Opportunities For Arabian Development

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Many Saudi schools teach Western/US hatred. 30,000 Wahhabi religious schools and mosques worldwide call not just for the destruction of the U.S. and Western values, democracy, and religions but for replacing it with totalitarian Islamic regimes and fundamentalist societies. Saudis refused most U.S. and Western demands to arrest known perpetrators. Some of the Saudi press praises and supports terrorist activities. Some Saudis actually rewarded families of suicide bombers.

Men and women are separated in all public places and women must wear veils and are forbidden to drive. Special decency police patrol shopping malls searching for women with loose scarves and forcing shop owners to shut during praying times. Every Friday there was a public spectacle in Riyadh Square when blindfolded criminals are beheaded.

If Saudi Arabia and for that matter many other Arab countries are to become modern, vibrant nations with a long-term future, buoyant economies and healthy social systems, they must recapture their educational systems and expand the base of government beyond the anachronistic traditions. There is a need for economic liberalization, political opening, and expansion of opportunity. They must start to build hope and not just build on the frustration, particularly of the young, by diverting the blame to the West or infidels in general. Unfortunately, for too long have governments and royals been insulated by the clerical establishment which tries to drag the country backwards. There is a need for long-term solutions and not just temporary fixes. Radical changes based on solid needs and leading to real opportunities must replace quick handouts. It is too late to plug leaks of the system. They need a complete redesign and reconstruction.

Saudi and other Gulf countries' economies would collapse if foreign experts and workers were to leave. This is not due to lack of local labor but the fact that Gulf Arabs are basically unwilling to do physical or even professional work, preferring to work for the government or survive on generous government handouts. In many countries they are furthermore shut out of the job market by better-qualified and cheaper expatriates. In Saudi Arabia some preacher teachers even issued fatwas approving the killing of Americans and other Westerners whose cultures are called lewd. They also call for the killing of Westernized Saudis, many of whom have received death threats. To 'protect' themselves many, including Prince Sultan, are giving huge sums to Islamic charities accused of links to Islamic terrorism. Some content that this is not a unique example but state policy.

Traditionally, Saudi's deflect internal criticism at the West but this only isolates the ruling cliques. Also directing popular anger at the West may serve as a temporary safety valve, but the pressure will mount over the longer run and backfire, particularly as the disadvantaged recognize that the interests of business, government, and clerics are all blurred by money.

Diverting public unrest and opinion by blaming the outside world only works so far. Similarly public displays of so-called justice such as public flogging and executions ultimately disgust the populace and are counterproductive in stemming crime. The Saudi government still has an opportunity to take charge and use its huge oil income to develop an effective, just, and liberalized secular and representative society that provides opportunities for its citizens. To achieve this it will have to cut its umbilical cord to the clerics and provide greater freedom of expression, human rights, and meaningful representative government. Only this way will the kingdom be able to survive the dual threat of loss of oil income and popular dissatisfaction and uprising, as the old diversions of unrest start to fail.

Saudi Arabia still has a few years and a few hundred billion of dollars to put things right but its government will have to make the right decisions with determination and conviction. The blame game they have practiced for so long will soon unravel not only because of bin Ladens' disciples who are also interested in toppling the royals in Saudi Arabia and similar governments in other Arab and Moslem countries, but also because an increasing number of young, educated Saudis and Arabs either from abroad or other Arab countries will demand greater representation and accountability. Even if oil incomes hold up under increasing competition and larger supply-demand imbalances, the increase in population, global inflation, and the need to repair, rebuild, and expand on ill-maintained infrastructure, as well as demand for better public services will make it difficult to meet the expectations of the Saudi population.

Another issue is that most Saudis, particularly Saudi royals and the rich elite in Saudi Arabia invest largely abroad. As an example, Prince Alwaleed bin Talal al Saud, one of the richest of the royals, has a reputed $11 billion in U.S. holdings. Overall, Saudi investments in the U.S. are estimated conservatively at over $190 billion. In addition, there are sizeable investments by Saudis in Switzerland and the EU. This is a sign of lack of confidence in and concern for the local economy.

