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Economic Reform in the Middle East
Following the Oil Boom of the 1970's, Middle Eastern economies have implemented several reform policies aimed at sustaining economic growth as well as economic participation at the macroeconomic level. While each country follows their own economic agendas, many economies within the Middle East face similar challenges and offer policy reform that tackle issues that affect the region as a whole.

The implementation of these economic reforms has become more urgent in the region as the Middle East faces more danger as oil price volatility continues to threaten the economic stability of major oil exporting countries. These reform policies focus on common concerns in the region and are especially concerned with attracting foreign investments in a global economy that has become highly integrated.

Countries within the Middle East have also begun implementing more policies that promote integration between Middle Eastern countries in order for the region to reach its full economic potential and to sustain the stability of countries that have accomplished higher rates of growth and development.

Background
The 1970's marks one of most crucial periods in Middle Eastern economic history. Following the OPEC embargo of October 1973, the market price of oil per barrel rose from $3 per barrel to $12 per barrel in reaction to the 5% production cut and reduction of supply by OPEC countries. The OPEC embargo was directed to the United States, in retaliation for their financial aid and support of Israel during the Yom-Kippur War, as well as other countries who also supported Israel, such as the Netherlands, Portugal and South Africa. The embargo was also prompted by the decision of President Richard Nixon to take the United States off the gold standard, hurting oil producing countries who collected revenue in US dollars. While the OPEC embargo exacerbated the deep recession and inflation in the United States, the economies of the Middle East witnessed rapid expansion and growth in GDP as well as an increase in the Middle East's share of global world trade values from 3.6% to 8% in the period between 1972-1979. As well as experiencing economic growth, the Middle East also made improvements in development indicators such as infant mortality, life expectancy and witnessed a decrease in unemployment across most sectors.

Following the oil boom and the OPEC embargo of the 1970's, the Middle East became a heavily integrated region, in terms of economic growth and employment. The increase in the export of oil by the major oil-exporting countries in the Middle East led to a mass influx of foreign workers from other Arab countries (labor exporting countries) as well as Asian countries. Towards the end of the 1980's the growth accumulated during the 1970's began to halt to a stop, as the price of oil began to decrease and the international environment began to become increasingly competitive. As a result, countries such as Morocco, Tunisia and Jordan began to implement types of economic reforms during the mid 1980's. Soon after, most countries within the region had implemented some form of economic stabilisation policy. During the 1990's the GCC countries (Saudi Arabia, United Arab Emirates, Bahrain, Kuwait, Oman and Qatar) were becoming increasingly vulnerable to oil-price volatility, which stunted economic growth, failing to sustain the growth rates achieved in the 1970's and early 1980's.

Common Issues addressed in economic reform
While not entirely similar, economic reform in the Middle East following the late 1990's prioritised the same goals and ideals. Common areas of importance within economic reform in the region were focused on how to sustain growth rather than achieve growth that is fleeting. Over the years, several policies and plans have been implemented and formed, aiming at reducing the constraints on economic growth and looking closely at how to maintain growth and adequately redistribute wealth to the people.

Intersection of Political and Economic Reform
For many countries and economies within the Middle East, the heavy integration of politics into the economy and vice-versa is a determining factor in the implementation process of both political or economic reforms that are being suggested. Political instability has proved to be a major obstacle to effective economic reform in the region. The instability throughout some parts of the region also deter foreign investment and further economic integration on a global level. Furthermore, political transparency has also proved to be a deterrence to economic development in the region. Since the quality of institutions and governance are important factors in stimulating growth, economic reform in the Middle East may not be complete if political reform is not suggested or implemented simultaneously. The political instability and continuous regional conflict (such as the Palestine-Israel conflict) within the Middle East also prevents the region from achieving its highest potential as it consistently faces numerous humanitarian crises that affect the majority of development indicators such as life expectancy or infant mortality rates.

