saudi woman tech FAYEZ NURELDINE/AFP/Getty Images

Rethinking the State’s Role in Arab Economies

The Arab world's state-led development model may be set to reach a breaking point, as hundreds of millions of young people prepare to enter the labor market in the coming decades. With the public sector unlikely to be able to absorb these new workers, there is an urgent need to create a dynamic and competitive private sector.

WASHINGTON, DC – The Arab world has a long tradition of commerce and enterprise. Yet, since achieving independence, many Arab countries have adopted state-led development models that have left their economies overly reliant on the government. This is unsustainable.

The Arab world’s economic model has endured, despite major setbacks in the 1990s, largely because the state employs a large share of workers and provides universal subsidies. This eliminates risk from citizens’ economic lives, entrenching their dependence on the government and stifling entrepreneurship and innovation. It also undermines the delivery of public services, stoking mistrust of the very government on which populations depend so heavily.

Now, the Arab world’s state-led development model may be set to reach a breaking point, as hundreds of millions of young people prepare to enter labor markets in the coming decades. With the public sector unlikely to be able to absorb these new workers, there is an urgent need to create a dynamic private sector that not only adopts, but also generates technological innovations that empower workers and deliver durable and inclusive growth.

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