The Arab Markets Are Suffering Too (Updated)

Apparently there is more to maintaining an economy than just pumping oil:

Stock markets across the Arab world experienced unprecedently sharp losses when trading began following the Id al-Fitr holiday earlier this week. The seven stock markets in the oil rich Gulf states shed around $150 billion of their capitalization in the course of the week.

The market in Saudi Arabia sank by 7 percent. In Egypt, the key index fell by around 16%. One Saudi economist quoted by Agence France Presse described the latest developments as a "catastrophe." For a number of reasons, the Arab world may well prove particularly vulnerable to the world economic downturn. This fact has political implications for the region, which are already being glimpsed and acted upon by various regional forces.

The first and most obvious reason why the Arab world is particularly vulnerable to the financial crisis is that a disproportionately large amount of Arab wealth is invested in global stock markets. Since the 1970s, the Arab world (or parts of it) has enjoyed a long windfall of oil wealth.

...Instead of investing in education, especially in cutting-edge fields such as information technology, and in industry, money has been gambled on the stock markets, or invested in glittering real-estate projects, built by foreign labor and using foreign know-how.

According to a poll by Al-Manar 84.5% think the current economic crisis in the US indicates the beginning of the 'fall of the US empire'. Maybe they should be looking closer to home:

On its first day of trading following a weeklong series of religious and national holidays, the Cairo and Alexandria Stock Exchange's benchmark CASE 30 index was down by over 16.4 percent, to 5,896.8, a drop that analysts attributed to the bourse reacting to precipitous slides in other world markets over the past few days.

So far this year, the CASE has been down over 4,650 points, or 44 percent. [emphasis added]

For all their wealth, the Arab billionaires are still amateurs--and the Arab people pay the price.

UPDATE: David Hazony explains why Israel is weathering the storm better.

Technorati Tag: Arab World.