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Unformatted text preview: CHAPTER 1.1 Assessing Competitiveness in the Arab World: Strategies for Sustaining the Growth Momentum MARGARETA DRZENIEK HANOUZ, World Economic Forum TARIK YOUSEF, Dubai School of Government The high energy prices of the past few years have brought the Arab world the highest growth rates in nearly three decades. In the oil-exporting countries, the oil boom has gone hand in hand with surging fiscal and external surpluses, shrinking public debts and raising levels of foreign reserves.This windfall has been shared by the nonoil-exporting countries through investment flows, remittances, and trade.These developments appear to have dramatically transformed the economic prospects of the region, bringing a renewed sense of optimism and overshadowing the heightened geopolitical insecurity of the past few years. As long as energy prices remain at their present high levels, it is safe to suggest that the Arab economies especially those endowed with substantial oil and gas reservescould sustain the ongoing prosperity for a while. But therein lies the danger as well.What if oil prices take an unexpected downward dive, as they have done over the past three decades? More worrisome, what if the current prosperity postpones the adoption of structural reforms needed to achieve international com- petitiveness and sustain the current growth momentum? After all, oil booms have traditionally provided breathing space for governments and delayed the implementation of reform programs. Such concerns about the long-term prospects of the region and the likely trajectory of reform are shared by international observers and, more importantly, poli- cymakers and the general public in the Arab world.Yet only a few regular assessments of economic develop- ments in the Arab world are produced, notwithstanding the increased relevance of the regions energy resources, financial liquidity, and geopolitics to the stability of the world economy. In addition, the region suffers from serious gaps in the availability of basic economic and financial indicators (see Box 1), not to mention a lack of transparency in policymaking and limited accountability in reviewing outcomes. This chapter makes a contribution toward closing this gap by assessing the competitiveness of Arab economies. Utilizing the results of the most recent World Economic Forums Executive Opinion Survey, the chapter benchmarks the competitive performance of Arab countries against selected comparators.The assess- ment is designed not only to identify present areas of strength and weakness but also to pinpoint areas of reform that should be addressed in the near future. Methodology The World Economic Forum defines competitiveness as the set of factors, policies, and institutions that deter- mines the level of productivity in a country. Productivity describes how efficiently available resources are used and therefore the growth performance of an economy.Thus what is assessed is the potential of an economy to achieve sustained economic growth over the medium to 3 1 . 1 : A s s e s s i n g C o m p e t i t i v e n e s s i n t h e A r a b W o r l d long term.The model controls for the starting level oflong term....
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- Spring '08