DEVELOPMENT: U.N. Projects Gloomy Prospects for Mideast Economies

By Thalif Deen Reprint | | Print |

Thalif Deen

UNITED NATIONS, Jul 29 2002 (IPS) - Continued violence in the West Bank and Gaza, the decline in the value of petro dollars, and the sharp slow-down in world economic growth have badly hurt Middle Eastern nations, says a new U.N. study.

The collective economic growth of 13 Middle Eastern nations will average about 2.0 percent this year, compared with 4.5 percent in 2000 and 2.1 percent in 2000, according to the survey by the Beirut-based U.N. Economic and Social Commission for Western Asia (ESCWA).

The projected 2.0 percent growth in 2002 represents a “substantial decline given the region’s annual population growth rate of 2.4 percent”, concludes the 15-page report.

ESCWA said slow growth in the global economy reduced the demand for oil, the main contributor to gross domestic product (GDP) and export in the region.

Addressing a meeting of the Economic and Social Council (ECOSOC) last week, the secretary of ESCWA, Huda Osseiran, said that countries in the region had worked hard to improve education, literacy, health and economic opportunities.

“However, significant regional challenges remained – the lack of peace and security, poverty, unemployment, inadequate natural resource management, unsustainable consumption and production patterns, lack of research and appropriate technologies, and the limited capacity of civil society to become actively engaged in the sustainable development process,” she added.

The study, which covers the economies of Bahrain, Egypt, Iraq, Jordan, Kuwait, Lebanon, Oman, Palestine, Qatar, Saudi Arabia, Syria, the United Arab Emirates and Yemen – said the oil sector is expected to perform “relatively poor in 2002 compared with 2001 and 2000”.

The price of a barrel of crude oil, which rose from about eight dollars in 1996 to a hefty 30 dollars in late 1999, has declined to an average of about 22-23 dollars this year.

The relative fall in the U.S. dollar had a direct impact, Nazem Abdalla of ESCWA told IPS. “The U.S. dollar continued its decline versus the Euro and other major key currencies, and thereby adversely affected the purchasing power of oil revenues of the region that are denominated in U.S. dollars.”

Abdalla said that balance of trade positions would further deteriorate from their 2001 levels. “Budgetary conditions would deteriorate and thereby force governments to limit both current and capital expenditures,” he warned.

The only silver lining, he said, is that governments in the ESCWA region are expected to intensify efforts towards economic diversification, and develop and adopt laws and regulations that would attract foreign direct investment.

According to the survey, the region’s oil sector performed poorly in 2001 because both production levels and prices fell.

Total oil revenues, which increased 62.5 percent from 1999 to 2000, to reach 165.6 billion dollars, declined to 129 billion dollars in 2001.

The overall outlook for economic and social development in 2002 is not brighter than that for 2001, ESCWA said.

The population of the ESCWA region has grown fairly rapidly, increasing from 94 million in 1980 to 166 million in 2000. Of this, an estimated 19 percent are young people of 15 to 24 years old. Unemployment among youth is a critical issue in many countries.

“Most of the unemployed in the region are young first-time job seekers, reflecting a swelling of the youth labour supply, as the Arab baby-boomer generation enters the labour market,” the survey said.

While the level of education and enrolment rates in most of the member countries have improved significantly since the 1970s, the rate of illiteracy is still “alarmingly high”, particularly in the less developed countries of the region and in the conflict-stricken ones.

Demand for labour is expected to be low because economic growth is not sufficiently high to absorb the annual increase in the supply of workers.

In the six countries of the Gulf Cooperation Council (GCC) – Bahrain, Oman, Qatar, Kuwait, Saudi Arabia and the United Arab Emirates (UAE) – expatriate workers still account for a major part of the labour force, ranging from about 33 percent in Bahrain to almost 90 percent in the UAE.

In most cases, GCC nationals refuse to accept low-paid manual jobs that require minimal skills. At the same time, they often lack the technical skills required for highly paid positions.

The expatriate labour comes mostly from Egypt, Jordan, Yemen, the Philippines, Bangladesh, Pakistan and Sri Lanka.

According to the survey, the inflows of foreign direct investment (FDI) in the ESCWA region are still very small compared to other regions in the world.

In 2000, total FDI to the region was 3.6 billion dollars, which corresponds to about 0.3 percent of FDI worldwide, or about two percent of FDI to developing nations.

The latter have attracted an annual average of almost 20 percent of world FDI.

The survey also said that the continued violence in the West Bank and Gaza has “adversely impacted” investment.

Meanwhile, the first Arab Human Development Report released in mid-July said that life expectancy in the region has increased by 15 years over the past three decades, while adult literacy has almost doubled.

But the report, commissioned by the U.N. Development Programme (UNDP), warned that over the past two decades, growth in per capita income in the Arab world was lower than any other region, except sub-Saharan Africa.

The way forward, the report said, involves promoting good governance based on expanding human capabilities, choices, opportunities and freedoms, empowering women and those marginalized in society.