The high costs of support of the clerics, corruption, and the special benefits to various sectors will have to be reduced if Saudi Arabia is to succeed in its transition to a more balanced economy that assures its citizens and particularly its young a future of opportunity. Unless this is done, per capita income will continue to decline. There is increasing pressure in and on Washington to reduce American dependence on Saudi and for that matter Persian Gulf oil, for political, strategic, and economic reasons. The global energy future looks very bright, not just in terms of reduced reliance on unstable and increasingly expensive Persian Gulf or OPEC petroleum supply, but also because of the rapid development of more environmentally friendly, reliable, economic, and often renewable energy sources as discussed before

During the Gulf War of 1991, oil prices shot up to $40/bbl in 1990 terms even though there were 5 million bbls/day of excess capacity. Today's excess capacity is even greater and sources of supply more diverse and less cartelized. The high price of oil can probably not be maintained in the long run, and under pressure of competing energy supplies. Overpricing of oil has encouraged new developments and competition, including development of higher cost production, which could not be justified at lower prices. Yet once in place there is an incentive for high cost producers, usually financed by consumer countries, to maintain a higher price to amortize their new investments.

Saudi Arabia will have to diversify rapidly into value added activities such as petrochemicals, refining, fertilizer production, alumina refining, and various manufacturing and service industry sectors. Yet this will require a large, skilled workforce and management cadre which the country does not have. It cannot be done with foreign workers and managers alone. It will also require a radical change in the social structure, human freedoms, and elimination of the behavioral restrictions imposed by the Umulas. You cannot have a modern economy in an environment and under the restrictions of an out dated regime. Some of the other Persian Gulf states have succeeded in partially diversifying their economies and opening them up not only to foreign investment but also service and industrial activities. Oman, Qatar, and the United Emirates are typical examples.

With all the bonanza of the world's largest petroleum reserves and production, the economies of the Middle East did not fare very well. Excluding Egypt, Syria, Jordan, Lebanon, and Israel, the oil producing Arab countries of the Middle East with a combined population of 72.653 m had a total product of $390.6 in 2002 or $5,372 average per capita income. Israel, with no petroleum or other major natural resource exports, achieved a per capita income 3.4 times as large or $18,300/capita. The answer is largely that most of these petroleum producing countries in the Middle East on average obtained 93% of export income and 43% of the GNP (or $182 b) from petroleum sales and no other economic activity. The economies of the Persian Gulf countries are diverse in terms of per capita annual income, as shown in Table 17.

There is an unsustainably large unemployment, 25% in Saudi Arabia, 30% in Yemen, and 15% in Bahrain. At the same time, the region suffers under a lack of foreign direct investment. For nearly 50 years regimes in the region wasted their huge oil and gas revenues instead of building up infrastructure and institutions to offer employment and opportunities to a rapidly growing population. Their economies are nearly stagnant while their populations grow at an unsustainable rate.

Countries in the region lack non-oil or gas-related exports and most importantly investment capital. Arab governments tried liberalization of their economies but the effort came to a virtual half in the late 1990s. After selling off a few profitable state enterprises, privatization has essentially stopped in most Gulf countries. Government bureaucracies continue to grow and to impede foreign economic participation, banking reform, as well as privatization. Egypt's civil service is supposed to number 7 million or 10% of the population according to the Economic Research Forum, a Cairo research group. The percentage is even larger in many Gulf countries. All of this bodes ill for countries with a rapidly growing and increasingly younger population that is loosing faith in its future.

Investment in infrastructure and expenditures for social and public services in Gulf countries was, on average, a dismal 26% of GNP, compared to over 50% for the U.S. and a global average of over 38%. As a result, most of the countries in Arabia are unprepared for a post-petroleum age economy and have done little to accumulate reserves or productive and human assets to deal with the new energy future. There are some exceptions, as noted before but the major producers, Saudi Arabia, Yemen, and Kuwait, as well as pre-war Iraq certainly did little to diversify their economies as well as prepare themselves for the new, globalized world markets.

