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Female Unemployment in the Middle East

Female Unemployment in the Middle East

In this OPINION piece, Carmen Haddad wrote on Friday, 23 August 2019, that Companies need to address female unemployment in the Middle East.

The skills gap poses a genuine threat to economic progress and could leave nations stalled, millions unemployed and prosperity dwindling.

Only one in five working-age women in the Middle East and North Africa (MENA) has a job or is actively looking for one, according to the World Bank and the region has one of the lowest female labour force participation rates in the world.

If the MENA region continues along this trajectory, it could take at least another 150 years to match the current global average for female labour force participation. 

Despite good progress in some countries, challenges and inequities persist.

Increasingly, there is a realisation that the levels of female unemployment are not simply a mirror of the business cycle, but a persistent structural issue that has distinct causes and requires specific solutions that cut across socio-economic and education policies.

This not only represents a great loss of human capital, but it also seriously hinders the region’s potential for social and economic development.

Across MENA, restrictive barriers including limited mobility, restrictive laws and closed industries, coupled with long-standing political and social issues, continue to impede women’s access to the labour market.

However, one factor that stands out is that education does not always lead to employment. There is a persistent mismatch between employers and jobseekers – whether in terms of skills, attitudes or expectations.

For example, in Saudi Arabia, female enrolment in tertiary education has doubled in the last decade (68.5% in 2017 compared to 34.2% in 2007), but still only two in ten working-age women participate in the labour force.

In Egypt, unemployment among women with advanced education is almost six times that among those with basic education only, according to World Bank Development Indicators. While in Tunisia, only 41% of women are enrolled in tertiary education and they represent just 26.5% of the total labour force in the country.

This skills gap poses a genuine threat to economic progress and has the potential to leave nations stalled, millions unemployed and prosperity dwindling.

I believe that women can be change-makers for the political, economic and social development of MENA.

However, participation from governments, employers and education providers is needed to bridge the gender gap, increase regional output, and put MENA on a more sustainable and inclusive growth path in the long run. 

Companies can do their part by engaging in thoughtful planning, cooperating with others and getting strategic about their staffing practices. This could range from supporting access to soft and technical skills programmes, endorsing philanthropic partnerships, designing policies and spearheading discussions among the education community to pushing inclusive job opportunities.

Over the next decade, it is estimated that 50 million women will come of working age in the region. Therefore, corporations are in a unique position to bring about significant change through empowering a previously untapped human resource.

Despite increased focus and spending over the past decade, MENA governments still have a long road ahead in improving women’s social and political barriers to employment. Without a drastic overhaul of personal development and soft skills programmes, companies will continue to struggle to fill jobs across the region.

The influence and investment of companies is crucial to start to re-shape the position of women across MENA and successfully bring them into the workforce – ultimately shaping a stronger, more inclusive economy.

Carmen Haddad is the Chief Country Officer of Citigroup Saudi Arabia and the Citi Saudi Arabia Business Governance Head. Citi Foundation has partnered with international NGO Education for Employment to tackle the MENA unemployment crisis. 

* Any views expressed in this opinion piece are those of the author and not of Thomson Reuters Foundation.

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Challenges for Saudi jobs market

Challenges for Saudi jobs market

ZAWYA #jobs of 18 April 2019, elaborated on the slowing growth that appears to be creating challenges for the Saudi jobs market, hence:

Hiring activity in the kingdom remains ‘subdued’, according to ICAEW/Oxford Economics survey.

Slowing growth creates challenges for Saudi jobs market

Image used for illustrative purpose Members of the Chambers of Commerce in the Saudi capital Riyadh vote for a new president of the commercial body in rare elections November 11, 2008.
Image used for illustrative purpose Members of the Chambers of Commerce in the Saudi capital Riyadh vote for a new president of the commercial body in rare elections November 11, 2008. REUTERS/Fahad Shadeed By Michael Fahy, ZAWYA

Growth in Saudi Arabia’s economy will slow slightly this year, creating a challenge in terms of generating enough jobs for its citizens, an economist has told Zawya.

A new Economic Insight: Middle East Q1 2019 report published by accountancy body ICAEW (Institute of Chartered Accountants in England and Wales) and Oxford Economics said that it expects economic growth in the Kingdom to slow marginally in 2019 to 2 percent, down from 2.2 percent in 2019 as oil revenue falls due to Organization of the Petroleum Exporting Countries-mandated production cuts and “only a modest acceleration in non-oil activity” due to the challenging business environment.

The report said that although it expects growth in Saudi Arabia’s non-oil sector to grow by 2.6 percent this year, supported both by an expansionary fiscal policy and reforms aimed at boosting the private sector, hiring activity remains “subdued”.

Mohamed Bardastani, ICAEW economic advisor and Middle East senior economist at Oxford Economics, told Zawya in a telephone interview that the jobs market in Saudi Arabia has been “extremely challenging, and we don’t see it changing any time this year”.

He explained that that in the two years between the end of 2016 and the end of last year, the country’s Labour Force Survey showed that more than 1.5 million jobs were lost among expats –  a result of “the economic slowdown, various fiscal consolidation measures, but most importantly the measures that the government took in terms of applying expat levies and expat dependent fees on private sector companies”, Bardastani said.

“The private sector, historically speaking, has been relying on expat workers. Around 80 percent of the private sector is made up of expat workers. So obviously, this will have ramifications on growth,” he said.

Moreover, unemployment among Saudi nationals remains stubbornly high at 12.7 percent, considerably above the 7 percent target set under the kingdom’s Vision 2030 goals.

“Historically speaking, the public sector most of the time absorbed the new job entrants. This is one of the main challenges in Saudi right now. I think it is the most pressing challenge, where you have around a 12-7-12.8 (percent) unemployment rate and you have around 400,000 graduates (each year), and then job creation is relatively weak,” he said.

