Finding a New Development Model for the Middle East

January 9, 2017

By Yasar Jarrar

The Middle East and North African region is at a critical moment in its history. Wars, economic instability, a weak private sector, and increasingly disenfranchised youth population are all challenging the region. The coming decade will test its sustainability, governance and social structures, and even geographical borders.

Today, most of the challenges that led to the Arab Spring remain (and some grew more complex). Key to the region’s future will be turning a potential “youth liability” into a youth dividend.

The Middle East and North Africa is a complex, and complicated, region. It is the heart of the Islamic world and the center of the world’s oil and gas reserves. The region also has one of the most youthful populations in the world (more than 60 percent are under the age of 30). It also has wide economic disparities coupled with ongoing instability and increasing sectarian divide.

On the one extreme, the Gulf Cooperation Council (GCC) countries were powering ahead with mega-developments, fueled by oil revenue, though progress has stalled with declining oil prices. On the other end of the spectrum are states that are either failing or enmeshed in a state of war (Syria, Yemen, Libya and Iraq). In the middle are Jordan, Egypt, Morocco and Tunisia, which have witnessed modest growth following basic economic reforms.

Yet all the countries in the region share three critical trends: a large youthful population, an exponential penetration of information technology and social media,  and a widening income gap (which signals a lack of inclusive growth).

The region needs a new development model, and inclusive growth is critical not only for social equality and well-being, but for basic social and political stability. Although some promising economic development strategies are apparent, like Egypt’s investment in infrastructure, Jordan’s growing ICT startup sector, and Dubai and Doha hosting major global events (EXPO 2020 and the World Cup, respectively), these positive stories are the exception to the rule. In the face of the mounting political, economic, social, technological, legal, and environmental challenges, the current economic development models are clearly inadequate.

Three strategies will be key to the region’s viability: enabling the private sector, improving governance and rule of law, and managing the “youth bulge.”

The private sector is limited. More than 88 of the top 100 companies are either state-owned or have some form or monopoly with strong government links. Moreover, more than 85 percent of those companies are oil / commodity companies, banks, or telecom operators. There are no manufacturing, technology or innovation-based firms. Governance and rule of law must also be reformed with improved legislation, institution-building, and capacity-building for enforcement.

However, it is the youth bulge that will be the most challenging of the three.

With one-third to one-half of the population under age 25, the region’s ability to create an enabling environment for young people to fulfill their aspirations will be key. Youth seek a better future, engagement, and they want to be heard. Doing so can turn the demographic tides from a “youth liability” to a “youth dividend.”

Most important, education systems must be reformed (a topic discussed for decades, with little concrete results). The entire education system, from pre-school to higher education and research, requires modernization. Although critical, challenges are daunting, from issues of scale to absorb the rising demand, to quality, availability of teachers and faculty, curriculum, government research policies, and aligning graduate skills with market needs.

In this context, entrepreneurship cannot be overemphasized. Governments must foster an independent pool of young, local entrepreneurs to drive diversification and create positive multiplier effects on the wider economy. Entrepreneurship will also help move away from the sense of entitlement that prevails among young Arab people today; nearly 75 percent believe energy, electricity, and transport should be subsidized by their government.

Today, as we look forward, the future is not clear. But what is clear is that all solutions must come from within the region. They cannot be imposed or imported. Today’s vacuum of leadership will be filled in the coming years. Who fills it will decide the fate of the region for the coming decades.

Yasar Jarrar is a Visiting Fellow with the Mastercard Center for Inclusive Growth. He is a strategy advisor and a former consultant to the governments of Dubai, UAE, and Jordan. He serves as the Vice Chair of the World Economic Forum’s Global Agenda Council on the Future of Government, was chosen as a Young Global Leader at WEF, and is the co-founder of 01government.com, the first Arabic portal for digital government.

Featured Photo Credit: Getty Images

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