The Arabian Peninsula, located in Western Asia, is the largest peninsula in the world with a population of 86.2 million citizens. The peninsula includes the countries of Kuwait, Bahrain, Qatar, United Arab Emirates, Oman, Yemen and Saudi Arabia. These states are rich in two specific and most valuable resources, oil and gas. The peninsula has the largest oil reserves in the world. Due to this significant production of resources and trade, the Arabian Peninsula derives a large part of its GDP from external states. This is called rentierism. Rentierism can be defined more precisely as “a State which regularly receives substantial amounts of external rents … from the sale of natural resources”. Rentierism in the Arabian Peninsula has had a key impact on the political economy as revenues go directly to the state, which creates social dependence on the state, resulting in a more authoritarian structured economy.
The large production of natural gas and crude oil reserves in the Arabian Peninsula shows that there is no end to the rentier system. This is significant on a global scale as the Arabian Peninsula holds 37% of the world’s oil reserves and 25% of the world’s natural gas reserves. Another benefit comes from the large amounts of excess faloos (money) generated by industries associated with oil and gas production. As a result of the Arab Spring protests in the early 2010s, there was an estimated $ 1.7 trillion in excess. This money has been of great benefit to the government because it can be invested in a number of ways. The rulers of the Arabian Peninsula have built insurance policies against the global volatility resulting from their wealth. All established sovereign wealth funds and government-owned entities have been tasked with turning excess income into international investments. The Arabian Peninsula continually invests heavily in the West and has been able to acquire significant influence from outside countries through these investments. However, they are careful not to overinvest as there is always the possibility that political conditions are attached. Reflecting their wealth, seven of the 13 major SWFs are from regions of the Arabian Peninsula. With this excess of money, the Arabian Peninsula has been able to build mega-cities which cater to all areas of economic activity. These include several cities in Dubai dedicated to media, internet, health and education, all of which have created employment opportunities for citizens regardless of the oil rent. In addition, tourism has grown significantly, with increased nightlife in Bahrain, luxury hotels in Dubai, and a variety of sports and music festivals in the region. The variety of investments in the Arabian Peninsula offers economic diversification, which greatly benefits states as they can rely on other means besides oil and gas resources to generate more income and broaden their economic horizons in the near future.
While this system has many advantages for the political economy and the citizens of the Arabian Peninsula, it also has several limitations that contradict these advantages. An important drawback is that the liability of state generators has become a relativistic concept. This means that the state is not responsible for the quality of the services provided and is not responsible for errors. This approach can lead to unclear disagreements between producer and user on the level of resources. The result is a sort of social inequality between distributors and users, a direct cause of the deterioration in customer-patron relationships. The fundamental result of this relationship is a system of patronage, which creates a conflict of interest between what the citizens want and what the authoritarian leadership wants. As a result, the international political realm is on one side of the spectrum, while the citizens are on the other, affecting the political culture of the country. These power struggles are a limitation because oil rent equals society’s dependence on the state, and when competing ideologies emerge, citizens begin to protest. This can be seen in the uprisings of the Arab Spring, where the government was forced to give more money to particular groups of people to effectively suppress their ideology and appease their people’s desires to maintain power. This demonstrates that there is little room to recognize ideological forms of protest, as protests are seen as the result of material rather than political issues. In addition to the effects of rentierism on the citizens of the Arabian Peninsula, these limitations can be reflected in the idea that oil rent equates to social dependence on the state, as citizens are highly dependent on production and of the state’s oil trade to receive benefits in society. This allows the state to continue to operate in an authoritarian manner, giving the government power and control over its people. In addition, because of the annuitant system, there are unequal dividends. On the one hand, there is a wealthy group which obtains more rent because of its oil wealth; the Kingdom of Saudi Arabia, the United Arab Emirates, Kuwait and Qatar. On the other hand, there is a poor group that receives less rent and benefits due to their oil shortage; Oman and Bahrain. This causes political turmoil as poor groups are more inclined to comply with GCC (Gulf Cooperation Council) agreements, resulting in increased independence and poor economic performance.
