In addition to increasing globalization, which has been key to rapid growth for many countries, an emerging debate is which sector, services or manufacturing, could be the main source of growth for developing countries today. The East Asian middle and high income countries globalized through manufacturing-led activities, having followed the traditional development path from agriculture through manufacturing and only later to services. For the Middle East and North Africa (MENA) countries, which sector path to growth, services or manufacturing, could emerge and be fostered?
Many of the Middle East and North African countries are embarking on transitions with the goal of developing more open and accountable governments. Like the East Europeans and others before them, they will face challenges in the short run, as business is disrupted and investors wait for uncertainty to be resolved. Evidence from 47 recent transitions shows that growth declines by about 3-4 percentage points, on average, during such transitions. The good news is the decline tends to be short lived, with the dip lasting only one year and growth then resuming or exceeding pre-transition levels.