Feisal Omar, Reuters

International Reports

Pragmatic Giants

by Fabian Blumberg

On the Development Policy of the Gulf States: Motives, Priorities, and the Potential for Collaboration

It is many years since the Gulf states were the “newcomers” to development policy. However, their motives and approach to development assistance differ from those of their Western counterparts. Despite this, there are areas of common interest that make it possible to collaborate with the “giants” of the Gulf.

In terms of development assistance, the Gulf states are often called the “silent giants”. This description highlights how they have been quietly, but very actively, going about their business as aid donors. In a 2017 conversation with analyst and author Peter Salisbury, an unnamed development policy actor said: “In the Middle East, Africa, and in Islamic countries in Asia, the Gulfies have been there as long as they have had oil money. […] The more recent phenomenon has been that they have been entering the same space [as the OECD countries], and they are often not as experienced or sophisticated in that space, so they are seen as these newcomers.”

These “newcomers” from the Gulf – mainly Qatar, Kuwait, Saudi Arabia, and the United Arab Emirates (UAE) – have had numerous bilateral and multilateral organisations dedicated to development assistance since the 1970s and spend huge sums in this area compared to other countries. It is true that there are still some yawning data gaps with regard to the development assistance provided by the Gulf states. Nevertheless, a 2020 report from the Organisation for Economic Co-operation and Development (OECD) provides some interesting clues to the amounts spent by Gulf donors. According to the report, in 2017, the UAE and Saudi Arabia were among the world’s most significant bilateral providers of development assistance (in 7th and 8th place). Qatar and Kuwait are also classified as “significant” donors by the OECD (ranked 20th and 22nd, respectively). With regard to the target of spending 0.7 per cent of gross national income on development assistance (Official Development Assistance ratio, ODA ratio), the UAE has been above 1 per cent since 2013 and, in 2017, had the highest ODA ratio in the world. Kuwait ranks 9th, Qatar 11th, and Saudi Arabia 20th in the corresponding OECD survey. According to the United Nations Office for the Coordination of Humanitarian Affairs (OCHA), Saudi Arabia was the fourth largest humanitarian aid donor in 2018, and the ninth largest in 2020; the UAE was the third largest humanitarian aid donor relative to its gross national income in 2016. In 2013, the UAE became the world’s largest humanitarian aid donor after providing 5.89 billion US dollars, according to the International Federation of Red Cross and Red Crescent Societies. So it seems legitimate to describe them as “giants”. But it can no longer be said that they are “silently” going about their business. In terms of development assistance, they are particularly active in education and training; support and empowerment of women, children, and young people; as well as health, electricity, drinking water, and sanitation, for example, through the provision of microcredits and budgetary support.

 

Policy Interdependence in Development Assistance – Zakat, Security, Stability, and Economic Prosperity

The image of today’s Gulf monarchies is one of glittering skyscrapers, air-conditioned shopping malls, globe-spanning airlines, a Mars mission, and rentier systems that provide citizens with their basic needs for a good quality of life – so it is hardly surprising that they are also in a position to spend huge sums on development assistance. It is easy to forget that, in the experiences of the stakeholders and of Gulf citizens, their own countries were still “underdeveloped” in the 1970s. In 1979, in a special issue on “Arab aid” of Saudi Aramco World, the company magazine of oil company Saudi Aramco, a representative of the Abu Dhabi Fund is quoted as saying: “You have to have been here 10 years ago to know how we feel. […] Then, we did not have any streets, any schools, any kind of infrastructure at all. People walked around barefooted. Life was very poor. All this is still very fresh in our minds, so we feel it is our duty to help other people now that we are in a position to do so.” This awareness of their own past, combined with the religiously motivated emphasis on charity, mercy, and generosity (the obligation for Muslims to donate 2.5 per cent of their personal wealth to the poor, known as zakat), has also created a culture of helping others in the Gulf: “A desire to help the less fortunate and be generous with wealth is […] embedded in the cultural consciousness of the region. Shared religious and cultural affinity may partially explain the observation that Gulf aid tends to be concentrated in the immediate region, with a demonstrable preference of Arab and Muslim countries.”

The development policy of the Gulf states has a particular focus on the neighbouring region, Arab and Muslim states.

