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Sunday, September 25, 2011
GCC Investment Can Lead Post-Revolution States To Stability
One cannot separate political rights from economic rights; there
is an urgent need to take real steps to address chronic job shortages and lack
of short-term liquidity in post-revolution economies.
By Majid Jafar
Leaders of the Gulf Cooperation Council (GCC) countries
revolutions and unrest sweep the Arab world, commentary centres on a struggle
for freedom and political change. These elements do come into play, but what
lies at the core of these revolutions is a chronic and widening deficit of economic
opportunity, combined with the demographic time-bomb of an exploding youth
population. The stark statistic is that 100 million jobs need to be created in
the Arab world in the next two decades alone - more than was created in the
whole of the last century.
attempts at economic reform in many of these countries achieved certain success
in terms of headline economic growth, but incomplete reforms and corruption led
to only a small minority feeling the benefits. This combined with persistent
inflation, especially with food prices rising 30 per cent last year, to create
worsening inequality. In addition, education systems have failed to provide the
skills needed by the evolving job market. Reform in all these areas is still
sad reality is that the basic causes that drove the revolutionaries in all
these countries - corruption, economic stagnation and lack of job opportunities
- are likely to get much worse in the short term. Investment has frozen,
economic growth is slowing and unemployment will see a sharp rise.
people's level of expectation is high, with many hoping that because a regime
has toppled, jobs and housing will become available immediately. This was seen
in Cairo when the public housing directorate was mobbed by hopeful applicants
the day after Hosni Mubarak's fall.
in particular is an important case as the most Arab populous country. Now that
the euphoria of Cairo's Tahrir Square has died down, we face an urgent reality:
the critical tourism and construction sectors have ground to a halt causing a
liquidity crisis. And 700,000 jobs per year must be created in Egypt, just to
keep unemployment from rising. That pace of growth is just unrealistic. If a
solution is not found soon, the whole region risks instability or even
take a historical perspective, after the Second World War in Europe, the United
States established the European Recovery Plan, known as the Marshall Plan, to
rebuild western Europe's battered economies and prevent them falling to
communism. The plan was in effect for just four years from the end of 1948, but
saved Western Europe with the US investing $13 billion, a full 5 per cent of
annual US GDP at the time, equivalent to over $700 billion (Dh2.6 trillion)
today. The economies of the Arab world are not as destroyed as Europe's were,
but the situation and needs are similar.
"make work" infrastructure projects are desperately needed to employ
large numbers of workers, such as construction of highways and bridges, and large
rural or agricultural projects. The private sector could implement them, but
the funding needs to be provided.
western governments today are all struggling with their own domestic economic
crises, and are unable or unwilling. Instead, the GCC states can act during
this time of crisis and unrest. This is not charity, but very much within the
GCC's economic and political interests.
leadership of the Arab world in the 21st century is already shifting from Egypt
and Syria towards the GCC. It is Saudi Arabia that represents Arab countries at
the G20, and the cities of the GCC are already the most advanced in the Arab
Arab Spring has already resulted in a sustained increase in oil prices of at
least $30 per barrel. Over a period of just one year, this will result in an
additional income of over $250 billion per year to the GCC states above what
had been budgeted. A portion could be set aside in an infrastructure fund
designed to inject liquidity into Arab economies that have suffered unrest.
International institutions such as the World Bank and IMF could assist in
designing the governance and mechanism of the fund, but the leadership and
decisions should be kept within the GCC.
demonstrations and civil conflict attract the attention today, but we must not
forget that the chants in Tahrir Square for "bread and dignity". One
cannot separate political rights from economic rights; there is an urgent need
to take real steps to address chronic job shortages and lack of short-term
liquidity in post-revolution economies.
-This commentary was published in The National on 25/09/2011
-Majid Jafar is the chief executive of Crescent Petroleum and a board member of
the Sharjah Chamber of Commerce and Industry