Articles

Economics blogArticlesBooksComment & AnalysisReports

Rutledge, E.J. and Al-Shamsi, F. (2015). The Impact of Labor Nationalization Policies on Female Participation Rates in the Arab Gulf. In M. Karshenas and N. Chamlou (Eds.), Women, Work and Welfare in the Middle East: The Role of Socio-Demographics, Entrepreneurship and Public Policies, (525–551). London: Imperial College Press.

Lekhraibani, R., Rutledge, E.J. and Forstenlechner, I. (2015). Securing a dynamic and open economy: the UAE’s Quest for Stability, Middle East Policy, 22(2): 108–124.

Rutledge, E.J. (2014). GCC Currency Union: Necessary Precursors and Prospects, Gulf Policy Papers, August 2014, Cambridge: Gulf Research Center.

Forstenlechner, I., Rutledge, E.J. and Alnuaimi, R. (2012). The UAE, the “Arab Spring” and Different Types of Dissent, Middle East Policy, 19(4): 54-67.

Forstenlechner, I., Madi, M., Selim, H.M. and Rutledge, E.J. (2012). Emiratisation: determining the factors that influence the recruitment decisions of employers in the UAE, The International Journal of Human Resource Management, 23(2): 406-421.

Rutledge, E.J., Al-Shamsi, F., Bassioni, Y. and Al-Sheikh, H. (2011). Women, labour market nationalisation policies and human resource development in the Arab Gulf States, Human Resource Development International, 14(2): 183-198.

Forstenlechner, I. and Rutledge, E.J. (2011). The GCC’s “Demographic Imbalance”: Perceptions, Realities and Policy Options, Middle East Policy, 18(4): 25-43.

Forstenlechner, I. and Rutledge, E.J. (2010). Growing Levels of National Unemployment in the Arab Gulf: Time to Update the ‘Social Contract’, Middle East Policy, 17(2): 38-51.

Rutledge, E.J. (2008). Is EMU a Viable Model for Monetary Integration in the Arabian Gulf? Journal of Economic Policy Reform, 11(2): 123-134.

Rutledge, E.J. (2008). Business Expectations for a Common Currency in the Arabian Gulf, Journal of Development and Economic Policies, 10(1): 37-55.

Panagiotidis, T. and Rutledge, E.J. (2007). Oil and Gas Markets in the UK: Evidence From a Cointegrating Approach, Energy Economics, 29(2): 329-347.


The Impact of Labor Nationalization Policies on Female Participation Rates in the Arab Gulf

Rutledge, E.J. and Al-Shamsi, F. (2015). The Impact of Labor Nationalization Policies on Female Participation Rates in the Arab Gulf. In M. Karshenas and N. Chamlou (Eds.), Women, Work and Welfare in the Middle East: The Role of Socio-Demographics, Entrepreneurship and Public Policies, (525–551). London: Imperial College Press.

The past decade has seen a growing realization in the Arab Gulf countries, which comprise the Gulf Cooperation Council (GCC: Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates [UAE]), that no longer can all new labor market entrants be absorbed into the respective public sectors, especially not the largely unproductive bureaucratic echelons. This is evidenced first by rising levels of unemployment—almost one in five nationals aged between 15 and 29 — and second, by the fact that all the countries have policies in place for nationalizing labour in the private sector. In the regional context, ‘unemployment’ can be observed in the guise of, on the one hand, an increasing number of nationals choosing to remain unemployed unless, or until, a government position is made available and on the other, a large number of unfulfilling sinecures. Such labour market strains have in fact been emergent and indeed, documented for some time, as have the associated nationalization polices designed to address them. What is largely missing from the literature is a gendered analysis of these policies. Labour nationalization combines top-down measures — including imposing quotas on certain private sector industries, taxing the importation of expatriate workers, and reserving certain job categories for nationals — and bottom-up measures — such as overhauling education systems, introducing minimum standards, and providing vocational training. While the approaches differ across the GCC, their common goal (and reason for being) is to encourage more nationals into private sector employment.

