The Political Economy of Industrial Policy in the Middle East and North Africa

In this paper, we examine the political economy and consequences of industrial policy in the Middle East and North Africa (MENA) region. Unlike in many other regions, industrial policy in MENA developed within the context of the region's strong "social contract" between the government and its people. Although industrial development was an objective, it at times took a backseat to the more important goals of social transformation and economic redistribution - which influenced not only the types and success of industrial policies adopted, but also critically influenced the balance of power among interest groups.

Despite the mounting strains on MENA's economic development models, oil and strategic revenues, and the lack of a full-fledged economic crisis, have allowed the region to maintain industrial policies far longer than other regions. Equally important, the lack of interest groups to emerge and press for change has hindered the region's move toward more functional, market friendly policies for growth. As internal and external forces shape the way industrial policies can be used in the globalized economy, the MENA region's old style of industrial policy will need to adjust. The ultimate path of change will be determined greatly by each country's initial conditions and individual political economy factors.