July 11-13, 2023, Cambridge UK

3 DAYS / 10 Workshops

Business-State Relations in the Gulf

The relationship between business and government is commonly regarded as a key determinant of economic growth and development. It has a critical bearing on the outcomes of policy reform and the performance of practically every area of the economic life of any country—from investment, trade, and productivity to regulation, competition, and entrepreneurship. It might also be a principal explanatory factor behind variations in economic grow ...

The relationship between business and government is commonly regarded as a key determinant of economic growth and development. It has a critical bearing on the outcomes of policy reform and the performance of practically every area of the economic life of any country—from investment, trade, and productivity to regulation, competition, and entrepreneurship. It might also be a principal explanatory factor behind variations in economic growth and performance among countries. The Gulf states—defined herein as countries of the Gulf Cooperation Council, Iran, and Iraq—have been undergoing major economic reforms to cope with serious economic and political challenges stemming from the decline in petroleum prices and popular demands for economic sustainability and growth. In these efforts, on the one hand, the role of the private sector is becoming ever more important to the success of any reform. On the other hand, many of the proposed reforms represent not only change in the “social contract” that has existed throughout the petroleum age, but also in the state-business relations and citizens’ relations with both the public and the private sectors. Nonetheless, relative to the voluminous scholarship on business-state relations in other regions, especially East Asia and Latin America, the 2 subject has been understudied in research on the political economy of the Middle East and the Gulf countries. This workshop will be devoted to an intensive, rigorous, and theoretically informed quantitative and qualitative examination of the interface and interactions between the private and public sectors of the Gulf states, with a focus on a core set of policy areas. It will aim at advancing a more illuminating perspective on the dynamics and evolution of this relationship in light of key economic and political changes, and on its effects on economic reforms and the economies of these countries. 