Nevertheless, a number of factors are thought to complicate this goal. First, an overwhelming majority of nationals consider the private sector unattractive in terms of remuneration and working hours. Second, a widespread sentiment held by private-sector employers is that nationals lack the necessary qualifications or work ethic, while their wage demands are several times higher than those of like-for-like expatriates. Third, in the eyes of society, the private sector is felt to be an inappropriate place for citizens to pursue a career, and such sentiment is pronounced with respect to women nationals. In some quarters, indeed, there is ambiguity with regard to women nationals in formal employment.

Keywords: Labour nationalization, Arabian Gulf labour markets, human resource development, female labour force participation


Securing a dynamic and open economy: the UAE’s Quest for Stability

Lekhraibani, R., Rutledge, E.J. and Forstenlechner, I. (2015). Securing a dynamic and open economy: the UAE’s Quest for Stability, Middle East Policy, 22(2): 108–124.

[T]he UAE’s international profile and stature have grown significantly in recent years. Both CNN and Rupert Murdoch’s Sky News broadcast from Abu Dhabi, and the BBC’s regional hub is located in Dubai. Two famous English Premier League football clubs, Arsenal and Manchester City, play their home games at the “Emirates” and “Etihad” stadiums, respectively. Along with the world’s tallest tower and largest shopping mall, Dubai is home to Emirates, currently the fourth-largest global airline, operating from the world’s busiest airport in terms of international passenger traffic. In 2014, Dubai won the bid to host the 2020 World Expo and, for a number of years, has convened the world’s richest horse race. The final race of the Formula One season now takes place in Abu Dhabi, and the Louvre will soon open its first satellite venue there, as will the Guggenheim Museum. Since 2007, Abu Dhabi has partnered with MIT and Siemens in the field of renewable energy at the Norman Foster-designed, carbon-neutral Masdar City. It can now be accessed via the iconic, Zaha Hadid-designed, Sheikh Zayed causeway. In 2017, the UAE will be the first in the region to generate electricity by nuclear technology as part of a multi-billion-dollar partnership with South Korea.

There are, however, a number of opportunity costs resulting from this enhanced prominence on the global stage. This overt modernity is construed by reactionary Islamists as the antithesis to the mode of society they prefer and agitate for. Another is more reputational in nature: today, UAE government actions and policies are subjected to far greater levels of international scrutiny and critique, informed and otherwise, than at any point in its short, 43-year history. No longer can it be typified as an unobtrusive Middle Eastern backwater remote from international affairs. This has been particularly apparent since the “Arab Spring” and the UAE’s resultant stance toward the Muslim Brotherhood (Al Ikhwan al Muslimeen). Despite some commentary to the contrary, this does not portend a Huntington-style clash. Neither is it necessarily indicative of a confused national identity or a confessional contradiction. Islam as a faith and a set of values is not in any way comparable to political Islam (“Islamism”), which, although ideologically grounded, is, in various respects, fundamentally at odds with modernity in the Western sense.

The adoption of such a confrontational stance may nevertheless affect the UAE’s continued transition towards a knowledge-based economy — the reforms now underway that are designed to overcome the deleterious socioeconomic consequences that are typically said to afflict rentier state/resource curse (RS/RC) economies. Security and stability (actual and perceived) are vital to achieving a dynamic and open economy and to attracting conventional non-oil Foreign Direct Investment (FDI) and the more fickle and fluid human capital such as highly skilled expatriate labor. The UAE is seeking to develop an employment-rich service sector, to attract more tourists and conference delegates, and to become a regional hub for a number of industries, including logistics and financial services. It follows that at no previous juncture has the UAE’s ability to effectively use statecraft been more important. …


GCC Currency Union: Necessary Precursors and Prospects

Rutledge, E.J. (2014). GCC Currency Union: Necessary Precursors and Prospects, Gulf Policy Papers, August 2014, Cambridge: Gulf Research Center.

