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Summary of the survey of economic and social developments in the Economic and Social Commission for Western Asia region, 2005-2006
Description:The economies of member countries of the Economic and Social Commission for Western Asia (ESCWA) continued to grow for the third straight year after two decades of stagnation. This growth, however, is relatively jobless and dependent on one unsustainable trend: a huge surge in the price of oil. Sooner or later, the trend will end, possibly abruptly, and when that happens the drop may be even more acute because resources are being intermediated by speculation on a poorly regulated regional asset market. Had the bursting of the regional stock market bubble coincided with even a moderate drop in oil prices, the negative impact on economic growth would have been severe. Using windfall oil rents to speculate on slowly expanding assets doubly exposes the region to more volatility. Instead of bubblebuilding in the regional stock markets (some doubling in value in less than a year) and capital diversion abroad, the current relative abundance of capital should offer ESCWA member countries a timely opportunity to implement some of the structural changes that are urgently needed to set the region on the path of rights-based development and employment-intensive growth free from the vacillations in the price of oil.

Failure to take advantage of the current oil boom and reinvest in the region will consign the present surge in rents to a time-bound gain in a way similar to what happened during the great oil booms of the 1970s. The ESCWA region will not be
able to leave the lower, short-lived paths of growth and development for higher, sustainable paths if the Governments in the region continue to pursue traditional reforms concentrated solely on improving the business environment, while
neglecting targeted public investment. A viable strategy of reform should recognize two essential points. First, sustainability of growth cannot be maintained without the effective participation of the citizenry. Reform in public institutions and policies should be carried out with the determined purpose of implementing a rights-based development strategy. Secondly, sustainable growth would be enhanced with the production of some public goods that no single country in the region is capable of producing optimally by itself. These goods have the characteristic of being regional goods, and their optimal production requires regional coordination and cooperation.
Agenda Item: Regional cooperation (10)
Issue Date: 27 April 2006
ODS Symbol:E/2006/20
  • Summary of the survey of economic and social developments in the Economic and Social Commission for Western Asia region, 2005-2006