Daily Management Review

Ghost employees are undermining economies of the Persian Gulf


The problem of employees that receive money, but do nothing and often don’t even come to work, has acquired the scale of the catastrophe that threatens economic development in the Arab world.

The governments of the Persian Gulf Arab countries spend a lot of money on salaries for civil servants. Many of them come to work to do nothing and they skip work quite often. In Kuwait, for example, more than half of the emirate's budget goes to the salaries of such ghost employees, Bloomberg writes. 

The ghost employees problem is part of a tacit agreement between the ruling families of Arab monarchies and their subjects. In exchange for money, citizens of Arab monarchies agree not to get into politics and not to wonder who and how to make decisions in the country.

This system of relations between monarchs and subjects suited all for many years. However, in recent years, after the strongest collapse of oil prices in 2014-15, Arab authorities have discovered that petrodollar reserves, which have always seemed inexhaustible, are not bottomless. Riyadh, Abu Dhabi, Doha, Kuwait, Manama (Bahrain) and Muscat (Oman) began to consider every riyal, dollar, pound sterling and euro. It’s not a crisis as such, but the subjects of kings, emirs and sheikhs also learned what it means to tighten belts.

Naturally, fighting with ghost employees is an excellent means for saving and replenishing the budget. However, the savings in this direction proved to be very difficult. It quickly turned out that it is fraught with numerous political risks, because it is an attempt on the social contract and social stability in the Persian Gulf.

This problem is most acute in large countries and, first of all, of course, in Saudi Arabia. It may happen fast in small Kuwait and Qatar, although it is obvious that solving the problem of ghost employees is necessary everywhere.

70% of the population Saudi Arabia are under 30 years old. By 2022, the number of able-bodied population will increase by another 1.2 million people. For comparison, this is four times more than the citizens of Qatar.

The government of Saudi Arabia, which employs almost two-thirds of the working-age population of the kingdom, naturally tries to reduce the budget deficit. Following the collapse of prices in 2014, the deficit increased by 16%, including with the help of salaries of civil servants. Prince Mohammad bin Salman, who now actually rules the kingdom on behalf of his elderly and sick father, has reduced salaries of civil servants along with the closure and freezing of many infrastructure projects and other measures. However, a few months later, he was compelled to go back on track and spend the saved money for paying state servicemen a monthly allowance of $ 266 a month.

Of course, the situation is changing, but very slowly. In the Arabian monarchies of the Persian Gulf, the overwhelming majority of foreigners work in private companies, where the salaries are lower. Now the authorities are trying to squeeze them out. Riyadh, for example, is campaigning to hire more local residents. In some sectors, bans on hiring foreign workers have recently been introduced.

However, ousting foreigners can only lead to a decline in employment. Many companies are simply ruined if they employ Saudi Arabian citizens and pay them a salary comparable to state-owned enterprises. Last year, 466,000 foreigners were laid off in the kingdom, and only 103,000 Saudi citizens were able to find jobs.

The government tightening the belts is even more dangerous, particularly with regard to the freezing of investment projects and creation of jobs in the private sector. McKinsey & Co., which helped the Crown Prince prepare an economic reform plan, estimated that $ 4 trillion of investments would be needed by 2030 to create 6 million jobs.

On the other hand, foreign investors are now reluctant to go to the Persian Gulf region. Thus, foreign direct investment in Saudi Arabia last year fell by more than 80%, according to the UN. Investors are frightened by Prince Mohammed's fight against corruption, during which he arrested dozens of officials and businessmen, including princes of the royal blood, and took away their assets without any ships and consequences.

Some experts believe that in the Persian Gulf authorities should open access to the wealth of countries not only through jobs. Here is an example of Alaska, where the state fund distributes the money received from the sale of oil between citizens.

And yet, despite the unpopularity of actions taken to solve the problem of ghost employees, it is necessary to go on. 

source: bloomberg.com