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

Abstract

The political economy of the country determines not only what types of industrial policies are pursued, but may also determine which group will benefit and which will be harmed. MENA countries maintained strong roles for the government and policies of significant government intervention in production and economic planning. Economic justifications alone cannot fully explain the nature and effects of industrial policy on performance; political factors are central. Political economy factors are thus central to understanding the industrial policy experience of the MENA region. The lack of interest groups emerging to press for change has hindered the region's move toward more functional, market-friendly policies for growth—a phenomenon closely linked to the weaknesses in governance. The ultimate outcome will be largely determined by each country's initial conditions and individual political economy factors.