The last few decades have seen a fundamental change in the way governments look at ascertaining the kind of activities to be implemented in bringing about transformation in the economic structure so as to bring rapid economic development. Such a process requires vast structural reforms in the economy, which are in the nature of proactive actions in keeping with the use of modern management techniques. Essentially structural reforms imply the taking of action in first identifying specific goals that are to be achieved in keeping with the reform objectives. There have to be partnerships with major stakeholders after an analysis has been made of the competition in the region in keeping with the advantages accruing from economies of scale. Since most of the actions will require a restructuring of the corporate setup, a review will have to be made of the economic, political and organizational situations in which corporatization and privatization will be introduced. A solution will have to be devised to balance the political, economic and social objectives in line with the ideology of the government that is initiating the structural reforms. Eventually a transparent system of implementing the changes has to be devised for bringing about the desired changes.
The fact remains that structural reforms are essential for long term growth of any country and most countries in the Middle East region saw the necessity of realigning themselves on the basis of three requirements that pertained to shifting from a format of closed economy to open economy, shifting from public sector dominance to private sector-led economies and from dependence on oil industry to a more diversified economy. But unfortunately most countries in the Middle East, despite having realized the need to go for such transformation have not been able to do so in view of the inherent constraints in such countries. The region has not kept pace with the progress made in other regions of the world in bringing about structural reforms. The Middle East countries have not registered a growth in reforms in the fields of business environment, governance and trade practices. Hence there is strong need for them to follow an agenda of aggressive reforms. There is strong need for these countries to improve upon the levels of job creation and growth within the next two decades. Improvements have been made in bringing about reforms in trade resulting from trade agreements signed on regional and bilateral basis, and the countries have done fairly well in reducing barriers to trade by dismantling non-tariff barriers, particularly in countries such as Jordan, Lebanon, Saudi Arabia and Egypt. However most Middle East countries have been very slow in improving the business environment by way of their slackness in implementing financial sector and business reforms. Reforms in the judiciary have in particular been very negligible in view of political circumstances. There are also reports of the lack of significant progress in improvement of governance in terms of public sector accountability and public administration. Although there are some improvements in these sectors in the region, but the comparative performance with other regions is poor. In this context it is proper to conclude that more support and involvement is needed from labor unions, the private sector and the population at large. In addition to the recent shock from the volatile pattern of oil prices, a massive economic shock has resulted due to the Iraq war and due to diversion of resources for the reconstruction and integration of the country during the last four years.
The political development process implies involvement of the principles of nationalism, structures of government functioning, extent of institutional participation in the economy, leadership, social mobility and extent of secularism prevalent in the country. Upon examining these factors in regard to the Middle East region it is quite evident that most countries are still in the transitional stage of such developments due to several reasons. It is only Israel that has manifested all the advantages of political development along with incorporating the latest developments in modern technology. Significantly there is a direct relationship between economic development and the extent of democratization prevalent in a country. If the political environment is liberal the economy will be responsive to efforts in globalization. A noteworthy feature of the Middle East economies is that while these countries are close to Europe, they have not been able to take location advantage in as much as other countries which are further away, have been able to develop themselves at faster pace. The banking system in these countries was established fairly late thus making financial resources scarce for economic development. This was primarily due to the decisions taken by the political setup in these countries. However the monarchies in these countries have started to realize the value of partnering in sync to achieve synergy in overall economic development, and there now appears to be an indication that reforms have started to be implemented in true spirit and economies are on the track for rapid development.