Edited by Ndiame' Diop, Daniela Marotta, Jaime de Melo
MENA is one of the richest regions in the world in terms of natural
resources: it holds more than 60 percent of the world’s proven
oil reserves, mostly located in the Gulf region, and nearly half of gas
reserves. Oil represents 80-85 percent of merchandise exports in the
region, making it highly depending on fluctuations in international
prices. A long strand of economic literature has suggested that such
dependence may hurt a country’s growth prospects and the scope
for job creation by reducing economic diversification.
This volume investigates the effect of natural resources and the
role of policies on achieving higher and sustained growth through
diversification away from oil. It explores analytical questions which
include: (i) the impact of the real exchange rate on manufacturing and
tradable services competitiveness in MENA; (ii) the role of fiscal
policy in supporting diversification; (iii) how “weak
links” (input sectors with low productivity) play a critical role
in explaining the concentration of economic activities, in addition to
the classical Dutch Disease effect and (iv) the impact of macroeconomic
factors on the drive for regional integration.
Several policy recommendations emerge from this analysis: (i)
policymakers should strive to avoid real exchange rate overvaluation
through consistent fiscal policies, flexible exchange rates and
adequate product and factor market regulations; (ii) reforms to improve
the competition and efficiency of upstream input activities are crucial
for improving the performance of downstream activities and
diversification in MENA (iii) a consistent and transparent fiscal
policy is essential to reduce instability, build the fiscal space
needed to invest in core infrastructure and human capital and create a
favorable environment for diversification; (iv) while regional trade
integration is desirable for political, social, cultural and economic
reasons, in terms of trade liberalization, this is not the best option
for resource-rich countries of the region. Policymakers should take
this into account in discussing regional integration options.
It is hoped that the findings of this work will be of interest to
policymakers, the civil society, donors and practitioners in MENA
countries and stimulate the debate of such an important topic.
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