The rapid growth of cities in the Arab world has outpaced the development of effective governance systems, leading to a mismatch between the skills of young graduates and the needs of local industries. In Egypt, for example, a 26-year-old economist with advanced degrees and strong skills finds himself unemployed due to the lack of mechanisms to connect him with potential employers. This issue is not unique to Egypt, as similar problems are seen in Tunisia, Jordan, and other countries in the region.
The concentration of economic activity in major cities like Cairo, Tunis, and Amman is not necessarily due to their higher productivity, but rather a result of the lack of governance and infrastructure in secondary cities and regional corridors. In Tunisia, despite having a formal decentralization system with elected municipalities, regional inequalities have grown, with coastal cities producing 85% of the country's GDP, while inland areas face unemployment rates nearing 26%. This highlights the need for effective governance and economic development strategies at the local level.
The European Union's Smart Specialisation Strategy, which focuses on regional investments based on a region's genuine strengths, can provide valuable lessons for Arab cities. However, the strategy's success depends on the presence of effective governance and institutional support. In the absence of these elements, funding and resources may not be utilized efficiently, and strategic plans may not be implemented effectively.
To address these challenges, Arab cities need to focus on strategic planning, institutional support, and courageous decision-making. This includes establishing intermediary institutions, such as cluster organizations and innovation agencies, that can connect public governance with private companies and facilitate knowledge sharing and investment. Additionally, cities need to prioritize decentralization and give local authorities genuine authority, fiscal resources, and accountability mechanisms.
The informal economy, which accounts for 40-70% of economic activity in many Arab cities, should be viewed as a productive asset rather than a problem to be formalized. Urban strategies should engage with street traders, artisans, and home-based food processors, and provide them with support and resources to enhance their productivity and contribution to the economy.
Countries in the region, such as Egypt, Tunisia, Jordan, and Saudi Arabia, have developed strategic plans and visions for economic development, but their implementation at the city level remains limited. In Saudi Arabia, for example, the Vision 2030 strategy has driven rapid urban development, but the capacity for effective economic governance at the city level is still a work in progress.
To achieve success, Arab cities need to prioritize institutional courage, legitimacy, and participatory governance systems. This includes narrowing priorities and focusing on specific areas, rather than pursuing broad policies. By doing so, cities can unlock their economic potential, create sustainable jobs, and improve the livelihoods of their citizens.
Key points
- Arab cities need to establish intermediary institutions to connect public governance with private companies and facilitate knowledge sharing and investment.
- Effective decentralization and genuine authority for local authorities are crucial for successful economic governance.
- Urban strategies should view the informal economy as a productive asset and engage with informal sector operators to enhance their productivity and contribution to the economy.
