Time Travellers (Pt. 1 of Economist's survey of the Gulf)

Economist ^ | 3/21/2002 | Max Rodenbeck

[lds23]

Time travellers

Mar 21st 2002
From The Economist print edition

The Gulf states have come a long way, fast. Now they need to think about where they are going, says Max Rodenbeck

DUBAI'S Internet City looks rather unreal, like an architect's model come alive. Mirrored façades gleam. Ever-blue sky glistens in reflecting pools. Smart-looking office workers mingle in open plazas. Yet the business conducted here is real enough. Two hundred firms employing 4,000 workers are installed already and another 100 are due to arrive this year, including big names such as Cisco, Sun and Oracle, following in the wake of Microsoft. By 2010, if the momentum keeps up as planned, the city's bold ambition is to host some 80,000 “knowledge professionals”, making it the IT hub of a region stretching from Bologna to Bangalore.

Until recently there was nothing here but desert, but three years ago Dubai's ruler, Sheikh Muhammad Bin Rashed al-Maktoum, thought up the idea of a fully serviced, tax-free IT village to complement his emirate's growing list of other attractions. These include the Media City taking shape next door, the yacht marina, the indoor ski slope, the tropical jungle and the giant, palm-tree shaped artificial island all under construction, and the string of sumptuous resorts along the nearby beach where 20 years ago there were only a few fishermen's huts.

Only yesterday

Here, as elsewhere in the Gulf, the pace of change has been breathtaking. In Dubai, where desalination plants now meet the country's voracious demand for water, old people remember filling tins from shallow wells outside the city and trundling them into town on donkeyback. The vast, low-lying sprawl of Riyadh, Saudi Arabia's capital, may soon be relieved by a pair of graceful skyscrapers, but some still recall the beggarwomen who used to squat in the dust by the gates of the king's mudbrick palace, whimpering for alms. Oman today is as orderly as Denmark, yet as recently as the 1960s lunatics were stumbling through the souks of its capital in leg-irons, and diminutive long-haired mountain men, naked to the waist and armed with axes, were roaming its remote interior. In what is now the asphalt jungle of Kuwait city, goats used to amble. And not so long ago the main landmark of Abu Dhabi, today a glittering Miami-scape of towers and boulevards set amidst lush parks, was a single scraggly acacia tree.

Numbers tell an equally dramatic tale. The population of the United Arab Emirates has increased 35-fold since 1950, and the area of the city of Riyadh has grown 100-fold. In Oman, electricity output has risen 670 times over the past 30 years, the number of telephones 420 times and the number of doctors 260 times. In Qatar, average incomes have grown 50-fold since 1960, and average wealth 200-fold.

“I grew up with camels,” says the Internet City's chief executive, Ahmed bin Byat, flicking back the folds of his crisp white headdress to sip his cappuccino in a glass-walled conference room. “My generation's been through a time machine that's left our parents in the old world and put our children in the new one.” The pace of change has been exciting, he says, but also stressful: “You constantly have to make decisions that will have an impact far into the future. You have to choose what to take with you and what to leave behind, because you can't take everything.”

Half a century ago, all six of the desert monarchies that make up the Gulf Co-operation Council (GCC) were wretchedly poor, thinly populated and so loosely governed they could barely claim the status of nations. All were catapulted into modernity by a gusher of oil, and left scrambling to find a way to manage their sudden riches. All have had to cope with the most wrenching change any part of the world has had to endure in living memory, including the fastest population growth, the most rapid urbanisation and some of the biggest tides of immigration.

By most measures they have done well. Since 1970 their governments have spent a combined total of $2 trillion to treble literacy levels to 75%, add 20 years to average life expectancy and create a world-class infrastructure. Education, once limited to a lucky few males living in large cities, or whose families could afford to send them abroad, is now universal and free. Health care and housing, subsidised by all six states, are generally of a high standard. And although the image of Arabs wallowing in wanton luxury persists abroad, Gulf societies, with some notable exceptions, are fairly egalitarian. Saudi Arabia's 5,000 princes and its great merchant families are indeed rich beyond the dreams of avarice, yet the kingdom as a whole has a per-head income little higher than Mexico's. Unlike Mexico, however, it has no slums or seriously deprived regions, no child malnutrition, practically no single-parent households and virtually no crime.

Thirty years ago an Egyptian diplomat could dismiss his Gulf neighbours as “tribes with flags”. This is no longer true: they are now countries with strong institutions and national identities. With minor exceptions, their borders—long a source of trouble, as Kuwaitis can attest—have been fixed for good. Their economies are the most dynamic in the region. Their business and government leaders are fairly sophisticated and outward-looking.

They need to be. The Gulf may never again see the kind of quantum leap in its fortunes that has transformed it over the past few decades, but it still faces the tough choices Mr bin Byat speaks of. Perhaps the toughest ones are yet to come. The period of nation-building is pretty much over. So, too, is the phase when oil wealth alone could make and keep the region prosperous, as well as insulate Gulf societies from the buffeting winds of globalisation.

This survey will argue that the Arab states of the Gulf, with few exceptions, have been slow to gear up for the problems ahead. This is not to say that they are unaware of what is needed. There is talk everywhere of shifting from quantity to quality in education, of employing more local and less imported labour, of freeing private industry and scaling down the role of the state, of opening up to foreign investment and of speeding regional integration. Several rulers are even giving political rights to their citizens, including women.

But more urgent action is needed. Unemployment has only just surfaced, but will balloon dangerously in coming years as populations continue to grow rapidly. Cradle-to-grave welfare systems will begin to come apart. With prospects for oil revenues flat for the indefinite future, diversification efforts must start now, while coffers are still fairly full. The chances of success would be much improved by an unconditional embrace of open markets and a big shift in government priorities, from planning and production to regulation and arbitration.

Security is another concern. Huddling increasingly uncomfortably under an American umbrella, the GCC states have made little progress towards a joint defence. Given that they hold 45% of the world's known oil reserves, and are close to such emerging regional powers as India, Iran and China, they need to get organised.

Perhaps most difficult of all is the question, in Mr bin Byat's words, of “what to take with you” from the past. Gulf Arabs are proud of their traditions, and have tended to cast them in stone. Resistance to change need not be a bad thing, but the inflexibility of some Gulf societies holds back their potential for growth and for general well-being.

Political reform is vital—if not to sweep away the cosy patriarchies that currently siphon off so much of the region's vitality, then at least to render governments more effective, responsive and predictable. Women must be granted greater equality, whether conservatives like it or not. The new, more educated generation will not put up with the boredom and restrictions their mothers had to endure. And the economic argument against keeping half the workforce idle is conclusive.

And then there is the issue of Islam, swept to the fore by recent events. Since September's attacks on America, Muslims have been hurt by what they see as a wave of undeserved hostility. At the same time, though, few religious leaders in the Gulf have gone out of their way to advocate understanding and acceptance of other faiths and ways of life. Until they do, doubts will linger about the prospects of harmonious relations with that part of the world.

[lds23]

Part One, I will attempt to post the rest with links back here.

[lds23]

Apologies for not being able to post links to all six parts before:

Part One: Time Travellers
Part Two: Middle Earth
Part Three: People pressure
Part Four: No taxation, no representation
Part Five: The Pen and The Sword
Part Six: Beyond Oil

Your forebearance is appreciated.

[DB]

Yet all of this "GDP" growth is due to oil exports, nothing else. That pretty much says it all...