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Globalisation may be decreasing . . .

Globalisation may be decreasing . . .

The first large-scale study of the risks that countries face from dependence on water, energy and land resources has found that globalisation may be decreasing, rather than increasing, the security of global supply chains. Here is the latest on the effects of the pandemic, in perhaps its most important aspect:

Globalized economy making water, energy and land insecurity worse: study

By the University of Cambridge.

globalisation
Credit: Pixabay/CC0 Public Domain

Countries meet their needs for goods and services through domestic production and international trade. As a result, countries place pressures on natural resources both within and beyond their borders.

Researchers from the University of Cambridge used macroeconomic data to quantify these pressures. They found that the vast majority of countries and industrial sectors are highly exposed both directly, via domestic production, and indirectly, via imports, to over-exploited and insecure water, energy and land resources. However, the researchers found that the greatest resource risk is due to international trade, mainly from remote countries.

The researchers are calling for an urgent enquiry into the scale and source of consumed goods and services, both in individual countries and globally, as economies seek to rebuild in the wake of COVID-19. Their study, published in the journal Global Environmental Change, also invites critical reflection on whether globalisation is compatible with achieving sustainable and resilient supply chains.

Over the past several decades, the worldwide economy has become highly interconnected through globalisation: it is now not uncommon for each component of a particular product to originate from a different country. Globalisation allows companies to make their products almost anywhere in the world in order to keep costs down.

Many mainstream economists argue this offers countries a source of competitive advantage and growth potential. However, many nations impose demands on already stressed resources in other countries in order to satisfy their own high levels of consumption.

This interconnectedness also increases the amount of risk at each step of a global supply chain. For example, the UK imports 50% of its food. A drought, flood or any severe weather event in another country puts these food imports at risk.

Now, the researchers have quantified the global water, land and energy use of189 countries and shown that countries which are highly dependent on trade are potentially more at risk from resource insecurity, especially as climate change continues to accelerate and severe weather events such as droughts and floods become more common.

“There has been plenty of research comparing countries in terms of their water, energy and land footprints, but what hasn’t been studied is the scale and source of their risks,” said Dr. Oliver Taherzadeh from Cambridge’s Department of Geography. “We found that the role of trade has been massively underplayed as a source of resource insecurity—it’s actually a bigger source of risk than domestic production.”

To date, resource use studies have been limited to certain regions or sectors, which prevents a systematic overview of resource pressures and their source. This study offers a flexible approach to examining pressures across the system at various geographical and sectoral scales.

“This type of analysis hasn’t been carried out for a large number of countries before,” said Taherzadeh. “By quantifying the pressures that our consumption places on water, energy and land resources in far-off corners of the world, we can also determine how much risk is built into our interconnected world.”

The authors of the study linked indices designed to capture insecure water, energy, and land resource use, to a global trade model in order to examine the scale and sources of national resource insecurity from domestic production and imports.

Countries with large economies, such as the US, China and Japan, are highly exposed to water shortages outside their borders due to their volume of international trade. However, many countries in sub-Saharan Africa, such as Kenya, actually face far less risk as they are not as heavily networked in the global economy and are relatively self-sufficient in food production.

In addition to country-level data, the researchers also examined the risks associated with specific sectors. Surprisingly, one of the sectors identified in Taherzadeh’s wider research that had the most high-risk water and land use—among the top 1% of nearly 15,000 sectors analysed—was dog and cat food manufacturing in the U.S., due to its high demand for animal products.

“COVID-19 has shown just how poorly-prepared governments and businesses are for a global crisis,” said Taherzadeh. “But however bad the direct and indirect consequences of COVID-19 have been, climate breakdown, biodiversity collapse and resource insecurity are far less predictable problems to manage—and the potential consequences are far more severe. If the ‘green economic recovery’ is to respond to these challenges, we need radically rethink the scale and source of consumption.”


