The Arab region discovered oil more than 70 years ago. Today, it holds close to half of global oil reserves and a quarter of natural gas reserves. It controls almost a third of oil production and 14 percent of that of natural gas. The hydrocarbon sector dominates these economies, accounting on average for 50 percent of GDP and fuel exports represent around three-quarters of merchandise exports. Moreover, these countries derive at least two-thirds of their fiscal revenues from hydrocarbons. Despite this tremendous wealth, resource-rich countries Arab countries have neither achieved economic prosperity nor became developed countries.
Recent research by the Economic Research Forum (ERF) has shown that weak institutions in the Arab World are the root cause of the resource curse, and that mismanagement of resources os primarily shaped by the prevailing political institutions which predated resource discovery. Over time, the interaction between these factors became intertwined, preventing these countries from embarking on a sustainable development path.
In an attempt to understand the role of institutions in shaping overall performance, the ERF has initiated new research work on macroeconomic institutions, both monetary and fiscal, and macroeconomic outcomes. The first research project is on “Institutional Requirements for Optimal Monetary Policy in the Resource-Dependent Arab Economies.” Led by Bassem Kamar, this work aims to assess the impact of monetary policy institutions including central bank independence and the interactions between monetary and fiscal policies on performance in resource-dependent economies.
The second is on “Fiscal Institutions and Macroeconomic Management in Resource- Rich Arab Economies” is led by Jeff Nugent. It seeks to examine the impact of budget institutions, rules and procedures on macroeconomic management, stabilization and economic diversification in a sample of resource-endowed Arab countries.
In this regard, ERF will be holding a workshop on October 25-26 at the Mariott Cairo Hotel. The objective of the workshop is to provide a platform for discussing the research papers and their findings among authors and experts in natural resource economics in order to improve the final output.