Economic woes on the war against the Arab states

The war that U.S. leaders claimed would make the world safer may be over, but economic problems at the heart of Middle East instability remain, experts say.

Rapidly growing populations, the concentration of wealth and power in few hands, corruption and economies highly focused on one sector -- oil -- combine to foster political problems.

"Having scores of impoverished and unemployed or underemployed people in the region makes it a fertile recruiting ground for extremists. It's just that simple," said Mahmoud El-Gamal, a professor of Islamic economics at Rice University in Houston.

The economic issues loom as large as the Israeli-Palestinian conflict and regional leaders have long said the two are closely linked.

That is the subject of debate, but experts say there is no disagreement that economic stagnation in the Middle East is a key ingredient in the region's volatile mix.

Arab economies suffer from slow growth, high unemployment, minimal foreign investment and structural problems that impede improving the lives of the region's fast-growing millions.

A United Nations report says the total gross domestic product for Arab states, with a combined population of 280 million, was $531 billion in 1999, compared to $595 billion for Spain, with a population of 40 million.

Unemployment rates in Arab states are generally about 15 percent or more and appear set to grow, with half of the population under the age of 16 -- the most worrisome statistic in a region whose troubles tend to become global.

"You have what I call the double whammy of anaemic economic performance and robust demographics, which has created serious conditions of high unemployment," said U.S. investment banker Hani Findakly at a recent conference in Doha. "This is nothing short of a ticking bomb." The United Nations says oil makes up 70 percent of Arab exports, but the wealth generated by the middle East's vast hydrocarbon reserves is in relatively few hands.