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Centre for the Study of African Economies
Department of Economics . University of Oxford . Manor Road Building . Oxford OX1 3UQ
T: +44 (0)1865 271084 . F: +44 (0)1865 281447 . E: csae.enquiries@economics.ox.ac.uk . W: www.csae.ox.ac.uk
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CSAEWorkingPaperWPS/201123
TheeconomicsoftheArabSpring
AdeelMalik†andBassemAwadallah
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†Correspondingauthor:adeel.malik@qeh.ox.ac.uk
DepartmentofInternationalDevelopment,3MansfieldRoad,Oxford,OX13TB,UnitedKingdom.
AdeelMalikistheGlobefellowinthe economiesofMuslimsocietiesattheOxfordCentrefor IslamicStudies,
fellow of St. Peter’s College, Oxford, and a lecturer in development economics at the University of Oxford.
BassemAwadallahis the Secretary General of theIslamicChamber of Commerce and Industryanda former
FinanceandPlanningMinisterandChiefofRoyalCourtoftheHashemiteKingdomofJordan.
2
I.Introduction
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ͲʹͻǤ͵
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3
ͳͻͺͲǦʹͲͲͲ
Ǥͷǡ
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ǤǡǦ
ǡgenerationalǤ
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ǯǤ
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4
political ǡ
ǡǯǤ
ǡregionalǡ
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ǤͳͲǡ
ǡǡ
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Ȅǡ
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ǦǤ Firstǡ
ǤSecondǡ
Ǣ ǤThirdǡ
ǤFourthǡ
ǡ ǡ Ǥ Fifthǡ
ȄǡȄǯ
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5
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Ǥǯ
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ǯǤ
ǤǦ
ǤǡǤ
II.Theoriginalsin
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ʹͲͲͺ ȋ͵ Ͷͻ Ǧ
ȌǤͳ͵
ͳͻͲȋͳȌǤǦ
ǤͳͶ Ǧ ǡ
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ʹͲͳͲǤʹͲǤͳͷ
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6
FIGURE1ǣǡͳͻͲǦʹͲͲͻ
SourceǣȋʹͲͳͳȌǡ
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ʹͲͳͲǤͳͺͻͲǤʹͲʹͲ
ͳͲͷ Ǥͳͻǯ
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7
ǡ
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unemployableǤ
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ȋ
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ǤʹʹǤ
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DzǡǦdzǤ
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8
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ǣ ǯ
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III.Thepuzzle:afragmentedregion
Ȅ ǡ Ǥ
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9
ͳͺǤ ͺ ʹͳǤʹ
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FIGURE2ǣ
SourceǣʹͲͳͲǤ
FIGURE3ǣǦǡ
10
SourceǣȋʹͲͳͲȌǤʹͺ
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III.A.Thecostsoffragmentation
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ȋȌ
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ǡDzǦdzǣ
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11
Ǥ͵ͳ
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ȋȌȋͷȌǤ
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FIGURE4ǣǡΨ
ȋʹͲͲͲǦͲͻȌ
SourceǣǡʹͲͳͲǤ
FIGURE5ǣǡǡΨ
12
SourceǣǡʹͲͳͲǤ
III.B.Defyingtheforcesofgravity
ǯǤ
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13
ͳͲǡǡͶͲ
ͳͲͲǡͲͲͲǤ͵ʹ
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FIGURE6ǣǡΨ
SourceǣȋʹͲͲͺȌǤ͵ͻ
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15
ǡǡ
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license rajǤ
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dejuredefactoǤͲ
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FIGURE7ǣǦ
SourceǣȋʹͲͳͲȌǤͷͳ
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17
IV.Trappedintradelogistics
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18
ǡ
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V.Aninfrastructureforcooperation
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19
Ǥ ǣ ȋȌ
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20
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FIGURE8ǣǡͳͻͳͶ
SourceǣǣȀȀǤǤȀ
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21
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FIGURE9ǣǡΨ
SourceǣǤȋʹͲͲȌǤͲ
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ʹͲͳͳ
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ǡǤͳͻͳ
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Ǥǡ
Ǥ ǡ economic
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VI.Candemographychangethepoliticalcalculus?