Belatedly, Saudi Arabia is slowly moving to open some economic sectors (telecom, insurance, etc.) to foreign investment, supposedly to revitalize the economy. Unfortunately this appears to be largely a publicity stunt, as the required changes in the laws and regulations to make this work have not yet been passed. The oil rich nations in the Middle East have a larger percentage of poor and unemployed as well as a much higher fertility than other nations with an equal per capita income. They also have large numbers of unemployables and large-scale political disenfranchisement. All this must be corrected if they are to successfully survive in the post-petroleum economy.

However, an even more important issue is their ability to join the forces of globalization. Globalization has been largely led by OECD, East, and South East Asian countries. It has resulted in a diffusion of capitalist markets, and western ways of life. It has also influenced personal lives by reducing the effects of local culture, religion, and government on individuals. It introduces economic interdependence, which in turn makes economic reprisals ineffective. Globalization outsourcing and increasingly open global markets have become a fact of life and nations that do not adapt to this new environment are simply being left out. This is what is increasingly happening in Persian Gulf countries and particularly in Saudi Arabia, Yemen, etc. Globalization does have many drawbacks and often discriminates against the poor in the short run. However, in the long run, it provides new opportunities.

Arab nations have a lot of catching up to do. Their only hope is their young generation, which must learn to look at itself, at the hopelessness of their condition, the hypocrisy of their elders and rulers, and identify true opportunities for their future. They must recognize and work towards opportunity which will not materialize by channeling their emotions and hate toward the outside world, primarily the West. They must identify the real causes for their poverty and lack of opportunity, which are largely the artificially imposed constraints on economic and personal development.

Much of the population in Arab countries feels alienated and disenfranchised, yet impotent, to do anything about their condition. Their resentment though is directed by their leaders toward secularism and modernity not their own often corrupt leadership and elite which is often the cause of their troubles. Christians, Jews, Buddhists, Hindus, and others learn to love all others in their religious studies, something that the Koran also advises.

Arab nations, particularly those on the Arab Peninsula, now face a time of decision to either join the world at large or continue to stagnate. The end of the petroleum bonanza is at hand and a radical change in attitude and approach is needed. Political stagnation may soon be followed by economic stagnation. Ultimately most Arab economies and political systems will become unsustainable unless radical changes are introduced soon. They must not only change their political structure and assure effective representation but develop a modern society with modern education, health care, social care, business opportunities, media and related services. In other words, they must develop a truly popular participatory society not necessarily modeled after Western democratic systems but one in which people are really involved and feel a part of. Countries such as Oman, United Arab Emirates, Qatar, and Bahrain have all made major efforts at diversifying their economies, include their populations, and allow more freedom of expression, movement, and participation in the economy and government. The laggard in this process has been Saudi Arabia which only now at the end of 2006 starts to recognize that it must change as well.

We are on the verge of a major change in the way energy is produced, distributed, and used. More and more renewable and environmentally friendly fuels and energy conversion methods will become available. Use of most fossil fuels and particularly petroleum and solid coal will be reduced and ultimately phased out within a few decades.

Global solid and liquid fossil fuel consumption (coal and oil) was 3824 million tons of oil equivalent in 1970. This figure grew to 4894 million tons in 1980, 5212 million tons in 1990, 5287 million tons in 1995, 5360 million tons in 2000, and has since leveled off at an estimated 5680 million tons in 2006. More importantly, oil consumption reached 2968 million tons in 1990 and has since barely increased. In fact, global oil consumption has essentially been flat at 3069 to 3300 million tons between 1995 and 2006.

Natural gas consumption has leveled off at 2100-2300 million tons of oil equivalent. It appears that as shown in Table 10 not only did oil consumption reach a peak a few years ago but more importantly it contributes a declining percentage of fossil fuel consumption and an even more declining percentage of total energy consumption.

