By Ghiya Bsat
Surely many of us (Arabs & non-Arabs) have wondered how can a whole region filled with heritage, diversity and oil fields have exceedingly incapacitated economies? Well it's not a simple equation to solve, there are many variables. It is also imperative to understand that a growing GDP doesn’t necessarily reflect economic strength & growth, as you’ll see with numerous cases throughout this article. So prepare yourselves, because this catering company offers more than your average three course meal.
For starters, there’s the famously publicized factor that is seen as the lavish gold of the middle east: Oil. Many argue that oil abundance is in fact a “resource curse” that results in high levels of corruption and poor economic growth. The petroleum sector accounts for 90% of Saudi Arabia’s export earnings, and so any change in oil prices could potentially wreck its economy and cause further inequality. If the prices increase, the shares will only be distributed among the country’s elites, and if they decrease, the government can no longer provide its citizens with a social safety net (energy subsidies) to avoid severe budget deficits. During the pandemic, when oil revenues fell by significant amounts, the Saudi government had to drastically increase its VAT from 5% to 15% and put its monthly living subsidy on hold, hitting only the most vulnerable parts of the population.
This brings us onto our next factor which I've talked about more thoroughly in my previous article; subsidies and tax revenues. Most governments in the Middle East don't depend on citizen tax for revenue, they rely on foreign aid instead and allocate all of it on subsidies which drain government budgets furthermore and halt any chance of economic sustainability. In Iraq and Sudan, tax revenues represent 2% and 8% respectively of GDP compared to 33% in France, United kingdom and Sweden. Tax revenues help hold a state accountable for its financial management and social welfare. Depending on foreign aid however, can help the decline of democracy in a state and move it towards an autocratic (Gulf countries/ Syria) or oligarchic (Iran/Lebanon) system, as well as making it heavily indebted to the donor countries.
For the main courses, we will address the elephant(s) in the room. Coming in hot is a gigantic plate of nepotism and patronage networks that stem into the heart of a large majority of middle eastern countries. Syria and Yemen are among the top 5% of the most corrupted public sectors according to the Corruption Perceptions Index (CPI), such daunting scores are what stirred continuous instability and led these countries to be razed by civil wars. In Lebanon, the ruling class thrives off embezzlement and clientelism, and despite mass protests in 2015 and 2019 against mismanagement and corruption, all attempts to conduct rightful investigations have been interrupted and no public officials have been put on trial. Next up, Women in the Middle East. Nonetheless, a pivotal point should be understood that not all women live under the oppressive societal norms of Saudi Arabia where women weren't even allowed to drive until 2018. Literacy rates have gone up but transforming education into
economic productivity remains an obstacle. As stated in an OECD report for gender equality in the MENA region “stimulating female labour force participation, and entrepreneurship is a largely untapped source of vital human capital for the region”. The gap between men and women with a full time job is 23 percent (largest in the world), given the fact that most job opportunities do not provide free child care or proper maternity leave (6 weeks in the UAE, Qatar & Oman compared to 14 weeks in Germany) leaving some with no choice but to work in part-time jobs. Earning less makes it also harder for women to qualify for a bank loan and start their own business, so they often start home businesses and because they are not taxable, economic growth is yet again limited.
And finally the disappearance of the middle class. A country’s economic security is measured by the presence of its middle class because it has the ability to promote change that benefits all of society and thus setting space for economic innovation. However, it is for the benefit of the authoritarians that govern middle eastern countries to control the middle class because it is them who will fight for political change and overthrow these dictators from their thrones. The erasure of the middle class manifests by solely practicing favoritism as means for climbing the ladder of better job opportunities which is beneficial for the individuals in already high positions, at the expense of every modest citizen. This was one of the driving factors for the Arab Spring uprisings, which left citizens crying out of a rising toll of unemployment and failure to afford necessities as basic as bread.
While most of these factors are global and are not entirely peculiar to middle eastern countries, the fact that they’re all present & condensed in this region, weakens its economies and perpetuates hardship in stabilizing it or promoting economic growth.
Ressources: https://www.opec.org/opec_web/en/about_us/169.htm https://carnegie-mec.org/2020/03/12/inequality-and-its-discontents-in-middle-east-pub-8 1266 https://www.washingtoninstitute.org/media/833 https://www.oecd.org/mena/governance/women-in-public-life-mena-brochure.pdf https://www.bbc.com/news/world-middle-east-52588971 https://www.transparency.org/en/news/cpi-2020-middle-east-north-africa https://ips-dc.org/women_in_the_middle_east/ https://stepfeed.com/here-s-a-look-at-maternity-leaves-across-the-arab-world-4438 https://www.statista.com/statistics/1201541/mena-female-literacy-rate/
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