Integration into the Global Economy
Another common issue that the region has addressed in economic and policy reforms is the integration of the Middle East into the global economy. Reports of economic reform in the Middle East in the early 2000's called for massive reforms to improve the Middle East's global financial integration as it stood below most developed regions. Such reports also called for a reform of the trade sector and agreements that had been previously implemented in the region that prevented most trade, besides the export of oil by oil-exporting countries. Noting trade openness as a "a significant contributor to higher productivity are per capita income growth", several countries in the Middle East have accomplished the common goal of trade reform and openness in order to more properly integrate the region within the global economy.

History of Price Subsidies in the Middle East
A common issue within Middle Eastern economies is the use of subsidies, of which energy subsidies account the most for. Price subsidies were first introduced in the Middle East over a thirty year period from 1940-1970, with the primary goal of price stabilisation. Many of the price subsidies implemented in the Middle East began simply as price stabilisers, however over time these stabilisers mechanisms all transformed into price subsides. The issue with the use of subsidies in the Middle East was that these subsidies, while meant to be implemented as a "social protection" or welfare tool, in actuality were not targeted enough nor were they cost effective, defeating their primary purpose. A concern about the use of subsidies in the Middle East was that they were not reaching their target audience, people in the economy who needed more government assistance, and rather a large portion of richer citizens within these economies were receiving the benefits that result from the implementation of subsidies. Many economies in the Middle East have embraced the use of subsidies for major sectors because it is one of the only social protection programs that may be put into place in the region. Moreover, the citizens of several Middle Eastern nations had also adapted naturally to the implementation of price subsidies, embracing them as natural rights available to them as citizens, making these subsidies difficult to remove without failure. During the 1990's, the Middle East saw various structural reforms, from privatisation to financial stabilisation, however subsidy reform was still not implemented due to subsidies accounting for a smaller portion of GDP during the period, reducing the pressure on reform.

Pressure for Reform
Following the 1990's, the pressure to implement price subsidy reforms began to build as the prices of oil rose beginning in the 2000's. As the price of oil steadily increased, it became apparent that price subsidies were preventing governing bodies from implementing more needed social programs. This came along with the fact that as the price of oil increased in the global market, as do price subsidies in the local economies, leading to a price increase in subsidised products, such as food. Almost a decade later, price subsidy reform is becoming more tangible as the Middle East goes through a political upheaval which results in the of The pressure for subsidy reform increased following the 2008-2009 world financial crisis, under which the prices of commodities rose, invariably raising the subsidies on these commodities.

Reform
Beginning in 2010, 6 countries in the Middle East (Islamic Republic of Iran, Republic of Yemen, Jordan, Tunisia, Morocco and Egypt) made significant reforms to their price subsidies system. The Republic of Iran was the first country in the region to do so, and began by implementing major price increases of all fuel products as well as electricity, water and transport. This increase in prices of commodities was offset by the implementation of cash transfers of 445,000 rials per person each month. In terms of non subsidised commodities, the prices of such goods also rose, with increases in price averaging around 30% and peaking at 100%. The cash transfers provided to citizens were found to be excessive and were disproportionately benefiting the richer citizens of the country. Due to the adverse effects of the subsidy reform, some portions of the reform were repealed in March of 2012 under the newly amended Targeted Subsidies Reform Act. Another country in the region that implemented subsidy reforms was the Republic of Yemen, which did so with the help of the International Monetary Fund and The World Bank in 2005-2010. During this period, prices periodically increased several times. In 2011 and 2012, increases in the price of gasoline, diesel and kerosene continued, drawing little public attention. However, the decision to remove subsidies all together in 2014, increasing prices by almost 90% for some products, drew public outcry and led to the reverse of some of these reforms within the same year. Different approaches have been taken by these countries, with some being more extreme with the course of change and others who take a more transitionary approach to the reforms. The effectiveness of such reforms is dependent on many different factors that differ on a case-by-case basis, such as the political climate during the time of the reform or whether or not the public receives precautionary warnings and advice in regards to the removal of subsidies from goods and services.