Tough choice

Bardastani said that the government faces a difficult choice, “between either absorbing those new job market entrants and increasing its spending, which will lead to higher budget deficits” or continuing to push through reforms in the expectation that they create enough opportunities for private sector companies to generate jobs.

“I think, for sure, that’s going to take some time,” he said.

The survey also stated that it expects faster non-oil growth in the United Arab Emirates, but again a limited increase in employment opportunities.

Growth in the non-oil economy is set to increase to 2.1 percent this year, up from 1.3 percent in 2018, on the back of expansionary budgets and “pro-growth government initiatives”, such as the 50 billion dirham ($13.6 billion) ‘Ghadan 21’ initiative in Abu Dhabi, but job creation has slowed in key sectors, including services and manufacturing.

Bardastani said firms that have seen input costs rising have been unable to increase selling prices due to competitive pressures.

“So you have this squeeze in profitability margins. Many firms are becoming more efficient in terms of producing the output – they have to do more with less resources. That’s why job creation has been weak.”

A jobs survey also published on Wednesday by recruitment firm Michael Page was more upbeat on the prospects for Saudi jobseekers, stating that 64 percent of respondents were positive about the current job market in the kingdom. It also said 86 percent of respondents said that they expect the jobs market in Saudi Arabia to improve over the next six months.

In a press release announcing the survey results, Michael Page Saudi Arabia’s operating director, Domenic Falzarano, said: “Given the kingdom’s commitment to its Vision 2030, the bulk of the hiring is taking place in the financial services, infrastructure, entertainment, tourism and healthcare sectors.”

(Reporting by Michael Fahy; Editing by Mily Chakrabarty)

(michael.fahy@refinitiv.com)

Expatriate workers continue increasing in the Arabian Gulf

Expatriate workers continue increasing in the Arabian Gulf

Migrant or expatriate workers continue adding to the labour force of oil-rich Gulf due to mega-construction projects, UN data shows.  Al Jazeera posted this article dated 20 Dec 2018 elaborating on a situation known to all since the advent of oil.

Gulf Arab blue-collar workforce continues to grow: UN

by James Reinl

Blue-collar migrant workers continue adding to the labour force of the oil-rich Gulf, skewing long-standing efforts by its leaders to increase the percentage of its own citizens in the workforce, data of the UN’s International Labour Organization (ILO) shows.

Figures released this month in a 78-page study, ILO Global Estimates on National Migrant Workers, showed that the proportion of migrants in the eastern Arab region’s workforce ballooned by 5.2 percent from 2013 to 2017, mostly in the construction sector.

Migrants now make up 40.8 percent of the workforce across a 12-nation region that includes the Gulf Cooperation Council (GCC) bloc of Saudi Arabia, the United Arab Emirates (UAE), Qatar, Kuwait, Bahrain and Oman.

This is a much higher proportion than other rich regions that attract some of the world’s estimated 164 million migrant workers. In comparison, migrants make up only 20.6 percent of the labour force in North America, and 17.8 percent in Europe.

In Dubai, Doha and other Gulf boomtowns, foreigners make up as much as 90 percent of workers, according to older figures. The ILO did not have data on separate countries for this month’s report; Ryszard Cholewinski, the ILO’s Beirut-based expert on migrant workers, said that figures provided by Gulf governments are often incomplete.

Blue collar jobs

The increase in labour flows to Gulf states these past five years was driven mainly by mega-construction projects, including pavilions for Expo 2020 Dubai and the FIFA World Cup 2022 stadiums being built across Qatar, said Cholewinski.

Demand has also grown for maids, gardeners, drivers and other domestic staff, he added. In particular, more foreign carers are being hired to look after a growing number of elderly folks in their homes, as the Gulf population ages.

“The demand for male workers in the Arab states explains the sharp increase in the share of migrant workers in this region. Many of these workers are manual labourers, located mostly in the construction sector,” Natalia Popova, an ILO labour economist, told Al Jazeera.

“Possible other reasons for the increase in the high share of migrant workers may include the increasing demand for domestic workers, both male and female, as well as for migrant workers in the hospitality sector.”

Nationalisation efforts

While data on nationalisation efforts is skewed due to the sheer amount of blue-collar migrants, Gulf leaders have long sought to boost the numbers of their working citizens, mainly in the white-collar workforce.

However, state-led hiring drives, with such names as Qatarisation, Emiratisation and Saudisation, have had only limited success, particularly in the private sector, according to the ILO.

“Many of these nationalisation policies are not really having any impact. It’s one of the region’s big challenges,” Cholewinski told Al Jazeera.

“There’s a lot of rhetoric on nationalisation in for example Saudi Arabia’s Vision 2030 agenda. But in practice, this is going extremely slowly.”

Al Jazeera contacted the UN missions of all six Gulf states by email and telephone over the course of several days, but was not able to get a comment on this issue.

While each Gulf nation faces different challenges when it comes to nationalisation, many Gulf citizens loathe taking jobs in private companies, which cannot compete with the pension plans, generous holidays and shorter working hours in the cushy jobs-for-life enjoyed by civil servants.

This can lead to odd distortions. A visitor to Dubai, the UAE’s tourism hub, can spend their whole week-long vacation being served by migrant workers in shops, taxis and eateries, and the only Emirati they meet is a passport-stamping immigration clerk at the airport.

Last month, the UAE launched it’s so-called Citizen Redistribution Policy to temporarily shift civil servants into private sector jobs. It also rolled out training schemes for Emiratis and online recruitment tools.

In recent months, Riyadh has introduced rules requiring shops to have Saudis in at least 70 percent of sales jobs. Expat workers pay monthly fees for their spouses and children, employers pay similar penalties for foreign employees.

Saudi Crown Prince Mohammed bin Salman’s ambitious Vision 2030 agenda aims to overhaul the Saudi economy by massively expanding the healthcare, education, recreation and tourism sectors and slash the high unemployment rates for young Saudis.

John Shenton, chairman of the Chartered Institute of Building’s Novus initiative, which supports construction jobs in Dubai, told Al Jazeera that Gulf nationalisation schemes were bearing fruit.

