Economic challenges and opportunities in the Arab region

Date: 03 - 08 - 2023


Source: Al Wafd Newspaper

Dr.. Ali Mohamed Al-Khouri

The Arab region and the Middle East face a complex set of economic, political and social challenges. These challenges are exacerbated by regional and global conflicts and tensions that threaten to generate further global instability. While the world is going through a global crisis of confidence, the main requirement is to find a thorough and detailed understanding of these issues before entering into the arena of searching for comprehensive solutions.

Repercussions of global conflicts

Today’s global conflicts, such as the Russian-Ukrainian war, the geopolitical conflict between the United States and China, as well as regional tensions in Asia – over the island of Taiwan, the conflicts between Pakistan and India, the two Koreas, Iran and the Arab region – contribute to fueling the crisis of global stability. These conflicts are not isolated events given their global impacts.

Despite the abundance of natural resources in the Arab region such as oil, natural gas and minerals, the reality proves that it is not immune to these challenges, with the continuation of the series of political unrest and conflicts since the Arab Spring in 2011 in countries such as Libya, Syria, Yemen and Sudan.

Challenges and opportunities for the Arab region

Despite the gloomy scenarios depicted in international reports, Arab countries can overcome many challenges by resetting the compass of strategic focus. It is possible to reshape the economic path through a set of critical factors that we will review in broad lines.

Economic Performance: Economic performance serves as a basic indicator of progress or regression. Countries such as the United Arab Emirates are emerging as a leading country in many fields, and have become competitive with many developed countries, whether in economic diversification or future industries. Saudi Arabia and Qatar have also made great strides in diversifying sources of income and reducing dependence on oil and gas. The link between these countries lies in their visions based on supporting the development and maturity of their financial and economic institutions, institutional reforms, optimal employment of technology and continuous investment in human capital.

The global system: The phenomenon of globalization presents both opportunities and risks. Rapid global development and innovations from developed countries bring new prospects for growth. The provision of international capital and economic openness can greatly influence the development of national and regional economies. However, many developing countries face many challenges to attract global capital due to insufficient legislative and banking controls, incomplete national policies and plans, lack of digital skills and weak national and sectoral environments to absorb modern technology.

It is worth noting that net money flows in developing countries rose from the average level, which was estimated at $10 billion annually, during the 1970s, to more than $100 billion annually in the first half of the nineties, then rose to $166 billion in 2021. The exports of developing countries rose 10% in 2021, after it had not exceeded 5% before that. These flows, especially in the countries that embarked on structural and reform changes, provided many investment opportunities, technological development, increased production, job creation, rapid economic growth, and the expansion of international trade.

Economic planning and reform : There is an urgent need for effective economic planning in the short and long term in the Arab region, with the aim of containing global crises and population increase. The private sector is still far from playing its main role in advancing economic reforms, with governments continuing to focus on relying on the public sector, which has greatly weakened and sluggish economies. It is possible that institutional reforms, improving the efficiency and effectiveness of institutional performance, stimulating investment in economic resilience, and providing various projects that absorb unemployed workers can contribute to tangible economic growth and improvement.

Exploitation of natural resources: The Arab region is rich in natural resources, which, if exploited responsibly, can support economic growth targets. This requires the development of legislative and regulatory frameworks that support investment, and a conceptual shift in a production economy that is not dependent on exports of raw materials or an abstract consumption economy.

Finance and Financial Institutions: Sound financial institutions are essential to promoting economic growth. Developing legislative frameworks in this area would facilitate and simplify the relationship between savers and investors and those responsible for financing the private sector and could lead to significant economic development. Banking systems must be consistent with government policies without any conflict with legislative amendments, and to facilitate an economic renaissance and effective economic growth, based on comprehensive analytical plans and studies of the economy, market conditions and nature.

Policy suggestions

Addressing current economic challenges requires a comprehensive, forward-looking approach. Policy makers need to focus on enhancing economic performance, and regional and international integration in the global system, through strategic planning and implementation of coherent economic reforms, responsible exploitation of natural resources, and strengthening financial institutions. Focusing on achieving these goals can improve economic stability, job creation, and social security, providing a sense of confidence for decision-makers in the region.

Undoubtedly, the Arab region will continue to face direct confrontation with large and complex economic challenges. The effectiveness of the solutions will remain dependent on well-thought-out policies, and their ability to overcome obstacles and develop a more diversified and resilient economy. Policy makers must adhere to forward-looking strategies to take advantage of the great potential of the region and ensure a stable and prosperous future for its people.