Image Credit: Dana A, Shams/©Gulf News

It is no secret the economies of Arab countries will continue to face major risks, in the short term, amidst continued regional political tensions and a slow global recovery, even among the new economic powers of the world like China. This is reflected in slow growth, high unemployment, especially among the youth, and difficult fiscal situations in many countries throughout the Middle East and North Africa.

Arab countries, particularly those in transition, face a difficult domestic and international environment, compelling them to maintain subsidies and increased wage and pension spending. This is despite the self-evident unsustainability and long-term harm to their economies such policies bring about.

Against this background, Arab countries must engage in serious and deep reforms that can set the foundation for future growth, job creation, correction of the deep distortions developed over decades of entitlement programmes, and a more competitive and merit-based environment for better private sector development.

But beyond the political commitment to such reforms, Arab countries separately or alone will not be able to face the challenges before them in the short or the long run.

First, Arab countries need to realise that some of their challenges must be faced collectively through increased economic integration in such areas as trade, investment, employment, climate change and food security.

Secondly, it is imperative that the international community as a whole must fully understand that failure to adequately help and support the region at this most critical period in its modern history will have a global impact, no less significant than the failure to deal with the Eurozone crisis or Eastern Europe in the early 90s.

Much of the underlying factors that propelled millions of young Arabs, who represent almost two-thirds of the population, into the streets two years ago — in what became known as the ‘Arab Spring’ and whose impact is still reverberating — are grievances relating to economic frustrations borne out of a lack of fair and equal opportunity to participate in the economic life of their countries.

Young Arabs today face the depressing prospect of low quality education systems that cannot equip them for the New Economy and the private sector, skewed economic incentives that force them to seek public sector employment that is becoming scarcer as governments are no longer able to guarantee these, and unfair and unequal opportunity in starting or competing in private enterprise.

With such prospects, young Arabs are graduating into a bleak economic landscape, unable to find good jobs and economic opportunity, forcing some to seek the route of immigration. Others are left unable to get married, buy homes and cars, or contribute to their societies on both the productivity and consumption sides.

To face these challenges and lay a stronger foundation for better economic future, Arab countries need to urgently begin work on domestic reforms, regional integration and global partnerships.

On the domestic level, they need to have the political commitment to engage in immediate reforms to their legal code to encourage private sector development, improve the performance of their public policy and administration, invest in transformational public-private financed and managed projects, and improve the quality of the education system.

Regionally, governments need to act with the understanding that in this globalised world, and given the limitations of each country on its own, they must seek more economic integration with their Arab neighbours. Areas such as trade, intra-regional investment, labour mobility, energy, transport, healthcare, the challenges of climate change, and even ensuring food security, are low-hanging fruits and very suitable for such co-operation and securing quick wins for all to share.

On the international level, it is imperative that the international community and major economic powers understand that ensuring the stability and prosperity of the Middle East and North Africa is a ‘Global Public Good’, not just a regional or country-specific issue. This region — a strategic corner of global trade, home to over 300 million people, and 70 per cent of global energy deposits — cannot be left to drift alone to an uncertain future.

Arab countries need financial support, technical assistance and knowledge sharing, and access to global markets. Failure to support the region overcome its difficult political and economic challenges now will spill over globally, from south and east Asia to the Americas, and from Africa to Europe.

Many parts of the world have gone through deep and wide-ranging political and economic transitions, from Western Europe after World War II, to Eastern Europe, East Asia and Latin America more recently. There are lots of lessons of what works and what does not, the global knowledge available at the finger tips of the Arab world is enormous.

What is lacking and most urgently needed is the political will to turn that knowledge and expertise, coupled with the financial reserves of the region itself, into a real force and dynamism for ensuring this most strategic part of the world becomes a force for global peace, security and stability, instead of a source of instability, chaos, and turmoil.


— The writer is advisor to the executive director, The World Bank Group.