The Wages of Oil The Wages of Oil Parliaments and Economic Development in Kuwait and the UAE Michael Herb Cornell University Press Ithaca and London Copyright © 2014 by Cornell University All rights reserved. Except for brief quotations in a review, this book, or parts thereof, must not be reproduced in any form without permission in writing from the publisher. For information, address Cornell University Press, Sage House, 512 East State Street, Ithaca, New York 14850. First published 2014 by Cornell University Press Printed in the United States of America Library of Congress Cataloging-in-Publication Data Herb, Michael, 1966– author. The wages of oil : Parliaments and economic development in Kuwait and the UAE / Michael Herb. pages cm Includes bibliographical references and index. ISBN 978-0-8014-5336-6 (cloth : alk. paper) 1. Democratization—Kuwait. 2. Democratization—United Arab Emirates. 3. Kuwait—Politics and government. 4. United Arab Emirates—Politics and government. 5. Petroleum industry and trade— Political aspects—Kuwait. 6. Petroleum industry and trade—Political aspects—United Arab Emirates. 7. Economic development—Political aspects—Kuwait. 8. Economic development—Political aspects—United Arab Emirates. I. Title. JQ 1848.A91H47 2014 330.95357—dc23 2014022400 Cornell University Press strives to use environmentally responsible suppliers and materials to the fullest extent possible in the publishing of its books. Such materials include vegetable-based, low-VOC inks and acid-free papers that are recycled, totally chlorine-free, or partly composed of nonwood fi bers. For further information, visit our website at www.cornellpress.cornell.edu. Cloth printing 10 9 8 7 6 5 4 3 2 1 Cover photograph: Burj Khalifa Window, August 2013. Photograph by Francis Cox. To Aqil and Yasmeen Contents List of Tables and Figures ix Acknowledgments xi Note on Transliteration xiii Two Models 1 1. Labor Markets and Class Politics 18 2. Participation 45 3. Explaining Kuwaiti Exceptionalism 60 4. The Consequences of Absolutism 107 5. The Consequences of Participation 141 6. What Resource Curse? 184 Dilemmas of Development and Democracy in the Gulf 193 References 217 Index 235 Tables and Figures Tables 2.1. Representative assemblies in the Gulf monarchies 47 3.1. Composition of state revenues around 1906 72 3.2. Pearling fl eets, population, and armed retainers in the Gulf shaykhdoms 74 3.3. Visits by British fl agged steamers to the Gulf shaykhdoms 75 3.4. Time line of the 1962 Kuwaiti constitution 91 5.1. Cost to export a container 168 5.2. Quality of port infrastructure 168 Figures I.1. Net foreign direct investment fl ows 5 I.2. Rent abundance versus rent dependence 12 I.3. Rent abundance versus rent dependence, fuel and mineral export data 13 I.4. Rents per citizen in the richest rentiers 15 1.1. Percentage of UAE citizen men and women in the labor force 22 x Tables and Figures 1.2. Female UAE citizen labor-force participation by level of education 23 1.3. UAE workforce by citizenship and sector 24 1.4. UAE population pyramid 29 1.5. Wages paid to government workers as percentage of government oil revenue in Kuwait 30 1.6. Bahraini workforce by citizenship and sector 31 1.7. Qatari workforce by citizenship and sector 32 1.8. Average expatriate wages as percentage of average Bahraini citizen wages, by educational level 33 4.1. Per citizen oil production in Gulf monarchies 108 4.2. Population growth in the UAE 114 4.3. Change in total population in fi ve Gulf monarchies 115 5.1. Land purchases as percentage of all Kuwaiti government expenditures 154 5.2. Annual tourist arrivals in the Gulf 162 5.3. Value of merchandise exports from the Gulf, except fuels 166 5.4. Air freight in the Gulf 167 5.5. Air passengers carried in the Gulf 167 5.6. Value of petroleum exports 170 5.7. Value of total GCC stock market capitalization of banks and fi nancial fi rms 176 5.8. Market capitalization of banks and investment fi rms on GCC stock markets 177 Acknowledgments This book has its genesis in several trips back and forth from Kuwait to Dubai in 2007 while I was in Kuwait on a Fulbright research fellowship. The trips were funded in part by a Research Initiation Grant from my home institution, Georgia State University. In Kuwait, I was hosted by the American University of Kuwait. An earlier version of some of the arguments in this book appeared in the August 2009 issue of the International Journal of Middle East Studies . I have received invaluable help from many people in writing this book. I have had the opportunity to present various parts of this book at workshops, con- ferences, and lectures. Feedback from colleagues at these events has helped me sharpen my arguments and avoid mistakes. These events have included talks given at Kuwait University (organized by Khaled Al-Fadhel), at Yale University (Ellen Lust), Sciences Po (Steffen Hertog), the Center for Strategic and International Studies (Jon Alterman); the University of Olso (Bjørn Utvik and Jon Norden- son), Florida International University (Russell Lucas); the Project on Middle East Political Science at George Washington University (Marc Lynch), the Moulay Hicham Foundation, and the American University in Kuwait (Farah Al-Nakib). I presented a version of chapter 1 at the Gulf Research Meeting of the Gulf Research Center in July 2010; the workshop was organized by Steffen Hertog and Rola Dashti. Participants at the University of Chicago Comparative Politics Workshop read an early draft of chapter 3, and it is better as a result. Others who have helped include Abdulkhaleq Abdulla, Abdul Hamid al-Ansari, Hassan Mohammed Al Ansari, Mohammed Al-Dallal, Yousef Al-Ebraheem, Khaled bin Sultan Al-Essa, Ibtisam al-Ketbi, Mohammad Al-Moqatei, Odah Al-Rowaie, Anas xii Acknowledgments Al-Rushaid, Nasser Al-Sane, Khalid bin Jabor Al Thani, Ghanim al-Najjar, Mo- hammed Al-Rokn, Abd al-Rahim al-Shahin, Omar Al-Shehabi, Barbara Bibbo, Saad Bin Tefl a, John Duffi eld, Hasan Johar, Shana Marshall, Jennifer McCoy, Pete Moore, Mary Ann Tétreault, and Sean Yom. Hamza Olayan of al-Qabas gener- ously allowed me to consult the newspaper’s archives. I am indebted to Steffen Hertog and Greg Gause for their extensive and extremely useful comments on a draft of the manuscript, and to Roger Haydon and the team at Cornell University Press. And thanks to Francis Cox for providing the cover photo. My children, Aqil and Yasmeen, have been hearing about “the book” for a very long time—and here it is, at long last. I dedicate it to them. They mean the world to me. My wife Kathryn provided more support and encouragement than I can properly thank her for; she makes me happy. Note on Transliteration In transliterating the titles of Arabic sources, I have used a system based on that of the International Journal of Middle Eastern Studies . For place names, I have used the transliterations commonly in use on street signs and in other English lan- guage sources (thus, Shuwaikh, not Shuwaykh). For personal names, I have used the transliteration that appears to be favored by the individual him- or herself, as evidenced by websites, business cards, and the like. Two Models There are no accomplishments [of the National Assembly in promoting the private sector] because of a great imbalance lying in the nature of those who vote in elections. A majority of them are employees of the state or its enterprises. The role of the deputy changes . to a role resembling that of a member of a union of government employees, and the National Assembly gradually becomes a large union for the employees of the government and its enterprises. — Abdulwahab al-Haroun, former deputy in the Kuwaiti National Assembly Not long ago, before oil, Kuwait and Dubai shared much in common; both were small trading ports on the Gulf littoral, dependent on pearling and trade, and ruled by Arab families under British tutelage. Both had thriving merchant com- munities and an economy oriented toward trade and the sea. Today they are very different places. Dubai is an internationally famous entrepôt, tourist destination, and showplace for ostentatious architecture. Partly because of its relatively limited oil wealth, Dubai has led the United Arab Emirates (UAE) in diversifying its economy beyond oil, building a vibrant entrepôt economy that attracts foreign visitors and residents from far and wide. Yet the UAE—in which Dubai is one of seven emirates—remains one of the least democratic countries in the world. Kuwait, by contrast, has none of the economic vitality of the UAE, but it has a parliament (the National Assembly) that is by far the most potent among the six Gulf monarchies. The Kuwaiti economy, however, remains almost entirely dependent on oil. In this book, I offer an explanation for the divergent paths followed by Kuwait and the UAE. Explaining this puzzle is interesting in itself, but it also gives us a window on the underlying political economy of the Gulf. My goal is to set out a framework for understanding the distinctive politics and economics of the Gulf monarchies, one that explains how the often-competing interests of rulers, 2 Two Models capitalists, citizens, and expatriates take shape in Gulf states with more or less politi- cal participation and in those with more or less oil rent per capita. I argue that: • The Gulf rentiers should be divided into two groups. The fi rst group is the extreme rentiers—Kuwait, the UAE, and Qatar—which enjoy the highest per capita rent incomes in the world. The second group is the not-quite-so-rich middling rentiers—Saudi Arabia, Oman, and Bahrain.