Ding Long: w88 online casino order in the Middle East faces historic reshaping
(Source: "Global Times" Global Network 2020-06-03)
Starting this month, the Saudi government has suspended the payment of living allowances to public employees, and the value-added tax rate has increased from 5% to 15% starting from July 1. This move is aimed at coping with the dual impact of the COVID-19 epidemic and plummeting oil prices and relieving financial difficulties, but it is by no means a temporary measure. It sends a signal of a dramatic transformation of w88 online casino model of Saudi Arabia and other Gulf oil-producing countries. Since oversupply in the oil market has become the norm, the rebound in oil prices is expected to be highly limited in the future. This indicates that the oil-producing countries in the Middle East are about to usher in a "post-oil era" and the "rentier economy" model in the Middle East that relies on oil and gas revenue is about to collapse. This change is undoubtedly of great significance and will reshape the political and economic order in the Middle East.
This crisis occurs at a critical stage for Gulf oil-producing countries to achieve their goals of de-petroleumization. In recent years, Gulf countries have begun to prepare for the "post-oil era". The goal of the development plan represented by Saudi Arabia's "Vision 2030" is to gradually get rid of dependence on oil and achieve a soft landing for the economy. However, the COVID-19 epidemic and the plummeting oil prices have led to a sharp decline in oil revenue and the devaluation of oil and gas resources and related financial assets. Oil-producing countries will de-petroleize in a "hard landing" manner without being ready, and the prospects are not optimistic.
Historical experience shows that falling oil prices will hinder w88 online casino diversification of oil-producing countries. Under low oil prices, the oil and gas industry's contribution to the economy may not decline. In the early stages of the de-petroleization process, the funds required for the development of non-oil industries mainly came from oil revenues. In addition, the increase in tax burden affects the business environment and inhibits consumption, which is not conducive to the development of non-oil industries.
w88 online casino transformation of Gulf oil-producing countries has achieved some results, but there are still many problems and risks. The most prominent one is that the current transformation direction will lead to the "re-rentalization" of the economy. For example, some Gulf countries have adopted the "investment to build a nation" strategy, investing heavily in start-up companies and acquiring shares of multinational companies. There is a tendency for the country to play the role of venture capital funds or equity investment funds. Since the outbreak of the new crown epidemic, Saudi Arabia’s sovereign wealth fund has acquired shares in European energy companies such as Carnival Cruise Line, English Football Club Newcastle United, Shell and Total.
However, this strategy involves greater risks and has considerable negative impacts. First, investment income fluctuates due to economic cycles, which is no different from oil price fluctuations, which will exacerbate w88 online casino vulnerability and dependence of oil-producing countries. Most of the Gulf oil-producing countries' foreign investment flows to international investment intermediaries. For example, Saudi Arabia invested US$45 billion in cooperation with Japan's SoftBank to establish the SoftBank Vision Fund. However, the fund's performance was unsatisfactory, with a loss of US$16.7 billion last year and an expected loss of US$30 billion this year. More than half of the 88 companies invested by the fund suffered serious losses, and 33 of them have gone bankrupt.
Secondly, Saudi Arabia’s foreign investment is purely capital-based, does not carry technology, does not participate in management, and has no technology and management spillover effects. Therefore, this part of investment income still belongs to rental income, which will lead to the second "rentierization" of the relevant country's economy.
Third, political factors prompt Gulf countries to make irrational investment decisions. Some countries use investment in the United States as a means to consolidate their alliance with the United States. Most foreign investment ultimately flows to the United States, many of which include projects with poor returns.
Regions with small oil reserves, represented by Dubai, have basically gotten rid of their dependence on oil by taking advantage of their location to develop emerging industries such as real estate, finance, aviation, and entrepot w88. However, what is more difficult to overcome than rentier economy is rentier culture. Most of the emerging industries focused on development by the Gulf countries belong to the non-real economy and still have rentier characteristics. Some scholars believe that these countries have entered the "end of rentier economy", that is, they no longer rely on exporting a single natural resource, and their economic sources have become diversified rental income. Compared with the traditional economic model in the Middle East, this model has achieved transformation and upgrading, but it is still dependent and fragile. Most of these emerging industries are capital-intensive and have high debt risks. Gulf countries spend huge sums of money to introduce the world's most advanced technologies, but are unable to promote local technological innovation.
Therefore, w88 online casino transformation of the Gulf oil-producing countries is from the oil and gas industry to the non-real economy that is also rentier, and is not supported by the real economy. After the transformation, the industries in the Gulf countries became homogeneous again, leading to internal competition.
From a regional perspective, de-petroleumization of the economies of oil-producing countries will drag down the entire Middle East economy. The six Gulf countries account for half of the total economic output of Arab countries. Oil-producing countries in the Middle East and Africa share oil revenue through aid, investment, remittances, etc. w88 online casino difficulties of oil-producing countries will affect non-oil-producing countries, which will increase the pressure for transformation on the latter. Recently, many Arab countries such as Lebanon have fallen into financial crisis, and no country has provided them with a helping hand. Investment in Arab countries such as Saudi Arabia and the United Arab Emirates is expected to decrease significantly. The epidemic and falling oil prices have caused a sharp decline in remittance income from major labor-exporting countries such as Egypt.
What cannot be ignored is that w88 online casino transformation of Middle East oil-producing countries has its political consequences. The end of the rentier economy will rewrite the social contract, and it is no longer possible for the governments of oil-producing countries to continue to exist independently of citizens and society. At the same time, the geopolitical influence of Gulf countries based on financial strength will also be damaged. Oil is no longer scarce, and Gulf oil-producing countries have formed an energy competition relationship with the United States and Russia. This will reduce the strategic status of the Gulf and the Middle East and make them more susceptible to constraints from major powers.
If the oil-producing countries in the Middle East can give full play to their industrial advantages, actively join the global value chain, and use their small "oil dividend" to lay the foundation for industrialization and economic diversification, they still have a chance to successfully transform. Aligning with China’s “One Belt, One Road” initiative and international production capacity cooperation plans will be a feasible solution for w88 online casino transformation of the Middle East.
(The author is a researcher at the National Institute for Opening-up at the w88 casino and director of the Gulf Research Center)
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