Issues Concerning the Development of the Middle Eastern Economy

No.169
June 2003
Senior Fellow Reiji Takeishi

Economic Growth in the Middle Eastern Nations

The economic growth in the Middle East has become more stable since the 1990's and is now showing signs of departure from the ups and downs caused by the erratic fluctuation of oil prices. However, the financial stability of the oil producing nations in the Middle East is still heavily dependent on oil revenues. As oil will continue to be a major source of the world's energy consumption, it will not be easy for this dependence to be moderated.

Diversity in the Economic Structure of Middle Eastern Nations

Even amongst the countries whose economic structures are heavily dependent upon oil exports, we can see by comparing the coefficient of correlation between oil prices and economic growth that there are differences in the levels of their dependency. Moreover, while for some nations the sudden fluctuations in oil prices bring about immediate changes in the rate of economic growth, for others, the effects are registered after a fixed period of time. As for the reason for the differences in economic performance, one might point to examples such as the free zone in the UAE (Jubail Ali), which has brought about large increases in exports and imports.

Analysis of Inter-regional Trade in the Middle East

An analysis of inter-regional trade in the Middle East - using such indices as the degree of free trade, the rate of export, the rate of import, the import intensity index, and the export intensity index - shows that Jordan and the UAE are playing central roles in the market. It can also be inferred that Iraq's return to the market will increase the importance of Kuwait.

Sustainable Development in the Middle East and Free Trade Negotiations with Asian Countries

In order to achieve sustainable development in the Middle East, it is necessary to implement measures for economic cooperation that extend beyond the frameworks for project-based or sector-based support plans that have been adopted until now. While a focus on regional development and cultivation of human resources is important, it is also essential that each nation, in thinking about its development, apply a direction to its utilization of its gas and oil resources. It is expected that these considerations will give way to a broader vision and a larger purpose that would serve as a beacon for regional development and inter-regional conflict resolution.

Asian countries, led by Japan, must contribute to the development and stability of Middle Eastern countries by promptly establishing free trade agreements that would comply with and support the broader goals of the important countries (not necessarily the biggest but the key countries; e.g. Jordan, UAE, and Kuwait). The motivation and determination to squarely face and overcome each issues will be extremely important within the negotiations.

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