Threat of financial crisis has not gone away, WEF warns
Threat of financial crisis has not gone away, WEF warns
The WEF’s global competitiveness report — its annual ranking of the strength of 137 economies around the world — warns that 10 years on from the global financial crisis, “the prospects for a sustained economic recovery remain at risk due to a widespread failure on the part of leaders and policy-makers to put in place reforms necessary to underpin competitiveness and bring about much-needed increases in productivity.
“Levels of ‘soundness’ have yet to recover from the shock of 2007 and in some parts of the world are declining further. This is especially of concern given the important role the financial system will need to play in facilitating investment in innovation,” the WEF added.
The economies of the Middle East and North Africa improved their average performance in the first half of 2017, despite challenges mainly from the decline in energy prices. The most improved country in the region was Egypt, up 14 slots to 101 in the world.
“Low oil and gas prices are forcing the region to implement reforms to boost diversification, and heavy investments in digital and technological infrastructure have allowed major improvements in technological readiness. However, these have not yet led to an equally large turnaround in the region’s level of innovation,” the WEF said.
The UAE was again ranked top of the regional rankings, at 17th, down one slot from last year. Saudi Arabia was ranked 30th, also down one position.
Qatar fell by seven positions to 25th, though the WEF noted that the report was compiled before the economic effects of the economic sanctions introduced by some of its Gulf neighbors because of allegations of terrorism funding.
“The country will have to ensure better access to digital technologies for individuals and businesses, and further strengthen educational institutions,” the WEF said.
On Saudi Arabia, the report said: “The macroeconomic environment has improved slightly after the 2015 oil price shock, but financial market efficiency has deteriorated as interest rates increased in 2016 and credit growth slowed.
“The country has stable institutions, good-quality infrastructure, and the largest market in the Arab world. Saudi executives see restrictive labor regulations as their most problematic factor for doing business: The labor market is segmented among different population groups, and women remain largely excluded,” the WEF added.
Another concern is the lack of adequately educated workers. Although tertiary enrolment is strong at 63 percent, more efforts are needed to advance the quality of education and align it with economic needs, the report said.
The UAE “continues to lead the Arab World in terms of competitiveness, but it loses one place as other countries post even larger gains,” the WEF said.
“This improvement shows the resilience of the UAE economy, in part due to increased diversification, which is reflected in its stable macroeconomic environment and its ability to weather the double shock of lower oil and gas prices and reduced global trade,” the report added.
Although the International Monetary Fund (IMF) predicts gross domestic product (GDP) growth to drop to 1.3 percent this year, non-oil growth is expected to pick up, suggesting that the country’s diversification strategy is bearing fruit. To further increase its competitiveness, the UAE will have to speed up progress in terms of spreading the latest digital technologies and upgrading education.
For the ninth consecutive year, Switzerland — home of the WEF — was judged the most competitive economy in the world, narrowly ahead of the US and Singapore, which switched positions in second and third.
Another key finding of the report is that competitiveness is enhanced, not weakened, by combining degrees of flexibility within the labor force with adequate protection of workers’ rights.
“With vast numbers of jobs set to be disrupted as a result of automation and robotization, creating conditions that can withstand economic shock and support workers through transition periods will be vital,” the WEF said.
The data also suggests that the reason innovation often fails to ignite productivity is due to an imbalance between investments in technology and efforts to promote its adoption throughout the wider economy.
Klaus Schwab, WEF founder and executive chairman, said: “Global competitiveness will be more and more defined by the innovative capacity of a country. Talents will become increasingly more important than capital and therefore the world is moving from the age of capitalism into the age of talentism.”
Oil dividend could turn Libya into North Africa’s Norway
- Production has topped 1.2 million barrels per day
- Outlook improves following agreement with militias
LONDON: As Libyan oil production surges, the country has been noted for having some of the most important oil reserves in the world in terms of quality.
Middle East expert Fawaz Gerges, who is professor of international relations at the London School of Economics, told Arab News that the country had some of the most important oil reserves in the world in terms of quality.
“There is nothing to prevent it from becoming the Norway of North Africa,” he said, referring to the wealthy Scandinavian country that far outstrips the rest of Europe – apart from Russia – in terms of oil production.
With Libyan oil production growing there are hopes that the country’s goal of producing 1.6m barrels per day can be achieved by the early 2020s. Production has topped 1.2 million barrels per day sometimes this year.
The target is technically possible, and it would restore production to levels before the revolution that toppled Col. Muammar Qaddafi in 2011. According to the International Energy Agency, Libya holds Africa’s largest reserves at 48.4 billion barrels.
The country still faces huge obstacles, not least civil strife and political instability. But even so Libya’s National Oil Corporation (NOC) recently disclosed that oil and gas revenue in the first half of 2018 had reached $13.6 billion, more than for the whole of 2017.
A significant factor behind this performance has been the rise in the oil price. But there is more than that to the Libyan oil story, experts said.
In an interview with Arab News, Nicholas Fitzroy, Middle East analyst at the London-based Economist Intelligence Unit (EIU) said NOC had managed to reopen key oilfields by forging security deals with militias. This has paved the way for a marked increase in production over the last 12 to 18 months.
“There has been a skewing of production data,” said Fitzroy. “Early 2017 showed output of around 600,000bbl/d against about 1million bbl/d in early 2018. The upswing follows the resumption of production from some of the country largest oilfields as accords with militias have taken hold.”
A recent EIU paper said: “The implications for Libya’s economy are wide-reaching, given the vital importance of oil exports to both the current and fiscal accounts — oil makes up more than 90 percent of both government and export revenue.
“Even though further security-related disruptions are likely to weigh on production, Libya’s oil sector has shown a capacity to recover in a short space of time.”
Fitzroy was doubtful that the NOC target to raise production beyond pre-revolution levels of 1.6m bbl/d, let alone to 2.2m b/d by 2023, would be possible. He added that investors and foreign investment were desperately needed.
Fitzroy said: “Any gains they achieve from here will be much harder. Their oilfields need significant investment to boost production further. Also, there are frequent breakdowns in power supply, and the threat of disruption as rival militias try to control oil terminals or pipelines. This can lead to fighting, as happened in July (when 700,000bbl/d was lost at one point).”
Gerges described Libya as one of the richest countries in the world in terms of the ratio of resources to its population “(But) without a central government, without a constitutional agreement among the various stakeholders, no amount of money will help Libya to transition to a new peaceful order. Without peace and security, you can never really use the money effectively to modernize the country.”
The Libyan oil outlook has improved since mid 2016 following an agreement between powerful militia chief Khalifa Haftar and the NOC designed to keep oil running to export terminals via Libya’s pipeline network which is in reasonable shape, according to Fitzroy. The EIU was considering raising its 2018 forecast of an average of 915,000bbl/d, according to one of its reports this year.
Meanwhile, the focus is on political developments. Outside powers hope that Libya’s chaos will be eliminated by elections for a new, united, government to end the east-west split between Libya’s UN-backed Government of National Accord in Tripoli and a rival House of Representatives parliament in Tobruk. In May, talks in Paris hosted by French president Emmanuel Macron saw key Libyan leaders set December as the election date.
But according to a report this week by Petroleum Economist: “Preparations are lagging, and the surge of recent violence has seen UN envoy Ghassan Salame suggest that the election might be scrubbed.”
That would push targets for Libyan oil production, most of which is exported, even further into the future, said analysts at Thomson Reuters in London.