英文原文：Will the GCC be able to adjust to lower oil prices?
As oil prices continue to plummet, Gulf states have been forced to re-think how they fund their governments and spend money. On the revenue side－and after a debate that spanned over a decade－countries in the Gulf Cooperation Council （GCC） have finally decided to introduce a value added tax （VAT） in 2018. This is the first tax of its kind on citizens and residents of the region, who have long been accustomed to a low tax environment. GCC states have also increased their efforts to diversify their economy beyond oil and gas. And they have begun a series of cuts, with various levels of severity in each country, to rein in their spending.
These issues were the focus of an event at the Brookings Doha Center on February 10, and part of a wider discussion currently unfolding in the region about how the GCC will be able to adjust to lower hydrocarbon prices.
The $100 oil gravy train
For much of the past decade, oil-producing countries enjoyed windfall revenues due to high oil prices, and were able to spend accordingly. In Venezuela, the late president Hugo Chávez financed his Bolivarian revolution domestically and internationally with oil revenue. When the 2011 Arab Spring protests began spreading to Algeria, Africa's second-largest producer of oil, the government revised the annual budget and increased public spending by 25 percent with the extra amounts going into higher subsidies, social housing, and public sector wages. In Russia, Vladimir Putin went on a spending spree that included an incredible $51 billion spent on the Sochi Olympics, a project with an initial budget of $7.5 billion.
Higher oil prices enabled the GCC countries to spend handsomely on infrastructure, defense, education, public sector wages, and subsidies. In Saudi Arabia, the late King Abdullah commissioned the building of a desert megacity at a cost of $100 billion that will include the $1.2 billion Kingdom Tower, slated to become the tallest building in the world. In Kuwait, over 90 percent of locals continue to be employed in the public sector. Due to increasing regional geopolitical security concerns, the GCC combined spent $113 billion on military hardware in 2014; with Saudi Arabia alone spending approximately $81 billion. In addition, after the Arab Spring, GCC countries spent $150 billion on social welfare to cushion the political impact of the uprisings in the region.
2016: $100 oil, where art thou?
Fast forward to 2016, and the price of a barrel of oil has fallen more than 70 percent since June 2014. Meanwhile, the Organization of Petroleum Exporting Countries （OPEC） is forecasting that a $100 per barrel price for oil will not return until after 2040. The fall in oil prices wiped out $360 billion of GCC revenue in 2015 alone, forcing GCC capitals to reassess income sources and spending. In Saudi Arabia, the deputy crown prince indicated that the Kingdom will seek to bolster revenue. He stated that nothing is off the table, including privatizing parts of Aramco－considered to be the highest valued company in the world.
In his 2015 address, the Qatari emir advised people that lower oil prices should not be cause for panic, but at the same time, he advised Qataris that "the government can no longer provide for everything." Several GCC countries also undertook subsidy reforms; in Saudi Arabia, gasoline prices have increased by 50 percent in 2015, with hikes in the price of water and electricity. In December 2015, Oman's cabinet approved a set of belt-tightening measures that include public sector spending cuts and subsidy reforms.
Taxation without representation?
In addition to cuts in public spending, the GCC announced it will start implementing a 5 percent VAT levy in 2018. This is a first of its kind tax for a region known for its low tax environment. Nonetheless, compared to other much higher VAT rates around the world, this remains a relatively modest imposition.
Despite some cuts in subsidies, GCC nationals continue to enjoy a wide range of state largesse that includes land distribution, subsidies, income support, free education, and health care. In addition, the personal income tax rate remains zero. For that reason, it is unlikely that this 5 percent levy will challenge existing state-society relations between GCC rulers and their people. However, if GCC governments see that the 5 percent VAT raises enough revenue without widespread opposition, it can always be increased down the line. Should the tax burden increase further in the future, then it is likely that GCC citizens will look for increased accountability and representation from their respective governments.
Turning lemons into lemonade
Taking a more long-term view, current oil prices provide an opportunity for GCC governments to reform their economies for the next generation. Energy subsidy reform is less controversial in a low oil price environment. In addition, GCC governments have been forthcoming with their citizens, who are now more aware of the potential impact of lower oil prices. As such, they are more susceptible to understanding the measures undertaken by their governments.
To cushion the impact of subsidy reform on the country's poor and middle class, Saudi Arabia plans to extend welfare payments. Such payments will work in the short term, but in the long term one of the main challenges will be increasing the participation of GCC nationals in the private sector, away from government employment. As such redirection occurs, GCC governments can foster a leaner and more efficient public sector.
This process is particularly key for Saudi Arabia and the United Arab Emirates, which have the largest populations in the GCC （30 million and 10.5 million, respectively）. Of those numbers, approximately 30 percent of Saudi residents are expatriate workers, while the proportion of foreigners living in the UAE is estimated as high as 90 percent. Both countries have embarked on efforts known respectively as the Saudization and Emiratization, whereby foreign workers in the private sector would be replaced with Saudis or Emiratis. These ongoing processes have yet to yield the intended results, and recent figures showing a 38 percent year-over-year drop of Saudi employment in the private sector.
Saudi Arabia remains in what is referred to as the "90/90-employment gridlock": the government employs approximately 90 percent of Saudis, and 90 percent of the jobs in the private sector are filled by expatriates. A 2014 study by Massachusetts Institute of Technology found that while Saudization increased native employment, had a negative effect on companies operating in Saudi Arabia and caused 11,000 firms to exit the market. In addition, many firms add Saudi nationals on the payroll to meet government quotas, but they do not actually show up for work. The Saudi minister of labor recently admitted that such cosmetic Saudization is unproductive and negatively impacts companies.
In addition to the localization of jobs, the GCC countries have also attempted to diversify their economies beyond hydrocarbons, which currently dominate the economy. Diversification efforts have progressed at different paces in each of the GCC countries. Arguably, the UAE （and in particular Dubai） have proven the most successful in that regard. Saudi Arabia continues to pursue diversification, but overall, its economy remains very dependent on hydrocarbons. One of the factors that helped the UAE succeed is that it has been more open to tourism than Saudi Arabia, and has positioned Dubai as a transit hub （with 69 million passengers per year passing through Dubai alone）. The long-term success of economic diversification in the GCC will depend on the design and implementation of policies that focus on creating economic incentives both for firms to move beyond hydrocarbons, as well as for GCC nationals to seek employment outside the public sector.
Brookings Doha Center - Qatar University Joint Fellow, Foreign Policy, Brookings Doha Center