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Economies need more than just oil

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Scott Jagow: Did you see what happened to oil prices yesterday? They climbed $5 to a new record — almost $105 a barrel. Oil’s still close to that this morning. I doubt many Middle Eastern oil producing countries are complaining. But former U.S. Ambassador to the Middle East, Dennis Ross, says oil doesn’t make an economy whole.

Dennis Ross: For many Americans the Middle East is defined very simply: it all boils down to oil.

Most countries in the region don’t have fossil fuels. But the states in the Arabian Peninsula are awash in oil and natural gas. With oil at roughly $100 a barrel, they are also awash in cash.

Notwithstanding their considerable wealth, development continues to lag in these countries and the rest of the Middle East. In fact, there is not a single Arab state in the top 25 of the World Economic Forum’s most competitive countries.

The Arab states remain a net importer of foreign technology and services. As a rule, their educational systems are geared more toward rote memorization and less towards problem-solving and promoting innovation. Women are too often excluded from the work place. There is very little trade within the region and the wealthy oil states don’t invest in countries like Egypt — which is making efforts to transform its economy. Instead, they try to grow their money but in the United States, Europe, and increasingly China.

The Arab oil states understand their predicament. They are seeking to diversify their economies. They are trying to upgrade their approach to education, even beginning to import American universities.

They are seeking to introduce greater transparency into their economies as they further develop their financial services sector. And we’re even beginning to see these states foster greater interest in regional trade with an eye towards building the capabilities of Arab producers and exporters.

However, we need to see much greater investment in local research and development, as well as female empowerment in the workplace. Until that happens, don’t expect an early transformation.

Still, the Arab oil states have huge capital sums available for investment. I suspect Abu Dhabi and other sovereign wealth funds will continue to invest heavily in Citigroup and other Western financial institutions.

But we may also begin to see new investments geared towards regional or local development — and with a demographic timebomb of maturing young people demanding far greater job creation in the Middle East, that is necessary and long overdue.

Jagow: Commentator Dennis Ross is a distinguished fellow at the Washington Institute for Near East Policy.

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