Unemployment and poverty woes to surge without reforms

Arab unemployment and poverty could worsen without real reforms in the face of the global economic crisis, said economists.

The slowdown, the key reason for the rapid drop in oil prices in late 2008, could also hamper efforts by Gulf oil producers to tackle unemployment given their high population growth rates and sharp fall in their economies compared with the oil boom period.

"Apart from directly affecting the economies and earnings of Gulf countries, the global crisis will also adversely impact other Arab nations as they rely heavily on foreign cash inflow, financial aid from the GCC and large remittances from their citizens in the Gulf," said Ihsan bu Hulaiga, a Saudi economist.


17 MILLION JOBLESS

"These developments should prompt the GCC and other Arab countries to step up reforms to diversify their economies and attract investment.

"Otherwise, their economic problems, including joblessness, could worsen if oil prices stay low… efforts to end poverty could also be blocked."

According to the Arab Labour Organisation (ALO), regional countries had nearly 17 million unemployed people at the end of 2008 and the figure could surge to 100 million in 10 years without effective government measures. Around 26 per cent of the jobless are young educated persons who are rapidly increasing in the regional labour market that is recording slow growth rates, it said.

"Arab countries are facing a serious challenge as they entered the new millennium burdened with severe economic and social problems, including unemployment and poverty.

"They have no choice but to intensify their efforts to support economic development and ensure jobs for their citizens.

"Developments over the past years have shown that the fiscal policies in Arab countries lack flexibility because they are heavily reliant on limited sources of income, including oil. This reliance has made them highly susceptible to any shocks to those sources.

"Besides, the accumulating domestic debt in an increasing number of Arab states is seriously aggravating their financial situation.

"In some members, the debt has reached alarming levels that are consuming up a large part of their public revenues and seriously affecting their development spending… this is hindering economic growth."

In another study, the United Nations Economic and Social Commission for Western Asia, which groups most regional states, also blamed what it called poor economic performance, high population growth and inadequate planning. But it cited other factors in the Gulf, including preference of the public sector.

"In the Gulf, there is a problem of reluctance by citizens to take up technical and productive jobs and their preference of administrative, office and supervisory jobs.

"Their preference of the public sector is also aggravating the redundancy problem and widening the gap in real production… preference of the less costly expatriate workers by the private sector is another obstacle."

It gave no unemployment figures in the six-nation Gulf Co-operation Council (GCC) but a recent semi-official study put the rate at around 5.7 per cent. In such members as Saudi Arabia and Bahrain, it exceeds 15 per cent.


OIL INCOME

Joblessness problems are believed to have eased in the Gulf during the oil boom of between 2000 and 2008 as their economies galloped by at least 20 per cent in current prices and five per cent in real terms. The GCC states, which have nearly 45 per cent of the world's proven crude deposits, accumulated more than $1.5 trillion (Dh5.5trn) during that period while their fiscal and current account balances recorded massive surpluses.

The combined Arab oil income totalled about $2.55trn during 2000-08, more than double the revenues in the previous 15 years. The earnings peaked at around $618 billion in 2008 when crude prices hit a record average of $95 per barrel.

But the sharp fall in oil prices will ally with lower output to depress the Arab income this year to below half their 2008 earnings and this will have a strong adverse impact on the economies of regional oil producers.

The problem will also affect other Arab nations since they rely heavily on remittances and official aid from the GCC.

"The level of Gulf aid and remittances to fellow Arab nations has always been linked to the level of oil prices," the Kuwaiti-based Arab Fund for Economic and Social Development (AFESD) said in a study.

"This means there will be a decline in cash flow into Arab countries from their fellow Gulf states in the coming period."

Official data showed total cash transfers by foreign workers in the GCC peaked at above $40bn in 2008 compared with $37bn in 2007 and $33bn in 2006.

More than $6bn of the transfers headed for other Arab nations while Arabs accounted for nearly a third of the official Gulf aid of around $25bn during 2000-08 and half the total aid of $131bn.

In a recent study, the World Bank said the global crisis had already stifled remittances to developing nations and the slowdown would continue this year. "After several years of strong growth, remittance to developing countries began to slow down in the third quarter of 2008 and this trend is expected to deepen further in 2009 in response to the global financial crisis, although the exact magnitude of the growth moderation is hard to predict given the uncertainties about global growth, commodity prices and exchange rates," it said.


POVERTY ELIMINATION

Addressing members of the Council of Arab Economic Unity (CAEU) in Cairo this week, its Secretary-General Ahmed Jwili urged regional countries to implement the resolutions of the Arab economic summit held in Kuwait in early 2009, mainly those related to eliminating poverty and providing jobs.

Jwili said the Arab region is still suffering from "pockets" of poverty, adding that this should prompt regional governments to step up efforts to improve the living standards of citizens and slash poverty by half at the end of 2015.

"Poverty and unemployment in the Arab World are the main source of tension and social and political concerns… tackling these problems will pay off in both social and political terms.

"Arab countries should double their efforts in this respect although most of them have suffered from big economic and financial losses because of the global crisis.

"This will affect their economic and social development but should not dissuade them from tackling those problems."

According to AFESD, a key Arab League organisation, unemployment and poverty constitute "the biggest challenge" for regional nations.

It said the problem is underscored in low income members including Yemen, Sudan, and Mauritania as well as war-hit states of Iraq, Somalia and Palestine.

AFESD blamed what it described highly unstable growth in most members, the rapid population increase in the region, slow reforms in some members, peak capacity in the public sector and a declining capacity in the private sector.

It estimated the working population in the Arab World at 204 million at the end of 2007 while the workforce stood at nearly 122 million.

The report said the workforce accounted for about 60 per cent of the work age group, adding that this is "putting great demographic pressure on the labour market".

It said another key reason for the high unemployment rates in some Arab nations was the surge in the number of females who have joined the labour market over the past few years following the gradual collapse of social barriers.

The report said a large number of people in some members are still under the poverty line, mainly in Yemen, Somalia, Djibouti, Sudan, Palestine and Comoros.

"Poverty in these countries exceeded 40 per cent in the past years while the rate was estimated at between 10 and 20 per cent in Jordan, Bahrain, Syria, Egypt and Morocco. It was below 10 per cent in Tunisia, Algeria and Lebanon."

A breakdown showed Mauritania had the highest joblessness rate in the region, standing at 32.5 per cent in 2004.

It was followed by Iraq at 28.1 per cent and Palestine at 23.6 per cent.

The lowest rates were in Qatar and the UAE, the report said.

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