Unpegging for the better
The US President, George W Bush, came with much fanfare to the Middle East but left as if he hadn’t been here in the first place. The only traces of his visit are the papers of those days – no one talks of him anymore.
He had come to sow seeds of dissent between the Arabs and the Iranians, but no longer had he left, member states were quick to rub off any misconception about their ties with Iran.
Whole cities had to be closed for him. Dubai lost more than $1 billion in business due to his visit, and the following rains.
But one would be naïve to think that Iran was the only thing on Mr Bush's agenda. It was more to do with economics. US Presidential hopeful Clinton put it right when she accused Bush of "begging" for cuts in oil prices from Gulf leaders.
The US economy is witnessing a severe recession due to bad sub-prime loans, high oil prices and plunging stocks, skyrocketing inflation. Just how bad the situation is can be imagined by Mr Bush's announcement this Saturday of a $145-billion package to support the receding economy.
However, the US is not the only country to witness problems. The "contagious recession disease" has crossed borders and might become a global epidemic if not controlled; the reason being that the world had become very much dependent on the seemingly infallible dollar.
Inflation is also on the rise in the Gulf and is worrying governments, with figures reaching over 15-year highs in Saudi Arabia, UAE and Oman; inflation in Qatar hit 13.73 per cent in September just below record while Bahrain has come under mounting pressure to tackle inflation caused by rising food and property prices. To add to woes, real estate prices are expected to rise up to 20 per cent this year.
But member states still don’t seem to be ready to unpeg from the dollar or even revalue their currencies.
Speculators say that decision might soon be reversed if the dollar continues to further weaken. An eight per cent revaluation is already on the cards for the UAE dirham and the Saudi riyal before April.
It should have been done by now, but powers that be seem to have an upper hand in forcing these economies to stay loyal to the dollar. In a way they are bailing out the US economy. But this will certainly have a strong affect on the common man in the region.
While the oil boom continues to bloat national coffers, it is giving a hard time to the man below the economical ladder. And even though governments don't admit, prices of commodities have risen as have the prices of real estate soared; draining the purchasing power from the peoples' once boasted "tax-free" salaries.
It also adversely affects the import of human resources especially skilled labour, from Asian countries such as India, which itself is relishing its piece of the global "economic boom pie".
If this continues, it may be impossible to stop the flight of unskilled labour too, which these countries are so heavily dependent on. Any mass exodus of labour could bring these economies to a standstill.
In these biting circumstances, it would be prudent to think long-term. A few points for consideration could be:
The US President, George W Bush, came with much fanfare to the Middle East but left as if he hadn’t been here in the first place. The only traces of his visit are the papers of those days – no one talks of him anymore.
He had come to sow seeds of dissent between the Arabs and the Iranians, but no longer had he left, member states were quick to rub off any misconception about their ties with Iran.
Whole cities had to be closed for him. Dubai lost more than $1 billion in business due to his visit, and the following rains.
But one would be naïve to think that Iran was the only thing on Mr Bush's agenda. It was more to do with economics. US Presidential hopeful Clinton put it right when she accused Bush of "begging" for cuts in oil prices from Gulf leaders.
The US economy is witnessing a severe recession due to bad sub-prime loans, high oil prices and plunging stocks, skyrocketing inflation. Just how bad the situation is can be imagined by Mr Bush's announcement this Saturday of a $145-billion package to support the receding economy.
However, the US is not the only country to witness problems. The "contagious recession disease" has crossed borders and might become a global epidemic if not controlled; the reason being that the world had become very much dependent on the seemingly infallible dollar.
Inflation is also on the rise in the Gulf and is worrying governments, with figures reaching over 15-year highs in Saudi Arabia, UAE and Oman; inflation in Qatar hit 13.73 per cent in September just below record while Bahrain has come under mounting pressure to tackle inflation caused by rising food and property prices. To add to woes, real estate prices are expected to rise up to 20 per cent this year.
But member states still don’t seem to be ready to unpeg from the dollar or even revalue their currencies.
Speculators say that decision might soon be reversed if the dollar continues to further weaken. An eight per cent revaluation is already on the cards for the UAE dirham and the Saudi riyal before April.
It should have been done by now, but powers that be seem to have an upper hand in forcing these economies to stay loyal to the dollar. In a way they are bailing out the US economy. But this will certainly have a strong affect on the common man in the region.
While the oil boom continues to bloat national coffers, it is giving a hard time to the man below the economical ladder. And even though governments don't admit, prices of commodities have risen as have the prices of real estate soared; draining the purchasing power from the peoples' once boasted "tax-free" salaries.
It also adversely affects the import of human resources especially skilled labour, from Asian countries such as India, which itself is relishing its piece of the global "economic boom pie".
If this continues, it may be impossible to stop the flight of unskilled labour too, which these countries are so heavily dependent on. Any mass exodus of labour could bring these economies to a standstill.
In these biting circumstances, it would be prudent to think long-term. A few points for consideration could be:
- The rewards from the oil boom must be passed on to the working class – locals and expatriates – at once in the form of rise in salaries.
- Unpeg currencies from the dollar and use a basket of currencies instead
- Apply a strict rental ceiling to rise in prices of rent and property.
- Decrease dependence on oil and construct more technology-based industries, which can substitute oil and support the economies in times of adversity.
- Invest more rigorously in the skill-upgradation of local populations.
- Build more universities and institutions teaching modern sciences and technology.
- Invest in nuclear, wind and other forms of energies for power generation as substitutes to oil.
- Make more direct investments in emerging economies like India, China and others in Asia and Africa.
