How the Gulf States Deal with Coronavirus

by Maged Srour

Deserted streets, shuttered businesses, mosques without congregations: coronavirus is altering lives in the Gulf states just as it is in the rest of the world. The six states of the Gulf Cooperation Council (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and United Arab Emirates) have activated various measures to block the spread of the virus, yet contagion continues each day.

 

With more than 3000 cases (from 30 March 2020), the Gulf states realised early that this pandemic would spare no region and that it is necessary to put in place an action plan to respond with adequate planning for the post-crisis period. This pandemic is not only a global health emergency: it has spawned a deep economic crisis as well. However, the crisis is also generating some important opportunities. This short analysis looks at both the peaks and valleys in the Gulf during this crisis.

 

Lockdown

As many countries around the world, the Gulf states have shut cinemas, entertainment centres, gyms, spas, schools and universities—all activities that include gatherings or some sort of mobility of groups of people have been, largely, cancelled. The Gulf states are aware of the potential economic impact both on national wealth and on their citizen’s well-being. To offset the impact, each Gulf state has embarked on new economic strategies. Bahrain launched a 4.3 billion Bahraini dinar (€10 billion Euro) economic stimulus package, which is equivalent to 29.6% of the country’s annual GDP. Kuwait authorised as $1.6 billion USD fund to ministries and state agencies to fight coronavirus, as well as important donations to the World Health Organization ($40 million) and aid provisions to Iraq, Iran and Palestine. Oman announced a series of measures, notably  tax, fee and loan exemptions for industries and businesses as well as a reduction of 2020 budgets by 5%for the country's ministries and civil, military and security government agencies. Qatar allocated 75 billion Qatari riyals (€19 billion  Euro) to the private sector and banks to limit economic effects, as well as a €9 million Euro financial assistance package to Palestine and six tonnes of medical equipment and supplies to Iran. Saudi Arabia, through its Monetary Authority (SAMA), announced a 50 billion SAR (€12 billion Euro) package to support the banking sector, financial institutions and small and medium-sized enterprises (SMEs). The Central Bank of the UAE announced a €25 billion (Euro) set of measures  to support the country’s banks. Abu Dhabi also sent 32 tonnes of medical supplies to Iran. The aforementioned should not be taken to imply that all economic costs will be mitigated as there remains many unknowns, but these are steps in the right direction. It is also important to illustrate some of the more pronounced sectors that have already been impacted.

 

The Coronavirus Impact

First, as part of the global air-transportation links, the Gulf states have been forced to contend with the inevitable slowdown after major airlines sharply reduced their air traffic owing to the global travel limitations. Key regional airlines, such as Etihad and Emirates, have asked to their employees, including executives, to accept pay cuts for April, after which they will be reviewed.

 

The dip in air transport is matched with the decline in tourism further illustrated in a string of cancellations of major entertainment events. The ‘Jeddah Seasons’ and the ‘Red Sea International Film Festival’ in Saudi Arabia, the ‘Qumra’ mentoring event and Moto GP in Qatar, the Formula 1 Grand Prix in Bahrain, a Petroleum and Energy Show in Oman and an art expo in Dubai are just a few of the events that have been either postponed or cancelled because of coronavirus. This is a tough measure particularly for Saudi Arabia and the UAE. The former receives some 20 million religious tourists annually but has recently opened up to non-religious tourism and liberalised the visa process.  At the same time, the UAE attracts more than 17 million visitors every year and both  have invested heavily in their entertainment sector in order to obtain significant revenue from it and therefore add wealth to the country. The UAE fears the impact this crisis might have on the Dubai Expo 2020 scheduled for October this year, while Riyadh is concerned about the impact on the G20 summit in November, of which the Kingdom holds the presidency.

 

Oil prices have dramatically fallen following the OPEC+ group failed agree to cut output. Crude futures dropped more than 20% after Saudi Arabia said it would raise production and give discounts on its oil. This tumble is likely to be problematic for most of the Gulf States, as many of them rely heavily on oil revenues for the functioning of their economies and hence the timing of this drop — although unrelated to coronavirus — is particularly stinging given the freeze of other economic activities and the increased public spending demands.

 

On the flip-side, the pandemic not only about closures and severing, there are an assortment of opportunities, as well. For instance, the same Gulf airlines that saw a dip in passenger flights also saw a 20% surge in demand for cargo services since the demand for essential goods and medical supplies have been spiked. This is enhancing the Gulf states as crucial hubs in international supply chains.  At the same time, this is boom season for sectors connected to the digital sphere. In Saudi Arabia, for instance, the delivery app ‘Nana’ has raised some $18 million (USD) from investors, including the venture capital fund STV and Middle Eastern Venture Partners, as the virus lock-down boosted demand for its services. On 22 March, Bahrain announced another spike in GCC regional start-ups with ‘Transcend Travel Technology,’ ‘Bookr,’ ‘Digital Transformation Professionals ADTCs,’ ‘Enwan Al Jazeera,’ ‘Dynamic Cloud,’ ‘CodeBase Technologies,’ and ‘Innosoft,’ all setting up in the country. These are but a few examples — there are many others across the region — of how cyber space is being further harvested during this crises.

 

Finally, in relation to geopolitics, there is concern given the lacklustre Iranian approach to dealing with the outbreak of COVID-19. Most cases reported in the Gulf originated in Iran with people flying in or returning from Iran in mid-February and infecting people in Kuwait and Bahrain. Iran also took the unusual — and illegal — decision not to stamp the passports of people from Bahrain and Saudi Arabia making it very difficult to track infected people and place them in quarantine. This increased regional tensions particularly when Bahrain accused Tehran of ‘biological aggression’ for ‘hiding the spread of the epidemic.’ Bahrain’s Interior Minister, Shaikh Rashid Bin Abdulla Al Khalifa, noted that ‘with its behaviour [Tehran] allowed the virus to travel abroad…this represented biological aggression.’ Politics aside, all Gulf states are sympathetic to the Iranian people and hold the government, not citizens, responsible for its behaviour. This is reflected in the fact that all the Arab Gulf states either directly send medical equipment and/or food supplies to the country or support organisations that do so in proxy.

 

How this will all end is unclear. However, it is important to know that the Gulf states face many of the same conditions and perils as those in Europe and understanding how each other has worked at mitigating the negative impacts of the virus can only help in strengthening bonds in the Euro-Gulf space.

03 April 2020

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