The Arab Economies in a Changing World PETERSON INSTITUTE FOR INTERNATIONAL ECONOMICS The Arab Economies in a Changing World M A R C U S N O L A N D A N D H O WA R D PA C K Washington, DC April 2007 Marcus Noland, senior fellow, has been associated with the Institute since 1985 He was a senior economist in the Council of Economic Advisers and held research or teaching positions at Yale University, Johns Hopkins University, University of Southern California, Tokyo University, Saitama University, University of Ghana, the Korea Development Institute, and the East-West Center He received fellowships sponsored by the Japan Society for the Promotion of Science, the Council on Foreign Relations, the Council for the International Exchange of Scholars, and the Pohang Iron and Steel Corporation He won the 2000–2001 Ohira Masayoshi Award for his book Avoiding the Apocalypse: The Future of the Two Koreas (2000) He is the author of Korea after Kim Jong-il (2004) and Pacific Basin Developing Countries: Prospects for the Future (1990); coauthor of Famine in North Korea: Markets, Aid, and Reform with Stephan Haggard (Columbia University Press, 2007), Industrial Policy in an Era of Globalization: Lessons from Asia with Howard Pack (2003), No More Bashing: Building a New Japan-United States Economic Relationship with C Fred Bergsten and Takatoshi Ito (2001), Global Economic Effects of the Asian Currency Devaluations (1998), Reconcilable Differences? United States-Japan Economic Conflict with C Fred Bergsten (1993), and Japan in the World Economy with Bela Balassa (1988); coeditor of Pacific Dynamism and the International Economic System (1993); and editor of Economic Integration of the Korean Peninsula (1998) Howard Pack, visiting fellow, is professor of business and public policy and professor of economics at the Wharton School, University of Pennsylvania He taught at Yale University and Swarthmore College He was a fellow at the Harry S Truman Institute for Peace Research, the Hebrew University, Jerusalem He is the author of Structural Change and Economic Policy in Israel (Yale University Press, 1971) and Productivity, Technology, and Industrial Development (Oxford University Press, 1987) and coauthor of Industrial Policy in an Era of Globalization: Lessons from Asia with Marcus Noland (2003) He was one of the authors on the team that prepared East Asian Miracle: Economic Growth and Public Policy (World Bank Policy Research Report, 1993) He has been an adviser and consultant to many international institutions including the World Bank, the Asian Development Bank, the Inter-American Development Bank, UN Conference on Trade and Development, and the International Labour Office He has served on the editorial boards of a number of journals including the Journal of Development Economics and The World Bank Economic Review PETER G PETERSON INSTITUTE FOR INTERNATIONAL ECONOMICS 1750 Massachusetts Avenue, NW Washington, DC 20036-1903 (202) 328-9000 FAX: (202) 659-3225 www.petersoninstitute.org C Fred Bergsten, Director Valerie Norville, Director of Publications and Web Development Edward Tureen, Director of Marketing Printing by Automated Graphic Systems, Inc Typesetting by BMWW Cover Photo: the Burj Al Arab Hotel, Dubai, by Corbis Copyright © 2007 by the Peter G Peterson Institute for International Economics All rights reserved No part of this book may be reproduced or utilized in any form or by any means, electronic or mechanical, including photocopying, recording, or by information storage or retrieval system, without permission from the Institute For reprints/permission to photocopy please contact the APS customer service department at Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923; or email requests to: info@copyright.com Printed in the United States of America 09 08 07 Library of Congress Cataloging-inPublication Data Noland, Marcus, 1959– The Arab economies in a changing world / Marcus Noland and Howard Pack p cm Includes bibliographical references and index ISBN 978-0-88132-393-1 (alk paper) Arab countries—Economic conditions Arab countries—Economic policy Arab countries—Politics and government Arab countries—History Arab countries—Social conditions Globalization I Pack, Howard II Title HC498.N56 2007 330.917'4927—dc22 2007004018 The views expressed in this publication are those of the authors This publication is part of the overall program of the Institute, as endorsed by its Board of Directors, but does not necessarily reflect the views of individual members of the Board or the Advisory Committee Contents Preface xi Acknowledgments xv Introduction Addressing the Challenge Conclusion Appendix 1A Growth, Productivity, and Income Identifying the Comparators Relative International Performance Domestic Growth over Time Investment and Growth Sources of Differences in Growth Rates Conclusion Welfare, Happiness, and Discontent Social Indicators Happiness Discontent Conclusion 11 13 15 19 21 37 43 48 51 57 59 60 73 78 83 The Demographic Challenge and the Role of Globalization 85 Demographic Changes Employment Generation and Productivity Growth International Trade Performance 86 94 99 v Capital Flows Financial-Market Development Conclusion Appendix 4A Labor Force Absorption Religion, Institutions, and Growth Religious Affiliation and Growth Across Countries Legal Systems and Growth Corruption and Growth Concluding Remarks Economic Policies and Their Effects Policies in Arab Economies Measuring Policy Effects Technology and Productivity Growth Conclusion Appendix 6A Interaction of Education and Technology Attitudes, Interest Groups, and Reform Popular Attitudes Elite Attitudes Impediments to Reform Appendix 7A The Pew Survey Global Engagement Membership in Multilateral Institutions Role of Preferential Arrangements Conclusion Appendix 8A Select Regional Organizations Appendix 8B US Preferential Trade Arrangements with Select Arab Countries Risk, Credibility, and Supply Response Domestic Entrepreneurship Reversing the Brain Drain Role of Foreign Investment Affinity, Democracy, and Risk Conclusion Appendix 9A 10 Authoritarianism, Uncertainty, and Prospects for Change Path to Political Reform Implications for International Exchange Prospects for Change Appendix 10A Quantitative Modeling of Political Regimes vi 111 122 132 135 137 139 144 151 155 157 159 162 172 181 184 187 193 198 201 206 209 209 214 223 225 230 237 238 251 260 266 268 271 273 275 283 284 289 11 Conclusion Identifying the Constraints Designing Solutions: An Example Political Economy