Bolg #3: Iraq’s Oil Based Economy

IRAQ

This is the Iraq fact-book page from the Central Intelligence Agency. It contains all the basic information about Iraq like history, geography, population, and so on. A notable fact for example is the high percentage of people under 14 years old which is 39.88%, just like must Arab countries, Iraq has a youth majority. Unfortunately, those youths are unable to enjoy their early years due to two major facts, lack of security, and shaky economy.

When we take a look at the Middle East region, it is hard to see a country that suffered more than Iraq. Since its independence from Britain in 1983, they Iraqis have always encountered hardships and instability. For instance, between 1980 to 1988, Iraq, under the dictator Saddam Hussein, engaged in a costly war with the Islamic Republic of Iran. Only two years after the end of the Iran-Iraq war, Saddam decided to invade another neighboring country which was Kuwait. The US-led UN coalition forces intervened and forced the Iraqi troops to leave Kuwait ending what was called the Gulf War which lasted for about seven months. As a consequences of the government continues violence at that time, it was not until 2011 when the US forces withdraw from Iraq. In terms of economy, the abundance of oil in Iraq allowed it to dominate the economy for decades. However, oil is also a major cause of conflict between the Iraqi Government and autonomous Kurdistan Regional Government (KRG) in Iraq’s Kurdistan region. The internal disagreement disabled many improvement plans from the two sides as the foreign energy companies hesitate to sign contracts with any of the two governments, and if they did, they tend to leave shortly after they discover the unpleasant work environment. Moreover, Foreign direct investment is believed to be among the Iraqi government objectives, however, many obstacles Impede achieving such goal such as the weak political system, corruption, and the lack of security and societal stability.

 

Reflection:

Obviously, Iraq is a member of the organization of Petroleum Exporting Countries (OPEC) as one of the largest oil reserves in the world. However, taking a look at its poverty level would not give such indication, I think during Saddam’s era things were better economically and politically, however his tyranny destroyed the country, and the curse of history shall follow him forever. I always wondered from the large numbers of Iraqi migrants all around the world, starting from Saddam’s government in 1979, if not before, many Iraqis where forced to leave their countries due to economic, or political reasons like those who were exiled due to their religious or political affiliation. Nowadays, ISIS is forcing them to flee from the occupied cities as well, if not from the country as whole. I know some Iraqis who migrated, forcibly or voluntarily, to countries like Germany, UK, and the U.S since the ba’athist regime era and never have the chance to return home until now because the situation has changed from bad to worse. When trying to consider what is causing Iraq to be in such situation, I could not find any other answer that is more convincing than oil. Oil curse has an existence in Iraq with an additional dimension, it is triggering the greed of others like ISIS now and the U.S before them. I think without oil, Iraq might have been better off.

Iraq’s Economic Outlook- Spring 2016

This outlook from the World bank Organization explains the trends of the Iraqi economy in the fiscal year 2016. It gives details about some key economic indicators like the percentage of GDP growth and the inflation rate. It also compares 2016 to the previous two years as well as the first half of this year which shows negative outcomes so far.

The global oil price shock, and the rise of ISIS are two major events that have impeded the economy in Iraq starting from 2014. Many economical consequences emerged in the same year, such us the minimized governmental spending, especially on investment projects. Approximate contraction of 8.8% happened to the non-oil sector in that year while oil continued to show a notable rise produced by the southern oil fields that were far from ISIS hands. Moreover, with the increased political instability emerged the necessity to increase security-related expenditure which worsen the situation and added up to the fiscal deficit. Poverty doubled and is estimated to have reached 41.2% as a direct result. The next few years are expected to show more positive economic trends only under two conditions, if ISIS continued to loss power and control, and if the global oil prices recovered.

Reflection:

I just watched a clip from president Trump interview when he was talking about Iraq and said several times that the U.S is going to take the Iraqi oil because they are not a sovereign country in his opinion. What is distinctive about Mr. Trump is that he talks with absolute honest, I do not think that taking over the Iraqi oil is a new idea for the American government, indeed, it is the first time to be declared in such explicitly. I only wonder by what logic should we accept that, if it is a paycheck to the American occupation that overthrown Saddam, then we should look at the result, does it really created a better present and future for the Iraqis? I doubt it, but “to the victor belongs the spoil” as the current U.S president is suggesting.

Trump Iraqi oil

 

 

Blog #2: Saudi Socio-economic Changes

Vision 2030

This website was created by the Saudi government in 2016 after to the declaration of the Saudi development plan, also called Vision 2030.It contains various lengthy PDFs explaining the objectives and how they are attainable within the imposed time frame. The website could be browsed with 4 different languages, Arabic, English, Japanese, and Chinese.

“My first objective is for our country to be a pioneering and successful global model of excellence on all fronts, and I’ll work with you to achieve that.” said king Salman Al Saud, the current king of Saudi Arabia. Vision 2030 is a governmental developing plan consisting of a set of economic, cultural, and political objectives. The vision is divided to two major programs that aim to strengthen the country internally and externally. First program is National Transformation Program, this program focuses in enhancing the role of the private sector in the country, as well is evaluating and posting the current performance of the governmental sector. Second is the Fiscal Balance Program, it highlights the necessity to generate non-oil revenue, and developing the financial governance, increasing the economy competitiveness, and improving social welfare system to cover more of the needy people. If correctly implemented, those reforms are supposed to bring many positive changes to the kingdom. For instance, the vision aims to guarantee people better quality of life that includes having all necessities, in addition to having improved cultural and entertainment opportunities.

