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18 April 2024

Unemployment and poverty fuel Arab revolt

By Nadim Kawach

The events in Egypt and Tunisia as well as scattered similar incidents in Yemen, Sudan and Algeria appear to be a result of pent up sentiment about the failure of regional governments to tackle long-standing economic woes, on top of which are the festering unemployment and poverty. The steady rise in global food prices over the past two years came to pour oil on the fire.

After decades of economic activity, unemployment rates have increased in some Arab countries, more people have plunged under the poverty line and GDP growth has failed to match the rapid population growth of around 2.5 per cent a year, pushing the per capita income in the region further down.

Once some Arab nations started to report progress in economic reforms, the only way to tackle those woes, they appear to be back to square one after their fragile economic and financial systems were shaken by the 2008 global fiscal crisis.

In a recent report, a United Nations organization warned that the crisis would complicate the region’s endeavors to tackle poverty and unemployment.

“The global slowdown in economic growth which began in the second half of 2008 is primarily expected to lead to higher levels of unemployment, more specifically in the case of migrant workers who are often the most vulnerable category,” the Economic and Social Commission for Western Asia (ESCWA) said in the study about the post-crisis Arab job market.

“Evidence gathered so far shows that unemployment, depression in wages and worsening working conditions are on the rise in response to the slowing of activities in finance, construction, tourism, services and real estate.”

Arab League figures released last weak showed the crisis had already impacted the region’s growth and per capita income, with real Arab GDP growth sharply slowing to around 1.8 per cent in 2009 compared with 6.6 per cent in 2008.

In current prices, the combined Arab GDP collapsed by at least $200 billion to $1.7 trillion in 2009 from nearly $1.93 trillion in 2008, a fall of about 1.9 per cent against a growth of around 25.8 per cent in 2008.

“As a result, this led to a decline in the per capita income in the region from around $6,002 in 2008 to $5,159 in 2009,” the Cairo-based League said in its annual economic report released by the Abu Dhabi-based Arab Monetary Fund and two other key League Organizations.

While some Arab nations have managed to reduce poverty over the past few years, mainly because of higher oil prices, less developed regional nations are “finding it difficult” to attain that goal. “Preliminary indications show that while some Arab nations have recorded progress in their targets to cut poverty, others are still recording negative growth in their per capita income,” the report said.

It put the combined Arab population at around 340 million at the end of 2009, nearly eight million or 2.4 per cent above their number in the previous year.

“As a result of the relatively high population growth in the region and slow economic growth in some countries, unemployment has remained high….at the end of 2009, the jobless rate stood at 14.8 per cent in the Arab region as a while, far higher than the unemployment rates in other parts of the world,” it said.

“Despite some positive developments during the oil boom, many Arab countries are still facing major challenges including high population growth rates, worsening unemployment, poverty and poor living standards.”

According to the report, Arab countries need to create nearly 40 million jobs by 2020 to tackle unemployment through reforms.

Given their massive oil wealth, the UAE and other Gulf Cooperation Council (GCC) states have maintained the lowest jobless rate in the region but unemployment has largely deteriorated in such low income nations as Mauritanian, Djibouti, Somalia, Sudan, Yemen and Palestine.

“As a group, the Arab countries are suffering from the highest unemployment rates in the world despite a slight improvement in the past years….the Arab joblessness rate is estimated at over 14 per cent compared to an international average of nearly 5.7 per cent,” the study said.

“There was some improvement over the past years but it has been mainly a result of greater participation by the private sector…the region now faces a serious challenge in matching the rapid growth in the population and labour force and how to ensure jobs for those who are about to join the labour market, mainly the youth, who account for nearly 50 per cent of the total jobless Arabs….if the Arab countries want to face that challenge and reduce unemployment by half, they will have to create nearly 40 million jobs by 2020.”

The study said creation of those jobs would not be easy following the end of the second oil boom of between 2002 and 2008, adding that the surge in crude export earnings largely boosted growth in the Gulf and other Arab oil producers and at the same time increased financial transfers into non-oil Arab nations.

“Now that the oil boom is over, creating jobs will be very difficult…this should prompt Arab countries to step up reform programmes they launched during 1980s and 1990s…there is a strong need for efforts to improve the business and investment environment in the region and encourage the private sector so it will offset the eroding employment capacity of the public sector.”

A breakdown showed that in 2008-2009 GCC nations, which sit atop 45 per cent of the world’s proven oil wealth, had the lowest jobless rate in the region, with Qatar having the best record at only 0.5 per cent.

The rate was as low as 1.2 per cent in Bahrain, 1.3 per cent in Kuwait and 3.7 per cent in the UAE. Medium jobless rates were put at 8.2 per cent in Lebanon, 8.4 per cent in Syria, 8.8 per cent in Egypt, 9.6 per cent in Morocco and 10 per cent in Saudi Arabia and Libya. Djibouti had the highest jobless rate of 59 per cent while it was also as high as 25 per cent in Somalia, 22 per cent in Mauritania, 21.6 per cent in Palestine and 15.9 per cent in Iraq and Yemen.

