Oman’s youth unemployment drawback is a harbinger for wider Gulf

In late May the Gulf nation of Oman was rocked by demonstrations as younger individuals took to streets in cities throughout the nation to protest an absence of jobs and financial alternative.

The unrest fell simply weeks after the federal government, led by Oman’s new ruler, Sultan Haitham bin Tariq Al Said, launched a 5 p.c value-added tax (VAT) as a part of a long-delayed fiscal reform bundle that included different cuts to state spending and plans to introduce an earnings tax.

The austerity measures are designed to rein in Oman’s widening price range deficit and skyrocketing public debt after its public funds – among the many area’s worst – had been brutalised by final yr’s coronavirus pandemic disruptions and oil value crash.

Demonstrations over financial grievances within the Gulf’s most indebted state have occurred sporadically because the 2011 “Arab Spring”. The nation’s earlier ruler, the late Sultan Qaboos bin Said Al Said, managed to quell protesters by providing them beneficiant state handouts.

The new sultan responded to occasions in May in a similar way, promising nearly 15,000 public-sector jobs and one other 15,000 jobs within the non-public sector to be funded by a $500 authorities stipend.

But that technique will probably delay reform designed to trim bloated state budgets and jump-start the nation’s non-public sector to generate extra 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 skilled at Chatham House, instructed Al Jazeera.

While Oman has much less respiration room than its wealthier neighbours to efficiently reform its economic system, the fragile balancing act enjoying on the market between reining in state spending and creating financial alternatives for younger individuals lays naked a dilemma going through different Gulf nations.

2021 06 02T191753Z 134473053 RC2JSN986KGA RTRMADP 3 OMAN PROTESTSSultan Haitham bin Tariq Al Said responded to final month’s protests by promising nearly 15,000 public-sector jobs and one other 15,000 jobs within the non-public sector to be funded by a $500 authorities stipend [File: Sultan Al Hasani/Reuters]

These states have constructed their economies on oil and cemented their social contracts and safety by way of state largesse funded by petrodollars. But the worldwide march in direction of inexperienced vitality is heralding a not-so-distant way forward for waning fossil gas demand simply as legions of Gulf youths are coming into 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 chairman of the Middle East Institute, instructed 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 greater than 34 p.c of the nation’s gross home product in 2019 and made up nearly 65 p.c of its complete exports a yr earlier, based on the World Bank, Oman’s undersecretary of state for oil and gasoline mentioned in a 2019 interview that the sector solely employed simply shy of 15,000 Omanis in 2018.

Muscat is now grappling with the truth that the snug state jobs it provided to the fathers and older brothers of younger protestors only a few many years in the past are not an choice.

In 2019, the World Bank estimated Oman’s youth unemployment charge at 49 p.c. The pandemic has almost absolutely worsened it. The hope is that by diversifying the nation’s economic system, the non-public sector can fill the hole in unemployment that the state can not afford and the petroleum trade doesn’t have the capability to fulfill.

To accomplish this, Muscat is looking for to enhance training and diversify the nation’s economic system by selling job development in sectors like tourism, manufacturing and know-how.

327602145Muscat is looking for to enhance training and diversify the nation’s economic system by selling job development in sectors like tourism, manufacturing and know-how [File: Christopher Pike/Bloomberg]

This is the concept behind the nation’s National Program for Enhancing Economic Diversification (Tanfeedh). Although Oman’s funds are much less wholesome than these of its wealthier neighbours, the central planning proposals and want to compete globally on sectors apart from fossil fuels echo efforts made by different Gulf Cooperation Council members.

“You can say that Oman is in some sense a guinea pig,” Feierstein mentioned, describing how the nation’s fragile fiscal state could also be indicative of the higher strain different Gulf economies might discover themselves beneath within the coming years as the worldwide economic system transitions away from fossil fuels.

