More Arab countries are seeking to orient their economies towards knowledge
In January, sociologist Nadji Safir from the University of Algers (Algeria) remarked in Le Monde(1) that the UNESCO Science Report had appeared at a time in history that was dominated more than ever by challenges related to knowledge. Echoing many of the findings of the chapter in the report on the Arab States, he observed that, ‘in many Muslim countries, we are seeing a spiral of crises nurtured by a lack of knowledge that engenders a lack of innovation and economic growth and, in turn, a lack of job creation – particularly for the millions of young people who have come to form a large precariat.’
Young job-seekers constitute over 40% of the Arab region’s unemployed, according to the UNESCO Science Report. ‘As of 2013, most Arab states had achieved a gross tertiary enrolment rate of more than 30% and even above 40% for Jordan, Lebanon, Palestine and Saudi Arabia but they had failed to create the appropriate value chain of job openings required to absorb the spreading pool of graduates,’ notes the report. It recalls the widespread frustration engendered by ‘the inability of most Arab countries since 2008 to address socio-economic needs effectively and ensure that their economies keep pace with population growth. Even before the economic crisis of 2008, unemployment in the Arab world was high, at around 12%.’
The failure of the Arab Spring to deliver on its promises has left many disillusioned. In a region beset by turmoil, Tunisia’s fledgling democracy serves as a beacon of hope. The UNESCO Science Report suggests that there are lessons to be learned from Tunisia’s experience prior to December 2010. ‘Despite clear government support for research and higher education, socio-economic progress across the various strata of society had stalled and was failing to create jobs,’ observes the report. ‘This situation was at least in part a consequence of the lack of academic freedom and the fact that allegiance to the regime was considered more important than competence.’
‘There is more to developing a national innovation system than putting in place material institutions,’ observes the report. ‘Intangible considerations and values are vital, too. These include transparency, rule of law, intolerance of corruption, reward for initiative and drive, a healthy climate for business, respect for the environment and the dissemination of the benefits of modern science and technology to the general population.’ The report notes that ‘the events of the past few years may have stirred the cooking pot but real progress will only be measured against structural change at the economic, social and political levels.’
Low levels of research spending
The Arab world contributed just 1% of global spending on research and development (R&D) in 2013, compared to 6% of GDP. The country with the greatest research intensity is Morocco (0.73% of GDP in 2010), followed closely by Tunisia (0.68% in 2012) and Egypt – where government research spending accounted for 0.68% of GDP in 2013, up from 0.43% four years earlier.
Tunisia and Morocco both devote more than 1% of GDP to higher education, the highest ratios in the Arab world, and count the highest density of researchers: 1 394 and 864 respectively in full-time equivalents, compared to a global average of 1 083.
Neither of the two Muslim countries with the greatest research intensity is Arab, namely Malaysia (1.13% of GDP in 2012) and Turkey (0.94% in 2013). Recent data are unavailable for many Muslim countries but Oman, Kazakhstan and Kyrgyzstan have all hovered at the 0.2% mark for the past decade and spending levels have actually dropped in Iran and Pakistan to about 0.3% of GDP. Qatar and the United Arab Emirates devote just under 0.5% of GDP to research and Kuwait about 0.3%. It is hard for oil-rent economies to have a strong research intensity, owing to their high GDP, but, by any yardstick, the 0.07% of GDP spent on R&D by Saudi Arabia in 2009 is low.
Recent data are unavailable for many arab countries. The fact that several governments are now developing observatories of science, technology and innovation – including in Egypt, Jordan, Lebanon, Palestine and Tunisia – should help to improve data coverage in the Arab world.
Several Muslim countries have announced plans to hoist their ratio of research spending to 1% of GDP over the next few years, including Egypt, Iran, Kazakhstan, Libya and Pakistan. This target has even been inscribed in the Egyptian Constitution since 2014. Malaysia, meanwhile, plans to raise its own commitment to 2% of GDP by 2020 and Turkey to devote as much as 3% of GDP to R&D by 2023.
Lack of economic diversification hampering job creation
A key factor limiting job creation in the Arab world is the lack of economic diversification. For instance, seven out of ten Mauritanian exports consist in iron ores (46.7%), copper ores (15.6%) and octopus (10.5%). Mauritania’s unemployment rate was a high 31% in 2013, despite average economic growth of 5.9% between 2011 and 2013. This suggests that growth has not been sufficient to provide the much-needed jobs.
As long ago as 1986, the Gulf Cooperation Council identified economic diversification as a key strategic goal for its members. Whereas Saudi Arabia, the United Arab Emirates and Qatar have since developed their non-oil sectors, Bahrain and Kuwait are finding it harder to make the transition.
