The job-generating measure will give $10 billion to each country to upgrade housing and infrastructure over 10 years.
Foreign ministers from the Gulf Cooperation Council of the UAE, Bahrain, Oman, Kuwait, Qatar and Saudi Arabia, announced the measures after a three-hour meeting in the Saudi capital.
The UAE Foreign Minister, Sheikh Abdullah bin Zayed, said: “We believe this is an ambitious programme and it also shows strong support from the GCC.”
The countries are forming a committee to decide on the necessary mechanisms for the programme, the foreign ministers said, and will meet next in two weeks.
Bahrain’s foreign minister, Sheikh Khaled bin Ahmed al Khalifa, said on Twitter as he announced the aid package: “Dear Bahraini … messages of unity, brotherhood and social harmony are our most powerful weapons to fight sectarian strife.”
John Sfakianakis, the chief economist of Banque Saudi Fransi, said: “This is a huge commitment by GCC countries to support Bahrain and Oman."
“I don’t think this will just help to create jobs. It will be an enormous confidence booster for the entire GCC. It shows it has the capacity and willingness to help its members,” he said.
Young people across the Arab world have complained about high unemployment and limited economic prospects, forcing many governments to come up with incentives aimed at calming the unrest. Protests have taken place in both Bahrain and Oman in the past few weeks, demanding economic and constitutional reform, and further protests are planned today in Kuwait, Bahrain and Saudi Arabia. The violence has deterred investors and sent the Bloomberg GCC 200 Index of Gulf shares down 6.6 per cent so far this year, while oil rose to a 2 1/2-year high as protests in Libya, holder of Africa’s largest oil reserves, escalated into civil war.
The GCC pledges helped the region’s stocks pare losses yesterday, with Oman’s MSM30 Index rising 0.5 per cent and Bahrain’s BB All Share Index adding 0.1 per cent.
The Bahrain protests began on February 14. Shiites, who represent as much as 70 per cent of the population, say they face discrimination.
In Oman, protesters are demanding higher wages and pressing the ruler, Sultan Qaboos, to name a prime minister and give more power to the consultative council.
In both countries, the rulers have taken measures aimed at placating the protesters. On Wednesday Bahrain announced plans to spend $6.6 billion on new homes to address a shortage, and Crown Prince Salman bin Hamad Al Khalifa has invited the Shiite-led opposition to enter a “national dialogue”. The largest opposition group, al Wefaq, said it wants “significant steps” from the government before agreeing to negotiate.
In Oman, Sultan Qaboos dismissed 12 cabinet ministers and ordered the government to hire 50,000 Omanis and pay $390 a month to jobseekers.
Saudi Arabia, the largest GCC economy, has also taken steps to avert protests spreading to the kingdom, pledging more than $30 billion of spending to build homes, create jobs and increase social security payments.
In the United Arab Emirates, a petition has been circulated by academics and activists calling for elections to the legislative advisory body, the Federal National Council.
A UN spokesman Martin Nesirky called on Bahrain's neighbours to "support a dialogue process and an environment conducive for credible reforms" in the island emirate last night.
He said the UN "remains concerned at the apparent impasse in launching a national dialogue" and called for a "broad-based, peaceful and meaningful dialogue involving the political opposition and civil society".
* With additional reporting by Reuters and Bloomberg