Global Policy Forum

While the 1991 Gulf War is directly responsible for losses amounting to some 600 billion dollars from the gross domestic product (GDP) of countries in the region, the current war against Iraq could trigger the loss of about one trillion dollars worth of GDP, predicts U.N. Under-Secretary-General Mervat Tallawy. ''A dark cloud is covering the whole world and the Arab region in particular,'' Tallawy said on Tuesday. The official, who oversees social and economic developments in 13 Arab countries in her capacity as executive secretary of the Beirut-based Economic and Social Council for Western Asia (ESCWA), said she is terrified of the war's adverse consequences for the region and its crippling impact on Middle Eastern economies. She anticipates job losses alone to be around six to seven million, up from four to five million after the 1991 Gulf War.

Other negative consequences of the war will include falling levels of investments, sharp decreases in tourism, increased military spending (which in the Middle East has been twice the world average), increases in insurance costs and declining trade between Arab countries. Further losses will result from the cessation of bilateral commercial agreements between Iraq and a number of Arab countries, and the environmental degradation caused by the use of highly destructive weapons, including cluster bombs and depleted uranium, said Tallawy.

The war against Iraq, she pointed out, has come to a region that has been embroiled in disputes for over 50 years, affecting Palestine, Lebanon, Syria, Egypt, Kuwait and Iraq. These conflicts have had ''an obvious impact on the peoples of the region and on the development process of their countries''. For example, the World Bank says that since the uprising in the occupied territories in September 2000, the Palestinian economy has continued to decline, with gross national income per capita falling by nearly half. Over 50 percent of the Palestinian workforce is unemployed, while 60 percent of the population of both West Bank and Gaza live under a poverty line of two dollars per day. The numbers of the poor have tripled, from 637,000 in 2000 to nearly two million today.

In its semi-annual World Economic Outlook released last week, the International Monetary Fund (IMF) said that many Middle Eastern nations, such as Saudi Arabia, have benefited from higher oil prices in recent months. But the regional security situation continues to dampen economic activity in the region, particularly in countries with close economic ties to Iraq, such as Syria and Jordan, the IMF said. Additionally, Israel, Egypt and the occupied territories of West Bank and Gaza have also taken heavy blows. Last weekend finance ministers from the G7 most industrialised countries agreed to work with the World Bank and IMF to rebuild Iraq, after a supporting resolution is passed by the U.N. Security Council. According to an ESCWA report released last year, the region's GDP was expected to grow by around 2.0 percent last year, the same as in 2001, but down from 4.5 percent in 2000. Growth for 2003 could be less than 2.0 percent, it said.

The world's largest oil reserves, totalling 650 billion barrels, are in five Middle Eastern nations: Saudi Arabia, with 259 billion barrels, Iraq (112 billion barrels), United Arab Emirates (98 billion), Kuwait (94 billion) and non-Arab Iran (90 billion). But according to ESCWA, total oil revenues in the Middle East declined to 128.6 billion dollars in 2001, down from 165.6 billion dollars in 2000. Tallawy said that in the past 10 years, average per capita income in the Arab region has been the lowest in the world, ''largely because of the fall in the price of oil''. The current war's adverse effects on the U.S. economy could pale compared with those on hard-hit Middle Eastern countries close to Iraq, said Jeffrey Sachs, director of the Earth Institute and professor of sustainable development at New York's Columbia University. Sachs, who is also an adviser to U.N. Secretary-General Kofi Annan, predicted that these countries ''are likely to be viewed as less hospitable places for foreign investment''.

Turkey suffered drastic economic losses after the 1991 Gulf War due to the collapse of trade with Iraq and a decrease in foreign investment, as companies exited the Middle East for regions viewed as more stable, he added. In an article in the 'New Republic' magazine, Sachs also wrote, ''This time, Turkey is bracing for another economic disruption as a result of war, and the potential costs of caring for thousands of Kurdish refugees fleeing Iraq.'' Addressing a meeting of the world's finance ministers at the United Nations on Monday, Secretary-General Kofi Annan said there are ''serious concerns about the economic impact of the conflict in Iraq, particularly on developing countries''.

Unemployment has risen significantly around the world, he added, while households and entrepreneurs almost everywhere are concerned about their future and are hesitant to make long-term decisions. ''We must all do our part to rebuild global confidence,'' he added. But Germany's federal minister for economic cooperation and development, Heidemarie Wieczorek-Zeul, said the problem is how the world's money is spent. How is it possible for billions of dollars to be easily mobilised for a war on Iraq when the bigger battle for poverty has been starved of funds? she asked the U.N.'s economic and social council.

The U.S. Congress has already authorised over 80 billion dollars to pay for the war on Iraq. ''The world needs to prevent wars. It does not need so called 'pre-emptive' wars. They are against international laws,'' she added, taking a dig at the newfound U.N. doctrine. ''Already, we have seen a rise in worldwide arms expenditure, from 761 billion dollars in 2000 to 839 billion dollars in 2002.'' That has to stop, Wieczorek-Zeul said, and the international community has to re-start its war - but against poverty, hunger, disease, illiteracy and environmental degradation.

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