Examining economic inclusion and sustainable growth in Oman, Bahrain and Saudi Arabia

A new report from Rice University’s Baker Institute for Public Policy examines aspects of economic inclusion and sustainable growth in Oman, Bahrain and Saudi Arabia.

Skyline of Riyadh, Saudi Arabia, at night. Credit: 123RF.com/Rice University

Kristian Coates Ulrichsen, fellow for the Middle East at the Baker Institute, edited the report, “Economic Inclusion and Sustainable Growth: New Perspectives From the Gulf,” which is a collection of issue briefs by authors Aisha Al-Sarihi of the Arab Gulf States Institute in Washington, D.C.; Sumaya Almajdoub, an independent analyst from Manama, Bahrain; and Faris Al-Sulayman of the King Faisal Center for Research and Islamic Studies in Riyadh, Saudi Arabia.

Al-Sarihi’s brief, “Integrating Climate Change Policies With Economic Diversification Strategies: Challenges and Opportunities in Oman and the UAE,” draws on interviews with stakeholders in Oman and the United Arab Emirates representing governments, the private sector, academia and nongovernmental organizations who have relevant experience in climate change and/or economic development. It assesses the level of awareness of the integration of climate policies and explores where stakeholders perceive the policies’ specific challenges and opportunities.

“It appears that the integration of climate policies and economic diversification is likely to occur in the UAE, which has the advantages of its leaders’ political will as well as the institutional and resource capacity to implement the needed changes,” Al-Sarihi wrote. “In contrast, deficits in both existing data and institutional and resource capacities make climate change integration unlikely in the short-to-medium term in Oman.”

Almajdoub’s brief, “The Structural Constraints of Entrepreneurship in Bahrain,” aims to provide an assessment of the current entrepreneurship ecosystem in Bahrain, and it argues that a number of procedural reforms can be pursued to further improve it. However, these procedural reforms will only provide limited returns in the current economic framework and in the context of regional economic pressures, Almajdoub said.

“While there is still potential to expand the entrepreneurship ecosystem in Bahrain, its current economic structure faces tremendous fiscal pressure, remains dependent on regional support and is navigating the legacies of various internal and external shocks,” Almajdoub writes. “It is important to note that economic diversification and reform are not purely technical processes; rather, they depend on fundamental political and socioeconomic transformations. Moving forward, Bahrain will need to pursue both procedural and structural reforms to advance its strategy to move toward a post-oil economy.”

Al-Sulayman’s brief, “State Business Relations and the New Economic Agenda in Saudi Arabia,” focuses on the changing dynamics of the country’s state-business relations in particular and tries to understand what challenges this might pose to the broader reform agenda. By exploring the dual pressures being exerted on the state by high levels of unemployment on the one hand and large fiscal deficits on the other, the seemingly conflicting policy outcomes can be identified, examined and contextualized, Al-Sulayman said.

“The … perhaps most serious clash emerges from the state’s attempt to encourage the growth of private sector employment while maintaining high levels of public sector pay, benefits and bonuses, which continue to have a profound distorting effect on the labor market,” Al-Sulayman wrote. “This feature of public sector employment, often described in the literature as endemic to the structure of the state, along with the private sector’s long-held reliance on cheap foreign labor, form arguably the most significant challenges to the economic reform agenda. The state’s continued efforts to curtail the private sector’s reliance on cheap foreign labor — while maintaining most elements of public sector compensation — are telling, and reflect the rigidity of the state’s social contract with public sector employees and simultaneously the malleability and weakness of the social contract with the local private sector and business elite.”

The report is based on an April 9 workshop held in London. It is part of a broader, two-year Baker Institute research project on “Building Pluralistic and Inclusive States Post-Arab Spring” supported by a grant from the Carnegie Corporation of New York. Coates Ulrichsen and his Baker Institute colleague, A.Kadir Yildirim, fellow for the Middle East, are the project’s principal investigators.

Coates Ulrichsen’s main research interests examine political, economic and security trends in the Middle East and, in particular, the Gulf Cooperation Council states’ changing position within the global order.

About Jeff Falk

Jeff Falk is associate director of national media relations in Rice University's Office of Public Affairs.