision that differed fundamentally from that of Dubai but was no less bold and audacious. If Dubai’s approach was commercially-driven, Qatar’s was politics per se. If Dubai’s was creating a commercial and economic hub that would rank among the world’s top global cities while preserving the regional status quo, Qatar’s was embracing political change everywhere but at home. Qatar signalled its intentions with the launch in 1996 of the Al Jazeera television network, the freewheeling airing of news and opinions that were banned from a regional landscape dominated by staid state-run television stations that never veered away from government directives. Within a matter of years Al Jazeera had become the Middle East’s most popular Arabic-language television station, forcing an irreversible rewriting of the region’s media landscape. It matched the success of Al Jazeera with its strategic alliance with the Muslim Brotherhood, fending off severe Gulf pressure to change its policy; several high profile not always successful efforts to mediate regional conflict in Lebanon, Afghanistan and Darfur; and a strategic attempt to make sports a pillar of national identity and Doha a global sports hub with the World Cup as its crowning success.
Offence is the best defence The vast difference in Emirati and Qatari responses to multiple challenges was evident in their responses to international pressure to reform their restrictive labour regimes. The responses also defined the degree to which human rights and labour activists have been able to leverage an environment in which pressure on Gulf leaders is mounting to match words with deeds.
The activists got nowhere with the UAE that opted for traditional retrenchment by barring entry to the country of critics, closing down even mildly critical policy think tanks, unfounded portrayals of labour conditions that defy reality, and clumsy attempts at influencing public opinion with the help of highly paid communication consultants and a string of Emirati-funded non-governmental organizations that lack credibility. Its response has failed to counter campaigns denouncing labour conditions on high- profile projects like a branch of the Guggenheim Museum and a New York University campus.23 That is not to say that Sheikh Mohammed is insensitive to the criticism. On the contrary. He finds it embarrassing and a stain on Dubai’s reputation, according to people close to him. “Dubai seeks to project integrity. It’s not like Qatar that feels that any news including bad news is good news. Qatar doesn’t mind being vilified,” one person said.24 Yet, at the same time Dubai like Abu Dhabi does not want to be seen to be caving in to external pressure. In contrast to the UAE, Qatar decided that offence was its best defence. In a break with Gulf’s long- standing refusal to engage and policy of stonewalling, Qatar welcomed its critics in constructive dialogue. It also promised greater transparency.
Representatives of Amnesty International and Human Rights Watch were granted entry, access to officials and labour camps, allowed to hold news conferences and launch damning reports in Doha, and major Qatari institutions worked with them to develop internationally condoned labour standards.
The Qatari effort demonstrates nonetheless the degree to which Gulf states no longer can get away with going through the motions and statements designed to mollify critics that are not backed up by the fulfilment of their promise. Four years of Qatari engagement that have produced little more than lofty promises of labour reform enshrined in glossy documents are starting to turn counterproductive as even minimal change prove difficult to implement. In the latest round of missed opportunity, Qatar announced with fanfare in August the introduction of a Wage Protection System (WPS) that would ensure that workers are paid in full on time by forcing companies to make fortnightly or monthly payments by direct bank transfer, only to say days later that the reform had been indefinitely delayed.25
Transparency is nowhere to be found. Rather than providing chapter and verse on its controversial World Cup bid in an effort to counter mounting evidence of bribery and wrongdoing, Qatar has limited itself to issuing a string of denials, plain vanilla assertions that it upholds the highest standards of integrity, and promises to cooperate with any and every investigation.
Enquiries into details of the awarding of World Cup-related contracts, including who submitted competing bids, and the grounds on which winning consortia were chosen are stonewalled with statements consisting of platitudes and unrelated detail on the provision of comfortable housing for workers involved in the construction of stadia.
Qatar’s failure to live up to its promises is exasperating the United Nations’ International Labour Organization (ILO) as well as human rights and labour activists and undermining whatever goodwill the Gulf state had achieved.
