Commentary: Can the Gulf Create Its Own Marshall Plan?
It’s been more than 63 years since US Secretary of State George Marshall called for American involvement in restoring the economic infrastructure in Europe.
That call was developed into the Economic Cooperation Act of 1948, credited with restoring European economic productivity and political stability following the devastation of the Second World War.
Now there's talk of a "Gulf Marshall Plan." The finance ministers of the six-nation Gulf Cooperation Council (GCC) met over the weekend in Riyadh and most, it seems, expected a grand announcement to formalize what sounds like an even grander plan.
Basically, the four countries of the GCC with fewer troubles, at least by the look of their annual budgets, would underpin a stability and development fund aimed at helping out the other two: Oman and Bahrain.
At first glance, pumping billions dollars into the economies of Oman and Bahrain can hardly justify a Marshall Plan descriptor. But if you were to argue that supporting those economies is critical to the short-term stability, perhaps long-term survival of monarchies on the Arabian Peninsula, then maybe.
More certainly, the comparison gains substantial weight if that stability could offset the global economic recovery through skyrocketing oil prices on the back of a serious supply shock.
But judging by recent developments, monetary incentives have not proven effective. In Bahrain, after handing out about $2,600 to every family, King Hamad bin Isa ordered new hires in several government institutions, including 20,000 jobs in his ministry. Meanwhile, in Oman, Sultan Qaboos ordered 50,000 new civil service jobs and offered a monthly stipend of $390 for job seekers. The protests and sit-ins, variable in number as they may be, continue.
Oman is larger than Bahrain, and although not an OPEC member, it still produces almost 900,000 barrels per day. Together with Iran, it also oversees the crucial waterway of the Gulf, the Strait of Hormouz, which is the route for an estimated 40 percent of the world's oil tanker traffic.
Youth unemployment and almost stagnant political reform are among the common threads that toppled the regimes in Tunisia and Egypt, and continue to drive protests across the Arab world. The jury is still out on Kuwait and Saudi Arabia’s $36 billion financial support package. Qatar and the UAE are slightly unique in their respective demographics, and hence have less to worry about.
The concept of a "Gulf Marshall Plan" will face contemporary hurdles similar to the ongoing vociferous debate in Europe as to which nation’s taxpayers have to pick up the bill for the budget blunders of others. Granted, in the Gulf it’s the oil wealth more than the taxpayer, but the argument is the same. Unemployed Saudi youths would not openly welcome lavish assistance funds being sent to neighboring countries.
It’s improbable that a detailed breakdown, or even the very existence, of a "Gulf Marshall Plan" would be revealed to the public. The GCC, as a union with a GDP in excess of $1 trillions, should ensure that the reforms its members put on the table also bring the wheels of political reform into motion. Otherwise it will be difficult for investors, and everybody else, to see how far they can really get.