Reduce dependence on oil revenues: an essential step for economic reform

June 26, 2016 in the media center

Constitute a call to reduce dependence on oil revenues, a necessary step for the launch of the reform package of economic, political and social initiatives. It became clear, decades later, that the widespread reliance on oil revenues missed important economic opportunities for the region. And increased dependence on oil to 99 percent of Iraq's budget, and 80-90 percent of the budgets of other producing countries. Experience shows that experienced by many Arab countries and a few countries continue to pass out to the need for a holistic view of reform to try to get out of the bottleneck. As the invitations calling for the reform of the oil rent economy, important that the reforms also include custom social and political institutions, and by giving an active role of the middle and professional class.

It has emerged over the past years and the experiences of many calls in the area of ​​reducing dependence on oil. There is experience of the UAE, which has expanded significantly in the economy and a successful form of services in the field of tourism, banks and financial markets and the media. These sectors accounted for opportunities for the state to get additional financial income, along with oil revenues. But oil revenues remained accredited to cover the basic expenses of the state and support the new economy when it expands or stumbling.

And put Iran in 2005 «new look for 20 years» ie by 2025. Included expectations ambitious outlook, and growing rapidly, creating new jobs, and diversify economic resources, and the establishment of a new economy based on science and knowledge. But Tehran has not been able to launch outlook with the imposition of international sanctions on the Iranian oil industry and exports, not to mention Banhmak Iran in regional wars. Replace the Supreme Leader Ali Khamenei's outlook slogan «economy of resistance» which aims compelled to reduce dependence on oil.

In Iraq, after the reconstruction council's experience in the early fifties that transformed the oil rents the whole first and then part of it to infrastructure projects and stopped with the 1958 revolution, turning oil revenues entirely to the annual state budget to cover pension security and military forces. And prompted decades of bitter experiences to repeat economists and petroleum call for the need to diversify the resources of the state, most recently it was a warning and former oil minister Adel Abdul-Mahdi, who said in an article in the newspaper «justice» Baghdad on 6 April 2015: «The country has left itself depends entirely on oil, which in turn depends on the vagaries of oil prices. The increase in the dollar, means an additional billion dollars a year at current rates of export, while getting a billion dollars a year requires an increase of 250 thousand barrels per day rates current prices. There is no price can go up rates save us, nor production and exports could skyrocket such rates without massive investment and a great money ».

Abdul-Mahdi and concluded that «the basis of economic and financial crises is a rentier state and sagging and excessive expenses and non-diversity resources and launching activities in various sectors. We believe that the awareness of these issues is still a formality, and that the actions taken quite far, not to say that some of them moving in the opposite direction, what should be applied as policies College offers a qualitative change in the nature of the economic system and rent-seeking monopolist present. The crisis did not enter the houses of the decision-makers to realize that time is running out, and stay when prosthetic solutions, will not put the country on the road to real reform, and will continue to grumble and anger without sustained serious solutions. »

In Saudi Arabia, called Crown Crown Second Deputy Prime Minister and Defense Minister Prince Mohammed bin Salman in recent months «see Saudi Arabia in 2030» ambitious plans to reduce their reliance on Saudi oil revenues and diversification of alternative sources of income. The vision now under consideration for the development of Applied plans in the most important oil country in the world. And all eyes to how they are applied, because of their internal, regional and international importance. And vision to address both the economic and social aspects of petroleum and, after many decades of dependence on oil revenues and in the light of the current regional crises.

These initiatives launched multiple calls in different atmospheres: The UAE taken by the gradually, and Iran foundered in performance because of the political fallout. In Iraq, it did not find an invitation and former oil minister any local echo endangered because of the country's political risks and rampant corruption in the form of an unprecedented way. In Saudi Arabia, the field remains open for the success of the vision thanks to the internal and economic stability, investment and diagrams drawn. The challenge the president in all of these initiatives, the extent of success in the transformation of an economic era to another. Dependence on oil rents exempts citizens from the responsibility of state funding, and without total reliance on rents, the citizen bears responsibility in funding through taxes and paying an economic price for services. This is a big shift stems in financial responsibilities of the citizen and the extent of his participation in the decision-making.

The question remains: What is the time required to change the structure of the economy? What are the obligations of the oil-producing countries to global markets with a change of dependence on oil revenues? What is the extent of influence in the powers of the legislative, executive and judicial institutions of the state? To what extent rely on university graduates and professionals in the application? What is the role of the private sector? To what extent the possibility of merging multiple segments of society in a society in which citizens have equal rights and responsibilities before the Constitution and laws? And the possibility of eradicating the epidemic of corruption? What are the economic alternatives for each country - industry knowledge, or the production of consumer goods, or agriculture?