According to the Cairo-based Arab Labour Organization (ALO), another Arab League body, the number of unemployed people in the region has exceeded 20 million and that the problem could worsen in the absence of reforms.

In a recent study, ALO said several decades of socio-economic development have failed to tackle the problem and warned that the rate could jump to 100 million by 2020 without real efforts to match an upsurge in the workforce.

“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,” it said.

“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 and their efforts to improve living standards and find jobs for their citizens.”

Another Arab League group urged member states to create a common data network and a map for poverty in their region as part of a strategy to upgrade their socio-economic information and combat poverty.

Despite widespread poverty in many regional countries, Arab governments still far lag behind in gathering accurate data on local poverty and need to change criteria used in measuring poverty and preparing indexes in this respect, the Khartoum-based Arab Organization for Agricultural Development (AOAD) said.

In a recent study, AOAD said a poverty index should be based on family consumption data instead of GDP per capita income.

“To support efforts to fight poverty develop related indicators in the Arab world, regional countries should work on two fronts,” AOAD said.

“The first one should focus on upgrading the mechanisms used in poverty indexes…the second should be aimed at developing and improving the skills of Arab human resources in the field of poverty measurement.”

Citing national data, the report showed poverty rates are above 30 per cent of the total population in such countries as Sudan, Somalia, Mauritania, Djibouti, Yemen, Palestine and Comoros.

The rate averaged around 19.6 per cent in Egypt, Lebanon, Syria, Bahrain, Jordan, Morocco and Algeria. The report said it had no accurate data on poverty in Gulf oil producers but said the rate was relatively low.

Most Gulf nations also enjoy high per capita incomes mainly due to their relatively small population and massive hydrocarbon exports. This is in sharp contrast with most other Arab League members, who suffer from low income because of their large populations and slow economies.

During 2009, Qatar remained the wealthiest nation in the region given its huge gas sales, with its GDP per capita standing at $59,984, according to the AMF.

The UAE was second, with a per capital of $44,538 followed by Kuwait with around $29,941. The income of Bahrain, Saudi Arabia and Oman remained above $10,000 while it stood below $5,000 in 11 Arab countries.

A breakdown showed the per capita income stood at $4174 in Tunisia, down from $4,349 in 2008. It stood at $3,959 in Algeria, down from $4,915 in 2008.

The income shrank to $3,142 from $3,568 in Iraq, to $1,308 from $1,399 in Yemen and to around $923 from $1,105 in Mauritania.

It slightly increased in other members but remained relatively low, standing at 2,445 in Egypt, around $3,837 in Jordan, $2,872 in Morocco, $2,599 in Syria, $1,626 in Sudan and about $1,233 in Djibouti.

Although inflation in most Arab states has sharply fallen back from record high levels in 2007-2008, food prices have steadily risen as most regional nations are heavily reliant on farm imports despite their immense arable land potential. The situation is showing no let up as the World Bank has just warned that food prices will continue to rise, urging nations to join hands to tackle this problem which it said post a serious threat to poor people.

Over the past 10 years, Arab countries have suffered from a food bill deficit of nearly $180 billion because of soaring farm imports and slow exports.

Three months ago, officials said regional governments are considering launching a $65-billion strategy for the next 20 years to expand their agricultural sector, cut imports and ensure food items for their people at reasonable prices. But experts doubt such a strategy will materialize in the near future due to funding problems.

Analysts believe governments’ efforts to improve the living standards of their people in some Arab nations were complicated by widespread corruption in the absence of transparency, accountability and deterrent laws.

According to an anti-corruption group in the region, persistent corruption and other financial malpractices have cost Arab countries nearly $one trillion, which otherwise could have largely boosted the per capita income of citizens.

The losses accounted for nearly a third of the total income earned by the Arab countries between 1950 and 2000, said the Arab Anti-Corruption Organization (AACO), an independent civil institution with offices in Britain and Lebanon.

“The Majority of Arab countries are suffering from corruption and other financial offences, which have created a weak state unable to tackle problems,” AACO Secretary General Amer Khayyat said recently.

“Corruption has cost the Arab countries $one trillion…these funds could have increased the citizen’s income by nearly $200 a year, supported anti-poverty efforts and allowed the region to achieve self-sufficiency in food and water.”

Quoted by Arabic language newspapers in the region, Khyyat put the combined Arab income from oil sales and other exports at nearly $three trillion during 1950-2000. Around $one trillion has been spent on development projects.

“About one $trillion has been spent on arms purchases and the rest has been lost illegally because of widespread corruption and other financial offences.”

Khayyat said several financial institutions and sovereign wealth funds in the region, some of which are among the richest in the world, “are not subject to auditing or any other sort of accountability except the Kuwaiti fund.”