The purpose of this paper is to set out the steps that members of the GCC would need to take in order to effectively implement their long planned currency union. It will be argued that the preparatory measures themselves are likely to constitute some of the key economic benefits. Optimal Currency Areas (OCA) will only manifest within a single market in which labour and capital are mobile and in which banking operations and fiscal budgetary decisions are accountable, transparent, and subject to intra-regional institutional regulation and oversight. Thus, in taking steps toward a currency union (CU), participating members would first need to establish a single market and devolve, when required, some executive decision making powers in relation to monetary and macroeconomic matters. By doing so, they would create a larger and deeper market that would be considerably more attractive to domestic and foreign investors alike. However, if member states do achieve such precursors and form a “single” currency – as opposed to a “common” one which, give or take, they effectively have with their extant relationships with the US dollar – the driving force will have been political, not economic, incentives (as it was in Europe).

As the Eurozone is the only real barometer by which to gauge the prospects and merits of forming a CU, this paper will draw heavily on its experiences to date. Unlike other instances of CU, de facto or de jure, the 18 members of the Eurozone elected to cede monetary policy decision making powers and to make the euro their sole legal tender. They did so for a range of perceived economic and political benefits that, it was argued, would result as a consequence of this move. Te adoption of the euro back in 1999 was also a driving force behind the GCC’s own Unified Economic Agreement of 2001 (in which Article 22 covers the planned ‘joint currency’). The euro, moreover, has survived the worst post-war financial crisis and the subsequent recession, demonstrating that CUs can be managed, perhaps not always optimally, and maintained during economic booms and busts.

In terms of progress, relatively little of concrete substance has actually occurred since the Unified Economic Agreement. The GCC Customs Union, which was partly adopted in 2003, has yet to be fully implemented and is presently targeted for completion by January 1, 2015. Forming the Customs Union is a necessary precursor for a GCC Common Market (which was originally planned for 2005). In 2008, however, four of the six member countries did sign up to a Monetary Union Agreement (Article 3 of which specifically mentions a single currency) and, in 2010 the Gulf Monetary Council began operations. …


The UAE, the “Arab Spring” and Different Types of Dissent

Forstenlechner, I., Rutledge, E.J. and Alnuaimi, R. (2012). The UAE, the “Arab Spring” and Different Types of Dissent, Middle East International, 19(4): 54-67

Introduction
As the second anniversary of Mohamed Bouazizi’s tragic self-sacrifice approaches, analyses of the Arab Spring’s underlying causes and longer-term implications are starting to proliferate. With respect to the six Arab Gulf countries, there are two dominant viewpoints as to why the ruling elites have thus far remained in place. First, all are monarchies based upon tribal, clan and family allegiances and thus do not currently face a crisis of legitimacy (Bahrain, for sectarian reasons, being a partial exception). Second, the social contract has thus far been capable of providing enough jobs and housing and has been malleable enough to expediently transmit a series of additional quick-fix packages since 2011. (In Oman, the protests focused on its social contract’s not being generous enough; Sultan Qaboos’s legitimacy was never questioned.)

The prognosis for the longer term ranges from the bleak – it is no longer a question of if, but when, the Gulf monarchies fall – to the only slightly less bleak – they will, from now on, be characterized by internal instability. As we have previously argued … the outlook need not be so bleak; much still depends on the respective country’s ability to renegotiate such contracts. However, in addition to implementing a wide range of precursor economic and educational reforms, governments will now have to formulate policies and strategies capable of accommodating and dealing with dissent. …


Emiratisation: determining the factors that influence the recruitment decisions of employers in the UAE

Forstenlechner, I., Madi, M., Selim, H.M. and Rutledge, E.J. (2012). Emiratisation: determining the factors that influence the recruitment decisions of employers in the UAE, The International Journal of Human Resource Management, 23(2): 406-421

Abstract
The Arab Gulf’s labour market is being overhauled. The private sector is increasingly being ‘obliged’ to more actively support nationalisation programmes. This study seeks to quantitatively determine the recruitment decisions of the employers. We collated the views of just under 250 UAE-based HRM personnel, in order to identify which factors (social, cultural, economic, regulatory, educational and motivational) are most significant as cited in the relevant literature. Not having the necessary educational qualifications and high reservation wage demands were found to have less of a bearing than does the perceived lack of vocationally orientated motivation and the ambiguities over the differing rights afforded to employees.

