Stability and Instability in the Middle East
CSIS_______________________________ Center for Strategic and International Studies 1800 K Street N.W. Washington, DC 20006 (202) 775-3270
Stability and Instability in the Middle East The Economic, Demographic, Energy and Security Situation in the Middle East
Volume I Economic Growth, Per Capita Income, and Investment Anthony H. Cordesman Co-Director, Middle East Program Copyright Anthony H. Cordesman, all rights reserved.
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Center for Strategic and International Studies April, 1998
Copyright Anthony H. Cordesman, all rights reserved.
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Table of Contents STRATEGIC INTERESTS VERSUS REGIONAL INSTABILITY ....................................................................... 6 STRATEGIC INTERESTS ................................................................................................................................................ 7 THE “USUAL SUSPECTS” .............................................................................................................................................. 8 THE BROADER SOURCES OF INSTABILITY IN THE MIDDLE EAST ........................................................................... 9 ECONOMIC DEVELOPMENT HAS LAGGED BADLY IN THE MIDDLE EAST AND NORTH AFRICA, ALTHOUGH IT IS PROJECTED TO IMPROVE ................................................................................................. 11 THE US AND WORLD BANK PROJECT IMPROVEMENTS DURING THE 1990S TO 2015, BUT ESTIMATES DIFFER SHARPLY AND THE MIDDLE EAST WILL NOT CATCH UP WITH THAT OF HIGH GROWTH REGIONS LIKE EAST ASIA. ......................................................................................................................................................... 11 THE MIDDLE EAST AND NORTH AFRICA HAVE A STEADILY ............................................................................... 12 DECLINING SHARE OF THE GLOBAL ECONOMY: .................................................................................................... 13 THE GNP GROWTH OF THE MIDDLE EAST AND NORTH AFRICA LAG BADLY RELATIVE TO OTHER DEVELOPING REGIONS: 1972-1994 .......................................................................................................................... 14 THE MIDDLE EASTERN OIL BOOM AFTER 1973 DID NOT CAUSE THE GDP GROWTH OF MENA REGION TO OUTPACE OTHER DEVELOPING AREAS EVEN DURING THE 1970S AND 1980S .............................. 15 OECD/IEA/IMF WORLD BANK DERIVED ESTIMATE REVEALS THE SAME PATTERN IN COMPARATIVE GDP GROWTH FOR 1971-1993 ............................................................................................................................................ 16 THE IMF ESTIMATES ALSO SHOW THIS PATTERN FOR 1979-1998 ....................................................................... 17 TRENDS IN THE REAL CHANGE IN GDP BY COUNTRY IN NORTH AFRICA: 1979-1996 ....................................... 18 TRENDS IN THE REAL CHANGE IN GDP: EGYPT VERSUS ALGERIA - 1979-1996 ................................................. 19 TRENDS IN THE REAL CHANGE IN GDP BY COUNTRY IN LEVANT: 1979-1996 ................................................... 20 TRENDS IN THE REAL CHANGE IN GDP BY COUNTRY IN LEVANT: ISRAEL VS. JORDAN: 1979-1996 ............... 21 TRENDS IN THE REAL CHANGE IN GDP BY COUNTRY IN LEVANT: SYRIA VERSUS LEBANON: 1979-1996 ..... 22 TRENDS IN THE REAL CHANGE IN GDP BY COUNTRY IN THE GULF: 1979-1996 ................................................ 23 TRENDS IN THE REAL CHANGE IN GDP BY COUNTRY IN THE NORTHERN GULF: 1979-1996............................ 24 TRENDS IN THE REAL CHANGE IN GDP FOR IRAN: 1979-1996 .............................................................................. 26 TRENDS IN THE REAL CHANGE IN GDP IN THE SOUTHERN GULF: 1979-1996 .................................................... 27 TRENDS IN THE REAL CHANGE IN GDP IN THE SOUTHERN GULF LESS THE WARTIME IMPACT ON KUWAIT: 1979-1996 .................................................................................................................................................................... 28 TRENDS IN THE REAL CHANGE IN GDP IN SAUDI ARABIA: 1979-1996 ................................................................ 29 MIDDLE EASTERN ECONOMIC GROWTH LAGS POPULATION GROWTH: 1984-1994 ........................................... 30 RECENT WORLD BANK PROJECTIONS INDICATE THAT MENA REGIONAL GROWTH HAS IMPROVED SINCE 1990, BUT STILL LAGS SHARPLY IN GLOBAL TERMS: ............................................................................... 31 WORLD BANK PROJECTIONS INDICATE THAT FUTURE REGIONAL GROWTH WILL LAGS SHARPLY RELATIVE TO HIGH GROWTH REGIONS ................................................................................................................... 32 THE NUMBERS BEHIND THE WORLD BANK PROJECTIONS: MIDDLE EASTERN GROWTH IS IMPROVING, BUT LAGS BEHIND IN GLOBAL TERMS: ................................................................................................................... 33 OECD/IEA/IMF/WORLD BANK GDP GROWTH ESTIMATE INDICATES THE MIDDLE EAST WILL LAG DURING 1993-2010 ..................................................................................................................................................................... 34 MORE DETAILED US PROJECTIONS ALSO INDICATE THAT MIDDLE EASTERN GROWTH IS IMPROVING, BUT WILL LAG BEHIND IN GLOBAL TERMS: .......................................................................................................... 35 THE “UNCERTAINTY FACTOR”: DIFFERENT ESTIMATES OF FUTURE GROWTH FOR THE MENA AND MIDDLE EAST .............................................................................................................................................................. 36 THE COMPARATIVE GNP AND GDP OF MENA COUNTRIES HAS GROWN IN VERY DIFFERENT WAYS: 1980-1990 VERSUS 1990-1995 .................................................................................................................................... 37 IMF ESTIMATES OF GDP GROWTH FOR 1995-1997 BY COUNTRY VERSUS POPULATION GROWTH ................. 41 INCREASES IN REAL PER CAPITA INCOME LAG BADLY BEHIND GROWTH...................................... 42 MIDDLE EASTERN POPULATION GROWTH, LOW OIL PRICES, AND LOW OVERALL EXPORTS COMBINED Copyright Anthony H. Cordesman, all rights reserved.
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TO LIMIT PERSONAL WEALTH: ................................................................................................................................ 43 NORTH AFRICAN ECONOMIC GROWTH ALSO LAGGED POPULATION GROWTH: 1984-1994 ............................. 44 AND, NORTH AFRICAN POPULATION GROWTH, LOW OIL PRICES, AND LOW OVERALL EXPORTS ALSO COMBINED TO LIMIT PERSONAL WEALTH: ............................................................................................................. 46 NEGATIVE DEVELOPMENT DURING THE 1980S: ..................................................................................................... 47 AVERAGE ANNUAL CHANGE IN REAL PER CAPITA GDP: 1980-1991 ................................................................... 47 THE GROWTH OF PERSONAL WEALTH STILL LAGGED DURING THE EARLY AND MID 1990S: ........................ 48 GROWTH IN PER INCOME WAS NEGLIGIBLE EVEN IF IRAQ IS EXCLUDED ......................................................... 49 THINGS HAVE GOTTEN BETTER IN THE LAST FEW YEARS: .................................................................................. 50 RECENT TRENDS BY REGION AND KEY COUNTRY: 1994-1996 ............................................................................. 50 TRENDS IN THE ANNUAL CHANGE IN REAL PER CAPITA GDP BY REGION: ....................................................... 52 MENA VS. THE WORLD: 1979-1998 .......................................................................................................................... 52 THE RECORD FOR INDIVIDUAL MENA COUNTRIES OVER THE LAST QUARTER CENTURY IS POOR AND THE OIL STATES ARE NOT “WINNERS” ................................................................................................................... 53 THE COMPARATIVE PER CAPITA INCOME OF MENA COUNTRIES IS VERY DIFFERENT AND ESTIMATES DIFFER SHARPLY BY SOURCE .................................................................................................................................. 54 FUTURE GDP GROWTH MAY BE OFFSET BY POPULATION GROWTH TO REDUCE. GROWTH IN PER CAPITA INCOME ......................................................................................................................................................... 55 MIDDLE EAST GROWTH IS ACCEPTABLE IN ABSOLUTE TERMS BUT STAGNANT IN HUMAN TERMS ............. 57
THE MIDDLE EAST HAS FAILED TO COMPETE IN ATTRACTING INVESTMENT .............................. 58 THE POSITIVE TREND IN FOREIGN DIRECT INVESTMENT IN THE MIDDLE EAST ............................................... 59 REVERSED AFTER THE OIL BOOM YEARS ............................................................................................................... 59 WEAK FOREIGN INVESTMENT FLOWS CONTINUED DURING THE 1990S: ............................................................ 60 FOREIGN DIRECT INVESTMENT INFLOWS AS A SHARE OF GDP: 1993-1995 ........................................................ 60 THE TREND IN TOTAL FOREIGN DIRECT INVESTMENT IN THE MENA “FLAT LINED” DURING 1990-1996 ..... 61 MENA FOREIGN DIRECT INVESTMENT REMAINED VERY LOW AS SHARE OF TOTAL DEVELOPING WORLD: 1990-1996 .................................................................................................................................................................... 63 COMPARATIVE TOTAL FOREIGN INVESTMENT: 1990 VERSUS 1995 ..................................................................... 64 EGYPTIAN REFORM VERSUS MALAYSIAN PROGRESS: COMPARATIVE FOREIGN INVESTMENT IN 1996 ........ 65 THE RATE OF PRIVATE CAPITAL TRANSFERS LAGGED THAT OF OTHER REGIONS WHEN MEASURED AS A SHARE OF GDP: 1993-1995 ........................................................................................................................................ 66 MIDDLE EASTERN FOREIGN INVESTMENT BANK HOLDINGS HAVE BEEN SHARPLY REDUCED BECAUSE OF PAST DEBT AND HEAVY NATIONAL SPENDING ..................................................................................................... 67 BUT, THE ARAB WORLD HAS CONSIDERABLE PRIVATE WEALTH OF ITS OWN: $1,568 BILLION IS HELD BY 200,000 PEOPLE ........................................................................................................................................................... 68 NEVERTHELESS, THE MENA REGION HAS NOT COMPETED IN ATTRACTING PRIVATE CAPITAL ................... 69 WHILE MENA TOTAL MARKET CAPITALIZATION IS RISING VERY RAPIDLY, BUT IT LAGS BADLY IN TERMS OF TOTAL VALUE .......................................................................................................................................... 71 MENA GROSS INTERNATIONAL PORTFOLIO FLOWS (EQUITY & DEBT) ARE SMALL AND LAG BADLY BEHIND THE PERFORMANCE OF HIGH GROWTH DEVELOPING COUNTRIES: 1990-1996 .................................... 72 MENA PORTFOLIO EQUITY FLOWS (EMERGING MARKET AND PRIVATE CAPITAL FLOWS) ARE SMALL AND LAG BADLY BEHIND THE PERFORMANCE OF HIGH GROWTH DEVELOPING COUNTRIES: 1990-1995 ..... 73 THE MENA AREA ALSO LAGS IN PRIVATE INTERNATIONAL FINANCING OF INFRASTRUCTURE .................... 74 MOST INDIVIDUAL MENA COUNTRIES HAVE LOW INVESTMENT RATES, WITH ............................................... 75 NO PATTERN OF RECENT INCREASES ...................................................................................................................... 75 MANY MIDDLE EASTERN COUNTRIES ARE ASSESSED AS HIGH INVESTMENT RISKS: ESTIMATES OF INVESTMENT RISK IN THE MIDDLE EAST ................................................................................................................ 77 SOME MIDDLE EASTERN COUNTRIES ARE, HOWEVER, BEGINNING INTERNATIONAL EQUITY ISSUES: 1993-1996 ..................................................................................................................................................................... 78 THEY ARE ALSO MOVING INTO INTERNATIONAL BONDS: 1993-1996 ................................................................. 79 DEBT PERFORMANCE IS MIXED........................................................................................................................ 80 THE DEBT BURDEN TRENDS IN THE MIDDLE EAST ARE RELATIVELY STATIC: 1980-1995............................... 81 Copyright Anthony H. Cordesman, all rights reserved.
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TOTAL MENA DEBT HAS RISEN SINCE 1990, BUT THE COST OF PRINCIPAL REPAYMENTS HAS GONE DOWN: 1970-1996 ....................................................................................................................................................... 82 HOWEVER, MIDDLE EASTERN DEBT PERFORMANCE BY COUNTRY IS MIXED .................................................. 83 THE MIDDLE EAST HAS FAILED TO COMPETE IN TERMS OF PRODUCTIVITY ................................ 84 PRODUCTIVITY DROPPED WHILE RISING IN OTHER REGIONS: ........................................................................... 85 AVERAGE ANNUAL CHANGE IN TOTAL FACTOR PRODUCTIVITY: 1960-1990 .................................................... 85 THE MIDDLE EAST LAGGED IN REGIONAL OUTPUT GROWTH ............................................................................. 86 DURING 1985-1993 ...................................................................................................................................................... 86 THE MIDDLE EAST HAS LAGGED IN VALUE ADDED TO MANUFACTURING ....................................................... 87 RELATIVE PERCENTAGE INCREASE IN VALUE ADDED TO MANUFACTURING: 1980-1994 ................................ 88
Copyright Anthony H. Cordesman, all rights reserved.
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Strategic Interests versus Regional Instability • The US and the West has major strategic interests in the Middle East, most of which are independent of its overall economic development. • There are many critical sources of instability in the region, and Islamist extremism is only one such issue. • Demographics, development, and “statism” are the critical issues -- not a clash of civilizations.
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Strategic Interests •
Arms control - local/regional/global
•
Bilateral security-bilateral relationships
•
Collective security - regional alliances
•
Containment of hostile states
•
Counter-Terrorism
•
Defend and encourage democracy and human rights
•
Exclusion of hostile outside powers
•
Humanitarian values
•
Lines of communication
•
Image of US
•
Support military presence - secure access to ports and facilities
•
Defense of bases, foreign facilities
•
Oil
•
Peace
•
Preserve global reputation and power
•
Proliferation
•
Security of US and allied citizens
•
Trade
•
Treaties and agreements
•
Ensure supply of critical minerals and materials
•
Halt and repel aggression
•
Contain and/or defeat hostile ideologies
Copyright Anthony H. Cordesman, all rights reserved.
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The “Usual Suspects” • Arab-Israeli Conflict • Islamic Extremism • Rogue States: Iran, Iraq, Libya, and Syria • Corruption • Water • Lack of Democracy • Terrorism • Human Rights
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The Broader Sources of Instability in the Middle East • Repressive authoritarian, governments
one
party,
and
or
military
controlled
• Lack of rule of law • High population growth rate • Excessive state sector/government control of economy • Over-reliance on oil and gas sectors coupled to uncertain long-term energy development • Over-reliance on non-productive service sectors • Excessive government employment/ false jobs • Structural and disguised unemployment • Lack of global competitiveness • Regionalism and Pan-Arabism • Mismanagement of agricultural sector • Failure to reduce dependence on water • Desertification • Other religious divisions (e.g. Islamic extremism, Jewish extremism, Sunni vs. Shi’ite, Christian ethnocentrism • Ethnic/racial divisions ( e.g. Arab vs. Berber, Arab vs. Black) • Tribalism/clans/family nepotism • Over-urbanization/concentration in capital • Inadequate infrastructure/inadequate infrastructure • Failure of educational system/inadequate educational infrastructure • Failure to offer opportunities to native youth • Displacement and alienation • Over-reliance on foreign labor • Labor migration • Excessive military spending and arms imports Copyright Anthony H. Cordesman, all rights reserved.
