Evaluating Economic Reform in the Arab World

Marking the launch of its events series, the Carnegie Middle East Center in Beirut hosted a roundtable discussion on Evaluating Economic Reform in the Arab World on Thursday, February 15, 2007.

The roundtable featured a presentation by Dr. Sufyan Alissa, an Associate at Carnegie’s Middle East Center who spoke about a forthcoming long term project assessing economic reform in seven Arab countries. The panel also featured two commentators: Dr.Samir Makidissi, Professor of Economics and Director of the Institute of Financial Economics at the American University of Beirut and Dr. Kamal Hamdan, Head of Economic Division at the Consultation and Research in Institution in Beirut. The panel was moderated by Dr. Paul Salem, Director of the Center. 

Dr. Salem’s opening remarks focused on acquainting the audience with the Carnegie Middle East Center and its various research projects. He explained that Economic Reform in the Arab World, the topic of discussion, was one of the long-term projects the Center will be working on for the next two years.

In his presentation, Dr. Alissa pointed out that the paper was to launch a set of studies on economic reform in the Arab world. It aimed to address key questions regarding the issue of economic reform in the region. Governments in the region have chosen to avoid addressing major problems by implementing a wide variety of uncontroversial programs and largely working within the same economic foundations. Much of the reform policies were designed with the goal of sustaining the presence of ruling elite in power’.  Dr. Alissa said.

Dr. Alissa posed key questions regarding economic transformation in the Arab world, such as: how do we define economic reform in the region? Is it possible to have economic reform without political reform? What is needed to accelerate the process of ‘significant’ economic reform and are state institutions capable of absorbing and implementing economic reform programs? He emphasized as well that much more work is still required promoting economic transformation in the Arab world. ‘

Dr. Alissa cited three main factors which influence the success or failure of any economic reform program: the lack of common understanding of what this reform means and entails, nor a common agreed plan of action to implement economic reform; limited state and institutional capacities to absorb and implement economic reform programs in the Arab world; and the mismatch between economic reform with political reform.

Furthermore, he outlined  two forms of resistance to economic reform: ‘constructive resistance’ which manifests itself in the form of pressures exercised from the people and civil society organizations on policy makers in order to force them to have their economic policies more sensitive to people’s needs and demands; and ‘destructive resistance’ which mainly comes from business and other elites and those who have a stake in the status quo, hence would stand in the way of any substantive and significant economic reform.

Commenting on the paper, Dr. Makdisi acknowledged that economic reform has been slow and partial: for example, “while reforms in the 1990s focused on increasing the role of the market and decreasing the role of the state, they tended to neglect the role of institutions,” Dr. Makdisi explained. He also explained that per capita income in the region has not grown in the last two decades and that productivity has been in decline. He warned that this was not a sustainable pattern, given the rapid population growth in the region and the millions that are entering the labor force every year.

Dr. Hamdan emphasized that for the region to prepare itself for radical economic and social transformation, it must break out of its almost hypnotic reliance on oil as the miracle provider of growth and begin to work seriously on its productive sectors. 
He also argued that sustained economic growth is closely tied to more political reforms and democratic opening.

The responses from the participants raised questions about whether economic reform was one package deal that had to be implemented at once, or a gradual process that had to be approached in phases according to each country’s conditions. Other commentators focused on the importance of education and technology as long term drivers of growth, and the critical areas of job creation and employment.