Explore further Researchers examine food supply chain resiliency in the Pacific during COVID-19 pandemic

More information: Global Environmental ChangeDOI: 10.1016/j.gloenvcha.2020.102158

Provided by University of Cambridge 

Bloated public salaries at heart of Iraq’s economic woes

Bloated public salaries at heart of Iraq’s economic woes

Bloated public salaries at heart of Iraq’s economic woes

Until recently, labour markets in the MENA’s oil-exporting countries were characterized by a large public sector, a small, weak private sector, and depending on the country, a sizable agricultural industry, and a sizable informal sector. But in the case of Iraq like elsewhere in the region, the volatility of oil prices and the pandemic impacted the economy, resulting in a critical situation where bloated public salaries at the heart of Iraq’s economic woes result in increasingly unstoppable youth unemployment.
The currently general upheaval in the region, rural to urban and cross-border migration has not helped, leading to an even greater informal market.

Bloated public salaries at heart of Iraq’s economic woes by Samya Kullab is a vivid picture or a series of pictures on life in Iraq as perceived by a locally based journalist.

People shop for clothing at the used-clothes market in Baghdad, Iraq, Tuesday, Oct. 20, 2020. Iraq is in the throes of an unprecedented liquidity crisis, as the cash-strapped state wrestles to pay public sector salaries and import essential goods while oil prices remain dangerously low. (AP Photo/Khalid Mohammed)

BAGHDAD (AP) — Long-time Iraqi civil servant Qusay Abdul-Amma panicked when his monthly salary was delayed. Days of waiting turned to weeks. He defaulted on rent and other bills.

A graphic designer for the Health Ministry, he uses about half his salary to pay his rent of nearly 450,000 Iraqi dinars a month, roughly $400. If he fails to pay twice in a row his landlord will evict him and his family, he fears.

“These delays affect my ability to survive,” Abdul-Amma said.

Iraq’s government is struggling to pay the salaries of the ever-swelling ranks of public sector employees amid an unprecedented liquidity crisis caused by low oil prices. September’s salaries were delayed for weeks, and October’s still haven’t been paid as the government tries to borrow once again from Iraq’s currency reserves. The crisis has fueled fears of instability ahead of mass demonstrations this week.

The government has outlined a vision for a drastic overhaul of Iraq’s economy in a “white paper” presented last week to lawmakers and political factions. But with early elections on the horizon, the prime minister’s advisers fear there is little political will to execute it fully.

“We are asking the same people we are protesting against and criticizing to reform the system,” said Sajad Jiyad, an Iraq researcher.

The white paper’s calls for cutting public sector payrolls and reforming state finances would undermine the patronage systems that the political elite have used to entrench their power.

A major part of that patronage is handing out state jobs in return for support. The result has been a threefold increase in public workers since 2004. The government pays 400% more in salaries than it did 15 years ago. Around three-quarters of the state’s expenditures in 2020 go to paying for the public sector — a massive drain on dwindling finances.

“Now the situation is very dangerous,” said Mohammed al-Daraji, a lawmaker on parliament’s Finance Committee.

One government official said political factions are in denial that change is needed, believing oil prices will rise and “we will be fine.”

“We won’t be fine. The system is unsustainable and sooner or later it will implode,” the official said, speaking on condition of anonymity to discuss internal politics.

Iraq’s activists have called for a march on Oct. 25, expected to draw large crowds, a year since massive anti-government protests first brought tens of thousands to the streets demanded reforms and an end to the corrupt political class.

“As far as meeting our demands, there have been no changes,” said Kamal Jabar, member of the Tishreen Democratic Movement, founded during the protests last year. “To us, the white paper is a joke.”

Abu Ali, a merchant in Baghdad’s commercial district of Shorjah, fears what the following months have in store. The state is the primary source of employment for Iraqis, and civil servants are the lifeblood of his business.

“The delays in salary payments have affected the market directly,” he said. “If these delays continue our business and the economy will collapse.”

Abdul-Amma’s September pay was 45 days late, and he still hasn’t received the October pay that was supposed to come on the first of the month. He worries about the coming months as well.

“I have a history of chronic heart disease, and one of my daughters is also sick,” said the father of four. He pays $100 in medical fees per month.

But to the architects of the reform paper, he is part of the problem: Public sector bloat is first in line for reform.

“We hope the civil service and bureaucracy will recognize a need for change,” Finance Minister Ali Allawi told The Associated Press in a recent interview.

Iraq relies on oil exports to fund 90% of state revenues. Those revenues have plunged to an average $3.5 billion a month since oil prices crashed earlier this year.