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• Proliferation • Transfer of advanced conventional weapons and technologies • Border disputes
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Economic Development Has Lagged Badly in the Middle East and North Africa, Although it is Projected to Improve • The real GDP of the Middle East and North Africa “flat-lined” during 1979-1994, compared to East Asia, the developing world and the developed world. • The US and World Bank project improvements during the 1990s to 2015, but estimates differ sharply and the Middle East will not catch up with that of high growth regions like East Asia.
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A World Bank Overview of Recent and Projected Trends (Percent of Annual Growth) 9
8
7
6
5
4
3
2
1
0 GDP
Per Capita Consumption
-1
Adapted by Anthony H. Cordesman from MEED, May 24, 1996. p. 4.
Copyright Anthony H. Cordesman, all rights reserved.
Export Volume
Median Inflation
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The Middle East and North Africa Have A Steadily Declining Share of the Global Economy: The GNP of the Middle East Relative to World Total - 1979-1994 in $Current Billions)
30000 25000 20000 15000 10000 5000
World East Asia Developing
0 79 80 81 82 83 84 85 86 87 88 89
Middle East North Africa 90
91
92
93
94
Adapted by Anthony H. Cordesman form ACDA, World Military Expenditures and Arms Transfers, various editions. Middle East does not include North African states other than Egypt.
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The GNP Growth of the Middle East and North Africa Have Lagged Badly Relative to Other Developing Regions: 1972-1994 (GNP in $Current Billions)
9000 8000 7000 6000 5000 4000 3000 2000 1000 0 72
74
76
78
80
82
84
86
88
East Asia Developing Middle East North Africa 90
92
94
Adapted by Anthony H. Cordesman from ACDA, World Military Expenditures and Arms Transfers, various editions. Middle East does not include North African states other than Egypt. Copyright Anthony H. Cordesman, all rights reserved.
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The Middle Eastern Oil Boom After 1973 Did Not Cause the GDP Growth of MENA Region to Outpace Other Developing Areas Even During the 1970s and 1980s (GDP in $Current Billions)
1800 1600 1400 1200 1000 800 600
Europe & Central Asia Latin America & Caribbean East Asia
400 200
Middle East and North Africa
0
South Asia 70
80
88
89
90
91
Sub-Saharan Africa 92
93
94
95
Adapted by Anthony H. Cordesman from World Bank, World Debt Tables, 1995.
Copyright Anthony H. Cordesman, all rights reserved.
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OECD/IEA/IMF World Bank Derived Estimate Reveals the Same Pattern in Comparative GDP Growth for 1971-1993 (Economic Growth in Percent: Average Annual Percentage Change in GDP) China East Asia Other Developing South Asia OECD Pacific Latin America WORLD Africa Total OECD North America OECD Europe Middle East FSU FSU/EE Eastern Europe -4
-2
0
2
4
6
Adapted by Anthony H. Cordesman from OECD/IEA, World Energy Outlook, 1996, p. 234.
Copyright Anthony H. Cordesman, all rights reserved.
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10
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The IMF Estimates Also Show This Pattern for 1979-1998 (Percent of Real Annual Change)
10 9 8 7 6 5 4 3 Asia
2
Latin America
1
Subsahara
0 7988
MENA 89
90
91
92
93
94
Middle East 95
96
97
98
Adapted by Anthony H. Cordesman from IMF, World Economic Outlook, May, 1997, pp. 135-137. The total for the Middle East and North Africa includes Turkey and Yemen, but excludes Algeria, Israel, Morocco & Tunisia.
Copyright Anthony H. Cordesman, all rights reserved.
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Trends in the Real Change in GDP by Country in North Africa: 1979-1996 (Percent of Real Annual Change)
12 10 8 6 4 2 0 Tunisia
-2
Morocco
-4
Libya
-6
Egypt
-8 79-88
89
90
91
92
Algeria 93
94
95
96
Adapted by Anthony H. Cordesman from IMF, World Economic Outlook, May, 1997, pp. 138-139.
Copyright Anthony H. Cordesman, all rights reserved.
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Trends in the Real Change in GDP: Egypt versus Algeria - 1979-1996 (Percent of Real Annual Change)
6 5 4 3 2 1 0 -1 -2 Egypt
-3 79-88
89
90
91
92
Algeria 93
94
95
96
Adapted by Anthony H. Cordesman from IMF, World Economic Outlook, May, 1997, pp. 138-139.
Copyright Anthony H. Cordesman, all rights reserved.
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Trends in the Real Change in GDP by Country in Levant: 1979-1996 (Percent of Real Annual Change)
40 30 20 10 0 -10 -20
Syria
-30
Lebanon Jordan
-40
Israel
-50 79-88
89
90
91
92
Egypt 93
94
95
96
Adapted by Anthony H. Cordesman from IMF, World Economic Outlook, May, 1997, pp. 138-139.
Copyright Anthony H. Cordesman, all rights reserved.
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Trends in the Real Change in GDP by Country in Levant: Israel vs. Jordan: 1979-1996 (Percent of Real Annual Change)
20 15 10 5 0 -5 -10 Jordan
-15 79-88
89
90
91
92
Israel 93
94
95
96
Adapted by Anthony H. Cordesman from IMF, World Economic Outlook, May, 1997, pp. 138-139. Copyright Anthony H. Cordesman, all rights reserved.
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Trends in the Real Change in GDP by Country in Levant: Syria versus Lebanon: 1979-1996 (Percent of Real Annual Change)
40 30 20 10 0 -10 -20 -30 -40 Syria
-50 79-88
89
90
91
92
Lebanon 93
94
95
96
Adapted by Anthony H. Cordesman from IMF, World Economic Outlook, May, 1997, pp. 138-139. Copyright Anthony H. Cordesman, all rights reserved.
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Trends in the Real Change in GDP by Country in the Gulf: 1979-1996 (Percent of Real Annual Change)
80 60 40 20 0
UAE Saudi
-20
Qatar Oman
-40
Kuwait -60
Iraq Iran
-80 7988
89
90
91
92
Bahrain 93
94
95
96
Adapted by Anthony H. Cordesman from IMF, World Economic Outlook, May, 1997, pp. 138-139.
Copyright Anthony H. Cordesman, all rights reserved.
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Trends in the Real Change in GDP by Country in the Northern Gulf: 19791996 (Percent of Real Annual Change)
20 10 0 -10 -20 -30 -40 -50 -60 Iraq
-70 79-88
89
90
91
92
Iran 93
94
95
96
Adapted by Anthony H. Cordesman from IMF, World Economic Outlook, May, 1997, pp. 138-139. No estimate is possible for Iraq after 1992. Iranian growth through 1992 consists largely of post-war recovery, financed through
Copyright Anthony H. Cordesman, all rights reserved.
Stability and Instability in the Middle East - Volume I
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Trends in the Real Change in GDP for Iran: 1979-1996 (Percent of Real Annual Change)
12 10 8 6 4 2 0 -2 79-88
89
90
91
92
Iran 93
94
95
96
Adapted by Anthony H. Cordesman from IMF, World Economic Outlook, May, 1997, pp. 138-139. Iranian growth through 1992 consists largely of post-war recovery, financed through foreign debt/
Copyright Anthony H. Cordesman, all rights reserved.
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Trends in the Real Change in GDP in the Southern Gulf: 1979-1996 (Percent of Real Annual Change)
80 60 40 20 0
UAE Saudi Arabia
-20
Qatar -40
Oman Kuwait
-60 79-88
89
90
91
92
Bahrain 93
94
95
96
Adapted by Anthony H. Cordesman from IMF, World Economic Outlook, May, 1997, pp. 138-139. Adapted by Anthony H. Cordesman from IMF, World Economic Outlook, May, 1997, pp. 138-139. Note: Virtually all of shift is driven by oil export revenues. Copyright Anthony H. Cordesman, all rights reserved.
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Trends in the Real Change in GDP in the Southern Gulf Less the Wartime Impact on Kuwait: 1979-1996 (Percent of Real Annual Change)
20 15 10 5 0 UAE
-5
Oman -10
Saudi Arabia Bahrain
-15 79-88
89
90
91
92
Qatar 93
94
95
96
Adapted by Anthony H. Cordesman from IMF, World Economic Outlook, May, 1997, pp. 138-139. Note: Virtually all of shift is driven by oil export revenues. Copyright Anthony H. Cordesman, all rights reserved.
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Trends in the Real Change in GDP in Saudi Arabia: 1979-1996 (Percent of Real Annual Change)
10 8 6 4 2 0 -2 79-88
89
90
91
92
Saudi Arabia 93
94
95
96
Adapted by Anthony H. Cordesman from IMF, World Economic Outlook, May, 1997, pp. 138-139. Note: Virtually all of shift is driven by oil export revenues.
Copyright Anthony H. Cordesman, all rights reserved.
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Middle Eastern Economic Growth Lags Population Growth: 1984-1994 600
500
400 Population in 1,000s
Gross National Product in $US 1994 Billions 300
200
100
0 84
85
86
87
88
89
90
91
92
93
94
Adapted by Anthony H. Cordesman form ACDA, World Military Expenditures and Arms Transfers, various editions. Middle East does not include North African states other than Egypt.
Copyright Anthony H. Cordesman, all rights reserved.
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Recent World Bank Projections Indicate that MENA Regional Growth has Improved Since 1990, But Still Lagged Sharply in Global Terms: (World Bank Estimate of Average Annual Percentage Change in GDP) 12
1980-1990
10
1990-1995
8
6
4
2
0 East Asia
-2
South Asia
SubSaharan Africa
Latin America
Middle East and North Africa
Europe & Central Asia
-4
-6
-8
Adapted by Anthony H. Cordesman from World Bank, World Development Indicators, 1997, p. 133.
Copyright Anthony H. Cordesman, all rights reserved.
US
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World Bank Projections Indicate that Future Regional Growth Will Lag Sharply Relative to High Growth Regions (World Bank Estimate of World Economic Growth in Percent: Annual Percentage Change in GDP) 10
1981-1990
9
1991-1994
1995
1996-2005
8
7
6
5
4
3
2
1
0 OECD
East Asia
South Asia
SubSaharan Africa
Latin America
Adapted by Anthony H. Cordesman from Washington Post, December 29, 1996, p. A-27.
Copyright Anthony H. Cordesman, all rights reserved.
Middle East and North Africa
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The Numbers Behind the World Bank Projections: Middle Eastern Growth Is Improving, But Lags Behind in Global Terms: (World Bank Estimate of World Economic Growth in Percent: Annual Percentage Change in Real GDP) Region
66-73
74-80
81-90
91-94
1995
Forecasts 96-2000 3.1
3.5
World Total High Income Countries OECD Countries
5.1
3.4
3.1
1.5
96-97 2.8
4.8 4.7
3.0 2.9
3.2 3.1
1.7 1.6
2.5 2.4
2.6 2.6
2.9 2.8
Developing Countries East Asia South Asia Sub-Saharan Africa Latin America and Caribbean Europe and Central Asia Middle East and North Africa
6.9 7.9 3.7 4.7
5.3 7.1 4.0 3.5
3.0 7.9 5.7 1.7
1.0 9.4 3.9 0.7
3.9 9.2 5.5 3.8
4.8 8.2 4.4 3.7
5.3 7.9 5.4 3.8
6.4
4.8
1.7
3.6
0.9
2.6
3.8
6.9
6.1
2.1
-9.0
-0.7
3.0
4.3
8.6
4.9
0.8
2.4
2.5
3.2
2.9
Eastern Europe and Former Soviet Union
7.0
5.1
1.8
-9.4
-2.5
2.9
4.4
Developing Countries Excluding FSU & East Europe
6.2
5.0
3.4
5.0
4.9
5.1
5.4
Note: GDP is measure in market prices and expressed in 1987 prices and exchange rates. Growth rates over historical intervals are computed using least squares regression. Source: Adapted by Anthony H. Cordesman from World Bank, Global Economic Prospects and the Developing Countries, 1996, p. 6, based on OECD national accounts and World Bank estimates.
Copyright Anthony H. Cordesman, all rights reserved.
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OECD/IEA/IMF/World Bank GDP Growth Estimate Indicates the Middle East will Lag During 1993-2010 (Economic Growth in Percent: Average Annual Percentage Change in GDP, assumes high oil prices)
China
East Asia
South Asia
Other Developing
Africa
High Growth
Latin America
Base
Low Growth
Middle East
0
1
2
3
4
5
6
7
Adapted by Anthony H. Cordesman from OECD/IEA, World Energy Outlook, 1996, p. 234.
Copyright Anthony H. Cordesman, all rights reserved.
8
9
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More Detailed US Projections Also Indicate that Middle Eastern Growth Is Improving, But Will Lag Behind in Global Terms: (US Estimate of World Economic Growth in Percent: Annual Percentage Change in Real GDP) Region
1970-1980
1980-1990
1990-2000
2000-2015
1993-2015
OECD North America Europe Pacific
3.2 3.0 3.0 4.3
2.8 2.6 2.6 4.0
2.2 2.1 2.1 2.6
2.5 2.3 2.6 2.7
2.5 2.3 2.6 2.8
Non-OECD
4.4
2.8
2.0
4.7
4.3
EE/FSU FSU EE
3.2 3.2 3.5
2.1 2.1 1.8
-4.0 -4.4 -1.1
3.8 3.7 4.2
2.8 2.6 3.9
Non-OECD Asia China Other Asia
6.3 5.8 6.4
6.9 8.9 6.3
6.4 9.2 5.3
6.0 7.6 5.2
6.0 7.7 5.2
Middle East
4.8
1.5
3.3
3.4
3.4
Africa
4.2
1.4
2.3
3.5
3.2
Central & South America
5.8
1.1
3.9
3.8
3.7
3.5
2.8
2.2
3.1
3.0
Total World
WEFA Group, World Economic Outlook and DOE/EIA, International Energy Forecast, 1996
Copyright Anthony H. Cordesman, all rights reserved.
Stability and Instability in the Middle East - Volume I
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Page 36
The “Uncertainty Factor”: Different Estimates of Future Growth for the MENA and Middle East (Percent of Growth in GDP)
DOE/IEA 97
1995-2015
World Bank MENA-97
1993-2010
IEA Low Exports
2000-2015
IEA Max Exports
2001-2010
OECD Non-Oil Low
1993-2000
OECD Non-Oil Base
1990-2000
OECD Non-Oil High
1996-2000
World Bank MENA-96
1996-1997 1995 1991-1994 1981-1990 1974-1980 1980-1980 1996-1973
-10
-8
-6
-4
-2
0
2
4
6
8
10
Adapted by Anthony H. Cordesman from World Bank, World Development Indicators, 1997, p. 132. IEA, World Energy Outlook, 1996, pp. 168-169; World Bank, Global Rconomic Prospects and the Developing Countries, 1996, p. 6. Estimates differ sharply in methodology and definition.
Copyright Anthony H. Cordesman, all rights reserved.
