The Gulf states have been debating privatization for 15 years, but with limited progress. This slow pace reflects several concerns, such as increased unemployment — already a major problem in Bahrain and Saudi Arabia and a potential problem in Oman and Kuwait — and rising prices, due, for example, to elimination of subsidies to the national electricity company. Furthermore, the Gulf states realize that rushing into privatization without planning could disrupt private-sector activities, especially since a successful privatization program requires prerequisites that some have only recently achieved: a functioning stock market, legislative infrastructure, sophisticated financial services and a functioning legal framework, among other things.

One major factor behind the Gulf Cooperation Council's (GCC) move toward privatization has been the need to relieve the governments of the financial burdens of capital expenditure. Another factor is the lack of equal opportunity among the citizenry. For instance, financial strains on state budgets may raise concerns over state revenues reserved for the ruling families. The implications of enforcing hardships (e.g., unemployment and rising prices) on the population, while the ruling elite maintain or increase their share of state revenues, could generate enormous public resentment. Privatization may reduce the current advantage of the ruling families in the private sector (such as preferential treatment by state authorities and immunity from judicial proceedings). On the other hand, alienating privileged members of the business community and the royal families could erode the rulers' support base and generate a political backlash.¹ The recent pushes in the Middle East for radical reforms are political on the surface, but they are deeply rooted in the search for fair economic opportunities.

A closer look at the Gulf countries suggests that many of their ruling elite are now showing a will to forgo some of their control over economic power and to encourage participation of the private sector in the process of wealth creation, consequently alleviating poverty. This is being progressively achieved through privatization programs currently in progress in a number of Arab countries and the development of the region's financial markets.