Transforming the Private Sector
The agenda for private sector reform is enormous and varied. Arab enterprises have benefited from protection, subsidized access to inputs (land, fuel, and credits), and lax enforcement of labor laws. Most have a complex structure of administrative controls, and many of these regulations operate at cross-purposes and with considerable bureaucratic discretion, giving rise to corruption and deterring investment. Citizens and businesses have recourse to these problems. The Arab world ranks last among all regions in the world in terms of protection of property rights. The result is a large informal sector along with a share of manufacturing in GDP that is half the average for comparable countries at a similar stage of development. Past efforts at liberalization did not have a strong supply response primarily because of a lack of reform credibility. Some economies in the region need to “break into" world markets, while others face the challenge of moving up the value-added chain. Oil producers, on the other hand, need to diversify. This chapter proposes broad strategies for fostering competition and controlling of corruption; financial, judicial, and labor market reform: and more focused initiatives that focus on information and communications technology, tourism, logistics, and education.
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