Political, economic overhaul crucial for Gulf future

FUTURE GROWTH: Political and economic reforms are vital if Gulf governments want to sustain economic growth in the long term. (Google Maps)

Leading Arab financers 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%, half independent estimates.

A report by the Arab Petroleum Investments Corporation (Apicorp) forecast economic growth in the Gulf to average 6% over from 2008 to 2012, with unemployment at 7%. The report did not give comparative figures.

Ali Aissaoui, senior manager at Apicorp, said the oil sector accounts for 30-40% of the Gulf's gross domestic product (GDP) but only 3% 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 newswire Reuters.

Moazzam Mekan, manager of advisory services at the International Financial Corporation (IFC), 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)

Print | Email | Discuss this article |

USER COMMENTS (0 COMMENTS)

POST A COMMENT

CLICK HERE TO POST A COMMENT

Add your Comment All posts are sent to the administrator for review and are published only after approval. ArabianBusiness.com reserves the right to remove any comment at any time for any reason. Please keep your responses appropriate and on topic.
Name *
Remember me on this computer
Email *	(Your email address will not be published)
City
Country
Subject *
Comment *
Notify me of further comments
Security Code *
Please click post only once - your comment will not be published immediately.