The Gulf states target their development assistance at different recipients, also depending on political motives. For example, Qatar’s strategy in Egypt is different to that of Saudi Arabia and the UAE, and Saudi Arabia has a more pronounced interest in Yemen, which is reflected in the fact that the majority of Saudi funding is allocated to the country. Overall, however, the Gulf states prefer to focus their aid on Arab and Muslim countries. This has always been the case with Gulf donors. For example, they have been sending aid to the Palestinian territories since the 1960s. Between 1975 and 1990, aid flowed to Lebanon in an effort to stabilise the civil war-torn country. In the 1970s and early 1980s, Saudi Arabia was particularly keen to bolster other monarchies in the face of Arab nationalism and Soviet influence. In the 1980s, Saudi Arabia was the world’s largest per capita donor, directing aid to its allies in the region (mainly Jordan, Morocco, North Yemen, Iraq, and Syria). Finally, reference should be made to the assistance provided by the Gulf states to Iraq after the Islamic Revolution in Iran in 1979 to build Iraq up as a bulwark against Iranian influence. It is against this backdrop that Saudi Arabia’s so-called export of Wahhabism, a very conservative form of Islam, has occurred. For many years, this was one of the motivations behind the country’s development policy: spreading this understanding of Islam through development assistance, religious education at home and abroad, and financial support for corresponding religious schools and mosques. However, this changed since the 9/11 attacks (15 of the 19 attackers were Saudi citizens) and the subsequent criticism of the Kingdom’s religious policy, as well as eventually due to Saudi Arabia’s new stance under King Salman and Crown Prince Mohammed bin Salman. The clergy and religious police have had their wings clipped, and new, stricter rules have been put in place governing religious organisations, their activities, and financial flows. This is in line with Mohammed bin Salman’s policy of a “return to moderate Islam”.

The regional focus persists and reveals a second motive behind the development policies of the Gulf states: stabilising their neighbourhood and consolidating their own systems of government. For example, after the “Arab Spring”, financial support in the sense of the rentier model was initially expanded at home, but large amounts of financial aid also flowed to countries like Bahrain, Jordan, Morocco, and Oman – and later also to Egypt. The aims were: to stabilise other monarchies of the region and the neighbourhood as a whole, including Egypt; secure the status quo; empower countries that could be considered as security partners; and contain Iran’s regional influence. These interests also prompted Saudi Arabia to adopt a policy of military intervention while, at the same time, pouring humanitarian aid into Yemen.Development, stabilisation, and security policies are thus intertwined. These policy overlaps are reflected in data published by the OECD. Between 2013 and 2017, Gulf donors spent 68 per cent of their financial aid on development activities in the Middle East and North Africa (MENA). Egypt, Yemen, and Morocco were the main beneficiaries, receiving 60.3 per cent of that total.

However, funding earmarked for MENA countries fell by 11.2 per cent between 2013 and 2017, while funding for Sub-Saharan Africa increased by 46.6 per cent over the same period. Here, the main recipients are countries in the Horn of Africa, the Sahel, and West Africa, and a glance at the focus of this aid reveals three more drivers of the Gulf states’ development policy: food security, economic prosperity, and geopolitical co-determination.

Although the Gulf states (especially Qatar) have worked hard over recent years to build up their own domestic food infrastructures, they are still highly dependent on imports. This is why they are supporting and investing in the agricultural economies of other countries (especially in Africa), as well as in the transport, infrastructure, and logistics sectors, in order to help secure their own food supplies – a need that was once again underlined by the temporary disruption of supply chains caused by the COVID-19 pandemic. The above-mentioned regional priorities and areas of investment also point to the geopolitical interests that are being pursued in competition with each other, and with other countries. As a result, a new “great game” is developing in the Horn of Africa. Saudi Arabia, the UAE, Qatar, and Turkey are expanding their presence in Africa, as indeed are Russia, China, and the United States. The Gulf states are pursuing several interests in this respect: food security, access to Africa, securing sea routes and their western borders.

The Gulf states are demonstrating their willingness to assume more international responsibility and play their part in shaping international politics.

The Gulf states are also pursuing a strategy of exporting elements of their own economic reform models. They are seeking to generate economic benefits from their activities in the recipient countries and to support their strategies of economic diversification. For example, the UAE has made direct investments in real estate and industry in Egypt. This is in line with its own economic and development model at home, which focuses primarily on infrastructure and real estate projects. It has forged development partnerships to open up markets, secure follow-up orders, build its own attractiveness as a location, and create (economic) networks between donor and recipient countries. In this way, development and economic policy have become intertwined.

