Strategic objectives of economic diversification (3)

Al Furat Center for Development and Strategic Studies
24/06/2018


Hamed Abdul Hussein Khudair Jubouri


The economic and social objectives that economic diversification seeks to achieve are addressed in previous articles (1) and (2). The strategic objectives that will make the country's economy more robust and prudent in dealing with international policies in most areas, especially now known as globalization, will be addressed.

In the absence of diversification and the continuation of unilateralism, dependence on one resource or very limited resources, especially if it is rentier, will make the economy of the country an economy that is not economically independent and is exposed to crises in the international economy. To achieve economic independence and to respond to crises in the international economy, which can be briefly explained as follows:

1. Economic independence

Achieving economic independence and self-reliance in meeting diverse domestic needs is crucial for developing countries to end the state of economic dependency, which means "developing countries are devoted to the export of raw materials to meet the needs of developed economies".

The persistence of the state of economic dependence is the reason for the depletion of economic resources of these countries, through unequal relations, under an international division underdeveloped, which kept them in an enviable state of backwardness compared to the levels of development reached by the developed countries and kept them exporting raw materials and some products Agricultural products at low prices and imported miscellaneous manufactured materials at continuously rising prices [ii].

Most developing countries seek economic dependence and economic independence, even if they gain political independence after the Second World War, because achieving political independence is the first step towards achieving economic independence. Otherwise, what is the benefit of political independence without achieving economic independence? A country without economic independence is subject to the decisions and policies of that world and its dominant powers. As a result of the loss of its economic independence, the country loses all the elements of its sovereignty, even if it enjoys political independence.

The continuity of monopolization of the economy, ie, its restriction on the export of raw materials and certain agricultural products, can not meet the requirements of achieving economic independence, because the unilateral economy places the country in the category of economic dependence because it is not satisfying its varied needs and is satisfied by imports from other countries.

Since economic diversification leads the country out of economic dependence and goes towards economic independence, it can satisfy its diverse needs by establishing and developing the diversified productive base. It does not go to the developed countries except to the extent necessary or at least it can achieve the equality of economic relations

With developed countries, and therefore economic independence was one of the objectives of economic diversification.

2. Confronting crises

A single economy that relies on a single resource or very limited resources, especially if that resource or resources is rent, is exported abroad and uses its revenues to meet diverse domestic demand. It will be a fragile economy that does not have the most basic elements of resistance to crises in the global economy, Especially in the era of globalization which took the world as a small village by virtue of the information revolution and the communications revolution as well as the international institutions represented by the International Monetary Fund, the World Bank and the High Trade Organization, which calls for liberalization in the movement of capital and the movement of goods and services and hands And others.

An economy that does not increase the efficiency of its production and diversification and is limited to a single resource will become a crisis-prone country because it will exhaust its resources and become a market for the products of developed and diversified economies. This is further exacerbated by the fact that Domestic economy products and their competitiveness Being less efficient than imported products, the continued increase in imports leads to the first aspect is the depletion of resources and reserves of foreign exchange resulting from the export of natural resources.

For example, this resource or very limited resource, such as oil, on which the local economy depends, are uncontrollable and domestically controlled, as they are strategic resources that are internationally controlled outside the State, for reasons that may be political, economic, climatic or otherwise.

Moreover, industrialized countries have imposed protection measures in the world markets on developing countries' exports, which has increased the negative impact of the deterioration of growth rates [iv]. Therefore, as a result of the sudden fluctuation of this resource or resources, this fluctuation will move directly to the local economy to achieve the undesirable effects of unifying the economy and not to build or at least mitigate the effects of these effects, that is, not to build a diversified economy.

Where the increase in the economy's capacity to cope with external crises is achieved through the development and diversification of production and export bases [v], while the lack of diversification of exports increases the vulnerability of the country to negative shocks and macroeconomic instability, [6] The economy is fragile and can not cope with the crises in the global economy.

Thus, a country with economic diversification can avoid or even reduce the impact of economic crises, especially those that occur in the world economy, because the country, which enjoys economic diversification, has a lot of preventive measures that prevent the crisis from moving to the local economy or mitigate its effects.

The work is to achieve these goals through:

1- Building an investment climate that encourages attracting investment by facilitating administrative procedures, tax exemptions, political guarantees and achieving security and political stability.

2. To set these goals as a strategic vision at the top of the priorities of decision-makers and planners and harness all the material, financial and human resources to achieve them.

3 - Addressing the challenges faced by the economy such as corruption and weak infrastructure, for example.

4 - Identify the mechanisms used to achieve economic diversification, such as the private sector and the construction of sovereign funds and others, as these objectives can not be achieved without the mechanisms of economic diversification.

5- The State shall exercise the role of supervising the performance of the economy and practicing its amendment when it requires intervention in order to ensure the economy's progress towards achieving these objectives.

* Researcher at Al-Furat Center for Development and Strategic Studies / 2004-Ⓒ2018

www.fcdrs.com

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Approved sources //

[1] Omar bin Faihan al-Marzouqi, Economic Dependence in the Arab Countries and their Treatment in the Islamic Economy, First Edition, Al-Rushd Library-Publishers, Saudi Arabia, 2006, p.

[2] - Falih Hassan Khalaf, Arab Oil Revenue and its Use in the Industries of Means of Production, Journal of Oil and Development, Second Issue, Third Year, Shirin II, 1977, p. 85.

[3] - Hamid Abdul Hussain Khudair, The Role of Economic Diversification in Economic Independence, an article published on the website of the Al Furat Center for Development and Strategic Studies, available at:

http://fcdrs.com/economical/998

[iv] - Mehdi Sahar Ghilan Jubouri, The Effects of Monetary Shock on Macroeconomic Variables in Iraq, Al-Furat Journal, Al-Furat Center for Development and Strategic Studies, No. 8, February 2017, p.

[v] - Mustafa Qara, The Global Financial Crisis and the Challenges of Restoring Economic Stability and Achieving Global Growth in Arab Countries, Arab Monetary Fund, January 2013, p.

[6] - Nabil Mohamed Dior et al., Economic Outlook of the Organization of Islamic Cooperation, "Enhancing Productivity and Competitiveness", Organization of Islamic Cooperation, Statistical, Economic, Social and Training Center for Islamic Countries, 2014, p.


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