In this paper, authors examine thepolitical economy and consequences of industrial policy inthe MENA region. How can the features of MENA’s industrialpolicy be explained? And what accounts for the fact that,against world trends, industrial policies in MENA countriesdidn’t followed the evolutionary path of industrial policiesof other countries? Unlike in many other regions, industrialpolicy in MENA developed within the context of the region’sstrong ‘social contract’ between the government and itspeople. Although industrial development was an objective, itat times took a backseat to the more important goals ofsocial transformation and economic redistribution, whichinfluenced not only the types and success of industrialpolicies adopted, but also critically influenced the balanceof power among interest groups. Section two of the paperprovides the theoretical framework for understanding theexperience with industrial policy. Starting with a briefsurvey of the arguments used to justify industrial policyinterventions, and drawing on various strands of theliterature it provides a review of the various mechanismsand arguments which help understand the factors whichdetermine the emergence and type of industrial policiesobserved and how they change. Using this framework sectionthree reviews the experience of MENA countries during the1950s to the 1970s and the emergence of state-dominatedvertical industrial policy, where traditional/sectorselective and sector specific policies have been usedextensively. Section four attempts to explain the failurefor industrial policy to change during the 1980s and 1990s.While the developing world has moved toward more marketoriented policies and production systems that are dominatedby the private sector and rely on market signals, MENA hasmaintained much of the old style industrial policies andhigh state intervention in the economy that characterizedmuch of the developing world in the past. The final sectionfive makes concluding remarks on the likely directions ofindustrial policy in the region. As internal and externalforces shape the way industrial policies can be used in theglobalized economy, the MENA region’s old style ofindustrial policy will need to adjust. The ultimate path ofchange will be determined greatly by each country’s initialconditions and individual political economy factors.
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