THE POLITICAL ECONOMY OF THE MIDDLE EAST SERIES EDITOR: ASHRAF MISHRIF When Can Oil Economies Be Deemed Sustainable? Edited by Giacomo Luciani · Tom Moerenhout The Political Economy of the Middle East Series Editor Ashraf Mishrif Centre for Middle East & Mediterranean Studies King’s College London London, UK This series explores the nature of Middle Eastern political regimes and their approaches to economic development. In light of the region’s dis- tinctive political, social and economic structures and the dramatic changes that took place in the wake of the Arab spring, this series puts forward a critical body of high-quality, research-based scholarship that reflects cur- rent political and economic transitions across the Middle East. It offers original research and new insights on the causes and consequences of the Arab uprisings; economic reforms and liberalization; political institutions and governance; regional and sub-regional integration arrangements; for- eign trade and investment; political economy of energy, water and food security; finance and Islamic finance; and the politics of welfare, labor mar- ket and human development. Other themes of interest include the role of the private sector in economic development, economic diversification, entrepreneurship and innovation; state-business relationships; and the capacity of regimes and public institutions to lead the development process. More information about this series at http://www.palgrave.com/gp/series/14415 Giacomo Luciani • Tom Moerenhout Editors When Can Oil Economies Be Deemed Sustainable? Editors Giacomo Luciani Tom Moerenhout Graduate Institute of International and Columbia University Development Studies School of International and Geneva, Switzerland Public Affairs New York, NY, USA Paris School of International Affairs Sciences Po Paris, France ISSN 2522-8854 ISSN 2522-8862 (electronic) The Political Economy of the Middle East ISBN 978-981-15-5727-9 ISBN 978-981-15-5728-6 (eBook) https://doi.org/10.1007/978-981-15-5728-6 © Gulf Research Centre Cambridge 2021. This book is an open access publication. 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The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. Cover illustration: © Nick Gibson / Getty Images This Palgrave Macmillan imprint is published by the registered company Springer Nature Singapore Pte Ltd. The registered company address is: 152 Beach Road, #21-­01/04 Gateway East, Singapore 189721, Singapore ACKNOWLEDGEMENTS This book originates from discussion in a workshop held in the context of the Gulf Research Meeting of August 2018 at Cambridge University (UK), supported by the Gulf Research Center Cambridge. We are grateful to GRC Cambridge and its Chairman, Dr. Abdulaziz Sager, for the gener- ous support of the annual Gulf Research Meeting, that has allowed us to convene the seminar and, more broadly, has given extraordinary impulse to scholarship on the Gulf in multiple disciplines. Thanks also to the GRC team, notably Dr. Christian Koch, Dr. Oskar Ziemelis and Ms. Sanya Kapasi, who validly supported us as well as all other workshop conveners. We are also grateful to Prof. Ashraf Mishrif for inviting us to publish in Palgrave’s “Political Economy of the Middle East” series that he is the editor of. We are indebted to Prof. Robert Springborg for many useful comments that allowed us to improve the manuscript and for his support to open access publication. Finally, we are very grateful to the Swiss National Foundation for the generous grant that has made publication of this volume in Gold Open Access possible. Tom Moerenhout also expresses his gratitude to the Swiss National Foundation for funding his research At a moment in history when the world is entering a global recession widely seen as the worst in a century, the issue of sustainability of the oil economies is more urgent than ever: we hope a wide public will find our reflections of use. April 2020 Giacomo Luciani & Tom Moerenhout v CONTENTS 1 Introduction: Economic Sustainability of Oil Economies 1 Giacomo Luciani and Tom Moerenhout 2 Framing the Economic Sustainability of Oil Economies 9 Giacomo Luciani 3 Fiscal Sustainability, the Labor Market, and Growth in Saudi Arabia 31 Ishac Diwan 4 Outlook for Producer Economies 55 Ali Al-Saffar 5 Economic Diversification in Arab Oil-­Exporting Countries in the Context of Peak Oil and the Energy Transition 73 Bassam Fattouh and Anupama Sen 6 Economic Diversification and Sustainable Development of GCC Countries 99 Joerg Beutel vii viii CONTENTS 7 Redefining Economic Sustainability in Resource-rich States: Comparative Lessons 153 Manal Shehabi 8 Fuel and Electricity Reform for Economic Sustainability in the Gulf 191 Tom Moerenhout 9 Fiscal Sustainability and Hydrocarbon Endowment Per Capita in the GCC 215 Monica Malik and Thirumalai Nagesh 10 GCC Fiscal Reforms and Labor Market Policies 255 Monica Malik and Thirumalai Nagesh 11 Economic Diversification and Job Creation in the Arab Gulf Countries: Applying a Value Chain Perspective 281 Martin Hvidt 12 Climate Strategy for Producer Countries: The Case of Saudi Arabia 301 Jim Krane 13 The Sustainability of GCC Development Under the New Global Oil Order 329 Ibrahim A. Elbadawi and Samir Makdisi 14 When Can Oil Economies be Deemed Sustainable? 349 Giacomo Luciani and Tom Moerenhout NOTES ON CONTRIBUTORS Ali Al-Saffar is the Middle East and North Africa programme manager at the International Energy Agency (IEA), leading the IEA’s engagement with the region and acting as a key advisor to the executive manage- ment. Prior to this role, he was an energy analyst at the Directorate for Sustainability, Technology and Outlooks, where he co-authored seven editions of the IEA’s flagship long-term forecast, theWorld Energy Outlook. He was the lead author of the Outlook for Producer Economies report, which focused on the issue of how the changing global energy landscape could impact oil-dependent economies. Prior to joining the IEA in 2012, he was a Middle East economist and chief automotive analyst at the Economist Intelligence Unit in London. He holds degrees in Economics and Development Studies. Joerg Beutel is Professor of Economics and Environmental Sciences at Konstanz University of Applied Sciences in Konstanz, Germany. He served as Dean of the Department of Economics and Social Sciences from 1991 to 1998 and retired in 2008 from the university. He is still active in research and as economic advisor. He conducted major projects for the European Commission, Eurostat, United Nations Statistics Division (UNSD) of the United Nations, the Ministry of Economy and Planning (MOEP) of Saudi Arabia, the Prime Minister’s Office of Brunei Darussalam (JPKE) and the Kuwait Institute for Scientific Research (KISR). He was the editor of the Eurostat Manual of Supply, Use and Input-Output Tables (2008) and became a member of the edi- torial board for the Handbook of Supply, Use and Input-Output Tables ix x NOTES ON CONTRIBUTORS with Extensions and Applications (2018) of the United Nations. Main activities in research are development planning, macroeconomics, national accounts, and input-output analysis. He was engaged in applied economics throughout his professional career. Ishac Diwan is Professor of Economics at Paris Sciences et Lettres (a consortium of Parisian universities) where he holds the chair