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22
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ͳͲȌǤʹ ȋ Ȍ
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FIGURE10ǣǡΨ
SourceǣȋʹͲͳͳȌǤ
ǡ Ǧ Ǥ
Dzǡ dzǤ͵
ǡ ǯ Ǧ
ǤͶ Ǧ
23
ǣǤǡ
ǣǡ
ͷͳͲǡǤǦ
Ǥ
ǡ Dz dz ǡ
DzdzǤ
ǡDzǦ
dzȄDz
dzǤͷ
ǡǤ
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Ȅ Ǥ
ǡȄ
24
ǡǤǡǡ
Ǥ
ǡ
ǦǤ ǡ
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ȋ
ͳͳȌǤǡ
Ǥ
ǡ Ǥͺ
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Ǥͺͳǡ
ǡ ǡ
Ǥͺʹ ǡ
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FIGURE11ǣ
SourceǣȋʹͲͳͳȌǤ
25
Ǧ Ǥ
ǡ
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ǣ
Dz ǡ
dzͺ͵ȋǦǡͳͻͻȌǤ
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Dz
ǯ
dz ȋ
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Ǥǡ
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26
Ǧ
ǡǯǡ
Ǥǡ
ǡ
Ǥ
ǡ
Ǥ Dz dz
ǦǤ
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ǡǡ
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ǦǤ
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27
ǫ
VII.Conclusion:an“openaccessorder”
Ǥ
DzdzǤ
ǡ ǯ ǡ Dz dzȄ
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Ǥ
ǡ
Ǥ ǡ
Ǥ ǡ
Dz dzǤͺͶ
ǡǤ
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ǡ
ǤǤ
Dz dzǡ
ǡ
Ȅ ǡ wasita
Ǥ
ǡǤ
Ǥ ǡ
Ǥ
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ǯ
ǦǤ
despised desirable Ǥ
ǡ
ǤǡͳͲͲ
Ǥͺͷ
Ǥ ǡ
Ǥ
ǣ
Ǥ
Ǥ
Ǥǡ
Ǥ infitah
ȋȌǡ
ǦǦǤ
ǡǤ
28
ǯ
Ǥǡ
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Ǣ
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ǡ Ǥͺ
ǡ
ǡ Ǧ
ǦǤͺ
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ǣǡ
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Ǥ ǡ
ǡ
ǡǤTanzimat
ǡ ͳͻͲ Ǧ
ͳͻͺͲǡ ǯ Ǥ
ǫǤ
29
Acknowledgements
Ǥ
ǡǡǡǡǡ
ǡ ǡ ǡ ǡ ǡ ǡ
ǡǤǯǡǡ
Ǥ
1The“Arabworld”isbroadlydefinedtoincludetheArabnationsoftheMiddleEastandNorthAfrica.
2Daron Acemoglu and James Robinson, 2008, “Thepersistence and change of institutions in theAmericas”,
Southern Economic Journal, 282299. Also see: James Robinson, 2010, “Elites and institutional Persistence”,
WIDERWorkingPaper2010/85,Helsinki.
3AlManar,2010,EmploymentandUnemploymentSurvey:NumberofEmployedJordanians200009.Amman,
Jordan.
4Francisco R. Rodriguez and E. Samman, 2010, “The North African Miracle”,
http://hdr.undp.org/en/humandev/letstalkhd/201011b/ (Also, see, the Human Development Report 2010,
OxfordUniversityPress).
5TarekM.Yousef,2004, “Development, growth and policy reform in the Middle East and NorthAfricasince
1950”,JournalofEconomicPerspectives,18(3),91116.
6TheWorldBank,2004,“UnlockingtheEmploymentPotentialintheMiddleEastandNorthAfrica:Towarda
NewSocialContract”,Washington,D.C.
7A.Kapiszewski,2006,“ArabVersusAsianMigrantWorkersintheGCCCountries”,UN/POP/EGM/2006/02.
8 Sahar Taghdisi Rad, 2011, “Jordan’s paradox of growth without employment”, DevelopmentViewpoint65,
SOAS,UniversityofLondon.
9 The World Bank, 2005, World Development Report: A Better Investment Climate For Everyone, NewYork:
OxfordUniversityPress.
10UnitedNationsIndustrialDevelopmentOrganization,2009,IndustrialDevelopmentReport2009,Vienna.
11WorldDevelopmentIndicators(availableat:http://data.worldbank.org/datacatalog).
12Theimportance of Suez Canal canbegauged from the fact that around8percent of the global seaborne
tradepassesthroughit.ItgeneratedUS$4.8billioninrevenuesin2010alone.
13WorldDevelopmentIndicators(availableat:http://data.worldbank.org/datacatalog).
14JaneHarrigan,2011,“ThepoliticaleconomyofaidflowstoNorthAfrica”,WIDERWorkingPaper2011/72,
WorldInstituteofDevelopmentEconomicsResearch,Helsinki,Finland.
