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Discussion and Conclusions | The Gulf Cooperation Council States (GCC) |

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Discussion and Conclusions

Onn Winckler

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The development of human capital was and remains the most important official socioeconomic target of the GCC authorities.

The Saudi Ninth Five-Year Development Plan (2010-2014) opened the chapter dealing with human resources by declaring that: “Development of human capital is a means and a target of socioeconomic development, for the human element has become the cornerstone of and the most important criterion for the progress of nations” (KSA, MEP, 2009:169). The development plans of the other GCC countries also concentrate on developing human capital, creating job opportunities for their national workforces and increasing their labor force participation rate in order to achieve both reducing dependence on foreign labor and increasing per capita income.


However, there was and still is a huge gap between the official plans and reality. Examining the “rentier level” in each of the GCC countries reveals that the dependence of the national workforce on public sector employment and that of the private sector on foreign labor did not decrease during the past four decades; rather, in many cases it increased. In 2001 unemployment among the Qatari national population was as high as 11.6% (Berrebi, Martorell and Tanner, 2009:428) and it rapidly declined to a mere 0.3% in 2009 (ESCWA, 2011:13). This rapid decline was not a result of an improvement in the economic effectiveness and absorption of many Qataris in the private sector. It was rather a consequence of the ability of the state to absorb the vast majority of the young into the public sector using its bulging oil and gas rental revenues.

It should be noted in this respect that a common mistake among researchers is to evaluate the success of the GCC labor and nationalization policies through measuring the number of nationals employed by both the public and the private sectors. This is a misguided approach for two main reasons: one is that many nationals are employed in the already bulging public sector without making any contribution; the second reason is that many nationals are employed in the private sector only in order to fill the quota percentage. In general, during the past two decades, one can find some kind of pendulum pattern in the enforcement quota regulations: in periods of economic boom, although the regulations are not abolished, the authorities do not enforce them tightly; in periods of economic recession, there is a stricter enforcement of the regulations (Forstenlechner and Rutledge, 2010:43).

Lacking economic diversification

It appears that the failure of the labor force nationalization policy of the GCC countries is the other side of the failure of their economies to reduce the dependence on rental revenues. Although diversification of the economy was and still is the main economic target of the GCC countries, with the exception of Dubai and Bahrain to a lesser degree, none of the other GCC economies have really achieved this paramount aim. Even in the case of Oman - the least rentier of all the GCC economies together with Bahrain - in 2010 oil and gas revenues constituted 80.8% of the total governmental revenues (CBO, 2011:8). In the other GCC economies, the oil and gas revenues represented more than 90% of the total governmental revenues at exactly the same rate as in the 1970s. To the direct oil and gas revenues one should add the returns from the huge investments abroad. In the case of Kuwait, for example, in 2011 rental incomes, namely oil exports and investments income, amounted to 95.8% of the total governmental revenues (MEES. 25 July 2012:18). This is also the reason for the rapid fluctuation of government revenues since the “oil boom.” The paradox is that inasmuch as the political situation in the Middle East worsens, oil revenues have increased thus improving the economic position of the GCC ruling families. The Saudi oil revenues, for example, increased from $150.5 billion in 2005 to $293.3 billion in 2011 (MEED, 10-16 February 2012:32), albeit oil production declined from 9.55 million b/d (barrel per day) to 8.44 million b/d (EIA, IPM).

Dependence on rental income and its consequences

Although the control over oil and gas income strengthened the control of the ruling families on their indigenous populations, it obligated them to supply steady public sector employment, housing and a wide variety of fully or near fully subsidized goods and services regardless of the economic situation. It should be noted that extremely low energy product prices automatically led to increased oil and electricity consumption, thus steadily increasing government costs on subsidies. In other words, full control on rental incomes obligated the GCC ruling families to be fully responsible for the living standard of their indigenous populations. This is the actual meaning of the GCC unique socioeconomic-political formula of “no taxation and no representation.”

The GCC ruling families were constantly “buying” the loyalty of their nationals, something akin to a “give and take” relationship and not “a common destiny” as it the case of the social-democratic countries. Thus, while in the social-democratic economies the aim of the governmental direct transfers, mainly social security allowances, is to re-distribute the national income, in the GCC economies the main aim of the “rentier system” is to prevent the development of any kind of opposition. Therefore, those who enjoy the highest rental transfers are not those at the bottom stratum of the society but rather the upper classes through the non existence of personal income taxes together with huge financial benefits to the private sector companies. The end result is a steady increase of governmental expenditures. In the Saudi case, for example, governmental expenditures increased from $92.4 billion in 2005 to a projected $184 billion in 2012 (MEED, 10-16 February 2012:32; MEES, 28 May 2012:5).

The situation is such that the GCC authorities must constantly increase their rental income in order to avoid taxation on the one hand and high unemployment or living standard deterioration on the other. Indeed, close examination on the 2012 budgets of the GCC economies reveals that each of them is substantially higher than those of the previous year (see, e.g., MEES, 16 January:10-12; 26 March 2012:21). The result is that the break-even oil price for balancing their budgets is constantly increasing. In the Saudi case, analysts believe that at the current production level this price is $90-$100 per barrel (MEED, 20-26 January 2012:7; MEES, 16 January 2012:11). In order to preserve high oil prices despite the global economic recession, in January 2012, the Saudi Oil Minister, ‘Ali al-Na‘imi, said that “Our wish and hope is we can stabilize this oil price and keep it at a level around $100” (, 12 January 2012; MEES, 28 May 2012:5).

The future of labor migration and therewith associated social challenges

As the GCC indigenous population continues to increase due to their high natural increase rates, so will the foreign labor. This is not only because of the increasing demand for workers in the rapidly expanding GCC industries and services but also due to the steady increase in the number of the domestic service workers. As the number of foreign workers continues to increase, the percentage of males over females will continue to increase accordingly. Today in Qatar, the UAE and Kuwait females already represent less than a quarter of the total population. What will the social situation in these countries be when females constitute 10% of the total population or even less? Is there any society worldwide that can survive with such a gender composition in the long run? Will this composition encourage crime, particularly that which relates to women? Will this situation lead the GCC authorities to again switch their immigration and employment policies? The answers to these crucial questions are the key to the basic survival of the GCC current socio-political structure.



  1. Thus, for example, in late 2011 the price for a liter gasoline in Saudi Arabia was $0.12 – the lowest worldwide following only Venezuela. This huge subsidy cost the Saudi government a loss of approximately $70 billion in oil export revenues. Since the gasoline price is so low, one should not be surprised that the per capita gasoline consumption in Saudi Arabia is higher than in Germany! In addition, the prices of electricity and water are both extremely low due to massive governmental subsidies (MEED, 16-22 September 2011:22). In the other five GCC countries the situation is quite similar to that which prevails in Saudi Arabia.


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Onn Winckler is professor at the Department of Middle Eastern History, University of Haifa. His major fields of academic research are political demography and economic history of the modern Middle East.
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