of Reform Concluding Thoughts 299 300 302 303 312 References 315 Index 333 Tables Table 1A.1 Table 2.1 Table 2.2 Table 2.3 Table 2.4 Table 2.5 Table 2.6 Table 2.7 Table 2.8 Table 3.1 Table 3.2 Table 3.3 Table 3.4 Table 3.5 Table 3.6 Table 3.7 Table 3.8 Table 4.1 Table 4.2 Table 4.3 Table 4.4 Table 4.5 Table 4.6 Table 4.7 Table 4.8 Table 4.9 Table 4.10 Table 4.11 Table 4.12 Table 5.1 Table 5.2 Classifications and memberships GDP and population of the Middle East, 2004 Rents Incremental capital-output ratios Polity scores Share of science and engineering tertiary graduates GDP per capita (PPP) Cumulative percent change of constant price GDP per capita and exports, 1995–2000 Growth rate of GDP per capita Life expectancy at birth, 1982 and 2004 Maternal mortality, 1990, 1995, and 2000 Childhood nutritional status Gini coefficients measuring income inequality Population below income poverty line Subjective self-assessment of well-being, 2004 Unemployment Compound growth rate of real manufacturing-sector wages Population growth Contraceptive prevalence rates among married women, 2002 Population projections Net migration Alternative scenarios for labor force absorption Exports of manufactures, 1980 and 2004 Exporting and backward linkages Trade barriers Inward foreign direct investment Aid, workers’ remittances, and fuel exports Financial-market development indicators Cumulative portfolio investment Legal origins and effectiveness Regulation 15 22 27 29 31 36 40 46 47 62 64 66 67 68 74 76 77 87 91 92 93 97 102 104 106 112 121 125 133 147 150 vii Table 5.3 Table 5.4 Table 6.1 Table 6.2 Table 6.3 Table 7.1 Table 7.2 Table 7.3 Table 8.1 Table 8.2 Table 8A.1 Table 9.1 Table 9.2 Table 9.3 Table 9.4 Table 9.5 Table 9.6 Table 9A.1 Corruption Indirect indicators of corruption typologies Effects of policy variables and institutional quality on growth in income per worker, 1980–2000 GDP per capita growth rates: Actual and predicted Technology absorption Religious affiliation shares, 1900 and 1990 Regional Pew survey responses Pew responses by country and regional average GATT/WTO and Bretton Woods accession status, as of 2005 Middle East’s total trade shares, 2004 Participation in preferential trade arrangements Starting a business Enforcing contracts Closing a business Total entrepreneurial activity values and projections Macroeconomic environment: Business costs of terrorism Chicago Council on Foreign Relations “temperature data,” 1978 and 2002 Lower-bound estimates of Arabs in Europe 152 154 168 170 176 190 194 195 210 216 227 239 241 242 247 263 267 271 Figures Figure 1.1 Figure 1.2 Figure 1.3 Figure 1.4 Figure 1.5 Figure 2.1a Figure 2.1b Figure 2.2 Figure 2.3a Figure 2.3b Figure 2.4a Figure 2.4b Figure 2.5a Figure 2.5b viii Rate of growth of GDP per capita in constant prices, 1960–2004 Map of the Arab economies Commodity price series for petroleum, spot Average polity score, 2003 Average number of regime changes, 1960–2003 Endowment triangle of human capital, land, and labor, 1961 Endowment triangle of physical and human capital and labor, 1961 Savings and investment ratios, 1960–2004 Human capital accumulation, normally endowed countries, 1960–2000 Human capital accumulation, resource-rich countries, 1960–2000 GDP per capita, normally endowed countries, 1960–2004 GDP per capita, resource-rich countries, 1960–2004 Investment ratio and GDP growth, 1970–80 Investment ratio and GDP growth, 1980–90 25 25 32 35 35 44 44 49 49 Figure 2.5c Figure 2.6a Figure 2.6b Figure 2.6c Figure 3.1 Figure 3.2 Figure 3.3 Figure 3.4a Figure 3.4b Figure 3.5 Figure 4.1a Figure 4.1b Figure 4.2a Figure 4.2b Figure 4.3a Figure 4.3b Figure 4.4 Figure 4.5a Figure 4.5b Figure 4.6a Figure 4.6b Figure 4.7 Figure 6.1 Figure 6.2 Figure 6.3 Figure 6.4 Figure 6.5 Figure 7.1 Figure 10.1 Investment ratio and GDP growth, 1990–2000 Accounting for economic growth, 1970–80 Accounting for economic growth, 1980–90 Accounting for economic growth, 1990–2000 Life expectancy, 1960–2004 Difference between female and male life expectancy, 1960–2004 Infant mortality rate, 1960–2004 Childhood immunization, normally endowed countries, 1980–2004 Childhood immunization, resource-rich countries, 1980–2004 Gender gap in literacy, 1970–2004 Initiation of fertility declines, normally endowed countries, 1960–2004 Initiation of fertility declines, resource-rich countries, 1960–2004 Age dependency ratio, normally endowed countries, 1960–2004 Age dependency ratio, resource-rich countries, 1960–2004 Female labor force participation, normally endowed countries, 1950–2020 Female labor force participation, resource-rich countries, 1950–2020 Manufacturing exports, 1980 and 2003 Financial depth, normally endowed countries, 1980–99 Financial depth, resource-rich countries, 1980–99 Market capitalization, normally endowed countries, 1988–2004 Market capitalization, resource-rich countries, 1988–2004 Saudi stock market closing price, May 2001– January 2007 Fiscal balance, 1980–2000 Inflation, 1980–2000 Sachs-Warner openness index, 1980–2000 Institutional quality, 1982 Royalties and fees for technology licensing, 1980–2004 Civilization fault line Likelihood of liberalizing transition, 1970–99 50 53 54 55 61 62 63 65 65 69 88 89 90 90 95 95 101 124 124 128 128 130 166 166 167 167 177 189 274 ix computable general equilibrium (CGE) models, 233 Confucianism, 140n, 157, 286n consumption rate, 122 contraceptive use, 89, 91t contract enforcement, 238, 241t corruption “cascading,” 153 economic growth and, 151–55, 171 foreign investment and, 264n indicators of, 153, 154t levels of, 151, 152t popular attitudes toward, 196 Council for Mutual Economic Assistance, 188, 212 counterelites, terrorists as, 82 credibility deficit, in authoritarian regimes, 7–8, 88, 160 credit, access to, 125t, 126 crime, organized, 153 Cuba, 51 cultural factors corruption and, 153 discontent and, 59 economic reform and, 10, 204, 307–308 entrepreneurship and, 244, 249 European division based upon, 188–89, 189f foreign investment and, 305 globalization and, 105–108 nontraditional, acceptance of, 196 political structure and, 286–87, 291–94, 296 cultural tolerance, indicators of, 193, 196 currency convertibility, 211 currency unions, 218–19 customs clearance, 107–108 customs unions, 218–19 Dana Gas, 132n Dean, Howard, 278n decolonization, 197 demilitarization, 203 democratic deficit, 289–97 democratization, 5–9, 7f, 192, 192n See also political reform barriers to, 291 in Central Europe, 188, 191 cultural factors affecting, 286–87, 291–94 