GCC Private Sectors Roles Discussed at AUK

The Center for Gulf Studies (CGS) at the American University of Kuwait (AUK) hosted Dr. Steffen Hertog, Senior Lecturer of Comparative Politics at the London School of Economics and Political Science, to give his insight in a public lecture entitled "Diversified But Marginal: The GCC Private Sector as an Economic and Political Force". The lecture, which took place at the AUK campus, discussed the main reasons why the private sector in the Gulf Cooperation Council (GCC) countries appeared to be successful in terms of employment generation, capital formation, and economic diversification, yet remains politically marginalized and largely dependent on the state.

Dr. Hertog attributed this phenomenon to the nature of the rentier state that characterizes most GCC economies and state structures. The GCC state is the primary driver of demand, and state spending is the main driver for economic growth within the private sector. The lack of taxes has decoupled the private sector from the state, creating a one-sided relationship where the private sector is dependent on the state and does not contribute to the financing of public services.

Another factor leading to the marginalization of private sectors, according to Dr. Hertog, is the rigid divide in the foreign and local employment forces, as well as, the public and private wealth. The private sector employs mostly foreign workers and contributes little to national employment; which dominates the public sector. State-owned enterprises usually provide the most productive jobs for nationals, who, in turn, fuel consumer demand. As most wealth is privately held, the private sector also offers few investment opportunities for citizens, compromising the linkages to the national population at large. This vicious cycle is the main reason why local businesses experience marginalization in economic policy-making and politics.

In order to alter the status quo, Dr. Hertog outlined several options available for the private sector to adopt. These include: an acceptance of taxation, the reforming of corporate governance, and most importantly, an increase in the employment of nationals through increased use of technology and improved human resources. Employing more nationals in the private sector, however, will also require a change in state policy to reduce the incentives among the local population for seeking public employment.

Concluding the discussion with a series of questions from the audience, Dr. Hertog touched on several topics, including the available statistics about business sizes in the GCC, the correlation between democratic practice in GCC states and private sector involvement in public policies.

Dr. Steffen Hertog is a senior lecturer in comparative politics at the London School of Economics and Political Science. He was previously Kuwait Professor at the Chaire Moyen Orient at Sciences Po/Paris. His research interests include Gulf politics, Middle East political economy, political violence, and radicalization. Dr. Hertog has also been published in numerous prestigious journals. His book Princes, Brokers and Bureaucrats: Oil and State in Saudi Arabia was published by Cornell University Press in 2010.

The Center for Gulf Studies (CGS) at the American University of Kuwait aims to promote greater cultural understanding of and increased intellectual interest in the Gulf, by facilitating free and open academic discourse on a range of issues that both shape and challenge this critical region of the world. The goal of the CGS is to enable scholars, as well as political and civil society actors, both within and outside the region to contribute and add value to the burgeoning field of Gulf Studies, while at the same time informing and engaging the general public. To this end, the CGS encourages, supports, and cultivates interesting and original research on the Gulf, while regularly organizing a variety of public academic events such as lectures, roundtable discussions, and conferences. For more information about CGS, visit www.auk.edu.kw/cgs/project_lectures_kuwait.jsp

Released by the Office of Public Affairs on the 11th October 2012