Growth Fundamentals and Economic Growth in the MENA Region

Hadi Esfahani ()

No 435, Working Papers from Economic Research Forum

Abstract: This paper examines the strategies of Middle Eastern and North African (MENA) countries concerning growth-enhancing institutions and policies. Long-term economic growth depends crucially upon the quality and robustness of a country’s institutions. The fundamental institutions are typically perceived as rule of law, impartial courts, representative government, effective bureaucracy, and open markets with minimum necessary regulation. However, building these growth fundamentals takes a long time and a great deal of resources. As a result, for developing countries with weak institutions, a key growth strategy question is whether to focus on building their institutions and to wait for the long-term growth to emerge or to seek short- and medium-term substitutes for the fundamentals, which are not permanent solutions and may violate some principles of good governance, but bring about growth for a while and create opportunities for further development. It is argued that some MENA countries have been investing in the fundamentals with limited returns so far. Some others have found good substitutes and have grown faster. But, most have lacked conscious and effective growth strategies. This bodes poorly for the ability of the latter countries to cope with the waves of future economic shocks.

Pages: 20
Date: 2008-01-09, Revised 2008-01-09
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