Who Really Runs The Gulf Economy

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The Arabian gulf region consists of countries like the United Arab Emirates, Oman, Saudi Arabia, Qatar, Kuwait, Bahrain and Iraq. The middle eastern region as we know, is an oil rich region. The oil has been the major source of income for most of these countries. And since the demand for oil is so high all around the world, these countries have become very rich and prosperous as a result.

The discovery of oil in the middle east is not a recent phenomena. Oil was discovered a long time back and the oil was discovered on the pretext of searching for water in the hot, desert region of Arabia. What they found however, made them rich beyond their wildest dreams.

The main source of income for these countries were pearl diving and fishing. Though pearls are an expensive commodity, the trade for pearl diving started to die as there was too much competition from other countries and the low margins that came with it. Not only that, pearl diving was a pretty dangerous trade in itself and combined with the new discovery of oil, the trade was pretty much dead by the time serious oil drilling began and oil companies all around the world started scrambling to explore and drill new regions for oil.

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The discovery of oil prompted the opening up of thousands of industries which was, at least initially, oil based. The population in these areas were not that much especially when the oil was discovered, so there was a need to employ more workers. The Arabs hired expatriates in order to fill up jobs which were necessary in order to make full use of the oil. They needed more people on the oil rigs. As the oil industry flourished in the Arabian gulf, the industries started to diversify. It started of as oil-related industries such as oil refining, transporting and the others. As more and more oil was discovered, more and more firms were opened, and there was a need to hire more and more people.

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The people mainly came from India, Pakistan and the Philippines. There was a mixture of roles played by the expatriates. Expatriates were needed to perform all kinds of roles ranging from skilled to unskilled labour. Expatriates suddenly started pouring in. And the demand for more labour was there because these countries were developing extremely fast.

Soon, there were new industries developing. These were not just oil or petroleum based. New construction started, there were several projects, the governments spent their newly acquired money into infrastructure. The governments’ budgets ran into surplus. They had a lot of money to spend.

As these countries began to develop further, there was high employment. Surprisingly, the Arabian gulf still found itself in a position where they were short on a proper workforce. Though it was surprising, it was pretty understandable. An extremely large number of projects were initiated and it had aimed to develop the country and provide it with proper infrastructure and for that it required a really huge workforce.

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Expatriates from other countries were keen on coming to the Gulf region too. First of all, expatriates came from countries where there are few opportunities for employment. Second of all, the Gulf were paying really handsome salaries to workers. Third of all, the gulf was developing and modernizing extremely fast and that provided for a much higher standard of living.

As more money came in, there was demand for many more goods and services. A lot of industries came up which produced food items, plastic goods and many other consumer items. The governments encouraged this too. They did not want to import something as basic as food from other countries. Though they import most of their food grains, fruits and vegetables from other countries, they are processed all in their own countries. And to man these industries, there was a need for more labour which was cheap, so they kept hiring more and more people, especially expatriates.

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Now the situation was as such, that the Arabs who are the employers of the huge number of expatriates that they hired, started constituting a minority in the country. This is because the number of expatriates far exceeded the number of Arabs. In the United Arab Emirates, 80% of the population is Indian. Arabs constitute only about 10% of the population, the rest are other expatriates. The situation is like that in the gulf region as of now.

But that has led to a very interesting insight.

The Gulf economy is no longer run by oil now. Cities like Dubai have given up oil drilling and have started searching for opportunities in other sectors like tourism and real estate.

The gulf economy is still employing a lot of expatriates to fill up jobs. And people are literally pouring from outside to the gulf. This in itself has created such a huge market.

The gulf economy doesn’t need to run on exports in order for its economy to thrive. The large number of expatriates it has added into its population has resulted in this huge internal market where the economy actually runs.

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Expatriates in the gulf are paid pretty well and they are good consumers. As long as they stay in the gulf, they spend in the gulf. They spend a lot of money. Especially when expatriates settle there, they spend even more. Some of them have their families in the gulf and there is a need to put their children in schools and the economy grows stronger that way.

Since the Gulf countries do not charge taxes on salaries, the people have more disposable income which they can spend on consumer goods. And since some of them are pretty well paid, they consume goods on a pretty large scale. When expatriates go back home for holidays, they take a lot of goods with them for their friends and relatives back home. So the holiday season in the gulf is a bonanza for the gulf economy.

In fact, the Dubai Shopping Festival which is conducted every year is testimony to this very fact that it is not oil that rules the gulf economy, it’s the people buy consumer goods. The Dubai shopping festival was made to tap the demand of the people in the gulf. So people from all over the gulf, however far they are, come to Dubai and shop for that whole month. And it is no secret that the Dubai Shopping festival is a financial success.

And the very fact that more and more firms catering to consumer goods are building their factories in the gulf stands testimony to the fact that the demand for goods is high. There are a lot of people there who want more and more things.

The governments in the gulf know that the oil is not going to last for a really long time. That is why most governments are trying to divert their resources into building industries and improving tourism in their countries. And they are trying to woo the very people they brought into their country to work on their oil fields and rigs.


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