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Page 37
Recent Trends Are Also Far More Pessimistic. Oil Quotas Were Set Far Too High in Late 1997, the Asia Economy Dropped, and Seasonal Demand Was Low (Oil Exports in Millions of Barrels a Day)
1.456 1.35
Indonesia
2.042 2.29
Nigeria
11/97 Quota
2.583
Venezuela
3.31 0.87 0.909
Algeria
1/98 Production
3.942 3.65
Iran
1.314
Iraq
1.4 2.1 2.19
Kuwait
1.522 1.46
Libya
0.414 0.7
Qatar
8.7 8.761
Saudi Arabia
2.366 2.32
UAE
0
1
2
3
Copyright Anthony H. Cordesman, all rights reserved.
4
5
6
7
8
9
Stability and Instability in the Middle East - Volume I
6/6/16
Adapted by Anthony H. Cordesman from Middle East Economic Digest, March 6,1998, p. 4.
Copyright Anthony H. Cordesman, all rights reserved.
Page 38
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And, Oil Wealth is Projected to Drop Sharply in 1998 (Oil exports in $US millions)
2000 2000 1650
Algeria
Bahrain
1996 1340 877 700
Egypt
1997
18230 17100 13000
Iran
Iraq
1998 13700 13000 10500
Kuwait
9000 8300 6100
Libya
5925 5780 4230
Oman
3100 3500 3000
Qatar
Saudi Arabia
50200 51250
40000
Sudan 2500 2300 1800
Syria
14600 13500 10000
UAE 620 590 440
Yemen 0
10000
20000
30000
40000
50000
Estimate for 1998 assumes average price of $24 for Brent and $12.50 for Arab light. Adapted by Anthony H. Cordesman from Middle East Economic Digest, April 3, 1998, p. 2.
Copyright Anthony H. Cordesman, all rights reserved.
60000
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The Comparative GNP AND GDP of MENA Countries Has Grown in Very Different Ways: 1980-1990 versus 1990-1995 (Percent of Growth in GNP and GDP in $US Calculated Using the World Bank Method)
High Income Nations East Asia Algeria
5% level is generally the minimum needed to both raise living standards and off-set population growth
Bahrain Egypt Iran Iraq Israel Jordan Kuwait Lebanon Libya Mauritania Morocco Oman Gaza & West Bank Qatar Saudi Arabia
1980-1990
Somalia Sudan Syria Turkey
1990-1995
Tunisia UAE Yemen -10
-5
0
5
10
15
Adapted by Anthony H. Cordesman from World Bank, World Development Indicators, 1997, Section 1.1, and CIA on-line edition of the World Factbook, 1996, accessed April 1996.
Copyright Anthony H. Cordesman, all rights reserved.
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IMF Estimates of GDP Growth for 1995-1997 by Country versus Population Growth (Percent of Growth in GDP in Current $US Calculated Using the IMF Method)
Developing World
Algeria
Egypt
Iran
Jordan
Kuwait
Morocco
Pakistan Population Growth in 1980-1995
Saudi Arabia
1997 Sudan 1996 Tunisia 1995 Turkey -10
-5
0
5
10
15
Adapted by Anthony H. Cordesman from IMF and Middle East Economic Digest, May 16, 1997, p. 3, and September 12, 1997, p. 2
Copyright Anthony H. Cordesman, all rights reserved.
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Page 42
Increases in Real Per Capita Income Lag Badly Behind Absolute Growth • The Middle East and North Africa lagged the entire world during 1980-1991. • Real per capita income declined by well over 25% during the 1980s. • The situation has improved since 1991, but there is still very little real growth. • Many of the oil exporting states still have a real per capita income less than 50% of their peak annual level during the oil boom of the early 1980s.
Copyright Anthony H. Cordesman, all rights reserved.
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Page 43
Middle Eastern Population Growth, Low Oil Prices, and Low Overall Exports Combined to Limit Personal Wealth: (Population, and Per Capita Income Relative to 1984 from 1984 to 19941984=100, and all following years are percentages of 1984 as base year. All expenditure totals are measured in constant 1984 US dollars.) 140
120
100
80
60 Population
Gross National Product
40
Per Capita Income 20
0 84
85
86
87
88
89
90
91
92
93
94
Adapted by Anthony H. Cordesman form ACDA, World Military Expenditures and Arms Transfers, various editions. Middle East does not include North African states other than Egypt.
Copyright Anthony H. Cordesman, all rights reserved.
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Middle Eastern and North African Oil Revenues by Country: 1996-1998: The Impact of Oil Prices on Revenues (in US $Current Billions)
Qatar
Algeria
Libya
Kuwait
UAE
Iran
Saudi Arabia
0
5
10
15
20 UAE
25
Saudi Arabia
Iran
Kuwait
1998
29.2
12.8
9.5
1997
42.9
16.3
13.5
1996
45.7
18.7
14.5
13.5
30
35
40
Libya
Algeria
Qatar
9.1
7.1
5.7
3.4
12.4
10.2
7.5
4.3
11.1
7.9
3.3
Source: Adapted by Anthony H. Cordesman from projections by the Petroleum Finance Corporation.
Copyright Anthony H. Cordesman, all rights reserved.
45
50
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North African Economic Growth Also Lagged Population Growth: 1984-1994 120
100
80
60
40
Population in 1,000s
Gross National Product in $US 1994 Billions
20
0 84
85
86
87
88
89
90
91
92
93
94
Adapted by Anthony H. Cordesman form ACDA, World Military Expenditures and Arms Transfers, 1995, various editions. Middle East does not include North African states other than Egypt.
Copyright Anthony H. Cordesman, all rights reserved.
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Page 46
And, North African Population Growth, Low Oil Prices, and Low Overall Exports Also Combined to Limit Personal Wealth: (Population, and Per Capita Income Relative to 1984 from 1984 to 19941984=100, and all following years are percentages of 1984 as base year. All expenditure totals are measured in constant 1984 US dollars.) 140
120
100
80
Population
60
Gross National Product
40
Per Capita Income
20
0 84
85
86
87
88
89
90
91
92
93
94
Adapted by Anthony H. Cordesman form ACDA, World Military Expenditures and Arms Transfers, 1995, various editions. Middle East does not include North African states other than Egypt.
Copyright Anthony H. Cordesman, all rights reserved.
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Negative Development During the 1980s: Average Annual Change in Real Per Capita GDP: 1980-1991 (Change in Average Percent of Growth or Decline)
6 East Asia 5 South Asia
4
3
Europe and Central Asia
Latin America and Carribean
Africa 2
1
Middle East and North Africa
0
-1
-2
-3
Source: Adapted by Anthony H. Cordesman from World Bank, Claiming the Future, p. 15
Copyright Anthony H. Cordesman, all rights reserved.
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The Growth of Personal Wealth Still Lagged During the Early and Mid 1990s: (Average Annual Change in Real Per Capita GDP: 1991-1995)
8
East Asia South Asia
6
Europe and Central Asia Latin America and Carribean Sub-Saharan Africa
4
Middle East and North Africa High Income Countries
2
0
-2
-4
-6
-8
Source: Adapted by Anthony H. Cordesman from World Bank, Global Economic Prospects and the Developing Countries, 1996, p. 3.
Copyright Anthony H. Cordesman, all rights reserved.
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Growth In Per Income Was Negligible Even if Iraq is Excluded (Average Annual Change in Real Per Capita GDP)
2
MENA with Iraq
1.5
MENA Less Iraq
1
0.5
0 1974-1980
1981-1990
-0.5
-1
-1.5
-2
-2.5
Source: Adapted by Anthony H. Cordesman from data provided by the World Bank
Copyright Anthony H. Cordesman, all rights reserved.
1991-1995
Stability and Instability in the Middle East - Volume I
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Things Have Gotten Better in the Last Few Years: Recent Trends by Region and Key Country: 1994-1996 - Part One (Change in Average Percent of Growth or Decline in Per Capita Income in Constant Dollars)
1996
Bahrain
1995 Egypt
1994 1990-1995
Iran Iraq Israel Jordan Kuwait Morocco Oman Saudi Arabia Syria Turkey Tunisia Yemen Middle East -10
-5
Copyright Anthony H. Cordesman, all rights reserved.
0
5
10
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Things Have Gotten Better in the Last Few Years: Recent Trends by Region and Key Country: 1994-1996 - Part Two (Change in Average Percent of Growth or Decline in Per Capita Income in Constant Dollars) 1990-1995
1994
1995
1996
Bahrain
2.4
-
-
-
Egypt
1.4
2.7
3.2
4.8
Iran
1.4
1.8
3
3.5
-9
-
-
-
Israel
-
6.5
6.9
5.7
Jordan
2.4
5.9
6.4
6.5
Kuwait
-
1.1
-0.3
-2.4
Morocco
-0.8
-
-
-
Oman
-0.2
-
-
-
Saudi Arabia
-1.4
-0.1
-0.8
-0.1
Syria
4.2
-
-
-
Turkey
-
-4.7
7.4
3
Tunisia
1.9
-
-
-
Yemen
-4.8
-
-
-
-
0.7
3.7
3.1
Iraq
Middle East
Source: Adapted by Anthony H. Cordesman from World Bank for 1990-1995, and from IMF, World Economic Outlook, May, 1996, p. 24 for 1994, 1995, and 1996.
Copyright Anthony H. Cordesman, all rights reserved.
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Trends in the Annual Change in Real Per Capita GDP by Region: MENA vs. The World: 1979-1998 (Percent of Real Annual Change)
8
6 4 2 0 Asia
-2
Latin America -4 7988
Africa 89
90
91
92
93
94
Middle East 95
96
97
98
Adapted by Anthony H. Cordesman from IMF, World Economic Outlook, May, 1997, pp. 135-137. The total for the Middle East and North Africa includes Turkey and Yemen, but excludes Algeria, Israel, Morocco & Tunisia. Copyright Anthony H. Cordesman, all rights reserved.
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Page 53
The Record for Individual MENA Countries Over the Last Quarter Century Is Poor and the Oil States Are Not “Winners” (Percentage of Average Annual Growth in GNP Per Capita)
Indonesia South Korea Hong Kong China US Algeria Bahrain Egypt Iran Iraq Israel Jordan Kuwait Lebanon Libya Mauritania Morocco Oman Gaza & West Bank Qatar Saudi Arabia Somalia Sudan Syria Turkey Tunisia UAE Yemen -6
-4
-2
0
2
4
6
8
10
Adapted by Anthony H. Cordesman from World Bank, World Development Indicators, 1997, Section 1.3.
Copyright Anthony H. Cordesman, all rights reserved.
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Page 54
The Comparative Per Capita Income of MENA Countries Is Very Different and Estimates Differ Sharply By Source (Current $US in 1995, Calculated Using the World Bank and CIA Methods)
Algeria Bahrain Egypt Iran Iraq Israel Jordan Kuwait Lebanon Libya Mauritania Morocco Oman Gaza & West Bank Qatar Saudi Arabia Somalia Sudan Syria Turkey Tunisia UAE Yemen 0
5000
10000
15000
20000
25000
Adapted by Anthony H. Cordesman from World Bank, World Development Indicators, 1997, Section 1.1, and CIA on-line edition of the World Factbook, 1996, accessed April 1996.
Copyright Anthony H. Cordesman, all rights reserved.
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Current Oil Revenue Trends are Not Promising: The Impact of Oil Prices on Revenues (in US $Current Billions) 50
45
40
35
30
25
20
15
10
5
0
Saudi Arabia
Iran
UAE
Kuwait
Libya
Algeria
Qatar
1996
45.7
18.7
14.5
13.5
11.1
7.9
3.3
1997
42.9
16.3
13.5
12.4
10.2
7.5
4.3
1998
29.2
12.8
9.5
9.1
7.1
5.7
3.4
Source: Adapted by Anthony H. Cordesman from projections by the Petroleum Finance Corporation.
Copyright Anthony H. Cordesman, all rights reserved.
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Page 56
Future GDP Growth May Be Offset by Population Growth to Reduce. Growth in Per Capita Income (Percent of Growth in GDP)
IEA Per Capita Income
Low High Exports
1993-2010
IEA Low Oil Exports GDP IEA High Oil Exports GDP OECD Non-Oil GDP Low OECD Non-Oil GDP Base OECD Non-Oil GDP High IEA Per Capita Income
Low Exports PCI High Exports PCI OECD Urban Population Growth OECD Total Population Growth 2001-2010
IEA Low Oil Exports GDP IEA High Oil Exports GDP OECD Non-Oil GDP Low OECD Non-Oil GDP Base OECD Non-Oil GDP High IEA Per Capita Income * OECD Urban Population Growth OECD Total Pop. Growth
1993-2000
IEA Low Oil Exports GDP IEA Max Oil Exports GDP OECD Non-Oil GDP Low OECD Non-Oil GDP Base OECD Non-Oil GDP High 0
1
2
3
4
5
* For High Exports. Figure for Capacity Constrained Exports is Zero. Adapted by Anthony H. Cordesman from IEA, World Energy Outlook, 1996, pp. 168-170.
Copyright Anthony H. Cordesman, all rights reserved.
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Page 57
Middle East Growth is Acceptable in Absolute Terms but Stagnant in Human Terms • Real economic growth has been acceptable during early 1990s (198981994): • MENA GDP has risen by annual average rate of 3.2%. • Africa is up 1.6% • Latin America is up 2.9% • Asia is up 7.5% • However, population growth, low oil prices, and conflict have meant that Middle East continues to lag in the growth of real per capita income: • No growth for MENA region • Developing countries as a whole average 3% • Developed countries average 1.3% • Algeria, Djibouti, Iran, Iraq, Kuwait, Saudi Arabia, Somalia, Sudan, and Yemen have been heavily impact by war. • Low oil prices, debt, deficit spending, and welfare costs have impact all oil producers - Real per capita incomes are 50% of oil boom level. • Israel, Jordan, Mauritania, Morocco, and Tunisia have made some progress because of structural economic reform. Source: Adapted by Anthony H. Cordesman from Mohamed A El Erian, Sena Eken, Susan Fennell and Jean-Pierre Chauffour, “Growth and Stability in the Middle East and North Africa,” Washington, IMF, March, 1996
Copyright Anthony H. Cordesman, all rights reserved.
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Page 58
The Middle East has Failed to Compete in Attracting Investment • Investment is very low as a percent of GDP. • Foreign direct investment has not been encouraged and has largely “flatlined.” • Private Capital has also gone to other regions. • The rapid growth of MENA stock markets disguises the fact they are very small relative to other developing regions. • Portfolio performance is also poor. • The region is failing to draw on investment to finance the maintenance and improvement of its infrastructure. • Risk assessment is mixed and often negative. • But, MENA countries with economic reform and investment opportunities do attract equity investment.
Copyright Anthony H. Cordesman, all rights reserved.
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Page 59
The Positive Trend in Foreign Direct Investment in the Middle East Reversed After the Oil Boom Years (Foreign Direct Investment Flows as a Percent of GDP )
1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 1982-92
0 East Asia Latin America &
1973-82 Middle East and North
High Income Countries
Source: Adapted by Anthony H. Cordesman from World Bank, Global Economic Prospects and the Developing Countries, 1996, p. 22 Copyright Anthony H. Cordesman, all rights reserved.
