After the Sheikhs

by Davidson, Christopher

  In the UAE’s case, conservative estimates according to Tanmia are that nationals make up only 9 per cent of the total workforce34 and just 1 per cent of the private sector workforce,35 and that there are currently 17,000 unemployed UAE national adults.36 Other estimates have put the figure as high as 35,000,37 with many of these being degree holders.38 The majority of these are likely to be in Abu Dhabi and probably fit into the category of voluntary unemployment. Indeed, latest official reports claim that the UAE has an unemployment rate of 23 per cent, with the government simply stating that the majority are ‘jobless by choice’.39 More broadly, it is thought that at least half of those nationals in receipt of generous social security benefits are able-bodied and capable of work.40 Interviewed by Reuters in 2010, one young UAE national explained that he ‘couldn’t not see the obvious’ and was willing to ‘hold out for up to a year for a government post rather than take a job with a private firm’. He also claimed that ‘I can work in a bank from at least 8am to 5pm, and get half the salary that I would get in a government job working 8pm to 2pm. Anyone would choose the better option’. Similarly, another national stated that ‘I will move to the government sector, I see it as a duty to my country’ before explaining that ‘You tell me, who wouldn’t wish to just sit there and get paid lots of money?’41

  The same comprehensive Reuters report estimated the situation to be little better in other Gulf monarchies, with only 10 per cent of Saudi nationals and 5 per cent of Qatari nationals being employed in the private sector,42 despite the Saudification programme aiming to replace 10 per cent of the expatriate workforce with unemployed nationals43 and the Qatarisation programme aiming for 40 per cent labour nationalisation. Speaking in late 2010 the Saudi minister for the interior (and up until recently the crown prince)44 made it clear that ‘…the government could not keep providing jobs for everyone’ and, according to a Financial Times report, he ‘signalled an impatience with businesses that hire only foreigners and urged the private sector to employ more Saudis’.45 Speaking a few months later the chairman of the Council of Saudi Chambers of Commerce and Industry46 agreed with the urgency of the situation, calling on the government to ‘appoint an international consultancy firm to help implement the Saudification program more effectively’ and arguing that ‘the problem… is that while [the government] has been relatively successful in creating a very good education sector, they are still not delivering people that are capable of working in the private sector’.47 As with the UAE, it seems that the problem will be very difficult to solve, with the average expatriate’s earnings in Saudi Arabia’s private sector being about $200 per month compared to over $800 for Saudi nationals.48 Understandably, the Financial Times’ report concluded pessimistically that ‘many young Saudis fresh out of college [still] feel entitled to a managerial post by virtue of their nationality, and complain that foreign bosses order them around’ and that ‘the government is grappling with the challenge of creating highly paid jobs for a young population with a strong sense of entitlement, poor education and, often, a weak worth ethic’. Similarly negative, and further hinting at the deep-rooted, structural nature of the problem, have been the recent views of chief economists at Saudi-based banks who have explained that ‘the government has to work on changing nationals’ attitudes, which were pretty much cultivated during the first oil boom in the 1970s’ and have questioned ‘how can you create jobs for Saudis if they do not want to join the private sector, and the private sector does not want them?’49

  In Kuwait, over 12,000 nationals are believed to be waiting for public sector positions, preferring to remain unemployed in the meantime rather than work in the private sector.50 Bahrain and Oman have suffered much less, but in part this is due to the increase in real unemployment in these states, as discussed later in this chapter. Moreover, there have been some relatively novel labour nationalisation schemes in these countries which have had some success, albeit still quite limited. In 2009, for example, Bahrain increased the charge on visas for foreign workers in an effort to make Bahraini workers more attractive to employers. In the end, however, too many businesses lobbied to protect the status quo and the visa charge was only raised to $27—which was deemed merely a minor obstacle to hiring expatriates. In Oman, the government has required taxi drivers and hotel reception workers to be nationals since the 1980s. This gives visitors to the country the impression that Oman’s labour force is far more nationalised than in the other Gulf monarchies. Nevertheless it is still a narrow example.