Even though wind and solar power contribute only a very small percentage of global electricity supply now, their contribution is growing at the rate of 20% per year. With very slow growth (2%/year) of global electric power demand, wind and solar energy are expected to contribute as much as 10% to the global electricity grid by 2020. Similarly, nuclear power generation has remained nearly constant over the last 10 years, while hydroelectric power generating capacity now at about 850 gigawatt is expected to grow to well over 1000 gigawatt by 2010 when the Three Gorges Dam in China (30 gigawatt) and other large new hydroelectric projects come on line.

Overall liquid and solid fossil fuel consumption in electric power generation has started a gradual decline. This trend is expected to accelerate and reduce total liquid and solid fossil fuel used in world electric power generation by about 20% within the next 20 years. Most of the reduction will be in oil, as clean coal technologies mature, and because coal is usually cheaper, more readily accessible and supply more secure. Similarly, use of liquid fossil fuel used in transportation will decline both because of improved technology such as use of hybrid/electric cars as well as the introduction of hydrogen fueled cars using natural gas etc. for regeneration. Most experts agree today that a decline in global petroleum consumption is inevitable. This decline may be as little as 1% or as much as 3% per year after 2010. At the same time significant new petroleum supply sources (Russia, Central Asia, Deep Sea, Alaska, etc.) are expected to come on line. Efficient transport systems (pipeline, shipping, etc.) to the major European, North American, and East/Southeast Asian markets are already under development. It is expected that by 2010 global excess petroleum production (supply) capacity will have grown to 25% and by 2020 to over 40% above demand. In other words, excess supply will greatly exceed the combined capacity of all Persian Gulf producers.

While it may not significantly affect the world price of petroleum immediately, as many of the new suppliers are higher cost producers, they can all profitably deliver oil to world markets as long as the price per barrel remains above $40. Saudi Arabia and other Persian Gulf producers may then find themselves in a quagmire. They all need prices above $40/barrel to sustain their economies. However if the prices are kept at such a level, they would still be marginally profitable to higher cost producers, Western buyers will prefer purchasing from such more reliable and safer sources of supply. This particularly as many of the oil majors such as BP, Exxon-Mobil, Shell, etc. not only have large stakes in new sources of supply, but also because they control much of the refining, distribution and retailing business. Saudi Arabia as a result may find itself in a dilemma controlled by a restricted buyer market. This may force OPEC to reevaluate its production and pricing strategies. It may even result in the departure of some OPEC members from the cartel.

The global energy future and particularly the future of petroleum as the world's principal fuel is expected to change radically as sources of supply of petroleum and other fuels become more diverse and alternative fuel and renewable energy technology advance. Although the U.S. did not accept or act on the Kyoto Protocol, American grass root organizations of environmentally concerned citizens are making an impact on U.S. policy and will influence both future policy as well as or more importantly manufacturers of energy conversion or producing technologies particularly in transport equipment or vehicles. As a result, we expect a gradual decline in U.S. petroleum consumption in U.S. electricity generation and transportation. As the U.S. and its transportation sector are the largest petroleum consumers, the effect will be acceleration in the decline of global petroleum consumption. The roles of major energy sources in global energy supply are projected and show the increasing contribution of alternative and/or renewable energy sources in electric power, building, transportation, and other energy uses. It shows clearly that the fossil fuel and particularly the petroleum age on our globe will be coming to an end. This may encourage a renaissance in human and economic development worldwide, and provide for a more equitable access to clean energy and thereby economic opportunity to all mankind.

This may be just in time as the ecological damage caused by 50 plus years of irresponsible use of fossil fuels, its finally showing devastating results in our changing weather patterns, growing deserts, declining wildlife and fish populations, melting polar ice, unhealthy polluted air, and more. It has also caused major strategic, social, and economic problems by encouraging inequities in society and among nations. We may be emerging from our fossil fuel addiction just in time, lest future generations be left with a desolate, less habitable world and life prospects.

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