This post is written by ERF Research Fellow, Hassan Hakimian, Director of the London Middle East Institute and a Reader in Economics at SOAS, University of London.
The burgeoning resource curse literature is mainly focused on the link between oil rents and poor economic performance in resource-rich countries. The yardstick for evaluating economic performance in oil exporting countries such as those in the MENA region has largely been GDP growth. Little attention has been devoted to whether the experience of economic development in these countries has been inclusive and if not why not? This is at odds with the fact that the relationship between growth and equity has a long tradition and deep roots in both economics thinking and development policy debates – an interest that has been revived in recent years.
Inclusive growth can be broadly conceived of policies that make growth more ‘inclusive’ for the benefit of ‘the widest’ social and economic groupings. Although there is not a universally agreed definition of inclusive growth and also operationalizing the concept has not met with consensual success, recent interest in ensuring that growth is inclusive has been on the rise. The Asian Development Bank (ADB) now features inclusive growth as a long-term strategic framework and the African Development Bank (AfDB) lists it as a development objective. Various governments too openly espouse the virtues of this policy with India, for instance, building concrete strategies into its Eleventh Five-Year Plan (2007-12) to safeguard and promote the well-being of the poor and disadvantaged groups.
Such interest has also been bolstered more recently by a desire to understand the economic performance of the Arab countries in the period leading to the spate of uprisings that brought down autocratic regimes from Tunis to Yemen.
The fact that the decade before these uprisings also coincided with unprecedentedly buoyant international oil prices and highly favorable oil incomes for oil exporters has added an interesting dimension to the habitual curiosity about the relationship between richness in oil endowments and performance in this period.
A recent study I have conducted for the AfDB casts an interesting light on this asking whether, and to what extent, the experience of the region’s oil exporters in this period may be considered to have been inclusive. This study constructs a single composite index for measuring inclusive growth for each country based on a wide range of indicators (14 in all) pertaining to such broad components of inclusive growth as economic, social, political and environmental aspects. It uses a comparative approach to rank all countries for which consistent and reliable data were available (153 in all are included in the dataset) for the two five-year periods: 2001-05 and 2006-10. The results, in particular for oil-exporting economies of the region offer new insights to the resource curse debate and literature.
Accordingly, the oil exporters – both large and small – Algeria and Iran, on one hand, and Libya, Bahrain and Kuwait (and Qatar to a lesser extent) on the other suffered a fall in their overall scores indicating a deterioration in their experience of inclusive growth during over these two sub-periods. What is perhaps additionally interesting is that for these countries the trend line performance is inferior to those of other Arab countries in general including the ‘Arab Spring’ countries such as Tunisia and Egypt. In the wider MENA context, only Syria and Yemen experienced a more inferior record in this regard. The best improver, on the other hand, was Oman (if we ignore Iraq which has to be considered an outlier due to a low base during the years of the US invasion).
Despite this shared deteriorating trajectory, there is variation among the oil exporters too. Algeria, Bahrain, Kuwait and the UAE all feature amongst the worst performers in terms of per capita GDP growth (ranking 117, 148, 151 and 153 out of 153 countries, respectively). Equally alarming is perhaps their low rankings in terms of unemployment in general and youth unemployment in particular (for instance Saudi Arabia ranks last amongst 153 countries in the dataset for youth unemployment during 2006-10). Other development dimensions such as gender and environment do not help their overall growth inclusivity either (data on poverty and inequality is unfortunately patchy).
This study underscores one overriding economic lesson of a decade which saw an unprecedented surge in oil prices (2001-10): the need to examine outcomes not just in terms of growth but also the quality of growth, its sustainability as well as the degree to which its benefits may extend to the wider sections of the society.
Estimated ‘Inclusive Growth’ Scores, 2001-05 and 2006-10, Normalized Ranks (min=0; max=100)
Source: H. Hakimian, AfDB, Economic Brief, forthcoming, 2016.