World's Poor Get Poorer as Result Of Gulf Crisis

By , Staff writer of The Christian Science Monitor

USUALLY overlooked even in the best of times, the world's poorest nations have been the least noticed, but perhaps hardest hit by the crisis in the Persian Gulf. Even before Iraq's Aug. 2 invasion of Kuwait, the frail economies of the world's ``least developed countries'' (LDCs) were reeling from the effects of unemployment, high debt, and declining export prices. In a decade in which many Western economies prospered, poor nations languished.

But since the start of the crisis matters have gone from bad to worse, says a report just issued by the United Nations. The crisis has led to deep cuts in aid from developed nations, tourism, and private remittances from relatives working in the Gulf.

With many LDCs already earning less than they did a decade ago, finding the money to promote economic growth will be more difficult than ever, concludes the report, prepared by the UN Conference on Trade and Development (UNCTAD).

Recommended: Could you pass a US citizenship test?

The 42 nations classified as LDCs have a combined population of 440 million and per capita incomes of less than $200 a year.

Hardest hit by the Gulf crisis have been countries that have relied heavily on remittances from workers in the Gulf region to supplement scarce foreign earnings.

Lost remittances and export earnings, plus the cost of repatriating thousands of workers returning from the Gulf, has left Bangladesh, for example, with $1.4 billion in Gulf crisis-related expenses, the UN report says.

Hundreds of thousands of Yemeni workers expelled from Kuwait and Saudi Arabia, meanwhile, have added to the burden of a country already faced with huge bills from last year's unification of North and South Yemen.

The Gulf crisis has also reduced aid flows to the third world from countries in the Gulf region that are now facing massive reconstruction costs. The slowdown comes even as levels of Western bilateral aid have been reduced because of the worldwide recession and stepped-up demands from Eastern Europe.

Third world economies were also disrupted by the sudden increase in petroleum prices initially caused by the worldwide boycott of oil from Iraq and occupied Kuwait.

The UN report says third-world nations have been particularly vulnerable to the disruption caused by the Gulf crisis because of what a decade-long decline in commodity prices has done to slash export earnings.

A majority of LDCs rely on agricultural commodities for more than half of their foreign income. In Uganda, to take the most extreme example cited, declining coffee prices reduced export earnings from $270 million in 1988 to $160 million in 1989. The effects have been ``disastrous,'' the report says.

The UNCTAD report says efforts to break dependence on traditional commodity exports - for example, a budding toy and sporting goods industry in Haiti - have run up against a variety of tariff and nontariff barriers erected by importing countries. That is one reason why even though world trade expanded during the 1980s, the LDCs share of it continued to decline.

In addition to external factors like the Gulf crisis, internal problems, including poorly managed economies, misused land, and civil strife, have contributed to the plight of the LDCs.

To provide relief, the report says, the wealthy industrial nations will need to provide some form of debt relief and spur the kind of market reforms that helped produce a dramatic turnabout during the 1980s in at least one LDC - the Maldives - which parlayed fishing and tourism into 10 percent economic growth.

The combination of unfavorable trade balances, smaller aid flows, and low commodity prices has contributed to an aggregate indebtedness of $70 billion, or about two-thirds of combined GNP of the LDCs, the report says.

In some of the 42 LDCs, debt service payments consume half of all foreign earnings, smothering hopes for reform, diversification, and growth.

Share this story:

We want to hear, did we miss an angle we should have covered? Should we come back to this topic? Or just give us a rating for this story. We want to hear from you.

Loading...

Loading...

Loading...