• Decline in Labour Productivity
  
• The Basic Parameters
  
• The Deficits
  
• The Way Forward
  
• Arab Economies Need Rapid Growth–From a Strong Knowledge Base
  
• The Arab World: Let the Numbers Speak!
  

Highlights

The Arab Human Development Report 2002 places people squarely at the centre, as both subject and object of development in all its dimensions: economic, social, civil, political, and cultural. It provides a neutral forum to measure progress and deficits, propose strategies to policymakers, and draw attention to country problems that can benefit from regional solutions. It is guided by the conviction that solid analysis can contribute to the many efforts underway to mobilize the region’s rich human potential.

There has been considerable progress in laying the foundations for health, habitat, and education. Two notable achievements are the enormous quantitative expansion in educating the young and a conspicuous improvement in fighting death. For example, life expectancy has increased by 15 years over the last three decades, and infant mortality rates have dropped by two thirds. Moreover, the region’s growth has been “pro-poor”: there is much less dire poverty (defined as an income of less than a dollar a day) than in any other developing region.

But there have been warning signals as well. Over the past twenty years, growth in per capita income was the lowest in the world except in sub-Saharan Africa. At an annual growth rate of 0.5% annually, if such trends continue in the future, it will take the average Arab citizen 140 years to double his or her income, while other regions are set to achieve that level in a matter of less than 10 years.

Decline in Labour Productivity

Labour productivity has been low and is declining. In fact:

• 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%.

From a human development perspective, the state of human development in the Arab world is a cause for concern.

Per capita income is still higher than that of most other developing regions. However, while Arabs outperform sub-Saharan Africa and South Asia in terms of human development, they rank below Latin America and the Caribbean as well as East Asia on the Human Development Index (HDI) in the Global HDR, as is seen in Figure 1.

Figure 1: Position of the Arab region vis-à-vis other regions in the world on human development indicators, 1998

Achievements by the Arab region on the Human Development Index (HDI) in the past decade were lower than the world average. Relative to other regions, the Arab world does better on income indicators than on development indicators. Thus it can be said that the Arab region is richer than it is developed. Although income poverty is low compared to other parts of the world, the Arab region is hobbled by a different kind of poverty - poverty of capabilities and poverty of opportunities. These have their roots in three deficits: freedom, women’s empowerment, and knowledge. Growth alone will neither bridge these gaps nor set the region on the road to sustainable development.

The richest Arab countries owe their wealth to oil, but the Arab HDR suggests that this is a mixed blessing. Oil revenues are not always reinvested productively in the country, let alone in the region.

The richest Arab countries owe their wealth to oil, but the Arab HDR suggests that this is a mixed blessing. Oil revenues are not always reinvested productively in the country, let alone in the region.

And when such revenues are used in physical capital formation they contribute little to growth, as efficiency still suffers. As the Report notes, a very large investment in fixed capital formation of over 3000 billion dollars, over the past 20 years, has had poor returns in per capita income, which experienced the lowest growth rate in the world apart from sub-Saharan Africa.

Arab oil wealth also distorts the global perception of Arab progress. In fact, the GDP of all Arab countries combined stood at just US$531.2 billion in 1999 – less than that of a single medium-sized European country, Spain (US$595.5 billion). Growth in the Arab region has been relatively static for much of the 1990s while other comparable regions have made modest progress.

There is a world of difference between Arab states, when it comes to human development, as Figure 2 reveals. Kuwait, the highest-ranking Arab country on the Global HDI, scored only slightly lower than Canada, which has often topped the Index.

The way forward 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 marginalized members of society. The empowerment of women must be fully addressed throughout.