The progress of countries in the Middle East to reduce subsidies is still an ongoing challenge, however it has developed significantly since the beginning of the century and at current the statuses of these reforms can still not be determined as they remain susceptible to changes in regime and political conditions as well as socioeconomic factors.

2. Economic Diversification
An area in which the Middle East has been increasingly attempting to develop in has been through the diversification of sectors, especially by oil-exporting countries, to decrease the region's dependency on natural resources. The countries of the Gulf Cooperation Council have addressed this issue and have taken a strong stance in the implementation of reforms that will continue to diversify the economy of the region. In order to decrease resource dependency within the Gulf states, reforms and policy proposals for the future have been implemented and follow a plan of economic development and signal the move from natural resources to a more diversified economy that attracts foreign investment and is highly integrated within the global scheme. Examples of such plans to diversify economies include Saudi Arabia's Vision 2030 and the United Arab Emirate's Economic Vision 2030, both of which outline the countries goals to reach the desired level of economic growth and development by the year 2030.

Saudi Arabia Vision 2030
Saudi Arabia's economic vision for the year 2030 outlines various goals that the Kingdom hopes to achieve in order to be "a pioneering and successful global model of excellence, on all fronts" A goal that is set to be accomplished by the year 2030 is the expansion of SME (small and medium sized enterprises) to account for 35% of Saudi Arabia's GDP, a 15% increase from the 20% the industry holds in percentage of GDP today. As well as aiming for a SMEs to contribute a larger percentage of GDP, the plan to allocate 20% of funding to SMEs was also outlined in the plan. The plan also makes mention of the continued privatisation of "state-owned assets" which aims to bring in more diverse forms of income for the country.

Abu Dhabi Economic Vision 2030
Abu Dhabi (capital of the United Arab Emirates) also has similar goals to the Kingdom of Saudi Arabia in terms of the increasingly global and diversified economy the city hopes to achieve by 2030. Abu Dhabi's vision outlines the plan to use the acquired oil wealth of the city as a means to diversify the economy. Focusing on GDP by sector, the Emirate outlines the plan to result in a more diversified economy, emphasising the link between economic diversification and economic sustainability. The Emirate is also concerned in developing the private sector within the city and states that at publication in 2008, that the ratio of small, privately owned businesses to large businesses was on-par with developed, international economy.

3. Value Added Tax in the GCC
As of January 2016, Saudi Arabia and the United Arab Emirates announced the plan to implement value-added tax (VAT) in the GCC as a response to the decrease in oil prices beginning in 2014. VAT is expected to be effective in the GCC as of January 2018, however some countries may implement this tax later into the year.

Implications of VAT
Though each member of the GCC will establish a separate national implementation of VAT, the implications of VAT on the economy are similar. First, the requirements for businesses operating under VAT appear universal across the region: all businesses that exceed the VAT threshold must register, filing periodic VAT tax returns with tax officials, and record keeping of all business transactions. Furthermore, similar considerations must be taken by businesses and governmental bodies in relation to the implications of implementing VAT. Within financial services, the acknowledgment that VAT may not apply to all financial services (such as services involving Islamic banking or insurance) must be made in order to implement more flexible systems that can manage the implementation of VAT into the already existing financial systems. Considerations of VAT on the oil and gas industry, a pivotal sector within the economies of the GCC, must also be made. The appropriate exceptions and VAT treatments on the existing financial operations regarding the Oil and Gas sector within each economy must be made. Another economic sector that may be adversely affected by the implementation of VAT in the GCC is the retail sector. As VAT is introduced and implemented in the economic market, retailers must be aware of the correct way to classify sales. Lack of caution in classifying retail sales as well as implementing retail loyalty schemes may potentially interfere with VAT, leading to complex situations.