  Apart from the long term economic consequences of having almost no nationals engaged in the public sector, with many remaining unemployed, and in receipt of (often generous) social security benefits, there are also growing symptoms of the social and political problems in store for the Gulf monarchies. In summer 2010, for example, several hundred frustrated Saudi national university graduates reportedly gathered outside the Ministry for Education carrying posters demanding government jobs and carrying posters with slogans such as ‘Enough Injustice’.51 The problem is also increasingly being linked to terrorism and security concerns, with some analysts remarking that ‘…the Saudi government believes that the question of unemployment is a major problem with huge implications on security… and the great majority of those recruited for terrorist activities are the unemployed’.52 Crime rates among Gulf nationals have also soared over the past few decades—mostly connected to acts of delinquency such as joyriding and shoplifting. Although official statistics are unavailable, given the sensitivities prevalent in conservative societies, alcohol and drug abuse have risen dramatically among the indigenous populations, despite the harsh penalties associated with narcotics. Most Gulf monarchies now have extensive rehabilitation centres. In Dubai, for example, the emirate’s Training and Rehabilitation Centre—available only to nationals—has been described by the New York Times as ‘a lush facility complete with swimming, art classes and a gym, deep in the desert’. In Saudi Arabia there are now television programmes that openly discuss drug abuse, while in Bahrain and Kuwait clerics increasingly preach about the dangers of narcotics. As a representative of Mentor Arabia—an organisation that aims to help regional governments formulate anti-drug policies—has claimed ‘the taboo around drug addiction is fading because the problem is becoming too scary’ and that ‘there are many indicators that suggest this is going to be a big problem… what shows it is that the governments are beginning to ask for help’. Meanwhile, a former UAE national drug user has explained that ‘…the drug problem here is really an invasion… there is money, the place is open, so it’s bound to happen here’.53

  Squandering wealth

  Although a pathology resulting from the opacity of politics in the Gulf monarchies rather than a side effect of the distributive economy, the massive squandering of national resources—sometimes to benefit ruling family members—is arguably just as damaging for these countries. For many years the most visible example of the problem was the ‘copycat spending’ of competing monarchies, as each seemed to try to out-do the other by buying or constructing better versions of the same, often prestigious article or totemic building. In many cases this led to a noticeable duplication of high profile investments in the region, usually with little cooperation between neighbours and with minimal regard for long term planning. Nowhere is this more obvious than in the air, as in addition to having at least one international airport, each Gulf monarchy now also has at least one international airline, despite the relatively small populations of these countries. Jointly owned by the UAE (specifically Abu Dhabi), Bahrain, Qatar, and Oman, Gulf Air was originally intended to be the principal carrier for these countries, before Dubai established Emirates Airlines, Qatar established Qatar Airways, Oman established Oman Air, and—eventually—Abu Dhabi established Etihad Airways. Today, therefore, Gulf Air is effectively the national carrier only of Bahrain, with its aeronautical siblings competing with each other along with other established Gulf carriers such as Kuwait Airways and Saudi Arabia Airlines. T
here are countless other examples, most of which connected to soft power strategies or diversification efforts, including the monarchies competing to acquire European football clubs and scrambling to host the most spectacular Formula One Grand Prix. Both Bahrain and Abu Dhabi now stage such events, despite their very close proximity, and back in 1981 Dubai held an unofficial ‘Dubai Grand Prix’—the posters for which displayed the face of the emirate’s ruler54 more prominently than any driver or car.

  There has also been fierce competition between the Gulf monarchies to build taller skyscrapers than each other. Almost as soon as Dubai’s 828 metre Burj Khalifa was completed in early 2010, Saudi Arabia’s Al-Waleed bin Talal Al-Saud announced that he had signed a $1.2 billion contract to build a 1 kilometre tall tower outside Jeddah. Intended as the centrepiece for his new model town—Kingdom City—and due to be completed by 2016, Alwaleed claimed that ‘…building this tower in Jeddah sends a financial and economic message that should not be ignored… It has a political depth to it to tell the world that we Saudis invest in our country despite what is happening around us from events, turmoil and revolutions even’.55

