Bahrain economy: Cruising along.

A tiny Island off the Saudi Arabian coast, and linked to Saudi Arabia via the famed causeway, an engineering marvel in the sea, Bahrain has come a long way from its nomadic past.

With oil came prosperity, which was, by and large, invested wisely, to create an economic base for the future progress of the country. The oil industry continues to dominate the economy, contributing over 10% to its GDP, 60% of its exports revenues, and over 70% to the Government kitty. It is also the major source of employment for the workforce.

The GDP of Bahrain has been running at a steady rate of 6.5% in 2007, 6.1% in 2008, and expected to be around 6% in 2009. The inflation rate is around 7%, and industrial production growth rate is about 5%. Bahrain is the only Gulf State to have a Free Trade Agreement(FTA) with the United States. Bahrain also scores high on the Heritage Foundation Index of Economic Freedom. For the year 2008, Bahrain was reported to be the 19th freest economy in the world.

Among the major economic activities of the country, apart from the oil and gas industry, are other industries like aluminium, the Banking and Financial Services, including Islamic Banking, and the contruction industry. Bahrain is making special efforts to develop the Island as an international financial center, especially for Islamic Finance and Banking.

It is noteworthy that the Bahraini Banking and Financial services industry has not suffered the same fate as its Western counterparts, mainly because it does not have exposure to toxic assets, and is better regulated.

The problems facing Bahrain in the long run, relate to the depletion of its oil and natural gas reserves, and the social problems resulting from a huge expatriate population.

Yemen economy: Trailing behind the rest.

Think of the Gulf, and you visualize super-rich Kingdoms and Emirates awash with oil wealth, and abuzz with multi billion dollar projects, moving and shaking the international economic system.

Not so Yemen, the poor cousin of the richer Gulf states in the Middle East, like Saudi Arabia, Kuwait, etc. According to a recent study, nearly one third of Yemenis endure chronic hunger, and 35% of the population lives below the infamous poverty line. And an equal percentage of the workforce is unemployed.

Quite ironic, given the fact that its other Gulf cousins are deficient in labor and import them in large numbers. As a matter of fact, hundreds of thousands of Yemenis work in the Gulf states, remitting over a billion dollars every year. In fact, that is the major source of revenues to the country, with oil revenues, as such modest, coming down further, on account of the fall in oil prices. The per capita income of the country is abysmally low compared to its richer cousins in the Middle East.

Poverty, unemployment, illiteracy, etc, the standard features of the least developed countries, are to be found in Yemen. With inflation running in double digits, it is an uphill task for the population to maintain a reasonable lifestyle.

Yemen is a modest producer of oil, though its gas reserves are considerable, though unexploited. Among the major agricultural produce of the country is coffee, cotton, wheat, sugar, etc. Yemen exports coffee, cotton, refined oil, sugar, processed fish, etc., and imports a wide array of consumer products, industrial machinery, foodstuffs, etc.

Recently the World Bank, in its quarterly study of the Yemeni economy projected a GDP growth rate of 7.7%. The development process in Yemen can take off and be sustained in the long run by integrating its economy with the Gulf economies, and attracting investment from them for infrastructure projects, and other projects that can earn foreign exchange for the country, while generating employment.

Syrian economy: Slower growth forecast.

The Syrian economy that has been growing at a decent pace over the years has taken a hit in 2008-09 on account of a combination of a drought, and shortage of electricity and water, apart from the negative effects of the global recession.

As such Syria is under economic sanctions by the United States for the last five years, and faces several hurdles in conducting free trade with the world at large, especially the West.

The Syrian economy is very much a state subject, though the country is slowly opening up to the world. The country does attract hordes of tourists from all over the world who are attracted to the ancient land and its civilization, and the historic monuments that dot the landscape. Tourism is a major foreign exchange earner, and the country also exports crude oil, phospates, cotton, fruits, etc. It imports foodgrains, metals, machinery, etc.

As for the economic outlook for the country, it expects a GDP growth of 5.1% in 2009. According to a study of the IMF, the Syrian economy is expected to grow at a slower pace compared to its other peers in the Middle East. The country’s inflation rate is 15.4%, and unemployment is hovering around 9%.

The sever drought, now in its third year, has led to a fall in food grain production, especially wheat, the staple. Further, remittances from Syrians working abroad are also coming down.

To counter this situation, the Syrian Government is encouraging economic liberalization, inviting foreign investment, especially from the Gulf states. However, unless the country provides the necessary infrastructure, it may not be able to attract the right kind of foreign investment. For instance, the major portion of foreign investment that has come so far, is said to have gone into the real estate sector, which has grown faster than the other sectors.

Given the increasingly liberal approach of the Syrian Government to the issue of economic development, there is hope that the future holds better promise for this ancient land and its people.

Qatar economy: Rising star of the Middle East.

The small and over-prosperous Arabian Gulf State of Qatar has ambitious plans to reduce its dependence on hydrocarbon income, primarily, liquefied natural gas, to zero by the year 2020. Presently, it is the world’s largest producer and exporter of LNG.

Revenues from this precious resource(LNG), have been invested into building up an infrastructure for the future development of the country, and also reduce dependence on oil based revenue streams. In the year 2008, the country boasted a per capita GDP of USD 68,467.00 that was the highest in the world. The country continues to embark upon projects and initiatives that is aimed at retaining this level, and increasing it further.

