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Resource Rich Muslim Countries and Islamic Institutional Reforms

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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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Preface

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There is considerable evidence to support a negative link between natural resource endowment and economic development and growth, which is commonly referred to as the ‘resource curse’ (Yuxiang and Chen, 2011). The membership of the Islamic Cooperation Countries (OIC) is composed of 57 countries (that include Palestine), several of which are rich in oil and natural gas. Given significant oil and gas exports revenues, one might expect that a number of the OIC countries would be at the forefront of economic performance and growth as they develop their ‘manna’ from heaven, especially during times of historically high oil prices. Yet, the performance of the oil-producing OIC countries has been inferior to the economic performance of comparable non-resource-rich countries.

During the period of rising oil prices, the economic performance of oil-producing OIC countries lagged behind that of similar countries that were not resource rich. Poor economic performance suggests the existence of the resource curse, whereby instead of raising wealth, natural resource endowments traps an economy in a lower economic equilibrium. In the current environment of lower oil prices and with the expectation that oil prices will not recover any time soon, the path to economic stability may be even more arduous with countries having to navigate out-of-budget shortfalls. There has not ← xv | xvi → been a better time to investigate the reasons for this subpar performance and to assess the popular belief that a few have engaged in constant accumulation or manipulation of wealth at the expense of...

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