Frustrations were reflected in an Amnesty report in May on Qatar’s lack of follow-up entitled, ‘Promising Little, Delivering Less.’ The report noted that “none of the proposed reforms have been implemented.26
Responding to a pledge by Qatari Labour and Social Affairs Minister Abdullah Saleh Al Khulaifi to implement reforms before the end of the year, Amnesty said: “This is not the first time such promises have been made. Senior Qatari officials have reiterated their commitment to labour rights over the past year, usually in response to international criticism.”27
Despite growing doubts about Qatar’s sincerity, its hosting of the World Cup still holds out the promise of being a rare sporting mega event that leaves a legacy of social and economic, if not political change rather than a mountain of debt and a slew of white elephants. If so, it would demonstrate the kind of bold, risk taking leadership and vision that matches that of the Al Maktoums.
A Pandora’s Box
Granting workers’ rights risks opening a Pandora’s Box in smaller Gulf states where foreigners constitute a majority of the population and citizens fear that their identity, culture and control of society and state is increasingly becoming tenuous. “Today, they don’t ask for political rights, but what about in a decade or two?” said Saudi journalist Jamal Khashoggi.28 Khashoggi’s articulation of Gulf fears notwithstanding, Qatar’s response to pressure has also dented the taboo on public discussion of demography in terms other than support of the status quo. Expressing an alternative view Sharjah intellectual Al Qassemi argued in an article in the Gulf News that “UAE national identity has proven to be more resilient and adaptive to the changing environment and times than some may believe.”29
Al Qassemi noted that the UAE had taken a first step towards a more liberal nationality policy by granting the offspring of mixed Emirati-non-Emirati nationals the right to citizenship rather than restricting it to children whose parents were both UAE citizens. He went on to point out that the success of the United States was in no small part due to the contribution of immigrants. “Perhaps it is time to consider a path to citizenship for them that will open the door to entrepreneurs, scientists, academics and other hardworking individuals who have come to support and care for the country as though it was their own,” Al Qassemi said.30 Pressure on Qatar to move forward with implementation of its promised reforms has further persuaded all the region’s states to tinker in one way or another with their labour regimes. Kuwait’s parliament has gone the furthest with the passing of a bill that grants rights to domestic servants. Kuwait also became the first Gulf state to open a refuge for female migrants.
At the bottom line, Gulf states are discovering what Europe realized in the wake of the wave of Gastarbeiter or foreign workers they invited in the 1960s to accommodate an expanding labour market in the belief the workers would eventually return to their home countries. They didn’t and eventually were joined by their families. In the Gulf, it is middle class expatriates rather than unskilled and semi- skilled labour who are striking social roots.
Asked recently whether he was bothered by the fact that he had no rights, the Dubai-born, third generation son of a prosperous Indian family answered: “No, why should I? Life is good.” The young man’s tone changed abruptly when queried whether it troubled him that his children would have no rights in their country of birth. “Absolutely,” he said slamming his fist on the table.31
The young man is unlikely to risk family and fortune to stand up for his rights. Yet, his is a widespread, largely unspoken sentiment that cannot simply be ignored or allowed to fester until a time when circumstance makes turning it into a public demand either opportune or inevitable.
Gulf leaders are also discovering that gleaming high rises, eight-lane freeways, and glittering shopping malls hosting luxury brands; paying lip service to modernization; and buying foreign talent allows them to project their conservative, autocratic societies on the cutting edge of creativity and inn ovation for at best a limited period of time.
“Innovation today is not an option but a necessity, not a general culture but business style. Governments and companies that do not renew or innovate lose competitiveness and control. They are bound to regress. We have doubled our investments in innovation and in the equipment, training and education of expert national cadres, because keeping pace with the world around us requires innovative resources and an environment that is supportive of innovation,” Sheikh Mohammed said last month.32
Much of Sheikh Mohammed’s requirements can be acquired. The environment is where he and other Gulf leaders feel the squeeze. Dubai’s Media City is home to the global and regional headquarters of the world’s major media houses. Efforts to add creativity and innovation to the concept of a real estate- driven media hub faltered however on legal restrictions, physical environs and lack of a creative, intellectual environment.
As a result, Media City’s neighbouring cluster, Dubai Internet City, hosts big brand services and marketing hubs who keep their regional research and development in Israel and India that boast educational institutions who produce top flight engineers/ Consultants hired to help Dubai make the transition advised the government that to achieve its goal it would have to broaden freedoms of expression, allow foreigners greater professional mobility, and create a physical environment that encourages the kind of creativity not found in modern office blocks.
