Interviews
Economy of Arab nations of ME middling over past 4 decades
17 May '07
3 min read
But it is relevant: Islam is the spiritual prism through which many in the region interpret existence, many adherents increasingly regard Islam as under threat, and for a variety of reasons political opposition to the region's ubiquitous authoritarian regimes has an increasingly Islamist bent.
The study suggests that macroeconomic instability is not the main culprit either. While macroeconomic policy management may not be perfect, and the presence of oil and other natural resources may present “Dutch disease” challenges for some countries, macroeconomic management is sufficiently good that alterations in macroeconomic policies are not likely to deliver large improvements.
However, the portrait derived from measures of microeconomic policies and institutional characteristics is less positive. As a group, the Arab countries have weak links to the global economy (outside of the special cases of oil, other natural resources, and tourism); low levels of foreign direct investment; lack of technology transfer, dissemination, and application; lack of innovation; lack of industrial competence as measured by exports of manufactures; high levels of government investment and ownership; and high costs of doing business.
Also, there is considerable intraregional variation, particularly with respect to progress on institutional reform. Islam or Arab culture may have many effects on local institutions and practices, but they cannot explain why it takes 15 times as long to enforce a contract in Egypt as it does in Tunisia.
Strengthening linkages with the rest of the world, and addressing the microeconomic and institutional weaknesses, will be a prolonged and uncertain slog, requiring both supportive policies and sufficient local productive capacity organized by local entrepreneurs or foreign investors.
The Peterson Institute for International Economics is a private, nonprofit, nonpartisan research institution devoted to the study of international economic policy. Since 1981 the Institute has provided timely, objective analysis and concrete solutions to key international economic problems.
Click here to read more:
The study suggests that macroeconomic instability is not the main culprit either. While macroeconomic policy management may not be perfect, and the presence of oil and other natural resources may present “Dutch disease” challenges for some countries, macroeconomic management is sufficiently good that alterations in macroeconomic policies are not likely to deliver large improvements.
However, the portrait derived from measures of microeconomic policies and institutional characteristics is less positive. As a group, the Arab countries have weak links to the global economy (outside of the special cases of oil, other natural resources, and tourism); low levels of foreign direct investment; lack of technology transfer, dissemination, and application; lack of innovation; lack of industrial competence as measured by exports of manufactures; high levels of government investment and ownership; and high costs of doing business.
Also, there is considerable intraregional variation, particularly with respect to progress on institutional reform. Islam or Arab culture may have many effects on local institutions and practices, but they cannot explain why it takes 15 times as long to enforce a contract in Egypt as it does in Tunisia.
Strengthening linkages with the rest of the world, and addressing the microeconomic and institutional weaknesses, will be a prolonged and uncertain slog, requiring both supportive policies and sufficient local productive capacity organized by local entrepreneurs or foreign investors.
The Peterson Institute for International Economics is a private, nonprofit, nonpartisan research institution devoted to the study of international economic policy. Since 1981 the Institute has provided timely, objective analysis and concrete solutions to key international economic problems.
Click here to read more:
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