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The imperative of creating millions of good jobs is the first of many daunting challenges confronting the Arab world. To meet those challenges, Arab countries would do well to embrace a model of economic growth based on knowledge and innovation, building on the global move toward the knowledge economy.
Over the past decade, some countries of the region have spurred growth and improved their global competitiveness by taking the first steps in the direction of the knowledge economy. To go farther, however, Arab societies must deepen their commitment to reforms in four key policy areas: developing more open and entrepreneurial economies, preparing a better-educated and more highly skilled population, improving their capabilities for innovation and research, and expanding information and communication technologies and their applications. The success of a knowledge-economy strategy depends on coordinated progress on all four fronts, with bold approaches tailored to each country’s challenges and opportunities.
Transforming Arab Economies: Traveling the Knowledge and Innovation Road has been developed by the CMI, with the World Bank, the EIB and ISESCO.
Testimonials
“Recent events in the Arab world have affirmed the need for greater opportunity and dignity for all. Governments across the region are grappling with the challenge of job creation, especially jobs for youth and women. Transforming Arab Economies: Traveling the Knowledge and Innovation Road provides countries of the Arab world with a new approach to development strategies that can help them achieve sustainable growth and create jobs—both key for ensuring social and economic inclusion. This work speaks directly to those in government, business, and civil society across the Arab world who are keen to work in new and different ways, using knowledge, innovation, and technology as key drivers to shape a more inclusive growth path and a better tomorrow.”
Inger Andersen, Vice President, Middle East and North Africa, World Bank
“CMI is to be congratulated on producing this daring and timely work. Envisioning the future is a bold step and a major challenge at a time when the protagonists of the Arab revolutions are so preoccupied with the present. The creation of wealth and jobs will require considerable changes in the political arena toward greater democracy, a more resolute search for social justice through more inclusive policies, and a new departure toward the knowledge economy at the economic level. Given the diversity of the countries of the Arab world, the knowledge economy will have the best chance of taking hold if the complementarities between the Gulf states and the countries of the Maghreb and the Mashreq are carefully exploited. This important work deserves to be widely discussed within the halls of government in the Arab world.”
Rachid Benmokhtar Benabdallah, President of the National Observatory of Human Development and member of the Academy of Science and Technology, Morocco.
“Transforming Arab Economies not only makes a powerful and compelling case for the adoption of a knowledge- and innovation-driven growth scenario for the Arab world, it also underlines the importance of a clear vision to drive the deep reforms needed to make it happen, reforms that cut across sectorial and ministerial silos. Such a vision should ensure that reforms are pursued in a participatory fashion that guarantees broad-based support for implementation. The report also highlights the idea of “growth spots” that would facilitate the adoption of the new economic model. This timely and very important report from the World Bank should be required reading for all decision makers and concerned citizens in the Arab world. Our future is being shaped right now by the actions we take to bend the future to our dreams.”
Ismail Serageldin, Librarian of Alexandria, Director of the Bibliotheca Alexandrina, former World Bank vice president
Chapter summaries
The full version of Transforming Arab Economies: Traveling the Knowledge and Innovation Road (World Bank 2013) has three parts.
Part 1. Key issues: Why, what, and how?
- Chapter 1. Deploying knowledge and innovation to transform Arab economies.
The chapter shows how a knowledge- and innovation-driven economy responds to the employment and empowerment challenges faced by Arab countries. It provides estimates of the job impact that such a knowledge economy might have, estimates based on past trends in Arab countries themselves. These effects could be greatly increased by redoubling knowledge-economy efforts, reducing skill mismatches through better education and training, and creating economic structures that produce the maximum number of jobs from economic growth.
- Chapter 2. Catching up with global knowledge-economy trends.
A knowledge economy has four fundamental pillars: a well-functioning economic and institutional and regime, a well-educated and skilled work force, an efficient innovation system, and a dynamic information infrastructure.
Using standard indicators to measure progress made by Arab countries on these pillars, and benchmarking them against more than 140 countries, the chapter shows that the Arab world needs to increase their knowledge-economy efforts to match those of close competitors and comparators, such as the countries of Eastern Europe, Central Asia, and Latin America. The chapter discusses the performance of the various Arab countries on each of the four pillars.
- Chapter 3. Shaping new development strategies for Arab countries.
