Arab States as Shareholders: Origins and Consequences

In the Arab world, the role of the state in the social contract has been addressed from various angles: as a provider of employment, as a supplier of goods and services, as a guarantor of security and political stability and more generally as an enabler of economic growth. State-owned enterprises (SOEs), which contribute significantly to all of the above objectives, have not been considered in economic policy making, despite the fact that they are integral to the economic history and competitiveness of most countries in the region. Tracing the history of state ownership from the nation-building process to the present time, this article argues that the scope of state capitalism in most Arab countries is not retreating and that the mechanisms of state control have become increasingly diverse. Across the region, the performance of state enterprises has been highly variable: while some operate with private governance models, those that operate as an extension of the public sector still underperform despite being subsidised. Recent experience demonstrates that in countries that have recently undergone political changes, political appetite or popular support for SOE reform is lacking and the prospects for the transfer of positive experiences of SOE management in the region are so far limited