Appendix. Technical Notes
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The paper focuses on the countries in the Middle East and North Africa region that export oil. These are: Algeria, Bahrain, Iraq, Kuwait, Libya, Oman, Qatar, Saudi Arabia, United Arab Emirates, and Yemen.
The paper was produced by a team led by Jean-François Dauphin and comprising Jean-Frédéric Noah Ndela, Xiangming Fang and Greg Auclair, under the supervision of Aasim M. Husain. Kadia Kebet and Geraldine Cruz provided editorial support.
The paper benefited from suggestions made by participants at the meeting of Arab deputy finance ministers that took place in Abu Dhabi on January 13, 2016.
For cross-country consistency, the data used in this paper draws where available on the October 2015 Regional Economic Outlook and World Economic Outlook. More recent data vintages may be available for particular countries and particular data.
For simplicity, the paper uses the term “oil” to mean hydrocarbons. In some countries (e.g., Algeria, Qatar), hydrocarbon production includes a significant share of gas.
Re-exports accounted 24 percent of total non-oil exports of the UAE in 2014 according to the UN Comtrade database.
Many oil exporting Arab countries have launched over the years initiatives to support a more diversified economy. For example, the UAE has promoted the development of industrial zones and the restructuring of industrial sectors; Algeria implemented large infrastructure projects; in Kuwait, a new Development Plan focuses on large infrastructure projects and is largely financed through partnerships with the private sector.
The world average total GDP per capita was estimated at 10,848 nominal USD in 2014.
See UNDP, 2011. The study shows that East Asian economies lost 18 percent of export revenue in 2009, while Middle East and African economies, which exhibit a higher export concentration ratio, lost about 30 percent of export revenue. This loss in export revenue also translated in growth performance with growth in South Asia declining by 1.4 percentage points while growth in Africa fell on average by 3.4 percentage points. Growth in Arab oil-exporting Arab countries fell by 5.7 percentage points during in 2009.
The fiscal break-even price is also sensitive to the level of production and to the level of exchange rate.
Initiatives in that direction are receiving increasing attention in some oil exporting Arab countries today. For example, GCC countries are considering adopting a VAT, Kuwait is considering the introduction of a profit tax; Saudi Arabia is considering increases in excises.
Many oil exporting Arab countries have already started to reform energy pricing. For example, UAE has implemented energy pricing reforms by adjusting fuel prices and increasing electricity tariffs; Algeria, Bahrain, Oman, Qatar, and Saudi Arabia have recently implemented substantial increases in energy prices; Kuwait has raised the prices for kerosene and diesel and further energy price reforms are under consideration.
Sturm et al, 2009.
Among oil-exporting Arab countries, Bahrain, Kuwait, Libya, Qatar, and the UAE have such sovereign wealth funds.
See also “Oil Prices, Financial Stability, and the Use of Countercyclical Macroprudential Policies in GCC,” IMF, 2015 forthcoming.
This section draws extensively on “Economic diversification in the GCC, past, present and future” (Callen and al., SND/14/12).
This paragraph borrows from “Fostering Export Diversification in Algeria” (A. Lahreche, Selected Issues Paper for the 2014 Article IV Consultation).
Pack and Saggi, 2006.
Backward linkages exist when the growth of an industry leads to the growth of the industries that supply it.