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Page 60
Weak Foreign Investment Flows Continued During the 1990s: Foreign Direct Investment Inflows as a Share of GDP: 1993-1995 (Change in Average Percent of Growth or Decline)
3.5
East Asia South Asia Europe and Central Asia
3
Latin America and Carribean Sub-Saharan Africa
2.5
Middle East and North Africa High Income Countries
2
1.5
1
0.5
0
Source: Adapted by Anthony H. Cordesman from World Bank, Global Economic Prospects and the Developing Countries, 1996, p. 3
Copyright Anthony H. Cordesman, all rights reserved.
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Page 61
The Trend in Total Foreign Direct Investment in the MENA “Flat Lined” During 1990-1996 ($US billions)
120 100 80 60
All Developing East Asia
40
Latin America and Carribean 20
Europe and Central Asia South Asia
0
Middle East and North Africa
-20 1990 1991
Sub-Saharan Africa 1992 1993
1994
1995
1996
Source: Adapted by Anthony H. Cordesman from World Bank, World Debt Tables, 1996, p. 17, and Global Copyright Anthony H. Cordesman, all rights reserved.
Stability and Instability in the Middle East - Volume I
Development Performance, 1997, p. 29.
Copyright Anthony H. Cordesman, all rights reserved.
6/6/16
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MENA Foreign Direct Investment Remained Very Low as Share of Total Developing World: 1990-1996 ($US billions)
70 60 50 40 30
East Asia Latin America and Carribean
20
Europe and Central Asia
10
South Asia
0
Middle East and North Africa
-10 1990
1991
1992
Sub-Saharan Africa 1993
1994
1995
1996
Source: Adapted by Anthony H. Cordesman from World Bank, World Debt Tables, 1996, p. 17, and Global Development Performance, 1997, p. 29.
Copyright Anthony H. Cordesman, all rights reserved.
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Comparative Total Foreign Investment: 1990 Versus 1995 (Percent of Growth or Decline)
70 Southeast and South Asia
60
50
Europe and Central Asia
Latin America and Carribean
Middle East and North Africa 40
30
20
10
0 1990
Source: Adapted by Anthony H. Cordesman from World Bank.
Copyright Anthony H. Cordesman, all rights reserved.
1995
Stability and Instability in the Middle East - Volume I
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Egyptian Reform Versus Malaysian Progress: Comparative Foreign Investment in 1996 ($US millions)
6000
Egypt Comparative Population Comparative Per Capita Income
57,800,000
Malaysia 20,100,000
$790
$3,890
5000
4000
3000
2000
1000
0 Egypt
Malaysia
Source: Adapted by Anthony H. Cordesman from World Bank and from World Bank Atala, 1997, pp. 16-17 36-37.
Copyright Anthony H. Cordesman, all rights reserved.
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Page 66
The Rate of Private Capital Transfers Lagged That of Other Regions When Measured as a Share of GDP: 1993-1995 (Change in Average Percent of Growth or Decline)
2.5
East Asia
South Asia 2 Europe and Central Asia
Latin America and Carribean
1.5
Sub-Saharan Africa
Middle East and North Africa
High Income Countries
1
0.5
0
Source: Adapted by Anthony H. Cordesman from World Bank, Global Economic Prospects and the Developing Countries, 1996, p. 3
Copyright Anthony H. Cordesman, all rights reserved.
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Page 67
Middle Eastern Foreign Investment Bank Holdings Have Been Sharply Reduced Because of Past Debt and Heavy National Spending (Middle Eastern Net Bank Assets and Liabilities Outside the Middle East)
160,000
140,000
Q11996 Q21996
120,000
100,000
80,000
60,000
40,000
20,000
0 Algeria
Egypt
Iran
Kuwait
Saudi Arabia
-20,000
Source: Adapted by Anthony H. Cordesman from Economist, December 21, 1996, p. 54.
Copyright Anthony H. Cordesman, all rights reserved.
Total Middle East
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But, the Arab World Has Considerable Private Wealth of Its Own: $1,568 Billion is Held by 200,000 People ($Current Billions)
1600
1400
1200
1000
800
600
400
200
0 Saudi Arabia
Individuals holding wealth
78,000
UAE
Kuwait
Rest of GCC
GCC Total
59,000
36,000
12,000
185,000
Rest of Arab Gulf
Mahgreb, Egypt, & Levant
15,000
-
Total Arab World
-
Note: Total region does not include Lebanon and Mahgreb. Merrill Lynch estimates private wealth in these countries at $800 billion. Total world private wealth estimated at 16,700 billion. As a result, Saudi Arabia has 2.5% of world total, GCC has 4.2 % of total, Arab world less Mahgreb has 4.6% of total, and Arab world with Mahgreb has 3.4% of total. Adapted by Anthony H. Cordesman from Merrill Lynch, Gemeni, and Middle East Economic Digest, February 14, 1997, p. 9.
Copyright Anthony H. Cordesman, all rights reserved.
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And, Stock Markets Are Growing Where The Private Sector is Allowed to Operate Effectively ($US Millions as of December 31, 1997)
Algeria 480
Bahrain
7571 7124
Egypt 702
Iran
20845
8943
Iraq 13845
Israel 499
Jordan
35493
4966
Kuwait
29600
34957
636 3511
Lebanon Libya Mauritania
Turnover
1412
Morocco
12039
4195
Oman
Captialization
8736
50 400
Gaza & West Bank
111 2589
Qatar
16549
Saudi Arabia
58838
Somalia Sudan Syria Turkey Tunisia
250 2637
UAE
2500
21286
Yemen 0
10000
20000
30000
40000
50000
Adapted by Anthony H. Cordesman from Middle East Economic Digest, February 13, 1998, p. 10.
Copyright Anthony H. Cordesman, all rights reserved.
60000
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Nevertheless, the MENA Region Has Not Competed in Attracting Private Capital (Accumulated Net Private Resource Inflows: 1985-1993 in $US Billions)
250
East Asia South Asia Europe and Central Asia Latin America and Carribean
200
Sub-Saharan Africa Middle East and North Africa
150
100
50
0
Source: Adapted by Anthony H. Cordesman from World Bank, Global Economic Prospects and the Developing Countries, 1996, p. 16
Copyright Anthony H. Cordesman, all rights reserved.
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Page 71
While MENA Total Market Capitalization is Rising Very Rapidly, But It Lags Badly in Terms of Total Value (Accumulated World Stock Market Capitalization in $US Billions)
600 East Asia South Asia Europe and Central Asia 500
Latin America and Carribean Sub-Saharan Africa Middle East and North Africa
400
300
200
100
0 1980
1995
Source: Adapted by Anthony H. Cordesman from World Bank, World Development Indicators, 1997, p. 242.
Copyright Anthony H. Cordesman, all rights reserved.
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MENA Gross International Portfolio Flows (Equity & Debt) Are Small and Lag Badly Behind the Performance of High Growth Developing Countries: 1990-1996 ($US billions: Includes gross capital raised through international bonds, certificates of deposit, and commercial paper, plus gross funds raised through international equity issues and net foreign investments in local equity markets)
70 60 50 40 Latin America 30 20 10 0
East Asia Europe and Central Asia South Asia Sub-Saharan Africa Middle East and North Africa
Source: Adapted by Anthony H. Cordesman from World Bank, Global Development Finance, 1997, p. 99. Copyright Anthony H. Cordesman, all rights reserved.
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MENA Portfolio Equity Flows (Emerging Market and Private Capital Flows) Are Small and Lag Badly Behind the Performance of High Growth Developing Countries: 1990-1995 ($US millions)
30000 25000 20000 15000
Latin America East Asia
10000
South Asia Europe and Central Asia
5000
Middle East and North Africa
0 1989
1990
1991
Sub-Saharan Africa 1992
1993
1994
1995
Source: Adapted by Anthony H. Cordesman from World Bank, World Debt Tables, 1996, p. 103. Copyright Anthony H. Cordesman, all rights reserved.
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The MENA Area Also Lags in Private International Financing of Infrastructure ($US billions, including loans, bonds, and equity from international capital markets)
20000 18000 16000 14000 12000 10000 8000
East Asia Latin America
6000 4000
Europe/Central Asia
2000
South Asia
0 1986
Middle East/North Africa 1988
1990
Sub-Saharan Africa 1992
1994
Source: Adapted by Anthony H. Cordesman from World Bank, Global Development Finance, 1997, p. 22.
Copyright Anthony H. Cordesman, all rights reserved.
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Most Individual MENA Countries Have Low Investment Rates, with No Pattern of Recent Increases (Investment as percentage of GDP, with GDP measured in constant 1992 prices)
Bahrain Kuwait Oman Qatar Saudi Arabia UAE GCC Egypt Jordan Lebanon Syria Yemen Non-GCC 0
10
20 Desirable Investment Rate
30
40
50
High Investment Rate
Adapted by Anthony H. Cordesman from Economic and Social Commission for West Asia, and Middle East
Copyright Anthony H. Cordesman, all rights reserved.
Stability and Instability in the Middle East - Volume I
Economic Digest, February 14, 1997, p. 3.
Copyright Anthony H. Cordesman, all rights reserved.
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Many Middle Eastern Countries are Assessed as High Investment Risks: Estimates of Investment Risk in the Middle East Country
COFACE Political Risk Estimate Short-Term Medium-Term
Moody & S&P Sovereign Ratings Moody LongS&P Long-Term Term Foreign Foreign Currency Currency Bonds and Notes
Algeria
low
very high
-
-
Bahrain
low
good
Ba1
-
Egypt
low
moderately high
Ba2
BBB-
Iran
moderate
very high
-
-
Jordan
low
high
B1
BB-
Kuwait
low
quite good
Baa1
-
Lebanon
low
moderately high
-
-
Libya
moderate
high
-
-
Morocco
low
moderately high
-
-
Oman
low
quite good
Baa2
BBB-
Qatar
low
quite good
Baa2
BBB
Saudi Arabia
low
quite good
Baa3
-
Syria
moderate
quite high
-
-
Tunisia
low
quite good
Baa3
-
Turkey
low
moderately high
-
-
UAE
low
good
Baa1
-
Yemen
low
very high
-
-
COFACE = France’s Export Credit Agency Investment grade for Moody’s is Baa3 and above; BBB- and above for S&P Source: COFACE, Moody’s Investor service, Standard and Poor’s, and Middle East Economic Digest, February 14, 1997, p. 2 and February 21, 1997, p. 4.
Copyright Anthony H. Cordesman, all rights reserved.
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Some Middle Eastern Countries Are, However, Beginning International Equity Issues: 1993-1996 ($US millions)
450 Algeria Bahrain 400 Egypt Jordan 350 Lebanon Morocco 300
Oman Tunisia
250
200
150
100
50
0 1993
1994
1995
1996
Source: Adapted by Anthony H. Cordesman from World Bank, Global Development Finance, 1997, p. 114.
Copyright Anthony H. Cordesman, all rights reserved.
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They Are Also Moving Into International Bonds: 1993-1996 ($US millions)
600
500 Tunisia 400
Lebanon Morocco
300
Bahrain Jordan
200 Algeria 100
Egypt
0 1993
Oman 1994
1995
1996
Source: Adapted by Anthony H. Cordesman from World Bank, Global Development Finance, 1997, p. 112.
Copyright Anthony H. Cordesman, all rights reserved.
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Debt Performance is Mixed • Total debt has risen, but has been controlled. • At the same time, the control of public debt has often come at the expense of polices that discourage investment in the MENA region. • Several countries also have serious debt problems.
Copyright Anthony H. Cordesman, all rights reserved.
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The Debt Burden Trends in the Middle East Are Relatively Static: 1980-1995 160
140
120
100 Ratio of Total External Debt Relative to Exports of Goods and Services Ratio of Total External Debt to Gross National Product
80
Ratio of Total Interest Payments Relative to Exports of Goods and Services 60
40
20
0 80
88
89
90
91
92
Adapted by Anthony H. Cordesman from World Bank, World Debt Tables, 1995.
Copyright Anthony H. Cordesman, all rights reserved.
93
94
95
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Total MENA Debt Has Risen Since 1990, but the Cost of Principal Repayments Has Gone Down: 1970-1996 (In $Current Billions) 180 Total Outstanding Debt 160
Principal Repayments 140
120
100
80
60
40
20
0 1970
1980
1990
1995
1996
Adapted by Anthony H. Cordesman from World Bank, Global Development Performance, 1997, p. 199.
Copyright Anthony H. Cordesman, all rights reserved.
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However, Middle Eastern Debt Performance By Country is Mixed Country
Relative Wealth
Debt Status
Algeria
middle income
severely indebted
Bahrain
middle income
less indebted
Egypt
low income
moderately indebted
Iran
middle income
severely indebted
Iraq
middle income
severely indebted
Jordan
middle income
severely indebted
Kuwait
---
---
Lebanon
middle income
less indebted
Libya
middle income
less indebted
Morocco
middle income
moderately indebted
Oman
middle income
less indebted
Qatar
---
---
Saudi Arabia
middle income
less indebted
Sudan
low income
severely indebted
Syria
middle income
severely indebted
Tunisia
middle income
moderately indebted
Turkey
middle income
moderately indebted
UAE
---
---
Yemen
low income
severely indebted
Note: Low income = $725 annually or less; lower-middle = $725-2,895; upper middle = $2,896-8,955. Kuwait, Qatar, and the UAE are high income countries with $8,956 or more. The ranking for indebtedness is determined by the present value of debt services relative to exports of goods and services or relative to GNP. Source: World Bank, World Debt Tables, 1995, pp. 43-44.
Copyright Anthony H. Cordesman, all rights reserved.
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The Middle East has Failed to Compete in Terms of Productivity • The Middle East was the only region in the world to exhibit a net drop in productivity from 1960-1990. • Middle East productivity dropped by around 6%, East Asian productivity rose by 54%. • The situation has improved in the last decade, but the Middle East still have only about 20% of the growth of East Asia and lags far behind South Asia.
Copyright Anthony H. Cordesman, all rights reserved.
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Productivity Dropped While Rising in Other Regions: Average Annual Change in Total Factor Productivity: 1960-1990 1.8
East Asia 1.6
1.4
OECD
1.2 Latin America 1
0.8
Middle East and North Africa
0.6
0.4
0.2
0
-0.2
Source: Adapted by Anthony H. Cordesman from World Bank, Claiming the Future, p. 15
Copyright Anthony H. Cordesman, all rights reserved.
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The Middle East Lagged in Regional Output Growth During 1985-1993 (Average Annual Increase in Percent)
8
6
East Asia South Asia Developing Europe and Central Asia Latin America and Carribean
4
Sub-Saharan Africa Middle East and North Africa
2
0
-2
-4
Source: Adapted by Anthony H. Cordesman from World Bank, Global Economic Prospects and the Developing Countries, 1996, p. 16
Copyright Anthony H. Cordesman, all rights reserved.
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The Middle East Has Lagged in Value Added to Manufacturing (Value in $US billions of sum of gross output, less the value of intermediate goods consumed in production)
350
300 1980
1994
250
200
150
100
50
0 East Asia
South Asia
Developing Europe and Central Asia
Latin America and Carribean
Sub-Saharan Africa
Middle East and North Africa
Source: Adapted by Anthony H. Cordesman from World Bank, World Development Indicators, 1997, p. 152
Copyright Anthony H. Cordesman, all rights reserved.
