In late May the Gulf nation of Oman was rocked by demonstrations as young people took to streets in cities across the country to protest a lack of jobs and economic opportunity.
The unrest fell just weeks after the government, led by Oman’s new ruler, Sultan Haitham bin Tariq Al Said, introduced a 5 percent value-added tax (VAT) as part of a long-delayed fiscal reform package that included other cuts to state spending and plans to introduce an income tax.
The austerity measures are designed to rein in Oman’s widening budget deficit and skyrocketing public debt after its public finances – among the region’s worst – were brutalised by last year’s coronavirus pandemic disruptions and oil price crash.
Demonstrations over economic grievances in the Gulf’s most indebted state have occurred sporadically since the 2011 “Arab Spring”. The country’s previous ruler, the late Sultan Qaboos bin Said Al Said, managed to quell protesters by offering them generous state handouts.
The new sultan responded to events in May in a similar fashion, promising nearly 15,000 public-sector jobs and another 15,000 jobs in the private sector to be funded by a $500 government stipend.
But that strategy will likely delay reform designed to trim bloated state budgets and jump-start the country’s private sector to generate more jobs.
“Some of the measures and reforms under the tawazun [or] ‘fiscal balancing’ plan will likely be scaled down, postponed, slowed, or sequenced in a more politically sensitive fashion,” Adel Hamaizia, a Gulf expert at Chatham House, told Al Jazeera.
While Oman has less breathing room than its wealthier neighbours to successfully reform its economy, the delicate balancing act playing out there between reining in state spending and creating economic opportunities for young people lays bare a dilemma facing other Gulf nations.
These states have built their economies on oil and cemented their social contracts and security through state largesse funded by petrodollars. But the global march towards green energy is heralding a not-so-distant future of waning fossil fuel demand just as legions of Gulf youths are entering prime working age.
“A youth bulge is coming into the labour force at a time when the ability of Gulf societies to continue in the traditional pattern of offering public-sector jobs is diminished,” Gerald Feierstein, Senior Vice President of the Middle East Institute, told Al Jazeera.
“In the Gulf, people have a certain level of expectations about what government is going to do for them,” he added.
The clock is ticking
Although petroleum industries accounted for more than 34 percent of the country’s gross domestic product in 2019 and made up nearly 65 percent of its total exports a year earlier, according to the World Bank, Oman’s undersecretary of state for oil and gas said in a 2019 interview that the sector only employed just shy of 15,000 Omanis in 2018.
Muscat is now grappling with the reality that the comfortable state jobs it offered to the fathers and older brothers of young protestors just a few decades ago are no longer an option.
In 2019, the World Bank estimated Oman’s youth unemployment rate at 49 percent. The pandemic has almost surely worsened it. The hope is that by diversifying the country’s economy, the private sector can fill the gap in unemployment that the state can no longer afford and the petroleum industry doesn’t have the capacity to meet.
To accomplish this, Muscat is seeking to improve education and diversify the country’s economy by promoting job growth in sectors like tourism, manufacturing and technology.
This is the idea behind the country’s National Program for Enhancing Economic Diversification (Tanfeedh). Although Oman’s finances are less healthy than those of its wealthier neighbours, the central planning proposals and desire to compete globally on sectors besides fossil fuels echo efforts made by other Gulf Cooperation Council members.
“You can say that Oman is in some sense a guinea pig,” Feierstein said, describing how the country’s fragile fiscal state may be indicative of the greater pressure other Gulf economies could find themselves under in the coming years as the global economy transitions away from fossil fuels.
Like Oman, Saudi Arabia faces an acute problem of creating jobs for young people. Half the population is under the age of 25 and nearly 60 percent of unemployed people are under the age of 30. Although youth unemployment has dropped in recent years, it’s still hovering at a blistering 28 percent.
Diversifying the economy and creating private-sector jobs for young people, in a country where two-thirds of nationals are employed by the state, is a central pillar of Vision 2030, the blueprint to transform the kingdom’s economy championed by the country’s de facto leader Crown Prince Mohammed Bin Salman (MBS).
The challenge is playing out in real time. By the end of this decade alone, Saudi Arabia will have to create 4.5 million jobs in order to keep up with the number of young people entering its labour market.
To spur this along, MBS announced in March of…
Read More: Oman’s youth unemployment problem is a harbinger for wider Gulf | Business and