“Creativity is an organic process. A part of town that is at the outset of gentrification is the perfect physical environment. A kind of Soho with the freedom to experiment, and aspiring opera singers who earn their keep as waiters. Sterile office blocks and visas that make having different occupations simultaneously impossible stymie creativity. Dubai has yet to put those building blocks in place,” one of the consultants said.33
Back to the Stone Age
Rather than liberalizing, institutionalizing and seriously rationalizing, Gulf states have in recent years tightened the reigns as they seek to insulate themselves from regional volatility, maintain market share in rapidly changing energy markets, fend off jihadist threats, fight proxy wars and with limited success assert themselves militarily in a bid to shape the Middle East in their mould, and all of that as budgets shrink and oil prices tumble.
The jury is out on whether the strategy will work. 2015 has turned out to be a difficult year for Gulf leaders. The US-fostered agreement with Iran to resolve the nuclear crisis promises to be a mixed bag. Countries like the UAE expect an initial economic boon but the agreement returns to the international fold one of the Middle East’s most powerful nations whose system of governance is rooted in political Islam and whose policies are diametrically opposed to those of many of the Gulf states.
The wars in Yemen, Syria and Iraq and to a lesser degree Libya constitute powerful threats that have highlighted the limitations of military forces flush with some of the world’s most advanced hardware but hampered by reluctance to commit ground troops in large numbers, a longstanding rulers’ distrust of armed forces capable of staging a military coup, and a tradition of wielding financial rather than military muscle.
Saudi and UAE support for Al Sisi’s military coup in 2013 that toppled Egypt’s first and only democratically elected president has produced one of the region’s most repressive dictatorships. Al Sisi’s brutal crackdown on all dissent has fuelled an insurgency that is spilling out of the Sinai desert into Cairo and other major Egyptian cities.
Emirati special forces, widely viewed as the region’s best after Israel as a result of a decade of UN peacekeeping experience, have earned praise for their performance in Yemen in support of Saudi-led efforts to defeat the rebel Houthis in Yemen and return exiled president Abd Rabbuh Mansur Hadi to power.
The inclusion of a woman fighter pilot in the first UAE raid on Islamic State targets as part of the US- led coalition offered the Emirates a picture perfect opportunity to project itself as a nation on the cutting edge of modernity. The Emirati air force demonstrated its potential reach in attacks in cooperation with Egypt on Islamist targets in Libya that did little to change the balance of power between rival forces in the North African nation. Yet, undeterred by the military campaign against it, the Islamic State is entrenching its alternative, harsh governance structures that not only challenge Gulf rulers’ vision of leadership but also their notions of the nation-state as opposed to an irredentist, expansionary pan-Islamist entity and is able to threaten domestic stability with attacks that target security forces and Shiite Muslim minorities.
Yemen despite major military advances in southern Yemen threatens to become the conservative Gulf’s Vietnam. Retaking northern Yemen and the capital Sana’a where the Houthis enjoy greater support than in the south is likely to prove more difficult. And military victory may prove difficult to translate into sustainable political achievement. Saudi-led Gulf interference in Yemeni politics lies at the core of problems in a nation in which many blame the Gulf states for having bombed them back to the Stone Age in a six-month long air campaign that has wreaked humanitarian havoc.
Yemen could affect efforts by the UAE and Qatar, the most recent Gulf states to dispatch ground troops to the war-torn country, to strengthen national identity with the recent introduction of conscription. UAE conscripts barely a year later suffered their first casualties in Yemen, leaving their grieving families in shock and angry. More than 50 Emiratis and five Bahrainis were killed in Yemen in the last six weeks. “These young men are forced to do military service and should not be taken to hot conflict areas. They are civilians who are supposed to go back to their lives and work after finishing their service," Middle East Eye quoted an Emirati as saying.34
Differences in vision
Despite attempts to project a united front to the region’s multiple crises, responses by Gulf leaders have laid bare differences in vision. Qatar and Oman with soft power strategies that emphasize being politically and diplomatically proactive in contrast to Saudi Arabia and the UAE’s increased reliance on military might and repression have largely opted for engagement and efforts at dialogue. The UAE remains alone among Gulf states in seeing political Islam as the greatest threat to Gulf rulers’ longevity after King Salman of Saudi Arabia cautiously began to reverse his predecessor’s war on the Muslim Brotherhood in a bid to form a pan-Sunni alliance against Iran. The UAE’s position is ironic given that Sheikh Rashid in 1974 provided the Brotherhood with the start-up funding it needed to establish a branch in the Emirates and the fact several Brothers rose to prominent including ministerial end educational positions.35 Political differences are compounded by a fundamental tension inherent in the region’s security architecture: several of the smaller Gulf states have resisted militarization of the six member Gulf Cooperation Council (GCC) comprised of Saudi Arabia, the United Arab Emirates, Qatar, Bahrain, Kuwait and Oman, fearing Saudi dominance.