The current global economic crisis has had an impact on the Qatari economy, with revenues down, but the adverse impact has been minimal, essentially in the form of a slowdown, that is likely to set back the time frame to achieve the set goals by a couple of years, according to official sources.

Qatar is encouraging foreign participation in its economic development, as much as it is interested in investing abroad in a range of opportunities, with the aim of creating a reserve and surplus for the future, as well as reducing its dependence on oil based revenues.

The country has been also active in internation fora, and is trying to build up an image of a moderate and a modern state in the Middle East, to act as a bridge between the West and the Gulf. It is an ambitious country with a budget and resources to match. The finesse with which the Qatari establishment handles the developing situations will determine the country’s level of success as an emerging leader in this part of the world.

A glimpse at the economic scene in the Gulf.

The Gulf. The Oil Boom. The construction frenzy. Swanky new multi-billion dollar cities. Unimaginable prosperity. Equally unthinkable profligacy. Millions of unemployed foreigners finding a job of a lifetime, and going back home with their pot of gold.

These are some of the images that flash through the mind when one thinks of the Gulf. The Arabian Gulf. For long a source of livelihood for millions of unemployed of the world, and also a source of rich pickings for businessmen and traders from around the globe, the Gulf has generated awe, envy, hatred, frustration, etc., in equal amounts.

Is it now time to do a reality check to see where the Gulf stands today in the most severe global recession in decades? With recession hammering the western, especially the American economy out of shape, the repercussions are being felt throughout the world, in varying degrees.

The Gulf, however, has, so far, escaped the worst effects of the recession, though there are certain vulnerable pockets that have taken a beating. For example, the construction industry in the UAE, especially Dubai, has taken a frontal blow to its second most important industry, after oil, with projects worth billions of Dirhams coming to a halt, and several new equally grand projects put on hold.

It is definitely an unreal atmosphere in Dubai today, used as it is to the sights and sounds of construction activity 24/7. Added to it is the obligation to cut back on oil production, that continues to be the number earner of cash, the UAE is expected to record a slower rate of economic growth in the current financial year. On the other hand, Big Brother, Saudi Arabia is expected to continue with its strong show, and in fact, has been acknowledged as the strongest Gulf economy by the World Bank in their recent report, followed by Algeria, surprisingly for many, and then by the UAE.

What the future holds for these economies cannot be predicted with any degree of certainty. However, the fact that these countries have not been affected by the recession as much as the west does signify certain positives in the way these economies are structured, and run.

Especially, the Banking sector in the middle east is considered safe and sound, and not known to indulge in overtly risky products, unlike their American counterparts. Of special significance is the role played by the Islamic Banks, that subscribe, by and large, to an ethical system of investment and accounting. As a matter of fact, those Islamic Banks that had strayed from the original system, have indeed, suffered in the crisis.

All eyes are on the Gulf to see how the region copes with the current crisis, that is expected to last at least for a few more years.

THE GULF DOOM!

Is it the end of the Gulf Boom?   Is it time to write the obit of the Gulf Boom?   By all available indications, yes!   A regular stream of expatriates is returning to India and other countries of the Third World, with broken dreams in their suitcases.

The lucky ones are those that have already made their pot of gold, and have to look for a job in their country, more for an occupation than for subsistence.   The unlucky ones are those that had borrowed money to chase their dreams, and have now to go back to their places and face the moneylenders.   It is a tragedy being played out across the Indian subcontinent, and some other countries in the less developed world.

So how do we rationalise this tragedy?   Who do we hold responsible for this unfolding tragedy?   The Government, the Citizens, fate, circumstances?   On balance, it would appear that the Governments and their citizens are responsible in almost equal measure, with the scale tilting slightly towards the Government.

One of the simple and abiding truths of life is, when you depend on others for anything, you are risking your own interests, and putting yourselves at the sweet mercies of the others.   The overdependence of countries like India on overseas jobs to take care of their unemployed millions has now boomeranged on them, and it may be only a matter of months before the deluge of returning for good expatriates delivers a body blow to their already wobbling economies.

It is an undeniable fact that Governments in many of the less developed countries like India, Pakistan, Philippines, etc., have taken the easy way out to deal with the unemployment problem by encouraging their citizens to migarate to the Gulf and other prosperous destinations, instead of making concerted efforts to fulfil their basic responsibilities towards their citizens.   What’s more they get cheap foreign exchange by way of remittances from the expatriates.   On their part, the citizens of these countries have also not bothered to fight for their rights in their own land.   Rather, they have taken the easy way out by taking up jobs abroad, than traverse the rough road of activism to bring about responsible governance in their own countries.  

So long as the going was good, neither the Governments, nor their citizens bothered about the implications of their respective actions or inaction.   But all good things have to come to an end.   And so it is with the Gulf Boom.

What now?   Increase in unemployment, social tensions, religious strife, political instability, economic chaos, crimes etc., etc.   We are in for some pretty tough times ahead.   It is a scary scenario alright!

On the brighter side, this situation offers both the Governments and the citizens of the affected countries, to ponder over their past mindless conduct, and their penchant to skirt chronic problems, and to finally put their collective heads together and find solutions for the exploding problem of the Gulf Doom.   And if that happens, there may yet be a chance to escape the worst consequences of this developing tragedy.

Views expressed above are the personal ones of the author.