The notion of wealthy Arabs

‘… access to
telephone lines in Arab
countries is one-fifth that of
developed countries…’

It is worth observing that the widespread notion of “wealthy Arabs” is both misinformed and misleading. In terms of production capacities, the aggregate GDP of the Arab countries by the end of last century was $604 billion--a little bit more than that of a medium-sized European country like Spain (with a GDP of $559 billion), and far less than the Italian GNP of $1,074 billion. If someone were to use the Arabic proverb, “Wealth lies in brainpower, not money,” to defend the notion of the “wealthy Arab” we would then have to confess that the gap here is far bigger than first admitted.
Economic development of the Arab countries since 1975 has lagged far behind average world economic growth rates. In that period, there was an annual growth of 3.3 percent accompanied by high population growth, which resulted in stagnant per capita income.
Word Bank data shows that annual per capita GDP growth in the countries of the Middle East and North Africa region was 2.8% in the 1970s, minus 1.2% in the 1980s, and 0.8% during the 1990s compared to 3.1%, 1.5%, and 2% in countries of low and medium level income, and compared to 4.75%, 6.4%, and 6% in East Asian and Pacific countries, respectively.
Productivity was even worse. Annual labor productivity growth averaged 3.5% in oil countries, and 3.1% in the rest of the Arab countries from 1965 to 1980. Afterwards, from 1980 to 1985, labor productivity declined annually by 3% in oil countries and by 2% in other Arab countries. In the late 80s to early 90s, labor productivity declined even further--by 5.5% annually in oil countries, and 0.02% in others.
This poor performance resulted in high unemployment and poverty. In the 1990s, the number of Arab unemployed averaged 12 million and reflected a 15% unemployment rate. In order to match the challenge of adequate job creation, the region's economies must open 100 million new jobs by the year 2020.
There is no doubt that the regional development effort has been affected by an unstable political environment, mainly the Israeli occupation and its continued aggression on the Palestinian population. But we can't agree with those who attribute the poor performance solely to regional and international obstacles. This view, I would argue, is mainly used to divert attention from badly needed reforms.
Nor can the poor achievements of Arab economies be attributed to under investment. Arab countries actually invested between 1980 and 1997 more than $ 2,500 billion in fixed capital formation, according to the 2003 Arab Human Development Report. As usual, there is no agreement between economists and development experts on the explanation for the Arab economies' poor performance.
Some economists believe that the slowdown in 1980 can be attributed to a massive deterioration in the terms-of-trade in oil exporting countries and that in the 1990s it became apparent that the poor growth performance largely mirrored the lack of restructuring. Another view refers the low growth to the quality of investment, saying it is both "insufficient and inefficient."
John Page of the World Bank indicates, on the other hand, that the main problems stem from the "inward-looking, statistic model of development" that characterized most of the economies of the region until the mid-1980s. Page examines regional reforms designed to implement the "Washington Consensus" (public advice towards liberalization and deregulation given by Washington-based groups to Latin America in 1990) and finds that the list of unfinished economic policies remains long.
Yet another view was promoted in the Arab Human Development Report by A. Zahlan, who concluded that the reason for the low growth was that imported new technology was not successfully transferred and adjusted to Arab economies. Therefore, the fault lies with inefficient educational systems. World experience indicating that 45 percent of growth in the per capita income of developed countries derives from technological development supports Zahlan's view.
The Arab Human Development Report stated that the main impediments to Arab development are: lack of freedom (the report finds that the regional Freedom Index was at its lowest in the 90s, and that the indexes for accountability and corruption were the worst in the entire world); absence of women's empowerment; and weak human capacities (or low levels of knowledge). To remove these defects will require the rebuilding of Arab societies based on full respect for human rights and human freedoms as the cornerstone of good governance, (which will then lead to) human development, the complete empowerment of Arab women, and the consolidation of knowledge acquisition and its effective utilization.
To proceed towards these goals, the report calls for a comprehensive development strategy that focuses on the development of social capital. That concept means a development effort that integrates a wide range of factors, including good governance; democracy; equality; women's participation and empowerment; quality education, research and development; capacities for acquiring technology; enabling a legal, regulatory, and competitive business environment; a restructuring towards openness; and finally, outward-oriented growth strategies.
A special focus of the Arab Human Development Report is how to create the environment needed for knowledge acquisition in the Arab world. The report observes that Arab countries suffer most from a lack of investment in research and development, and most of that slim portion of the GDP goes to salaries. Among every million citizens in the Arab world, there are 371 research scientists and engineers, as compared to 979 in the world at large.
Compare the Arab world to China, which increased its scientific research 11 times between the years of 1981 to 1995. The Arab countries only increased their commitments for research by 2.4 times. The list goes on: access to telephone lines in Arab countries is one-fifth that of developed countries, access to digital media is among the lowest in the world, there are just 18 computers per 1,000 people compared to a global average four times that, and only 1.6 percent of the Arab population has internet access compared to 68 percent in the UK and 79 percent in the United States.
To overcome that vast knowledge gap, the Human Development Report calls for creating capacities to promote the results of research and development, connecting those results with industry; promoting incentives for scientists to halt the brain drain; and bridging the technological gap by moving the focus from investing in material assets like infrastructure, machinery, and equipment to investing in knowledge and people.