The future of rentierism in the Arabian Peninsula can potentially be argued on the basis that the implementation of value added tax does not signal the end of this system. In 2014, oil prices collapsed globally, mainly due to supply issues such as increased oil production in the United States and a change in OPEC (Organization of oil-exporting countries). Since then, the Arabian Peninsula has started to consider different options to supplement oil revenues. GCC actors had envisioned the idea of a tax that had not existed since the British began paying site and concession rents at the turn of the 20th century. All the players collectively decided that they would have a common value added tax (VAT) agreement which would tax goods and services. In 2016, they all agreed to have a common 5% VAT. The response from citizens has been generally neutral as they do not consider VAT to be a tax. Instead, it is considered that the price of all goods and services increases by 5% and they will receive these services in return if they provide the government. Currently, only four of the six GCC states have implemented VAT, led by the United Arab Emirates, followed by the Kingdom of Saudi Arabia and Bahrain. Since this deal, Oman has hesitated but finally agreed to this implementation in 2021. It is a vulnerable time for Omanis to charge their people rather than give to their people because tax is such a new concept in the world. Arabian Peninsula. Oman, as well as Bahrain, are in much more difficult situations compared to other GCC states, as resource production in these countries is not as rich. Politics in Oman are currently stagnant as they try to implement economic reform. In addition to this, small businesses are the future of Oman, and they should receive the full support of the private sector and the government as this not only creates employment opportunities but also helps to increase the region’s GDP.
The possibility of the failure of rentierism must be considered in all regions of the Arabian Peninsula to allow other beneficial alternatives and reform of the system. These states must also assess under what conditions rent-seeking may exist and when political problems may arise. As a result, ideology can prevail against rent-seeking as well as against the opposition induced by repression. This is reflected in the ideological foundations of the Dhofar rebellion. When we examine regions to weigh both the advantages and limitations of the rentier system, we must look beyond the material factors and consider political discontent based on repression and ideology. Recalling theorist Al-Kawakabi, to escape tyranny, one must be aware of tyranny, engage in peaceful resistance, and evaluate all alternatives.
Looking at all of the aspects of rentierism discussed in this article, it is clear that the rentier system will continue to be the predominant agent in the political economy of the Arabian Peninsula. The history of rentierism has revealed a solid framework based on a diversity of abundant resources throughout the peninsula. The impact of the discovery of oil was furthermore a very rapid and fundamental transformation of the economic systems of the peninsula which created social protection systems which depended on the state in terms of how the state cared for it. its citizens. The benefits of this system have been shown to increase the well-being of citizens who have become dependent on the state for all their basic needs, which were previously much less structured before the emergence of the rentier system. In addition to its benefits to citizens, the annuitant system resulted in significant amounts of excess money that was invested in a variety of industries ranging from financial enterprises to tourism, hospitality and the construction of specific mega-cities. to materials.
On the contrary, this arrangement has damaged both the interdependence and the relationship between state and society. Due to its authoritarian regime, governments and wealth generators retain control over their citizens to suppress any resistance to the rentier system. This repression creates a conflict of interest, which can generate uprisings similar to those observed during the Arab Spring if a social pact is not developed. With the implementation of a social contract, the gap between state and society will be narrowed as agreements and, presumably, open conversations on both sides are accepted. With the establishment by the GCC of a value added tax in 2016, the future of the rentier system could be reformed. This could be accomplished by having more open conversations among GCC members on how to develop alternative arrangements to further distribute their rent to society, which would strengthen the political and socio-economic economies of all governments on the peninsula. To sum up, the advantages of the rentier system over the political economy of the Arabian Peninsula outweigh the restrictions, which have only a few short-term repercussions that can be easily resolved if the views of the society are recognized and their various beliefs are accepted. with an open mind.