Putting in place the new economic model requires bold and speedy initiatives, while at the same time taking due account of countries specificities. The chapter discusses the need to link the implementation of a growth and job strategy based on the knowledge- and innovation-driven approach to a new social contract. It indicates the nature of the policy measures needed to carry out reforms and create jobs in relation to the level of economic development of countries. Finally it provides views on integration within the Arab world, the European space, and the global economy, and on the decisive role that the international community could play.
Part 2. Policy pillars
- Chapter 4. Improving governance and the business environment.
The success of the knowledge economy strategy in a given country depends on that country’s economic and institutional regime, because that regime influences the efficiency and effectiveness of investments made in other pillars—education, innovation, and information. The chapter discusses several key issues: the need to articulate and monitor new strategies through truly participatory processes; questions related to the rule of law, the freedom of expression, and voice and accountability; the opening of societies, notably in favor of youth and women; and improvements in the business environment and trade relations.
- Chapter 5. Educating people for better jobs in a new economy.
Arab countries have made immense progress in providing equitable access to formal education, fighting illiteracy, and reducing gender disparities. However, despite these successes—and the considerable resources invested in education—education reforms in the Arab region have not yet fully delivered on their promise. The relationship between education and economic growth has remained weak, the divide between education and employment has not been bridged, and the quality of education continues to be disappointing. This calls for strengthening the governance of the education system and aligning its governance, management, financing, and performance incentive mechanisms to produce better learning outcomes.
- Chapter 6. Fostering innovation and technological upgrading.
The promotion of innovation is a task that requires actions by many government agencies and departments, while being focused on very specific objectives. There is, among other things, a need to support innovators along technical, commercial, and financial lines; to improve the functioning of research and development (R&D) structures, notably by developing better linkages between universities and industry; to tap efficiently into global stocks of knowledge and technology by taking advantage of levers such as foreign direct investment and by mobilizing diasporas; and to set up and facilitate the development of innovation sites such as technology parks and industrial clusters. Several countries in the region have already accumulated significant experiences in such programs and offer interesting examples that can be emulated throughout the region.
- Chapter 7. Moving to the information society.
Owing to accelerated liberalization over the past 10 years, the Arab world has experienced a high rate of growth in telecommunications services. This, along with the development of the Internet, has encouraged and enabled the population in some countries to mobilize for political change. There is a great opportunity to further reform the ICT sector, to increase competition, to remove Internet restrictions, and to provide new opportunities to increase employment, foster entrepreneurship, and enable better transparency and governance using ICT applications. Accelerating the use of the Arabic language on the Web could have important effects in advancing the knowledge economy across the region.
Part 3. Diversification initiatives
- Chapter 8. Promoting growth sectors.
In line with countries that have pursued active and efficient industrial policies to boost their transition to a knowledge-based development model, and with a view to plucking low-hanging fruit in terms of job and wealth creation, this chapter provides some suggestions of policies that could be implemented in a series of sectors by exploiting the comparative advantages of the region. These include, in established sectors, the food-processing and textile industries, which need to enhance their value chains; ICT related industries, which need to expand their success in offshoring activities; tourism, where medical and health tourism show particular promise; creative and media industries; and green growth, including energy efficiency and environmental stewardship. In all sectors, efficient programs require sets of complementary measures that combine regulatory actions, financial mobilization, training programs, R&D efforts, and export promotion campaigns, among other things. The role of the government is not to undertake all these tasks, but to create the right conditions for the private sector to step in–by changing government’s role to one of a facilitator and catalyst.
- Chapter 9. Managing local and regional development.
Modern economies develop where there is an accumulation of talents, knowledge, and entrepreneurship. Following global trends, Arab
governments have tried to facilitate the emergence and growth of such innovative sites by measures such as science and technology parks, industrial and export zones, and new cities (in resource rich
countries). The chapter examines these efforts and provides policy orientations accompanied by illustrative examples. It also discusses rural development issues and policies. Efficient spatial
diversification requires long-term regional planning and effective measures of decentralization and devolution of power—a challenge for most countries throughout the region.
Annexes
- Annex 1
Reviews the literature on the relationship between the knowledge economy, growth and employment and develops a methodological approach to link the knowledge economy to job creation in the Middle East and North Africa region.
- Annex 2
Provides insights on a series of country experiences from across the world in developing knowledge-based development strategies.
- Annex 3
Surveys knowledge-economy issues in several Arab countries and highlights policy initiatives that are adapted to their specific country circumstances.