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Relative Percentage Increase in Value Added to Manufacturing: 1980-1994 (Percentage Increase in $US billions of sum of gross output, less the value of intermediate goods consumed in production)
180
160
140
120
Middle East 100
80
60
40
20
0 East Asia
South Asia
Latin America and Carribean
SubSaharan Africa
Middle East and North Africa
High Income States
US
Source: Adapted by Anthony H. Cordesman from World Bank, World Development Indicators, 1997, p. 152
Copyright Anthony H. Cordesman, all rights reserved.
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Stability and Instability in the Middle East The Economic, Demographic, Energy and Security Situation in the Middle East
Volume I Economic Growth, Per Capita Income, and Investment Anthony H. Cordesman Co-Director, Middle East Program Copyright Anthony H. Cordesman, all rights reserved.
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Center for Strategic and International Studies April, 1998
Copyright Anthony H. Cordesman, all rights reserved.
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Table of Contents STRATEGIC INTERESTS VERSUS REGIONAL INSTABILITY ....................................................................... 6 STRATEGIC INTERESTS ................................................................................................................................................ 7 THE “USUAL SUSPECTS” .............................................................................................................................................. 8 THE BROADER SOURCES OF INSTABILITY IN THE MIDDLE EAST ........................................................................... 9 ECONOMIC DEVELOPMENT HAS LAGGED BADLY IN THE MIDDLE EAST AND NORTH AFRICA, ALTHOUGH IT IS PROJECTED TO IMPROVE ................................................................................................. 11 THE US AND WORLD BANK PROJECT IMPROVEMENTS DURING THE 1990S TO 2015, BUT ESTIMATES DIFFER SHARPLY AND THE MIDDLE EAST WILL NOT CATCH UP WITH THAT OF HIGH GROWTH REGIONS LIKE EAST ASIA. ......................................................................................................................................................... 11 THE MIDDLE EAST AND NORTH AFRICA HAVE A STEADILY ............................................................................... 12 DECLINING SHARE OF THE GLOBAL ECONOMY: .................................................................................................... 13 THE GNP GROWTH OF THE MIDDLE EAST AND NORTH AFRICA LAG BADLY RELATIVE TO OTHER DEVELOPING REGIONS: 1972-1994 .......................................................................................................................... 14 THE MIDDLE EASTERN OIL BOOM AFTER 1973 DID NOT CAUSE THE GDP GROWTH OF MENA REGION TO OUTPACE OTHER DEVELOPING AREAS EVEN DURING THE 1970S AND 1980S .............................. 15 OECD/IEA/IMF WORLD BANK DERIVED ESTIMATE REVEALS THE SAME PATTERN IN COMPARATIVE GDP GROWTH FOR 1971-1993 ............................................................................................................................................ 16 THE IMF ESTIMATES ALSO SHOW THIS PATTERN FOR 1979-1998 ....................................................................... 17 TRENDS IN THE REAL CHANGE IN GDP BY COUNTRY IN NORTH AFRICA: 1979-1996 ....................................... 18 TRENDS IN THE REAL CHANGE IN GDP: EGYPT VERSUS ALGERIA - 1979-1996 ................................................. 19 TRENDS IN THE REAL CHANGE IN GDP BY COUNTRY IN LEVANT: 1979-1996 ................................................... 20 TRENDS IN THE REAL CHANGE IN GDP BY COUNTRY IN LEVANT: ISRAEL VS. JORDAN: 1979-1996 ............... 21 TRENDS IN THE REAL CHANGE IN GDP BY COUNTRY IN LEVANT: SYRIA VERSUS LEBANON: 1979-1996 ..... 22 TRENDS IN THE REAL CHANGE IN GDP BY COUNTRY IN THE GULF: 1979-1996 ................................................ 23 TRENDS IN THE REAL CHANGE IN GDP BY COUNTRY IN THE NORTHERN GULF: 1979-1996............................ 24 TRENDS IN THE REAL CHANGE IN GDP FOR IRAN: 1979-1996 .............................................................................. 26 TRENDS IN THE REAL CHANGE IN GDP IN THE SOUTHERN GULF: 1979-1996 .................................................... 27 TRENDS IN THE REAL CHANGE IN GDP IN THE SOUTHERN GULF LESS THE WARTIME IMPACT ON KUWAIT: 1979-1996 .................................................................................................................................................................... 28 TRENDS IN THE REAL CHANGE IN GDP IN SAUDI ARABIA: 1979-1996 ................................................................ 29 MIDDLE EASTERN ECONOMIC GROWTH LAGS POPULATION GROWTH: 1984-1994 ........................................... 30 RECENT WORLD BANK PROJECTIONS INDICATE THAT MENA REGIONAL GROWTH HAS IMPROVED SINCE 1990, BUT STILL LAGS SHARPLY IN GLOBAL TERMS: ............................................................................... 31 WORLD BANK PROJECTIONS INDICATE THAT FUTURE REGIONAL GROWTH WILL LAGS SHARPLY RELATIVE TO HIGH GROWTH REGIONS ................................................................................................................... 32 THE NUMBERS BEHIND THE WORLD BANK PROJECTIONS: MIDDLE EASTERN GROWTH IS IMPROVING, BUT LAGS BEHIND IN GLOBAL TERMS: ................................................................................................................... 33 OECD/IEA/IMF/WORLD BANK GDP GROWTH ESTIMATE INDICATES THE MIDDLE EAST WILL LAG DURING 1993-2010 ..................................................................................................................................................................... 34 MORE DETAILED US PROJECTIONS ALSO INDICATE THAT MIDDLE EASTERN GROWTH IS IMPROVING, BUT WILL LAG BEHIND IN GLOBAL TERMS: .......................................................................................................... 35 THE “UNCERTAINTY FACTOR”: DIFFERENT ESTIMATES OF FUTURE GROWTH FOR THE MENA AND MIDDLE EAST .............................................................................................................................................................. 36 THE COMPARATIVE GNP AND GDP OF MENA COUNTRIES HAS GROWN IN VERY DIFFERENT WAYS: 1980-1990 VERSUS 1990-1995 .................................................................................................................................... 37 IMF ESTIMATES OF GDP GROWTH FOR 1995-1997 BY COUNTRY VERSUS POPULATION GROWTH ................. 41 INCREASES IN REAL PER CAPITA INCOME LAG BADLY BEHIND GROWTH...................................... 42 MIDDLE EASTERN POPULATION GROWTH, LOW OIL PRICES, AND LOW OVERALL EXPORTS COMBINED Copyright Anthony H. Cordesman, all rights reserved.
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TO LIMIT PERSONAL WEALTH: ................................................................................................................................ 43 NORTH AFRICAN ECONOMIC GROWTH ALSO LAGGED POPULATION GROWTH: 1984-1994 ............................. 44 AND, NORTH AFRICAN POPULATION GROWTH, LOW OIL PRICES, AND LOW OVERALL EXPORTS ALSO COMBINED TO LIMIT PERSONAL WEALTH: ............................................................................................................. 46 NEGATIVE DEVELOPMENT DURING THE 1980S: ..................................................................................................... 47 AVERAGE ANNUAL CHANGE IN REAL PER CAPITA GDP: 1980-1991 ................................................................... 47 THE GROWTH OF PERSONAL WEALTH STILL LAGGED DURING THE EARLY AND MID 1990S: ........................ 48 GROWTH IN PER INCOME WAS NEGLIGIBLE EVEN IF IRAQ IS EXCLUDED ......................................................... 49 THINGS HAVE GOTTEN BETTER IN THE LAST FEW YEARS: .................................................................................. 50 RECENT TRENDS BY REGION AND KEY COUNTRY: 1994-1996 ............................................................................. 50 TRENDS IN THE ANNUAL CHANGE IN REAL PER CAPITA GDP BY REGION: ....................................................... 52 MENA VS. THE WORLD: 1979-1998 .......................................................................................................................... 52 THE RECORD FOR INDIVIDUAL MENA COUNTRIES OVER THE LAST QUARTER CENTURY IS POOR AND THE OIL STATES ARE NOT “WINNERS” ................................................................................................................... 53 THE COMPARATIVE PER CAPITA INCOME OF MENA COUNTRIES IS VERY DIFFERENT AND ESTIMATES DIFFER SHARPLY BY SOURCE .................................................................................................................................. 54 FUTURE GDP GROWTH MAY BE OFFSET BY POPULATION GROWTH TO REDUCE. GROWTH IN PER CAPITA INCOME ......................................................................................................................................................... 55 MIDDLE EAST GROWTH IS ACCEPTABLE IN ABSOLUTE TERMS BUT STAGNANT IN HUMAN TERMS ............. 57
THE MIDDLE EAST HAS FAILED TO COMPETE IN ATTRACTING INVESTMENT .............................. 58 THE POSITIVE TREND IN FOREIGN DIRECT INVESTMENT IN THE MIDDLE EAST ............................................... 59 REVERSED AFTER THE OIL BOOM YEARS ............................................................................................................... 59 WEAK FOREIGN INVESTMENT FLOWS CONTINUED DURING THE 1990S: ............................................................ 60 FOREIGN DIRECT INVESTMENT INFLOWS AS A SHARE OF GDP: 1993-1995 ........................................................ 60 THE TREND IN TOTAL FOREIGN DIRECT INVESTMENT IN THE MENA “FLAT LINED” DURING 1990-1996 ..... 61 MENA FOREIGN DIRECT INVESTMENT REMAINED VERY LOW AS SHARE OF TOTAL DEVELOPING WORLD: 1990-1996 .................................................................................................................................................................... 63 COMPARATIVE TOTAL FOREIGN INVESTMENT: 1990 VERSUS 1995 ..................................................................... 64 EGYPTIAN REFORM VERSUS MALAYSIAN PROGRESS: COMPARATIVE FOREIGN INVESTMENT IN 1996 ........ 65 THE RATE OF PRIVATE CAPITAL TRANSFERS LAGGED THAT OF OTHER REGIONS WHEN MEASURED AS A SHARE OF GDP: 1993-1995 ........................................................................................................................................ 66 MIDDLE EASTERN FOREIGN INVESTMENT BANK HOLDINGS HAVE BEEN SHARPLY REDUCED BECAUSE OF PAST DEBT AND HEAVY NATIONAL SPENDING ..................................................................................................... 67 BUT, THE ARAB WORLD HAS CONSIDERABLE PRIVATE WEALTH OF ITS OWN: $1,568 BILLION IS HELD BY 200,000 PEOPLE ........................................................................................................................................................... 68 NEVERTHELESS, THE MENA REGION HAS NOT COMPETED IN ATTRACTING PRIVATE CAPITAL ................... 69 WHILE MENA TOTAL MARKET CAPITALIZATION IS RISING VERY RAPIDLY, BUT IT LAGS BADLY IN TERMS OF TOTAL VALUE .......................................................................................................................................... 71 MENA GROSS INTERNATIONAL PORTFOLIO FLOWS (EQUITY & DEBT) ARE SMALL AND LAG BADLY BEHIND THE PERFORMANCE OF HIGH GROWTH DEVELOPING COUNTRIES: 1990-1996 .................................... 72 MENA PORTFOLIO EQUITY FLOWS (EMERGING MARKET AND PRIVATE CAPITAL FLOWS) ARE SMALL AND LAG BADLY BEHIND THE PERFORMANCE OF HIGH GROWTH DEVELOPING COUNTRIES: 1990-1995 ..... 73 THE MENA AREA ALSO LAGS IN PRIVATE INTERNATIONAL FINANCING OF INFRASTRUCTURE .................... 74 MOST INDIVIDUAL MENA COUNTRIES HAVE LOW INVESTMENT RATES, WITH ............................................... 75 NO PATTERN OF RECENT INCREASES ...................................................................................................................... 75 MANY MIDDLE EASTERN COUNTRIES ARE ASSESSED AS HIGH INVESTMENT RISKS: ESTIMATES OF INVESTMENT RISK IN THE MIDDLE EAST ................................................................................................................ 77 SOME MIDDLE EASTERN COUNTRIES ARE, HOWEVER, BEGINNING INTERNATIONAL EQUITY ISSUES: 1993-1996 ..................................................................................................................................................................... 78 THEY ARE ALSO MOVING INTO INTERNATIONAL BONDS: 1993-1996 ................................................................. 79 DEBT PERFORMANCE IS MIXED........................................................................................................................ 80 THE DEBT BURDEN TRENDS IN THE MIDDLE EAST ARE RELATIVELY STATIC: 1980-1995............................... 81 Copyright Anthony H. Cordesman, all rights reserved.
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TOTAL MENA DEBT HAS RISEN SINCE 1990, BUT THE COST OF PRINCIPAL REPAYMENTS HAS GONE DOWN: 1970-1996 ....................................................................................................................................................... 82 HOWEVER, MIDDLE EASTERN DEBT PERFORMANCE BY COUNTRY IS MIXED .................................................. 83 THE MIDDLE EAST HAS FAILED TO COMPETE IN TERMS OF PRODUCTIVITY ................................ 84 PRODUCTIVITY DROPPED WHILE RISING IN OTHER REGIONS: ........................................................................... 85 AVERAGE ANNUAL CHANGE IN TOTAL FACTOR PRODUCTIVITY: 1960-1990 .................................................... 85 THE MIDDLE EAST LAGGED IN REGIONAL OUTPUT GROWTH ............................................................................. 86 DURING 1985-1993 ...................................................................................................................................................... 86 THE MIDDLE EAST HAS LAGGED IN VALUE ADDED TO MANUFACTURING ....................................................... 87 RELATIVE PERCENTAGE INCREASE IN VALUE ADDED TO MANUFACTURING: 1980-1994 ................................ 88
Copyright Anthony H. Cordesman, all rights reserved.
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Strategic Interests versus Regional Instability • The US and the West has major strategic interests in the Middle East, most of which are independent of its overall economic development. • There are many critical sources of instability in the region, and Islamist extremism is only one such issue. • Demographics, development, and “statism” are the critical issues -- not a clash of civilizations.
Copyright Anthony H. Cordesman, all rights reserved.
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Strategic Interests •
Arms control - local/regional/global
•
Bilateral security-bilateral relationships
•
Collective security - regional alliances
•
Containment of hostile states
•
Counter-Terrorism
•
Defend and encourage democracy and human rights
•
Exclusion of hostile outside powers
•
Humanitarian values
•
Lines of communication
•
Image of US
•
Support military presence - secure access to ports and facilities
•
Defense of bases, foreign facilities
•
Oil
•
Peace
•
Preserve global reputation and power
•
Proliferation
•
Security of US and allied citizens
•
Trade
•
Treaties and agreements
•
Ensure supply of critical minerals and materials
•
Halt and repel aggression
•
Contain and/or defeat hostile ideologies
Copyright Anthony H. Cordesman, all rights reserved.
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The “Usual Suspects” • Arab-Israeli Conflict • Islamic Extremism • Rogue States: Iran, Iraq, Libya, and Syria • Corruption • Water • Lack of Democracy • Terrorism • Human Rights
Copyright Anthony H. Cordesman, all rights reserved.