demands for, 273 determinants of, 285–88 economic effects of, 283–84 economic reform and, 270, 275, 283–84 336 episodes of, 294–97 oil rents and, 31–32, 31t quantitative modeling of, 289–97 repatriation and, 258, 283 rise of middle class and, 200–201, 201n terrorism and, 284 trade volumes and, 266–68, 283–84 war and, 276n demographic crisis, 1–11, 86–94, 87t addressing, 11–13 educational status and, 70 globalization and, 85–135 total factor productivity and, 56 demographic dividend, 13, 93 demographic transition, 88 projection of, 91, 92t, 93 Department of Homeland Security, 310 dependency theory, 105, 175, 198 developing countries, economic growth in, 23–24 diplomatic immunity, abuse of, 153 discontent, 59, 78–83 levels of, 59–60 living standards and, 57 political structure and, urbanization and, 60 diversification, economic performance and, 48 domestic entrepreneurship, 238–50 domestic growth fluctuations in, 43–48, 44f strategy aimed at, 100 domestic supply, 304 Dow Jones Arabia Titans index, 119 Dubai construction industry, 130–31 education industries, 111 financial markets, 116 stock market, 129 tourism industry, 110 Dubai International Financial Exchange, 116 Dubai Islamic Bank, 114 Dubai Ports World controversy over, 116, 117b, 308–309 sukuk issuance, 115 “Dutch disease.” See resource curse (“Dutch disease”) Eastern Europe See also specific country cultural tolerance in, 196 democratization in, 188, 191 discontent in, 79, 82 economic growth in, 24, 57, 188 THE ARAB ECONOMIES IN A CHANGING WORLD economic strategy in, 158, 162, 188, 198–99, 280 entrepreneurship in, 249–50 global engagement of, 209–14, 210t–11t political economy of, 99, 189, 191, 277 preferential trade agreements, 220 trade performance of, 101, 101f economic efficiency, and preferential agreements, 214 economic freedom index, 245 economic growth, 19–57 business climate and, 163, 171, 248–49, 300, 302–304 constraints on, 11–13, 171, 300–302 corruption and, 151–55 determinants of, 172 differences in, sources of, 51–56 financial-market development and, 122–32 investment and, 48–51, 49f–50f lack of focus on, 160–61, 169 legal systems and, 144–51 policies required for, 157–85, 299, 302–303 political constraints on, 13, 160, 273–75 post–World War II, 119–22 predicted versus actual, 169, 170t, 171 religious affiliation and, 10, 12, 139–44 sources of, 137, 142, 302–303 economic growth strategy absence of Arab voices in, 198–99 “big push,” 100 domestically oriented, 100 export-oriented, 100, 158–59 foreign investment focus of, 159, 250, 250n, 260–66, 275, 304–305 forming, 302–303 lack of focus on, 199–200 economic integration, cross-border See globalization economic performance of Arab economies, 1, 2f versus Asian countries, 160–61, 169, 170t, 171, 182, 198–99, 281 versus Eastern Bloc countries, 188 globalization and, 96 international comparison of, 37–44 investment climate and, 163 lack of diversification and, 48 liberalization and, 3–4 political structures and, 5–9, 295 reform needed to improve, 98–99, 300 regional comparison of, 21–37, 22t religious tradition and, 10 trends in, 19–57 economic policy in Arab economies, 159–62 authoritarianism and, effects of, 157–85 measuring, 162–72 growth and, 164–72, 166f–67f, 168t living standards and, 42 trade liberalization and, 109, 109n economic reform barriers to, 134, 279–81, 305 external commitments as anchor for, 205, 209 globalization and, 98 international dimension, 307–12 lack of, 8–9, 13, 57, 163, 199–200 local dimension, 303–307 needs assessment, 169, 300 obstacles to, 201–205, 313 political economy of, 5, 57, 99, 201–205, 270, 273–97, 303–12 promotion of, 209 prospects for, 284–88 second-generation, 158, 248 Economic Research Forum for the Arab Countries, Iran, and Turkey, 199 economic sanctions, 63n education economic growth and, 172–73, 184–85, 299, 302–303 investment in, 173, 180–81, 302–304 Islamic, 141 levels of, 69–70, 69f, 174 popular attitudes toward, 196, 303 quality of, 37 religious, 141, 281, 304 science and engineering (See science and engineering education) technological absorptive capacity and, 96, 179–80 of women, 69–70, 91, 94 educational capital, 70, 70n educational level and entrepreneurship, 244, 249 of immigrants, 253, 256 of terrorists, 82 education industries, development of, 111 Egypt and Arab free trade area, 217, 217n bank lending in, 126 business climate, 242–43, 243n, 249n debt write-offs for, 120, 123n INDEX 337 Egypt—continued demographics, 2–3 economic growth in, 10 economic reform in, 202, 234–35 effects of war on, 45, 160 emigration from, 93 FDI inflows to, 113 foreign aid to, 120, 161 income levels in, 20, 68–69 Islamic banking in, 114 political economy of, 57 returnees to, 255, 260 tourism sector in, 110 trade barriers, 107–108 US free trade agreement with, 222–23, 234–36 WTO accession, 212 elite attitudes, 198–201 employer costs, and entrepreneurship, 245 employment See also labor force; unemployment in Arab immigrant communities, 255, 257 globalization and, 3–4 happiness and, 75, 78 public-sector (See public-sector employment) employment generation and job types, 98 labor force absorption and, 96–98, 135 methods of, 86, 94, 99–100, 110, 132 need for, 85–86, 96, 282, 299, 313 endowment triangle, regional comparison of, 24, 25f, 26 engineering education See science and engineering education entrepreneurship, 238–50 See also business climate barriers to, 245, 269 cultural factors affecting, 244, 249 demand and supply model for, 245–46 foreign, 250, 252b indices of, 243–45 institutional environment and, 247–48, 260 levels of, 245–46, 247t motivation for, 243, 243n, 245 political economy of, 249–50, 304 technically competent, 250 Europe See also specific country Arab immigrants in, 256–59, 269, 271t cultural history of, 188–89, 189f versus Arab economies, 191–92 political economy of, 189, 191 338 versus Arab economies, 191–92 popular attitudes in, 73, 79, 82, 193, 268n European Union, 191 Common Agricultural Policy, 219 free trade agreements with, 219–21, 224 GATT provisions and, 218 Global Mediterranean Policy, 219 Middle Eastern trade with, 216t, 217 exchange programs, 310 exchange rate management, 28–30 expenditure policy, oil rents and, 30 export(s) agricultural, 219–20, 235 to European Union, 219–21 growth strategy aimed at, 100, 158–59 manufacturing, levels of, 100–103, 101f, 102t obstacles to, 105, 107–108 oil (See oil-exporting countries) volume of, 216t, 217 export customs clearance, 107–108 exporting linkages, 103, 104t export orientation, benefits of, 108–110, 158–59 