15TheWorldBank,2011,WorldDevelopmentIndicators2011,WashingtonD.C.
16 There may also be a feedback from the state’s redistributive system to demographics, as generousstate
provisionmayactasanincentiveforalargerfamilysize.
17Theregionimports50percentofitsfoodcalorieconsumption.
18 Annia Ciezadlo, 2011, “Let them eat bread: How food subsidies prevent (and provoke revolutions in the
MiddleEast?”ForeignAffairs,March232011.
19http://gitm.kcorp.net/index.php?id=579569&news_type=Economy&lang=en
20 Silvana Tenreyro and Miklos Koren, 2010, “Volatility, diversification and development in the Gulf
CooperationCountries”,KuwaitProgrammeWorkingPaper,LondonSchoolofEconomicsandPoliticalScience.
21Forkeyfeaturesof thisdevelopmentmodel,see,TarekM.Yousef, 2004,“Development,growthandpolicy
reformintheMiddleEastandNorthAfricasince1950”,JournalofEconomicPerspectives,18(3),91116.
22 Clemens Breisinger, Olivier Ecker and Perrihan AlRiffai, 2011, “Economics of the Arab awakening: From
revolutiontotransformationandfoodsecurity”.IFPRINote,Washington,D.C.
23 This is evident in Saudi Arabia, for example, where there are considerable government shares in large
businessconglomerates.
24GiacomoLucianiandSteffenHertog,2010,“HasArabbusinesseverbeen,orwillitbe,aplayerforreform?”,
ArabReformInitiativePolicyPaper1.
25Marcus Noland and Howard Pack, 2009, The Arab Economies ina Changing World, Washington:Peterson
InstituteforInternationalEconomics.
26WorldDevelopmentIndicators2010.
27NugentandYousef(2005).
30
28Ibid, chapter 10 (Lulu Shui and Peter Walkenhorst: “Regional integration: Status, developments and
challenges”).
29JoséR.LópezCálix,PeterWalkenhorst,andNdiaméDiop,(eds.),2010,TradeCompetitivenessinMiddleEast
andNorthAfrica:PoliciesforExportDiversification.WorldBank,Washington,D.C.(chapter10)
30FranciscoCaselliandJamesFeyrer,2007,“Themarginalproductofcapital”,QuarterlyJournalofEconomics,
MayIssue,535568.
31Paul Collier and AnthonyVenables,2010, “Trade andeconomicperformance: Does Africa’s fragmentation
matter?”,InJustinYifu LinandBorisPleskovic,(eds.),2010,People,PoliticsandGlobalization– AnnualWorld
BankConferenceonDevelopmentEconomics,TheWorldBank,Washington,D.C.
32UnitedNationsIndustrialDevelopmentOrganization,2009,IndustrialDevelopmentReport2009,Vienna.
33WorldDevelopmentIndicators,2010.
34TheEconomist,2010,“SpecialReportonEgypt”,July1723Issues,London.
35TheagglomerationindexfortheMENAregionis 67.5%comparedto62% in Latin America and Caribbean.
For more details please see, Hirotsugu Uchida and Andrew Nelson, 2008, “Agglomeration Index: Towards a
newmeasureofurbanconcentration”,BackgroundpaperfortheWorldDevelopmentReport2009,TheWorld
Bank,Washington,D.C.
36 Jeffrey B. Nugent and Tarik Yousef, 2005, “Does MENA defy gravity? How MENA has performed in its
intraregional,EUandothertrade?”,EUIWorkingPaper2005/26,EuropeanUniversityInstitute,Florence.
37 Hassan AlAtrash and Tarik Yousef, 2000, “IntraArab trade: Is it too little?” IMF Working Paper 10,
InternationalMonetaryFund,Washington,D.C.
38NathanNunn,2008,“ThelongtermeffectsofAfrica'sslavetrades,”QuarterlyJournalofEconomics,123(1),
139176.
39 Hirotsugu Uchida and Andrew Nelson, 2008, “Agglomeration Index: Towards a new measure of urban
concentration”,BackgroundpaperfortheWorldDevelopmentReport2009,TheWorldBank,Washington,D.C.
40AnalternativeexplanationrelatestotheinhibitingroleofIslamiclaw.See,forexample,TimurKuran,2010,
TheLongDivergence:HowIslamicLawHeldBacktheMiddleEast,PrincetonUniversityPress.
41The region’s fragmentation, together with the intensity of conflict, also increases military spending by
individualstates.
