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Resource Rich Muslim Countries and Islamic Institutional Reforms


Liza Mydin, Hossein Askari and Abbas Mirakhor

Resource Rich Muslim Countries and Islamic Institutional Reforms explores the "resource curse," a condition in which a country’s abundance of natural resources is negatively linked with the country’s development and economic growth, in resource rich Muslim countries. The resource curse puzzle has been studied for over twenty years, with prior researchers looking to prove its existence and explore its causes. Recent studies have begun to indicate institutional failure as a likely cause of the curse, as wealth of resources tends to cause counterproductive behaviors such as rent-seeking, patronage and corruption. The subpar economic performance of resource rich Muslim countries in the Organization of the Islamic Cooperation (OIC) could be attributed to the manifestation of a resource curse. Collectively, the member countries of the OIC contribute over 9% of the world’s total GDP with 22.8% of the world’s population. Saudi Arabia and the United Arab Emirates alone contribute about 17% of world oil production. Resource rich Muslim countries should be at the forefront of economic performance and growth, yet we see the opposite when we compare the performance of these countries to countries that are not resource rich (such as Spain, France, Hong Kong and Japan). Through an analysis of sample countries, the authors have discovered that natural resources exert a drag on the countries’ economic growth, thereby indicating the presence of the resource curse. Their research also found weaknesses in the quality of institutions as the cause of the curse. To counteract the negative effects of the resource curse in resource rich Muslim countries, the authors provide a number of Islamic institutional reforms.

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Chapter 7: Summary, Conclusions and Looking Ahead


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We first asked if our selected oil-producing OIC countries suffer from the resource curse and if so whether institutional weakness is the root cause? We presented a review of the resource curse theory, explanations and suggestions on how to reverse the curse. The landmark study by Sachs and Warner shows that none of the resource-rich countries with extremely abundant resources in 1970 grew rapidly for the next 20 years. The study of oil economies pointed to an even stronger negative association between growth and natural resource abundance. The study triggered further research in the area of the resource curse. The gap in the existing literature analysis indicates that there were few studies linking the OIC cluster countries to the resource curse. Moreover, there was no evidence that research had looked into Islamic principles and teaching as a potential solution to address the curse and manage resources. Our contribution to policy making is to develop recommendations that address the curse in totality and according to the teachings advocated by Islam. ← 157 | 158 →

Summary and Conclusions

A cross-country growth model, typical in the resource curse literature, was used as the core model. In line with the work of Latif, Farooq, Loganathan, and Shahbaz (2014), El Anshasy and Katsaiti (2013), Bjorvatn, Farzanegan, and Schneider (2012) and Alexeev and Conrad (2011), economic growth was the dependent variable and oil rent represented the preferred resource...

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