Arabs cry out for new dawn

People urge their leaders to stop relying on oil if the region is to build a secure future. Massoud A. Derhally reports in his final YouGov poll report.

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By  Massoud A. Derhally Published  October 16, 2005

|~|YouGov-200.jpg|~|UNITED WE STAND?: Many observers say a single Arab market represents a vital step towards creating a regional economic bloc. |~|RISING unemployment and stagnant economies have long been characteristic of the Arab world, as has been the need lure capital held in foreign banks back to the region to increase liquidity. This has proved to be very difficult in the past, given the slow progress of reform and the continued lack of transparency and an established legal framework. That may not be the case in the Gulf today, as soaring oil prices push stockmarkets higher and drive a region-wide construction boom. The windfall from oil has led to abundant liquidity, but the challenge now is to direct these resources more productively; to create jobs for local populations and help diversify Gulf economies away from hydrocarbons, according to Johnny AbedRabbo, a senior economist at National Commercial Bank in Saudi Arabia. In the recent survey conducted by Arabian Business and YouGov, 39% of respondents said they believed encouraging more of a manufacturing base outside the realm of oil-based industry would play an important role in building stable Arab economies over the long term. “Sadly, Arab countries have ignored the industrial sector, with most manufacturing taking place in the region limited to mere assembly lines of imported parts. Historically, developed nations had to go through the industrialisation stage before becoming service-oriented economies,” says AbedRabbo. “We have even witnessed this metamorphosis more recently in East Asia and in Latin America. Middle Eastern economies, however, seem to have chosen to skip this stage and jump right into the services-stage straight away. The lack of an industrial base could have dire consequences in the future for a region void of natural resources aside from oil.” With oil prices between US$60-70 a barrel, and governments recording budget surpluses, one would think the region has little to worry about. That, of course, is far from the case. Unofficial employment figures in Saudi Arabia — the kingpin of oil cartel OPEC — is estimated to be between 20-30%, depending on who you ask. In the small kingdom of Bahrain, an unemployment rate of 13-16% has been a key source of unrest. Only a handful of the 22 Arab countries produce oil and those that do have been unable to diversify their economies, to increase their competitive advantage, and create more jobs. “Local authorities tend to become more complacent about economic reform during high oil-price periods, when in fact they should seize the opportunity to implement the difficult measures needed, in order to align their economies with the rest of the world,” says AbedRabbo. The Arab World Competitiveness Report 2005, published by the World Economic Forum, said the majority of Arab countries are being held back by government corruption, red tape, soaring public debt, poor use of technology and limited participation in the global economy. Arab countries, according to the report’s findings, need to create 80 million jobs over at least the next decade to satisfy an expanding pool of young jobseekers. All the data reaffirms a grim reality — the region has failed to develop as an economic bloc, compared to other parts of the world including Asia, Europe and Latin America. Traditionally, the impact of the Gulf's oil wealth has trickled down to neighbouring Arab countries by way of increased workers’ remittances, higher tourism revenues and to a limited extent, inter-Arab investments. “The development of a so-called economic power bloc requires a political will, which really does not exist except on paper and in grandiose speeches,” says AbedRabbo. The region's economic weakness' are due to governmental control, the exclusion of foreign investors across the region and a prevailing welfare system that has characterised its oil-rich countries. This has not only led to high social spending, but also inefficiency, causing countries — such as Lebanon — to have high debt service ratios, and leaving the vast majority unable to snare sizeable amounts of foreign direct investment (FDI). FDI inflow to the Middle East grew by 51% in 2004 compared to the previous year, reaching US$9.8 billion, according to the 2005 UNCTAD World Investment Report. Saudi Arabia was the biggest recipient of FDI in the Arab world, receiving US$2 billion, but that was largely attributed to investments in the oil, gas and petrochemicals sector. According to the report, the region still lags far behind many other developing countries. Also worth noting is that the Arab world's Gross Domestic Product (GDP) has increased from 3.7% in the 1990s to 5.6% in 2003 and 2004. The combined GDP of all Arab countries stood at US$531.2 billion in 1999 — less than that of a single European country, Spain (US$595.5 billion). Moreover, Middle East trade only amounts to 3.4% of total global trade. In order to accelerate economic change, 14% of