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‘Comprehensive salary’ to reduce dependency on oil revenues vital

Gulf economies to be exposed to risk of increasing turmoil

KUWAIT CITY, April 6: Oil revenues constitute the lion’s share of Gulf government’s revenues, which allows them to maintain a low level of taxes. However, the large dependence of the citizens of Gulf countries on government jobs of low productivity has a detrimental effect on the private sector due to the decrease in specialized individual talent, reports Al-Qabas daily. Chief emerging market economist at Bloomberg Economics in Dubai Ziad Daoud said, “The economies of the Gulf countries will be exposed to the risk of increasing turmoil as the importance of crude oil diminishes in the global economy and its prices fall.

Instead of governments paying huge sums of money on government jobs of low productivity, these countries should give their citizens a fixed monthly salary. This may help facilitate the transition of these countries to the post-oil phase. Even before the COVID-19 outbreak, the International Monetary Fund expected the exhaustion of Gulf wealth amounting to about two trillion dollars by 2034. It indicated that the countries of the region will find it increasingly difficult to finance their budgets and maintain their pegs to the dollar, and the slowdown in job creation in the public sector may lead to unrest.

Diversify
Attempts to diversify the Gulf economies have achieved only limited success so far. Several Gulf governments have announced longterm economic visions and plans to reduce dependence on oil, but their results have not yet emerged. The most viable solution now is for the Gulf states to grant their adult citizens a monthly salary, or a “comprehensive salary.” Instead of hiring adult citizens in unproductive government jobs, governments could pay unconditional monthly salaries regardless of a person’s status, wealth, or gender. The concept of comprehensive salary is the most appropriate solution now for the Gulf countries for several reasons. By excluding the option of government employment, governments will effectively push citizens to take up more productive jobs in the private sector, and the private sector companies will be able to reduce the salaries of their employees while containing the impact on new lifestyles”.

Daoud stressed that the Gulf countries could finance the comprehensive salary plan for their citizens by reducing the public sector wage bill, and they could use their huge savings instead of using them for other benefits such as energy subsidies. He cited the example of Saudi Arabia where there are more than half of government jobs held by citizens and the government spends $131 billion annually on their salaries, saying, “Cutting state salaries in half would generate sufficient savings to pay 14 million adults a monthly salary of about $400 a month. People who have been cut off from government salaries can be helped in finding jobs in the private sector, or establishing new businesses, or living temporarily on a monthly stipend until they find work”.

Comprehensive
Daoud indicated that the value of the comprehensive salary will differ from one Gulf state to another depending on its financial and oil wealth and the size of its population, adding that the governments will have to decide whether they will pay government salaries that are sufficient only to cover their basic needs or allow less welfare. He said, “Since the comprehensive salary will be linked to oil revenues , it will not lead to indefinite financial coverage from lower crude prices. In the event of a collapse in prices, the Gulf governments will not be able to obtain these salaries the same as those of the public sector. The comprehensive salary in the Gulf countries, if adopted, would make the distribution of wealth less distorted than before, so the countries of the region must provide a safe way out of the idea of dependence on oil completely”.

In conclusion, Daoud stated that, “Reducing total wages in the private sector will lead to reducing the costs of goods and services produced in the Gulf region. Their prices will thus become lower, making them more competitive. This would increase their attractiveness at the local and external levels and help Gulf economies to diversify. Finally, the comprehensive salary would provide a more equitable income distribution and transparency of oil earnings and imports”.

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