Norms and Values
Problems of Inequality in the Middle East

The driver for the development of the countries of the Middle East should be a benchmark for economic diversification. To do this, it is necessary to create a favourable business environment for attracting FDI by, first of all, improving the quality of state institutions. Within the framework of state industrial policy, it is necessary to support local SMEs — the basis of the region’s economies.

Despite the traditional idea of the unity of the Arab world, the Middle East region as a whole is characterised by a heterogeneous economic, political, social and resource landscape.

The heterogeneity of the Middle East is largely determined by the scarcity of resources, most importantly, access to water. The Middle East is only home to 1% of the world’s renewable fresh water reserves. Most countries in the region rank among the lowest in terms of fresh water access. The lowest rate is in Kuwait, with 7 m3/person per year, the highest is in Turkey (2,885 m3) and Iraq (2,650 m3).

The increase in fresh water consumption in the region due to population growth and urbanisation, as well as the use of water in the economy, has led to less water per capita. According to forecasts, in the 1950 — 2025 period, the provision of water resources per capita will have fallen by almost 85% — from 4,462 m3 to 682 m3. A number of Middle Eastern countries (the Gulf countries, Jordan, Israel, Yemen) meet their needs thanks to the presence of non-renewable groundwater, which is considered a strategic reserve.

In the Gulf countries, 100% of the population enjoys access to water. Oman has the lowest rate: 86% of the rural and 96% of the urban population has access to fresh water; in Jordan, water is available to 98% of the population.

Wealthy countries in the Middle East will be able to eliminate water scarcity through costly seawater desalination projects as well as fresh water imports. For poor countries, however, this option seems unlikely. Against the background of scarce water reserves, the average level of water consumption in the region exceeds the welfare indicator by 9 times. The most serious gap is observed in Kuwait (63 times), and in the UAE (39 times). The average water consumption per capita in most of the Gulf countries is several times higher than the average for the world. The absence of restrictions and water subsidies contribute to further growth in water consumption.

The region suffers not only from water scarcity, but also from the inefficient management of water resources, including the lack of a system of reservoirs for collecting and storing water in most countries, as well as water-saving technologies in industry and agriculture.

A Naïve Scenario for Overcoming Global Inequalities
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There is need for a common understanding of how rich-poor gaps tie in locally with geopolitical, economic and demographic dynamics fuelling tensions and conflicts along class, ethno-racial, gender and sectarian lines.

Another equally important problem in the Middle East is the lack and inefficient use of farmland. For example, in Jordan, where the agricultural sector is an important component of the economy, only 10% of the country’s territory is suitable for cultivation; arable land accounts for 3% of the nation’s territory. On the contrary, in Turkey arable land accounts for 1/3 of the territory of the country. Against the background of the accelerating process of desertification, the countries of the region are increasingly facing food security problems. Wealthy Middle Eastern states solve this problem by increasing the volume of imports of goods, expanding the number and geography of exporters, as well as investing in agricultural land and agribusiness abroad (in countries in Africa, Southeast Asia, Europe, the USA, Australia and Canada). For the poor countries of the region, which cannot even provide stable and diversified grain imports on acceptable terms, such ways of solving the problem seem irrelevant. The inefficient use of land resources affects not only agriculture, but also tourism. Together they are the main economies of many countries in the region.

Not all countries in the Middle East have significant mineral resources. Against the background of the oil monarchies of the Persian Gulf, such states as Jordan, Syria, Lebanon and Yemen are a bit sad-looking. So, in Jordan, except phosphorites, potash salts and insignificant reserves of copper, there are no more mineral resources.

For a long time, the Middle East has remained the region with the highest level of social and economic inequality. In 2016, the share of the top 10% of rich people in the national income was 61% (for European countries, this figure was 37%). There is great inequality not only within the individual countries of the region, but also between the countries themselves. For example, rich Qatar has almost 55 times the per capita GDP of poor Yemen. There is a significant disparity between large cities and coastal areas on the one hand, and rural areas, small towns and areas remote from the sea, on the other. Accelerated urbanisation could help perpetuate existing social stratification: elites will move into closed urban areas, and former peasants and refugees will spontaneously form ghettos on the outskirts, having neither access to urban infrastructure nor the legal status of city dwellers.

The gap between the elites and the main part of the population is complemented by the lack of adequate social mobility, due to the traditional corruption of countries, as well as access to quality education, healthcare, and often to transport. Pedestrian amenities and public transport are very poorly developed in the region, which, as a rule, is limited to buses and fixed-route taxis (the railway network is poorly developed, and passenger transportation is practically non-existent).

One of the manifestations of economic inequality in the Middle East is high unemployment, which stands at about 10%. Among the population aged 15-24, this figure is 26%. In some countries, the situation is even worse: in Egypt, youth unemployment stands at about 30%, in Jordan this figure is 37%, and in Palestine it is 42%. Separately, unemployment among women is worth noting: in Saudi Arabia the rate is 46% and in Egypt it is 38.5%. At the same time, the formal private sector labour market is rather small, which is associated with the poor quality of state institutions, low investment rates and stagnant labour productivity (especially in the industrial sector). With 10-15% or even fewer workers in the formal private sector in countries such as Egypt, Iraq and Yemen, vertical mobility is extremely difficult, and about 40% of university graduates in the Middle East cannot find a job. As a result, the informal employment sector, with its low qualifications, wages and labour productivity “absorbs” a large amount of the labour force. The informal service sector accounts for up to half or more of the GDP of countries that are not major oil exporters.

Women’s emancipation and gender equality are gaining active momentum in the region. Thanks to the digitalisation of the economy, there are new opportunities for the active inclusion of women in economic life. However, progress in this direction has not been achieved everywhere. While Turkey, Israel, Jordan, Lebanon, and the UAE can be called secular states, such countries as Saudi Arabia (despite making significant improvements in women’s rights in recent years) and Iran are not.

The era of the digital economy, with the growth of automation and the development of artificial intelligence, brings with it both new solutions (acceleration of the integration of the region into new global production chains) and new problems for the Middle East. The consequences of the transition to a new technological order will be different for different states. If Israel and the rich Gulf countries can integrate into the new economy without much loss for themselves, then for countries with a relatively large blue-collar segment and with rather low social mobility (Iraq, Iran, Jordan, Turkey), the adaptation process may become more difficult. Thus, automation can lead to the loss of a large number of jobs in traditional sectors and increase polarisation, both between the countries of the region and within individual states. A strong blow to state monopolies and clan economies is possible, which, however, in the future may lead to an increase in the efficiency of the region’s economies. The smart adoption of new technologies can help narrow the existing gap between urban and rural populations by creating additional business opportunities outside urban centres.

The driver for the development of the countries of the Middle East should be a benchmark for economic diversification. To do this, it is necessary to create a favourable business environment for attracting FDI by, first of all, improving the quality of state institutions. Within the framework of state industrial policy, it is necessary to support local SMEs — the basis of the region’s economies.

Views expressed are of individual Members and Contributors, rather than the Club's, unless explicitly stated otherwise.