In some state-regulated sectors, such as banking, legal and financial services, the number of local staff has grown, Shenton said. “If the goal is to get more Emiratis in the workforce then it’s having some effect,” said Shenton. “However there are other factors that will mean that those efforts may not be reflected in the data.”

These gains are dwarfed by the mass-recruitment of foreign construction workers to build the skyscrapers, malls and artificial islands for which the region is famous, he added.

“At a site level, the chaps in safety boots and hard hats will always be from the subcontinent or South Asia,” Shenton said.

“At the engineering and supervisory level, the skill set required can’t be satisfied by the number of local graduates. The volume of work being undertaken and the discreet programme dates associated with projects like Qatar 2022 necessitate our hosts resourcing from overseas.”

Melissa Roza, a headhunter at a Dubai-based recruitment firm, said nationalisation schemes had made gains in some white-collar jobs, but that state-set hiring quotas and penalty fees were also hurting these sectors.

Banks in the UAE often prefer to pay fines for hiring foreigners than to cover the recruitment costs involved in hiring an Emirati, training them up and meeting their high salary expectations, she said.

Executives have also found workarounds by hiring migrants via outsourcing firms, which do not affect the quota count, added Roza, whose name was changed so she could talk frankly on a hot-button issue. 

Follow James Reinl on Twitter: @jamesreinl

  • Inside Story happen when the Gulf countries’ oil runs out?

SOURCE: Al Jazeera News

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UN clears Qatar over treatment of migrant workers

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Pakistan’s ties with the Gulf countries

Saudi Arabia’s ‘liberal’ Crown Prince, one year after

Saudi Arabia’s ‘liberal’ Crown Prince, one year after

FOX BUSINESS of June 21st, 2017 reported that “The new crown prince, Mohammed bin Salman, is the elderly monarch’s 31-year old son and minister of defence. The young man, after having reached the ultimate power in the Kingdom of Saudi Arabia set about to implement an ambitious economic agenda to reduce Saudi Arabia’s dependence on oil and carve out a more muscular foreign policy. 
Sukru Cildir, PhD Candidate, Lancaster University examines here how Saudi Arabia’s ‘liberal’ Crown Prince, one year after his designation as the heir apparent of the Kingdom of Saudi Arabia, is performing as it were in real life.

Saudi Arabia’s ‘liberal’ Crown Prince is a year into his tenure – how is he doing?

File 20180724 194149 balabn.jpg?ixlib=rb 1.1

When Mohammad bin Salman, first announced his ambitious, nationwide reform programme – bearing the rather theatrical title, Vision 2030 – targets included diversifying the economy, improving public services such as health and education, and, front and centre, drastically reducing dependence on oil. Two years on – and now Crown Prince – bin Salman’s reforms continue apace.

It may seem surprising that such an oil-rich state – 16% of global oil reserves; 13% of global oil supply – should be trying to turn its back on the commodity that took it from poor desert kingdom to wealthy world player. But with 87% of state revenue coming from oil, reform has been in the pipeline for some time. In fact, in some ways Saudi Arabia is retreading very old ground. Five-year plans for diversifying the economy have been regularly trotted out since the 1970s – they just haven’t worked particularly well.

There have been improvements to economic infrastructure, and some development of a previously poor transport system – but no major movement on the kingdom’s oil addiction. Most members of the country’s ruling elite have been noncommittal on reform, and have refused to address structural problems in both the economy and the government.

A five-year plan decades in the making.
Shutterstock

A prince of progress

So, when the young bin Salman – popularly known as “MbS”, and already strongly associated with reform – ascended from deputy to Crown Prince in June 2017, there was an expectation of real change. Vision 2030 contains a list of ambitious aims: entering the top 15 largest world economies; increasing the private sector share of GDP from 40% to 65%; manufacturing 50% of military equipment domestically; raising the export element of non-oil GDP from 16% to 50%; increasing non-oil state revenues five-fold; and many others. These ambitions seem far loftier than those of previous reform efforts, and are arguably more critical to the kingdom’s long-term prosperity than they have ever been before.

In order to meet these goals, bin Salman quickly introduced a liberalising agenda for both the economy and society. Perhaps his grandest project is NEOM, a planned megacity expected to cost US$500 billion dollars, take between 30 and 50 years to complete, and, it is hoped, attract vast sums of foreign investment. Located in Tabuk, a northern border region near Egypt, Jordan and Israel, the idea is to construct an ultra-modern, futuristic hub of international business, commerce, and digital tech. The government expects to fund the enterprise by privatising parts of state-run industrial programmes – including 5% of the world’s largest oil company, Saudi Aramco.

At the same time, bin Salman has made efforts to cut back the bureaucracy and restrictive legislation that has strangled the Saudi private sector. He has curtailed the power of the religious police, allowed women to drive and open their own businesses without the permission of a male guardian.

Timing and sustainability

But why now? Why after so many half-hearted attempts, is diversifying the oil economy quite so important? It is partly because of the industry landscape. The last few years have seen a soaring renewable energy sector, while the shale oil revolution in the US has helped saturate an already contracting market. At one stage oil prices plummeted from US$140 to less than US$30 a barrel, leading to rising unemployment, an increasing budget deficit, and dwindling financial reserves. An IMF report on the kingdom’s finances even floated the possibility of bankruptcy, should Saudi Arabia fail to urgently restructure its economy.

There is also a political angle. When bin Salman became Crown Prince he did so at the expense of incumbent Mohammad bin Nayef, his cousin, who was summarily stripped of all his official duties, angering sections of the public and the Saudi ruling elite. Bin Salman’s strident reforms are intended to help consolidate his position, build legitimacy, and send a message to those who would oppose him.

