The uprising in Egypt following Tunisia’s revolution demands a rapid look at the reforms Middle Eastern countries should make to address the urgent problems of their populations.
This is not an easy proposition as evidenced by the complete lack of ideas coming from the U.S. regarding what to do about Egypt.
The flight of foreign capital from Egypt will and is having a bearing on the entire Middle East.
Offshore investors will be uneasy until political stability returns to Egypt, the Arab world’s most-populous country. They will also be watching to see similar political standoffs in other Arab countries, including Algeria, Jordan, Yemen, Morocco and Syria—and it may not stop with just the Arab countries.
Crude oil prices are rising rapidly with Brent crude is almost at $100 a barrel while global benchmark Light Sweet Crude Oil (WTI) hovers above $88 a barrel. This is bound to have an damaging effect on the developed countries of the Western World.
Oil output in Saudi Arabia has risen to around 8.4 million barrels per day, well above its official OPEC allocation of 8.05 million. OPEC oil ministers meet in February and could raise output to hold down prices, which would be of great help to the net purchasers of oil like the U. S.
Currency rates in the Gulf countries are tied to the U.S. dollar. Consequently the U.S. dollar, viewed as a safe haven, is likely to remain strong even if tensions persist or escalate in Egypt.
The events in Egypt are a wake-up call to governments across the Middle East forcing them to tackle the problems of unemployment and income levels, and have shed light on the need to re-build the middle class, which has shrunk in size in most countries over the past decade—including in the U.S.
Emboldened by the success of Tunisians to oust their 20-year billionaire ruler, Egyptians are demonstrating against their soaring cost of living, growing poverty and mounting unemployment.
According to the UNDP, at least 90% of those unemployed in Egypt are under the age of 30. Inflation in Egypt has held in double-digit levels for about three years – surpassing 20% in many months in 2008; even now food inflation is around 17%.
Even a country like Saudi Arabia suffers from an unemployment problem. Unemployment among Saudi nationals rose to 10.5% in 2009, including 30.2% youth unemployment—not what one might expect.
Though the luck of oil, per capita income is much higher in the Gulf than it is in Egypt. Saudi GDP per capita was $16,039 in 2010—compared with about $2,500 in Egypt. Still, Saudi Arabia’s private sector is not creating enough jobs for Saudi nationals, who comprise only about one of every 10 employees in its highly skewed economy. Just like the U.S., Saudi Arabia gives away jobs to foreign nationals.
The entire Middle East including the Gulf oil exporting countries is being dragged into the 21st century.
Beyond that, the rapidly rising cost of food and unemployment will spur similar revolutions in Africa, and even throughout the developed countries of the Western World – beginning of the end for the status quo?