42 Malik (2011); Clement Moore Henry and Robert Springborg, 2010, Globalization and the Politics of
DevelopmentintheMiddleEast,Cambridge,CambridgeUniversityPress.
43 The important exceptions in this regard are Morocco, Syria and Lebanon, which had sizeable merchant
communities.
44NazihN.Ayubi,1995,OverstatingtheArabState,London:I.B.Tauris.
45AdeelMalik,2011,“ExplainingMiddleEast’spoliticaleconomy:Whyhistorymatters?”,forthcomingasQEH
WorkingPaper,UniversityofOxford.
46 Jill Chrystal, 1990, Oil and Politics: Rulers and Merchants in Kuwait and Qatar. Cambridge: Cambridge
UniversityPress.
47“This index corresponds to theuniform tariff that if imposed on allimports from partner countrieswould
leaveoverallimportsunchanged”,seeJoseetal.(2010).
48TheWorldBank,1999,FromPrivilegetoCompetition: UnlockingPrivateLedGrowthinthe MiddleEastand
NorthAfrica,Washington,D.C.
49InternationalMonetaryFund,2011,RegionalEconomicOutlook:MiddleEast andCentralAsia.Washington,
D.C.:IMF.
50SteffenHertog,2010,OilandtheStateinSaudiArabia,Princeton:PrincetonUniversityPress.
51Ibid, chapter 10 (Lulu Shui and Peter Walkenhorst: “Regional integration: Status, developments and
challenges”).
52TheWorldBank,1999,FromPrivilegetoCompetition: UnlockingPrivateLedGrowthinthe MiddleEastand
NorthAfrica,Washington,D.C.
53RobertoRocha,SubikaFarazi,RaniaKhouri,andDouglasPearce,2010,“ThestatusofbanklendingtoSMEs
inMiddleEastandNorthAfrica”,WorldBankReport,TheWorldBank,Washington,D.C.
54InternationalMonetaryFund,2011,RegionalEconomicOutlook:MiddleEast andCentralAsia.Washington,
D.C.:IMF.
55http://www.enterprisesurveys.org/
56Manycountriescontinuetoplacestringentrestrictionsoncurrencyconvertibility.ThisisthecaseinAlgeria,
forexample,whichhasasignificantcushionofforeignreservesagainstapossiblerunonthecurrency.
31
57Hoekman,Bernardand Alessandro Nicita, 2008, “Trade policy,tradecostsand Developing country trade”,
WorldBankPolicyResearchWorkingPaper4797,Washington,D.C.
58Therehasbeenasignificantprogressonmaritimetransshipment.
59The World Bank, 2011, Connecting to Compete 2010: Trade Logistics in the Global Economy, available at:
www.worldbank.org/lpi
60 J. Zarrouk, 2003, “A survey of barriers to trade and investment in Arab countries”, In A. Galal and B.
Hoekman (eds.), Arab Economic Integration: Between Hope and Reality. Washington, D.C.: Brookings
InstitutionPress.
61.Zarrouk,2003,“AsurveyofbarrierstotradeandinvestmentinArabcountries”,InA.GalalandB.Hoekman
(eds.),ArabEconomicIntegration:BetweenHopeandReality.Washington,D.C.:BrookingsInstitutionPress.
62Julia Devlin and Peter Yee, 2005, “Trade logistics indevelopingcountries:TheCaseoftheMiddleEastand
NorthAfrica”,TheWorldEconomy,435456.
63Julia Devlin and Peter Yee, 2005, “Trade logistics indevelopingcountries:TheCaseoftheMiddleEastand
NorthAfrica”,TheWorldEconomy,435456.
64 United Nations Industrial Development Organization, 2009, Industrial Development Report 2009, Oxford
UniversityPress,Oxford.
65Tunisiaisapartialexception,sinceitsexportsofpartsandcomponentshavesignificantlyexpandedinrecent
years.
66The WorldBank,2008,MENA Economic Developments andProspects2008:RegionalIntegration for Global
Competitiveness,Washington,D.C.
67ExamplesofotherfailedprojectsaretheFederationofArabRepublicsandtheArabCooperationCouncil.
68The World Bank, 2011, “Logistics Performance Index: Arab World”,
http://siteresources.worldbank.org/INTTLF/Resources/515003
1276029788910/LPI_Booklet_MENA_Feb2010.pdf
69MourhafSabouni,1997,“ArabRailways–pastandpresent”,JapanRailway&TransportReview,12,22–25.
70Peter Roberts, Shyam KC, and Cordula Rastogi, 2006, “Rural Access Index: A key developmentindicator”,
TransportPapers(TP10),WorldBank,Washington,D.C.