Keywords: Arab Gulf labour markets; Emiratisation; labour nationalisation; UAE


Women, labour market nationalisation policies and human resource development in the Arab Gulf States

Rutledge, E.J., Al-Shamsi, F., Bassioni, Y. and Al-Sheikh, H. (2011). Women, labour market nationalisation policies and human resource development in the Arab Gulf States, Human Resource Development International, 14(2): 183-193

Abstract
Growing levels of national unemployment constitute one of the Arab Gulf’s key domestic policy challenges and not least because the majority of new jobs will need to be created in the skilled private sector. We demonstrate that while female nationals obtain proportionately more of the vocationally orientated, tertiary level qualifications that this sector requires, structural issues and cultural attitudes continue to act as barriers. Based on the findings of interviews with policymakers in Saudi Arabia and the United Arab Emirates, we contend that while incumbent labour nationalization policies have led to marginal increases in female participation rates, more systemic labour market reforms will be needed in order to better capitalize on the ‘valuable human resource asset’ that they represent.

Keywords: labour nationalization; gender economics; education and human resource development; Gulf Cooperation Council; labour market policy


The GCC’s “Demographic Imbalance”: Perceptions, Realities and Policy Options

Forstenlechner, I. and Rutledge, E.J. (2011). The GCC’s “Demographic Imbalance”: Perceptions, Realities and Policy Options, Middle East Policy, 18(4): 25-43

Introduction
Historically the bulk of political-economy discourse on the Arab Gulf focused on its geo-strategic importance, the actors or factors that had the capacity to disrupt the outflow of oil, the extent to which respective governments were dependent upon the “rent” derived and, finally, the manner in which this was spent (consumption vs. investment). More recently, however, in light of the region’s “national” demographic pyramid profile, a considerable amount of the focus has shifted to examining the idiosyncrasies of its labour markets: the “emerging strains” and growing levels of “structural employment” resulting from an over-dependence on an expatriate workforce and the government job-provision mechanism (for citizens) that lies at the heart of the social contract. Related works consider the relative educational levels and vocational aptitudes of the national versus non-national workforce, the influence of sociocultural factors on occupational choices, and the merits of labour nationalization policies in principle and in practice.

In this article, we will suggest that a new strand of the literature will coalesce around the theme of the region’s “demographic imbalance,” the ratio of nationals (indigenous citizens) to non-nationals (expatriate workers and their dependents). Although the non-national component of the region’s population has been subjected to analysis for several decades, what is new is the way in which this potentially value-laden frame of reference has (a) expanded to encompass not only labor-market efficiency issues and conventional political-security threats but also sociocultural threats, and (b) gained such popular currency. Rhetorically speaking, the debate on and around the subject has become highly charged. It is considered to constitute a potential “demographic time bomb” that is now the Gulf’s most “dangerous addiction.” …


Growing Levels of National Unemployment in the Arab Gulf: Time to Update the ‘Social Contract’

Forstenlechner, I. and Rutledge, E.J. (2010). Growing Levels of National Unemployment in the Arab Gulf: Time to Update the ‘Social Contract’, Middle East Policy, 17(2): 38-51

Introduction
The growing level of national unemployment in the Gulf Cooperation Council (GCC) countries remains one of the region’s key domestic policy challenges. This is clear, even if one does not share the hyperbolic depiction of it as an “impending time bomb” that could culminate in “armed insurrection.” In order to provide adequate (and productive) employment opportunities for all nationals, not only is a major overhaul of educational systems required; there also needs to be a renewed focus on policies designed to facilitate economic diversification that generates the sorts of jobs nationals consider appropriate. Moreover, the region’s ruling elites need to modify and then re-communicate their respective social contracts (“ruling bargains”). These, in many senses, lie at the heart of the issue.

