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An earlier version of the paper was presented to the seminar on “Prospects of Arab Economic Development in the Nineties”, organized by the Arab Fund for Economic and Social Development and the Arab Monetary Fund in Bahrain on February 1-3, 1993. The paper will be published in the proceedings of the seminar. The authors are grateful for comments received from Jack Boorman, Paul Chabrier, Manal Fouad, Gerry Johnson, Manmohan Kumar, Melhem Melhem, Chris Yandle, and seminar participants. Data used in the paper were compiled by Ulrich Thiessen and Ilsa Marie Fayad. The authors are soley responsible for any remaining errors.
Aggregates for Arab countries are compiled on the basis of computed GDP-weighted averages for individual members of the Arab League for which comprehensive data are currently available (i.e., Algeria, Bahrain, Djibouti, Egypt, Jordan, Kuwait, Lebanon, Libya, Mauritania, Morocco, Oman, Qatar, Saudi Arabia, Somalia, Sudan, Syria, Tunisia, United Arab Emirates, and Yemen).
It should be noted that the comparisons with the developing country group are sensitive to the starting point for the comparison periods. Thus, the choice of 1980 as the base year biases downwards the comparison as the year was associated with an historically high oil price level. Indeed, nominal oil revenues of the Arab OPEC members increased from US$56 billion in 1975, to US$278 billion in 1980. Following the sharp fall in international prices, they declined to US$49 billion in 1986. Additional information is contained in El-Kuwaiz (1990).
For this purpose, oil countries are defined as those deriving more than half of their domestic output from the extraction of crude oil. As in the case of the coverage used by the Arab Monetary Fund (1991), the grouping includes Algeria, Bahrain, Kuwait, Libya, Oman, Qatar, Saudi Arabia, and the United Arab Emirates. As noted by El-Kuwaiz (1990), there are substantial differences even within this subgroup of Arab countries. Various attempts have been made to classify Arab countries on the basis of other criteria such as per capita income, population density, and debt burdens.
Real GDP in oil producing countries is heavily influenced by fluctuations in oil production. For a discussion of related national accounting issues, refer to Ahmed, El Serafy and Lutz (1989).
For an analysis of the potential impact of European integration on Arab countries, and the revision of “trade and aid privileges” associated with developments in Central and Eastern Europe, see Langhammer (1993).
A related issue that is not addressed directly in this paper is the scope for efficient economic cooperation among Arab countries. For a discussion of Arab economic integration, see Shafik (1992). It may be noted, however, that progress among countries in the identified policy areas would be an important contribution to the process of “policy convergence” that would be essential to underpin effective Arab economic integration.
It should be noted at the outset that, unless accompanied by appropriate fiscal, monetary, and exchange rate polices, the structural reform measures discussed below will not result in a sustainable improvement in economic and financial performance. At the same time, it is worth noting that several of the structural reforms discussed below can lead to an improvement in public sector finances, facilitating the reduction of macroeconomic disequilibria and more efficient resource allocation. For a discussion of the developing country experience in this regard, refer to IMF (1992). Selected aspects of demand management policies in Arab countries are discussed in Shaalan (1987).
See El-Naggar (1989b). El-Naggar notes that several other countries (e.g., Jordan, Morocco, Tunisia, and the former Yemen Arab Republic, as well as members of the Gulf Cooperation Council) may be viewed as belonging to the group of “pragmatic interventionism”, where sociopolitical considerations tended to play a relatively less important role.
The impact of fiscal policy on macroeconomic aggregates in these countries during the decade of the 1970s is discussed in Morgan (1979). Indicators of public sector activities for some other Arab countries are presented in Heller and Schiller (1989).
In the case of Tunisia, the privatization of the loss-making public enterprises identified in the study has been virtually completed. The authorities are now preparing to undertake the privatization of the other enterprises.
Further country-specific information is contained in Candoy-Seske (1988) and Heller and Schiller (1989). More detailed analyses of privatization in Egypt, GCC countries, Jordan, and Tunisia are contained in, respectively, Abdel-Rahman and Sultan (1989), Khatrawi (1989), Anani and Khalaf (1989), and Bouaouaja (1989).
This section does not address the issue of industrial development policies in Arab countries. An ESCWA (1990) study considers this as one of the important policy challenges, arguing that “on the whole, Arab industrialization efforts remained fairly modest and confined to small enclaves, without ever reaching the level of an integrated and mature industrial structure.”
Indeed, a stable macroeconomic environment has been viewed as the single most important factor for investment promotion in Arab countries. See Shihata (1990). Handoussa (1990) contains an analysis of the Egyptian case.
Prior to these reform measures, there were seven investment codes in Morocco and six in Tunisia.
This may be contrasted to the experience in Latin America where the adoption of multiple exchange rate regimes was motivated by policy makers’ desire to insulate the real economy from what were viewed as transitory shocks emanating from financial markets. See Kamin (1992).
The increased emphasis on nondebt creating flows has also reflected the fact that several Arab countries face heavy debt service burdens, with a number of them (e.g., Egypt, Jordan, Morocco, Somalia, and Sudan) resorting, at some stage, to nonpayment and/or formal debt restructuring arrangements.
The paper does not address the important issue of family planning and related policies, including human resource development. Similarly, the paper does not deal with the equally important issue of the environmental impact of structural reforms in the context of “sustainable development”. Discussions of these issues may be found in Heyneman (1993) and Tolba (1993), respectively.