 

Reflection:

Although very ambitious, all the objectives that are mentioned in the vision 2030 website  are fairly attainable. I think most of them are very connected to each other, for example, privatization could open up better hospitals which supposedly would lead to improving the health system and increase the life expectancy from 74 to 80 as the vision suggests. All the changes that have been implemented or proposed since the beginning of the Arab Spring including this proposal are a wise way to calm down the masses and avoid any possible internal conflict. Foreign press continues attacks on Muslims, in addition to the government tendency to polish its picture and minimize the stereotypes and criticisms about the country is another factor that I think added to the urgency of such developmental programs. Furthermore, diversifying the economy is an essential step is such changing world, instead of solely depending on oil. 

 

On a Common Currency for the GCC Countries

This paper was written by Esteban Jadresic and published by the International Monetary Found in December 1, 2002. It talks about a proposed common currency for the Gulf Countries. The paper provide details on the opportunities and limits of such unified currency. It also show the pros and cons of the proposal, which is helpful to understand the approximate 35 year delay on implementing the proposal.

 

Influenced by the European Union experiment with the Euro, the Gulf Cooperation council in 1982 suggested creating a common currency for the GCC members. There are numerous benefits of the unified currency that stimulated the attention of the Gulf governments. First of all, it could make the GCC as one economic block that has its weight in the face of global economic blocs like the European Union. Second, the movement of people in addition to the circulation of goods would be facilitated by such currency due to the elimination of customs barriers which would also encourage intra-trade and tourism between the member countries. A notable positive side of the proposed currency is that it should help creating non-oil based economic opportunities. On the other hand, a common currency require giving up the countries economic independence and make them more susceptible to shared hazards.

Reflection:

The positive side of the Unified currency seems bigger than the negative one; but this might not be the opinion of the authorities. After examining the issue,I strongly suggest having a common currency because it could open new horizons and free the region from the “oil curse”. However, the idea seems far from reaching right now because today Saudi Arabia, UAE, and Bahrain all cut off the diplomatic relationships with Qatar and the event are shocking and worth watching.

Blog #1: Saudi Arabia’s Oil-based Economy

The Economy

This document from the U.S. Library of Congress gives an overview of the economy of Saudi Arabia. It provides a timeline of the oil industry in Saudi Arabia and an explanation of the strong position the kingdom has in the global oil market.

The discovery of oil in Saudi Arabia has dramatically transformed the country on many levels. In the years before the 1930s, people in the region where depending on various economical activities. For example, the western province “Hijaz” was dependent on agriculture, trade, and religious tourism due to the existence of the two Islamic holy sites, Makkah and Medina, their. Another provinces like the eastern province had a mainly plantation economy and was dependent on cash crops like dates. With no doubt, oil played as a unification tool that encouraged urbanization and formed a large but closer communities. For many decades before oil, the people were considered hostile and separated from each-other; due to the requirements of the nomadic lifestyle that does not encourage permanent habitation on one place; as people were in constant looking for water sources.Three major events could describe the contemporary image of Saudi Arabia. First, the establishment of the kingdom in 1932. Second, the discovery of oil in the eastern province in 1938. Third, the high need for the cheap Saudi Arabian oil in the aftermath of the second world war in order for the European countries to rebuild their destroyed infrastructures.The Saudi Arabian oil industry flourished as a result and it later became a necessity to sustain the international economic stability. The importance of the Saudi oil is easily understandable from the intervention of the U.S in the 1991 Persian gulf war; in order to protect its favorite oil provider in the world. Further more, Saudi Arabia as one of the largest oil producing countries has a strong influence on the international oil prices; and its current strategies to secure its economy among the Organization of the Petroleum Exporting Countries (OPEC) is expected to damaged many of the smaller oil producing countries in both the short and the long run.

Reflection:

In the recent few years, we could see the global oil prices and demand experiencing many fluctuations; which I expected would seriously affect the country if it continued its heavy reliance on oil.Thankfully, the the government is starting to understand the importance of economic diversification and is trying to get rid of the “curse of oil” before it’s too late. I have always heard local economists promoting the idea of diversifying the economy but I have not felt its importance until recently. I am looking forward to see an implementation of their suggestions on the ground, not on papers only.

 

The end of the Oil Age

This article from the economist magazine takes about the predicted fate of oil. It was published in 2003 but it is really relevant to the current situation. The article highlights the former Saudi oil minister predictions about the end of the Oil Age. It also presents the possible global shift toward other energy sources.

“The Stone Age did not end for lack of stone, and the Oil Age will end long before the world runs out of oil.” said Sheikh Ahmed Zaki Yamani, former Saudi Arabian oil minister. The article is saying that the dependency of the Middle East on oil revenue is somehow resulting from the dependency of the world on the Middle Eastern oil. When the other countries of the world is self sufficient in terms of energy sources, they would no longer see the necessity of importing oil from the Middle East, and the region would realize the bad situation it is stock in by solely depending on such source. Saudi Arabia, as the largest exporter of oil in the world, is particularly in a great risk due to the uncertainty regarding the fate of oil in the near future; as some countries are developing more sustainable energy sources, and others are producing oil localy.

Reflection:

In 2016, In order to protect itself against any further oil prices storm, the government has declared a developmental program called vision 2030. It basically explains the economic, political, and cultural reforms the authorities are considering in order to improve the economy. The vision emphasis the tendency of diversifying the economy, strengthening the private sector,and encouraging the foreign direct investment by removing the current barriers they might face.The instability of the oil market in addition to the event of the so called Arab spring are two factors that stimulated the government to think more about the political stability which starts from the economic stability as I think. A thing that I know about Saudi Arabia is it abundant mineral stocks like gold and zinc that are being partial ignored because they are not easy to extract. If the improving the mining industry became a priority of the government, this could open up tens of thousands of jobs and provide a new investment opportunities that should not be missed.

 

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