export processing zones, 105, 107 extremist political movements, 79n, 80, 80n, 204–205 See also Islamic political movements family size, 89, 91 fatwas, 205 favoritism by government officials, 153 FDI See foreign direct investment (FDI) fees from technology licensing, 177, 177f, 179 fertility rates, 2, 86–88, 88f–89f and pension commitments, 89, 91 financial depth, assessment of, 123, 124f financial inflows, 111–22 financial market(s), 116, 261 differences between, 132, 133t financial-market development, 122–32 indicators of, 123, 125t spillover effects of, 129–32 financial system See also banking sector and domestic entrepreneurship, 238 Islamic, 118b, 131, 140, 197, 202 fiscal balance, measures of, 165, 166f fiscal policy in Arab economies, 159–62 promoting economic growth, 99, 283 foreign aid, 119–22 economic growth and, 23n, 161 THE ARAB ECONOMIES IN A CHANGING WORLD inflows, 120, 121t public welfare expenditures and, 73 foreign direct investment (FDI), 4–5, 111–19 best practice score in, 266 factors affecting, 174–75, 269–70, 299 gravity-type models, 261 growth strategy focused on, 159, 250, 250n, 260–66, 260n, 275, 304–305 horizontal, 261 inflows, 111, 112t intraregional, 116 motivations for, 261–62 popular attitudes toward, 264–66, 269, 305 stock markets and, 131–32 technology inflows via, 175, 175n, 177, 304 underperformance in, 261 vertical, 261 foreigners See also immigrants acceptance of, 196 entrepreneurship by, 250–51, 252b fear of, 279–80, 306 staffing of new enterprises with, 180–81 Forum for the Future, 312 France, Arab immigrants in, 257–58 Freedom Agenda, 284 free trade agreements (FTAs) See preferential trade agreements; specific agreement Front Islamique du Salut (FIS), 81, 204 Fulbright exchanges, 310 fundamentalist movements, 79n, 80, 80n Fund for the Future, 311–12 Gadhafi, Muammar, 249 GAFTA See Greater Arab Free Trade Area (GAFTA) Gandhi, Rajiv, 57 garment manufacturing, 180n gate of ijtihad, 140–41 GATT See General Agreement on Tariffs and Trade (GATT) GCC See Gulf Cooperation Council (GCC) GDP per capita global rate of, 1, 2f growth rate of, 47t, 48, 169, 170t, 171 happiness and, 73 investment ratio and, 48–51, 49f–50f in local prices, 43–48, 44f Mediterranean comparison of, 38b OECD comparison, 39, 42–43 oil prices and, 34b regional comparison of, 21, 22t share of government wages in, 71 share of rents in, 26, 27t GEM project See Global Entrepreneurship Monitor (GEM) project gender differences See also women in Arab-European community, 257 in educational attainment, 91 in life expectancy, 61, 62f in literacy, 69–70, 69f General Agreement on Tariffs and Trade (GATT) Article XXIV, 217–18 membership in, 209–14, 210t–11t generalized system of preferences (GSP), 230 geography and economic development, 137 and free trade agreements, 221 Germany, Nazism in, 189, 191–92, 192n Gini coefficients, 64–69, 67t Global Competitiveness Report 2005–2006, 103–104, 104t, 108, 123, 146, 149–53, 175, 177, 180 Global Entrepreneurship Monitor (GEM) project, 243, 245 globalization, 209–36 See also trade liberalization adaption to local values, 200 adverse effects of, 198 attitudes to, 12, 183, 193–96, 194t–95t, 206–207, 209, 305 and foreign investment, 264–66, 269, 306 and political reform, 277–78 challenge of, 11–13, 301 cultural impact of, 105 demographic crisis and, 85–135 economic effects of, 3–4, 96, 98, 108–11 obstacles to, 8–9, 86, 98–99, 105–108, 200, 299, 301 social change needed for, 305 Global Mediterranean Policy (EU), 219 GlobeScan surveys, 193n governance bad, deflecting attention from, 139, 139n, 276 effect on economic growth, 171 good, happiness and, 75–78 indicators of, 146 government burden indicators, and entrepreneurship, 245 government officials, favoritism by, 153 INDEX 339 government revenue, share of rents in, 26, 27t Greater Arab Free Trade Area (GAFTA), 215, 217, 225–26 Groupe Salafiste pour la Prédication et le Combat (GSPC), 80 Group of 20, 212 growth accounting Bosworth-Collins model of, 164–72, 166f–67f, 168t Nelson-Phelps model of, 172–74, 172n, 184–85 GSP See generalized system of preferences (GSP) Guantanamo Bay, 308 Gulf Cooperation Council (GCC), 98, 226 capital-market development, 127 financial-sector development, 123–26 free trade agreements, 218–19, 219n–20n Gulf War of 1990-91 aid inflows after, 120, 161 economic effects of, 44f, 45, 161 Hamas, 82, 85n happiness, 73–78 employment and, 75, 78 good governance and, 75–78 income levels and, 73–74, 78 lack of (See discontent) self-assessment of, 73, 74t hawala, 118b health care services industries, 111 hetistes, 82 Hezbollah, 82 homosexuality, acceptance of, 193, 196, 196n, 207 Hong Kong, 157 Hsinchu Science Park, 258 human capital, 33–37, 35f See also labor force entry barriers to, and popular attitudes, 196 regional comparison of, 24, 25f, 26 technology and, 173, 302–303 total factor productivity and, 51–52, 52n, 56 Hungary, 188 Hussein, Saddam, 267 ICOR See incremental capital-output ratio (ICOR) IGAD See Intergovernmental Authority on Development (IGAD) 340 IMF See International Monetary Fund (IMF) immigrants See also foreigners acceptance of, 196 in Europe, 256–59, 269, 271t in North America, 251–56, 269 return of (See repatriation) immigration, 93–94, 93n, 93t of educated workers, 180–81 (See also brain drain) to Europe, 256–59, 269, 271t to North America, 251–56, 269 immunization, childhood, 64, 65f imperialism, 191–92 import customs clearance, 107–108 imported equipment, cost of, 176t, 179 import liberalization, benefits of, 109 import substituting industrialization, 158, 187, 202 income inequality, 64–69, 67t land reform and, 66–67 social indicators and, 70–71, 70n sources of, 71–73 income levels, 19–57 See also per capita income; poverty happiness and, 73–74, 78 of immigrants, 253 international comparison of, 39, 40t–41t in oil-exporting countries, 1, 6b income per worker, growth in, effect of policy variables on, 164–68, 168t incremental capital-output ratio (ICOR), 28, 29t calculation of, 28n investment to GDP ratio and, 51 India business climate in, 243, 245 corruption in, 153, 155 economic growth in, 24, 48, 157, 163, 169, 170t, 171, 187 economic strategy in, 280 export orientation in, 109–110 human capital in, 180 immigrants from, 252b political economy of, 57 returnees to, 251, 259 Trade Expansion and Cooperation Agreement with, 226 Indian Institutes of Technology, 260 Indonesia Chinese business community in, 43n economic strategy in, 157, 159, 162, 281 legal system in, 146 manufacturing exports, 102–103 THE ARAB ECONOMIES