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Youth unemployment problem in Oman is harbinger for Gulf Enlargement | Business and Economy News

In late May, the Gulf of Oman nation was rocked by protests as young people took to the streets of cities across the country to protest the lack of jobs and economic opportunities.

The unrest fell just weeks after the government, led by the new ruler of Oman, Sultan Haitham bin Tariq Al Said, introduced a 5% value added tax (VAT) as part of a program long-delayed tax reform that included further cuts in state spending. and plans to introduce an income tax.

The austerity measures are designed to curb the widening budget deficit and skyrocketing public debt of Oman after its public finances – among the worst in the region – were brutalized by the disruptions of the pandemic of coronavirus from last year and falling oil prices.

Protests over economic grievances in the most indebted Gulf state have occurred sporadically since the “Arab Spring” of 2011. The country’s former leader, the late Sultan Qaboos bin Said Al Said, has successfully quelled protesters by offering them generous state subsidies.

The new sultan responded to the events of May in the same way, promising nearly 15,000 public sector jobs and another 15,000 in the private sector funded by a government allowance of $ 500.

But this strategy will likely delay reform designed to reduce inflated state budgets and revive the country’s private sector to generate more jobs.

“Some of the measures and reforms of the tawazun [or] The “budget balancing” plan will likely be scaled back, postponed, slowed down or sequenced in a more politically sensitive way, “Gulf expert Adel Hamaizia at Chatham House told Al Jazeera.

While Oman has less room to maneuver than its richer neighbors to successfully reform its economy, the delicate balance between containing state spending and creating economic opportunities for young people exposes a dilemma to which are facing the other Gulf countries.

Sultan Haitham bin Tariq Al Said responded to last month’s protests by pledging nearly 15,000 public sector jobs and another 15,000 in the private sector funded by a $ 500 stipend from the government. [File: Sultan Al Hasani/Reuters]

These states have built their economies on oil and cemented their social contracts and security through state largesse funded by petrodollars. But the global march to green energy heralds the not-so-distant future of declining demand for fossil fuels as legions of Gulf youth enter the workforce age.

“A wave of young people are entering the labor market at a time when the ability of Gulf companies to continue in the traditional model of public sector job provision is diminished,” Gerald Feierstein, vice-president, told Al Jazeera. -President of the Middle East Institute. .

“In the Gulf, people have a certain level of expectation about what the government is going to do for them,” he added.

The clock is turning

Although the petroleum industries accounted for over 34% of the country’s gross domestic product in 2019 and accounted for nearly 65% ​​of its total exports a year earlier, according to the World Bank, Oman’s Under Secretary of State for the Oil and Gas said in a 2019 interview that the sector employed just under 15,000 Omanis in 2018.

Muscat is now grappling with the reality that the comfortable public jobs it offered to the fathers and older brothers of young protesters just decades ago are no longer an option.

In 2019, the World Bank estimated Oman’s youth unemployment rate at 49%. The pandemic almost certainly made it worse. The hope is that by diversifying the country’s economy, the private sector can bridge the unemployment gap that the state can no longer afford and that the oil industry lacks the capacity to fill.

To do so, Muscat seeks to improve education and diversify the country’s economy by fostering job growth in sectors like tourism, manufacturing and technology.

Muscat seeks to improve education and diversify the country’s economy by promoting job growth in sectors such as tourism, manufacturing and technology [File: Christopher Pike/Bloomberg]

This is the idea behind the country’s National Program for Strengthening Economic Diversification (Tanfeedh). Although Oman’s finances are less healthy than those of its wealthier neighbors, proposals for central planning and the desire to compete globally in sectors other than fossil fuels echo efforts by others. members of the Gulf Cooperation Council.

“You can say that Oman is kind of a guinea pig,” said Feierstein, describing how the country’s fragile fiscal condition can be indicative of the increased pressure other Gulf economies may face in the years to come as the global economy is moving away from fossil fuels.

Like Oman, Saudi Arabia faces an acute problem of creating jobs for young people. Half of the population is under 25 and almost 60 percent of the unemployed are under 30. Although youth unemployment has declined in recent years, it still hovers around 28 percent.

The diversification of the economy and the creation of jobs in the private sector for young people, in a country where two thirds of nationals are employed by the State, is a central pillar of Vision 2030, the transformation project of the economy of the kingdom defended by the de facto leader of the country. Crown Prince Mohammed Bin Salman (MBS).

The challenge is played out in real time. By the end of this decade alone, Saudi Arabia will need to create 4.5 million jobs to keep up with the number of young people entering its labor market.

To boost that, MBS announced in March this year a program that plans to invest $ 3.2 trillion in the Saudi economy by 2030.

“Their ability to make the transition over the time that they’ve identified is going to be very difficult,” Feierstein said. “It’s not that they are wrong in their analysis of what is needed, but do they have the capacity to go through with it? “

By the end of this decade alone, Saudi Arabia will need to create 4.5 million jobs to keep pace with young people entering its labor market [File: Tasneem Alsultan/Bloomberg]

Change psychology

A main step in the follow-up is to replace the foreign workers who fill the large amount of jobs in the Gulf economies with the own nationals of the respective countries.

Oman is a country of just five million people, with expatriates making up over 38% of the population. Providing about 80 percent of jobs held by foreigners in the private sector is essential for the government’s economic transformation plans.

The pandemic has helped catalyze this process. According to the World Bank, the number of expatriate workers in Oman’s private sector declined by 14% between 2020 and 2021 amid intensifying “omanization” of the government. Muscat recently passed laws making it more expensive to hire foreign workers while implementing nationwide training programs to address skills gaps with Omani nationals.

This dynamic is playing out in other Gulf countries.

“Saudization” is the cornerstone of Riyadh Vision 2030. With 75% of workers estimated to be foreigners, the government has made vigorous efforts to fill positions in industries ranging from retail and education to taxi companies with Saudi nationals.

Hamaizia says the process is as much about changing national psychology as it is about creating jobs. “Saudi attitudes towards the labor market were previously characterized by Saudis seeking leadership positions,” he said.

With 75 percent of workers in Saudi Arabia estimated to be foreigners, the government has made vigorous efforts to fill positions in industries ranging from retail and education to the taxi business with Saudi nationals. [File: Tasneem Alsultan/Bloomberg]

As young people begin to embrace the idea of ​​occupying positions that might lack impressive status titles, “there remains a continuing mismatch in wages and skills in many areas of employment – especially value-added”, Hamaizia said.

Young women are a demographic more willing to take on jobs in the private sector, especially in Saudi Arabia. “They’ve shown themselves to be much more willing and able to take on jobs,” Feierstein observes.

For decades, women, legally prohibited from driving and living under draconian guardianship laws, have been barred from participating in economic life. Today, young Saudi women are the first generation to enter the country’s labor market.

According to a study by the Brookings Institution, a Washington-based think tank, between 2018 and 2020, the share of women in the Saudi labor market rose from 20% to 33%. But there is still a lot to do. The unemployment rate for young Saudi women is still around 60 percent, and women continue to face discrimination such as wage differentials.

The challenge of convincing young people to accept jobs held by expatriates shows how far away from oil economies and reliance on public spending will require buy-in not only from governments, but also from Gulf citizens.

“The change is happening faster than expected,” Feierstein said of the region’s attempt to move beyond petrodollars. “But time is running out. “

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