Gulf leaders’ divergent views of regional security echo far beyond the Gulf, home to a vast US military infrastructure designed to ensure security that includes the Bahrain base of the Fifth Fleet, which patrols the Gulf and accesses facilities in various littoral states; Camp Arifjan in Kuwait that serves as a logistics base for US operations against the Islamic States; the Al-Udeid air base in Qatar, the largest U.S. air base in the region; and access to air base facilities in Oman and the UAE as well as Saudi airspace.
In a rare public outburst, Omani minister of state for foreign affairs Yousef bin Alawi Al Ibrahim, a onetime representative of a separatist movement and key mediator in bringing the United States and Iran to the negotiating table, rejected in 2013 US and Saudi attempts to militarize the Gulf alliance through integration of missile defence. “We absolutely don’t support Gulf union. There is no agreement in the region on this …. If this union materialises, we will deal with it but we will not be a member. Oman’s position is very clear. If there are new arrangements for the Gulf to confront existing or future conflicts, Oman will not be part of it,” he said.36
Alawi’s comments and repeated reluctance by various smaller Gulf states to join past GCC military operations bodes ill for the creation of a Gulf military command announced late last year. The command would involve a force of several hundred thousand soldiers capable of responding to regional threats that include militant Islamists and rival Iran.
“Every effort at military unity among the Arab states has ended in failure, to a greater or lesser degree. There are plenty of reasons for this. For one, smaller states fear diluting their sovereignty and autonomy in a larger bloc. In the 1960s, they feared being overpowered by Egypt; now, they worry about Saudi Arabia, a wariness that has also played a large role in preventing the formation of a political and financial union in the Gulf,” noted military affairs scholar Shashank Joshi in a Foreign Affairs commentary.37
A fraying social contract
Dropping oil prices and revolutionizing new technologies such as fracking pose no less a challenge to Gulf leaders. Saudi-led efforts to allow prices to drop in a bid to undermine the US shale industry have failed. Lower revenues and higher expenditure have forced Saudi Arabia to draw on its reserves and turn to the domestic bond market while Qatar predicts for 2016 its first budget deficit in 15 years. Qatar in September issued 15 billion riyals ($4.1 billion) of bonds to take advantage of low borrowing costs and replenish funds eroded by the decline in oil prices.38
“New political challenges will emerge in the coming years as fiscal policy becomes unsustainable – and as the Gulf confronts its critical long-term challenge, the beginning of the post-oil age. Fiscal spending in the GCC states has soared to such an extent in recent years that they are now chronically dependent on high oil prices – a long-term structural risk,” noted a Chatham House report on future trends in the region.39
More threatening than the economics is the fact that the social contract on which autocratic Gulf rule is based is fraying at the edges and has been for more than a decade. The last time that happened was at the turn of the century when Saudi gross national product (GNP) per capita was at $7,700 less than half of what it had been 20 years earlier and the kingdom encouraged frustrated young men to join the anti- Soviet jihad in Afghanistan.
Young Saudis forced to do two or three jobs to make ends meet joined Al Qaeda as then Crown Prince Abdullah’s cost cutting measures, including the introduction of rents in student dormitories. Real GDP growth in the kingdom is, according to the IMF, likely to drop 2.8 percent this year and another 2.4 percent in 2016. The IMF predicts that a Saudi fiscal deficit of 19.5% of GDP this year.40
Things never got that bad in the UAE where male Emiratis receive some $55,000 a year in subsidies that include free land, healthcare, water, and education that can include degrees at Western universities; cheap electricity, and subsidized food and gasoline. In addition, Emiratis pay no income or property tax.