Is the sun finally setting on the Saudi oil juggernaut?
SHUTTERSTOCK

Rumblings of discontent

Bin Salman’s unyielding style of governance, however, mixed with Saudi Arabia’s unique political culture, may make for a rocky road ahead. First, tensions are rising with the conservative elements in the kingdom’s powerful religious and tribal establishments. It remains to be seen how obstructive they might be to the implementation of reforms.

Second, bin Salman’s aggressive, provocative stance towards Iran raises the possibility of war between the two states. Besides the obvious human cost, this would distract from reform and drain the Saudi coffers, abruptly halting costly projects such as NEOM.

Third, bin Salman has ordered a series of arrests, which include corruption charges against businessmen, government ministers and members of his own royal family. He was also alleged to be behind the detention of the Lebanese prime minister, Saad Hariri, in late 2017, who was reportedly forced to offer his resignation on Lebanese television – though four months later Hariri and Saudi King Salman were seemingly on good terms. These developments and claims not only make bin Salman very unpopular in parts of his own government, they also discredit his liberalisation programmes, and leave the country looking unstable to foreign investors and the private sector.

The ConversationThere is no doubt that the current reform programme is a giant step forward for the kingdom’s future welfare, and will surely facilitate further integration with the West. But how these reforms are implemented is more important than the garish manner with which they have been announced. Given how provocative and aggressive bin Salman has been in his foreign and domestic policies, this “progressive” prince may soon face a whole new set of challenges.

 

This article was originally published on The Conversation. Read the original article.

 

Tourism in Saudi Arabia as a palliative equivalent to oil exports

Tourism in Saudi Arabia as a palliative equivalent to oil exports

The International Monetary Fund in its recent report on Saudi Arabia informed that the country whilst reconsidering the speed at which it is taking steps towards austerity, it is nevertheless avoiding slowing down its economy, to notably not increase its unemployment rate. This report holds that although the budget deficit is shrinking, it is doing so at a high cost to the economy. Before adding that : “Riyadh has been cutting spending while raising taxes and fees to curb a huge state budget deficit caused by low oil prices. Last December it published a plan to eliminate the deficit, which was a record $98bn in 2015, by 2020.”  Tourism in Saudi Arabia as a palliative equivalent to oil exports related revenues has been reiterated as such for very long but was never taken this seriously.

It is to be noted that with the prospects of oil prices remaining low for the foreseeable future and the global economy possibly opting out of anything to do with fossil fuel type of energy soon, it would be up to the country itself to find other means of replacing those revenues.  For that, the country is developing a whole strategy; perhaps one of the rare few that could seriously be envisaged at this stage. Tourism has been plucked out as a good earner and it will not take much in order to expand this sector’s role in the economy.  

This of course will be limited in terms of earnings and employment as shown below in the WION graph. And if more earnings and employment were sought, there bound to be difficulties arising from the conservative establishment.

It consists of developing or furthering the already on-going religious tourism.  Projects to develop and diversify the Red Sea coast infrastructure and offer it as a world tourism destination have been announced.  The following WEF’s article is a good description of this move.

With The Red Sea Islands being developed, Saudi Arabia is hoping to bring more tourism in. Image: REUTERS/Suhaib Salem 03 Oct 2017

 

Could Saudi Arabia become a holiday destination?

John McKenna, Formative Content

Saudi Arabia is putting vast sums of money behind its ambitions to nearly quadruple the number of visitors to its holy sites by 2030.

It is spending $26.6 billion to expand the Grand Mosque in Mecca in order to accommodate more pilgrims during the haj week, plus another $3.6 billion on a hotel nearby that with 10,000 rooms would be the world’s largest.

When associated projects such as the Mecca-Medina rail link are included, it is estimated that Saudi Arabia is spending $80 billion on Mecca alone.

The Grand Mosque in Mecca is undergoing a $26.6 billion expansion. Image: REUTERS/Suhaib Salem

 

Further funds are being spent restoring and improving historical and religious sites across the country, as the government aims to more than double the number of Saudi heritage sites registered with UNESCO by 2030.

Life after oil

The spending on Saudi Arabia’s religious and historical sites is part of a drive by the country’s leaders to wean the country off its dependency on oil.

Saudi Arabia is, with Russia, the world’s joint largest oil and gas producer.

The petroleum industry accounts for roughly 87% of government revenues, 42% of GDP, and 90% of the country’s exports.

With oil prices remaining depressed, the Saudi Arabian economy is suffering – its GDP shrank by 0.5% in the first quarter of this year, caused by the oil and gas sector contracting by 2.4% in the same period.

Memories of the 1980s oil glut which put Saudi Arabia heavily in debt have combined with a realization that the oil and gas sector may never again be what it once was.

Renewable energy and the rise of electric vehicles point to a future where oil and gas use at best stagnates, and where prices may be in long-term decline.

Vision 2030

To wean the country off its oil addiction, Saudi Arabia’s Crown Prince Mohammed bin Salman bin Abdulaziz last year launched a roadmap for diversifying the country’s economy, called Vision 2030.

It includes plans to invest in infrastructure, education and a variety of business sectors outside of oil and gas.

A large portion of the plan will be funded by next year’s sale of less than 5% of state-run oil company Saudi Aramco – widely predicted to be the largest IPO in history, valuing the company at around $2 trillion.

One of the non-oil and gas sectors identified for growth in the Vision 2030 plans is tourism.

Image: WION

The country already welcomes 8 million visitors per year, the overwhelming majority of whom are pilgrims visiting Islam’s holy sites of Mecca and Medina – 1.75 million in just five days during this year’s haj pilgrimage.

Saudi Arabia’s leaders want to nearly double the annual number of pilgrims to 15 million by 2020. By 2030 it wants to welcome 30 million Umrah visitors every year.

Muslims pray at the Grand Mosque during the annual Haj pilgrimage in Mecca. Image: REUTERS/Suhaib Salem

 

 

Tourist attraction

And it is not just religious tourists that Saudi Arabia is hoping to attract.

It is also developing islands on its Red Sea coast to create a tourist resort the size of Belgium.