That’s half the $7 billion a month needed to pay urgent expenses. Of that, $5 billion is for public sector salaries and pensions, according to Finance Ministry figures. Iraq also imports nearly all of its food and medicine; with foreign currency reserves at $53 billion, the World Bank estimates the country can sustain these imports for another nine months. Foreign debts account for another $316 million.

Poor productivity of public workers is the heart of the issue, Allawi said.

“We’ve ended up with a low productivity, high-cost public sector that doesn’t really earn its keep,” he said. “In one way or another this issue has to be tackled by either reducing numbers, which is politically difficult, reducing salaries … or increasing productivity.”

The white paper calls for public sector payments to be reduced from 25% of GDP to 12% but doesn’t detail how. Officials said one step may be to restore taxes on civil servants’ benefits that previous administrations had lifted.

To meet month-to-month commitments now, the government has had to borrow internally from its foreign currency reserves. A request of a second loan of $35 billion was sent to parliament, drawing criticism from lawmakers.

Haitham al-Jibouri, head of parliament’s Finance Committee, said in televised remarks that if borrowing was the government’s only plan he would fetch a shopkeeper from Bab al-Sharqi, a commercial area in the capital, to do the finance minister’s job.

Parliament’s endorsement of the loan and the reform paper is crucial for the government to avoid a full-scale economic crisis.

But this will prove difficult with elections slated for next June, since factions want to hand out jobs to maintain their constituencies.

“Whoever decides to push ahead and support reforms first will lose out, they will also need to convince other political players who will also lose out,” said Jiyad. “That is a tough sell.”

Al-Kadhimi’s advisers privately acknowledge the challenges of having the system that produced such mismanagement and corruption be its own savior.

One official recalled a remark made by the finance minister at a meeting of a high-level committee tasked with managing the crisis.

He looked at the room of officials charged with halting the country’s fast spiral toward insolvency and said, “I can’t believe this was done for 10 years and none of you did anything to stop it.” There was silence.

What is the State of Human Capital in the MENA Region?

What is the State of Human Capital in the MENA Region?

The answer to What is the State of Human Capital in the MENA Region? is given by Keiko Miwa, Regional Director, Human Development, Middle East & North Africa – World Bank and Jeremie Amoroso, Strategy & Operations Officer, Human Development, Middle East & North Africa – World Bank.


Countries in the Middle East and North Africa (MENA) have made good progress in improving human capital over the past decade. And yet a child born in MENA today can expect to achieve (on average) only 57 percent of her future productivity. On top of that, the COVID-19 crisis poses significant risks to hard-earned improvements in human capital in MENA. We can—and should—do much more to preserve and improve human capital in the MENA region.

The World Bank recently released the Human Capital Index 2020 (HCI). This update covers 174 countries—17 more than when the index was first launched in 2018. Not surprisingly, the HCI scores among MENA countries vary widely from 0.67 in the United Arab Emirates (UAE) to 0.37 in Yemen. Countries affected by conflict, such as Iraq and Yemen, score low on the index, which poses an important question on how to support the protection and enhancement of human capital even in the midst of conflict.

Looking at the 10-year trend, the HCI improved in 11 out of 14 MENA countries (with available data). Morocco, Oman, and the UAE registered the largest gains in the HCI during this period. School enrollment—at the preprimary and secondary levels—as well as harmonized test scores and adult survival, are the main drivers of the region’s HCI improvements. During this period, girls surpassed boys in educational attainment. On the other hand, enrollment declines in primary and lower-secondary school outweighed gains in other components of HCI for Kuwait, Tunisia, and Jordan.

Figure 1. Change in HCI 2020 and HCI 2020 in MENA countries
Figure 1. Change in HCI 2020 and HCI 2020 in MENA countries

Source: World Bank. 2020. The Human Capital Index 2020 Update: Human Capital in the Time of COVID-19.

Note: Arrows indicate a decline in the HCI between 2010 and 2020. Data unavailable for Yemen, Iraq, Lebanon, and West Bank and Gaza for HCI 2010. See World Bank’s list of countries/economies by region.

WHAT’S NEW IN THE HUMAN CAPITAL INDEX 2020?

