Qatar tops regional economic league table

QATAR has the most competitive economy in the Arab world thanks to strong public institutions, low corruption levels and a transparent legal system, according to an international study.

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By  Richard Agnew Published  April 10, 2005

QATAR has the most competitive economy in the Arab world thanks to strong public institutions, low corruption levels and a transparent legal system, according to an international study. The Arab World Competitiveness Report 2005, which was published by the World Economic Forum (WEF) last week, said that the gas-rich emirate had the most business-friendly climate among 12 Arab countries it surveyed during 2004. The first such benchmarking exercise for the region unsurprisingly placed the smaller Gulf states at the top because of their “stable macroeconomic environments and institutional reforms providing the background against which governments are engaged in processes of rapid modernisation”. But it also urged governments across the region to cut red tape, reign in public debt, tackle corruption and adopt new technology or face a widening gap between them and the rest of the world. It also warned of a ticking “timebomb” of social instability in a region where it is reckoned that 100 million people will be out of work by 2020. The UAE came in second behind Qatar, helped, the WEF said, by a strong economy, a thriving private sector and the most effective use of technology in the Arab world. Bahrain ranked third, followed by Oman, Jordan, Tunisia, Saudi Arabia, Morocco, Egypt, Algeria, Lebanon and Yemen. “The way we measure competitiveness is to look into issues of governance, the operation of the court system and questions of intellectual property rights and transparency. The Gulf countries have moved up a little faster in that direction than others,” said Augusto Lopez-Claros, director of the Geneva-based NGO’s Global Competitiveness Programme and co-author of the report. Yemen had the least stable macro-economic environment of all countries assessed, with double-digit inflation, a large budget deficit and an extremely pessimistic business community, according to the report. The WEF also expressed concern over Lebanon’s weak economy and high debts, ahead of the elections planned there for May. “Regardless of what government emerges in Lebanon, it is going to have to tackle a fiscal crisis that has been in the making for many years,” said Lopez-Carlos. “There are not many countries with levels of public indebtedness at 200% of GDP. You can have, exceptionally, a public sector deficit of 10% to 12% of GDP because there are some factors that have boosted spending or contributed to an erosion of revenue. But you can’t have it year in or year out. Whatever government comes to power is going to have to tackle these issues head on,” he added. While expressing concern over the reluctance of governments to implement reforms, the report said that the Gulf states at the top of the list had shown that policies can make an impact on the lingering difficulties Middle Eastern countries have faced. But it also pointed out that the Gulf states had fallen behind others, such as Lebanon, in some areas, particularly around education and the creation of intellectual property. “For countries that have very high levels of per capita income, it is surprising to see that they don’t really have world-class educational institutions,” said Lopez-Carlos. “The [Gulf countries] are moving in that direction and doing it in a very creative way by importing high level institutions. But that’s not happening everywhere. Without boosting the qualifications of the population, you are not going to have innovation and these countries are not going to move to the next stage of development,” he added. The WEF repeated calls for Arab governments to accelerate economic, social and political changes, particularly to reduce their dependence on oil revenues, the continuing dominance of the public sector, and high levels of unemployment. “There is growing acceptance among prominent leaders in these countries that only reform — and comprehensive economic reform — will enable the region’s development agenda to move forward, and to broaden the sources of growth,” said Professor Klaus Schwab, founder and executive chairman of the WEF. Unemployment, the report said, presented one of the major challenges for governments in the region, where population growth has driven jobless rates to around 15% and where one quarter of the world’s unemployed people between the ages of 15 and 24 reside. The WEF urged countries to take heed of the instability that could result if the problem is allowed to fester, while at the same time asking them to encourage greater participation by women in the labour market. “The danger is that if they don’t tackle economic reforms, they are not going to have job creation,” said Lopez-Carlos. “If you don’t have economic reform, you will have more and more unemployment and social tensions. These could spill over into political instability and then affect the investment climate,” he added. The WEF also bemoaned the effect of slow integration between Arab economies on their attractiveness to investors. “The region as a whole should move in the direction of creating a unified, single, economic space where you have the same rules and the same legislation,” said Lopez-Carlos. “But integration requires political commitment and a work programme. It’s fine to talk about integration as a lofty, noble, long term goal, but you have to back it up with measures, legislation and timetables. This is what the Europeans have been doing for the last 40 years,” he added. One positive sign from the roundtable that followed the report’s publication was that a number of countries are now expected to set up National Competitiveness Councils (NCCs) — essentially, independent business organisations that will make attempts to push for reform and transparency. The idea of NCCs first emerged after the publication of the WEF’s first Competitiveness Report in 2003 and the first organisation was created in Egypt last year. Bahrain announced the creation of its own council at the meeting, alongside delegates from Jordan, Kuwait, Qatar and the UAE. But Lopez-Claros stressed that there was still a long way to go. “In centuries past, the Arab world was a thriving centre of knowledge, learning and innovation. Its peoples long ago demonstrated their capacity for enlightened, creative engagement with the rest of the world, in ways that left an indelible mark on the course of civilization. A return to that golden age requires a clear comprehension of the problems and challenges which the region faces today, an acceptance of the need for change, and the formulation of viable paths of reform,” he added. Next year's report is likely to see Qatar remain at the top of the competitiveness league. However, economic experts suggest that the UAE could face strong competition for second place from both Bahrain and Oman. The former is developing the huge Bahrain Financial Harbour project, which is expected to bring several economic and competitive benefits to the region. It is not yet clear whether Lebanon's ranking will be affected by the murder in February of former PM Rafik Hariri. LEAGUE LEADER: Qatar ranks number one in the latest report.

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