ESCWA Publication: E/ESCWA/ECRI/2013/1
Country: Arab region
Publication Type: Reports & studies
Cluster: Governance and Conflict Prevention
Focus Area: Financing for development, Inclusive development, Future of employment, Resilient development & conflict prevention
Initiatives: Development challenges
SDGs: Goal 11: Sustainable Cities and Communities
Keywords: Arab countries, Democratization, Economic growth, Economic reform, Governance, Labour market, Political conditions, Administrative reform, Human security, Internal security, Police, Security sector reform, Peacebuilding, Recommendations
Short- and Medium-term Economic Challenges of the Arab Countries in Transition
January 2013
The Arab Countries in Transition (ACTs) each have specific social and political environments. Nevertheless, they share some economic characteristics: negative growth rates, low private investment, scant job creation, high dependence on subsidies and deep-seated corruption. Transition governments must, therefore, identify avenues through which to address these economic issues while satisfying the expectations of as many internal groups as possible. This become particularly complex, as in most ACTs domestic savings are scarce, national markets are small and fragmented, and endogenous technology is relatively weak. In this context, contestability, access, participation and accountability acquire a central role, for the region is faced with an agenda of governance-based reform. In the short term, the challenge lies in initiating and sustaining economic reforms that demand strict measures and sacrifices for the prospect of future gains unlikely to reach the whole population. In the medium term, efforts move towards assuring that the burden of the reforms are fairly spread and the transitions, hence, are socially and politically acceptable.
This study found that transition to democratic and accountable governance favours long-term pro-poor reforms and sustainable development. GDP growth tends to reach higher rates after a downturn in the initial post-transition phase, following a J-shaped curve. ACTs must aim to undergo as short as possible a down phase, which can be achieved through economic and trade diversification, integration in the regional labour market, an improved investment climate, financial deepening, broadening of the tax base, more efficient public service delivery and better targeted social policy. It was also found that links between democracy and economic growth are weak, which indicates that transition to the former does not automatically lead to the latter. This is a long, gradual process, in which governments should try to capitalize on synergies of various reforms. The research concludes that governance reform is critical to transition, whilst inflation stabilization and market institution reforms provide the support for a sustainable economic transition.
Related content
Financing for development
, Inclusive development
, Future of employment
, Resilient development & conflict prevention
,
The Arab Countries in Transition (ACTs) each have specific social and political environments. Nevertheless, they share some economic characteristics: negative growth rates, low private investment, scant job creation, high dependence on subsidies and deep-seated corruption. Transition governments must, therefore, identify avenues through which to address these economic issues while satisfying the expectations of as many internal groups as possible. This become particularly complex, as in most ACTs domestic savings are scarce, national markets are small and fragmented, and endogenous technology is relatively weak. In this context, contestability, access, participation and accountability acquire a central role, for the region is faced with an agenda of governance-based reform. In the short term, the challenge lies in initiating and sustaining economic reforms that demand strict measures and sacrifices for the prospect of future gains unlikely to reach the whole population. In the medium term, efforts move towards assuring that the burden of the reforms are fairly spread and the transitions, hence, are socially and politically acceptable.
This study found that transition to democratic and accountable governance favours long-term pro-poor reforms and sustainable development. GDP growth tends to reach higher rates after a downturn in the initial post-transition phase, following a J-shaped curve. ACTs must aim to undergo as short as possible a down phase, which can be achieved through economic and trade diversification, integration in the regional labour market, an improved investment climate, financial deepening, broadening of the tax base, more efficient public service delivery and better targeted social policy. It was also found that links between democracy and economic growth are weak, which indicates that transition to the former does not automatically lead to the latter. This is a long, gradual process, in which governments should try to capitalize on synergies of various reforms. The research concludes that governance reform is critical to transition, whilst inflation stabilization and market institution reforms provide the support for a sustainable economic transition.