The second decade of the 21st century could very well go down in history as the decade when the realities of economic reliance on petroleum—an inherently volatile and exhaustible resource— and fears of persistent low petroleum revenue brought into question the viability and sustainability of the existing social contract and made economic reform imperative. Some states even declared the reliance of state-driven development through reliance on petroleum rents as unsustainable, justifying various reforms. The primary economic triggers for this rethinking is the collapse of the petroleum price since mid-2014 and the ensuing government revenue declines, inflationary pressures, and alarming budget deficits. Gulf economies have faced yet other challenges, including limited progress in economic diversification plans, technological advancement, and national competitiveness. Added to these problems are lagging labor productivity, limited innovation, fears of potentially high unemployment amid young, rapidly growing populations, and bloated public sectors. In the case of the GCC states, dependence on foreign labor in the private sector has been considered an economic challenge in their official economic development plans. Accompanying these economic changes and hurdles were heightened political pressures in an already vulnerable political environment due to existing political and geopolitical tensions, including the turmoil sparked by the “Arab Spring” and violent conflicts in Iraq, Syria, and Yemen. Besides pressures to address economic sustainability and diversification requirements, governments across the Gulf have confronted mounting citizen demands, fueled by social media, for employment, equality, economic opportunity, and an end to corruption. Economic and political changes have brought about an unprecedented awareness on the part of the business community and policymakers alike that the status quo is on the brink of change. Gulf states have responded by announcing a wide range of economic and fiscal reforms aimed at cutting budgets and achieving diversifications, with varying degrees of implementation. Of more immediate concern to this workshop is another government response: adopting plans to increase the role of the private sector in the economy. In the GCC states, for example, governments have declared, more emphatically than ever before, their intention to turn to the private sector as the generator of growth in employment and investment and as the provider of income and services. Although they differ in substance, the “vision” statements—economic blueprints cum wish-lists—that that have proliferated in the GCC all give pride of place to the private sector as the engine of growth and development. 3 Private enterprise and private capital, including foreign direct investment, have been heralded as the means to drive economic diversification. Toward that end, governments have placed heavier emphasis on, among other measures, privatizations and public-private partnerships in a broad range of sectors, including power, transportation, healthcare, and the environment. Of course, declamations by Gulf countries about commitments to transitioning to private sector-driven economies are hardly new. Privatization and boosting the share of the private sector in GDP have existed in economic development plans for decades, with results that are far from stellar. Every one of Saudi Arabia’s five-year development plans, for example, includes a paean to the private sector. The professed emphasis on private business and private enterprise could well turn out to be another of the periodic oscillations between the public and private domains that Albert Hirschman charted in Shifting Involvements: Private Interest and Public Action. Over the past decade, however, the overwhelming rhetoric on the imperative of reducing government dominance of economic activity, coupled with the adoption of ambitious economic blueprints and the introduction of a raft of reform initiatives, suggests that the emphasis on the private sector is more than ephemeral. These developments mark the beginning of a serious effort to change the status quo and the social contract, one that has profound implications for state-business relations and the political economies of the Gulf countries. As such, these developments make this workshop especially timely and relevant. Business-state relations are bound to be a determinant of the success (or lack thereof) of economic and policy reforms and long-term development plans. Business elites exercise a major influence on the orientation and outcomes of socio-economic policies in the Gulf countries. The scope of their impact spans the labor market, diversification, privatization, regulation, and other policies. Government policies, in turn, affect the operations, composition, and economic/political power of business elites. Private agents are already playing a greater role in many sectors of national economies, including manufacturing, telecommunications, transportation, and tourism. Therefore, it behooves us to explore the implications of the current wave of economic reforms for a reconfiguration of the public-private sectors relationship as well as the implications of the existing business-state relationship for the success of economic reforms and changes in socio-economic structures. Such an assessment must proceed from an examination of the nature of that relationship in countries of the Gulf, how it has evolved over time, the track record of attempts to restructure it in specific policy arenas, and its effect on economic growth and development. Existing scholarship on the Gulf offers little purchase on this task. Works on the private sector in Gulf countries as well as in-depth analyses of the relationship between the private and public sectors are limited. There are relevant works in the context of other regions, such as Melanie Cammet’s volume on Morocco and Tunisia (Globalization and Business Politics in Arab North Africa), Ayşe Bugra’s on Turkey (State and Business in Modern Turkey), Peter Evans’ on Korea (Embedded Autonomy: States and Industrial Transformation), and Mahrukh Doctor’s on Brazil (Business-State Relations in Brazil). 4 The literature on business-government relations in the Gulf countries, however, remains limited. Studies on recent economic reforms and their challenges in the Gulf are far from plentiful in the economics and politics literature. Moreover, in the context of the Gulf countries, there is a dearth of quantitative analyses of business-state relations and their contribution to economic growth and development. The proposed workshop thus aims to fill a void in this vital area. The conundra of analyzing business-state relations in the Gulf states A discussion of the nexus between business and government requires clearing some of the conceptual underbrush. The essence of this nexus consists of interactions between the private and public sectors at both the macro and micro levels. These interactions can be formal or informal. They can be by underpinned by mechanisms and processes that over time become routinized and institutionalized, or they can remain fluid, ad hoc, and variable, depending on the issues and actors involved. Business-state interactions can be adversarial or cooperative or, more likely, include both adversarial and cooperative elements. They can be collusive, even predatory, or, albeit much less likely, conducted at arms-length by organizations (both business and governmental) that are, by and large, autonomous from each other. Business-state interactions can also be underpinned by channels, associations, and networks that have widely different levels of strength and coherence, with different consequences for economic performance. However, untangling the complex linkages between business and government is far from straightforward. The boundaries between the private and public sectors are often blurred; in fact, the two cannot be said to be entirely distinct in any country of the Gulf, although they are often treated so analytically. There are intimate ties between business leaders and ruling families throughout the GCC: royal rulers and government officials—both of whom constitute state actors—are involved in business ventures with otherwise private firms across broad swathes of the economy. What passes as “economic elites” includes networks of individuals from both the nominally private sector as well as the public sector. The same goes for rent-seekers and rent-dispensers. Neither business nor the state is a homogenous entity; rather, each consists of a multitude of individuals, networks, and organizations with diverse resources and capabilities and divergent interests and strategies. As Giacomo Luciani in has noted, the private sector includes not only entrepreneurs and financiers, but also “pure rentiers”—to which we might add a variety of other actors, such as foreign creditors and investors. One challenge for workshop participants, who will be dealing with the complexities and ambiguities of the rubrics of “business” and “the state,” is to disaggregate and specify in detail the actors they are examining.

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Dr. Don


Lecturer and Research Associate at the Center for Middle Eastern Studies -
Harvard University

Dr. Manal


Research Fellow -
Oxford Institute for Energy Studies

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