The HCI 2020 update introduces the Utilization-Adjusted Human Capital Index (UHCI). This is quite relevant in several MENA countries since there is a large gap between human capital and labor market outcomes. The utilization of human capital accounts for the fact that when today’s child becomes a future worker, she may not be able to find a job (Basic UHCI). And even if she can, it might not be a job where she can fully use her skills and cognitive abilities in better employment that increases her productivity (Full UHCI). When adjusting for the proportion of the working-age population who are employed, MENA’s HCI value declines by at least one-third—from 0.57 to 0.32 (Basic UHCI) and 0.38 (Full UHCI). Low female labor force participation rates in MENA countries are a key factor for the region’s low Utilization-Adjusted HCI.

Figure 2. The average MENA HCI value declines by more than a third when accounting for the proportion of the working-age population who are employed.
Figure 2. The average MENA HCI value declines by more than a third when accounting for the proportion of the working-age population who are employed.
Source: World Bank. 2020. The Human Capital Index 2020 Update: Human Capital in the Time of COVID-19.

RISKS TO HARD-EARNED HUMAN CAPITAL

COVID-19 has cascaded into education shocks and the worst economic recession since World War II. At the height of the pandemic, almost 84 million children were out of school in MENA, and now countries that started to open schools are now reconsidering their decision due to the second wave. This could result in the loss of 0.6 years of schooling (adjusted for quality). Nevertheless, some MENA countries took early actions and adopted innovative measures to continue education. In Jordan, for example, the private sector and education officials collaborated to develop an education portal and dedicated TV channels for virtual lectures in Arabic, English, math, and science for grades one through 12. And Saudi Arabia’s universities achieved unprecedented results as more than 1.2 million users attended over 7,600 virtual classes, totaling 107,000 learning hours.

The HCI 2020 update uses data gathered as of March 2020—prior to the COVID-19 pandemic. It serves as a baseline for policymakers to track changes in human capital and inform policies to protect and invest in people through the pandemic and beyond. Previous pandemics and crises taught us that their effects are not only felt by those directly impacted, but often ripple across populations and, in many cases, across generations. COVID-19 is no exception. As a result, the region can—and must—build on its human capital progress amid the turmoil in three key ways.

First, the MENA region needs to continue building its human capital even during the pandemic or conflict. Crisis response measures that emerged out of necessity—such as distance learning and telemedicine—present new opportunities for building back better and differently the “new normal.”

Second, many countries in MENA have shown their sharp focus on protecting human capital by ramping up cash transfers and strengthening social safety nets since the onset of the pandemic. However, stronger efforts are still needed to preserve the human capital of internally displaced persons and refugees and to foster social inclusion for economic mobility.

Third, utilizing human capital is important to the immediate recovery and long-term development of MENA—the region with the highest youth unemployment in the world at more than 25 percent. Utilizing human capital requires job-focused policies as concerns about the future of work grow louder.

The HCI 2020 update shows that many MENA countries have made meaningful human capital progress over the past 10 years. As the pandemic threatens these precious gains, investment in human capital is more important than ever. Governments in MENA have launched promising initiatives that will help to build a better future. When today’s children in MENA become adults, hopefully, they will see how their region of the world turned the unprecedented crisis in 2020 into an opportunity to build stronger human capital.

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International Cooperation to Combat Trafficking and Terrorism

International Cooperation to Combat Trafficking and Terrorism

International cooperation to combat trafficking and terrorism, factors in destabilizing the MENA region by University professor, international expert Dr Abderrahmane MEBTOUL is given on the occasion of U.S. Defense Secretary Mark Esper’s Maghreb tour in Tunis, Algiers and Rabat.

This visit is officially aimed at strengthening ties with these three North African countries to combat terrorist threats. This visit to Algiers follows that of the head of the US Africa Command (Africom) Army General Stephen Townsend. It is not an insignificant visit because the United States of America considers Algeria, through the actions of its armed forces and its various security services,  as a critical player in the stability of the Mediterranean and African region. This is because the stakes in the MENA region foreshadow significant geopolitical and geoeconomic reconfigurations. This region has become a sensitive area with significant rivalries between Russia, China and Europe.  

