World Bank tells Mideast to use oil cash on new jobs

JEDDAH - A cash bonanza from higher oil prices will not create millions of jobs needed in the Middle East unless governments make tough reform decisions to reduce their dependence on energy, the World Bank says.

The bank's top Middle East official, Christiaan Poortman, said some countries had insulated their economies against oil price crashes by cutting debt and spending, and creating rainy day funds.

But the region needed to do more to create the up to five million new jobs needed a year.

"Some countries need to get their growth rates up," said Poortman.

Oil producers needed to create growth that was more labour intensive, "because oil brings in a lot of money but doesn't create too many jobs".

World Bank estimates showed Middle East growth at a healthy 6 per cent in 2003 and 5.8 per cent last year. The bank predicts growth of about 4.8 per cent this year and next.

Much of that has been fuelled by rising oil prices.

US crude hit a record US$55.67 a barrel late last year and prices remain close to US$50 a barrel.

Poortman said states must spend money on revamping education to give job-seekers useful skills in an environment where bloated civil services no longer automatically hired graduates.

"The oil boom provides new financing to all of these countries and, in a sense, decreases the urgency for reform," he said.

"We are arguing the opposite for everyone, including Saudi Arabia."

Red tape and other obstacles to domestic and international investment should be removed, and more countries should look to industries such as services and tourism to create jobs.

"There is a receptive ear to this but, for many of them, it is a feeling of how to go about it," Poortman said.

"Sometimes it also requires a dismantling of vested interests.

"Delaying reform during good times should not continue and we hope this time the circle will be broken."

Poortman said international donors that pledged billions to aid war-shattered Iraq had been slow in honouring their pledges because the security situation made it hard to execute projects.

Aid work has been hampered by kidnappings and killing of Iraqis and others aiding the reconstruction.

Poortman said his mission in the region was also to lobby cash rich oil producers to contribute to the World Bank's development funds - including the International Development Association - for needier countries.

- REUTERS