Arab oil handouts waste billions (skimps on poor, distorts economy)

Arab countries are wasting tens of billions of dollars on subsidies for fuel and energy but dare not roll them back for fear of a political backlash, a UN report said.

The UN Development Program (UNDP) report said six of the world's 10 biggest subsidizers are in the Arab world, led by Kuwait, Saudi Arabia and Qatar. People in the three countries pay less than a third of world prices for car fuel and electricity.

The annual cost for Saudi Arabia is more than $43 billion, $4.15 billion for Qatar, $10.59 billion for Algeria, the report said quoting International Energy Agency figures.

The $20 billion-plus that Egypt spends each year takes up 9.3 per cent of the country's gross domes-tic product. While governments say they aim to protect low-income families from high fuel costs, the subsidies help the rich more than the poor, the report said.

In Egypt, the top 20 per cent wage earners get 33 per cent of the energy subsidies, against 3.8 per cent for the poorest families. For gasoline, 93 per cent of the subsidies go to the rich.

The subsidies also distort the economy by encouraging waste and holding up investment in renewable energy, the report said. Energy consumption in the Arab world tripled between 1980 and 2008.

UN researchers said the money could be better spent on infrastructure and social spending.

In 2008, spending on energy subsidies in Egypt, Jordan and Syria accounted for more than spending on education and health.

"While energy subsidies do benefit low-income households, they must be seen as a costly and inefficient tool to protect the poor in the Arab world," said the report.

The report highlighted attempts in Jordan, since 2005, Syria, since 2008, and Iran, over the past two years, to move away from subsidies.

But it said "the political climate resulting from the 2011 Arab uprisings will increase the political adversity facing many Arab governments pursuing painful economic reforms, including the reform of domestic energy prices."

Jordan halted its reforms in January 2011 and the report said "unfolding political events in Egypt which resulted in the fall of president Hosni Mubarak in February 2011 are likely to delay much needed energy pricing reforms" there.

Meanwhile, in Nigeria, the state has lost $6.8 billion since 2009 through a fuel subsidy program rife with corruption, a parliamentary panel reported Thursday, calling for prosecutions and an overhaul of the state oil firm.

The committee said Nigeria, Africa's largest oil producer, lost $6.8 billion between 2009 and 2011 through the program, designed in part to keep fuel prices low.

"The committee believes that if the PSF [Petroleum Support Fund] scheme was properly managed, this sum . . . would have been available to the three tiers of government for budget enhancement," it said.

The report detailed what has long been suspected in Nigeria, describing a lack of accounting, overpayments, wilful disregard for regulations and outright incompetence.

The committee, set up in January to probe the subsidy program, also called for the state oil firm, NNPC, to be restructured.

"All those in the management and board of the NNPC directly involved in the infractions identified for the years 2009-2011 should be investigated and prosecuted for abuse of office by the relevant anti-corruption agencies," it said.

Nigeria imports much of its fuel despite its oil wealth due to a lack of refining capacity, a situation also blamed on corruption and mismanagement.

Back in the 70s, a friend's father was a contractor in Saudi Arabia. The man had a sort of personal taxi driver who would drive him around. The driver spoke English well, so they had numerous conversations.

Turns out, the taxi driver really didn't need to work as the gov’t was very generous each month. There really were no jobs, anyway. He only drove the taxi out of boredom. But housing was scarce, so every evening the taxi driver parked in the desert, unpacked his substantial belongings, including a radio & tv, & slept on the ground or in the taxi.

Gov’t mismanagement of the SA economy is as sure as any other country. SA is emulating a socialist economy, using gov’t largess to quell social unrest. With this formula, the gov’t must continually increase the largess to satisfy the masses. Sooner or later, the demands of the people will outstrip the gov’t ability to provide. European socialism is a prime example of this, & their financial & political future is bleak.

This is a typical UN play for the benefit of the richest industrialists in the world using the usual leftist word-play:

In Egypt, the top 20 per cent wage earners get 33 per cent of the energy subsidies, against 3.8 per cent for the poorest families. For gasoline, 93 per cent of the subsidies go to the rich.

How "rich" are the top 20% in Egypt? I'd bet that even 90% of the top 10% are middle class by American standards.

The subsidies also distort the economy by encouraging waste and holding up investment in renewable energy, the report said.

So what they want to sell them is hugely expensive Green Energy (in which the big players hold stock)! See tag line.

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