linkages, characteristics that generally drive a country’s exports. The IMF argues that if the MENA

countries had taken advantage of these characteristics in the same way that other middle income countries

have done, its exports would have been 50% higher in 2008 than they were actually. Competitiveness,

therefore, remains a critical issue for our selected group of countries. The different factors of

competitiveness, such as human capital and openness to trade constitute the main barriers to operations in

the global market place for many of the MENA countries.

Oil Exporting Countries (OECs)

An examination of the scenario of the OECs in the MENA region reinforces the point about structural

diversity. Our selected countries – Saudi Arabia and Yemen – are at different ends of the economic

spectrum. A direct comparison does not provide for meaningful analysis. This intra-OEC diversity

warrants independent investigation in order that we can derive appropriate insights for policy

development.

Saudi Arabia

Saudi Arabia has approximately one-fifth of the world’s oil reserves. It maintains the world’s largest oil

production capacity and is the largest producer of all petroleum liquids. An estimated 54% of the

country’s crude oil exports was received by the Far East. It ranks second to Canada as a petroleum

exporter to the US. Apart from crude oil, Saudi Arabia has the world’s fifth largest natural gas reserves

although natural gas production is limited. Excluding oil and gas services, the top economic sectors of the

Saudi economy include electrical power systems, water resources equipment, safety and security

equipment and chemical production machinery. The country grew at a rate of 7.1% in 2011 and although

the oil sector continues to dominate the economy, improved budgetary institutions have reduced the

connection between oil price and the level of fiscal spending with the objective of diversifying the

economy. The non-oil sector growth of 8% is the highest since 1981, with the private sector, led by

construction and manufacturing, growing by 8.5%. Of note is the government’s decision to set aside a

portion of extra oil revenues for future generations. However the continuing reliance on oil for fiscal and

foreign exchange revenues suggests that the global oil market is the main source of risk. Sustained

problems in the euro area could exacerbate the country’s economic problems.

Yemen

By contrast Yemen is one of the poorest countries in the Middle East, with more than 45% of the

population below the poverty line and a 35% unemployment rate (2003 figures). Current real GDP growth

rate stood at -1.9 % in 2012 which compares favourably to -15% in 2011 when the GDP plunged

dramatically due to the political unrest in the country. It is a fairly small oil and natural gas producer,

ranking forty second in the world for total oil production with 156.4 (thousand) barrels per day and a

crude oil production capacity of 154.14 (thousand) barrels a day (rank 40). Petroleum accounts for

approximately 25% of GDP and 60% of government revenue. Yemen’s location along the Bab el-Mandab

provides the country with a strategic advantage as far as world oil shipping routes are concerned. An

estimated 3.5m barrel of oil passed daily in 2010 on this route. Between 2011 and 2012, Yemen’s net

trade figures have declined from a deficit of -12.52 to – 30.46 (thousand barrels per day).

Asian markets (China- 29.5%; Thailand- 13.4%; South Korea- 10.6%; India, 7.5%) account for the most

part of Yemen’s exports. The country’s total estimated exports in 2012 was $7.958 bn Net exports are on

a declining trend with growing domestic consumption and decreasing production. Its other exports

include coffee, dried and salted fish and liquefied natural gas. The country has tried to diversity its

economy through a reform programme. Over a period of 9 years (2000-2009) exports have increased from

4.076m US$ to 5.360 US$ or a growth rate of 31%