  Given the existence of seven ruling families in the UAE, the federation provides a particularly good micro-level case study of such duplicated investments and unnecessary projects. Even in the mid-1970s the UAE’s minister for planning56 was already complaining of the problem, explaining that ‘…economic necessity will require the eventual cessation of the costly duplications of projects that have occurred throughout the UAE since it was established’. He also claimed that ‘officials recognise that this duplication of projects only wastes time and money that could be used more effectively elsewhere. The intense rivalry between the various emirates and the important status issue dictates that if one emirate acquires an airport or factory then a similar one has to be built in the other emirates’.57 Writing in the mid-1980s, a Western observer also emphasised this lack of co-ordination and the resulting unnecessary duplications in the UAE, stating that ‘Abu Dhabi, Dubai, Sharjah, and Ra’s al-Khaimah all have airports that service both international and domestic flights. This overbuilding, prompted by inter-emirate rivalry, has left the latter two facilities under-utilised. Abu Dhabi, on the one hand, recently opened a new, large civilian airport to handle its traffic. Dubai, with the busiest airport in the Gulf, is upgrading its facilities…’58

  Clearly, this under-utilisation of major airports was a direct result of so many facilities having been built in a relatively small country. This is a problem still very much in evidence today, with new international airports in Al-Ayn and Fujairah, and with foreign airlines having long since cut back their flights to Sharjah airport as a result of the continuing expansion of Dubai’s airport only a few miles away. In fact, Dubai airport is closer and now far more accessible to most parts of Sharjah than the Sharjah airport, and with the completion of Dubai’s new airport in Jebel Ali and the further expansion of Abu Dhabi’s airport the competition will increase even further. With regards to the UAE’s airlines there has been much the same problem, especially since Abu Dhabi’s withdrawal from Gulf Air. The launch of Etihad Airways in 2003 was deemed by many analysts to be wholly unnecessary for the UAE, not least because Dubai’s highly successful Emirates airline—set up by the former crown prince and current ruler—was headquartered only a few hundred miles away. Designated by an Abu Dhabi law as being the new ‘national airline of the United Arab Emirates’ and chaired by a key member of the Abu Dhabi ruling family,59 the establishment of Etihad Airways must be viewed as a response to Dubai’s highly successful operation, as much as anything else.

  Another visible example of the squandering of national wealth has been the funding of expensive, prestige projects that have usually been on the whim of ruling family members or their affiliated development companies with direct access to resources, and thus have bypassed regular government channels or planning controls. Often referred to in the region as ‘follies’ or ‘white elephants’, these have frequently resulted in empty buildings, half-finished schemes, or other high cost misadventures. In some cases this has led to grumbling and discontent among nationals, with the most outspoken claiming that these projects are evidence of corruption and waste at the highest levels. In the late 1980s, for example, the ruler of Sharjah60 was heavily criticised for his ‘sanctioning of expensive and unnecessary prestige projects including… an unfinished television station and several empty museums’. Indeed, when his elder brother briefly ousted him during the 1987 coup, one of the reasons given was his high spending, despite the emirate’s limited resources.61 Over the past decade Dubai has provided an even better example, with the emirate now being littered with unfinished, often environmentally damaging projects. These include an incomplete $11 billion ‘Arabian Canal’ which was originally supposed to extend 75 kilometres all the way around downtown Dubai,62 a third, unfinished ‘Palm Island’, which is currently just a pile of sand and rubble dumped out at sea, and the undeveloped ‘Dubai World’—an archipelago of dozens of artificial islands shaped like the countries of the world, but with only one being currently occupied. The building of these various islands was condemned by many environmental groups, as they were thought to be destroying natural maritime habitats, including coral reefs.63 Even the Burj Khalifa can be considered a white elephant, with more than two thirds of its commercial units reportedly being unoccupied more than two years after its official opening.64 Although most of these Dubai projects were financed by real estate companies rather than the government or the ruling family, many were nonetheless personally sanctioned and encouraged by the ruler, and the companies involved can best be described as parastatals of the emirate’s government. As such, their misadventures directly contributed to Dubai’s 2009 crash and the emirate’s continuing debt burden.

