The principal goal of a country should be to provide a safe environment, and a high and rising standard of living to its citizens. By this yardstick, Middle East (ME)region has been a mixed bag. While countries like Qatar, UAE, Saudi Arabia, Oman, Kuwait and Bahrain have managed to continuously improve upon their quality of life and competitiveness, Egypt, Syria, Iraq, Lebanon, Yemen, Libya etc. have struggled to take off for the past 10 years.

This region covers an area of about 6.3 million square kms.and is a home to 5.5% of the world’s population. The region includes two members (Israel and Turkey) of the Organization for Economic Co-operation and Development (OECD), and 6 of the 12 member countries of Organization of the Petroleum Exporting Countries (OPEC) in Iran, Iraq, Kuwait, Qatar, Saudi Arabia and the UAE. Historically, the region played a leading part in the economy of Roman Empire. The Arab empire contributed to promoting trade in the region and its countries were producing important raw materials – cotton from Egypt, tobacco, dry fruits and cotton from Turkey, silk in Iran, wheat and barley in Syria and Iraq, oranges from Palestine and coffee from Yemen were exported to various countries and contributed to the GDP of these countries.

But, the region that was once a cradle for some of the world’s earliest civilizations, has lagged behind in economic development over the past few decades. It is important to examine some of the reasons for its slow economic progress. The ME region is second to none when it comes to its factor endowments. Middle East presently contains more than half the world’s most important source of energy – Oil. This has been an important factor in the economic development of the region for the past 60 years. Oil and its associated products have provided the raw material for the development of the petrochemical industry and a huge amount of foreign exchange to the region.

Nevertheless, the Middle East lags behind in building its human capital through education and health programs. Lack of availability and quality of infrastructure like navigable waterways, poor endowment of its minerals, and fragility of its agricultural base have all been part of the reason for its slower growth when compared to the more developed countries.In addition, technology remains backward in the Middle East, an important factor that cannot be easily exchanged for oil money. And above all, geopolitical uncertainty due to external influence, lack of ethnic, linguistic and religious homogeneity, and lack of the government’s sustained interest in holistic economic development have all been much bigger issues for the region.

Stabilization and growth of this region is critical for the socio-political fabric of the whole world. The region is a home to both Shia and Sunni Muslims of the world, apart from Jews, Christians, Zoroastrians, and others. This religious diversity has been a key impediment in the economic and political success of the region. Harmony and unanimity of the Muslim community based on Quran and Hadith existed in an era of small scale agricultural communities with simple commodity productions, often linked through personal or familial connections. But with today’s more complex social and economic structures, every country is protecting its self-interest, and in the process hurting the ME region’s overall economic growth. Rulers of the ME region are usually absolved of a poor economic performance on the rationale that their economic and political failure is more than compensated by the spiritual gains. This has resulted in escalating national debt and lack of domestic savings, slower expansion of fixed investment, and resilience of hardline group like ISIS resulting in flight of capital and people, and deceleration in oil export growth over the medium term.

The challenge is getting people to agree on the nature of the problem and discuss possible solutions.Effectiveness and fairness of the talks between neighboring countries could be a big step forward and could help in countering the influence of money and advertising on current public opinion. Once the external affairs are mutually settled, countries need to focus on building up a resilient infrastructure like irrigation systems to increase crop yields, more economic opportunities for women, health clinics and sewage treatment plants to enhance the general well being of its people. Countries of the ME region can become competitive only if they pursue the economics of co-operation.

At Gurnoor Consulting, we work with the governments and public sector organizations to solve complex governance and economic development challenges.