IN A CHANGING WORLD in OECD, 140 oil rents in, 26–27, 42 resource curse in, 30 industrialization delays in, 105 import substituting, 158, 187, 202 repatriation and, 260 technology inflow and, 179 industrial sector, labor deployment to, 67 infant mortality, 2, 61–62, 63f, 63n, 87 inflation measures, 165, 166f information channels, and political reform, 278, 278n, 306 information technology sector, 46 initial public offerings (IPOs), 127, 127n, 131, 132n Institute for Technological Research and Innovation (ITRI), 258 institutional quality economic growth and, 139–44, 248, 301 entrepreneurship and, 248 measures of, 165, 167f worker income growth and, 168, 168t intellectual property rights (IPR) protection technology licensing and, 178 US trade agreements and, 222 WTO regime, 211 Intergovernmental Authority on Development (IGAD), 226 International Centre for Migration Policy Development, 256 International Country Risk Guide, 146 international exchange, 283–84 International Finance Corporation, 131 International Labour Organization, 94 International Monetary Fund (IMF) employment generation survey, 96 financial-market development assessment, 123 involvement with, 211, 312 Islamic financial institutions report, 114 policy changes imposed by, 163 Internet access, 278, 278n, 306 intraindustry trade (IIT), level of, 103, 104t investment See also foreign direct investment (FDI); incremental capital-output ratio (ICOR) economic growth and, 163, 171 in education, 173, 180–81, 302–304 financial-market development and, 122–23 Islamic financial system and, 115 for job creation, 86 political uncertainty and, 274–75 public sector, 71–72 riskiness of, 116, 262–65, 265n, 269–70 terrorism deterring, 78–79, 131, 261–64, 269, 305–306 investment ratios, 32–33, 32f GDP growth and, 48–51, 49f–50f IPOs See initial public offerings (IPOs) IPR protection See intellectual property rights (IPR) protection Iran economic policies in, 204, 282, 282n as part of Middle East, 4b war with Iraq, 160 Iraq gender literacy gap in, 70n infant mortality in, 63n invasion of Kuwait, 44f, 45, 120, 161 US invasion of, 81, 308 US popular attitude toward, 268 war with Iran, 160 Islam cultural tolerance and, 196 economic reform and, 204, 283, 300–301 European division based upon, 188–89, 189f, 191t political attitudes and, 197–98, 286–87, 286n, 292–94 social processes and, 197–98, 283 as source of personal identity, 197–98, 293–94, 293n Islamic Action Front, 281 Islamic bonds, 115, 119 Islamic Development Bank, 114–15, 126 membership in, 15t–17t Islamic education systems, 141, 281, 304 Islamic finance, 113–15, 118b, 131, 140, 197, 202 Islamic Financial Services Board, 114 Islamic nations Arab ethnicity in, 293–94 cross-country regression approach to, 142–44 economic comparison of, 26 economic growth of, 10, 12, 139–44 gender literacy gap in, 69–70, 69f happiness in, 74, 74t institutional environment in, 144 legal systems in, 145–46 Islamic political movements differences between, 79n, 80, 80n and potential for reform, 277, 281–83, 306–307 rise of, 279, 279n INDEX 341 Islamic Renewal, 310n, 311 Islamic Salvation Front, 81, 204 Israel economic effects of war on, 161, 276n economic integration and, 139 as part of Middle East, 4b ITRI See Institute for Technological Research and Innovation (ITRI) Jamahiriyah ideology, 249 Japan, 159 job creation See employment generation Jordan economic characteristics of, 21, 169, 303 emigration from, 94 fiscal deficit rate, 165, 166f foreign investment zones, 180, 180n market capitalization in, 127 political reform in, 278n, 297n remittances to, 120 unemployment in, 75 US free trade agreement with, 108n, 222, 222n, 223, 230–32 Jordan, Robert, 145 journal articles, technical, 178 journalists, abuse of, 278 JPMorgan Emerging Bond Index Global, 132 judicial independence, 149 Kenyatta, Jomo, 199 Kestenbaum, Charles, 145 Khaled Sheik Mohammed, 81 knowledge acquisition, modes of, 173–74 knowledge generation, domestic, 178–79 knowledge transfer banking sector and, 126n by immigration, 252b measures of, 175 Kramer, Martin, 82 Kundera, Milan, 188 Kuwait demographics, economic characteristics of, 21 FDI inflows to, 111n financial markets in, 119, 130 Iraqi invasion of, 44f, 45, 120, 161 labor force See also employment; human capital educational status of, 70, 180, 302–303 immigration and, 93–94 industrial sector, 67 measurement of, 94, 94n 342 regional comparison of, 24, 25f, 26 total factor productivity and, 51–52, 52n, 56 women in, 94, 95f, 96, 97n labor force absorption, 96–98, 135 alternative scenarios for, 97, 97t labor force growth, 1, addressing, 11–13 capital accumulation and, 33 cohort bulge causing, 88 obstacles to, 97–98 in OPEC countries, 161 rate of, 85 labor-intensive production export orientation resulting from, 109–10 job creation with, 86, 99–100, 132 labor-intensive service sectors, development of, 110–11, 132 land reform, income inequality and, 66–67 Latin America See also specific country debt crisis in, 158, 187 economic strategy in, 158, 187, 198–99, 280 political reform in, 275 law enforcement, terrorist financing and, 118b Lebanon, 255 legal systems effectiveness of, 146, 147t–48t, 149 impact on economic growth, 144–51 origins of, 145–46 lending bank, 126, 126n, 131 bureaucratization of, 125t, 126 less developed countries (LDCs), growth accounting model for, 184–85 Liberia, 162 Libya, 249 “license raj,” 153, 155 life expectancy, 2, 60–61, 61f, 87 gender differences in, 61, 62f liquidity glut, 122 literacy gap, gender, 69–70, 69f living standards changes in, 20, 299 government policy affecting, 42 international comparison of, 37–43 population growth and, real domestic, 43–48, 44f regional comparison of, 23 war and, 160–61 loans, bank, 126, 126n, 131 THE ARAB ECONOMIES IN A CHANGING WORLD Lugar, Richard, 79 “lumpen capitalists,” 248 macroeconomic policy deficiencies in, 12 economic growth and, 301, 312 entrepreneurship and, 248 investment and, 282 quality measures, 165–68, 168t MAFTA See Mediterranean Arab Free Trade Area (MAFTA) Maghraoui, Abdeslam M., 311 Malaysia, 157, 159, 281 manufacturing exports, levels of, 100–103, 101f, 102t manufacturing value added, oil prices and, 34b market capitalization, 127, 128f, 129 mass media, and political reform, 278, 278n, 306 maternal mortality, 63, 64t Mediterranean Arab Free Trade Area (MAFTA), 216n Mediterranean countries economic performance of, 38b preferential trade between Europe and, 219–21 middle class, rise of, and democratization, 200–201, 201n Middle East See also Arab economies; specific