(MENAFN- Arab Times) Independent Oil Analyst When a commercial organization faces financial difficulties, it starts the cost-cutting process. Since the most important element in any organization is the human resources, the low performers are mainly considered in this process. The recent collapse in the oil prices forced most oil companies to reduce costs from all aspects, most importantly by cutting down manpower. Companies that serve the oil sector fired more than 30,000 employees when the oil prices dropped from $100 to $45 per barrel.
Oil producing countries are facing the same problem. Their fiscal budgets are prepared in consideration of oil prices ranging between $65 and $100 per barrel. With the current oil prices, none of the OPEC countries can meet their targets without incurring budget deficit by the end of the year. The Gulf countries are experiencing this deficit problem and are taking some steps to combat it through cost reduction, which however has not been very effective.
They have sufficient financial and investment reserves which could last them for the next 4-5 years if the oil prices continue to be this low. They may be forced to cut down salaries but that will not happen in the near future. Let us assume that salaries have been reduced and some subsidies have been lifted. In this case, the head of a household will have to manage his expenditures based on his income. First step he must take is reducing the number of servants or so-called domestic workers, as there are more than three such workers in one house.
By just reducing the number of domestic workers, the population of Kuwait will reduce by about 500,000 to 1 million, which means 25 percent reduction in Kuwait's current population of 4 million. This 25 percent decrease in population will reflect positively on all aspects such as reduced consumption of electricity, water and fuel, usage of roads, medicines and hospitals, etc, which will in turn result in direct savings and lesser use of government services by 15 percent.
Perhaps, it is time for the governments of Gulf Cooperation Council (GCC) countries to raise the issue of reducing excessive number of domestic workers and saving large sums of money without reducing salaries out of desperation, if situation gets to that stage. In time of need and lesser revenues, reducing population will not be much different from cutting down manpower. The only difference is that the government is still obligated to house and feed them as though they are citizens of this country. Such a scenario is unlikely to happen in the next ten years without much population growth but it is certainly something to think about.
Legal Disclaimer:
MENAFN provides the information “as is” without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the provider above.