Since decisions on the volume, type, and recipient countries of development aid are made by the royal houses, this aid becomes highly personalised. This suggests that prestige-seeking and nation-branding are also motives for development assistance. Today, the Gulf states are more inclined to publicise their aid efforts than in the past, either through appropriate cross-media communications or by hosting development forums and major conferences. This also demonstrates a willingness to assume more responsibility internationally, to be seen as trusted partners, and to play their part in shaping international politics.

 

Pragmatic Donors

The Gulf states’ aid engagement is carried out by bilateral and multilateral organisations that have joined forces in the Coordination Group of Arab National and Regional Development Institutions, founded in 1975, as well as by other organisations in the various Gulf states. The financing instruments used are loans, grants, budget support, debt relief, and (religiously motivated) donations. Additionally, there are in-kind supply deliveries in the form of oil and gas, some of which are subsidised, as well as investments in construction and real estate. Contributions to international organisations are lower by comparison, but the Gulf states support specific programmes that they deem important (such as the United Nations Relief and Works Agency for Palestine Refugees in the Middle East and humanitarian aid for Syrian refugees); development assistance from the Gulf remains, however, predominantly bilateral.

This bilateral development assistance is particularly pragmatic in the way that it is tailored to the recipient countries. The Gulf states are more likely to respond to requests than to implement pre-formulated aid packages or strategies that they have developed themselves. Moreover, they rely on consultants, expertise, and government representatives in the recipient countries themselves. Conditionality – in the sense that financial assistance is tied to reforms in the areas of finance, the economy, or governance – is not only impossible to discern, but actively rejected. Development actors in the Gulf states are sceptical or even opposed to providing development assistance within the framework of international institutions or multilaterally if it entails political conditions. They have always argued in favour of non-interference and state sovereignty. Aid – said the former chairman of the Arab Fund in 2003, with regard to the Coordination Group – must be given free of political or economic conditions.

 

Giants under Pressure

It remains to be seen whether the Gulf states will be able to maintain their relatively strong commitment to development assistance. In the past, aid spending by the Gulf giants has generally mirrored changes in oil prices, the economic situation, or political priorities. In the 1970s, for example, oil prices rose at such a rate that the countries represented in the Organization of Petroleum Exporting Countries (OPEC) were able to spend an average of 12.48 per cent of gross national product on development assistance. In the 1980s and 1990s, Gulf donors were more cautious because oil revenues were declining and, in the wake of the Iraqi invasion of Kuwait, the Gulf states’ political priorities shifted towards their own security. During the oil boom of 2003 to 2008, they built up financial reserves of up to 514 billion US dollars, but development assistance was increased only moderately and tended to remain at the level of the late 1980s. This is also explained by the consequences of the 9/11 attacks, when financial contributions by the Gulf states to countries such as Afghanistan and Pakistan, as well as the activities of Islamic charities, were viewed particularly critically. During the oil price boom of 2010 to 2014, national budgets generated huge surpluses, which opened up more funds for development assistance.

A number of developments suggests that the Gulf states may scale back their development activities in future.

This brief history of the Gulf states’ development assistance shows that it can be very volatile – depending on the economic situation and current political priorities. A number of developments suggests that the Gulf states may scale back their development activities in the future. Oil prices have been low since 2014 (partly due to the shale gas revolution, a general shift away from fossil fuels, and weaker global growth). As a result, government revenues have declined, and the pressure on budgets is growing. Moreover, the onset of the COVID-19 pandemic marked the beginning of a multifaceted crisis for the Gulf states: oil revenues continued to decline, international transport of goods slowed down, and tourism as well as air traffic collapsed. These are the sectors on which the Gulf states are pinning their hopes as they prepare for a post-oil era. In response to the pandemic, governments have increased public sector pay, lowered key interest rates, postponed loan repayments, and launched support programmes for the private sector. Budget deficits are rising and fiscal reserves declining. A drop in gross domestic product is predicted for all the Gulf states. These problems have not been resolved in early 2021. They add to the pressure that the Gulf states were under even before the COVID-19 pandemic, meaning their economic outlook is, at the very least, uncertain. The fact that the Gulf states have traditionally been rentier states makes it reasonable to assume that they will cut back on overseas aid in order to expand their domestic programmes. This assumption is supported by the observation that the Gulf states have provided material and financial emergency aid to many countries in response to the pandemic (particularly Morocco, Egypt, Tunisia, Iran, Jordan, and Yemen), but have also shifted some of their development funding to focus on their domestic needs.

