Press Release: Reform Needed to Alleviate Looming Economic Crisis in Arab World

FOR IMMEDIATE RELEASE: May 7, 2007

- News Release -

A new study by the Carnegie Endowment finds that previous attempts at economic reform have not alleviated the economic problems of Arab countries, failing to dismantle state-dominated economies with high restrictions on private investments.  Arab countries represent only 4 percent of world trade and have the highest unemployment rate in the world at 12.2 percent. The per capita GDP in these nations has fallen in recent decades and public debt has hit a critical level in several countries. 

In a new Carnegie Paper from Carnegie’s Middle East Center, The Challenge of Economic Reform in the Arab World, Sufyan Alissa examines the major factors responsible for hindering meaningful economic reform in the Arab world.  Governments and established elites have little incentive to create reforms that could threaten their economic and political interests.  Furthermore, governments and institutions in the Arab world have limited capacity to plan, implement and manage reform programs, and have little agreement on what true reform would entail.

Alissa argues that, in economic terms, there are two types of states in the Middle East and North Africa—those that are highly dependent on oil, and those that depend on foreign aid, international loans, and remittances from expatriate workers. Both have used these highly volatile revenue sources to temporarily alleviate economic pressures, preserve dominant elite privileges, and buy loyalty to the state—all at the cost of sustainable, long-term reform.

In order to achieve genuine reform, governments must move beyond economies dominated by the public sector and support economic models driven by the private sector as the main source of growth and income.  

“A consensus is forming among international financial institutions, economics and aid practitioners that lack of progress in improving governance lies at the very heart of most of the challenges currently impeding economic transformation in the Arab world,” says Alissa.

Notes:

1. To read this Carnegie Paper, go to www.carnegieendowment.org/middleeast   
   Direct link to the PDF: http://www.carnegieendowment.org/files/cmec_1_econ_reform_final.pdf
2. The findings of this paper will be presented by the author at an event at the Carnegie Endowment on May 9, 2007 from 12:15 – 2:00 p.m. Mustapha Nabli, regional chief economist and director of social and economic development in the World Bank’s Middle East and North Africa region, will lead the discussion.  For more information on the event, please contact Jessica Jennings at jjennings@ceip.org.  
3. Sufyan Alissa is an associate at the Carnegie Endowment’s Middle East Center. An economist and specialist on Palestinian and Middle Eastern affairs, he previously served at Nuffield College–University of Oxford, the School of Oriental and African Studies–University of London, City University in London, and Bethlehem University–West Bank.            
4. This Carnegie Paper lays the framework for an assessment of economic reform efforts in seven countries in the Arab world.  Over the next two years, Carnegie scholars will analyze and report on a diverse selection of countries in hopes of generating conclusions for economic reform in the Arab world as a whole.
5. Press Contact: Jessica Jennings, 202/939-2265, jjennings@ceip.org
    
   The Carnegie Endowment for International Peace is a private, nonprofit organization dedicated to advancing cooperation between nations and promoting active international engagement by the United States. Founded in 1910, its work is nonpartisan and dedicated to achieving practical results.

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