In a recent article published by Knowledge@Wharton, Howard Pack (a professor of business and public policy at Wharton) and Marcus Noland (a senior fellow at the Peterson Institute for International Economics) examined how Arab countries are coping with globalization & exploiting the recent influx of hydrocarbon-based money into their economies. We found the following notes to be particularly interesting as they provide a snapshot of these two commentators’ thoughts about some of the challenges and opportunities facing emerging Middle Eastern & North African markets in the years ahead:

“…One way in which the Arab economies, at least the ones that have large populations, could deal with this population bulge is to have a significant amount of employment generated by potential exporting industries. They are just across the Mediterranean Sea, in many cases, from the European market. They all have trading agreements with the European market.

The trouble is that while that was a good model to try to pursue 25 to 30 years ago, whatever the Arab countries now try to do, they face these two extraordinary competitors — China in manufacturing and India in services — and that represents a very serious problem. To try this in 2007 is very different from what it was when we were trying to get on board the globalization train in 1977…

“…the number of years of education has been going up significantly in the Arab countries including the oil countries, but also the non-oil countries like Syria, Jordan and the North African countries. On the other hand, the quality of this education is really open to question. Moreover, they do not have large numbers of people enrolled in critical areas such as computer science, engineering, and the basic sciences. So the possibility of taking in technology from the rest of the world and generating jobs for the lower skilled people is going to be limited by this absence of high-tier people….

…Dubai cannot provide an easy template for the other countries because it has very specific circumstances in terms of oil revenues and other things per capita. Tunisia and Morocco have done okay…

….None of the Middle Eastern countries have done spectacularly well, which is very interesting. In Latin America, Chile has done extremely well. Asia for a long time had Korea and Taiwan and then were joined by a host of other countries such as China and India, and now, interestingly, Vietnam. But there have been no champions of economic growth in the Middle East. This is disappointing, and therefore, there is not a sense of confidence that if they change policies they will succeed. There is no [one] country that has done spectacularly well.

On the other hand, one has to notice that Morocco, Tunisia and Egypt have not done that badly. They look remarkably like Columbia, which has not had spectacular growth. Columbia doesn’t look like Korea and Taiwan, but it has done okay. At the current rates of per capita income growth — until this recent oil price spike which may or may not last — they were growing 2% to 2.5% per year per capita, which means that it will take roughly 30 years, a little bit more, for their incomes per capita to double. If you contrast that to countries where growth has been 5% to 6% per year and where it takes 12 years for income per capita to double, then you will see that they have not done well.

…if all of those things were to be put in place, I think that the countries would have a good chance of growing at a somewhat greater rate than they have been in the recent past. For countries in North Africa or in Jordan, this would mean growth of 3.5% to 4% per year, which would be unprecedented for a sustained period of time in these countries. That would be the optimistic scenario. In the Gulf, I think that those countries, assuming the oil price sticks, will do okay. Although they still face the question of what can be done for a lot of the younger people who still don’t have jobs there….”