Work across the 50 islands will include the building of luxury hotels, an airport, new roads and a port. Construction is due to begin in 2019, with the first phase of the development opening in 2022.

The Red Sea Islands will be developed as a “private area” with laws that match “international best practice”.

The Kingdom’s authorities have yet to confirm whether this means the resort will be subject to Saudi Arabia’s conservative laws, which ban alcohol and enforce modest dress.

As part of its bid to attract religious and recreational visitors alike, Vision 2030 also sets out plans to relax visa regulations.

 

Hidden consequence of Saudi Arabia’s Oil Price war

Hidden consequence of Saudi Arabia’s Oil Price war

“Life is unjust” as many have heard it said quite often over the centuries. Hidden consequence of Saudi Arabia’s Oil Price war is yet again another story on how, miscalculations and certain imponderables make life certainly not that agreeable for a third party. This is nicely wrapped up by Bulent Gökay, Professor of International Relations, Keele University in The Conversation and widely spread all over the world media. Here it is.

Venezuela crisis is the hidden consequence of Saudi Arabia’s oil price war

Venezuela crisis is the hidden consequence of Saudi Arabia’s oil price war

Venezuela crisis is the hidden consequence of Saudi Arabia’s oil price war

Venezuela is sinking ever deeper into a political and economic calamity. Inflation is above 700% and GDP is more than a third below 2013 levels. The country with the world’s largest proven oil reserves is now the world’s most indebted country – no other nation has a larger public external debt as a share of GDP or of exports. Living standards have truly collapsed.

Many factors have contributed to Venezuela’s current crisis including mismanagement of oil wealth by former president Hugo Chavez and the current leader, Nicolás Maduro, and criminality, lawlessness and the black market.

While all of these have undoubtedly had a part to play, the falling price of oil is the most significant factor. However the connection between this and an economic crisis in South America is not as obvious. What’s going on in Venezuela is the unintended consequence of Saudi Arabia’s policy of keeping oil prices deliberately low for political reasons.

The price of oil, as with any other commodity, is regulated through supply and demand. When there is an oil surplus, or a reduction in demand, the price will fall.

Between 2008-09 and 2014 supply and demand remained fairly constant, at around 80m barrels a day. But production started to escalate thereafter, and by late 2015 the average supply reached 97m barrels a day, with no significant change in demand. This caused a sharp and continuing drop in the price.

Part of this increase in supply was from American shale oil, extracted through fracking, but mostly it was the result of the Saudis deliberately pumping large amounts of oil for political reasons. As the only oil-producing country with sufficient reserves to regulate the market in this way, Saudi Arabia is considered the “swing producer”. Even though US shale production has reduced some of the Saudis’s swing power, the oil kingdom has still the capacity to produce more than it does currently and is therefore still very much capable of crashing the market.

Taking on America and Iran

It seems the Saudis are trying to achieve two aims. The first is to drive US shale producers out of business and consolidate the Gulf state’s leading role in global oil. Producing oil from shale via fracking is expensive, around US$60 a barrel, while the cost of natural oil is no higher than US$7 a barrel. Saudi Arabia hopes the drastic decrease in oil prices, to well below US$60 a barrel, will make it unprofitable for American shale producers to drill at their current rates.

Fracking in Colorado. Oil released by this rig can’t compete with cheap Saudi oil. Jon Mullen/Shutterstock

The second aim is to destroy the economy of Iran, the Saudi kingdom’s main competitor in the Middle East. This would thus limit Tehran’s ability to continue funnelling hundreds of millions each year to the Syrian regime, and Shia militias in Iraq, Yemen and elsewhere.

Oil markets have always been at the heart of the Saudi-Iranian struggle for regional hegemony. Back in 1977, when Iran was planning extensive nuclear power plants and envisaging the spread of its influence throughout the Middle East, the Saudi regime swamped the markets, expanding oil production from 8m to almost 12m barrels a day, sharply cutting the oil prices.

Iran watched billions of dollars in anticipated oil revenues vanish, and the Shah was forced to abandon his plans for nuclear investment. Manufacturing collapsed, inflation skyrocketed, unemployment rose steeply – and before long economic troubles had destroyed all support for the Iranian monarchy. The rest is history: the regime collapsed in two years and was replaced by Ayatollah Khomeini’s Islamic republic.

An oil alliance

It seems, after some hesitation and discussions in the early part of 2014, Saudi Arabia launched this oil price war in tandem with the US. America supported the policy as it wanted to undermine the influence of oil-dependent Russia, something it apparently considered more important than supporting its own fracking sector, while access to cheap imported oil is good news for US consumers and industry in general. Whether or not there was a clearly planned and agreed strategy, there seems to be an unmistakable convergence of interests between the Saudi and US positions.

This strategy of keeping the price of oil down has not necessarily destroyed either the Russian or Iranian economies however. Instead, the hardest hit oil-producing nations are in South America and Africa, where petro-states such as Libya, Angola, and Nigeria are suffering.

But the worst affected country of all is Venezuela, the most disastrously oil-dependent state in the world. Oil accounts for 96% of exports and more than 40% of government revenues.

It is still unclear whether the Saudi-US oil price strategy will ever achieve its main goal of crushing Russian and Iranian power and influence. But one thing is clear: the world oil market will continue to be extremely volatile, and smaller, less powerful nations will continue to be caught up in the wider battle.