With recent geostrategic tensions, traffic has increased in particular with the conflicts in Iraq, Syria, Mali, Niger and Libya. Transnational crime refers to organized criminal networks and consequently to terrorism that benefits from the sale of illegal goods. These international illicit markets, anonymous and more complex than ever, generate billions of dollars each year. This threat is worrying, not only for Algeria but also for the world and especially Europe. In the Sahel, armed groups have increased their capacity for nuisance, diversified into terrorists, insurgents, criminals and militias with a convergence that unites these groups. The most troubling aspect of the connection seems to be how the illegal drug trade undermines efforts to pursue the political reforms and development needed to stem the radicalization and rise of terrorist groups in several already fragile African countries. There is a deep vulnerability of states in the region characterized by poor governance and strong population growth. Only the Sahel, which will see its population double in 25 years, and has more than 100 million inhabitants by 2020. This growth affects human security, especially food security in the region as a whole. This is compounded by inequalities that promote radicalization, due to a combination of factors related to the individual, his relationships, his community and his relationship to society. Nevertheless, there are economic issues, where the Sahel is a space with critical departmental resources. Hence the foreign interference that manipulates different actors in order to position themselves within this strategic corridor and to take control of wealth are numerous. Libya, a wealthy country with a population of no more than 7 million, is an example where different foreign actors clash in interposed groups. The Sahelian arc is rich in resources: after salt and gold, oil and gas, iron, phosphate, copper, tin and uranium are all riches feeding the lusts of powers wishing to ensure control. The drug trade, for example, has the potential to provide terrorist groups with recruits and sympathizers among impoverished, neglected and isolated farmers who can not only cultivate on behalf of traffickers but also popularize and strengthen anti-government movements. More recently, with the impact of the coronavirus epidemic, this situation of vulnerability is likely to increase. The world of tomorrow will never be the same again because of the geostrategic implications in the political, social, security and economic fields at the level of North Africa and Black Africa.  In an interview given to the American Herald Tribune of 23 April 2020, the author said: “We Have Witnessed a Veritable Planetary Hecatomb and the World Will Never Be the Same Again.”

In the face of these complex geostrategic situations at the regional level, international coordination is needed, including Maghreb integration, a bridge between Europe and Africa thus contributing to shared prosperity for the Mediterranean and African region to reduce migration flows.  (see two important works coordinated by Professor Abderrahmane Mebtoul and Dr Camille Sari (from the Sorbonne) were published between 2014/2015 at Paris Edition Harmattan “The Maghreb facing geostrategic issues” – volume 1-dealing of institutions and governance (480 pages) and Volume 2 of the economic strands in different aspects (500 pages) bringing together for the first time -36 international experts, military-political scientists, economists, lawyers, sociologists, historians, Algerian-Moroccan- Tunisian- Mauritanian and Libyan- European).

Faced with these new geostrategic challenges that are upsetting the planet, international terrorism takes advantage of the dysfunctions of state regulation and has at least five characteristics in common. First,  on networks often established in large geographic areas where people, goods and money circulate. Second,  command control and communication. Third,  is their need to process large amounts of money, launder them and transfer them across countries and continents. Fourth, criminals and terrorists tend to have private armies, hence the need for training, camps and military equipment. Fifth,  terrorists and criminals in the Sahel region share common characteristics: frequent clandestine operations seeking legitimacy in supporting populations with the use of durable guerrillas to control territory and populations; sixth, contempt for international norms, the rule of law, or the notion of human rights, and a desire to kill those who oppose them; seventh,  these guerrillas also create specialized cells specializing in the use of the media and the Internet to disseminate their propaganda and their demands. Thus, we have different forms of transnational organized crime that is an ever-changing industry, adapts to markets and creates new forms of illicit trade that transcend cultural, social, linguistic and geographical boundaries, and knows no limits or rules.

The combination of these various elements in too complex patterns induces a climate of increasing insecurity conducive to the destabilization of the states of the region with different forms of trafficking numbering eight interdependentFirst,  the traffic of goods amplified for some countries that subsidize necessities such as Algeria, accentuated by distortions in exchange rates. Secondly,  the “black” market for weapons and their ammunition, necessarily derived from the “white” market since each weapon is manufactured in a legal factory, is a theme that allows us to understand the wills of power of various geopolitical actors around the world. Arms trafficking is regulated by states that profit from it and the advantage of arms trafficking for terrorists is that they can both use it and make a profit. The best prevention remains a sales control, a contractual framework, i.e. define beforehand the use of weapons and the establishment of international conventions on the sale of automatic or non-automatic firearms.  Thirdly,  the rise of drug trafficking at the regional level has implications for all of North Africa and Europe where we can identify actors with geostrategic implications where drug traffickers create new national and regional markets to transport their products. In order to secure the transit of their goods, drug traffickers resort to the protection that terrorist groups and various dissents can provide, by their perfect knowledge of the terrain, thus contributing to their financing.

