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What Hinders Economic Growth in the Middle East?

Juliane Brach | German Institute of Global and Area Studies | Sept. 2008

Economically speaking, Arab states have developed at a strikingly slower pace in the last 20 years than most other regions in the world. This is particularly true for the Arab Mediterranean, including Jordan, Egypt, Tunisia, Algeria and Morocco, which have failed to capitalize on their especially advantageous geo-strategic position "at the crossroads of three continents, with excellent connections to sea and waterways and in direct proximity to the European Union, one of the world's economic hubs." In contrast to those states of the sub-Sahara, ethnic fractionalization and high-burden diseases like AIDS or Malaria don't play an major role. Those sub-Saharan countries even attract more foreign direct investment than those in the Arab Mediterranean.

Two arguments dominate the debate surrounding the constraining factors that hinder economic development in the Arab Mediterranean: political conflicts and trade barriers. However, a state-of-the-art statistical analysis supports the hypothesis that these are only secondary factors. The primary obstacles lie elsewhere:

• The limited technological capacities and political economy structures cause the economic stagnation in the Arab Mediterranean.
• The authoritarian governmental structures prevent the utilization of the perfectly good and available Middle Eastern and North African resources.
• The employment of capital and labor resources is inefficient and primarily serves to secure political influence and personal gains.
• International structural adjustment programs and recommendations usually aim their efforts at false targets and, therefore, only make futile attempts to constrain the economic dysfunction.

Because authoritarian governments in the Arab Mediterranean are hardly going to change their system any time soon, closing the economic gap between these countries and the rest of the world will most importantly require increasing their technological capacity and making the utilization of existing resources more efficient.

This summary was prepared by the Atlantic Community editorial team from "Constraints to Economic Development and Growth in the Middle East and North Africa" published here by the German Insitute of Global and Area Studies.