Transforming Arab Economies: Towards Knowledge and Innovation-Driven Development Strategies

June 4, 2013

Rabat, June 4, 2013 - A new World Bank-CMI-EIB and ISESCO report titled “Transforming Arab Economies: Traveling the Knowledge and Innovation Road” shows how an economy based on innovation and knowledge can help promote greater economic growth and spur competitiveness. The report, launched today in Rabat at an event organized with the Islamic Educational, Scientific and Cultural Organization (ISESCO), underlines that greater investment in a knowledge-economy model will be needed to meet the job creation challenge common to the region.

“We hope this report can help countries of the Arab world imagine a new kind of development strategy with a knowledge and innovation-driven model at its very heart,” said Inger Andersen, Vice President for the Middle East and North Africa at the World Bank. “The report lays out helpfully how this approach can help Arab countries diversify their economies and innovate, creating new enterprises and jobs.”

The new report suggests that the extent of change will depend in good part on how well the knowledge economy takes hold throughout the region. Creating jobs entails more investment in knowledge-related sectors and new emphasis on how to develop competitive, productive, and sustainable economies.

“If small countries like Finland and Singapore, medium-sized ones like Malaysia and the Republic of Korea, and large like Brazil, China, and India are able to harness the power of technical change, then countries in the Arab world can do so too,” said Mats Karlsson, Director, Center for Mediterranean Integration (CMI).  “But patience and determination will be required, because the fruits of investments in knowledge may not begin to appear for a few years.”

Many Arab countries have made progress over the last decade in terms of rolling out education access and information and communication technologies (ICT), gradually improving the institutional environment for private-sector led growth. Morocco and Tunisia have worked to support innovation, especially through the creation of technoparks and industrial zones that have attracted foreign direct investment and advanced manufacturing operations.  Jordan has embarked on a major effort to transform the education system at the early childhood, basic, and secondary levels to produce graduates with the skills needed for the knowledge economy.  The Kingdom of Saudi Arabia has launched a host of education reforms and has invested in the development of new universities, especially to boost science and technology. 

The report describes how engaging in a knowledge-economy model involves the implementation of a number of key cross-sectoral reforms that can create an incentivizing environment for innovation and growth. This would require the adoption of a combination of policies, including developing more open and entrepreneurial economies, preparing a more skilled labor force, improving innovation and research capabilities, and expanding information and communication technologies (ICT) and their applications.

Knowledge transfer is another important piece of the knowledge-economy model, essential in organizing, creating and disseminating knowledge, especially through foreign direct investments and international trade in goods and services. Managing knowledge, the report argues, is a critical driver for enhancing productivity that in turn offers higher and sustainable economic growth. The study also shows that regional integration can be a positive asset to develop a stronger knowledge-economy development model in MENA, helping to expand trade and develop more efficient labor markets.

In addition to structural reforms, the report recommends that governments in the region should establish appropriate conditions for the development of specific promising sectors and sites that can generate new activities and jobs. The development of dynamic “growth spots” would help to create trust and confidence in the new economic model and therefore attract investments, economic activities and enhance knowledge sharing and innovation.

The implementation of a knowledge and innovation-based development strategy requires a vision, strong coordination at the top level of government, and a participatory approach to mobilize the population to back the needed reforms,”said Abdulaziz Othman Al-Twaijri, Director General,  ISESCO. Sustained strategic efforts are needed to obtain tangible outcomes and to anchor the new practices so that they will endure over the medium to long term. The real challenge especially for  the private sector is to develop more competitiveness and identify ‘niche markets” in the global economy.  

Anuja Utz, CMI Task Team Leader and main contributor to the report said its approach reflects the rich differences in challenges and opportunities across the MENA region. “Given the diversity of the Arab world, the study does not provide a cookie-cutter approach.” she said. “It offers examples of good practice from countries around the world and policy recommendations to help guide efforts, which should be customized to the specific circumstances of each country.”   

The report: Transforming Arab Economies: Traveling the Knowledge and Innovation Road is being launched at a high-level international conference at the headquarters of ISESCO in Rabat on June 4-5, 2013. Participants from governments, the private sector and the civil society will discuss concrete actions to move forward to a knowledge economy in their national contexts as well as within the Arab world and the Mediterranean.

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