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24 February 2024

Arab leaders to seek long-term strategies

Sheikh Khalifa is leading the UAE delegation for the first Arab Economic Summit that opens today in the Kuwaiti capital (WAM)

By Nadim Kawach

Arab heads of state converge on Kuwait today to discuss a host of economic issues against the backdrop of deteriorating poverty in their region and warnings that the unemployment rate could jump by nearly six times in 10 years.

Official statements over the past few days have indicated the two-day economic summit would debate social problems that have hit most Arab nations in the absence of sustained real growth in their economies and amid rapid increases in their population, uneven distribution of wealth and internal strife.

Despite long-standing plans to tackle unemployment and poverty, such problems have persisted and even worsened in some member states because of low growth, lack of investment, military conflicts, corruption and other factors.

Experts said high defence spending in the Arab World and relatively low allocations for economic development are among key reasons for unemployment and poverty, which have been the main source of social problems and tensions.

"Arab states have remained the largest defence spenders in the world in terms of military allocations relative to the total budget," said an economist at a Saudi bank in Riyadh. "Defence spending largely exceeded economic allocations and this is one of the main reasons for stifled growth and low job opportunities."

Arab League figures showed defence and security allocation in its 22 nations have averaged as high as 28 per cent of the current expenditure over the past eight years while economic affairs allocations have not exceeded eight per cent.

The figures showed current expenditure totalled around $309 billion (Dh1.13 trillion) in 2007 as it accounted for nearly 72 per cent of the total spending of $430bn.

At 28 per cent of the current spending, defence and security allocations totalled nearly $86bn. Economic affairs allocations stood at only $24.7bn.

"Latest indications point to a decline in poverty rates in some Arab countries but an increase in others. Despite the decline in those members, the poverty rates are still considered very high," said the joint Arab economic report, released last week by the Abu Dhabi-based Arab Monetary Fund and the Arab League.

Its figures showed poverty has declined in Tunisia and Morocco over the past few years but sharply increased in Djibouti, Somalia, Yemen, Iraq and Palestine.

"Poverty in the Arab countries is closely linked to economic growth rates and developments in wealth distribution. Economic growth alone is not enough to reduce poverty as wealth re-distribution could not be to the advantage of the poor. Arab states should focus on even and fair distribution of wealth."

While Arab economies have recorded high growth over the past eight years, it was nominal growth as real growth was relatively weak and much lower than the population growth in some Arab countries, according to the AMF.

High nominal growth over the past few years was mainly a result of a surge in oil prices as the economies of many Arab nations, mainly the Gulf oil producers, recorded low performance and some of them declined during 1990s.

Besides worsening poverty, such developments have resulted in a deterioration of the long-standing joblessness problem in the Arab region, with the number of unemployed persons peaking at nearly 17 million at the end of 2007.

Nearly 26 per cent of the jobless are young educated people who are rapidly increasing in a regional labour market that is recording slow growth rates, according to the Arab Labour Organisation (ALO).

"Unemployment in the Arab World is estimated at around 14 per cent, which means we have nearly 17 million jobless people," ALO Director-General Ahmed Mohammed Lukman said in a recent ALO report,

"In the absence of effective measures and policies by the Arab governments and serious cooperation among all Arab countries, the unemployed people will increase to 100 million within the next 10 years," he warned.

Lukman said all Arab nations are suffering from unemployment but added the rate varies from one country to another. While the problem is caused by flawed policies in some members, heavy reliance on expatriates, mainly Asians, in the Gulf states is to blame for the rising joblessness rate.

"Nearly 26 per cent of the unemployed people are young graduates. They have been increasing rapidly while the market is unable to accommodate them," he said. "I don't think there is any Arab country which is not suffering from unemployment. There are too many reasons and too many obstacles. In the Gulf, they are still heavily relying on expat labour."

Lukman did not specify the causes of high unemployment in the region but according to the Organisation of Arab Economic and Social Development, they include relatively low development spending, rapid population growth, a surge in the workforce and flawed economic and fiscal policies. It estimated the combined workforce in the Arab countries at around 118 million, more than 38 per cent of their total population of nearly 320 million.

But the report noted that the level is low compared to that in the advanced countries and it cited a high number of under-15 population group in the region, low female participation in work, and longer years in schools and universities.

"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 member states, 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."

In another report, 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 study by the GCC Chambers' Federation put the rate at around 5.7 per cent. It again blamed the foreign labour.

"The most important effect was that the expatriates have remained the dominant force in the labour market in the GCC states, mainly in the private sector, as they are grabbing between 60 and 70 per cent of the job opportunities in that sector every year. This has led to an aggravation of the unemployment problem among GCC citizens. In 2006, the combined GCC unemployment rate was estimated at 5.7 per cent but taken individually, the rate is higher in some member states."