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Fri 8 Nov 2019 10:58 AM

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Social services model operated by Gulf gov'ts 'unsustainable'

Strategy& says there is an opportunity for GCC governments to upgrade their social services model in the long-term

Social services model operated by Gulf gov'ts 'unsustainable'
The social services model operated by governments in the Gulf region is unsustainable financially and operationally, according to new research.

The social services model operated by governments in the Gulf region is unsustainable financially and operationally and needs to be evolved, according to new research.

A report by Strategy&, part of the PwC network, said there is an opportunity for GCC governments to upgrade their social services model in the long-term.

GCC governments have been urged to work with not-for-profit organisations (NFPs) and private-sector companies to supplement government offerings, moving social development beyond merely the government as a provider.

The report said that for decades, the region’s oil economy has paid for the provision of government-backed social services delivered by the public sector.

"However, an extended period of low oil prices has negatively affected state finances, and many governments simply cannot meet all the needs of all their constituents," the report noted.

Fadi Adra, partner with Strategy& Middle East, said: “Given the current economic climate, it is apparent that the social services model we have in the GCC is not sustainable; it’s time for governments in the region to engage further with NPF organisations, as well as the private sector to be able to provide for its citizens without burdening the GDP.

"While this will need concerted effort and change in regulations, it is, in fact achievable.”

Adra added: “Demographic trends compound the challenge. Populations in the GCC region are aging, due to improved healthcare and increased longevity, putting a strain on government-funded services. The unemployment rate among nationals of these countries is often high, as countries continue to rely on expatriates for most skilled labor in the short to medium term.”

The Strategy& report outlines three potential mechanisms that Gulf countries could focus on including building an ecosystem of NFPs, making them more financially sustainable, creating ties with the private and public sectors, and putting the right regulatory environment in place.

The report also said governments should implement performance-based payments by the public sector to reward favourable outcomes, including social impact bonds, which bring investors to the market for the most promising social initiatives.

Sami Zaki, principal with Strategy& Middle East, added: “This model has been used successfully in several western countries and can in fact be replicated in the Middle East. We believe that change can be affected by easing regulations as the current NFP ecosystem is vastly underdeveloped in the region"

Zaki said any Gulf country has around 1,000-2,000 NFPs compared to a country like the United States which has about 1.5 million.

The report warned that the current approach to social services provision in the GCC region countries is unsustainable.

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