respondents who took part in our poll believed more foreign companies should be allowed to set up in Arab countries and trade restrictions be reduced. Creating a single Arab market with one currency and a central bank like the European Union is necessary, according to 24% of respondents. The single Arab market represents a vital step towards the integration of the region's economies and the creation of an economic power bloc, says AbedRabbo. “However, this requires first and foremost a real political determination to enact the necessary steps needed to lift trade restrictions, align customs policies and facilitate capital and labour movement,” explains AbedRabbo. Passing legislation to end corruption is what 14% of those polled believe is an important step towards establishing a transparent culture and strong economic growth. “Aspects of corruption are also clearly visible to citizens, particularly those in the business sector who complain that the people in power monopolise the main areas of the economy, either directly or as ‘partners’ of successful businessmen,” according to the 2004 Arab Human Development report published by the UNDP. Interaction with government services in the Arab world has become easier in the past five years, according to 52% of respondents. While 30% believed interaction with the government has remained the same and 11% said it had become more difficult and 6% had no opinion. A resounding 53% believed that citizens living in democratic countries have a higher standard of living than citizens in non-democratic countries. Approximately 35% said they didn’t believe there was a correlation between democracy and people’s standard of living. Only 3% said citizens in democratic countries have a lower standard of living. “If you put those results with the findings of the UN Arab Human Development Report, where a majority of the youngsters interviewed — more than 50% — wanted to leave the Arab world and migrate elsewhere — when asked why they said because they are searching societies to live in, where they can find work, and freedom,” says Saad Eddin Ibrahim a leading Egyptian pro-democracy activist and a professor of Political Sociology at the American University in Cairo. The results echo findings of the survey that Arabian Business disclosed last week, which showed 69% of respondents believed wider political participation and democracy are the most important issues surrounding political and social reform in the Middle East. ||**||Peace deal ‘not possible’|~||~||~|Peace between Israel and the Palestinians will remain elusive, according to a survey conducted recently by Arabian Business and respected opinion pollsters YouGov. According to the study, conducted between August 16 and September 15, which dealt with a cross sample of society from the Middle East and North Africa (MENA) with a representative number of respondents from 17 different countries, 59% of those polled believed peace “was not possible” between Israelis and Palestinians. Only 36% believed peace between the two peoples would be possible and 6% had no opinion. In an attempt to establish what the necessary variables are for peace to be achieved, respondents were provided with 11 alternatives which they had to list in order of what they thought were most applicable. Pressure from the United States is what 65% of respondents said is necessary for there to be peace, whereas only 32% said they believed pressure from other Middle Eastern countries was necessary. According to 52% of those polled, withdrawal of US and international aid to Israel is a factor that will contribute to a lasting peaceful settlement. Israel is the largest recipient of US aid in the world. Since 1987, the US congress has annually been approving a foreign aid bill totalling an average of US$3 billion of American taxpayers’ money to Israel, US$1.2 billion in economical aid, and US$1.8 billion in military aid. After the Gulf War in 1991, the US has additionally been offering Israel US$2 billion annually in federal loan guarantees, which brings the total US foreign aid to Israel to about US$5 billion, or US$13.7 million per day. Other forms of aid to Israel are a result of “consequential” aid, such as the approximate US$1.5 billion in total tax-deductible private donations from numerous Jewish charities and individual donors. “Consequential” aid to Israel adds up to an approximate $8 billion in total US foreign aid to Israel, according to MIFTAH, a non-governmental non-partisan Jerusalem-based institution dedicated to fostering democracy and good governance. Only 11% of respondents believed withdrawal of US or international aid to the Palestinians would influence the prospects for peace. Involvement of the United Nations as a mediator is necessary according to 43% of respondents. Though 76% of respondents distrust America, the mediation of the United States in the conflict is still seen as crucial, according to 40% of participants. Only 32% believed the participation of other Middle Eastern countries would have an impact. Financial assistance from both the US and other Middle Eastern countries can be an important factor in ending the conflict, according to 42% of those polled.||**||

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