Moreover, according to some intelligence sources, if drug traffickers were a country, their GDP would rank them 20th in the world.  Fourth,    human trafficking is an international criminal activity in which men, women and children are subjected to sexual exploitation or exploitation through labour. Fifth, as we are currently seeing in the Mediterranean through migrant trafficking, which is an organized activity in which people are displaced around the world using criminal networks, many smugglers do not care whether migrants drown at sea, die of dehydration in a desert or suffocate in a container. Each year, this trade is valued at billions of dollars.  Sixth, the trafficking of natural resources which includes the smuggling of raw materials such as diamonds and rare metals (often from conflict zones) and the sale of fraudulent drugs that are potentially lethal to consumers. Seventh,   cybercrime,  which is linked to the revolution in information systems, can destabilize an entire country militarily, security and economically, encompassing several areas, including increasingly exploiting the Internet to take private data, access bank accounts and sometimes fraudulently obtain strategic data for the country. Digital technology has transformed just about every aspect of our lives, including the notion of risk and crime, so that criminal activity is more effective, less risky, more cost-effective and more accessible than ever. Eighth, money laundering is a process in which money earned by a crime or an illegal act is washed away. It is a matter of hiding the origin of the money to use it after legally (investment, purchases). The multiple tax-havens, clearing companies (also Off Shore) allow hiding the origin of the money.

This different traffic linked to the importance of the informal sphere produces malfunctions of the state apparatuses, in fact, governance, the weight of bureaucracy that maintains diffuse relations with this sphere and exchange rate distortions, representing in Africa according to the latest ILO-2020 report – more than 75/80% of employment and more than 20 50% of gross domestic product(GDP)  (Study of Professor Abderrahmane Mebtoul – French Institute of International Relations (IFRI) Paris December 2013- The informal sphere in Maghreb countries and its geostrategic impacts).   The main determinants of informality can be summarized as follows. First, the weakness of formal employment is obvious. This is a factor that explains the evolution of the informal sector in both developed and developing countries. As a result, the supply of formal jobs in the labour market can no longer absorb all the demand as the labour force; particularly the unskilled labour force is growing at an accelerated rate. Second, when taxes are numerous and too high, businesses are encouraged to hide some of their income. Third, the weight of regulation or the complexity of the business environment discourages business registration. Where the institutional framework is not conducive to the creation of businesses in a formal way, entrepreneurs prefer to operate in the informal sector and avoid the burden of regulation. Fourth, the quality of public services provided by the government is an important determinant of the informal sector because it influences the choice of individuals. Individuals active in the informal sector cannot benefit from public services (protection from theft and crime, access to financing, protection of property rights). That is one of the drawbacks of this sector. Fifth,  as a result of economic policy, the primacy of bureaucratic administrative management is required when transparent economic mechanisms refer to governance are required.

In short, Algeria’s security is at its borders; with Mali, 1376 km; with Libya 982 km; with Niger 956 km; with Tunisia 965 km as can be imagined not an easy task  It is because the reading of the threats and challenges facing the world and the region is based on the need to jointly develop a collective and effective response in a strategy on international terrorism, human trafficking and organized crime through drugs and money laundering. All safe for security has limitations that exist dialectical links between development and security. Also, the fight against terrorism implies, first of all, an internal development, linked to new governance of Africa, of regional sub-integrations where inter-African trade according to the UN only exceeds 16/17% in 2019, and to put an end to this inequality where a minority takes over a growing fraction of the national income giving birth to misery and therefore terrorism, referring to the morality of those running the show.  ademmebtoul@gmail.com

Dubai economy to contract by 11% this year

Dubai economy to contract by 11% this year

Dubai economy to contract by 11% this year: S&P as the international lockdown impacted international travel to and stay in the previously popular spots of the world. Dubai, for its particular regional specifics and as the most popular venue in the Gulf region, seems to endure the most critically the pandemic or all the safeguards against it.