Page 8
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The Broader Sources of Instability in the Middle East • Repressive authoritarian, governments
one
party,
and
or
military
controlled
• Lack of rule of law • High population growth rate • Excessive state sector/government control of economy • Over-reliance on oil and gas sectors coupled to uncertain long-term energy development • Over-reliance on non-productive service sectors • Excessive government employment/ false jobs • Structural and disguised unemployment • Lack of global competitiveness • Regionalism and Pan-Arabism • Mismanagement of agricultural sector • Failure to reduce dependence on water • Desertification • Other religious divisions (e.g. Islamic extremism, Jewish extremism, Sunni vs. Shi’ite, Christian ethnocentrism • Ethnic/racial divisions ( e.g. Arab vs. Berber, Arab vs. Black) • Tribalism/clans/family nepotism • Over-urbanization/concentration in capital • Inadequate infrastructure/inadequate infrastructure • Failure of educational system/inadequate educational infrastructure • Failure to offer opportunities to native youth • Displacement and alienation • Over-reliance on foreign labor • Labor migration • Excessive military spending and arms imports Copyright Anthony H. Cordesman, all rights reserved.
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• Proliferation • Transfer of advanced conventional weapons and technologies • Border disputes
Copyright Anthony H. Cordesman, all rights reserved.
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Economic Development Has Lagged Badly in the Middle East and North Africa, Although it is Projected to Improve • The real GDP of the Middle East and North Africa “flat-lined” during 1979-1994, compared to East Asia, the developing world and the developed world. • The US and World Bank project improvements during the 1990s to 2015, but estimates differ sharply and the Middle East will not catch up with that of high growth regions like East Asia.
Copyright Anthony H. Cordesman, all rights reserved.
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A World Bank Overview of Recent and Projected Trends (Percent of Annual Growth) 9
8
7
6
5
4
3
2
1
0 GDP
Per Capita Consumption
-1
Adapted by Anthony H. Cordesman from MEED, May 24, 1996. p. 4.
Copyright Anthony H. Cordesman, all rights reserved.
Export Volume
Median Inflation
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The Middle East and North Africa Have A Steadily Declining Share of the Global Economy: The GNP of the Middle East Relative to World Total - 1979-1994 in $Current Billions)
30000 25000 20000 15000 10000 5000
World East Asia Developing
0 79 80 81 82 83 84 85 86 87 88 89
Middle East North Africa 90
91
92
93
94
Adapted by Anthony H. Cordesman form ACDA, World Military Expenditures and Arms Transfers, various editions. Middle East does not include North African states other than Egypt.
Copyright Anthony H. Cordesman, all rights reserved.
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The GNP Growth of the Middle East and North Africa Have Lagged Badly Relative to Other Developing Regions: 1972-1994 (GNP in $Current Billions)
9000 8000 7000 6000 5000 4000 3000 2000 1000 0 72
74
76
78
80
82
84
86
88
East Asia Developing Middle East North Africa 90
92
94
Adapted by Anthony H. Cordesman from ACDA, World Military Expenditures and Arms Transfers, various editions. Middle East does not include North African states other than Egypt. Copyright Anthony H. Cordesman, all rights reserved.
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The Middle Eastern Oil Boom After 1973 Did Not Cause the GDP Growth of MENA Region to Outpace Other Developing Areas Even During the 1970s and 1980s (GDP in $Current Billions)
1800 1600 1400 1200 1000 800 600
Europe & Central Asia Latin America & Caribbean East Asia
400 200
Middle East and North Africa
0
South Asia 70
80
88
89
90
91
Sub-Saharan Africa 92
93
94
95
Adapted by Anthony H. Cordesman from World Bank, World Debt Tables, 1995.
Copyright Anthony H. Cordesman, all rights reserved.
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OECD/IEA/IMF World Bank Derived Estimate Reveals the Same Pattern in Comparative GDP Growth for 1971-1993 (Economic Growth in Percent: Average Annual Percentage Change in GDP) China East Asia Other Developing South Asia OECD Pacific Latin America WORLD Africa Total OECD North America OECD Europe Middle East FSU FSU/EE Eastern Europe -4
-2
0
2
4
6
Adapted by Anthony H. Cordesman from OECD/IEA, World Energy Outlook, 1996, p. 234.
Copyright Anthony H. Cordesman, all rights reserved.
8
10
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The IMF Estimates Also Show This Pattern for 1979-1998 (Percent of Real Annual Change)
10 9 8 7 6 5 4 3 Asia
2
Latin America
1
Subsahara
0 7988
MENA 89
90
91
92
93
94
Middle East 95
96
97
98
Adapted by Anthony H. Cordesman from IMF, World Economic Outlook, May, 1997, pp. 135-137. The total for the Middle East and North Africa includes Turkey and Yemen, but excludes Algeria, Israel, Morocco & Tunisia.
Copyright Anthony H. Cordesman, all rights reserved.
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Trends in the Real Change in GDP by Country in North Africa: 1979-1996 (Percent of Real Annual Change)
12 10 8 6 4 2 0 Tunisia
-2
Morocco
-4
Libya
-6
Egypt
-8 79-88
89
90
91
92
Algeria 93
94
95
96
Adapted by Anthony H. Cordesman from IMF, World Economic Outlook, May, 1997, pp. 138-139.
Copyright Anthony H. Cordesman, all rights reserved.
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Trends in the Real Change in GDP: Egypt versus Algeria - 1979-1996 (Percent of Real Annual Change)
6 5 4 3 2 1 0 -1 -2 Egypt
-3 79-88
89
90
91
92
Algeria 93
94
95
96
Adapted by Anthony H. Cordesman from IMF, World Economic Outlook, May, 1997, pp. 138-139.
Copyright Anthony H. Cordesman, all rights reserved.
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Trends in the Real Change in GDP by Country in Levant: 1979-1996 (Percent of Real Annual Change)
40 30 20 10 0 -10 -20
Syria
-30
Lebanon Jordan
-40
Israel
-50 79-88
89
90
91
92
Egypt 93
94
95
96
Adapted by Anthony H. Cordesman from IMF, World Economic Outlook, May, 1997, pp. 138-139.
Copyright Anthony H. Cordesman, all rights reserved.
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Trends in the Real Change in GDP by Country in Levant: Israel vs. Jordan: 1979-1996 (Percent of Real Annual Change)
20 15 10 5 0 -5 -10 Jordan
-15 79-88
89
90
91
92
Israel 93
94
95
96
Adapted by Anthony H. Cordesman from IMF, World Economic Outlook, May, 1997, pp. 138-139. Copyright Anthony H. Cordesman, all rights reserved.
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Trends in the Real Change in GDP by Country in Levant: Syria versus Lebanon: 1979-1996 (Percent of Real Annual Change)
40 30 20 10 0 -10 -20 -30 -40 Syria
-50 79-88
89
90
91
92
Lebanon 93
94
95
96
Adapted by Anthony H. Cordesman from IMF, World Economic Outlook, May, 1997, pp. 138-139. Copyright Anthony H. Cordesman, all rights reserved.
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Trends in the Real Change in GDP by Country in the Gulf: 1979-1996 (Percent of Real Annual Change)
80 60 40 20 0
UAE Saudi
-20
Qatar Oman
-40
Kuwait -60
Iraq Iran
-80 7988
89
90
91
92
Bahrain 93
94
95
96
Adapted by Anthony H. Cordesman from IMF, World Economic Outlook, May, 1997, pp. 138-139.
Copyright Anthony H. Cordesman, all rights reserved.
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Trends in the Real Change in GDP by Country in the Northern Gulf: 19791996 (Percent of Real Annual Change)
20 10 0 -10 -20 -30 -40 -50 -60 Iraq
-70 79-88
89
90
91
92
Iran 93
94
95
96
Adapted by Anthony H. Cordesman from IMF, World Economic Outlook, May, 1997, pp. 138-139. No estimate is possible for Iraq after 1992. Iranian growth through 1992 consists largely of post-war recovery, financed through
Copyright Anthony H. Cordesman, all rights reserved.
Stability and Instability in the Middle East - Volume I
foreign debt/
Copyright Anthony H. Cordesman, all rights reserved.
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Trends in the Real Change in GDP for Iran: 1979-1996 (Percent of Real Annual Change)
12 10 8 6 4 2 0 -2 79-88
89
90
91
92
Iran 93
94
95
96
Adapted by Anthony H. Cordesman from IMF, World Economic Outlook, May, 1997, pp. 138-139. Iranian growth through 1992 consists largely of post-war recovery, financed through foreign debt/
Copyright Anthony H. Cordesman, all rights reserved.
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Trends in the Real Change in GDP in the Southern Gulf: 1979-1996 (Percent of Real Annual Change)
80 60 40 20 0
UAE Saudi Arabia
-20
Qatar -40
Oman Kuwait
-60 79-88
89
90
91
92
Bahrain 93
94
95
96
Adapted by Anthony H. Cordesman from IMF, World Economic Outlook, May, 1997, pp. 138-139. Adapted by Anthony H. Cordesman from IMF, World Economic Outlook, May, 1997, pp. 138-139. Note: Virtually all of shift is driven by oil export revenues. Copyright Anthony H. Cordesman, all rights reserved.
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Trends in the Real Change in GDP in the Southern Gulf Less the Wartime Impact on Kuwait: 1979-1996 (Percent of Real Annual Change)
20 15 10 5 0 UAE
-5
Oman -10
Saudi Arabia Bahrain
-15 79-88
89
90
91
92
Qatar 93
94
95
96
Adapted by Anthony H. Cordesman from IMF, World Economic Outlook, May, 1997, pp. 138-139. Note: Virtually all of shift is driven by oil export revenues. Copyright Anthony H. Cordesman, all rights reserved.
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Trends in the Real Change in GDP in Saudi Arabia: 1979-1996 (Percent of Real Annual Change)
10 8 6 4 2 0 -2 79-88
89
90
91
92
Saudi Arabia 93
94
95
96
Adapted by Anthony H. Cordesman from IMF, World Economic Outlook, May, 1997, pp. 138-139. Note: Virtually all of shift is driven by oil export revenues.
Copyright Anthony H. Cordesman, all rights reserved.
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Middle Eastern Economic Growth Lags Population Growth: 1984-1994 600
500
400 Population in 1,000s
Gross National Product in $US 1994 Billions 300
200
100
0 84
85
86
87
88
89
90
91
92
93
94
Adapted by Anthony H. Cordesman form ACDA, World Military Expenditures and Arms Transfers, various editions. Middle East does not include North African states other than Egypt.
Copyright Anthony H. Cordesman, all rights reserved.
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Recent World Bank Projections Indicate that MENA Regional Growth has Improved Since 1990, But Still Lagged Sharply in Global Terms: (World Bank Estimate of Average Annual Percentage Change in GDP) 12
1980-1990
10
1990-1995
8
6
4
2
0 East Asia
-2
South Asia
SubSaharan Africa
Latin America
Middle East and North Africa
Europe & Central Asia
-4
-6
-8
Adapted by Anthony H. Cordesman from World Bank, World Development Indicators, 1997, p. 133.
Copyright Anthony H. Cordesman, all rights reserved.
US
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World Bank Projections Indicate that Future Regional Growth Will Lag Sharply Relative to High Growth Regions (World Bank Estimate of World Economic Growth in Percent: Annual Percentage Change in GDP) 10
1981-1990
9
1991-1994
1995
1996-2005
8
7
6
5
4
3
2
1
0 OECD
East Asia
South Asia
SubSaharan Africa
Latin America
Adapted by Anthony H. Cordesman from Washington Post, December 29, 1996, p. A-27.
Copyright Anthony H. Cordesman, all rights reserved.
Middle East and North Africa
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The Numbers Behind the World Bank Projections: Middle Eastern Growth Is Improving, But Lags Behind in Global Terms: (World Bank Estimate of World Economic Growth in Percent: Annual Percentage Change in Real GDP) Region
66-73
74-80
81-90
91-94
1995
Forecasts 96-2000 3.1
3.5
World Total High Income Countries OECD Countries
5.1
3.4
3.1
1.5
96-97 2.8
4.8 4.7
3.0 2.9
3.2 3.1
1.7 1.6
2.5 2.4
2.6 2.6
2.9 2.8
Developing Countries East Asia South Asia Sub-Saharan Africa Latin America and Caribbean Europe and Central Asia Middle East and North Africa
6.9 7.9 3.7 4.7
5.3 7.1 4.0 3.5
3.0 7.9 5.7 1.7
1.0 9.4 3.9 0.7
3.9 9.2 5.5 3.8
4.8 8.2 4.4 3.7
5.3 7.9 5.4 3.8
6.4
4.8
1.7
3.6
0.9
2.6
3.8
6.9
6.1
2.1
-9.0
-0.7
3.0
4.3
8.6
4.9
0.8
2.4
2.5
3.2
2.9
Eastern Europe and Former Soviet Union
7.0
5.1
1.8
-9.4
-2.5
2.9
4.4
Developing Countries Excluding FSU & East Europe
6.2
5.0
3.4
5.0
4.9
5.1
5.4
Note: GDP is measure in market prices and expressed in 1987 prices and exchange rates. Growth rates over historical intervals are computed using least squares regression. Source: Adapted by Anthony H. Cordesman from World Bank, Global Economic Prospects and the Developing Countries, 1996, p. 6, based on OECD national accounts and World Bank estimates.
Copyright Anthony H. Cordesman, all rights reserved.
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OECD/IEA/IMF/World Bank GDP Growth Estimate Indicates the Middle East will Lag During 1993-2010 (Economic Growth in Percent: Average Annual Percentage Change in GDP, assumes high oil prices)
China
East Asia
South Asia
Other Developing
Africa
High Growth
Latin America
Base
Low Growth
Middle East
0
1
2
3
4
5
6
7
Adapted by Anthony H. Cordesman from OECD/IEA, World Energy Outlook, 1996, p. 234.
Copyright Anthony H. Cordesman, all rights reserved.
8
9
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More Detailed US Projections Also Indicate that Middle Eastern Growth Is Improving, But Will Lag Behind in Global Terms: (US Estimate of World Economic Growth in Percent: Annual Percentage Change in Real GDP) Region
1970-1980
1980-1990
1990-2000
2000-2015
1993-2015
OECD North America Europe Pacific
3.2 3.0 3.0 4.3
2.8 2.6 2.6 4.0
2.2 2.1 2.1 2.6
2.5 2.3 2.6 2.7
2.5 2.3 2.6 2.8
Non-OECD
4.4
2.8
2.0
4.7
4.3
EE/FSU FSU EE
3.2 3.2 3.5
2.1 2.1 1.8
-4.0 -4.4 -1.1
3.8 3.7 4.2
2.8 2.6 3.9
Non-OECD Asia China Other Asia
6.3 5.8 6.4
6.9 8.9 6.3
6.4 9.2 5.3
6.0 7.6 5.2
6.0 7.7 5.2
Middle East
4.8
1.5
3.3
3.4
3.4
Africa
4.2
1.4
2.3
3.5
3.2
Central & South America
5.8
1.1
3.9
3.8
3.7
3.5
2.8
2.2
3.1
3.0
Total World
WEFA Group, World Economic Outlook and DOE/EIA, International Energy Forecast, 1996
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The “Uncertainty Factor”: Different Estimates of Future Growth for the MENA and Middle East (Percent of Growth in GDP)
DOE/IEA 97
1995-2015
World Bank MENA-97
1993-2010
IEA Low Exports
2000-2015
IEA Max Exports
2001-2010
OECD Non-Oil Low
1993-2000
OECD Non-Oil Base
1990-2000
OECD Non-Oil High
1996-2000
World Bank MENA-96
1996-1997 1995 1991-1994 1981-1990 1974-1980 1980-1980 1996-1973
-10
-8
-6
-4
-2
0
2
4
6
8
10
Adapted by Anthony H. Cordesman from World Bank, World Development Indicators, 1997, p. 132. IEA, World Energy Outlook, 1996, pp. 168-169; World Bank, Global Rconomic Prospects and the Developing Countries, 1996, p. 6. Estimates differ sharply in methodology and definition.
