A Human Capital Strategy for Competing in World Markets

Abstract

After a quarter–century of strong output growth the economies of the Middle East and North Africa entered a period of economic stagnation around 1985. During the 1960s output across the region had grown by about 6.2 percent a year. Growth was led by public sector investments in manufacturing, particularly in the Mashreq region (Egypt, Jordan, Lebanon, and Syria). Development was concentrated in modern, capital–intensive production. Public enterprises were focused on the production of undifferentiated goods, including raw materials and intermediate goods. These enterprises remained economically viable under the protection of high trade barriers; firms that were unable to cover costs with operating revenue received generous subsidies. This development strategy generated a respectable rate of growth, but it also consumed inordinate amounts of capital while producing relatively few jobs.

In order to restore growth and improve the living standards of their rapidly growing populations, the economies of the Middle East and North Africa must increasingly compete in world markets. Doing so will not be easy—today’s global markets are forcing dramatic changes in the organization of work and the skills required of workers. To create the skills that workers need, education and training systems will have to change what they teach, how they teach, whom they teach, and when they teach. The share of each country’s student–age population that completes a quality education will have to grow—by substantial percentages in some countries. Because the costs of meeting these targets will overburden the public budgets of most countries, governments should develop a system of mixed public and private financing, at least for higher education. The financing mechanism should promote externally efficient education, internally efficient operations of schools and universities, and equitable access to education.