OIC Economic Outlook 2016 Growth Rates of 3.6% and 4.0%, Respectively
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2016 OIC ECONOMIC OOK 20152016 OUTLOOK OIC ECONOMIC OUTL Transforming the Potentials into Impact O R G A N I S AT I O N O F I S L A M I C C O O P E R AT I O N STATISTICAL ECONOMIC AND SOCIAL RESEARCH AND TRAINING CENTRE FOR ISLAMIC COUNTRIES STATISTICAL, ECONOMIC AND SOCIAL RESEARCH AND TRAINING CENTRE FOR ISLAMIC COUNTRIES Kudüs Cad. No:9 Diplomatik Site 06450 ORAN-Ankara, Turkey Tel: (90-312) 468 61 72-76 Fax: (90-312) 468 57 26 Email: [email protected] Web: www.sesric.org OIC ECONOMIC OUTLOOK 2016 TRANSFORMING THE POTENTIALS INTO IMPACT Organisation of Islamic Cooperation Statistical, Economic and Social Research and Training Centre for Islamic Countries © 2016 Statistical, Economic and Social Research and Training Centre for Islamic Countries (SESRIC) Kudüs Cad. No: 9, Diplomatik Site, 06450 Oran, Ankara –Turkey Telephone +90–312–468 6172 Internet www.sesric.org E-mail [email protected] The material presented in this publication is copyrighted. The authors give the permission to view, copy, download, and print the material presented provided that these materials are not going to be reused, on whatsoever condition, for commercial purposes. For permission to reproduce or reprint any part of this publication, please send a request with complete information to the Publication Department of SESRIC. All queries on rights and licenses should be addressed to the Publication Department, SESRIC, at the aforementioned address. ISBN: 978-975-6427-47-7 Cover design by Savas Pehlivan, Publication Department, SESRIC. SESRIC hereby expresses its profound appreciation to the Turkish Statistical Institute (TurkStat) for providing printing facilities. For additional information, contact Research Department, SESRIC through: [email protected] This report has been prepared by a research team at SESRIC led by Kenan Bağcı and comprising Cem Tintin, Mazhar Hussain, Davron Ishnazarov, Cihat Battaloğlu and Adam Ben Said. CONTENTS ACRONYMS III FOREWORD V EXECUTIVE SUMMARY 1 PART I: RECENT ECONOMIC DEVELOPMENTS IN THE WORLD AND OIC COUNTRIES 11 1 PRODUCTION, GROWTH AND EMPLOYMENT 13 2 TRADE AND FINANCE 35 PART II: TRANSFORMING THE POTENTIALS INTO IMPACT IN OIC COUNTRIES 53 3 EXPLORING POTENTIALS OF OIC COUNTRIES WITH ECONOMIC IMPACT 55 3.1 FACTORS LEADING TO HIGHER ECONOMIC GROWTH 55 3.2 COMPARATIVE ADVANTAGES OF OIC COUNTRIES IN PROMOTING GROWTH AND COMPETITIVENESS 57 3.2.1 HUMAN CAPITAL 58 3.2.2 NATURAL RESOURCES 60 3.2.3 KNOWLEDGE CAPITAL 61 3.2.4 SOCIAL CAPITAL 63 3.2.5 ECONOMIC GEOGRAPHY 66 I 4 DYNAMIC POPULATION STRUCTURE 69 4.1 STRUCTURE OF POPULATION IN OIC COUNTRIES 70 4.2 ROLE OF HUMAN CAPITAL IN DEVELOPMENT 75 4.3 INVESTING IN HUMAN CAPITAL 78 4.4 UNLEASHING PRODUCTIVE CAPACITY OF YOUTH 83 4.4.1 SKILLS DEVELOPMENT OF YOUTH 84 4.4.2 ENTREPRENEURSHIP AND JOB CREATION 85 4.4.3 SOCIAL MOBILITY 87 5 RICH NATURAL RESOURCES 89 5.1 STOCK OF NATURAL RESOURCES IN OIC COUNTRIES 89 5.1.1 MINERAL RESOURCES 90 5.1.2 ENERGY RESOURCES 94 5.2 ADDING VALUE TO NATURAL RESOURCES 100 5.3 ACTIVATING THE POTENTIALS OF RENEWABLE ENERGY 101 6 GREAT MARKET POTENTIAL 103 6.1 SIZE OF THE MARKET IN OIC COUNTRIES 104 6.2 UTILIZING MARKET SIZE FOR MORE TRADE FLOWS 107 6.2.1 OVERCOMING BARRIERS TO TRADE 107 6.2.2 INCREASING PARTNERSHIPS 111 6.2.3 OPPORTUNITIES FOR MORE TRADE 113 6.3 UTILIZING MARKET SIZE FOR MORE INVESTMENT FLOWS 115 6.3.1 OVERCOMING BARRIERS TO INVESTMENT 116 6.3.2 INCREASING PARTNERSHIPS 117 6.3.3 OPPORTUNITIES FOR MORE INVESTMENT 119 7 POLICY OPTIONS FOR TRANSFORMING THE POTENTIALS INTO IMPACT 121 REFERENCES 131 II ACRONYMS Acronyms ADB Asian Development Bank BIT Bilateral Investment Treaties BNEF Bloomberg New Energy Finance EBRD European Bank for Reconstruction and Development EDBI Ease of Doing Business Index EFTA European Free Trade Area FDI Foreign Direct Investment FTA Free Trade Agreement GCC Gulf Cooperation Council GCF Gross Capital Formation GDP Gross Domestic Product GER Gross Enrolment Rate GFCF Gross Fixed Capital Formation GNI Gross National Income HDI Human Development Index HIPC Heavily Indebted Poor Countries ICT Information and Communication Technology IDB Islamic Development Bank IFS International Financial Statistics ILO International Labour Organisation IMF International Monetary Fund IPR Intellectual Property Rights LAC Latin America and the Caribbean LDC Least Developed Countries MDB Multilateral Development Bank III MENA Middle East and North Africa MGI McKinsey Global Institute ODA Official Development Assistance OECD Organisation for Economic Cooperation and Development OIC Organisation of Islamic Cooperation PISA Programme for International Student Assessment PPP Purchasing Power Parity PPPs Public Private Partnerships PRETAS Preferential Tariff Scheme for TPS-OIC PTA Preferential Trade Agreement R&D Research and Development RTA Regional Trade Agreement SDG Sustainable Development