Like Oman, Saudi Arabia faces an acute drawback of making jobs for younger individuals. Half the inhabitants is beneath the age of 25 and nearly 60 p.c of unemployed persons are beneath the age of 30. Although youth unemployment has dropped lately, it’s nonetheless hovering at a blistering 28 p.c.

Diversifying the economic system and creating private-sector jobs for younger individuals, in a rustic the place two-thirds of nationals are employed by the state, is a central pillar of Vision 2030, the blueprint to rework the dominion’s economic system championed by the nation’s de facto chief, Crown Prince Mohammed bin Salman (MBS).

The problem is enjoying out in actual time. By the top of this decade alone, Saudi Arabia must create 4.5 million jobs with the intention to sustain with the variety of younger individuals coming into its labour market.

To spur this alongside, MBS introduced in March of this yr a programme that plans to take a position $3.2 trillion within the Saudi economic system by 2030.

“Their ability to make the transition in the time they identified is going to be very tough,” Feierstein mentioned. “It’s not that they are wrong in their analysis of what’s needed, but do they have the capacity to follow through?”

362152598By the top of this decade alone, Saudi Arabia must create 4.5 million jobs with the intention to sustain with younger individuals coming into its labour market [File: Tasneem Alsultan/Bloomberg]

Changing the psychology

A major step in following by way of is changing overseas employees who workers the huge quantity of jobs in Gulf economies with the respective international locations’ personal nationals.

Oman is a rustic of simply 5 million, with expats accounting for greater than 38 p.c of the inhabitants. Filling the roughly 80 p.c of jobs held by foreigners within the non-public sector is crucial to the federal government’s financial transformation plans.

The pandemic helped catalyse that course of. According to the World Bank, the variety of expat employees in Oman’s non-public sector decreased by 14 p.c between 2020 and 2021 amidst an intensified “Omanisation” push by the federal government. Muscat has lately handed legal guidelines making it extra pricey to rent overseas employees whereas additionally implementing nationwide coaching programmes to deal with expertise gaps with Omani nationals.

That dynamic is enjoying out in different Gulf nations.

“Saudisation” is a cornerstone of Riyadh’s Vision 2030. With 75 p.c of employees estimated to be overseas, the federal government has made an aggressive effort to fill positions in sectors starting from retail and training to the taxi enterprise with Saudi nationals.

Hamaizia says that the method is as a lot about altering nationwide psychology as it’s about creating jobs, “Saudi attitudes to the job market had been previously characterised by Saudis wanting management positions,” he mentioned.

362152047With 75 p.c of employees in Saudi Arabia estimated to be overseas, the federal government has made an aggressive effort to fill positions in sectors starting from retail and training to the taxi enterprise with Saudi nationals [File: Tasneem Alsultan/Bloomberg]

While youthful persons are coming round to the concept of taking positions which may lack spectacular standing titles, “there remains a perennial wage and skills mismatch in many — particularly value-add — areas of employment,” Hamaizia mentioned.

A demographic that has been extra prepared to take jobs within the non-public sector, significantly in Saudi Arabia, is younger ladies. “They have shown themselves much more eager and capable of taking on jobs,” Feierstein observes.

For many years, ladies, legally barred from driving and living beneath draconian guardianship legal guidelines, had been prevented from collaborating in financial life. Now younger Saudi ladies are the primary era to enter the nation’s job market.

According to a research by the Brookings Institution, a Washington-based think-tank, between 2018 and 2020 the share of ladies within the Saudi labour market elevated from 20 p.c to 33 p.c. But there’s nonetheless far to go. The youth unemployment charge for Saudi ladies nonetheless stands at round 60 p.c, and ladies proceed to face discrimination akin to wage differentials.

The problem of convincing younger individuals to take jobs completed by expats highlights how transferring economies away from oil and a dependence on public spending would require buy-in not simply from governments, however Gulf residents as properly.

“Change is happening faster than anyone anticipated,” Feierstein says of the area’s try to move past petrodollars. “But the clock is ticking.”

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