Mahmoud Sabit at PostGlobal

Mahmoud Sabit

Cairo, Egypt

Mahmoud Sabit is a historian and an authority on Egypt’s 19th century political reforms. Sabit also works as a writer and producer of historical documentaries. Close.

Mahmoud Sabit

Cairo, Egypt

Mahmoud Sabit is a historian and an authority on Egypt’s 19th century political reforms. more »

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Costly Oil and Unrealized Markets Hurt Asia

Cairo, Egypt - When discussing the economic relationship between the Middle East and Asia one is discussing oil. Other aspects to their relationship include finance, construction, development, and the potential for the Middle East to be an emerging export market.

An ongoing conflict in the Middle East will promote economic instability in Asia because of the reliance of the larger economies -- China, Japan and India -- on Mideast oil. China with its accelerated growth of energy-related imports relies on the Middle East for 58% of its energy imports. It is predicted that this shall expand to 70% by the year 2015. Japan relies on the Middle East for 90% of its energy imports. India is also a major client for Middle Eastern oil, importing something like 32% of its energy needs from the Middle East.

The crisis has affected oil prices and they have been fluctuating around the $72.00 per barrel figure. This is a sharp increase from the price it was before Hamas was voted into the leadership of Gaza. Then it was at $61.00 per barrel. The impact of rising oil prices on the economies of Asian countries is obviously negative.

In addition to oil there is the added factor of the Middle East as a consumer market. The consumer base in the region has been steadily growing, outside of Saudi Arabia and the Gulf countries where the consumer base is already high, although the populations themselves are much lower. Jordan has seen significant growth in this sector and Egypt has also seen an increase in its consumer base. Egypt's population is 70 million and counting; its economic potential can be immense. As an example, when Egypt had a freewheeling economy in the mid 1950's -- before its era of socialist engineering -- its economy was in high growth.

In economic terms it was a nation ahead of Greece, ahead of Portugal and a little behind Italy. Its economic downfall in the 1960's and early 1970's is slowly being rebuilt through its free market policies. It has real potential. In short the Middle East has a great deal of growth potential. It is a region with a population of about 400 million, similar in population size to Europe, yet with a balance of trade, including oil, equal to Holland's or Belgium's balance of trade with the U.S. With an emerging consumer base these numbers will grow exponentially.

But with a situation in the Middle East lurching between crisis and short periods of calm, this potential is curtailed. Economic instability can lead to social discontent, which becomes caught in vicious cycles. Asia has been quick to expand its exports to reach these consumer populations. With the present crisis these efforts are inevitably retarded, with negative results on their bi-lateral trade arrangements. Therefore in answer to the question of Asian prosperity: between the effects of rising oil prices and the unrealized growth potential of consumer exports to the Middle East, Asia will suffer a negative economic effect from this crisis.

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