The global economic crisis has further widened the competitiveness gap between the GCC countries and the rest of the Arab World, shows the Arab World Competitiveness Review 2010.

The review, published ahead of the 2010 World Economic Forum on the Middle East and North Africa, sees Qatar, Saudi Arabia and Kuwait outperforming other economies at a similar level of development in terms of competitiveness. In the overall ranking of 139 economies, they are placed 17th, 21st and 35th, respectively.

“The UAE is the only economy from the region that has reached the most advanced innovation-driven stage of development because of its diversified structure. It is placed 23rd within this group and 25th overall,” the report said.

Kuwait is placed second among the factor-driven economies (lowest stage of development) Tunisia and Morocco (efficiency-driven) rank 32nd and 75th in the overall ranking and outperform Egypt (81), Algeria (86) and Libya (100), which remains in the factor-driven stage of development.

The Arab world’s competitive strengths lie in sound and transparent institutions, macroeconomic stability and business sophistication, it said.

Countries will need to accelerate efforts in raising the efficiency of their labour markets, furthering the development and stability of financial markets, and reforming education.

“GCC countries have reached OECD levels on a number of categories of the index, such as institutions, infrastructure, as well as efficiency of goods, labour and financial markets,” the report said.

North Africa outperforms the Levant in terms of infrastructure, macroeconomic stability, market size and innovation. The Levant region outperforms North Africa in terms of education, efficiency of goods, labour and financial markets, and business sophistication.

The special focus highlights while the access to education has improved greatly, the quality lags behind best practice in OECD members in most countries. Reforms in the GCC economies have significantly improved the quality of education over the past years, while North Africa and the Levant stagnated.

Over the past five years, efforts on average have improved the region’s competitiveness and yielded better results in key areas such as health and primary education, higher education and training, and technological readiness.

“Uncertainty and the shifting balance of economic activity towards the developing world will require strategic responses from policy-makers across the Arab world to best place the region’s economies on a sustainable economic footing going forward,” said Klaus Schwab, Founder and Executive Chairman, World Economic Forum.

“In such a global economic environment, it is more important than ever for countries to put into place the fundamentals underpinning economic growth and development.”

Masood Ahmed, Director of the Middle East and Central Asia Department at the International Monetary Fund, said: "Enhancing Mena's competitiveness will be key for the region's ability to grow faster, create more jobs and fully reap the benefits of globalisation. This will imply improving the quality of education, developing a more favourable business environment, as well as deepening and diversifying trade flows."

“Education is the key to the future competitiveness of all Arab countries, but although access to primary education is as good as in OECD countries, tertiary education remains elusive to the vast majority of young people and the progress has been slow with respect to the quality of education,” said Margareta Drzeniek Hanouz, Senior Economist and Director, Centre for Global Competitiveness and Performance, World Economic Forum and co-author of the review.

“On a positive note, the education gap between boys and girls has been closed, although this does not yet translate into higher labour market participation for women.”