The Middle East is of vital concern to the world economy, which is only heightened by the continued armed conflicts in this region. Mihaylo Economics Professor Jane Hall examines the economic performance of this region, the headwinds it faces going forward and the practical implications for business graduates.
The recent history of the Middle East is a story of unending armed conflict and war. However, a quieter transformation has been occurring in the region as the Middle East economies have embarked on the road to economic development and vitality. Today, the Middle East economies are of paramount importance to the world, not the least for their oil industries. This concern is heightened by the ongoing tensions in the region, which threaten to dampen, if not derail, these vital economies.
Mihaylo Economics Professor Jane Hall, instructor of ECON 336 – Economies of the Middle East, provides business students with a background on the Middle East economies, the political factors that shape this region and the major challenges and opportunities expected in the future.
Defining the Middle East is perhaps the first step in understanding the economic conditions of the region. For the purposes of her course, Hall considers all of Southwest Asia – from Iran in the east to Turkey in the west, the Arabian Peninsula in the south and Egypt in the southwest – as the Middle East. Hall excludes the countries of North Africa, other than Egypt, in this definition.
Hall says that while some countries in the Middle East, such as the oil-rich Gulf States, have some of the highest per capita incomes in the world, economic development is a daunting task for the region as a whole. “All countries in the region face significant challenges in seeking to increase human development, which includes health, education, economic opportunity and basic security,” she says. “All have improved their standard of living, but not consistently, and in some cases not to a very high quality.” This progress is constantly imperiled by the political conflicts this region faces. “Not a single country in the region is immune from economic upheaval resulting from conflict or the potential for conflict,” Hall says. This makes foreign direct investment difficult, hinders infrastructure development and creates a serious “brain drain,” in which educated Middle Easterners leave the region in search of stability. She says instability is the main factor in these economies. “The issue is how to achieve economic goals in spite of the turmoil.”
The oil industry is particularly dependent on the Middle East, yet Hall says there are many industries that are affected by the region’s performance. “Globally, firms that have large markets in the Middle East or depend on imports from the Middle East see the greatest impacts. This includes industries such as pharmaceuticals, plastics and refining, which depend on oil stocks, and those that sell high-tech transportation and telecommunications equipment to the Gulf States,” she says. “It also includes professional-services firms, in areas such as logistics, accounting and construction. Countries in the region are also a significant market for armaments and defense systems.”
Despite the headwinds that the region faces, the Middle East presents myriad opportunities for business students. Many international firms have extensive holdings in the region, while the potential for direct or indirect investments in commodities or other sectors often include substantial ties to the Middle East. A substantial percentage of world trade passes through the region, which affects corporations of all kinds and is a major factor in the performance of the broader world economy. All of these factors make a study of the region worthwhile for business students, Hall says.
Hall’s interest in the Middle East economies grew out of her academic experience. She studied abroad in Alexandria – Egypt’s second largest city, and traveled extensively throughout the region. She also worked as a resource economist in the oil industry, which is heavily linked to the region.
Business students seeking to learn more about the Middle East economies may check the Middle East Economic Digest, which provides daily economic updates on the region. A Political Economy of the Middle East by Richards and Waterbury, the text that Hall uses in her course, also provides extensive information on the economies of the region.