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Recent Trends Are Also Far More Pessimistic. Oil Quotas Were Set Far Too High in Late 1997, the Asia Economy Dropped, and Seasonal Demand Was Low (Oil Exports in Millions of Barrels a Day)
1.456 1.35
Indonesia
2.042 2.29
Nigeria
11/97 Quota
2.583
Venezuela
3.31 0.87 0.909
Algeria
1/98 Production
3.942 3.65
Iran
1.314
Iraq
1.4 2.1 2.19
Kuwait
1.522 1.46
Libya
0.414 0.7
Qatar
8.7 8.761
Saudi Arabia
2.366 2.32
UAE
0
1
2
3
Copyright Anthony H. Cordesman, all rights reserved.
4
5
6
7
8
9
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Adapted by Anthony H. Cordesman from Middle East Economic Digest, March 6,1998, p. 4.
Copyright Anthony H. Cordesman, all rights reserved.
Page 38
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And, Oil Wealth is Projected to Drop Sharply in 1998 (Oil exports in $US millions)
2000 2000 1650
Algeria
Bahrain
1996 1340 877 700
Egypt
1997
18230 17100 13000
Iran
Iraq
1998 13700 13000 10500
Kuwait
9000 8300 6100
Libya
5925 5780 4230
Oman
3100 3500 3000
Qatar
Saudi Arabia
50200 51250
40000
Sudan 2500 2300 1800
Syria
14600 13500 10000
UAE 620 590 440
Yemen 0
10000
20000
30000
40000
50000
Estimate for 1998 assumes average price of $24 for Brent and $12.50 for Arab light. Adapted by Anthony H. Cordesman from Middle East Economic Digest, April 3, 1998, p. 2.
Copyright Anthony H. Cordesman, all rights reserved.
60000
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The Comparative GNP AND GDP of MENA Countries Has Grown in Very Different Ways: 1980-1990 versus 1990-1995 (Percent of Growth in GNP and GDP in $US Calculated Using the World Bank Method)
High Income Nations East Asia Algeria
5% level is generally the minimum needed to both raise living standards and off-set population growth
Bahrain Egypt Iran Iraq Israel Jordan Kuwait Lebanon Libya Mauritania Morocco Oman Gaza & West Bank Qatar Saudi Arabia
1980-1990
Somalia Sudan Syria Turkey
1990-1995
Tunisia UAE Yemen -10
-5
0
5
10
15
Adapted by Anthony H. Cordesman from World Bank, World Development Indicators, 1997, Section 1.1, and CIA on-line edition of the World Factbook, 1996, accessed April 1996.
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IMF Estimates of GDP Growth for 1995-1997 by Country versus Population Growth (Percent of Growth in GDP in Current $US Calculated Using the IMF Method)
Developing World
Algeria
Egypt
Iran
Jordan
Kuwait
Morocco
Pakistan Population Growth in 1980-1995
Saudi Arabia
1997 Sudan 1996 Tunisia 1995 Turkey -10
-5
0
5
10
15
Adapted by Anthony H. Cordesman from IMF and Middle East Economic Digest, May 16, 1997, p. 3, and September 12, 1997, p. 2
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Increases in Real Per Capita Income Lag Badly Behind Absolute Growth • The Middle East and North Africa lagged the entire world during 1980-1991. • Real per capita income declined by well over 25% during the 1980s. • The situation has improved since 1991, but there is still very little real growth. • Many of the oil exporting states still have a real per capita income less than 50% of their peak annual level during the oil boom of the early 1980s.
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Middle Eastern Population Growth, Low Oil Prices, and Low Overall Exports Combined to Limit Personal Wealth: (Population, and Per Capita Income Relative to 1984 from 1984 to 19941984=100, and all following years are percentages of 1984 as base year. All expenditure totals are measured in constant 1984 US dollars.) 140
120
100
80
60 Population
Gross National Product
40
Per Capita Income 20
0 84
85
86
87
88
89
90
91
92
93
94
Adapted by Anthony H. Cordesman form ACDA, World Military Expenditures and Arms Transfers, various editions. Middle East does not include North African states other than Egypt.
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Middle Eastern and North African Oil Revenues by Country: 1996-1998: The Impact of Oil Prices on Revenues (in US $Current Billions)
Qatar
Algeria
Libya
Kuwait
UAE
Iran
Saudi Arabia
0
5
10
15
20 UAE
25
Saudi Arabia
Iran
Kuwait
1998
29.2
12.8
9.5
1997
42.9
16.3
13.5
1996
45.7
18.7
14.5
13.5
30
35
40
Libya
Algeria
Qatar
9.1
7.1
5.7
3.4
12.4
10.2
7.5
4.3
11.1
7.9
3.3
Source: Adapted by Anthony H. Cordesman from projections by the Petroleum Finance Corporation.
Copyright Anthony H. Cordesman, all rights reserved.
45
50
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North African Economic Growth Also Lagged Population Growth: 1984-1994 120
100
80
60
40
Population in 1,000s
Gross National Product in $US 1994 Billions
20
0 84
85
86
87
88
89
90
91
92
93
94
Adapted by Anthony H. Cordesman form ACDA, World Military Expenditures and Arms Transfers, 1995, various editions. Middle East does not include North African states other than Egypt.
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And, North African Population Growth, Low Oil Prices, and Low Overall Exports Also Combined to Limit Personal Wealth: (Population, and Per Capita Income Relative to 1984 from 1984 to 19941984=100, and all following years are percentages of 1984 as base year. All expenditure totals are measured in constant 1984 US dollars.) 140
120
100
80
Population
60
Gross National Product
40
Per Capita Income
20
0 84
85
86
87
88
89
90
91
92
93
94
Adapted by Anthony H. Cordesman form ACDA, World Military Expenditures and Arms Transfers, 1995, various editions. Middle East does not include North African states other than Egypt.
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Negative Development During the 1980s: Average Annual Change in Real Per Capita GDP: 1980-1991 (Change in Average Percent of Growth or Decline)
6 East Asia 5 South Asia
4
3
Europe and Central Asia
Latin America and Carribean
Africa 2
1
Middle East and North Africa
0
-1
-2
-3
Source: Adapted by Anthony H. Cordesman from World Bank, Claiming the Future, p. 15
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The Growth of Personal Wealth Still Lagged During the Early and Mid 1990s: (Average Annual Change in Real Per Capita GDP: 1991-1995)
8
East Asia South Asia
6
Europe and Central Asia Latin America and Carribean Sub-Saharan Africa
4
Middle East and North Africa High Income Countries
2
0
-2
-4
-6
-8
Source: Adapted by Anthony H. Cordesman from World Bank, Global Economic Prospects and the Developing Countries, 1996, p. 3.
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Growth In Per Income Was Negligible Even if Iraq is Excluded (Average Annual Change in Real Per Capita GDP)
2
MENA with Iraq
1.5
MENA Less Iraq
1
0.5
0 1974-1980
1981-1990
-0.5
-1
-1.5
-2
-2.5
Source: Adapted by Anthony H. Cordesman from data provided by the World Bank
Copyright Anthony H. Cordesman, all rights reserved.
1991-1995
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Things Have Gotten Better in the Last Few Years: Recent Trends by Region and Key Country: 1994-1996 - Part One (Change in Average Percent of Growth or Decline in Per Capita Income in Constant Dollars)
1996
Bahrain
1995 Egypt
1994 1990-1995
Iran Iraq Israel Jordan Kuwait Morocco Oman Saudi Arabia Syria Turkey Tunisia Yemen Middle East -10
-5
Copyright Anthony H. Cordesman, all rights reserved.
0
5
10
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Things Have Gotten Better in the Last Few Years: Recent Trends by Region and Key Country: 1994-1996 - Part Two (Change in Average Percent of Growth or Decline in Per Capita Income in Constant Dollars) 1990-1995
1994
1995
1996
Bahrain
2.4
-
-
-
Egypt
1.4
2.7
3.2
4.8
Iran
1.4
1.8
3
3.5
-9
-
-
-
Israel
-
6.5
6.9
5.7
Jordan
2.4
5.9
6.4
6.5
Kuwait
-
1.1
-0.3
-2.4
Morocco
-0.8
-
-
-
Oman
-0.2
-
-
-
Saudi Arabia
-1.4
-0.1
-0.8
-0.1
Syria
4.2
-
-
-
Turkey
-
-4.7
7.4
3
Tunisia
1.9
-
-
-
Yemen
-4.8
-
-
-
-
0.7
3.7
3.1
Iraq
Middle East
Source: Adapted by Anthony H. Cordesman from World Bank for 1990-1995, and from IMF, World Economic Outlook, May, 1996, p. 24 for 1994, 1995, and 1996.
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Trends in the Annual Change in Real Per Capita GDP by Region: MENA vs. The World: 1979-1998 (Percent of Real Annual Change)
8
6 4 2 0 Asia
-2
Latin America -4 7988
Africa 89
90
91
92
93
94
Middle East 95
96
97
98
Adapted by Anthony H. Cordesman from IMF, World Economic Outlook, May, 1997, pp. 135-137. The total for the Middle East and North Africa includes Turkey and Yemen, but excludes Algeria, Israel, Morocco & Tunisia. Copyright Anthony H. Cordesman, all rights reserved.
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The Record for Individual MENA Countries Over the Last Quarter Century Is Poor and the Oil States Are Not “Winners” (Percentage of Average Annual Growth in GNP Per Capita)
Indonesia South Korea Hong Kong China US Algeria Bahrain Egypt Iran Iraq Israel Jordan Kuwait Lebanon Libya Mauritania Morocco Oman Gaza & West Bank Qatar Saudi Arabia Somalia Sudan Syria Turkey Tunisia UAE Yemen -6
-4
-2
0
2
4
6
8
10
Adapted by Anthony H. Cordesman from World Bank, World Development Indicators, 1997, Section 1.3.
Copyright Anthony H. Cordesman, all rights reserved.
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The Comparative Per Capita Income of MENA Countries Is Very Different and Estimates Differ Sharply By Source (Current $US in 1995, Calculated Using the World Bank and CIA Methods)
Algeria Bahrain Egypt Iran Iraq Israel Jordan Kuwait Lebanon Libya Mauritania Morocco Oman Gaza & West Bank Qatar Saudi Arabia Somalia Sudan Syria Turkey Tunisia UAE Yemen 0
5000
10000
15000
20000
25000
Adapted by Anthony H. Cordesman from World Bank, World Development Indicators, 1997, Section 1.1, and CIA on-line edition of the World Factbook, 1996, accessed April 1996.
Copyright Anthony H. Cordesman, all rights reserved.
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Current Oil Revenue Trends are Not Promising: The Impact of Oil Prices on Revenues (in US $Current Billions) 50
45
40
35
30
25
20
15
10
5
0
Saudi Arabia
Iran
UAE
Kuwait
Libya
Algeria
Qatar
1996
45.7
18.7
14.5
13.5
11.1
7.9
3.3
1997
42.9
16.3
13.5
12.4
10.2
7.5
4.3
1998
29.2
12.8
9.5
9.1
7.1
5.7
3.4
Source: Adapted by Anthony H. Cordesman from projections by the Petroleum Finance Corporation.
Copyright Anthony H. Cordesman, all rights reserved.
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Future GDP Growth May Be Offset by Population Growth to Reduce. Growth in Per Capita Income (Percent of Growth in GDP)
IEA Per Capita Income
Low High Exports
1993-2010
IEA Low Oil Exports GDP IEA High Oil Exports GDP OECD Non-Oil GDP Low OECD Non-Oil GDP Base OECD Non-Oil GDP High IEA Per Capita Income
Low Exports PCI High Exports PCI OECD Urban Population Growth OECD Total Population Growth 2001-2010
IEA Low Oil Exports GDP IEA High Oil Exports GDP OECD Non-Oil GDP Low OECD Non-Oil GDP Base OECD Non-Oil GDP High IEA Per Capita Income * OECD Urban Population Growth OECD Total Pop. Growth
1993-2000
IEA Low Oil Exports GDP IEA Max Oil Exports GDP OECD Non-Oil GDP Low OECD Non-Oil GDP Base OECD Non-Oil GDP High 0
1
2
3
4
5
* For High Exports. Figure for Capacity Constrained Exports is Zero. Adapted by Anthony H. Cordesman from IEA, World Energy Outlook, 1996, pp. 168-170.
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Middle East Growth is Acceptable in Absolute Terms but Stagnant in Human Terms • Real economic growth has been acceptable during early 1990s (198981994): • MENA GDP has risen by annual average rate of 3.2%. • Africa is up 1.6% • Latin America is up 2.9% • Asia is up 7.5% • However, population growth, low oil prices, and conflict have meant that Middle East continues to lag in the growth of real per capita income: • No growth for MENA region • Developing countries as a whole average 3% • Developed countries average 1.3% • Algeria, Djibouti, Iran, Iraq, Kuwait, Saudi Arabia, Somalia, Sudan, and Yemen have been heavily impact by war. • Low oil prices, debt, deficit spending, and welfare costs have impact all oil producers - Real per capita incomes are 50% of oil boom level. • Israel, Jordan, Mauritania, Morocco, and Tunisia have made some progress because of structural economic reform. Source: Adapted by Anthony H. Cordesman from Mohamed A El Erian, Sena Eken, Susan Fennell and Jean-Pierre Chauffour, “Growth and Stability in the Middle East and North Africa,” Washington, IMF, March, 1996
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The Middle East has Failed to Compete in Attracting Investment • Investment is very low as a percent of GDP. • Foreign direct investment has not been encouraged and has largely “flatlined.” • Private Capital has also gone to other regions. • The rapid growth of MENA stock markets disguises the fact they are very small relative to other developing regions. • Portfolio performance is also poor. • The region is failing to draw on investment to finance the maintenance and improvement of its infrastructure. • Risk assessment is mixed and often negative. • But, MENA countries with economic reform and investment opportunities do attract equity investment.
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The Positive Trend in Foreign Direct Investment in the Middle East Reversed After the Oil Boom Years (Foreign Direct Investment Flows as a Percent of GDP )
1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 1982-92
0 East Asia Latin America &
1973-82 Middle East and North
High Income Countries
Source: Adapted by Anthony H. Cordesman from World Bank, Global Economic Prospects and the Developing Countries, 1996, p. 22 Copyright Anthony H. Cordesman, all rights reserved.
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Weak Foreign Investment Flows Continued During the 1990s: Foreign Direct Investment Inflows as a Share of GDP: 1993-1995 (Change in Average Percent of Growth or Decline)
3.5
East Asia South Asia Europe and Central Asia
3
Latin America and Carribean Sub-Saharan Africa
2.5
Middle East and North Africa High Income Countries
2
1.5
1
0.5
0
Source: Adapted by Anthony H. Cordesman from World Bank, Global Economic Prospects and the Developing Countries, 1996, p. 3
Copyright Anthony H. Cordesman, all rights reserved.