Yet, even the UAE sees itself forced to rationalize in line with IMF advice. The UAE in July tied petrol prices to world market prices leading to a 30 percent hike at the pump and prices that were only 13 cents below the American retail price. The hike tackling cheap petrol, which many Emiratis see as a birth right, did nothing to rock the boat but like Abdullah’s measures more than a decade ago constituted writing on the wall. Oman and Kuwait, which backed away from raising diesel and kerosene prices in January following a public outcry, were quick to announce that they had no intention of following in the Emirates’ footsteps.
The UAE is also looking at expanding its corporate tax, which currently applies only to foreign banks and the oil industry, to the corporate sector as such and introducing a sales tax on the back of an expected GCC agreement to levy a value added tax (VAT) across the Gulf states.41 Similarly, Saudi Arabia is studying whether to cut state subsidies that keep domestic gasoline prices at some of the lowest levels in the world while Kuwait is mulling taxes on luxury items and tolls on highways and is reviewing the pricing of goods and fees charged for public services and land rental. The IMF warned in September that Saudi Arabia's growing budget deficit could rapidly erode its reserves unless drastic action is taken. The IMF urged Riyadh to implement urgent reforms, including bolstering energy efficiency, reducing energy subsidies, cutting government spending particularly on wages and diversifying the economy.42
“None of these states can afford to keep increasing public spending in the way to which their economies and societies have become accustomed in the last decade of high oil prices. All have long-term plans envisaging a transition to a post-oil economy, developing a mix of energy-intensive and knowledge- based industries, employing more nationals in the private sector, and considering the introduction of taxation, all of which will have implications for their social contracts... Citizens who will in future need to make a greater contribution to their economies, and receive fewer economic benefits from the state, are likely to have very different expectations about government transparency and accountability,” the Chatham House report said.43
“Leaner times provide the opportunity for governments to revisit inefficiencies in their systems and to develop a more sophisticated and effective political relationship with their citizens. Given the increasingly young and informed public, building and maintaining a strong national identity must be encouraged to create active citizens who produce more than they consume,” added Zaid M. Belbagi, a member of Young Arab Leaders (YAL), in the inaugural addition of a new academic journal, Gulf Affairs.44
Ironically, tax regimes of various sorts do not simply challenge leaders’ concepts of absolute power. They also make regimes dependent on their expatriate populations not only for their labour but also their contributions to the coffers of the state and they grant leverage to a business community that historically was reliant on government.
Grabbing the bull by the horns
The fraying of the Gulf’s traditional social contract poses not only a threat but also an opportunity to ensure regime survival. While it inevitably will provoke a restructuring of the relationship between rulers and ruled, it offers leaders with vision an opportunity to grab the bull by its horns. That would have to involve the kind of bold and gutsy moves that Dubai’s Al Maktoum’s and Qatar’s Al Thanis have made their trademarks.
“Social and political changes in the Gulf are certain. The questions are rather what form they will take and how they will be managed. One scenario could be a consensus-based process of adaptation, building on some of the existing institutions, and making parliaments and courts more independent. But this would entail bringing in new checks on the power of the rulers, which, in turn, would require those in authority to judge that voluntary reform today would ultimately cost them less than having change thrust upon them in the future,” Chatham House concluded.45
For now, with crackdowns on freedom of expression and dissent Gulf leaders’ vision appears one of salvaging the status quo rather than managing political transition. Amid the growing doubts about US reliability, China looms large as a model of achieving extraordinary economic performance while maintaining tight political control.
It’s a model that seeks to suppress inevitable demands for greater sharing of power and resources and risks exacerbating fault lines that include divides along sectarian lines, between urban and tribal communities and between regions within the borders of various Gulf states. Yet, the jury is still out. It’s not what Qatari leaders had in mind when they submitted their bid for the 2022 World Cup but the tournament despite feet dragging on promised reforms could prove to be a Trojan horse that drives change. As could the overall strategy of countries like the UAE and Bahrain to project themselves internationally through the hosting of major sporting events and the acquisition of big name clubs and other assets.
