The Political Upheaval in key Arabian countries was most welcome as it removed decades of monarchy, but The Subsequent Economic winter is certainly not. It is time for the Arab world to unite and face the crisis
Although military Keynesianism might feel presumptuously correct, history bears testimony that political upheaval is often followed by economic paralysis. Immediately after the 1789 revolution in France, the economy was in doldrums. The 1917 Soviet Socialist Revolution led to huge economic commotion. The impact of Islamic Revolution in Iran in 1979 was so severe that it triggered the 1980-81 recession. This time too, it doesn’t look like an exception will be made.
As per reports by The Arab Organization for Investment Insurance and Export Guarantees, foreign investments in 18 Arab countries have declined from $83.9 billion in 2009 to $64.3 billion in 2010, which is a decline of 23.4% or $19.7 billion. Foreign investment is further projected to decline by 15% in 2011 in the region. Saudi Arabia, the largest FDI recipient, has seen the biggest fall by 41% from $35 billion in 2009 to $21.6 billion in 2010. Another facet to it is that most of the investments that these countries are attracting are going into real estate, banking and oil infrastructure; while there is no surge in investment in IT, education, health, automotive, et al. Unemployment in Arab nations remains the highest compared to any region. According to a McKinsey report, unemployment rate of the Arab region is as high as 25%, far higher than the global average of 8.8%.
The impact of political unrest is worse for Yemen, Libya and Egypt. As per the Gaddafi government, the unrest has cost Libya over $50 billion. While oil remains its major earning, technology and infrastructure are in complete mess with no idea of when they will be get back to normal again. Realising the severity, the World Bank has agreed to lend $2.2 billion to Egypt and WB and IMF together have promised $1 billion to Tunisia. Saudi Arabia has also promised to aid Bahrain with a lump sum, while Iran has also promised to provide loan to Syria. But they have to go beyond these token gestures now. A lesson can be learnt from the East European crisis, when Europe created The European Bank for Reconstruction and Development for recovery. The Arab world needs something similar. Would this crisis be able to unite them?
As per reports by The Arab Organization for Investment Insurance and Export Guarantees, foreign investments in 18 Arab countries have declined from $83.9 billion in 2009 to $64.3 billion in 2010, which is a decline of 23.4% or $19.7 billion. Foreign investment is further projected to decline by 15% in 2011 in the region. Saudi Arabia, the largest FDI recipient, has seen the biggest fall by 41% from $35 billion in 2009 to $21.6 billion in 2010. Another facet to it is that most of the investments that these countries are attracting are going into real estate, banking and oil infrastructure; while there is no surge in investment in IT, education, health, automotive, et al. Unemployment in Arab nations remains the highest compared to any region. According to a McKinsey report, unemployment rate of the Arab region is as high as 25%, far higher than the global average of 8.8%.
The impact of political unrest is worse for Yemen, Libya and Egypt. As per the Gaddafi government, the unrest has cost Libya over $50 billion. While oil remains its major earning, technology and infrastructure are in complete mess with no idea of when they will be get back to normal again. Realising the severity, the World Bank has agreed to lend $2.2 billion to Egypt and WB and IMF together have promised $1 billion to Tunisia. Saudi Arabia has also promised to aid Bahrain with a lump sum, while Iran has also promised to provide loan to Syria. But they have to go beyond these token gestures now. A lesson can be learnt from the East European crisis, when Europe created The European Bank for Reconstruction and Development for recovery. The Arab world needs something similar. Would this crisis be able to unite them?
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
IIPM Best B School India
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age Woman
IIPM's Management Consulting Arm-Planman Consulting
IIPM Prof. Arindam Chaudhuri on Internet Hooliganism
Arindam Chaudhuri: We need Hazare's leadership
Professor Arindam Chaudhuri - A Man For The Society....
IIPM: Indian Institute of Planning and Management
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
IIPM Best B School India
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age Woman
IIPM's Management Consulting Arm-Planman Consulting
IIPM Prof. Arindam Chaudhuri on Internet Hooliganism
Arindam Chaudhuri: We need Hazare's leadership
Professor Arindam Chaudhuri - A Man For The Society....
IIPM: Indian Institute of Planning and Management