country definition of, 4b, 15t–17t map of, 3f population of, 22t trade shares, 216–17, 216t Middle East Economic Research Forum (World Bank), 159, 159n Middle East Foundation, 310 Middle East Free Trade Area (MEFTA), 216n, 222, 311 Middle East North Africa (MENA) region definition of, 4b, 15t–17t policy indicators, 163 Middle East Partnership Initiative, 284, 311 migration See immigration military-industrial complex See also war economic reform and, 203 global engagement and, 212 political reform and, 291 mineral endowments, 24 See also oil modernization as determinant of democracy, 286, 289–90 failure of, 38b, 42 Mohammed Atta, 81 monarchies, 6, 273 monetary policy in Arab economies, 159–62 financial-market development and, 123–26 money laundering, 118b Morocco business climate in, 242–43 demographics, 2–3 economic characteristics of, 21, 303 immigrants from, 256–58 political reform in, 297n returnees to, 258 stock market in, 132 US free trade agreement with, 222, 232–34, 284 mortality, 2, 88 child, 64 infant, 2, 61–62, 63f, 63n, 87 maternal, 63, 64t MSCI Emerging Markets equity index, 127 Mubarak, Hosni, 42 Multi-Fiber Arrangement, phaseout of, 220 multilateral agreements, versus preferential agreements, 214, 311–12 multilateral institutions See also specific institution membership in, 209–14, 210t–11t, 312 Muslim Brotherhood, 10, 80, 192n, 205, 281 mutual funds, Islamic, 114–15 Nahdlatul Ulama, 281 Nasser, Gamal Abdel, 42, 199 NATO See North Atlantic Treaty Organization (NATO) natural resources, 26–33 See also oil Nazif, Ahmed, 243 Nazism, 189, 191–92, 192n necessity index, 243–45 Nehru, Jawaharlal, 199 Nelson, Richard, 172 Nelson-Phelps growth accounting model, 172–74, 172n, 184–85 neoimperialism, 308 newly industrialized countries, economic strategy of, 158 Nigeria, 26, 120, 162 Nkrumah, Kwame, 199 nonperforming loans (NPLs), 126, 126n North American Free Trade Agreement, 51 North Atlantic Treaty Organization (NATO), 191 INDEX 343 North Korea, 51 NPLs See nonperforming loans (NPLs) nutritional status, childhood, 64, 66t OECD See Organization for Economic Cooperation and Development (OECD) countries offshoring, 181 oil, demand for, 119, 309, 309n oil-exporting countries economic growth in, 44f, 45–46 comparison of, 24, 25f foreign investment in, 175n global competitiveness of, 103–105, 104t, 212 ICORs for, 28, 29t income levels in, 1, 42–43 market capitalization in, 127, 128f, 129 political reform in, 295 remittances paid to, 119–22, 121t rents received by, 26–27, 27t resource curse in (See resource curse) trade volume of, 103, 216t, 217 oil prices capital accumulation and, 33, 34b economic performance and, 12, 14, 20, 158 emigration and, 93 exchange rate management and, 28–30 financial-market development and, 122–23, 132 fluctuations in, 5f, 6b, 27, 43, 119 income levels and, 1, 24, 26 poverty levels and, 69 public welfare and, 72, 80 oil rents, 26, 27t, 119–22 allocation of, 30 economic reform and, 9, 303, 307 negative impact of, 30–32, 31t, 261, 299 (See also resource curse) political structures and, 290–91 public welfare expenditures and, 73 Oman, 119, 218, 222 Opacity index, 146, 151 Open Door policy (China), 203 Organization for Economic Cooperation and Development (OECD) countries as determinant of democracy, 294n export growth in, 46, 46t financial-sector development, 123 GDP per capita, 39, 42–43 income in, versus Arab economies, 20 technology inflows, 177, 177n 344 Organization of Petroleum Exporting Countries (OPEC) economic strategy and, 158 labor demand and, 161 membership in, 15t–17t, 26 remittances to, 120 Organization of the Islamic Conference, 226 membership in, 15t–17t, 26 organized crime, 153 organized labor, 202 Osama bin Laden, 81 Ottoman Empire, collapse of, 192 output per worker, growth in, 164–68, 168t Palestinian Authority territories, 110, 161, 223, 232, 308 Pan-Arab Free Trade Area (PAFTA), 215, 225–26 pan-Arabism, 42, 199–200, 286–87 Park Chung-hee, 9, 42 patent applications, 178 Peninsular and Oriental Steam Navigation Company (P&O), 117b pension commitments, 89, 91, 245 per capita income business sector and, 238, 241 entrepreneurship and, 245 globalization and, 96 happiness and, 73–74 international comparison of, 39, 40t–41t population growth and, 1, 91 religion and, 143n trade performance and, 101–103 personal identity, sources of, 197–98, 293–94, 293n petrodollars See oil prices petroleum See oil Pew Global Attitudes Project on globalization, 193, 193n, 194t–95t, 206–207, 264, 266, 277 on immigration, 257–58 on United States, 308 Phelps, Edmund, 172 Philippines, 103 physical capital, regional comparison of, 24, 25f, 26 PIMCO Emerging Market Fund, 132 Piscatori, James, 205 Poland, 212–13, 213n policy environment entrepreneurial response to, 247–48, 260 repatriation and, 259 supply response to, 237–71 THE ARAB ECONOMIES IN A CHANGING WORLD policy inertia, 8, 59 political economy constraints caused by, 13, 160 of economic reform, 5, 57, 99, 200–205, 270, 273–97, 303–12 of entrepreneurship, 249–50, 304 of Europe, 189, 191 versus Arab economies, 191–92 of intraregional trade, 217–18 of multilateral institutions, 212–14 oil rents and, 30–32, 31t of preferential agreements, 215 productivity growth and, 99 public-sector employment and, 159 religion and, and rise of middle class, 200–201, 201n statistical modeling of, 285–86 of trade barriers, 202 political equilibrium, 288 political geography, 137, 139 political leaders, lack of focus on economic issues, 199–200 political reform See also democratization; regime change binary solution to, 276 demand for, 273, 273n, 295 economic effects of, 274–75, 295 episodes of, 294–97 international exchange and, 283–84 Islam and, 286–87, 286n lack of, 276 path to, 273, 274f, 275–83, 313 prospects for, 284–88 political structures, 5–9, 7f See also specific structure cultural factors affecting, 286–87, 291–94, 296 happiness and, 75–78 impact of religion on, 144, 197–98 oil rents and, 290–91 popular attitudes toward, 7, 197–98 quantitative modeling of, 289–97 political uncertainty, 6, 8f, 14, 299 See also war economic effects of, 44f, 45–46, 116, 274–75 versus need for equilibrium, 288 and prospects for change, 273–97, 306 religion and, political voice, lack of, 80–81 polity scores, 5–6, 7f, 31–32, 31t, 259, 273, 283, 286, 290 popular attitudes, 193–98 See also discontent American, 266–67, 268t anti-Western (See anti-Western attitudes) on civil rights, 287–88 on cultural tolerance, 193, 196 on economic markets, 193 on education, 196, 303 on entrepreneurship, 