Leading Arab financers (pictured above) on Friday urged Gulf governments, flush with cash from the oil boom, to embark on wholesale political and economic reforms they said were crucial to sustain their economies in the long-term.
Efforts by autocratic Gulf rulers to restructure and liberalise their oil dependent economies have been mostly piecemeal, lacking vigour to expand a private non-oil sector, solve high unemployment and reduce dependence on the state, they said at the Arab Economic Forum in the Lebanese capital.
The Forum is an annual meeting of policy makers, financiers and businessmen in Beirut organised by al-Iktissad Wal Aamal magazine.
"The oil surplus is hiding mismanagement, massive waste and lack of progress on human development. Add to this a lack of transparency and corruption. I am not optimistic," said Ali Zumai, head of a Kuwaiti investment group."
Zumai, a former finance minister, said Gulf budgets contain huge spending on salaries and handouts "without any return on development".
Pointing out that the oil boom of the 1970s made Gulf governments "complacent", Zumai said reforms must also address political taboos, such as restrictions on public freedoms and the rights of millions of foreign workers.
"You cannot discuss improving investment regulations and keep backward immigration and civil laws. We will not have sound economic management without political reform," he said.
Record oil prices have fuelled fast growth rates in the Gulf but unemployment mostly remains high. In key oil producer Saudi Arabia official data puts unemployment at 12 per cent, half independent estimates.
A report by the Arab Petroleum Investments Corporation (Apicorp) forecast economic growth in the Gulf to average 6 per cent over from 2008 to 2012, with unemployment at 7 per cent. The report did not give comparative figures.
Ali Aissaoui, senior manager at Apicorp, said the oil sector accounts for 30-40 per cent of the Gulf's gross domestic product but only 3 per cent of the employment directly due to increased reliance on technology.
"There are structural economic problems at the origin of high unemployment in the Gulf. There is no quick fix. Economic diversification is a long term, sustained effort," Aissaoui told Reuters.
Moazzam Mekan, manager of advisory services at the International Financial Corporation, said secretive ways by Gulf governments of doing business needed to change to widen the pool of investors and lower costs of huge projects.
"You want to give all the bidders an equal chance to improve your ability to attract more investors," Mekan said.
"In the Gulf countries it is probably even worse (than the rest of the Arab world) because they do not publicise information." (Reuters)