This chapter analyzes the evolution of Arab world competitiveness over the past decade and frames the region’s current situation in the context of the global trends that will shape the future of the world’s economy in the coming years, and the risks associated with them. The region experienced a converging trend with respect to advanced economies until 2011–2012. In the following years, its gap with the OECD countries at first remained stable and then widened slightly with the recent decrease in oil prices. The improvement of transport and technological infrastructure was particularly sizeable thanks to heavy investments by both the public and the private sectors. The creation of thriving innovation ecosystems has been less successful, as a number of constraints have not been addressed: inadequate access to financing for innovative projects and SMEs, a lack of modernization of the legal frameworks, the low availability of trained workers, and the inefficient labor market.
In the coming years, the region will have to face the consequences of growing inequality, increasing polarization of societies, rising cyber-dependency, and changing climate. These could exacerbate risks already faced by the Arab countries, including those of persistent unemployment (especially among the youth), social instability, data fraud, cyberattacks, and water crises. The dependency on oil revenues and the public sector also increases the chances of fiscal crises, asset bubbles, and energy price shocks in some countries.
Against this backdrop, we identify four key challenges for the Arab world: (1) transitioning away from natural resources and diversifying the economy, (2) increasing the role of the private sector and diminishing the state’s intervention in the markets, (3) ensuring opportunities for the youth and the workforce of the future, and (4) mastering the Fourth Industrial Revolution and improving the innovation ecosystem. Addressing the first two will be a necessary step toward finding solutions to the latter ones.
This chapter provides actionable insight for both governments and the private sector to step up to these challenges and work together on a new competitiveness agenda for the Arab countries, focusing on the need for productive and inclusive economies to ensure a prosperous and sustainable future for the region. The rest of the Report will further delve into the issues of diversification and entrepreneurship, directly linked to the first two challenges above.
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