249 European, 268n on foreign investment, 264–66, 269, 305 on globalization, 12, 183, 193–96, 194t–95t, 206–207, 209, 305 effect on foreign investment, 264–66, 270, 303, 305–306 and political reform, 277–78 information-averse, 278 living standards and, 57 on multilateral institutions, 213–14 on politics, 7, 197–98, 275, 313 on terrorism, 80 on trade liberalization, 183, 187 population growth See demographic crisis portfolio investment, 132, 133t, 261 poverty absolute, 66, 68t, 72–73, 161 strategies to combat, 72–73, 299 terrorism and, 79–82 poverty traps, 306 PPP See purchasing power parity (PPP) preference falsification, 201 preferential trade agreements See also specific agreement as anchor for reform, 224, 311 “deep integration,” 223, 234–35, 308 with European Union, 219–21, 224 harmful effects of, 217–18 intellectual property rights and, 178 Mediterranean, 219–21 multilateral, 214–15, 311–12 versus multilateral agreements, 214 pan-Arab, 215–16, 311 participation in, 227t–29t regional, 215–19, 225–29, 311 role of, 214–23 with United States, 108n, 178, 218–24, 223n, 230–36, 308, 311 prices asset, 127 local, GDP per capita in, 43–48, 44f oil (See oil prices) INDEX 345 PricewaterhouseCoopers indexes, 146, 149, 151 privatization and foreign investment, 262, 264n of public assets, 127, 129, 159, 202 productivity, 19–57 agricultural, 67 globalization and, 98 labor, need for, 299, 302–303 productivity growth employment growth and, 96–98, 135 potential for, 99 technology and, 172–81 property rights, 149 Protestant Reformation economic development and, 140 European division based upon, 188–89, 189f, 191t public opinion See popular attitudes public sector development of, 71–72, 200–201 privatization of, 127, 129, 202 size of, 31–32 trade barriers created by, 107–108 public-sector banks, development of, 124–26 public-sector employment focus on, 85n, 200–201, 307 income distribution and, 71, 71n, 73 politics and, 159 public welfare expenditures, sustainability of, 72 purchasing power parity (PPP), 20, 23 international comparisons of, 39, 40t–41t, 43 Qatar, 3, 111, 116, 119 qualified industrial zones (QIZs), 94, 107, 223, 223n, 230–32 quantitative restrictions, 105, 106t, 107 real estate, 113, 130–31 regime change, 6, 8f, 9, 14 See also political reform regional organizations, 225–29 See also specific organization regional spillovers, as determinant of democracy, 286, 289–90 regulatory burden, 149–51, 150t and domestic entrepreneurship, 238, 239t–42t religion See also specific religion autonomy from state, 204, 204n 346 economic growth and, 10, 139–44, 204, 300–301 European division based upon, 188–89, 189f, 191t political attitudes and, 197–98, 286–87, 286n, 292–94 political economy and, 9, 60, 301 social change and, 197–98 social networks related to, 77 as source of personal identity, 197–98, 293–94, 293n religious education, 141, 281, 304 remittances, 119–22, 121t for poverty attenuation, 72 rent(s) channeling of, 214, 248 definition of, 26 oil (See oil rents) regional comparison of, 26, 27t rentier mentality, 30, 75, 248–49 repatriated earnings, 161 income equality and, 71 as investment financing, 113 repatriation, 180–81, 251–61 and brain drain reversal, 180–81, 251–61, 275, 283 factors affecting, 258–59, 269 social and political effects of, 283, 306 research and development, domestic, 178–79 resource allocation preferential agreements and, 214 stock markets and, 131 resource curse (“Dutch disease”), 28, 30–32 economic reform and, 9, 301 growth rates and, 51, 162 public welfare and, 72 remittances and, 120 riba, 113, 115, 140 risk and foreign investment, 116, 262–65, 265n, 269–70, 299, 305 and trade flows, 266–68, 306 risk-free funds, 130 Romania, 99 royalties from technology licensing, 177, 177f, 179 “rule of law” index, 149 Saad Eddin Ibrahim, 248 Sachs-Warner openness index, 165, 167f Sadat, Anwar, 42, 45 THE ARAB ECONOMIES IN A CHANGING WORLD Saddam Hussein, 70n Salafist Group for Preaching and Combat, 80 satisfaction See happiness Saudi Arabia business climate in, 243 economic characteristics of, 21, 203 happiness in, 74–75 immigration to, 93 income levels in, 20, 43 Islamic banking in, 114 oil rents in, 30 stock market in, 119, 127, 129, 129n, 130f, 130n terrorist financing from, 118b terrorists from, 80 US popular attitude toward, 267–68 war with Egypt, 160 WTO accession, 145, 149, 212 savings ratios, 32–33, 32f, 99 science and engineering education, 33, 36t, 37, 70, 304 economic growth and, 173, 281, 302–303 terrorists with, 307 sea freight, 107–108, 137 second-generation reforms, 158, 248 September 11, 2001 See terrorism service sector labor-intensive, development of, 110–11, 132 trade liberalization in, 234, 234n SEZs See special economic zones (SEZs) sharia law, 145, 200 financial systems compliant with, 114, 118b, 131 versus WTO rules, 212 Shi’ism, 141 Shuaa Capital Arab Composite index, 129 Sierra Leone, 162 Singapore, 157, 159, 250n small and medium-sized enterprises (SMEs) and business climate, 238 discrimination against, 169, 171, 171n Smith, Adam, 77 social change discontent and, 59–60, 282–83 needed for globalization, 305 religious belief and, 197–98 social environment employment opportunities and, religion and, 77, 141, 197–98 variety in, acceptance of, 196 social indicators, 60–73, 299 income levels and, 70–71, 70n political reform and, 275 of well-being, 77 social insurance and entrepreneurship, 245 happiness and, 75 provided by authoritarian governments, 88–89 socialism, Arab, 275 socioeconomic factors, and entrepreneurship, 244 Solow-Swan model, 142 South Korea business climate in, 242–43 economic growth in, 23, 23n, 171 economic strategy in, 157, 159–61, 182 foreign investment in, 113n, 126 human capital in, 173, 180, 302 income inequality in, 68, 72 land reform in, 66–67 legal system in, 146 returnees to, 251, 255, 258 trade liberalization in, 109 sovereign ratings, 265n Soviet Union, 191–92, 212–13 special economic zones (SEZs), 280 state-owned sector See public sector stock markets, 127, 129–30, 130f Sufism, 141 suicide bombing, 82 Sukarno, 199 sukuks, 115 supply response, 237–71 Syria business climate in, 242–43, 249, 249n economic characteristics of, 21 information-averse attitude in, 278 oil rents in, 30n Taiwan business climate in, 242–43 economic growth in, 23, 23n, 171n economic strategy in, 157, 160–61, 182 foreign investment in, 113n human capital in, 180, 302 income inequality in, 68, 72 land reform in, 66–67 legal system in, 146 returnees to, 251, 255, 258–59, 269, 306 takaful, 115 Tamil