[T]he educational sector accounts for 36 per cent at RO 791 million, i.e. an increase of RO 81 million (or 11 per cent) over the approved budget for the year 2008. Similarly, the health sector accounts for 12 per cent or RO 271 million of the total civil ministries’ expenditure, showing an increase by RO 43 million (19 per cent) over the 2008 allocations. Allocations for the development budget stand at RO 800 million, showing an increase of 10 per cent over the 2008 budget. These allocations are set to cover the ongoing as well as new projects listed in the Seventh Five-Year Plan (2006-2010) under the different sectors. RO 18 million has been allocated to subsidise the interest on development and housing loans provided by the Development Bank, the commercial banks and Oman Housing Bank to the beneficiaries.
Showing posts with label economics. Show all posts
Showing posts with label economics. Show all posts
Sunday, January 4, 2009
Oman's 2009 Budget
The Oman Daily Observer announced the specifics of Oman's 2009 budget. The country anticipates running a larger deficit this year due to an approximately 11% increase in expenditures on the previous year and anticipated lower oil revenues (planned at $45/barrel). Increases come in much needed areas, such as education, healthcare, and road infrastructure according to the Observer. Below are some details. RO x 2.6 = US dollars.
Saturday, August 2, 2008
Arab Economics and Politics
I found this passage to be very helpful in framing some of my thoughts.
From Marcus Noland and Howard Pack, The Arab Economies in a Changing World, (Washington DC: Peterson Institute, 2007):
"Across the region there is a tendency to rely on centralized regulatory intervention to facilitate the creation of economic rents and their channeling to politically preferred groups. By implication, cross-border economic integration, whether globally or regionally, is discouraged: Opening up would imply a loss of control and the concomitant ability to rig the local market to the benefit of regime supporters. All of this militates against a vibrant private sector that could promote increased productivity, employment, and growth. This combination of political illegitimacy and policy intervention makes it difficult for these economies to liberalize: Reform and the erosion of rents could undermine the very basis for political loyalty."
From Marcus Noland and Howard Pack, The Arab Economies in a Changing World, (Washington DC: Peterson Institute, 2007):
"Across the region there is a tendency to rely on centralized regulatory intervention to facilitate the creation of economic rents and their channeling to politically preferred groups. By implication, cross-border economic integration, whether globally or regionally, is discouraged: Opening up would imply a loss of control and the concomitant ability to rig the local market to the benefit of regime supporters. All of this militates against a vibrant private sector that could promote increased productivity, employment, and growth. This combination of political illegitimacy and policy intervention makes it difficult for these economies to liberalize: Reform and the erosion of rents could undermine the very basis for political loyalty."
Thursday, July 17, 2008
Economics, Capitalism, and Political Development
For those who are interested, one of the Economist's blogs is having a "summer book club" discussion of Milton Friedman's Capitalism and Freedom.
As reported by the Gulf News and linked by Emirates Economist, Abu Dhabi, of all places, is having serious fuel shortages these days.
Washington Post reports on Saudi Arabia's plan for a post-oil economy. Major problems are that education is still poor and Saudi manufactures are extremely few.
These are all related. How? I don't really have the time to go into great detail, but the bottom line is that Gulf states have massive economic resources in their hands due to the riches beneath their soils. These states have been able to extract these resources with relatively little effort and development. The knowledge and expertise for this industry was rented, leased, bought, contracted, however you want to look at it, from developed economies. The technical know-how, the instruments, and the educated citizens were bought, brought to Arabia, and turned to at extracting oil. This came at quite a profit to the oil companies and their employees, but also to the state governments themselves. But, critically, in this jump to prosperity, the ruling elites were never forced to build a state: educated citizenry, capable institutions, far-reaching infrastructure, heavy industrial base, and the rule of law and sense of national identity that binds all of these things together.