Dubai’s economy will contract by around 11% in 2020, owing mainly to the Covid-19 impact on its travel and tourism industry, the sector most affected by the pandemic, according to an S&P Global Ratings report. 

Dubai economy to contract by 11% this year

As per S&P estimate, Dubai’s gross general government debt will reach about 77% of GDP in 2020.

Low oil prices have had broad effects on GCC economies, of which Dubai is one, but hydrocarbons directly contribute only about 1% to Dubai’s total GDP. 

The indirect effect of weaker demand from Dubai’s neighbours will dampen Dubai’s trade, tourism, and real estate markets, it stated.

Although Dubai’s economy is somewhat more diversified than that of most its regional peers, the report anticipates an economic contraction of around 11% of GDP in 2020, recovering to 2019 levels by 2023. 

STR Global, a data intelligence and benchmarking firm, reported Dubai’s hotel occupancy rate at 26% in June as inbound tourism sharply declined following global lockdowns and much-reduced air travel designed to curb the spread of Covid-19. 

The fact that fewer residents left Dubai during the hot summer months and instead spent more domestically to some extent has supported the economy. Local support for the economy cannot, however, offset the almost complete shutdown of inbound international tourism for most of 2020, and the likely slow recovery of the long-haul aviation that Dubai specializes in.

The Dubai government now expects to post a deficit of AED12 billion (3.2% of GDP) this year, largely owing to the reduction in economic activity and the consequent expected 28% decline in revenue, stated S&P Global Ratings. 

It also expects significant off-balance-sheet expenditure, resulting in the government’s net debt position worsening by more than what the headline deficit would imply, as has occurred in previous years.

S&P Global Ratings pointed out that the below-the-line expenditure which causes the variance between headline deficits and the change in net debt mostly involves support for Dubai’s government-related entities (GREs), an example of which is the recently disclosed AED7.3 billion (1.9% of GDP) already provided to national carrier Emirates in 2020. 

Support for GREs will likely be appreciably larger in 2020 than in the past, due to the broad cross-sector shock to Dubai’s economy, it added.

The ratings major said that in total, it expected new government bond issuance and loans to total around 7% of GDP in 2020. The government has issued AED8.4 billion (2.2% of GDP) of public debt so far in 2020, marking the biggest year for Dubai’s debt issuance since 2009. 

“This, in combination with recently disclosed new bilateral and syndicated facilities through June 2020 (facilities that have increased by AED15 billion (4% of GDP) since Dubai’s previous end-2018 disclosures) supports our estimation that 2020 will be another year where debt accumulation far exceeds the headline deficit,” it stated in the review.

TradeArabia News Service

Navigating the Middle East as witnessed from Pakistan

Navigating the Middle East as witnessed from Pakistan

Navigating the Middle East as witnessed from Pakistan

THE NATION in its Navigating the Middle East as witnessed from Pakistan by Usama Shirazi is an eye-opener on the MENA region’s neighbourhood reciprocal relationship feelings towards it.

September 12, 2020

The Middle Eastern region has enormous importance in Pakistan’s foreign policy. Due to its geographical proximity and historical linkages, it has always been an area with paramount importance for Pakistan’s national interests. Besides a political, economic, and strategic convergence, this region offers cultural, religious, and historical theatres to determine Pakistan’s foreign policy priorities.

Unfortunately, throughout history, this region has been a centre of big power proxies exploiting its heterogeneous population by dividing them into tribes, sects, and religions. In the contemporary geopolitical environment, KSA (Kingdom of Saudi Arabia)/Iran rivalry, intended for regional dominance, has made this region tumultuous and left Pakistan with little space to navigate. Pakistan shares strong bonds with both rivals and has its compulsions in dealing with them.

Even before the inception of Pakistan, the Muslims of the subcontinent had historical relations with all MENA (the Middle East and North Africa) countries. During the First World War, the Muslims started the Caliph movement to save and restore the ailing Ottoman caliphate. The MENA Region people also vehemently supported the Pakistan movement. The relations based on brotherhood continued after the independence of Pakistan. KSA and Iran supported Pakistan in times of every crisis whether these were wars with India or natural calamities.