‘Bahrain has the smallest hydrocarbon reserves of any Gulf state,’ observes the report, ‘producing just 48 000 barrels per day from its one onshore field. The gas reserve in Bahrain is expected to last for less than 27 years, leaving the country with few sources of capital to pursue the development of new industries.’ The country wishes to shift from an economy built on oil wealth to a productive, globally competitive economy but its Bahraini Economic Vision 2030 does not indicate how this goal will be attained. After the slump in Brent crude prices in 2014, economic growth slowed from 5.4% (2013) to 4.5%.
Kuwait’s dependence on oil revenue has actually grown in the past few years. The country was a regional leader in science and technology and higher education in the 1980s but has been losing ground ever since. The World Economic Forum’s 2014 Global Competitiveness Report reveals a significant deterioration in many STI-related indicators. Kuwait recorded negative growth of 1.6% in 2014 and only modest growth in 2013 (1.1%).
In Saudi Arabia and the United Arab Emirates, on the other hand, the economy grew faster in 2014 than in 2013 and, in Qatar, slowed only slightly, from 4.6% to 4.0%.
Oil-rent economies developing knowledge economies
Besides its oil and gas industry, Qatar relies on the petrochemical, steel and fertilizer industries to drive the economy. It has one of the world’s lowest unemployment rates, at just 0.5%, and, in 2010, Qatar showed the world’s fastest growth rate for industrial production of 27.1% over the previous year. The Qatar National Vision 2030 (2008) advocates finding an optimum balance between the current oil-based economy and a knowledge economy characterized by innovation and entrepreneurship, excellence in education and the efficient delivery of public services. To support this shift towards a knowledge economy, the government budget for education to 2019 has been raised by about 15%.
The government has also begun offering investors tax breaks and other incentives to support entrepreneurship and promote small and medium-sized enterprises (SMEs). The new Qatar Science and Technology Park focuses on the four priority areas identified by the Qatar National Research Strategy of 2012, namely energy, environment, health sciences and information and communication technologies (ICTs).
Qatar’s efforts to diversify the economy appear to be paying off. Industries and services derived from hydrocarbons have been expanding, fuelling private-sector growth. Although the manufacturing sector is still in its infancy, there has been a boom in the construction sector, thanks largely to heavy investment in infrastructure; this, in turn, has boosted the finance and real estate sectors. Much of construction is occurring in the non-hydrocarbon sector, in transportation, health, education, tourism and sport. Consequently, non-hydrocarbon sectors grew by 14.5% in 2013.
The United Arab Emirates has, likewise, been reducing its dependence on oil exports by developing other economic sectors, including the business, tourism, transportation and construction sectors and, more recently, space technologies. One of the seven priorities of the United Arab Emirates’ Government Strategy (2011–2013) is to develop a competitive knowledge economy.
The United Arab Emirates is not the only Arab country to be investing in space technologies. Bahrain launched its National Space Science Agency in April 2014 and Iraq its first satellite for environmental monitoring two months later; TigrisSat was launched from a base in the Russian Federation and is being used to monitor dust storms in Iraq, as well as potential precipitation, vegetative land cover and surface evaporation.
With the slump in oil prices since mid-2014, current economic growth is being buoyed in the United Arab Emirates mainly by the sustained recovery of Dubai’s construction and real estate sectors from the global financial crisis of 2008–2009, together with significant investments in transportation, trade and tourism. Dubai has launched a megaproject for the construction of the world’s biggest shopping centre and no fewer than 100 hotels. A project to develop a national railway is also ‘back on track’ after being brought to a halt by the global financial crisis.
The country is also erecting a ‘greenprint’ for sustainable cities known as Masdar City. The aim is to build the world’s most sustainable city by 2020, one capable of combining rapid urbanization with low consumption of energy, water and waste. Masdar City has one of the largest installations of photovoltaic panels on rooftops in the Middle East. The city is sprouting around the Masdar Institute of Science and Technology, an independent research-driven, graduate-level university set up in 2007 with a focus on advanced energy and sustainable technologies. Companies are being encouraged to foster close ties with the university to accelerate the commercialization of breakthrough technologies. By 2020, it is estimated that Masdar City will have 40 000 inhabitants.
The United Arab Emirates is known to have one of the region’s best climates for business. In mid-2013, the United Arab Emirates Federation adopted a new Companies Law that comes closer to respecting international standards. It does not soften the rule, however, that prevents a majority foreign participation in local companies. The law also introduces an ‘Emirization’ jobs programme advocating recruitment based on nationality, a measure that could curtail foreign investment, according to the Coface credit insurance group.