“We need to rethink this and give human rights a much higher status,” said Theo Zwanziger before he stepped down as a member of the FIFA executive committee.46 His words are echoed in the International Olympic Committee’s Agenda 2020 that emphasizes rights in the awarding of the games.47
Initial signs of change, the product of pressure not only by FIFA and human rights and labour activists but also Western governments and corporations, go beyond Qatar’s engagement with critics. They remain tentative and have yet to be bolstered by robust legislation and implementation but are sparking a process that is likely to be irreversible, take on dynamics of its own that Gulf regimes may find hard to control, and is part of a growing realization in the region that it cannot escape global demands for greater transparency and accountability. They also keep open the promise that enlightened leadership can manage the process.
Leaders of Dubai and UAE have in as yet small ways signalled that they are not oblivious to the winds of change that are sweeping the Middle East and North Africa even if they have yet to wholeheartedly get in front of the cart. One indication are reports that Qatar has approved the creation of an independent soccer players union, the country’s first trade union and a move that could open the door to a more radical restructuring of its labour system.
Another is the decision by traditionally secretive, major state-owned companies such as Qatar Airways and the Investment Corporation of Dubai ICD) that owns Emirates airlines among other of the emirate’s crown jewels, to publish their results for the first time to counter criticism by Western governments and airlines of unfair competition and restore investor confidence.
A third indication was Qatar Airways’ recent lifting of restrictions on pregnancy and marriage for its female personnel in response to criticism by the ILO, the UN labour organization.48 The airline said it was also reviewing rules that impose curfews on women and do not allow women to be brought or picked up from work by men who are not family of theirs. Similarly, women in Saudi Arabia, the Gulf’s most restrictive nation, were in August allowed to register for the first time for municipal elections scheduled for December.
Labour reform presents leaders an opportunity to project themselves as agents of inevitable change and foresighted adaptation to new realities. It is low hanging fruit because it does not involve the granting of political rights and would take the sting out of the most immediate criticism of Gulf leaders and project them as enlightened rulers. Yet, at the same time labour reform is as tricky and potentially treacherous as political reform. It involves managing what are legitimate, existential fears among the region’s citizenry about a future in which demography threatens their ability to maintain indigenous control of their culture and societies.
A report commissioned and endorsed by the Qatari government lays out a roadmap for labour reform that would involve the introduction of minimum wages, abolition of the sponsorship system, development of unfettered labour markets, setting of wage rates through collective bargaining, workers’ freedom to change employers, and ethical recruitment that eradicates corruption and the indenture of workers.49
To be sure, the Gulf’s need for foreign labour has an upside. “Foreign migrant workers earn vastly more in the GCC than they would at home in Bangladesh or India, where they would make around $1,000 per year. By welcoming migrant workers, the UAE and its neighbour Qatar do more than any other rich country to reduce global inequality, professors Eric Posner and Glen Weyl argued in New Republic in defence of kafala.50
“The kafala system exists as part of an effort by Qataris to retain control of their country. Abolishing the system means opening up a labour market in a country where there is no labour market. The requirement for an exit visa is partly the result of Qatar not having extradition treaties with a lot of countries and wanting to prevent those who break the law from simply skipping the country,” added Ray Jureidini, author of a Qatar Foundation report that advocates far-reaching reform of the labour system.51
Yet, in a further sign that Qatar’s top leadership recognizes the political, social and economic implications of the labour issue, the Doha-based Arab Center for Research & Policy Studies, an initiative fostered by Sheikh Tamim, warned that “in the absence of the establishment of a modern state based on the bond of citizenship, justice, the rule of law, and equal opportunity among all components of society, it is extremely difficult to assimilate immigrants. … The Gulf countries, due to the delay in the construction of the modern state on the institutional, legal and constitutional levels, have extreme difficulties integrating the population of their home societies – let alone assimilating immigrants.”52
The cost to Gulf states of restrictive labour regimes is not just reputational and the risk is not simply demographic. Despite perceptions that the kafala system ensures the supply of cheap labour, it is proving to be detrimental to the efforts of Gulf leaders to turn their countries into cutting edge, 21st century knowledge-based societies. A study by researchers of Weill Cornell Medical College in Qatar argued that Qatar would be near the top of the United Nation’s Human Development Index (HDI) if adjustments were made for the country’s large population of migrant workers.53