In the contemporary setting, this region has bogged down in conflicts and chaos due to global and regional power politics. Ever since the Islamic revolution took place in Iran, the fissures between Iran and KSA have been widening. Now, this hostility came to a stage where a little spark may be turned into a conflagration. Pakistan’s relations with both regional powers are of paramount value. Iran shares a 959-kilometer border with Pakistan. Both countries are connected through various economic, trade, energy, and security, cultural and religious engagements. The recent Sino/Iran strategic deal would further create new avenues of cooperation. Iran is very important for Pakistan’s internal security due to the tumultuous population along both sides of its porous border.

On the other side, KSA also holds a special place in Pakistan’s foreign policy. Pakistan shares deep-rooted cultural, religious, economic, and strategic ties with Riyadh. Following the Iranian revolution and during the Afghan war, Pakistan’s relations with Tehran became sour which brought Islamabad and Riyadh closer and their strategic partnership became deeper. Riyadh played a key role in the economic development of Pakistan. Moreover, Pakistan’s diaspora in KSA and its allied GCC countries is a major source of foreign remittances. This shows that both sides hold equal importance for Pakistan and tilting towards either side will alienate the other. Hence, Pakistan cannot afford it due to its internal security problems and the dwindling economy. In Pak/Iran and Pak/KSA relations, there exists a limited parity which demands a neutral foreign policy towards both.

In the Yemen crisis, Pakistani parliament passed resolutions to stay neutral as both KSA and Iran were involved in the conflict. The realist prism proposes that while choosing between two allies, you must go for the one where approximate parity is tilted. However, in Pak/KSA and Pak/Iran, there exists a similar parity. Hence, balancing does not work here.

Secondly, another alliance that makes the region volatile and compels Pakistan to navigate smartly is the new alliance led by Turkey. Turkey besides its close economic and commercial engagements is also a vocal supporter of Pakistan’s stance on Kashmir. However, it has divergent and conflicting interests in Syria, Libya, and Egypt from Pakistan’s gulf partners. Qatar’s closeness to Turkey and Iran made its relations rancorous with GCC countries. In the Qatar blockade, Pakistan wisely maintained neutrality, however, this time; the mounting conflicting dynamics are narrowing diplomatic space for Pakistan.

In managing its relations with new regional blocs, Pakistan should firstly prioritise its national interest. Currently, in the backdrop of the August 5 move, the Kashmir issue has become the lynchpin of Pakistan’s foreign policy. It has become an easy way to win Pakistan’s confidence. So far Turkey and Malaysia have succeeded to win the hearts of the Pakistani people by their vocal support. However, is Turkish and Malaysian support enough to pressurise Narendra Modi to restore the Kashmir status? These countries do not have much political clout in New Delhi and Washington as do Riyadh and its GCC partners. So far, Pakistan is disappointed by the response of its gulf partners on Kashmir; however, in the long run, the simmering public pressure against Modi atrocities could compel them to change their policies. Moreover, in the time of crisis, Pakistan could use their clout in New Delhi and Washington to deescalate tensions as it did successfully following the Balakot episode.

Navigating through this complex and sensitive region, Pakistan needs a dynamic and multipronged foreign policy. Firstly, the civil/military leadership should prioritise its key interests and then use different tools from its foreign policy kit for each partner in the region. The current Sino/Iran strategic deal has further narrowed parity between Pak/Iran and Pak/KSA relations. Secondly, despite a year after the altercation of Kashmir status, the Pakistani ruling elite is still bewildered and unable to devise a vibrant policy on Kashmir. Choosing between the economy and Kashmir, Pakistan is oscillating aimlessly. Without a strong economy, no one will pay heed on what is happening in Kashmir. Hence, taking Kashmir and economy hand-in-hand, Islamabad should devise a neutrality-cum-balancing strategy towards the Turkish-led bloc and the KSA-led block. Thirdly, Pakistan needs to diversify its partnership to reduce reliance on either side. This would give Pakistan enough space to manoeuvre. Moreover, Pakistan should place its best diplomats in the MENA region who know the art of diplomacy. As Churchill said, “Diplomacy is the art of telling people to go to hell in such a way that they seek direction”.