The UAE and Saudi Arabia gear up for an oil-free future
According to the British newspaper, this has to do with the oncoming oil crisis. Not the one that is pushing oil prices up, but the one that is deemed to lead to the decrease or even the end of the oil supply. Actually, both the UAE and Saudi Arabia no longer find it sustainable to rely on an economic model that is overly dependent on oil. However, although they are already diversifying their economies, oil remains their leading source of wealth. Is the climate emergency forcing them to act? Some observers see all this as a PR stunt aimed at attracting more expatriates. You will recall the UAE's seduction operation in 2020 when the rest of the world was still locked down.
On the other hand, it must be pointed out that the UAE and Saudi Arabia did not wait for the recent energy crisis to think about a post-oil world. In 2016, during the oil crisis, the Crown Prince of Saudi Arabia, Mohammed Bin Salman (MBS), presented his "Vision 2030" plan, in which he outlined a series of measures, including massive investment in renewable energy. But the Saudi strategy is still considered controversial, even if MBS aims to make the country the world's number one in renewable energy, with an investment of $100 billion allocated for constructing 16 nuclear reactors by 2030. Other measures include the partial privatization of companies, including the number one oil company Aramco, to bring in more foreign capital. At the same time, MSB acknowledged: “We all have a heavy dependence on oil in Saudi Arabia, which is dangerous.” It's worth noting that the United Arab Emirates had launched its "Plan 2020" long before Saudi Arabia. This plan was all about technological revolution based on the production of renewable energies that embraced hydraulic, hydrogen and solar. Attracting more wealthy foreigners would help diversify sources of investment. This would be a way out of the "all oil" situation.
Is it a new strategy for leaders of the oil industry?
The UAE has largely benefited from the rise in oil prices in 2022, which allowed the country's GDP to jump by +5%. The gross domestic product from oil thus represented 8.1% of Emirati wealth in 2022. The UAE has also been able to capitalize on hydrocarbons with an increase of 4%. Even with the quota limitation decided in September 2022 by OPEC+, 2022 was an excellent year for the UAE, the world's 7th-largest oil producer and 13th-largest gas producer. The same is true for Saudi Arabia. The world's second-largest oil producer (behind the US) posted 8.7% growth in 2022. However, these good figures are largely due to a strong increase in oil activity: +22.9% compared to the previous year.
In any case, the oil business is indeed supporting the UAE and Saudi economies. In 2022, for the first time since 2013, the Saudi government's budget was in surplus. Thanks to increased oil activity, the government has been able to balance its books earlier than expected, as of 2022 instead of 2024. In the United Arab Emirates, the Abu Dhabi National Oil Company (ADNOC) even plans to increase its oil production by 2027. The country has also achieved a balanced budget by 2022, with a surplus of 7.7%.
Considering these economic figures, it is difficult to imagine a post-oil strategy without oil. However, ADNOC justifies its strategy with the need to secure short-term liquidity. The company wants to take advantage of the state's oil capacities for better investment. Meanwhile, Mohammed bin Salman announced on July 16, 2022, that oil production would peak in 2027 and gradually decline. So how exactly does MBS envision the "Vision 2030" plan? Is he already anticipating resource depletion? Other oil-producing countries, including Algeria, Angola and Nigeria, are already less profitable now and are being referred to as "mature" oil fields that will only produce less over time.
Citizenship for expatriates: What are the government's goals?
So, what is the connection between economic diversification, immigration, and access to citizenship? Well, for the United Arab Emirates and Saudi Arabia, the formula is quite straightforward. Easier access to citizenship is a way to flex the rules in a globalized trade environment. If the economy must adapt to the post-oil world, societies must too.
In Saudi Arabia, expatriates represent about 36.7% of the 35 million inhabitants, while in the United Arab Emirates, expatriates account for almost 90% of its population of 10 million. At the same time, the Emirati government is reportedly considering welcoming an additional 3 to 5 million. Hence the decision to make access to citizenship easier with the aim of attracting foreigners. But not just any foreigners.
Those who tried the path to citizenship in Gulf countries know the drill. It can be indeed a long and bumpy trip. For quite some time now, Gulf countries have been fiddling with the various types of available visas. Citizens usually can enjoy special rights, such as subsidies or interest-free loans to buy a home. But beyond these benefits, governments and part of the population have long feared that an increase in naturalization would undermine national identity.
According to The Economist's study, the various current crises have increased awareness in Gulf states. As a matter of fact, they have realized that relaxing rules meant being more liberal and, so, more competitive in a global trade environment. Other advanced countries are looking to attract foreign talent too. By making it easier to obtain permanent residence and citizenship, the UAE and Saudi Arabia are doing what it takes to play on the same level as other economic powers.
The immigration challenge for Gulf Countries
The past few years have been marked by many changes. In the UAE, the weekend is now Saturday and Sunday, as in other liberal economies, rather than Friday and Saturday, as in many Arab countries. Unmarried couples can now live together, and Muslims are allowed to drink alcohol. Saudi Arabia is granting more rights to women. They can now drive, and travel without a man's permission and twice as many women are working: 35.6% in 2021, as compared to 2016. But men are still the majority in the labor market (66.8%) and earn about 34% more than women. In addition to the abolition of the kafala (sponsorship system) for foreign workers, the government can now boast about the country's progress in terms of human rights. On September 21, 2021, Saudi Arabia even held its first human rights summit with the European Union. All these positive points improve the country's image on the international scene and among expatriates.
Is this enough to attract more wealthy expatriates to the Gulf countries? Although MBS's “Vision 2030” strategy plan is believed to embrace several economic and social reforms, little room seems to be left for human rights issues. The Saudization of jobs, particularly in the administration (37% of Saudi men) and energy sectors, is still underway. Women are slimly represented in education (27.5%), trade (18%) and health (9.8%), while domestic activities (21%), trade and automobiles (19.5%), construction (14.7%), and manufacturing (12.3%) are left mainly to foreign workers. Observers believe that the Saudization of jobs is still hampered by overly high government quotas. In reality, companies have to cope with skill levels that often fall short of standard requirements.
When will citizenship be made more accessible?
It will take more time for the rules in the United Arab Emirates and Saudi Arabia to be truly relaxed. In both countries, potential citizenship is still reserved for a handful of expatriates. At the end of the day, the newly announced measures are aimed at the elite: entrepreneurs, investors, doctors, and distinguished scientists. In May 2021, Abu Dhabi announced it would offer citizenship to wealthy foreigners. Saudi Arabia is doing the same by opening its doors to wealthy expatriates. In 2021, the country was competing with Dubai and announced its intention to attract 500 multinationals. While Dubai remains the most "liberal" city, being a magnet for expatriates, Riyadh is looking to become a new giant in economic relations. The possibility of facilitated citizenship in a post-oil future should therefore be seen as another investment avenue for the growth of Gulf economies.
