"While industrial policy has received much attention in the economic discourse of Arab countries since the 1960s, real industrial development has often occupied a secondary position in exchange for preserving the continuation of existing political balances.
Economic privileges were granted and profits were distributed without taking into account economic efficiency. Looking at the experiences of Algeria, Egypt and Morocco, it is clear that a distorted industrial policy led to a misallocation of labor and capital between industrial activities instead of improving productivity in the long term. This policy led to an increased tendency toward a rentier economy, and resulted in huge costs incurred by governmental budgets. These came in the form of non-performing loans and the bankruptcy of state banks and industrial projects.
The performance of Arab countries has significantly differed from that of other emerging market economies, which have witnessed over the past two decades a rapid growth in private investment, industrial production and a diversity of manufactured products with a heavy focus on technology. The employment challenges faced by Arab countries – in light of the demographic transitions they have witnessed – reveal the weaknesses that afflict this non-diversified economic model, which is primarily based on the extraction and export of raw materials, agricultural and traditional activities, and some value-added industries that depend first and foremost on non-skilled labor."
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