Like the communist economic system, this state-centric economic system is showing signs of wear and tear as the Abu Dhabi story points out. An oil rich Emirate cannot supply its own citizens with gas because there is no incentive for companies to do so at unfavorable terms. Gulf states are realizing this, and are moving toward greater degrees of privatization, are attempting to improve infrastructure, and are revamping educational curricula. Yet, some of the most important aspects of state-building, the involvement and investment of the citizens, unified under a national identity and respect for the rule of law as enforced by the government, is lacking. This will be a major challenge in the coming years. How do Gulf rulers change their societies to create post-oil economies that employ citizens in a meaningful way and provide them and their government with a powerful income source without giving up the social provisions, price supports, and other handouts upon which they have based their legitimacy? And once citizens are more educated and involved, can the ruling elites keep the tight grip on the press and other levers of power that they now have?
The Gulf over the coming years will be a real-time laboratory in state-building as they attempt to jump to economic prominence that it took other countries centuries to create. While this project is starting with the economy, there is likely to be a great deal of spill-over into the political realm, which is a main topic of Friedman's book. If the Gulf is successful in creating a post-oil economy capable of maintaining some degree of the income it enjoyed from oil, the political sphere is likely to look quite different than it does today.
As reported by the Gulf News and linked by Emirates Economist, Abu Dhabi, of all places, is having serious fuel shortages these days.
Washington Post reports on Saudi Arabia's plan for a post-oil economy. Major problems are that education is still poor and Saudi manufactures are extremely few.
These are all related. How? I don't really have the time to go into great detail, but the bottom line is that Gulf states have massive economic resources in their hands due to the riches beneath their soils. These states have been able to extract these resources with relatively little effort and development. The knowledge and expertise for this industry was rented, leased, bought, contracted, however you want to look at it, from developed economies. The technical know-how, the instruments, and the educated citizens were bought, brought to Arabia, and turned to at extracting oil. This came at quite a profit to the oil companies and their employees, but also to the state governments themselves. But, critically, in this jump to prosperity, the ruling elites were never forced to build a state: educated citizenry, capable institutions, far-reaching infrastructure, heavy industrial base, and the rule of law and sense of national identity that binds all of these things together.
Like the communist economic system, this state-centric economic system is showing signs of wear and tear as the Abu Dhabi story points out. An oil rich Emirate cannot supply its own citizens with gas because there is no incentive for companies to do so at unfavorable terms. Gulf states are realizing this, and are moving toward greater degrees of privatization, are attempting to improve infrastructure, and are revamping educational curricula. Yet, some of the most important aspects of state-building, the involvement and investment of the citizens, unified under a national identity and respect for the rule of law as enforced by the government, is lacking. This will be a major challenge in the coming years. How do Gulf rulers change their societies to create post-oil economies that employ citizens in a meaningful way and provide them and their government with a powerful income source without giving up the social provisions, price supports, and other handouts upon which they have based their legitimacy? And once citizens are more educated and involved, can the ruling elites keep the tight grip on the press and other levers of power that they now have?
The Gulf over the coming years will be a real-time laboratory in state-building as they attempt to jump to economic prominence that it took other countries centuries to create. While this project is starting with the economy, there is likely to be a great deal of spill-over into the political realm, which is a main topic of Friedman's book. If the Gulf is successful in creating a post-oil economy capable of maintaining some degree of the income it enjoyed from oil, the political sphere is likely to look quite different than it does today.
Thursday, May 29, 2008
More on Currencies
News Briefs Oman just posted an article about inflation, which mentioned the same indications I mentioned in an earlier post that the U.S. may be giving a subtle green light to currency revaluation in the Gulf.
A Gulf News article is quoted in the post as saying, "If any country is found to be a currency manipulator, it is required to hold talks with the US government." The GN article goes on to state that only one country, China, has been labeled a currency manipulator and that was fourteen years ago, but this is not mentioned in the NBO post. I think that the verbiage that a country is "required" to hold talks is a bit of an overstatement of the power of the U.S. The U.S. cannot require any country to hold talks against its will, unless there is some sort of treaty obligation. Also, dropping the quote out of the context of the GN article, which also references one provision of the law without providing its legal context, gives a false impression of the evil big brother U.S.