Saudi Arabia is implementing a similar recruitment drive, dubbed Saudization. The country remains overdependent on foreign labour, with only 1.4 million Saudis being employed in the private sector, compared with 8.2 million foreigners, according to the Ministry of Labour. The government is investing in professional training and education as a way of reducing the number of foreign workers in technical and vocational jobs. In November 2014, it signed an agreement with Finland to utilize Finnish excellence to strengthen its own education sector. By 2017, the Technical and Vocational Training Corporation of Saudi Arabia is to have constructed 50 technical colleges, 50 girls’ higher technical institutes and 180 industrial secondary institutes. The plan is the first step in creating training placements for about 500 000 students, half of them girls.
As part of its agenda for embracing a knowledge economy, the Saudi government has launched a multi-billion dollar development scheme to build six industrial cities. By 2020, these cities are expected to generate US$ 150 billion in GDP and create 1.3 million jobs. This strategy has been endorsed by the record number of non-oil exports in 2013.
It is noteworthy that the greatest number of scientific articles per million inhabitants in the Arab world in 2014 came from two oil-rent economies: Qatar and Saudi Arabia. Along with Algeria, Egypt and the United Arab Emirates, their output has grown faster than that of any other Arab country. Qatar and Saudi Arabia also have the region’s highest citation rates. This trend may be partly due to the leap in international co-authorship since 2005 in Qatar (from 59% to 92% of articles) and Saudi Arabia (from 42% to 80%), which was greater than the regional average: two-thirds (66%) of articles from the Arab region had international co-authors in 2014, compared to 44% in 2005.
Also of note is that scientific output grew faster in the Arab world (+109.6%) between 2008 and 2014 than in any other part of the world, pushing up the region’s share of articles from 1.4% to 2.4%.
Bringing businesses in from the cold
The Arab world contributed just 0.2% of the patents submitted to the US Patents and Trademark Office in 2013 and 1.9% of business expenditure on R&D in the decade to 2011.
The UNESCO Science Report observes that ‘up to now, science technology and innovation policies in the Arab world have failed to catalyse knowledge production effectively or add value to products because they focus on developing R&D without ‘bringing the business sector in from the cold’. One of the key thrusts of the Arab Strategy for Science, Technology and Innovation adopted recently by the Council of Ministers of Higher Education and Scientific Research is to ‘involve the private sector more in regional and interdisciplinary collaboration, in order to add economic and development value to research and make better use of available expertise.’
Given the modest role played by the private sector in the Arab world, it is hardly surprising that the share of high-tech products in manufactured exports is low, particularly for Gulf States. Morocco tops the region for this indicator and comes second only to Egypt for patents.
Although the Moroccan economy is diversifying, low value-added products still account for about 70% of manufactured products and 80% of exports. Since 2001, Morocco has managed to raise the business sector’s contribution from 22% to 30% of domestic research spending. This prowess owes a lot to the creation of the National Fund for Scientific Research and Technological Development in 2001. The government has encouraged companies to contribute to the fund to support research in their sector. Moroccan telecom operators, for instance, have been persuaded to cede 0.25% of their turnover to the fund and today finance about 80% of all public research projects in telecommunications supported through the fund.
Like Tunisia, Morocco is investing heavily in technoparks to foster start-ups and SMEs and create jobs. Morocco’s third technopark opened in 2015 in Tangers and, like the first two in Casablanca and Rabat, focuses on ICTs, green technologies and cultural industries. Morocco has ambitious plans to become the African leader in wind and solar power by 2020. Tunisia has more than half a dozen technoparks dotted around the country focusing on a wide range of areas, including ICTs, biotechnologies, chemistry and solar power.
One imperative will be for Arab countries to adapt university curricula to the needs of a knowledge economy. Several Arab countries have engaged in higher education reforms in the past couple of years, including Egypt and Tunisia. UNESCO, itself, has been helping Arab universities to modernize their curricula and nurture an entrepreneurial culture by developing linkages with industry in convergent technologies through the Network for the Expansion of Convergent Technologies in the Arab Region (NECTAR).
Curricular reform is essential but it will not suffice on its own to create jobs in a knowledge economy. The UNESCO Science Report concludes that, in most Arab countries, ‘the education system is still not turning out graduates who are motivated to contribute to a healthier economy. Why not? Governments should ask themselves whether the fault lies solely with the education system or whether other impediments are stifling innovation and an entrepreneurial culture, such as a poor business climate.’