ARAB AFFAIRS - July 2 - 1st Arab Human Development Report.

The UN releases in Cairo its first Arab Human Development Report (HDR) 2002, after 18 months of research, sponsored by the UN Development Program (UNDP) and the Arab Fund for Social & Economic Development (AFESD). It says one out of every 5 Arabs lives on less than $1/day. It concludes that the cause of economic stagnation in the Arab world lies in the dearth of democracy, proper education and empowerment of women. Dr. Clovis Maksoud, a former Arab League ambassador to the UN and a member of the advisory board for the report, was on July 6 quoted by the Daily Star in Beirut as saying: "The report has elevated the discourse from discussion of political manipulation to issues about accountability, and it points out the corrosive effect of corruption". He and the rest of the report's UN-commissioned team brought the study to Beirut on July 4, with Lebanon being the current chair of the Arab League's annual summit. The report states: "There is much less dire poverty (income below $1 per day) than in any other developing region". But in the Arab world there is a poverty in empowerment and opportunities. Maksoud said: "We are a rich nation of poor people. We have to work hard lest we become a poor nation of poor people". The report shows that growth in per capita income in 2000 was the lowest in the world except for sub-Saharan Africa, and if this annual rate of 0.5% were to continue, it would take the average Arab 140 years to double his or her income, while other regions are geared to reach this level in less than 10 years. The following are highlights of the report:

Arab investment in research is less than one-seventh of the world average, while internet connectivity is lower than in sub-Saharan Africa. Around 65 million adult Arabs, 23% of the 280m Arab population, are illiterate, two-thirds of them women. The report's freedom index ranks the Arabs at the bottom of the world's seven regions.

Maksoud said: "Governments in the Arab world are legal, but their legitimacy is questionable and that cannot be sustained. If it is sustained it will lead to frustration, and frustration leads to explosion... While we seek stability, it should not be an excuse for stagnation. Arabs may once have conquered Spain culturally and economically. But today Spain's GDP is bigger than that of all the 22 Arab countries combined, and the 100,000 or so books translated by Spain each year is just about the number the Arabs have translated since the reign of Caliph Mamoun in the ninth century". Maksoud added: "Growth, if not coupled with freedom and literacy, becomes a distorted development...even at the level of creative contribution in literature, art, film-making... The report considers development in a holistic way.

While economic growth is an important determinant for development, it is not necessarily a precursor for development".

The Arab world's stagnation is becoming ever more serious as its population grows; figures are set to rise from the current level of 280m people up to 459m by 2020. This is the outcome of the Arab world's development policy in the last three decades, which has lengthened life expectancy by 15 years and lowered infant mortality rates by two thirds. These have left the Arab world with a young population; it currently has the largest proportion of people under age 14, at nearly 40% of the total, in the world. These statistics translate in strong migratory tendencies for the young, unless some local work opportunities crop up in the near future. The report adds: "If Arab youths are not given better opportunities, they will grow up stunted, literally, in size, since in some countries more than half of the population is stunted through malnutrition. They will also grow with stunted horizons compared to the rest of the world's children". Arab youngsters, according to the report, are nearing the abyss, particularly as half the young - those aged between 13 and 20 - polled by the report in 2001 wanted to immigrate.

"The Arab-Israeli conflict", the report says, "is both a cause and an excuse for distorting the development agenda. While the conflict has created serious refugee and economic problems, Arab governments have long used it as an excuse not to undertake economic policies. But excuses and missed opportunities are common to the region.

According to the report, fixed capital investments going up to $3 trillion over the past 20 years "have had poor returns in per capita income", accounting for the Arab region's having the lowest growth rate outside sub-Saharan Africa. Other than bad management of resources, the Arab world is also suffering from unequal distribution of wealth.

Kuwait, the highest-ranking Arab country on the global HDI (Human Development Index), scored only slightly lower than Canada, which has often topped the index. The worst-scoring Arab country, Djibouti, is not better off than Sierra Leone, which has the world's lowest HDI value.

Maksoud said this report's message was targeted at both governments and people, showing what the end-game might be if the same trends continue. He added: "The report has shown that Arabs think, know and now they want to act. Do governments know and want to act? That is what we have to discover". Below are facts highlighted by the report:

- The combined GDP of all 22 Arab countries stood at $531.2 bn in 1999, less than Spain's $595.5 bn.