The quote references U.S. Public Law 100-148, "The Omnibus Trade and Competitiveness Act of 1988." In section 3004, it states:
"The Secretary of the Treasury shall analyze on an annual basis the exchange rate policies of foreign countries, in consultation with the International Monetary Fund, and consider whether countries manipulate the rate of exchange between their currency and the United States dollar for purposes of preventing effective balance of payments adjustments or gaining unfair competitive advantage in international trade. If the Secretary considers that such manipulation is occurring with respect to countries that (1) have material global current account surpluses; and (2) have significant bilateral trade surpluses with the United States, the Secretary of the Treasury shall take action to initiate negotiations with such foreign countries on an expedited basis, in the International Monetary Fund or bilaterally, for the purpose of ensuring that such countries regularly and promptly adjust the rate of exchange between their currencies and the United States dollar to permit effective balance of payments
adjustments and to eliminate the unfair advantage."
China, for comparison, has a significant bilateral trade surplus with the U.S.: $256 billion in 2007. Oman had a trade deficit of $18.4 million in 2007. UAE's trade deficit was $10 million. Saudi Arabia, due to its oil exports I imagine, had a trade surplus of $25 billion. Bahrain has a very small trade surplus. Therefore, the provisions of the U.S. law, which are not binding on the Gulf countries, do not even apply in the case of most GCC countries. I believe it would be extremely hard to label any GCC state as a currency manipulator in the case of a revaluation anyway. For instance, Kuwait does have a trade surplus of $1.6 billion, but it has already revalued its currency and has not gotten any wrist-slaps from the U.S.
So, I think that the U.S. was encouraging the Gulf countries to hold out on revaluation as long as they could, but the writing is on the wall at this point. And "encouraging" is probably a lot more accurate regarding U.S. power than "requiring." Perhaps I'm wrong, but I think that the U.S. asked and the Gulf leaders decided to oblige up to a point. If anyone has any insights or corrections to my economic ramblings (I'm on thin ice with my economic knowledge here) please comment.
A Gulf News article is quoted in the post as saying, "If any country is found to be a currency manipulator, it is required to hold talks with the US government." The GN article goes on to state that only one country, China, has been labeled a currency manipulator and that was fourteen years ago, but this is not mentioned in the NBO post. I think that the verbiage that a country is "required" to hold talks is a bit of an overstatement of the power of the U.S. The U.S. cannot require any country to hold talks against its will, unless there is some sort of treaty obligation. Also, dropping the quote out of the context of the GN article, which also references one provision of the law without providing its legal context, gives a false impression of the evil big brother U.S.
The quote references U.S. Public Law 100-148, "The Omnibus Trade and Competitiveness Act of 1988." In section 3004, it states:
"The Secretary of the Treasury shall analyze on an annual basis the exchange rate policies of foreign countries, in consultation with the International Monetary Fund, and consider whether countries manipulate the rate of exchange between their currency and the United States dollar for purposes of preventing effective balance of payments adjustments or gaining unfair competitive advantage in international trade. If the Secretary considers that such manipulation is occurring with respect to countries that (1) have material global current account surpluses; and (2) have significant bilateral trade surpluses with the United States, the Secretary of the Treasury shall take action to initiate negotiations with such foreign countries on an expedited basis, in the International Monetary Fund or bilaterally, for the purpose of ensuring that such countries regularly and promptly adjust the rate of exchange between their currencies and the United States dollar to permit effective balance of payments
adjustments and to eliminate the unfair advantage."
China, for comparison, has a significant bilateral trade surplus with the U.S.: $256 billion in 2007. Oman had a trade deficit of $18.4 million in 2007. UAE's trade deficit was $10 million. Saudi Arabia, due to its oil exports I imagine, had a trade surplus of $25 billion. Bahrain has a very small trade surplus. Therefore, the provisions of the U.S. law, which are not binding on the Gulf countries, do not even apply in the case of most GCC countries. I believe it would be extremely hard to label any GCC state as a currency manipulator in the case of a revaluation anyway. For instance, Kuwait does have a trade surplus of $1.6 billion, but it has already revalued its currency and has not gotten any wrist-slaps from the U.S.
So, I think that the U.S. was encouraging the Gulf countries to hold out on revaluation as long as they could, but the writing is on the wall at this point. And "encouraging" is probably a lot more accurate regarding U.S. power than "requiring." Perhaps I'm wrong, but I think that the U.S. asked and the Gulf leaders decided to oblige up to a point. If anyone has any insights or corrections to my economic ramblings (I'm on thin ice with my economic knowledge here) please comment.
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