The United Arab Emirates is the Arab world’s most competitive economy, according to a new report by the World Economic Forum and the World Bank Group.
The UAE was ranked 17th on the latest Global Competitiveness Index (GCI) putting it ahead of Qatar (25th) and Saudi Arabia (30th) among regional economies.
The Arab World Competitiveness Report 2018 explores trends, challenges and opportunities for countries in the region.
A mixed picture
A handful of countries in the region have made efforts to reform and increase investments to improve competitiveness. However, in many respects the region continues to lag.
Overall competitiveness in Arab world economies has not changed significantly over the past decade and it remains less competitive than East Asia and Europe.
It’s important to note though that the region contains a hugely diverse set of economies - from some of the world’s richest countries, to countries devastated by conflict. Indeed, data couldn’t be collected in countries such as Iraq, Syria and Libya because of fragility, conflict and violence.
High youth unemployment, low levels of female labour force participation and social frustration are key challenges for economies in the Arab world. Diversification and the development of entrepreneurial freedom to increase opportunities for young people are urgently needed to prepare the region for the Fourth Industrial Revolution.
“The Middle East and North Africa region is brimming with talented young people, especially in technology,” said Philippe Le Houérou, IFC’s Chief Executive Officer. “By helping entrepreneurs to reach their potential, governments can support the creation of good jobs and drive technological innovation, making the lives of everyday people better.”
The top 10
The UAE, Qatar and Saudi Arabia take the top 3 spots, reflecting a general trend of resource-rich countries unaffected by conflict ranking much higher on the GCI.
United Arab Emirates
The UAE has improved its absolute assessment, but fell one place in the most recent GCI because of larger gains by other countries.
The improvement highlights the resilience of the UAE economy, in part thanks to diversification. But the report flags that, to improve competitiveness, the country needs to speed up progress on spreading the latest digital tech and upgrading education.
Qatar remains in second place, despite falling in the global rankings from 18th to 25th. A drop in oil and gas prices was largely behind the slide, as this had a significant impact on its fiscal situation. From 2015 to 2016, public debt increased from 35.8% to 47.6% of GDP, while a fiscal surplus of 10.3% was replaced by a deficit of 4.07% over the same period.
However, infrastructure facilities and an efficient goods market remain areas of strengths.
Note: Both the survey and statistical data reflect the situation prior to the diplomatic crisis.
Saudi Arabia’s performance has remained relatively steady - slipping one position. Stable institutions, good-quality infrastructure and a large market (the largest in the Arab world) are all areas of strength.
Saudi executives name restrictive labour regulations as the most problematic factor for doing business, while advancing the equality of education is another area for improvement.
The country has improved on a number of indicators in the last year, including technological readiness and the macroeconomic environment - although persistent challenges remain here. Other challenges include a large fiscal deficit, security, innovation and market size.
Kuwait has dropped to 52nd overall - down 20 places from 2016-17 - largely as a result of a deterioration in the macroeconomic environment. A revision of indicators published by the International Telecommunication Union also sees a fall in technological readiness.
Investments in higher education and training would increase its innovation capacity.
Oman moves up four places to 62nd. Improvements in its macroeconomic environment and higher education and training are reasons for this rise. It also has strong institutions and infrastructure.
However, work is still needed to improve education and training systems as well as reforms to its labour markets.
A stable and efficient institutional system and relatively good infrastructure, innovation and business sophistication are areas of strength for Jordan. The large influx of Syrian refugees has put the country’s fiscal situation and macroeconomic environment under strain, but the government has worked to consolidate both of these.
Morocco places 71st in the Global Competitiveness Index, with the same score as the previous three years.
It scores well on its institutions, but sits 120th for labour market efficiency and 101st for higher education and training.
Algeria has risen nearly 25 places in the GCI since 2012-13. Its market size is a particular area of strength, however it scores poorly for labour market efficiency and financial market development.
Tunisia completes the top 10, coming 95th in the GCI with the same score as the previous two years. However, its overall score and place has fallen since 2013-14.
It scores well, relatively, in the health and primary education pillar, but poorly for labour market efficiency and macroeconomic environment.
Six countries have seen their competitiveness score improve over the last 10 years, while six have seen their score fall back.
Investments in infrastructure and connectivity have turned some countries into global leaders for technological adoption in the last decade. However, the report argues that for progress to continue, and competitiveness to increase, societies in the region will need to update their social and economic models.