Goal SSA Sub-Saharan Africa SWFI Sovereign Wealth Fund Institute TPS-OIC Trade Preferential System among the Member Countries of the OIC UAE United Arab Emirates UN United Nations UNCTAD United Nations Conference on Trade and Development UNESCAP United Nations Economic and Social Commission for Asia and the Pacific UNESCO United Nations Educational Scientific and Cultural Organization UNSD United Nations Statistics Division UNWTO United Nations World Tourism Organization USD United States Dollar WB World Bank WDI World Development Indicators WEF World Economic Forum WTO World Trade Organization IV FOREWORD Foreword Growth in the global economy continues to remain weak in the aftermath of the global financial crises in 2008, which increased only by 3.1% in 2015. The repeated poor performance of the global economy is largely influenced by the sharp decline in commodity prices, economic slowdown in China, negative macroeconomic outlook in Brazil and Russia and increasing concerns about the global security. Furthermore, the uncertainty caused by the decision of UK to leave the EU membership and the tighter financial conditions and large debts in many countries of euro area has further weakened the prospects for the global economic growth. Accordingly, the growth rate of the world economy is predicted to reach 3.2% by the end of the year. Economic development trajectory of OIC countries has been highly volatile over the last decades, while the resulting development landscape of OIC countries is multifarious. In general, OIC member countries could not sustain long-term growth as developed countries did over the last century. The fact that economic performances of OIC member countries have been relatively weaker than the western countries due to diverse reasons does not imply that OIC countries do not have enough capacity and resources to perform better. It is just a matter of identifying the productive resources and potentials and then developing correct mechanisms and instruments to effectively utilize them in welfare improving economic activities. Each and every country has different resources and potentials to catalyse for their economic development programs. This report followed a broader approach and tried to identify the most common potentials of OIC countries that can be utilized for better economic performance. In this connection, this report identified three major factors that can potentially contribute to achieving better economic performance and living standards. These were dynamic population structure, rich energy resources and great market potential. In all these areas, the report provided some preliminary assessment on the significance of these resources and potential contributions that they can make to socio-economic development in OIC countries. It was also noted that reckless consideration of these resources and potentials may equally deteriorate already existing level of development, transforming the potentials into threat rather than strength. Amb. Musa Kulaklıkaya Director General SESRIC V VI Executive Summary EXECUTIVE SUMMARY Executive Summary Recent Economic Developments in the World and OIC Countries Production, Growth and Employment Production Global GDP – expressed in current USD and based on PPP – has witnessed an increasing trend over the period 2011-2015, reaching to US$ 113.5 trillion in 2015 compared to US$ 94.2 Page | 1 trillion in 2011. Developing countries witnessed more rapid increase in GDP from US$ 51.5 trillion in 2011 to US$ 65.3 trillion in 2015. Total GDP of developed countries was recorded at US$ 48.2trillion in 2015 compared to US$ 42.7 trillion in 2011. OIC countries also witnessed an increasing trend in economic activity and their GDP increased from US$13.9 trillion in 2011 to US$ 17.1 trillion in 2015. As a group, the OIC countries produced 15.0% of the world total output and 26.1% of that of the developing countries in 2015. In current prices, the share of OIC countries in world total GDP is measured as only 8.6%. The average GDP per capita in OIC countries also increased from US$ 8,988 in 2011 to US$ 10,224 in 2015. Growth The slowdown in the global economy continued in 2015 with growth rate plunging down to 3.1%. However, the outlook for 2016 and 2017 is positive with expected growth rates of 3.2% and 3.5%, respectively. While the recovery in the developed countries remained slow, the developing countries seem to be the driving force of the growth in the world economy. On the other hand, the global per capita GDP growth has also witnessed a declining trend with 2.2% growth rate in 2015 and it is forecasted to reach 2.3% in 2016 and 2.7% in 2017. In 2015, growth in GDP per capita was recorded at 2.9% in developing countries and expected to increase to 3.0% in 2016 and 3.6% in 2017. On the other hand, the developed countries witnessed a comparatively very low growth rate of 1.3% in their GDP per capita in 2015, which is estimated to increase to 1.4% in 2017.