Comments in the Economist’s article “An oil windfall offers Gulf states one last chance to splurge”, 7 Aug 2022

8 August, 2022
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Dr. Nasser Saidi’s comments appeared in The Economist’s article titled “An oil windfall offers Gulf states one last chance to splurge”, published on 7 Aug 2022.

The comments are copied below; click here to access the original article. 

Oil wealth offers other ways to shield citizens from cost pressures. In 2016 the Gulf states agreed to introduce a 5% value-added tax, and four have done so since (the laggards are Kuwait and Qatar). Saudi Arabia has gone much further. In 2020 it tripled vat to 15%, hoping to offset the fiscal effects of the pandemic and low oil prices. “You have a policy tool you didn’t have before,” says Nasser Saidi, a Lebanese economist who runs an advisory firm in Dubai. “Rather than increase spending or hiring, you could lower VAT.”

The Gulf states would be wise to focus on areas where they have clearer competitive advantages. Developing expertise in desalination techniques and technologies, much as Israel has done, could make a virtue of the region’s aridity. Investments in green-energy technologies like hydrogen could offer a source of revenues after the energy transition. Mr Saidi proposes investing in renewables projects and climate-mitigation strategies in Asia and Africa, as a green version of China’s Belt and Road Initiative. “This is a moment when you want to look again at how you provide foreign aid,” he argues.

 

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