Tigers, 82 INDEX 347 tariff elimination, in intra-Arab trade, 215–16 tariff rates, 105, 106t, 107–108 tax provisions, for bank lending, 126 tax rates, and foreign investment, 262, 264n TEA See total entrepreneurial activity (TEA) technical education See science and engineering education technology absorption capacity for, 179–80, 302–303 entrepreneurship and, 245, 250 and WTO measures, 211 technology licensing, 177, 177f, 179 technology transfer absence of, 179 data on, 175, 176t, 177–78 human capital, 260 indicators of, 174, 301 productivity growth and, 96, 172–81 US trade agreements and, 222 via foreign investment, 175, 175n, 177, 304 telecommunications Arab economies involved in, 46 investment in, 116, 116n political reform and, 278, 306 terrorism democratization and, 284 economic effects of, 79, 83, 262, 263t, 264n, 275, 305–306 education and, 307 financing of, 118b foreign investment and, 78–79, 116, 131, 261–64, 269 global examples of, 80–81 poverty and, 79–82 public opinion of, 80 sources of, 2, 9, 19, 60, 77–79, 81 technology inflow and, 181 US popular attitudes and, 267–68 US security concerns and, 117b–18b terrorists, basic profile of, 82, 82n textile exports, 220–21, 231–32, 235 Thailand, 157, 159 “third world” issues, dominance of, 199–200 TIFAs See trade and investment framework agreements (TIFAs) tolerance, cultural, 193, 196 total entrepreneurial activity (TEA), 243, 245–46, 247t total factor productivity (TFP), 28 corruption and, 171 348 differences in, 51–56, 53f–55f drop in, 50 economic policy and, 164–68, 166f–67f, 304 employment growth and, 96–98, 135 entrepreneurship and, 248 growth of, 56, 96, 98 measurement of, 52, 52n, 172, 174 tourism development of, 110, 113, 301 political uncertainty and, 274–75 trade, regional integration of, 223–24 trade agreements See preferential trade agreements; specific agreement trade and investment framework agreements (TIFAs), 223n trade barriers, 105, 106t, 107–108 hidden, 108 political economy of, 202, 296 trade diversion, 214, 217, 236 Trade Expansion and Cooperation Agreement with India and Yugoslavia, 226 trade liberalization See also globalization agricultural reforms and, 138b attitude toward, 183, 187 benefits of, 108–11 discouragement of, 8–9 economic performance and, 3–4 foreign investment and, 262 measures of, 165, 165n, 167f obstacles to, 98–99 political reform and, 295–96 preferential, 214–23 in services, 234, 234n trade volume, 99–111 with European Union, 220 intraregional, 216–17, 216t, 219 Middle East, 216–17, 216t oil-exporting countries, 103, 216t, 217 political reform and, 283–84, 283n poor, 100–103, 101f, 102t risk and, 266–68 with United States, 222, 222n, 231 Transparency International, 146, 151, 264n transportation of goods barriers to, 107–108, 108n economic development and, 137 tropical disease, 137 trucking, 107 Tunisia business climate in, 238, 242–43, 243n economic characteristics of, 21 THE ARAB ECONOMIES IN A CHANGING WORLD returnees to, 259 US free trade agreement with, 222 Turkey business climate in, 242–43 as part of Middle East, 4b unemployment, entrepreneurship and, 245 happiness and, 75 measurement of, 94, 94n rates of, 75, 76t, 85 unhappiness See discontent United Arab Emirates demographics, market capitalization in, 127, 129n, 131 services sector in, 110–11 US free trade agreement with, 222, 232 United Nations definition of Middle East under, 4b, 15t–17t Development Program (UNDP), 199 (See also Arab Human Development Reports (UNDP)) Educational, Scientific, and Cultural Organization (UNESCO), 15t–17t United States Agency for International Development, 311 Arab immigrants in, 251–56, 269 balance of payments deficit, 309 business costs of terrorism in, 263 Dubai Ports World controversy, 116, 117b, 308–309 economic reform initiative led by, 309–12 foreign opinion of, 117b, 308–11 happiness in, 73 Middle Eastern trade with, 216t, 217 Patriot Act, 118b popular attitudes toward foreign policy issues in, 266–67, 268t preferential trade agreements with, 108n, 178, 218–24, 223n, 230–36, 284, 308, 311 public diplomacy effort, 310–11, 310n spread of democracy as goal of, 284 trade with, effect of political reform on, 283–84 universities quality of, 37 science, 173 women at, 70 Unocal, 117b urbanization discontent and, 60, 77, 79, 89 female labor force participation and, 94 Uruguay Round, 220 vaccination, childhood, 64, 65f Venezuela, 14, 146 Vietnam, 161 Vietnam War, 161 wages real, 75, 85 employment generation and, 96–98, 135 repatriation and, 258–59 (See also repatriated earnings) war See also specific war of attrition, 201–202 economic effects of, 44f, 45–46, 63n, 160–61, 191–92, 203 political reform and, 276n, 291 Washington Consensus, 158–59, 162, 182, 199–200 water supplies, 64, 137, 138b welfare, 59–83 well-being See happiness Western culture adoption of, 141, 141n–42n attitudes toward (See anti-Western attitudes) Williamson, John, 158 See also Washington Consensus Wolfensohn, James D., 79 women See also gender differences educational attainment, 91, 94 entrepreneurship by, 244 labor force participation, 94, 95f, 96, 97n life expectancy, 61, 62f literacy gap, 69–70, 69f status of, 286–87 World Bank corruption index, 151 employment generation survey, 96 governance indicators, 146 involvement with, 211, 312 Middle East Economic Research Forum, 159, 159n regulatory burden index, 149, 151 rule of law index, 149 sukuk issuance, 115 World Development Indicators, 94 World Economic Forum, 126n Global Competitiveness Report, 103–104, 104t, 108, 123, 146, 149–53, 175, 177, 180 INDEX 349 World Trade Organization (WTO) Chinese accession to, 163 expansion of, 202 lack of integration into, 13 legal system imposed by, 145 membership in, 209–14, 210t–11t problems with, 214–15 World Values Survey, 73–74, 74t 350 xenophobia, 279–80, 306 Yemen, 45, 160 youth dependency ratio, 56, 88, 90f, 93 Yugoslavia, 226 zakat, 118b, 140 THE ARAB ECONOMIES IN A CHANGING WORLD ... countries—Egypt, Algeria, and Mo2 THE ARAB ECONOMIES IN A CHANGING WORLD Figure 1.2 Map of the Arab economies Tunisia Lebanon Syria Iraq Kuwait Moroc co Algeria J ordan Libya Egypt Qatar Saudi Arabia Yemen.. .The Arab Economies in a Changing World PETERSON INSTITUTE FOR INTERNATIONAL ECONOMICS The Arab Economies in a Changing World M A R C U S N O L A N D A N D H O WA R D PA C K Washington, DC April... East East Asia Eastern Europe OECD South Asia Sub-Saharan Latin Africa America Note: Middle East includes Algeria, Bahrain, Egypt, Iraq, Jordan, Kuwait, Libya, Morocco, Oman, Qatar, Saudi Arabia,