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The Trend in Total Foreign Direct Investment in the MENA “Flat Lined” During 1990-1996 ($US billions)
120 100 80 60
All Developing East Asia
40
Latin America and Carribean 20
Europe and Central Asia South Asia
0
Middle East and North Africa
-20 1990 1991
Sub-Saharan Africa 1992 1993
1994
1995
1996
Source: Adapted by Anthony H. Cordesman from World Bank, World Debt Tables, 1996, p. 17, and Global Copyright Anthony H. Cordesman, all rights reserved.
Stability and Instability in the Middle East - Volume I
Development Performance, 1997, p. 29.
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MENA Foreign Direct Investment Remained Very Low as Share of Total Developing World: 1990-1996 ($US billions)
70 60 50 40 30
East Asia Latin America and Carribean
20
Europe and Central Asia
10
South Asia
0
Middle East and North Africa
-10 1990
1991
1992
Sub-Saharan Africa 1993
1994
1995
1996
Source: Adapted by Anthony H. Cordesman from World Bank, World Debt Tables, 1996, p. 17, and Global Development Performance, 1997, p. 29.
Copyright Anthony H. Cordesman, all rights reserved.
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Comparative Total Foreign Investment: 1990 Versus 1995 (Percent of Growth or Decline)
70 Southeast and South Asia
60
50
Europe and Central Asia
Latin America and Carribean
Middle East and North Africa 40
30
20
10
0 1990
Source: Adapted by Anthony H. Cordesman from World Bank.
Copyright Anthony H. Cordesman, all rights reserved.
1995
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Egyptian Reform Versus Malaysian Progress: Comparative Foreign Investment in 1996 ($US millions)
6000
Egypt Comparative Population Comparative Per Capita Income
57,800,000
Malaysia 20,100,000
$790
$3,890
5000
4000
3000
2000
1000
0 Egypt
Malaysia
Source: Adapted by Anthony H. Cordesman from World Bank and from World Bank Atala, 1997, pp. 16-17 36-37.
Copyright Anthony H. Cordesman, all rights reserved.
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The Rate of Private Capital Transfers Lagged That of Other Regions When Measured as a Share of GDP: 1993-1995 (Change in Average Percent of Growth or Decline)
2.5
East Asia
South Asia 2 Europe and Central Asia
Latin America and Carribean
1.5
Sub-Saharan Africa
Middle East and North Africa
High Income Countries
1
0.5
0
Source: Adapted by Anthony H. Cordesman from World Bank, Global Economic Prospects and the Developing Countries, 1996, p. 3
Copyright Anthony H. Cordesman, all rights reserved.
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Middle Eastern Foreign Investment Bank Holdings Have Been Sharply Reduced Because of Past Debt and Heavy National Spending (Middle Eastern Net Bank Assets and Liabilities Outside the Middle East)
160,000
140,000
Q11996 Q21996
120,000
100,000
80,000
60,000
40,000
20,000
0 Algeria
Egypt
Iran
Kuwait
Saudi Arabia
-20,000
Source: Adapted by Anthony H. Cordesman from Economist, December 21, 1996, p. 54.
Copyright Anthony H. Cordesman, all rights reserved.
Total Middle East
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But, the Arab World Has Considerable Private Wealth of Its Own: $1,568 Billion is Held by 200,000 People ($Current Billions)
1600
1400
1200
1000
800
600
400
200
0 Saudi Arabia
Individuals holding wealth
78,000
UAE
Kuwait
Rest of GCC
GCC Total
59,000
36,000
12,000
185,000
Rest of Arab Gulf
Mahgreb, Egypt, & Levant
15,000
-
Total Arab World
-
Note: Total region does not include Lebanon and Mahgreb. Merrill Lynch estimates private wealth in these countries at $800 billion. Total world private wealth estimated at 16,700 billion. As a result, Saudi Arabia has 2.5% of world total, GCC has 4.2 % of total, Arab world less Mahgreb has 4.6% of total, and Arab world with Mahgreb has 3.4% of total. Adapted by Anthony H. Cordesman from Merrill Lynch, Gemeni, and Middle East Economic Digest, February 14, 1997, p. 9.
Copyright Anthony H. Cordesman, all rights reserved.
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And, Stock Markets Are Growing Where The Private Sector is Allowed to Operate Effectively ($US Millions as of December 31, 1997)
Algeria 480
Bahrain
7571 7124
Egypt 702
Iran
20845
8943
Iraq 13845
Israel 499
Jordan
35493
4966
Kuwait
29600
34957
636 3511
Lebanon Libya Mauritania
Turnover
1412
Morocco
12039
4195
Oman
Captialization
8736
50 400
Gaza & West Bank
111 2589
Qatar
16549
Saudi Arabia
58838
Somalia Sudan Syria Turkey Tunisia
250 2637
UAE
2500
21286
Yemen 0
10000
20000
30000
40000
50000
Adapted by Anthony H. Cordesman from Middle East Economic Digest, February 13, 1998, p. 10.
Copyright Anthony H. Cordesman, all rights reserved.
60000
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Nevertheless, the MENA Region Has Not Competed in Attracting Private Capital (Accumulated Net Private Resource Inflows: 1985-1993 in $US Billions)
250
East Asia South Asia Europe and Central Asia Latin America and Carribean
200
Sub-Saharan Africa Middle East and North Africa
150
100
50
0
Source: Adapted by Anthony H. Cordesman from World Bank, Global Economic Prospects and the Developing Countries, 1996, p. 16
Copyright Anthony H. Cordesman, all rights reserved.
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While MENA Total Market Capitalization is Rising Very Rapidly, But It Lags Badly in Terms of Total Value (Accumulated World Stock Market Capitalization in $US Billions)
600 East Asia South Asia Europe and Central Asia 500
Latin America and Carribean Sub-Saharan Africa Middle East and North Africa
400
300
200
100
0 1980
1995
Source: Adapted by Anthony H. Cordesman from World Bank, World Development Indicators, 1997, p. 242.
Copyright Anthony H. Cordesman, all rights reserved.
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MENA Gross International Portfolio Flows (Equity & Debt) Are Small and Lag Badly Behind the Performance of High Growth Developing Countries: 1990-1996 ($US billions: Includes gross capital raised through international bonds, certificates of deposit, and commercial paper, plus gross funds raised through international equity issues and net foreign investments in local equity markets)
70 60 50 40 Latin America 30 20 10 0
East Asia Europe and Central Asia South Asia Sub-Saharan Africa Middle East and North Africa
Source: Adapted by Anthony H. Cordesman from World Bank, Global Development Finance, 1997, p. 99. Copyright Anthony H. Cordesman, all rights reserved.
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MENA Portfolio Equity Flows (Emerging Market and Private Capital Flows) Are Small and Lag Badly Behind the Performance of High Growth Developing Countries: 1990-1995 ($US millions)
30000 25000 20000 15000
Latin America East Asia
10000
South Asia Europe and Central Asia
5000
Middle East and North Africa
0 1989
1990
1991
Sub-Saharan Africa 1992
1993
1994
1995
Source: Adapted by Anthony H. Cordesman from World Bank, World Debt Tables, 1996, p. 103. Copyright Anthony H. Cordesman, all rights reserved.
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The MENA Area Also Lags in Private International Financing of Infrastructure ($US billions, including loans, bonds, and equity from international capital markets)
20000 18000 16000 14000 12000 10000 8000
East Asia Latin America
6000 4000
Europe/Central Asia
2000
South Asia
0 1986
Middle East/North Africa 1988
1990
Sub-Saharan Africa 1992
1994
Source: Adapted by Anthony H. Cordesman from World Bank, Global Development Finance, 1997, p. 22.
Copyright Anthony H. Cordesman, all rights reserved.
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Most Individual MENA Countries Have Low Investment Rates, with No Pattern of Recent Increases (Investment as percentage of GDP, with GDP measured in constant 1992 prices)
Bahrain Kuwait Oman Qatar Saudi Arabia UAE GCC Egypt Jordan Lebanon Syria Yemen Non-GCC 0
10
20 Desirable Investment Rate
30
40
50
High Investment Rate
Adapted by Anthony H. Cordesman from Economic and Social Commission for West Asia, and Middle East
Copyright Anthony H. Cordesman, all rights reserved.
Stability and Instability in the Middle East - Volume I
Economic Digest, February 14, 1997, p. 3.
Copyright Anthony H. Cordesman, all rights reserved.
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Many Middle Eastern Countries are Assessed as High Investment Risks: Estimates of Investment Risk in the Middle East Country
COFACE Political Risk Estimate Short-Term Medium-Term
Moody & S&P Sovereign Ratings Moody LongS&P Long-Term Term Foreign Foreign Currency Currency Bonds and Notes
Algeria
low
very high
-
-
Bahrain
low
good
Ba1
-
Egypt
low
moderately high
Ba2
BBB-
Iran
moderate
very high
-
-
Jordan
low
high
B1
BB-
Kuwait
low
quite good
Baa1
-
Lebanon
low
moderately high
-
-
Libya
moderate
high
-
-
Morocco
low
moderately high
-
-
Oman
low
quite good
Baa2
BBB-
Qatar
low
quite good
Baa2
BBB
Saudi Arabia
low
quite good
Baa3
-
Syria
moderate
quite high
-
-
Tunisia
low
quite good
Baa3
-
Turkey
low
moderately high
-
-
UAE
low
good
Baa1
-
Yemen
low
very high
-
-
COFACE = France’s Export Credit Agency Investment grade for Moody’s is Baa3 and above; BBB- and above for S&P Source: COFACE, Moody’s Investor service, Standard and Poor’s, and Middle East Economic Digest, February 14, 1997, p. 2 and February 21, 1997, p. 4.
Copyright Anthony H. Cordesman, all rights reserved.
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Some Middle Eastern Countries Are, However, Beginning International Equity Issues: 1993-1996 ($US millions)
450 Algeria Bahrain 400 Egypt Jordan 350 Lebanon Morocco 300
Oman Tunisia
250
200
150
100
50
0 1993
1994
1995
1996
Source: Adapted by Anthony H. Cordesman from World Bank, Global Development Finance, 1997, p. 114.
Copyright Anthony H. Cordesman, all rights reserved.
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They Are Also Moving Into International Bonds: 1993-1996 ($US millions)
600
500 Tunisia 400
Lebanon Morocco
300
Bahrain Jordan
200 Algeria 100
Egypt
0 1993
Oman 1994
1995
1996
Source: Adapted by Anthony H. Cordesman from World Bank, Global Development Finance, 1997, p. 112.
Copyright Anthony H. Cordesman, all rights reserved.
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Debt Performance is Mixed • Total debt has risen, but has been controlled. • At the same time, the control of public debt has often come at the expense of polices that discourage investment in the MENA region. • Several countries also have serious debt problems.
Copyright Anthony H. Cordesman, all rights reserved.
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The Debt Burden Trends in the Middle East Are Relatively Static: 1980-1995 160
140
120
100 Ratio of Total External Debt Relative to Exports of Goods and Services Ratio of Total External Debt to Gross National Product
80
Ratio of Total Interest Payments Relative to Exports of Goods and Services 60
40
20
0 80
88
89
90
91
92
Adapted by Anthony H. Cordesman from World Bank, World Debt Tables, 1995.
Copyright Anthony H. Cordesman, all rights reserved.
93
94
95
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Total MENA Debt Has Risen Since 1990, but the Cost of Principal Repayments Has Gone Down: 1970-1996 (In $Current Billions) 180 Total Outstanding Debt 160
Principal Repayments 140
120
100
80
60
40
20
0 1970
1980
1990
1995
1996
Adapted by Anthony H. Cordesman from World Bank, Global Development Performance, 1997, p. 199.
Copyright Anthony H. Cordesman, all rights reserved.
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However, Middle Eastern Debt Performance By Country is Mixed Country
Relative Wealth
Debt Status
Algeria
middle income
severely indebted
Bahrain
middle income
less indebted
Egypt
low income
moderately indebted
Iran
middle income
severely indebted
Iraq
middle income
severely indebted
Jordan
middle income
severely indebted
Kuwait
---
---
Lebanon
middle income
less indebted
Libya
middle income
less indebted
Morocco
middle income
moderately indebted
Oman
middle income
less indebted
Qatar
---
---
Saudi Arabia
middle income
less indebted
Sudan
low income
severely indebted
Syria
middle income
severely indebted
Tunisia
middle income
moderately indebted
Turkey
middle income
moderately indebted
UAE
---
---
Yemen
low income
severely indebted
Note: Low income = $725 annually or less; lower-middle = $725-2,895; upper middle = $2,896-8,955. Kuwait, Qatar, and the UAE are high income countries with $8,956 or more. The ranking for indebtedness is determined by the present value of debt services relative to exports of goods and services or relative to GNP. Source: World Bank, World Debt Tables, 1995, pp. 43-44.
Copyright Anthony H. Cordesman, all rights reserved.
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The Middle East has Failed to Compete in Terms of Productivity • The Middle East was the only region in the world to exhibit a net drop in productivity from 1960-1990. • Middle East productivity dropped by around 6%, East Asian productivity rose by 54%. • The situation has improved in the last decade, but the Middle East still have only about 20% of the growth of East Asia and lags far behind South Asia.
Copyright Anthony H. Cordesman, all rights reserved.
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Productivity Dropped While Rising in Other Regions: Average Annual Change in Total Factor Productivity: 1960-1990 1.8
East Asia 1.6
1.4
OECD
1.2 Latin America 1
0.8
Middle East and North Africa
0.6
0.4
0.2
0
-0.2
Source: Adapted by Anthony H. Cordesman from World Bank, Claiming the Future, p. 15
Copyright Anthony H. Cordesman, all rights reserved.
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The Middle East Lagged in Regional Output Growth During 1985-1993 (Average Annual Increase in Percent)
8
6
East Asia South Asia Developing Europe and Central Asia Latin America and Carribean
4
Sub-Saharan Africa Middle East and North Africa
2
0
-2
-4
Source: Adapted by Anthony H. Cordesman from World Bank, Global Economic Prospects and the Developing Countries, 1996, p. 16
Copyright Anthony H. Cordesman, all rights reserved.
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The Middle East Has Lagged in Value Added to Manufacturing (Value in $US billions of sum of gross output, less the value of intermediate goods consumed in production)
350
300 1980
1994
250
200
150
100
50
0 East Asia
South Asia
Developing Europe and Central Asia
Latin America and Carribean
Sub-Saharan Africa
Middle East and North Africa
Source: Adapted by Anthony H. Cordesman from World Bank, World Development Indicators, 1997, p. 152
Copyright Anthony H. Cordesman, all rights reserved.
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Relative Percentage Increase in Value Added to Manufacturing: 1980-1994 (Percentage Increase in $US billions of sum of gross output, less the value of intermediate goods consumed in production)
180
160
140
120
Middle East 100
80
60
40
20
0 East Asia
South Asia
Latin America and Carribean
SubSaharan Africa
Middle East and North Africa
High Income States
US
Source: Adapted by Anthony H. Cordesman from World Bank, World Development Indicators, 1997, p. 152
Copyright Anthony H. Cordesman, all rights reserved.
Stability and Instability in the Middle East - Volume I
Copyright Anthony H. Cordesman, all rights reserved.
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