Arab World Competitiveness Report 2005
Arab unemployment may spark unrest if oil boom ends
DOHA (Reuters) - Arab countries could face a "lethal combination" of falling oil prices and rising unemployment in the next five years if they fail to reform their economies, a senior economist said on Saturday. Augusto Lopez-Claros, chief economist at the World Economic Forum (WEF) and editor of the Arab World Competitiveness Report 2005, released on Saturday, said this scenario could ignite unrest among disillusioned youths throughout the Arab world.
"If for some reason oil prices come down sharply, as of course they tend to do, the sense of optimism and well-being being generated by this bonanza -- at least in some of these countries - could turn around," he told Reuters on the sidelines of a conference in Doha, capital of gas-rich Gulf state Qatar. "If at the same time you have rising unemployment, you have a potentially lethal combination. The chances that that could lead to social dysfunction and instability are quite high." Unemployment is running at about 10 percent in several Arab countries including Egypt, Morocco, and Saudi Arabia, while in others it can be as high as 20 percent.
The problem is exacerbated by rapid population growth. The United Nations Development Programme says two-thirds of the region's population is under the age of 30, and of that 40 percent are unemployed. Lopez-Claros said Arab states should stimulate the private sector and create jobs by building an investor-friendly environment with macroeconomic stability, strong public institutions and better technology and education. "The Arab countries do reasonably well in macro management. Where we have serious shortcomings is on the public institutions side, and beyond that in ... technology and human capital."
LOSE OUT He said Arab countries should be careful about how they spend their large oil and natural gas revenues, boosted in the recent months by record high oil prices. "This revenue is not always being channelled to those things that will really push the development process forward - education, infrastructure, liberalising the economy so that you will actually have private sector development."
A U.N. report said last year that Arab countries drew less than one percent of the total direct investments in the world in the last two decades, while $500 billion of Arab capital, mainly Gulf money, remains invested outside the region. Lopez-Claros said that if Arab countries did not implement reforms in these areas, they would lose out on investment to more dynamic economies such as India, China and Central Europe. "If you travel in the Czech Republic, young people have a sense of optimism about the future. They feel galvanized about building a new society. You don't have that among young people in Arab countries," said Lopez-Claros. "It is sad when this optimism turns inwards and makes these people frustrated because their governments are not doing the right things to create jobs and provide opportunities." Qatar ranked first in the Arab World Competitiveness Report 2005, produced by the WEF, an economic think-tank based in Switzerland. The report said Qatar had strong finances, robust public institutions and relatively advanced technology. It had the highest 2004 Arab per capita gross domestic product, at $33,600. The United Arab Emirates ranked second, while Bahrain was third. Lebanon (11th) and Yemen (12th) were the lowest ranked countries, although some Arab states -- including Iraq and Syria -- were excluded from the study because of a lack of data.
http://www.arabtimesonline.com/arabtimes/breakingnews/view.asp?msgID=8476
DOHA (Reuters) - Arab countries could face a "lethal combination" of falling oil prices and rising unemployment in the next five years if they fail to reform their economies, a senior economist said on Saturday. Augusto Lopez-Claros, chief economist at the World Economic Forum (WEF) and editor of the Arab World Competitiveness Report 2005, released on Saturday, said this scenario could ignite unrest among disillusioned youths throughout the Arab world.
"If for some reason oil prices come down sharply, as of course they tend to do, the sense of optimism and well-being being generated by this bonanza -- at least in some of these countries - could turn around," he told Reuters on the sidelines of a conference in Doha, capital of gas-rich Gulf state Qatar. "If at the same time you have rising unemployment, you have a potentially lethal combination. The chances that that could lead to social dysfunction and instability are quite high." Unemployment is running at about 10 percent in several Arab countries including Egypt, Morocco, and Saudi Arabia, while in others it can be as high as 20 percent.
The problem is exacerbated by rapid population growth. The United Nations Development Programme says two-thirds of the region's population is under the age of 30, and of that 40 percent are unemployed. Lopez-Claros said Arab states should stimulate the private sector and create jobs by building an investor-friendly environment with macroeconomic stability, strong public institutions and better technology and education. "The Arab countries do reasonably well in macro management. Where we have serious shortcomings is on the public institutions side, and beyond that in ... technology and human capital."
LOSE OUT He said Arab countries should be careful about how they spend their large oil and natural gas revenues, boosted in the recent months by record high oil prices. "This revenue is not always being channelled to those things that will really push the development process forward - education, infrastructure, liberalising the economy so that you will actually have private sector development."
A U.N. report said last year that Arab countries drew less than one percent of the total direct investments in the world in the last two decades, while $500 billion of Arab capital, mainly Gulf money, remains invested outside the region. Lopez-Claros said that if Arab countries did not implement reforms in these areas, they would lose out on investment to more dynamic economies such as India, China and Central Europe. "If you travel in the Czech Republic, young people have a sense of optimism about the future. They feel galvanized about building a new society. You don't have that among young people in Arab countries," said Lopez-Claros. "It is sad when this optimism turns inwards and makes these people frustrated because their governments are not doing the right things to create jobs and provide opportunities." Qatar ranked first in the Arab World Competitiveness Report 2005, produced by the WEF, an economic think-tank based in Switzerland. The report said Qatar had strong finances, robust public institutions and relatively advanced technology. It had the highest 2004 Arab per capita gross domestic product, at $33,600. The United Arab Emirates ranked second, while Bahrain was third. Lebanon (11th) and Yemen (12th) were the lowest ranked countries, although some Arab states -- including Iraq and Syria -- were excluded from the study because of a lack of data.
http://www.arabtimesonline.com/arabtimes/breakingnews/view.asp?msgID=8476
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