Modernizing the Middle East’s Economies

Most Middle Eastern countries missed the first industrial revolution based on coal and steam power, and the second industrial revolution based on oil and the internal combustion engine. While this has spared them the burden of declining industries, they need policies aimed at joining the third industrial revolution - the post-carbon economy of renewable energy and fuel-cell cars.

AMMAN – Rather than speak of the Middle East or the Arab world, I increasingly prefer to use the term WANA, meaning West Asia-North Africa. But, whatever we choose to call it, the danger is that the global economic crisis is providing an almost perfect alibi for governments and others in the region to continue with “business as usual,” when what is needed is a loud wake-up call.

The global economic crisis has merely helped to mask chronic structural imbalances within the region. Over-dependence on aid and oil revenues characterizes almost all the economies of WANA. Indeed, it is no exaggeration to say that they represent a form of life-support system. The problem of how to wean these countries off this addiction seems to be insurmountable.

For the “Dutch disease” and a rentier spirit prevail in WANA, and have affected oil-producing and non-oil-producing countries, ranging from migrant workers’ remittances and financial investment flows from the oil countries (mainly into real estate) to stock-exchange bubbles and foreign aid. A side-effect of this has been the widening of income gaps, both within and between the WANA countries.

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