Preserving social stability is one of the key drivers of policy in the GCC. However, the Gulf states face a difficult balancing act — they must maintain a sense of security and contentment for their citizenry during a period of rapid economic growth and social change.
The central focus of the implicit social contract that the Gulf rulers have with their citizens has always been prosperity through economic growth. In recent times, more emphasis has been placed on ensuring that oil wealth translates into social welfare and both economic security and opportunity for nationals.
One of the greatest social challenges facing Gulf countries is ensuring that nationals receive acceptable levels of education, healthcare and housing. But higher expectations of quality and strong pressure on resources from the fast-growing Gulf population has made it even more challenging for the public sector to deliver.
* Education reform required to modernise local skill base
Gulf countries’ spending on education has been increasing very rapidly in recent years, and expenditure per student is among the highest in the world. However, despite the spending, state schools’ performance across the GCC tends to lag those in other regions.
Private sector solutions can definitely help, but they will not be sufficient to tackle the challenge alone. A number of well-regarded private schools have emerged, especially in the UAE and Qatar. This provides students with the international outlook and capacity for critical thinking that is missing in state-run schools, preparing them well for the Gulf labour market.
But it divides the national population into those who are well prepared to cope with the new economic realities of their countries and those who are not.
Gulf governments must continue to reform both their schools and universities, modernising their skill base while retaining their cultural identity.
* Healthcare system in need of increased private sector involvement
Tensions are particularly visible in the healthcare system. In the past, the vast majority of healthcare was delivered by the public sector. However, the old model has been strained by two factors. First, the cost of treatment for nationals is rising, as chronic disease becomes common even among those in their 20s and 30s, while high standards of care are increasingly expected. Secondly, the rapid growth in the expatriate population has put pressure on medical facilities. The net result has been a tendency for nationals to insist on treatment abroad, leaving the quality of public sector provision to dwindle.
The private healthcare sector presents tremendous growth prospects. Gulf countries have responded to the current challenges by moving increasingly to a market-based model where the private sector delivers many healthcare services and also pays for them through mandatory insurance schemes, which have been introduced in most GCC states.
Simultaneously, Gulf governments are developing primary care systems to ensure that chronic diseases can be prevented and treated outside of hospitals.
* Housing demand continues to rise
The huge investment in real estate projects across the GCC in the last decade obscures the fact that there is a serious housing crisis for many Gulf nationals. Demand for housing has increased given the high birth rate among the Gulf population which, although now slowing, has resulted in a large youth bulge. As a result, nationals have looked to their governments to provide them with affordable housing.
Increasingly, the private sector is being seen as the solution to rapidly boosting the housing stock for nationals, as well as financing opportunities. Several GCC states who understand the important role that the private sector can play, have been looking at public-private partnerships and providing incentives to encourage private financing of housing schemes.
To realise the promise of diversification and nationalisation policies, while maintaining social stability, Gulf governments will need to move further toward private sector solutions for providing for citizens’ needs, especially in healthcare, but also in education and housing. This means creating attractive jobs and providing a high-quality and affordable social infrastructure for the fast-growing Gulf populations.
The private sector cannot solve the region’s challenges alone. The public and private sector will need to work hand in hand to reduce the pressures on GCC governments.
Understanding the opportunities and assistance that the private sector can provide will be key for GCC governments to ensure continued social stability.
— The writer is a Partner, Advisory Services, EY MENA.