  Elsewhere in the UAE, Abu Dhabi’s rulers have also been facing criticism, with a slew of recent projects appearing to have little connection to official development plans. In early 2011, soon after it was revealed that Abu Dhabi was contemplating funding the construction of nine ‘energy-generating solar pyramids’ in the desert, including a central pyramid that would stand 50 metres tall,65 it was also reported by the British press that many UAE nationals were puzzled as to the increasing density of clouds and the increasing frequency of rain and storms. Residents of the city most affected—Al-Ayn—were becoming concerned over the violence of some of these storms, which were often accompanied by lightning, gale force winds, and even hail. According to The Sunday Times, the storms were the result of a secret project funded by the ruler of Abu Dhabi since 2010, which had been launched without consulting any Al-Ayn residents. Involving a Swiss weather systems company, the controversial scheme had aimed to increase rainfall over the city in question by seeding clouds with various chemicals, and had apparently generated more than fifty man-made rainstorms over the year.66 Although a website with limited information was later published, it has since been removed and the total cost of the project remains unknown. A little later in the year a similar project in Qatar was also reported by the British press, when it transpired that the emirate had been paying for technology to create artificial clouds to provide shade for its football stadiums in the event that its 2022 FIFA World Cup would have to be played in the extreme heat of the summer months. If the system is implemented, each cloud will reportedly cost about $500,000 to produce, and will be remotely controlled by solar powered engines.67

  Of greater concern, perhaps, has been the accumulation of vast personal wealth by key members of the ruling families. This has been taking place since the mid-twentieth century and has been shrouded in near complete secrecy, often with the assistance of expatriate financial managers and ‘personal bankers’. With many rulers and their relatives still ‘owning’ most of their country’s land and natural resources, it remains very difficult to separate the wealth of ruling families from the state. Indeed, most of the original hydrocarbon concessions were signed between foreign oil companies and rul
ers, rather than with state officials. Although this is now no longer the case, it still appears that in some Gulf monarchies hydrocarbon revenues are first subjected to a share being taken by the ruling family, before the remainder is divided between the government and its various sovereign wealth funds. As with the various prestige projects, this is increasingly becoming the subject of criticism among national populations, with concern mounting over the complete unaccountability of the ruling elite and the impact this was likely to have on their welfare states and the continuing distribution of wealth. In 2011, this was described by one scholar as ‘…the king sometimes undertaking to redistribute the national wealth in favour of the underprivileged… but even this kind of social paternalism is limited by the predatory tendencies of the ruling clique, a close-knit network of families and clients, which ends up controlling a substantial part of the national resources’.68

  Given the obvious secrecy surrounding the source of the wealth, it is now little more than a guessing game as to the exact size of the fortunes that have been built up by the Gulf’s ruling families. It is likely that they are now the richest families in the world, with substantial assets placed overseas in the name of private shell companies rather than via official sovereign wealth funds. Occasionally there are glimpses and hints of the extent of the wealth, though these are usually the result of overseas scandals and investigations. In the early 1990s, for example, the extensive international investigation into the collapse of the Bank of Credit Commerce International—headquartered in Abu Dhabi, managed by expatriate Pakistani bankers, and part funded by the ruling family—temporarily lifted the lid on the ‘web-like multi-layered structure of shell companies and private investments established on behalf of key family members’.69 Similarly, a recently leaked US diplomatic cable, written in 1996, provided a detailed account of the mechanisms of wealth distribution (and the resulting waste) within Saudi Arabia’s ruling family. In addition to reporting that ‘corruption abounds largely unchecked’ in Saudi Arabia, the cable concludes that ‘…getting a grip on royal family excesses is at the top of priorities’ for the kingdom, and that ‘…many in the Kingdom feel that royal greed has gone beyond the bounds of reason’. In particular, the cable explains that the Ministry for Finance siphons off a portion of the country’s hydrocarbon revenues. This is then distributed in varying portions to each ruling family member in the form of monthly stipends. Back in 1996 this was believed to be on a scale ranging from $800 per month for the thousands of lowly princes up to $270,000 for the few hundred top princes and their families. Moreover, it was reported that many princes could gain bonuses of about $3 million for getting married or building palaces, with further increases to their stipends for having more children. For about five or six princes it was thought that stipends equivalent to a million barrels of oil per day were being distributed. Today these figures are likely to be much higher with the number of recipient princes having greatly increased. Other, almost institutionalised benefits enjoyed by the ruling family were believed to be the ‘royal rake-offs’ resulting from confiscating land from non-ruling family members and then selling it on to the government, bank loans which were defaulted on, and princes acting as ‘super sponsors’ to hundred of expatriates under the aforementioned kafala system.70