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Capital Surpluses and Deficits in the Arab Middle East: A Regional Perspective
Published online by Cambridge University Press: 29 January 2009
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The Arab oil-based economies in the Middle East are experiencing a period of unprecedented economic growth and prosperity owing to the recent dramatic increases in their oil revenues. The countries, however, have started to encounter considerable difficulty in implementing their overly ambitious development plans. Their economies are exhibiting obvious signs of tension and stress with acute bottlenecks developing in many areas and sectors. These bottlenecks relate basically to their generally narrow resource base, inadequate infrastructure, profound labor shortages especially in skilled and highly trained manpower, and inefficient administrative machinery. The cumulative impact of these factors diminishes the capacity of these countries to absorb their tremendous oil revenues productively.
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- Copyright © Cambridge University Press 1977
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NOTE: The authors are, respectively, Professor of Economics, University of Colorado; and Postdoctoral Fellow, The International Research Center for Energy and Economic Development, University of Colorado, Boulder. The research was supported by a National Science Foundation grant entitled "Regional Development in the Middle East and Its Implications for United States Trade, Capital Flows and Balance of Payments."
1 Cf. Fliakos, Constantine and Lewison, Ronald D., “Prospects for International Oil Supply,” Journal of Energy and Development, 1 (Autumn, 1975), 69–83.Google Scholar
2 For a thorough survey of these studies and their techniques, see our forthcoming book, Mallakh, Ragaei El, Kadhim, Mihssen, and Poulson, Barry, Capital Investment in the Middle East: The Use of Surplus Funds for Regional Development (New York: Praeger Publishers, 1977).Google Scholar
3 For detailed information on these estimates see ibid.
4 Regional investment must be evaluated not only in terms of pecuniary benefits but also in terms of its contribution to the multifarious objectives of the investing country. The rationale for this perception is the fact that oil revenues accrue to governments that, unlike their private citizens, are not narrowly motivated.
5 For a discussion of the rationale for regional aid and investment, see Mallakh, Ragaei El and Kadhim, Mihssen, “Arab Institutionalized Development Aid: An Evaluation,” Middle East Journal, 30 (Autumn, 1976).Google Scholar
6 Historical rates of growth of GNP in 1965–1971 in the region ranged between — 0.1 percent in Jordan and 6.4 percent in Syria. See International Bank of Reconstruction and Development, The World Bank Atlas, 1973.Google Scholar
7 The incremental GNP is calculated assuming that, without additional capital transfer, GNP would be growing at 5 percent. The availability of capital increases the rate of growth of GNP to 10 percent, thus contributing an additional $9.4 billion. This argument must be viewed, however, as tentative and preliminary because it neither takes into account the benefits of investment beyond 1980 nor the rate of amortization of debt.
8 Cf. Rasool, F. Abdul, “The Role of Arab Monetary Reserves in Arab Economic Integration.” 1974.Google Scholar Memo in Arabic.
9 Of course, this conclusion could be invalidated if the world demand for OPEC's oil resumed its previous growth pattern at prevailing prices, or if the oil producers failed to maintain their own growth momentum in the 1980s.