 

Saudi’s riches conceal lack of decision making

Saudi’s riches conceal lack of decision making

Saudi’s riches conceal lack of decision making on every single item of the country’s main current worrisome concerns. For instance, in Keep OPEC out of Wall Street published by Journal of Energy Security of July 19, 2017, we were informed that for the past several months two of the world’s leading stock exchanges – the New York Stock Exchange (NYSE) and the London Stock Exchange (LSE) – have been competing over the listing of Saudi Aramco, Saudi Arabia’s national oil company, in what would be the largest IPO in history. 
But for the Saudis the choice between New York and London is not an easy one. Prince Mohammad Bin Salman, who was recently installed as the Kingdom’s crown prince and who is considered the mastermind of the IPO, prefers an NYSE listing which would solidify US-Saudi relations even beyond the recent $350 billion arms deal between the two countries. Aramco executives on the other hand prefer London as there, they believe, the company would be more protected from shareholders lawsuits over not only the conduct of the company but also that of the Saudi government. To date no decision has been made.
No one can blame the owners of those exchanges for their eagerness. The same is true for the underwriters of the IPO like Goldman Sachs and JP Morgan or the various consultancies and law firms benefiting from lucrative retainers and consulting fees associated with the offering. With an estimated valuation of $2 trillion the five percent Aramco will be offering the public are valued at $100 billion – more than the combined value of the top five largest IPOs ever floated in New York City. With such a bonanza every crumb is a mountain of cash. But from the broader public’s perspective things look vastly different. The Aramco IPO is a test of the integrity of our financial system and under the current structure no democratic government which believes in free and open markets should expose its investors to such an offering.
In the meantime, the IMF has recently come up with this conclusion-report of their Executive Board on the country that is reproduced here with our thanks to all.  Reading the above article in conjunction with the proposed one below can be very enlightening at a time where as reported by Reuters on this Monday morning that Oil prices dip as prospect of deeper OPEC output cut dims.

IMF Executive Board Concludes 2017 Article IV Consultation with Saudi Arabia

On July 17, 2017, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV Consultation [1] with Saudi Arabia.

Non-oil growth is projected to pick up to 1.7 percent in 2017, but overall real GDP growth is expected to be close to zero as oil GDP declines in line with Saudi Arabia’s commitments under the OPEC+ agreement. Growth is expected to strengthen over the medium-term as structural reforms are implemented. Risks mainly come from uncertainties about future oil prices, as well as questions about how the ongoing reforms will affect the economy. Employment growth has weakened, and the unemployment rate among Saudi nationals has increased to 12.3 percent.

After increasing in early 2016 due to higher energy and water prices, CPI inflation has turned negative in recent months. It is, however, expected to increase over the next year due to the recently introduced excises taxes, further energy price reforms, and the introduction of the VAT at the beginning of 2018.

The fiscal deficit is projected to narrow substantially in the coming years. It is expected to decline from 17.2 percent of GDP in 2016 to 9.3 percent of GDP in 2017 and to just under 1 percent of GDP by 2022. This assumes that the major non-oil revenue reforms and energy price increases outlined in the Fiscal Balance Program are introduced on schedule and that operational and expenditure savings identified so far by the Bureau of Spending Rationalizations are realized. The deficit is expected to continue to be financed by a combination of asset drawdowns and domestic and international borrowing.

The current account balance is expected to move into a small surplus in 2017 as oil export revenues increase and import growth and remittance outflows remain relatively subdued. Net financial outflows are expected to continue, and SAMA’s NFA is projected to continue to decline, although it will remain at a comfortable level.

Credit and deposit growth are weak and are only expected to recover gradually. Interbank interest rates, which spiked higher during 2016, have fallen, and liquidity in the banking system is at adequate levels. Non-performing loans (NPLs) increased slightly to 1.4 percent, but remain low.

Saudi Arabia has embarked on a bold reform program under Vision 2030 that was announced in 2016. The authorities have made considerable progress in initiating the implementation of their ambitious reform agenda. Fiscal consolidation efforts are beginning to bear fruit, progress with reforms to improve the business environment are gaining momentum, and a framework to increase the transparency and accountability of government is largely in place. Effective prioritization, sequencing, and coordination of the reforms is essential, and they need to be well-communicated and equitable to gain social buy-in and ensure their success.

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Chatham House is arranging for a webinar to be held on Tuesday July 25, 2017 between 10:00 and 10:30 BST

Vision 2030: Can Saudi Arabia Effectively Modernise?
With as Jane Kinninmont, Senior Research Fellow and Deputy Head, Middle East and North Africa Programme, Chatham House as a speaker.
Saudi Arabia’s Vision 2030

Saudi Arabia’s Vision 2030

Saudi Arabia’s Vision 2030 wants to break its “addiction” to oil . . .

Reuters reports that “Saudi Arabia’s cabinet has agreed to implement a broad reform plan known as Vision 2030, which is expected to involve sweeping change to diversify the country’s economy beyond dependence on oil exports, state media reported on Monday.”  On that Monday 25 April 2016, an ambitious programme of reforms of how Saudi Arabia’s Vision 2030 could allow it to live without oil in 2020 by simply transforming it into a global financial power.

Prince Mohammed bin Salman said that Riyadh wanted more than multiply the capital allocated to its sovereign investment fund, by up to €1.650 billion compared with the current 600 billion.  To do this, the state is envisaging plans to sell off up to 5% of the capital of ARAMCO.

The 31-year-old prince climbed in a flash within the Saudi power structure since his father ascended to the throne 15 months ago.  Little known until then, he is considered today as one of the main proponents of the transition of Saudi Arabia towards the post-oil era.

“We have developed some sort of addiction to oil in Saudi Arabia,”  Prince Mohammed said in an interview shown on Al Arabiya TV, adding that Riyadh should break its addiction to oil revenues.Prince Mohamed at Al Arabiya

The plan, he detailed includes also reforms aimed at changing the social structures of the country, for instance by promoting women’s employment as well as improving foreign workers status.

World economists and analysts believed well before the now one year and half old drop in the price of oil, the country’s budgetary structures would be untenable in the long run and these could also be exacerbated by the ensuing difficulties.

The budget deficit of last year reached last year 15% of the gross domestic product (GDP) and the 2016 budget forecasts yet another deficit of greater magnitude.

At the centre of the “Vision 2030” unveiled in the above mentioned presentation is the restructuring of the Saudi Public Investment Fund, destined according to prince Mohammed to become a nucleus of international investment, that should bring in funds through the sale of shares of ARAMCO.

