Oil-rich Arab states open their coffers

AFP , Monday 28 Feb 2011

Oil-rich Arab regimes move to 'buy' calm as protests sweep across the region

Oil-rich monarchies in the Gulf may have chosen to pre-empt protests by opening their coffers to their citizens, but other Arab states in turmoil -- or in the wake of it -- lack the "cash for calm" option.

The fact that Arab rulers in the Gulf have responded with money and benefits to the wave of popular unrest sweeping across the region betrays their deep concern, analysts say.

While a swift injection of cash may take the edge off potential crises in the rich states, only huge amounts of international aid can ensure development of those poorer Arab nations where the current unrest began, they believe.

"It is usual for the king to give people something, a token, but this time it's bigger -- it shows a bit of a panic," said Dubai-based Platts analyst Kate Dorian, in reference to Saudi Arabia.

Just hours before returning from medical treatment and lengthy convalescence abroad on Wednesday, King Abdullah ordered social benefits for civil servants, a 15-percent pay rise for state employees and an increase in funds for housing loans.

"The kingdom is trying to avoid the same upheavals as those in Tunisia and Egypt," Dorian said.

Other regional states followed hot on the heels of the world's largest oil exporter in announcing the distribution of greater largesse to their populations.

In Bahrain, where the monarchy has been battling a vocal protest and reform movement for the past two weeks, the government announced a 30% reduction in the mortgage costs of 30,000 households.

And in Oman, where police shot dead two demonstrators on Sunday, Sultan Qaboos ordered a monthly allowance of 150 riyals (390 dollars) for each registered job seeker and also gave orders to provide 50,000 new jobs.

"There is also a level of discontent in Kuwait, with not enough jobs being created," Dorian said.

The emir has granted each of Kuwait's more than 1.1 million citizens 1,000 dinars ($3,570) and free distribution of basic food items for 14 months, at a total cost of more than $5 billion.

His government has also raised the basic salaries of servicemen by up to 115 percent at a total annual cost of close to $1 billion.

"In all the Gulf countries people are asking for social reforms, but not only. There are other issues that people want to focus on like corruption," Dorian said. "Those are rich countries where the wealth has not been shared."

The yawning breach between rich and poor in a region strategic to US interests has been identified by one senior American military officer as a catalyst for change in which the poor will have a greater voice because of globalisation.

"This globalisation... allows people to talk to each other all around the world and share their ideas at a moment's notice. It's going to usher in a new era," US Lieutenant General William Webster told AFP in Kuwait.

"And I think people who are in countries where there is a great disparity between the poor and the rich, I think the poor will have a bigger voice," he said.

Poverty can, of course, feed instability. This can reach critical mass in countries lacking in natural resources, where years of political negligence have aggravated infrastructural problems, as in Yemen, Egypt and Tunisia.

"Egypt and Tunisia will require a well-coordinated international effort" in the transition following the ouster of veteran strongmen Hosni Mubarak and Zine El Abidine Ben Ali, said analyst Salman Shaikh of the Brookings Doha Centre.

Even in oil- and gas-rich Libya, currently in the throes of deadly unrest, the dying regime of Muammar Gaddafi, currently under siege in Tripoli, financed a system based on cronyism, running counter to dynamic economic development.

"In Libya, where are the billions? Libya needs a lot of infrastructure and Gaddafi killed off private industry," said Dorian. "Poor people knew how to deal with the system, that providing them with subsidies. It will be more difficult for them to deal with a new situation."

Shaikh said mismanagement of the Libyan economy led to a fall in the standard of living there.

"But the country has potentially great revenues, and a vibrant Libya can be very much a catalyst for progress in northern Africa," he said.

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