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Privatizing the Gulf

JEDDAH – As the Arab world undergoes fundamental changes, its leaders must adapt fast or risk popular uprisings – a lesson that has not been lost on the countries of the Gulf Cooperation Council (GCC) – Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates. With their neighbors embroiled in internal conflict or in the midst of difficult transitions, and with discontent rising at home, the Gulf states are eager to stem the tide of revolution.

Indeed, the GCC has offered generous aid, totaling roughly $160 billion so far, to countries swept by the Arab Spring. Furthermore, to cool domestic political tensions, some of the Gulf countries have announced additional spending packages that include significant wage hikes, substantial increases in public-sector jobs for their citizens, and higher unemployment benefits.

Simply put, the Gulf states are relying on their wealth to ward off revolution. After all, the majority of their population has benefited immensely from decades of rapid, natural-resource-based economic growth.

But the GCC economies are also rife with structural problems that short-term economic packages will not address – bloated public sectors, heavy dependence on imported labor, and endemic unemployment, especially among young people, who make up a disproportionately large share of the population. The region needs sustainable policies aimed at bringing about much-needed economic diversification. Indeed, without profound structural change, the favorable standard of living that underpins the Gulf states’ political stability is likely to erode.