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Economy of Arab nations of ME middling over past 4 decades

May '07
The economic performance of the Arab countries of the Middle East (ME) has been middling over the past four decades. It has been worse than East Asia, better than sub-Saharan Africa, and about the same as Latin America and South Asia. While the region has suffered no major economic crisis, it now faces a major challenge: the demographic imperative to create jobs for the large cohort of young people reaching working age and to raise living standards.

The stakes are high. Rapid labor force growth in many Arab countries has contributed to despair among young people about their job prospects and consequent worries about political stability.

The region's reputation as a risky business environment, and deep uncertainty about the future of many of the region's political regimes, significantly inhibits successful globalization. The central role of oil in the economic and political life of a number of these countries creates additional opportunities—and potential pitfalls.

To productively absorb the growing labor force, aggregate growth must accelerate, and this growth will have to be labor-intensive. However, the growing competitiveness of low-income rivals, such as India and China, and the existing economic, political, and social practices and beliefs in the Arab economies may inhibit or preclude the growth necessary for these economies to succeed or indeed for their governments to maintain political viability.

The authors conclude that Islam, the dominant religion in the region, is not the problem, at least not in a simple sense that the adherence to the faith encourages behavior antithetical to economic development.

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