| Kippreport.com

Road to Recovery, Part II

November 23, 2009 12:15 by Scott MacMillan

For Saif, the boom amounts to a massive missed opportunity. Gulf government could have introduced aggressive reforms to, for instance, address labor market distortion, reducing reliance on cheap imported labor, he says. They chose not to.

They failed to introduce new educational curricula to prepare the local workforce for employment in the private sector, instead leaving in place a patronage system for GCC citizens, with what amounts to an entire class of sinecure positions in the public sector. “A merit-based culture must be encouraged in the appointment of public positions,” Saif writes, rather than leaving the government as the “employer of first resort” for nationals.

“I think the surge in oil revenues and the accumulated revenues of the GCC countries have, one way or another, postponed the urgency of the needed reforms,” Saif says.

“The economic crisis will renew interest in revisiting some of the economic policies that were adopted during the period 2002 to 2008. If the economic crisis reveals something, it’s that dependence on a single source of revenue is not sustainable in the long run.”

In this light, perhaps the economic development of Gulf countries during the boom years should be viewed less as a straightforward qualitative indicator – that is, a GDP growth figure, ideally in the high single or double digits – but more qualitatively, instead. Growth does not always mean good growth. “These countries were growing at an accelerated rate, yet they were suffering from a high level of unemployment [among nationals] and low productivity,” Saif says.

“All kinds of economic illnesses were there and are still there,” he says.

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Tags: Economy, Financial Crisis, gcc, Regional