“We have restructured the Fund.  We have integrated new assets in the Fund, ARAMCO and other assets, and solved problems of the assets currently held by the public investment fund, both in terms of companies and projects”, he said before adding “Live without oil” by 2020, is our objective.

“According to some initial informative data, the Fund will control more than 10% of the overall investment capacity.”

And to prepare its partial privatization, ARAMCO will be reorganized in differing holdings of the energy sector and the prince suggested that all should be valued at $2,000 billion, adding that up to 5% of the capital would be sold in an initial public offering.  The Prince explained how ARAMCO, having huge oil reserves in the Kingdom, enjoys a valuation such that even the placing on the market of 1% of its capital would be the largest initial public offering ever.

He said that several subsidiaries of ARAMCO should be introduced as stock, other public companies, pointing out that these operations would enhance transparency of the accounts of these companies and limit corruption.

This policy will increase the share of the private sector in the economy of 40% to 60%, reduce unemployment from 11% to 7.6% and take non-fuel related revenue to (Saudi Riyal) SR1,000 billion against 163 billion today, but did not specify how and by what means.

“Vision 2030” plans also to go passed 22% to 30% share of women in employment, although this has already significantly increased these past five years.

It is also based on the establishment within five years of a system of “Green Card” allowing expatriate workers to live and work permanently in the country.

“I think that by 2020, if the oil stops, we will be able to survive”, says Prince Mohammed, explaining that his plan was safely based on the assumption of a $30 a barrel.

“We need, it is a fact, but I think that in 2020 we will be able to live without oil.”

 

 

Unrest in Arab States contributing to Slower Growth in MENA

Unrest in Arab States contributing to Slower Growth in MENA

Unemployment-fuelled unrest in Arab states contributing to slower growth in MENA: IMF as published on the 28th October 2019 New Indian Express.

The unrest is, in turn, contributing to slower growth in the Middle East and North Africa region, alongside global trade tensions, oil price volatility and a disorderly Brexit process.

By PTI

DUBAI: Unemployment and sluggish economic growth are fuelling social tension and popular protests in several Arab countries, the International Monetary Fund said Monday.

The unrest is, in turn, contributing to slower growth in the Middle East and North Africa (MENA) region, alongside global trade tensions, oil price volatility and a disorderly Brexit process, the IMF said in a report on the regional economic outlook.

Earlier this month it lowered the 2019 forecast for the region — taking in the Arab nations and Iran — to a meagre 0.1 per cent from 1.1 per cent last year.

The IMF slashed its outlook for the region’s three largest economies — Saudi Arabia, Iran and the United Arab Emirates.

The risks around the forecast of earlier this month “are skewed to the downside and are highly dependent on global factors,” the IMF said in its report on Monday.

“The level of growth that countries in the region are having is below what is needed to address unemployment,” said Jihad Azour, the IMF’s director for the Middle East and Central Asia.

“We are in a region where the rate of unemployment at the youth level exceeds 25-30 per cent and this requires growth to be higher by 1-2 per cent” in order to make a dent in joblessness, Azour told AFP in an interview.

The IMF report said that high unemployment was worsening social tensions in Arab countries.

“Unemployment averages 11 per cent throughout the region versus seven per cent across other emerging market and developing economies,” it said.

“Women and young people are particularly likely to be out of work, with more than 18 per cent of women…without jobs in 2018.” Violent protests have broken out in several Arab countries since early 2010 and turned into bloody civil wars in Syria, Yemen and Libya.

A new wave of demonstrations erupted over the last year in Algeria, Sudan, Iraq and Lebanon, typically demanding economic reforms and action against corruption.

In Lebanon, where protesters have brought the country to a standstill with demands for a full overhaul of the political system, the economy grew at a very slow pace over the past few years, Azour noted.

“The government has to act firmly and swiftly in order to address those imbalances, bring confidence back by addressing the fiscal situation, and lower expenditure,” he said.

The IMF also said that public debt levels were very high in many Arab countries — exceeding 85 per cent of gross domestic product (GDP) on average, with rates of more than 150 per cent in Lebanon and Sudan.

“Having built over many years, the cost of public debt burdens has become sizeable, preventing investments critical to the region’s long-term economic future,” it said.

The IMF said that Iran, which is subject to crippling US sanctions, has entered a steep economic recession and faces a battle against spiralling inflationary pressures.

The Islamic republic’s economy is projected to contract by 9.5 per cent this year after posting negative growth of 4.8 per cent in 2018.

Iranian authorities must align “the exchange rate close to the market rate and also reform the financial sector…and try to address some of the implications of the high level of inflation,” Azour said.

As a result of the sanctions, Tehran is believed to be exporting only around 500,000 barrels per day of crude, down from over two million bpd before the sanctions.

The IMF said that oil-rich Gulf Cooperation Council (GCC) states, led by Saudi Arabia, are expected to grow by just 0.7 per cent this year from 2.0 per cent in 2018 due to lower oil prices and output.

“GCC economies need to diversify and grow out of oil and this requires them to accelerate the reforms that have been started in the last four to five years,” Azour said. Stay up to date on all the latest World news with The New Indian Express App. Download now (Get the news that matters from New Indian Express on WhatsApp. Click this link and hit ‘Click to Subscribe’. Follow the instructions after that.)

Iraq protests expose the fallacy of the country’s democracy

Iraq protests expose the fallacy of the country’s democracy

Streets demonstrations in the vast and populous countries of the MENA region’s Algiers, Khartoum, Cairo and finally, Bagdad chasing some long-time running democratic awakening appear to be stalling. However, these capital cities of the so-called republics’ populations seem to be going through a quasi-general disenchantment with their respective establishments because of all the prospects for future development in political and security terms have become uncertain given this sudden but not surprising worsening regional situation. Like throughout all these countries, Iraq protests expose the fallacy of the country’s democracy. Technological advances in the world and their penetration in the MENA region could definitely be behind all these upheavals.

