Gulf states boost spending in hope of calming unrest

DUBAI (Reuters) – Oil-rich Oman and Bahrain are planning massive boosts in state spending aimed at calming popular unrest, officials said on Sunday.

But analysts said measures intended to buy public support may fail because grievances are deeper than financial worries among their relatively affluent citizens.

Oman expects spending in 2011 to be about 20 percent higher than previously planned, a finance ministry source said, as robust oil prices would help the country pay for its extra social spending.

The official, who asked not be named, said: “We are spending to satisfy protesters’ demands.”

A Bahraini finance ministry spokesman said the king had approved a budget of $16.44 billion over the next two years, a 44 percent rise in a state hit by unrest this year.

Worries in the oil-rich Arab Gulf, started by the uprisings that toppled the long serving rulers of Tunisia and Egypt, have been stoked by protests in Yemen, which look likely to end President Ali Abdullah Saleh’s three-decade reign.

“The measures that all of the Gulf states have been announcing are directly due to the concerns they have about the Arab Spring,” said John Sfakianakis, chief economist at Banque Saudi Fransi in Riyadh.

“Handouts have a certain timeframe and limitations… but that does not mean you will eliminate the possibility from society to demand wider political and economic reforms.”

A striking difference between Oman and Bahrain with Egypt, Tunisia and Yemen is their wealth, which has changed the nature of the protests in the streets. Per capita GDP in Oman and Bahrain is at least four times higher than Tunisia’s, seven times higher than Egypt’s and 15 times higher than Yemen’s.

In Oman, where protests have been relatively small, demands have focused on higher wages, jobs and an end to graft.

In Bahrain, the protests were spearheaded by the Shi’ite majority who feel they have been left behind in the state’s economic achievements by the Sunni ruling family.

Saudi Arabia, the world’s biggest oil exporter, is spending an estimated $130 billion, nearly 30 percent of its annual economic output, in government handouts to quell discontent.

The United Arab Emirates, together with Qatar the only countries in the Gulf Arab region which have so far avoided unrest, plans to fix the cost of about 400 foodstuffs to help UAE citizens manage higher global food prices.