71Allen Denis, 2006, “Theimpact of regional tradeagreementsand trade facilitation inthe Middle East and
NorthAfricaregion”,WorldBankPolicyResearchWorkingPaper3837,TheWorldBank,Washington,D.C.
72InternationalMonetaryFund,2011,RegionalEconomicOutlook:MiddleEast andCentralAsia.Washington,
D.C.
73Tarek M. Yousef, 2004,“Development,growthand policy reformintheMiddleEastand NorthAfricasince
1950”,JournalofEconomicPerspectives,18(3),91116.
74TherecordofeconomicreformismixedintheMENAregion.Morocco,Tunisia,JordanandEgyptweresome
oftheearlyreformersintheregion.ReformwaspartiallysuccessfulinEgypt;inTunisiaandmoroccoitledtoa
revivalofFDI.
75http://www.mcgill.ca/files/icames/Boom_Bust2.pdf
76Jordan, Tunisia, Morocco, Lebanon and Egypt have been the prime beneficiaries of these foreign capital
flows.Forfurtherdetails,seeLuluandPeterWalkenhorst,2010,“RegionalIntegration:Status,Developments,
and Challenges”, In ShuiJosé R. LópezCálix, Peter Walkenhorst, and Ndiamé Diop, (eds.), Trade
CompetitivenessinMiddleEastand NorthAfrica:PoliciesforExportDiversification.WorldBank,Washington,
D.C.(chapter10).
77Changing geopolitical circumstances inthe wake of 9/11attacks, liberalization of thefinancial sector and
therecentoilboomhaveallplayedahelpfulpart.
78Recently, the United States,whenfacedwiththedifficultyofnegotiatingan FTA, has pushed insteadfora
TradeandInvestmentCooperationAgreementwiththeGCC.
79ForevidenceonwelfaregainsfromtradewiththeEU,see,AllenDennis,2006,“Theimpactofregionaltrade
agreements and trade facilitation in the Middle East and North Africa region”, World Bank Policy Research
WorkingPaper3837,WorldBank,Washington,D.C.
80Inparticular,tradebetweenMENAcountriescangeneratesignificantdynamicgains.
81The UStradeagreementswith theGulfcountriesare sometimesviewedasdisruptive forGCCtrade.There
have been concerns among large GCC countries about the entry of US goods into the GCC via Bahrain. For
furtherdetails,pleasesee,FredLawson,2011,“GeopoliticalcomplicationsofUSFreeTradeAgreementswith
GulfArabCountries”,InMatteoLegrenziandBasmaMomani(eds.),ShiftingGeoEconomicPoweroftheGulf,
London:AshGatePublishing.
32
82MichaelHudson,1998,MiddleEastDilemma:ThePoliticsandEconomicsofIntegration,I.B.Tauris,London.
83 “Rather than set as their first economic policy priority the goal of regional integration, MENA countries
should focus on domestic policy reforms and the associated process of greater integration into the world
economy”. In Mohammad A. ElErian and Stanley Fischer, 1996, “Is MENA a region? The scope forregional
integration”,IMFWorkingPaper30,InternationalMonetaryFund,Washington,D.C.
84DouglassC.North,JohnJosephWallisandBarryR.Weingast,2009,ViolenceandSocialOrders–Interpreting
RecordedHumanHistoryDuringtheLastFourHundredYears.Cambridge:CambridgeUniversityPress.
http://blogs.worldbank.org/governance/thearabspringalimitedaccessordersperspective
85The World Bank,2003,UnlockingtheEmployment PotentialoftheMiddleEastand North Africa: Towarda
NewSocialContract.Washington,D.C.
86Inthisregard,theproposedaccessionofJordanandMoroccototheGCCisawelcomestep,butthedriving
incentiveforthisshouldbetheintegrationofmarketsratherthanmonarchies.
87KristianCoatesUlrichsen,2010,“InternalandExternalSecurityin theArabGulfStates”,MiddleEastPolicy,
available at: http://www.mepc.org/journal/middleeastpolicyarchives/internalandexternalsecurityarab
gulfstates
88MustafaK.Nablietal.,2006,“ThepoliticaleconomyofIndustrialpolicyintheMiddleEastandNorthAfrica”,
TheWorldBank,Washington,D.C.
89Forafurtherillustrationofthispoint,seethediscussioninchapter4,NazihN.Ayubi,2001,Overstatingthe
ArabState:PoliticsandSocietyintheMiddleEast,London,I.B.Tauris.
