The Topic and the Aim of the Book

Public expenditure shaped the economic development patterns in the six member countries of the Gulf Cooperation Council (GCC; Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, United Arab Emirates). The start of oil production provided GCC governments with large inflows of oil export earnings. These inflows allowed GCC governments for strong increases of public expenditure levels over the following decades which altered local economies in various aspects.

Prior to the start of oil production in the early-to-mid-20th century, economic activities in the pre-industrial societies on the Arabian Peninsula primarily consisted of trade, fishing and pearl diving. In addition, modern day infrastructure as well as public health and education services were virtually non-existent. This all changed with the start of oil production and, even more so, with the strong increase of oil prices during the years of the first oil price boom (1974-1985). A substantial expansion of public education and health services contributed to a large improvement of socio-economic development levels. In addition, oil wealth gave rise to a very important role of GCC governments in production and employment patterns. While the trade balances and the fiscal accounts of the GCC countries continue to be dominated by oil and gas export revenues, all GCC economies witnessed strongly rising levels of economic activity outside the oil and gas sector over the last decades.

This book examines in more detail the impact of public expenditure on non-oil economic growth in the three GCC countries Bahrain, Oman and Qatar since the late 1970s. While the academic literature highlighted different roles of public expenditure within the political economies of the GCC countries, very little empirical research has so far analysed the overall impact of public expenditure on non-oil economic growth dynamics. This book aims to fill this gap by elaborating the country-specific characteristics of the links between public expenditure and non-oil economic growth in Bahrain, Oman and Qatar against the background of economic growth theory.

The perspectives on the economic and political roles of public expenditure in the GCC countries are not uniform across different strands of the academic literature. Proponents of rentier state theory such as Luciani (1990) and Beblawi (1990) do not attribute public expenditure an important role for fostering the development of non-oil economies. As GCC governments command over sizeable external oil rents, they are presumed to have only little incentives for pursuing a developmental economic policy.