Facing up to globalisation

Academics and economists have hailed a UN report that provides a brave and honest assessment of the economic, political and social conditions of the Arab world. But will its findings nudge governments to do more?

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By  Massoud Derhally Published  July 30, 2002

|~||~||~|If there is anything remotely close to a wake up call for the Arab world, it came on July 2, 2002. It came in the form of a brutally honest 133-page United Nations Development Programme (UNDP) report, which drew attention to the failings of the 22 members of the Arab league.

While the report highlights advances made by the Arab world, it showed that at the cusp of the new millennium, Arab states are still decades behind most other nations on almost every economic front. That was the resounding consensus of a number of the Arab intellectuals who published the first UNDP report on Arab Human Development.

The findings of the report, sponsored by the Arab League, are too compelling to ignore. The report recognises the success of stabilisation programmes that have helped reduce budget deficits and curb inflation in many countries.

However, it also notes the poor record of many critical indicators, including low savings rates, and high unemployment, which at 15% is higher than in any other region. “For markets to meet their promise in creating jobs and increasing investment, they need to be competitive and people friendly. There is still a long way to ensure pro-poor markets,” says Moez Doraid, officer-in-charge for the regional programme division, at the regional bureau for Arab States, United Nations Development Programme.

“A cornerstone will be to give job creation the highest priority in government decisions to support investments as well as in government investments themselves,” Doraid added.

While some ground has been covered, the region can no longer continue to disregard issues pertaining to freedom, gender inequality, and knowledge. This is the underlying message of the report, terming these shortcomings as the three deficits that face 280 million Arabs. “The three deficits in the report are serious socio-economic and political deficiencies which the Arab world suffers from and there are also problems of half-hearted economic reform efforts,” says Hania Farhan, director of the Middle East and North Africa department at the Economist Intelligence Unit (EIU).
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On freedom, the report highlights Morocco and Bahrain as having made recent progress. There are also some micro rather than macro steps forward on the political scene in several countries. “The rapid expansion in the number and impact of civil society organizations in the region is evidence for greater dynamism and participation,” says Doraid.

On gender equality, Tunisia has been a leading example for decades, because the Tunisians have been able to rely on Islamic Sharia to advance women’s rights. Tunisia was the first country to place limitations on polygamy. Recently, Egypt and Jordan have made advancements in improving gender equality before the law.

If efforts to curb the perils of unemployment are to succeed, and the backlog caused by years of neglect by governments is to subside, more socio-economic issues need to be tackled. “The development of the private sector is being impeded by an over-bearing public sector, with governments backing off from reform when the vested interests intervene, or when they imagine that reform would exacerbate unemployment and cause social and political unrest,” Farhan explained.

Failure to act will essentially mean that Arabs will regress and whatever gains or improvements they can point to now, will fizzle away tomorrow.

According to the report’s findings, 65 million adult Arabs are illiterate, two thirds of them women. “Nearly half of Arab adult women are still illiterate and the situation is even worse on the opportunity side where women’s economic (through employment) and political participation (through representation in parliaments or governments) is among the lowest in the world,” explains Doraid. This is in addition to the 10 million children between 6 and 15 years of age currently out of school. If this trend persists, the number of children out of school will increase by 40 percent in 2015, according to the report.
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The rate of economic growth over the past two decades was very low, second lowest in the world after sub Saharan Africa. “At 0.5% annual growth in per capita income, it is much less than satisfactory,” says Rima Hunaidi Khalaf, former deputy prime minister of Jordan, and currently assistant secretary general and director of the UN Development Program’s Arab regional bureau.

Hunaidi, who was the motivating force behind the survey, adds: “You need to look not only at economic policies but also other variables that affect growth. In particular, issues of social cohesiveness and freedom that allow for innovation and creativity, issues related to fighting poverty and the type of the strategies that governments need to adopt.”

Per-capita income growth has shrunk in the last 20 years to a level just above that of sub-Saharan Africa, with some Arabs living on less than $2 a day. “Most of the economic reforms implemented by the authorities in the Arab world are half hearted to different degrees,” says Farhan. “In Saudi Arabia, in Egypt, and in almost all countries in the region, governments did not want to exacerbate unemployment so they have not pressed on with public sector reforms and opening up the economy, including privatisation. In most, if not all, countries, state dis-engagement from the economy and privatisation starts but then fizzles out, with political factors undermining potentially good policies.”

Productivity is declining, research and development are weak and science and technology are dormant, the report says. Only 0.6% of the population uses the internet and the personal computer penetration rate is estimated to be only 1.2%. Investment in research and development does not exceed 0.5% of gross national product, well below the world average. Moreover, while the production of scientific papers in the Arab region is within the range of leading third world countries, the use of national scientific expertise is at much lower levels.
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Creative thinking begets ideas

Investing in education is extremely important, the report concludes. “We have to achieve higher growth, it is important, but in and of itself it is not the ultimate objective, it’s a means to an end. We seek higher economic growth in order to better the lives of Arabs all over but we know in and of itself it is not sufficient,” says Hunaidi.

All members of the report team were very concerned about the gap between what students learn in high schools or university and what the job market actually requires, according to Hunaidi. The focus has been on competencies; how graduates can be helped in obtaining the competencies required by local and international job markets. “You can no longer talk about the training of students, and circulars and methods of teaching that are no longer sufficient in today’s world. Education is a perquisite in order to attain higher economic growth in the Arab world,” Hunaidi says.

Despite the gloom, there is economic hope for the region, according to Nubar Hovsepian, associate director of the Middle East Centre at the University of Pennsylvania. But only if the region begins to engage more in foreign and regional trade, as opposed to trade practices that reinforce the inequalities of the global market.

A shift in how business is conducted, according to Hovsepian, will “start laying the groundwork for regional markets and a form of an economic union. With markets, you will have the free movement of goods, people and with movement of people come ideas.”
“We need to rethink our educational systems across the region, which essentially rely on rote learning, and to replace them with circulars that require critical thinking,” says Hovsepian. “Of course, uprooting entire school systems is expensive. Priorities need to change. Instead of spending US $1 on education for every US $166 spent on military security apparatus we need to reverse that ratio making it US $166 for education,” Hovsepian added.

With the picture for some countries looking grim the natural question to ask is, how receptive will governments be to the findings of the UNDP report? “I think that governments are aware of the problems. The report provides intellectual ammunition for reform. Its analysis and ideas can be used by governments themselves as well as for advocacy by civil society, be it non-governmental organisations (NGOs), academics or the media that have a growing role in affecting public policy,” explains Doraid.
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In the Gulf, economies are still too dependent on the price of oil. Oil revenues still account for some 50-90% of total government revenues. According to figures from the Economist Intelligence Unit, 70-80 percent of the government’s revenue in Saudi Arabia still comes from oil and that depends largely on the price of oil in a given year.

In the UAE, oil revenues are 86% of government revenues. In Kuwait it accounts for 92%. “If you have a period of two to three years of a sustainable low price of oil, say US $10-15 a barrel, then you will see an economic crisis,” says Farhan.

Hunaidi believes the report hints at what the future has in stall for the region if things persist as they are. If nothing is done, and Arab world’s problems are not addressed, the gap between the Arab world and other countries, including developing ones, will widen.
Throw out your conspiracy theories, the report says. The Arab world’s future isn’t crafted by external factors. What the region does today, will very much help shape the future. Hopefully, governments will sit up and notice.

“I think the quality of the report is so good that I don’t think anybody, including governments, will ignore it. At the end of the day, the goal of the authors of the report is a noble one and it is the duty of governments to tend to their citizens,” says Hunaidi. —Massoud A. Derhally

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