BY ZAMILA BUNGLAWALA PUBLISHED 18 SEPTEMBER 2011
Imagine you are an Arab country, thus not a democracy but a political economy and rentier state, and you have not seen the protests of the Arab Spring on your streets calling for greater democratic institutions, better governance, growth and inclusion within your borders, yet. You have however, seen the power of the protests and its successful domino effect at toppling dictators and their regimes all around you, within a period of a few months. So, despite your own internal stability, do you wait to see if the Arab Spring dominos lean towards you or, do you take decisive pre-emptive action to keep your population « on-side » and avoid revolt?
Now imagine that you are the richest country in the world per capita and despite the billions you have invested in recent years in economic growth, market liberalisation and diversification to help reduce reliance on your considerable oil wealth to help move your economy towards greater productivity and stability, one of the key cards you still hold is that of national wealth re-distribution. So, will the action you take to avoid protests and revolt take you closer towards democracy and liberalisation or further entrench your rentier state?
Last week, despite internal stability, a booming economy with 19.4 per cent growth and strong investment to create more capital market forces and increase private sector employment, Qatar announced a public sector pay and benefits rise of incredible proportions. With retrospective effect from 1 September, public sector employees in Qatar will receive a 60 per cent increase in basic salary, social allowance and pensions and military staff will receive a 50-120 per cent increase. This is no small Band Aid. With over 80 per cent of Qataris working in the public sector, the implications of this salary and benefits hike will be felt almost population-wide. No explicit reasons for the rises were given, though it is interesting that the military received nearly twice the rise of the public sector.
These pay rises are significant in themselves – the majority of public sector workers already receive double and treble the pay level of most private sector workers – but even more so as Qatar and their wealthy Arab neighbours have been trying to achieve more balanced economies with greater reliance on the private sector and entrepreneurship to create jobs and wealth for over a decade now. Reducing economic volatility and sole reliance on oil for jobs and stability is sound economics but so far few have had much success at this. The private sector in Qatar still employs less than 10 per cent of the Qatari workforce and increasing public sector pay may now reduce this even further.
So why raise public sector pay and benefits – are Qatar, UAE and Saudi Arabia worried that after years of stability they may now follow their Arab neighbours in overthrow? Or, as Qatar and UAE have not yet seen protests, are they rewarding their people for not revolting or buying time to reform? Who’s it hurting – especially if you can afford it? Pay and pension rises in Qatar will cost around $8bn a year extra, in Saudi the extra handouts are around $130bn and in UAE, in addition to pay rises, they have also now subsidised staple foods.
Indeed, redistributing wealth in the short-term through high subsidies, salaries and pensions hikes is a rational and tactical move, and can be implemented speedily. However, in doing so, these countries risk further long-term dependency on the state. Higher salaries and benefits for public sector workers do not come without wider costs. Already in Qatar, social networking sites are full of cries of inequity and discontent by private sector workers and disadvantaged groups who have been overlooked, whereas in previous pay hikes they too were « rewarded », and how all are now experiencing demand-push inflation are retailers and services have increased their prices, to no doubt take advantage of the greater disposable income now floating in the economy. Moves to balance out the pay rises to all workers have not yet been announced but moves to counter inflation are being made.
The Arab Spring protests have been largely about a lack of jobs, opportunities, equity and equality, political and economic liberalisation, and so increasing public sector salary and benefits measures will not lead in themselves towards the stability and reforms the people are protesting for. In the long-term that requires genuine economic, social and political reconstruction and reform too.
Qatar especially has played a strong and proactive leadership role in the region and globally to show support for the Arab Spring, through diplomatic intervention in Syria and Yemen to military support for the NTC in Libya, thus showing it understands what the protesters in the region are now demanding. And President Obama back in April praised Qatar for the leadership it showed for democracy in the Middle East, but also let slip how Qatar was not itself a democracy and was making no reforms to that end.
In the long-term, all Arab policy-makers must implement strategic moves towards greater economic diversification, political and social reform to truly deliver the equity and opportunity their protesters are demanding. Oil rich states, may be able to afford many pay-rise ‘Band Aids’ but these are not equitable or long-term strategic or sustainable options – the oil will run out at some point – and risks harming or even reversing the sound investments already made towards economic diversification. Indeed, the few national private sector workers these countries have may now quit their jobs in hope to find more lucrative and secure public sector jobs, thereby leading to further reliance and rentier state entrenchment – not democracy.
The Arab Spring represents an opportunity and a « wake-up call » for Arab countries – that have and have not seen protests – to now accelerate reform. Moving away from the rentier state model may not be easy – and is long overdue – but all should try to avoid short-term fixes that in the long-term are unsustainable.