For it is the way in which oil wealth has been historically distributed that has led to a situation in which nationals choose to remain unemployed until they obtain a government job. It is the primary transmission mechanism of the social contract – the provision of well-remunerated public sector jobs – that, albeit unwittingly, has caused GCC labour markets to become so highly segmented. The concomitant laissez faire approach to the private-sector labour market has further exacerbated distortions. From the 1960s onward, an influx of expatriate workers, while pivotal to the impressive and rapid transformation of the region’s infrastructure, accepted wages at levels far below those being offered to nationals in the public sector.

There is, it seems now, a growing realization within the region that public-sector bureaucracies have reached the saturation point. They can no longer act as employer of first and last resort. It is therefore likely that, in the coming period, both perceptions of entitlement and the manner in which hydrocarbon wealth is distributed will need to be reconsidered, regardless of the predicted rebound in oil prices. For Bahrain, Oman and Saudi Arabia, where per capita oil revenues are much lower, the imperative to address this issue is considerably greater. Nevertheless, many citizens, especially those who operate local businesses, have a vested interest in the status quo. …


Is EMU a Viable Model for Monetary Integration in the Arabian Gulf?

Rutledge, E.J. (2008). Is EMU a Viable Model for Monetary Integration in the Arabian Gulf? Journal of Economic Policy Reform, 11(2): 123-134

Abstract
The Gulf Cooperation Council (GCC) intends to form a monetary union using the EMU process as a blueprint, including a set of Maastricht-style convergence criteria. Yet, as the 2010 deadline approaches, few of the necessary institutional preparations have been made. This paper argues that while GCC leaders considered the economic case (on the whole beneficial) they neglected to fully consider the political implications of monetary union. It concludes that devolving decision-making powers to pan-GCC institutions, the need for greater levels of budgetary transparency and fiscal discipline may presently be considered too costly for the region’s ruling elites.

Keywords: monetary union; economic integration; economic policy objectives; Gulf Cooperation Council states; comparative studies
JEL Classification: E52, F15, E61, O53, O57


Business Expectations for a Common Currency in the Arabian Gulf

Rutledge, E.J. (2008). Business Expectations for a Common Currency in the Arabian Gulf, Journal of Development and Economic Policies, 10(1): 37-55

Abstract
This paper presents the results of the first survey designed to ascertain the opinions of businesses regarding the proposed Gulf Cooperation Council Monetary Union (GCC MU). Overall, businesses are in favour of the project and expect it to have a positive impact, but they consider non-monetary factors to be more significant to their future growth. Nevertheless, businesses are not prepared for the single currency. Regional institutions have yet to provide any business-centric information regarding a common GCC currency. The paper contends that if participating governments do not start making policy preparations soon – not the least assisting businesses to prepare – then the existing positive sentiment may erode.


Oil and Gas Markets in the UK: Evidence From a Cointegrating Approach

Panagiotidis, T. and Rutledge, E.J. (2007). Oil and Gas Markets in the UK: Evidence From a Cointegrating Approach, Energy Economics, 29(2): 329-347

Abstract
The paper examines the relationship between UK wholesale gas prices and the Brent oil price over the period 1996-2003 in order to investigate whether oil and gas prices ‘decoupled’ during this period as orthodox gas market liberalisation theory suggests. Tests for unit roots and cointegration are carried out and it is discovered that a long-run equilibrium relationship between UK gas and oil prices exists. Moreover, this relationship pre-dates the opening of the UK-Mainland Europe Interconnector. Following a recursive methodology [Hansen, H. and Johansen, S. (1999), Some tests for parameter constancy in cointegrated VAR-models, Econometrics Journal, 2, 306-333.], it was found that the cointegrating relationship is present throughout the sample period. However, the long-run solutions seem to be more volatile. Evidence is provided that the short-run relationship is linear and impulse response functions are used to examine the effects that a shock in oil would have on gas. These findings do not support the assumption that gas prices and oil prices ‘decouple’.

Keywords: Oil price; Gas price; Cointegration; Nonparametric cointegration; Recursive trace test; Error correction; Impulse response
JEL Classification: C22; C52; O13; Q43