- 1.2% of Arabs can access computers; half that use the internet.

- 15 Arab countries are below the water poverty line of less than 1,000 cubic meters per person per year.

- The Arab world translates about 300 books annually, one-fifth of the number that Greece translates.

- More than half of Arab women cannot read or write. Women occupy 3.5% of parliamentary seats, the lowest in the world outside sub-Saharan Africa.

- Scientific expenditure in the Arab world was less than 0.5% of GDP in 1996, lower than Cuba.

Total factor productivity declined at an annual average of 0.2% during 1960-1990, while it rapidly accelerated in other parts of the world. Compared to the Asian Tigers, per capita output was higher than the average of this group in 1960. Now it is half that in Korea. The productivity of Arab industrial labour in 1960 was 32% that of the North American level. By 1990, it had fallen to 19%. The decline in workers' productivity has been accompanied by deterioration in real wages, which has accentuated poverty. In both quantitative and qualitative terms, Arab countries have not developed as quickly or as fully as other comparable regions. The state of human development in the Arab world is a cause for concern.

The way forward, the report says, involves tackling human capabilities and knowledge. It also involves promoting systems of good governance, those that promote, support and sustain human well-being, based on expanding human capabilities, choices, opportunities and freedoms (economic and social as well as political), especially for the currently poorest and most marginalised members of society. The empowerment of women must be fully addressed throughout.

A key driver of change would be a transformation in attitudes and societal incentives to support greater creativity and innovation. The rules of the social game need to be modified to provide incentives for embracing change and to afford real opportunities for social recognition, renewal and advancement to those who work in areas of knowledge.

Investing in knowledge begins by setting a clear agenda for investment in science and technology and R&D. The share of R&D should be increased from the current level of less than 0.5% of GDP to 2% by the end of the decade. The region can capitalise on economies of scale while addressing pan-Arab concerns, for example, in areas relating to water scarcity, oil, health, codes and standards, and other common needs. Arab governments and institutions should tap the expertise of the one million highly qualified Arabs working in industrialised countries.

The report emphasises the need to mobilise the private sector within an enabling policy and regulatory environment. In addition, the private sector should be engaged, together with government and academia, in R&D, and focus on human-intensive rather than capital-intensive R&D, particularly "knowledge sciences" such as IT, mathematics, theoretical and device physics, and economics. Governments should disengage from productive activities while strengthening their regulatory role to ensure openness and competitiveness. The objective should be to encourage global and not just regional competitiveness. The bottom line is that domestic markets are too small to provide the basis for sustainable growth based on manufacturing and services. For this reason, the most viable response to globalisation is openness and constructive engagement in which Arab countries both contribute to, and benefit from globalisation. Hence the goal of inter-Arab integration has become critical, to survive and compete, through creation of a customs union or a common market. Arab co-operation can bring added value if the region focuses on a small number of specialised centres of excellence in fields where distinctive capabilities exist. These include water desalination in the Gulf states, computer programming in Egypt and Jordan, the phosphate industry in Morocco and Tunisia, or petrochemicals in Saudi Arabia.

The legitimacy and strength of states and their institutions are inextricably linked to their capacity to mobilise and be mobilised in the fight against poverty. This implies that it is essential to mainstream human development and poverty reduction within national economic policy. Human development is vital to the region's success in reinvigorating economic growth. The basic priority for policy in Arab countries is to create a virtuous cycle whereby economic growth promotes human development and human development in turn promotes economic growth.

Policies that discourage employment creation should be reversed as part of a move towards full employment. Necessary actions include monitoring the labour market and supporting measures for pro-poor human capital accumulation through education, training, and health care systems, and institutional reform.

There is also an urgent need to reverse the feminisation of unemployment by removing gender bias in labour markets, including gender-based occupational segregation and wage differentials, and by addressing gender gaps in the quality and relevance of education and training. Similarly, in efforts to strengthen local capacity to deliver micro-finance services beyond the less than 2% of poor households that can currently access financial services, priority must be given to women entrepreneurs. Overall, social safety nets must be expanded and transfer programmes increased from 0.2% to about 1% of GDP.

Finally, the Report observes that the Arab world is at a crossroads. The fundamental choice is whether its trajectory will remain marked by inertia, as reflected in much of the present institutional context, and by ineffective policies that have produced the substantial development challenges facing the region; or whether prospects for an Arab renaissance, anchored in human development, will be actively pursued.