Game On: There are two kinds of intra-GCC rivalries now.
First, the long-standing “boys with toys” competition that plays out in the accumulation of professional sports events from Formula 1 races to hosting the World Cup, a kind of soft power projection of brand association. In the same spirit and category is a more recent effort to compete in economic diversification and vitality which emerged after the decline of oil prices in late 2014 and accelerated with the decision to economically-divorce Qatar in June 2017. In this competition, there is no objective winner, as the three main protagonists (Saudi Arabia, UAE, and Qatar) each continue to practice the same state-led growth patterns led by fiscal outlays into large project spending and the extension of social benefits to citizens.
Be the first to know – Join our Facebook page
Despite some important efforts to create new sources of government revenue through taxes and fees, along with reformed labor market and immigration policy, their economies remain highly reliant on resource revenues as a proportion of government spending, and they are all vulnerable to a collective problem of hesitant or declining foreign direct investment, weak real estate prices due to over-supply of government contracting, and local stock markets that are dominated by state-linked firms with a habit of defensive interventions. (Saudi Arabia has been called out for the practice, but it is not uncommon across the region.)
The second arena of competition is much more impactful and will have long-standing institutional consequences for the Middle East and beyond. The Gulf states are engaged in a battle of economic intervention that rivals the creation of the Bretton Woods system after World War II. They are a formidable source of development finance without economic ideology, without a model of economic growth to prescribe, other than an understanding of state-led investment and a reliance on personalistic politics and man-to-man alliances.
Be the first to know – Follow us on Twitter @Saxafi
The effects will be profound and are only beginning to emerge across the Middle East and Horn of Africa. At the Doha Forum this past weekend, the prescient prime minister of Somalia, Hassan Ali Khayre, aptly summed up the effect in recipient sites of this competition. “The GCC crisis impacts us — politically, economically, security-wise.” (Starting minute 35.) He refers to policymaking, long-term development planning, and the ability of fragile domestic politics to grow institutional bases of power, rather than personalistic dynasties. To the prime minister’s credit, he made these remarks while sitting next to the Qatari foreign minister, underscoring the point that conflict and competition within the GCC has effects outside of the Gulf. We should look to the recipient sites of GCC competition to understand how the deployment of foreign aid, direct cash support to central banks, and promises of foreign direct investment affect national political decision-making and bargaining.
The map below indicates some of the extent of this recent economic intervention by the GCC states into the Middle East and the Horn of Africa. This regional security architecture is evolving as a sphere of influence of the Gulf, expanding to the north to Jordan and Egypt, and to the south to Yemen and southwest to the vital trade corridor around the Arabian Sea toward the Horn and Red Sea. In some recipient sites of Gulf financial intervention, we see a hybrid model, in which traditional development finance agents like the IMF partner with Gulf funds that retain some element of conditionality and structural adjustment in line with liberal economic models of growth, as in Egypt and Jordan. However, in most others, there is an emergent “no policy strings attached,” but certainly an expectation of political loyalty. There is also no expectation or commitment to the next round of finance injection, such that a $3 billion package in 2018 (as Ethiopia has received from the UAE) may or may not include a follow-up support two years down the line. What this does to fiscal governance, and how it affects electoral politics in recipient states, is cause for concern.
The GCC states, led by Saudi Arabia, the UAE, and Qatar, are now global development actors. The United States is less of an actor or leader of this conversation, as the new “Prosper Africa” policy meekly demonstrates we are late to the game and largely out-classed in terms of development dollars in Africa, but even more so in the Middle East as post-conflict reconstruction will demand. The American “Prosper Africa” policy may also overly emphasize Russia as a key competitor to US influence in Africa when really it is the Gulf states and China that are most active as sources of investment and political influence. Moreover, we should think of the competition not just in dollar amounts, but in ideological influence. There is less global agreement now on how to create growth — no stark Cold War assessments of state versus market. The great game of regional influence is on; the ramifications are largely unknown.
Some examples of this Gulf financial intervention, also (limited) on the map below:
- Yemen central bank deposits ($2.2 billion in 2018) and humanitarian aid (totaling $11.5bn);
- Jordan support ($2.5 billion);
- Lebanon support for new Saudi commitments with France of more than $1.6 billion (part of a history of support in previous years, in which Saudi Arabia withheld as much as $4 billion in military aid);
- Egypt support ($12 billion from Gulf states since 2013, and Saudi Arabia is central to the IMF restructuring package disbursed this year);
- Pakistan support ($6 billion in commitments, $1 billion deposited in November);
- Ethiopia ($3 billion), from the UAE, along with Saudi in-kind oil and gas support;
- Bahrain ($10 billion in 2018, along with Kuwait and UAE; preceded by $10 billion in infrastructure investment support after 2011 to Bahrain and Oman);
- Qatar’s recent investment commitment of $15 billion to Turkey;
- and $830 million from Saudi Arabia to Tunisia.
Karen E. Young @ProfessorKaren
- TCAS Incident Highlights Ongoing Issues In Somaliland And Somalia Airspace
- 3 Emirati Soldiers, One Bahraini Officer Killed In Attack In Somalia
- Implementing Ethio-Somaliland MoU Crucial To Bolster Regional Development, Security: HPR Standing Committee Chair
- Brexit Britain Edging Closer To Surprise Diplomatic Move To Help End Houthi Red Sea Crisis
- Eliot Wilson: Recognize Somaliland As An Independent Nation
- Joe Biden Pushed To Follow UK Lead In Recognizing Somaliland, An Essential Ally In Red Sea Houthi Crisis