Knowledge@Wharton

Try Jim Cramer's Action Alerts PLUS
CLICK HERE NOW

How Arab Economies Cope With Globalization

01/17/08 - 01:51 PM EST

Knowledge @Wharton

At the beginning of 2008, crude prices are at record highs, creating immense wealth for oil-exporting nations in the Middle East. Yet the Arab economies also face what economists call "a demographic bulge of a fast-growing labor force" -- and the challenge of creating enough jobs for the population. This is happening at a time when the arrival of China and India is raising the competitive stakes for other emerging economies that want to make their mark on the global economic stage. How are the Arab economies dealing with these challenges?

Howard Pack, a professor of business and public policy at Wharton, and Marcus Noland, a senior fellow at the Peterson Institute for International Economics, address these issues in a book titled, The Arab Economies in a Changing World. Knowledge@Wharton recently spoke with Pack about his book. An edited transcript of the conversation follows.

Knowledge@Wharton: Economists are predicting that oil could average $85 a barrel in 2008, and the OPEC countries seem to be going strong. Yet creating jobs for young people seems to be a challenge for the Arab economies. What explains this paradox?

Pack: The OPEC countries have large amounts of oil and relatively small populations. Dubai may have a native population of about 400,000 and it has immense oil wealth. On the other hand, countries like Egypt, which have very large populations, around 80 million, have very little oil wealth. Now, part of the wealth from the Gulf countries like Saudi Arabia, Kuwait and Dubai gets repatriated to Egypt because Egypt sends a lot of workers to the Gulf. On the other hand, given the size of Egypt's population, that has a relatively limited impact on Egypt. The same thing is true of Algeria, Morocco and Tunisia. Algeria does have substantial natural resources, but these are diminishing. The populations [in these countries] continue to grow relatively rapidly, although the rates of growth have slowed down. Therefore, for the next 10 to 15 years, there's a very large bulge in the group of people aged 15 to 25 who will be looking for jobs.

Knowledge@Wharton: Do you think the emergence of China and India will affect the Arab economies and their ability to integrate with the global market?

China Watch: Studying EDU

Pack: The big problem that China and India pose is of a following type: One way in which the Arab economies, at least the ones that have large populations, could deal with this population bulge is to have a significant amount of employment generated by potential exporting industries. They are just across the Mediterranean Sea, in many cases, from the European market. They all have trading agreements with the European market.

The trouble is that while that was a good model to try to pursue 25 to 30 years ago, whatever the Arab countries now try to do, they face these two extraordinary competitors -- China in manufacturing and India in services -- and that represents a very serious problem. To try this in 2007 is very different from what it was when we were trying to get on board the globalization train in 1977.

Knowledge@Wharton: Oil in the Middle East can't last forever. What strategies are these countries adopting to deal with the time when the oil runs out? What do you think of those strategies?

Pack: The countries in the Middle East have learned a lot from their experience in the 1970s and early 1980s, when they again had a huge bulge in earnings from oil. And, in some way those resources were frittered away on wasteful projects, and to some extent -- but much less than often thought -- on corruption.

Previous «
1 2 3 4

Investing A-to-Z

Knowledge@Wharton

Go To Section Home


01/15/08
India's Banks Gear Up for the Global Market

To compete with banks of other countries, they must address specific challenges, a report finds.


01/15/08
ETF Industry's Next Conquests: Africa and Mideast

'Frontier markets' are the newest thing in emerging-market investing.


12/28/07
China's Shifting Microfinance Landscape: New Players, Old Problems

Here's a look at China's microcredit scene and why foreign investors are so interested in it.


12/28/07
China: 'The Best Place to Invest in the Next Five to 10 Years'

David Rubenstein, co-founder and managing director of the Carlyle Group, discusses China, private equity and venture capital.


12/17/07
Latin America Faces a Major Test in 2008

Turbulence ahead for this fast-growing region? New studies forecast that growth could drop. Here's why.


12/13/07
A Closer Look at Sovereign Wealth Funds

Run by governments, these funds raise special questions.


05/19/08
Cramer on Top Searched Stocks: Yahoo!

Yahoo! is among the most searched stocks on TheStreet.com. Here's what Cramer had to say about the stock recently.


05/17/08
Jim Cramer's Best Blogs

Catch up on his thinking on the hottest topics of the past week.


04/26/08
Coming Week: Make or Break

Investors will have to deal with a Fed meeting and another flood of earnings and economic data.


05/19/08
Top Rocket Stocks: Ensco

Ensco International and Echelon have the potential to move higher in coming days.


04/28/08
Monday's Analysts' Upgrades, Downgrades

See who made what calls.


05/19/08
Telecom Giants See a Savior in Video

The addition of video is helping telecom companies compete against cable and satellite companies.


05/19/08
Contract Expiration Tempers Oil's Rise

The June West Texas Intermediate contract reflects selling pressure ahead of Tuesday's expiration. But stocks in the sector are generally trading higher.


05/19/08
Analysts' Upgrades, Downgrades: Amazon

See who made what calls.


Your Recent Quotes: Quote Up0 | Quote Down0
Dow S&P 500 NASDAQ
Oil*
Gold
10 Yr
0.00%
%
%
%
Data delayed 20 min
Sign up for our FREE newsletters now.

Keep on top of the market and the critical information you need to make more profitable investing decisions.

  • Cramer's Daily Booyah!
  • Before the Bell

Privacy Policy

See All Free Newsletters

Premium Stock Ideas