The volatility is not only caused by economic factors. Politics also plays a role – for example, providing political and financial support to the Palestinian territories has been part of the Gulf states’ reason of state for decades. But even here, cracks seem to be appearing. The core of the 2002 Arab Peace Initiative – normalisation of relations with Israel in return for a peace agreement that is acceptable to the Palestinians – is no longer applicable to the UAE and Bahrain. They are both normalising their relations with Israel, showing that cooperation with Israel now outweighs the Palestinian cause. The performance of the Palestinian Authority has attracted criticism in all the Gulf states, and it is possible that they will either use development assistance as a means of exerting pressure for reform, or will impose further cuts.

 

The Potential for Collaboration

Since the 1970s, there have been various modes of cooperation between the Gulf states and the OECD Development Assistance Committee (DAC). So far, according to the OECD, this collaboration has three main dimensions: firstly, the DAC encourages Gulf countries to show their commitment to the OECD by submitting data and statistics to help map the global development picture. The DAC also urges them to improve the accuracy, timeliness, and transparency of the data. Secondly, it promotes regular policy exchange and collaboration (through the Arab-DAC Dialogue on Development and joint Arab-DAC Task Forces on specific topics, such as education, energy, and water). Thirdly, as DAC-participants, the UAE, Qatar, Saudi Arabia, and Kuwait can attend all DAC meetings and participate in DAC Communities of Practice discussions on issues such as statistics, evaluation, the environment, conflict, fragile states, and gender equality. The DAC and the Coordination Group of Arab National and Regional Development Institutions meet regularly for the Arab-DAC Dialogue on Development, most recently in February 2021. According to the OECD: “All in all, the collaboration provided a better understanding of Arab development co-operation activities to DAC members and globally. […] By engaging in policy dialogue with the DAC and its members, Arab countries and institutions benefit from the sharing of knowledge, experiences and good practices on a range of development co-operation themes.” Since 2014, Gulf organisations have also been involved in “triangular cooperation” projects in development cooperation and have committed to the Sustainable Development Goals (SDGs). Assuming greater responsibility internationally, participating in the international dialogue on development policy, increasing transparency by publishing data on development assistance – these are all areas where the Gulf states have made great strides in the direction of the OECD countries.

Dwindling financial resources could lead the Gulf states to seek ways of increasing regional and international synergies.

Nevertheless, the bilateral approach continues to prevail. The basic principle of non-conditionality is not questioned. The Gulf states are committed to ensuring the autonomy of their own development policies while prioritising stability, security, and the success of their own reform policies over development policy.

However, the aforementioned imperatives of the Gulf states’ development policies, coupled with dwindling financial resources, could lead them to seek ways of improving regional as well as international coordination and synergies. The decline in financial resources available for foreign aid could also make them adjust their priorities: less large-scale investment in infrastructure and logistics, and more development aid for small and medium-sized businesses, male and female entrepreneurs, start-ups, education, training, capacity building for young people and women in particular, and gender equality. These areas are also at the heart of the Gulf states’ own visions and reform programmes. These seem to be aimed at greater diversification based on their own experience and economic networks, and at mitigating the risk to regional stability engendered by unemployment and social discontent. These are also the areas that are likely to be congruent with other countries’ interests, such as those of German development policy. Energy and the environment are other potential areas where the DAC and Gulf states could work together. In recent years, the Gulf states have built capacity in preparation for a post-oil era. For example, they have ramped up research into alternative energies and energy efficiency while promoting corresponding programmes and initiatives at home and abroad. Triangular cooperation would be an appropriate instrument in these areas, for example, with a German development organisation and a Gulf organisation. This would also allow the development policy coordinated by the DAC to benefit from the expertise that the Gulf states have built up in their key sectors, and from the trust they enjoy as Arab donors in the Arab and Muslim region.

Areas of common interest exist in these sectors, and some joint projects are already underway. Germany is a key player when it comes to collaboration with Gulf states on development, for example through the GIZ programme Cooperation with Arab Donors (CAD), along with partnership agreements and co-financing. This shows that – despite all the differences in motives and approaches – it is possible to work together in a spirit of partnership. The combination of dwindling financial resources and increasing global challenges makes this collaboration essential.

– translated from German –

 


 

Fabian Blumberg is Head of the Regional Programme Gulf States at the Konrad-Adenauer-Stiftung based in Amman, Jordan.


 

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