March 10, 2011 / 3:27 PM / 7 years ago

Gulf states launch $20 billion fund for Oman and Bahrain

<p>An anti-government protester flashes victory signs in front of the Bahrain Immigration Directorate in Manama March 9, 2011. REUTERS/Hamad I Mohammed</p>

RIYADH (Reuters) - Gulf Arab oil producers launched on Thursday a $20 billion aid package for Bahrain and Oman, both of which are facing anti-government protests inspired by uprisings across the Arab world.

The job-generating measure, which will give $10 billion to each country to upgrade their housing and infrastructure over 10 years, was above the $10 billion to $15 billion indicated by officials during discussions earlier this week.

Youths across the Arab world have complained about high unemployment and limited economic prospects, forcing many governments in the region to come up with incentives aimed at calming the unrest.

“They are probably scared by the fact that revolution is taking place in various places. They probably all agreed because the old guard, they would love to keep the status quo,” said Martin Hvidt, associate professor at the Center for Contemporary Middle East Studies at the University of Southern Denmark.

“If you have land and you have this amount of money you will be able to create a lot of housing for poor segments (in Bahrain). That would be definitely a contribution to calm the situation, no doubt about that,” he said.

Protests are planned in numerous Gulf countries on Friday, including Kuwait, Bahrain and Saudi Arabia.

Foreign ministers from the six-nation Gulf Cooperation Council, which comprises Bahrain, Oman, Kuwait, Qatar, Saudi Arabia and the United Arab Emirates, announced the measures after a three-hour meeting in the Saudi capital.

“We believe this is an ambitious program and it also shows strong support from the GCC,” UAE Foreign Minister Sheikh Abdullah bin Zayed al-Nahayan told reporters.

SOCIAL SPENDING

<p>Sheikh Mohammed Habib Muqdad shouts anti-government slogans while talking to protesters in front of the Bahrain Immigration Directorate in Manama March 9, 2011. REUTERS/Hamad I Mohammed</p>

The GCC countries are forming a committee to decide on the necessary mechanisms for the program, the foreign ministers said in a statement.

“That’s quite sizeable. Even if it is split equally between Bahrain and Oman, it seems there is maybe an effect of assisting Bahraini economy more, because it is smaller,” said Giyas Gokkent, chief economist at the National Bank of Abu Dhabi.

The package amounts to over half of Bahraini economy and nearly 22 percent of Oman’s gross domestic product, data shows.

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The Arab world has been shaken by popular protests this year, that started in Tunisia and have recently spread to the less oil-rich nations of the Gulf region.

Bahrain, a small island kingdom, has been particularly hard hit as long simmering tensions within its majority Shi‘ite population burst into the open.

“Dear Bahraini ... messages of unity, brotherhood and social harmony are our most powerful weapons to fight sectarian strife,” Bahrain’s Sheikh Khaled bin Ahmed al-Khalifa said on Twitter as he announced the aid package.

Worried about spreading rebellions, Saudi Arabia and the United Arab Emirates are planning to spend billions of dollars to improve the living standards of their poorer citizens and are equally anxious to put a lid on unrest in their neighbors.

Oman and Bahrain are small non-OPEC oil producers that have less fiscal flexibility to boost spending than oil giants such as Saudi Arabia, which has revealed an estimated $37 billion plan to ease social tensions.

However, robust oil prices at around $116 per barrel on Thursday are helping ease budget pressure for the two countries to finance their recently announced social handouts.

“In terms of fiscal stimulus, it is enormously important for both Bahrain and Oman,” said John Sfakianakis, chief economist of Banque Saudi Fransi.

Additional reporting by Martina Fuchs and Martin Dokoupil in Dubai, Writing by Crispian Balmer, editing by Diana Abdallah

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