Whether these media as social or just digital distribution of news, they did help to connect citizens and build linkage to an unprecedented level. Government organisations always in desperate need of credibility fell short to keep up with how fast the region’s peoples demands of more democracy, etc. This article elaborates on the specifics of Iraq’s.

Iraq protests expose the fallacy of the country's democracy
Anger on the streets: protesters in al-Tayaran square in central Baghdad on October 4. Murtaja Lateef/EPA

Violent crackdown against Iraq protests expose fallacy of the country’s democracy

By Balsam Mustafa, University of Birmingham

When Muhanad Habib, a 22-year-old Iraqi from the Sadr City district of Baghdad, posted on Facebook in late September, he probably didn’t imagine that his demands for a better life and basic rights would be met with bullets.

It will be a huge and angry public revolution in Baghdad … We will take to the streets protesting … Enough silence about what’s going on in Iraq. We cannot just watch Iraq being destroyed when we have armies of jobless and poor.

This was how it all started. Angry youth from Baghdad took to the streets. Unaffiliated with any political party or with well-known activists, the protesters – the majority of whom were born in the late 1990s or early 2000s – despaired about any prospect for change in Iraq.

The crackdown by security forces that followed left more than 100 people dead and thousands more injured. Iraqi President Barham Salih condemned the crackdown in a televised speech on October 7, claiming that orders to shoot at the protesters weren’t made by the state or its apparatus. The interior ministry ordered an investigation into the deaths.

Yet, Salih’s statement raised questions about who is actually running the Iraqi state. And despite his and international condemnation, the crackdown continues on the ground.

Calls for a homeland

Endemic corruption, unemployment, flawed institutions and poor public services linger in Iraq and have prompted protests since 2011, including notably in Basra in 2018. The recapture of Iraqi lands from the grip of Islamic State (IS) gave many Iraqis hope that lessons would be learnt about the repeated failures which gave rise to IS, and that those in power would take sincere steps to reform. But that hope has been diminishing every day.

The most recent protests came in the wake of multiple smaller demonstrations by different groups, including PhD graduates, doctors and engineers in September 2019.

They followed government actions that caused widespread anger. Impoverished people were outraged at a recent state campaign to destroy unlicensed properties and market stalls across Iraq, leaving many homeless and jobless.

It also followed the removal of a key general, Abdul Wahab Al Saadi, from his position as commander of the Counter-Terrorism Service, followed by his demotion to a lower post at the Ministry of Defence. The marginalisation of a figure admired for his role in the military campaign against IS enraged many Iraqis.

The new generation want a homeland. “We want a respected homeland,” and “I am taking to the streets to get my right,” were among the slogans on display during the protests. “The issue is not about water or electricity, but about a homeland,” shouted another protester.

Violent crackdown

The immediate crackdown of the protests has surprised, shocked, and shaken Iraqis. The suppression turned a protest about anti-corruption and unemployment into an uprising against the status quo and what participants see as foreign interference, particularly from Iran.

Tear gas, live ammunition, and snipers were used to quell the protesters. As one protestor put it: “They did things to us they never did to IS. They beat and insulted us. They used live fire and grenades. What have we done? All what we are asking for are our rights and all people’s rights.” The protestor’s words were used as the opening of a new rap song titled “Iran’s tails” released in the wake of the crackdown by an Iraqi expat in solidarity with the demonstrators.

Iraq protests expose the fallacy of the country's democracy
The funeral in Baghdad of a protester allegedly killed by Iraq soldiers. Murtaja Lateef/EPA

The violent oppression and state’s authoritarian measures to cover up the carnage are reminiscent of the days of Baathist rule and former president Saddam Hussein’s oppression of a 1991 uprising. In 2019, such measures included an internet blackout across Iraq except in the Kurdistan region, curfews in Baghdad and other provinces in the south, and blocked roads leading to Tahrir square in Baghdad where demonstrators gathered. Comparisons were also made with IS, who also cut off the internet in Mosul when Iraqi troops were advancing to retake the city in 2016.

Offices of media agencies covering the protests were attacked and reports emerged of protesters, activists and journalists being threatened and arrested.

By disconnecting Iraqis from the outside world, the authorities in Iraq tried to control the circulation of videos that showed civilians killed in broad daylight. But they also pushed the narrative of Iran-backed political parties and officials: that “intruders” – an implicit reference to Baathists or actors backed by an external agenda – were responsible for riots. A similar narrative was echoed by Iranian media outlets to undermine the legitimacy of the protests, accusing foreign powers of being behind them, an indirect reference to the US, Israel and Saudi Arabia.

Despite the internet blackout, which remains partially in place, footage of the live shooting at the protestors and ambulances carrying the wounded were shared on social media as some Iraqi protesters resorted to innovative methods with the help of Iraqi expats to reveal the scale of the violence.

The heartbreaking scenes caused uproar among the Iraqi diaspora who protested in several countries around the world in solidarity. But for people inside Iraq, many still don’t know the scale of the atrocities as they haven’t been able to access social media sites.

The fallacy of democracy

Since the fall of Hussein’s regime in 2003, successive governments have failed to put an end to Iraqis’ grievances. Time and again, only empty promises were made, and superficial measures taken. The electoral system has helped to produce and perpetuate a hybrid form of kleptocracy, authoritarianism and kakistocracy – a government run by the worst, or most unscrupulous people. Armed groups, tribes, foreign powers and religious clergy have all maintained this system.

The latest protests may have been suppressed but they revealed that democracy in Iraq is nothing but a facade. What sort of democratic government kills its own people, taking away their hopes and dreams? And can it still be called legitimate? Reacting indifferently to the deadly crackdown of innocent people in Iraq, the world needs to at least recognise that the root causes of Iraq’s ills are in the post-2003 system itself.

Balsam Mustafa, Teaching Fellow, University of Birmingham

This article is republished from The Conversation under a Creative Commons license. Read the original article.