To win more foreign investment Arab countries must tackle corruption and red tape, reform weak legal system and cut high business costs, OECD and World Bank representatives said on Tuesday. "A lack of a private sector in the economy, a lack of effectiveness in government, and corruption" were the main obstacles to foreign direct investment in Arab countries, said Shuichiro Megata, a Japanese representative to the OECD.
Weak foreign and domestic investment in Arab states was a "conundrum" for economists, John Speakman, a Middle East specialist at the World Bank, told a conference in Dubai.
"There is tonnes and tonnes of investment capital just dying to invest in the Arab world, but there is very little investment," Speakman said, pointing to about $1 trillion of Arab investments abroad.
World Bank figures show that resolving contract disputes in the region requires, on average, 38 bureaucratic procedures, higher than for any other area.
Corruption is particularly rife concerning contracts for major government infrastructure projects, one senior conference delegate told Reuters, on condition of anonymity.
Poorer Arab countries like Syria and Egypt were more prone to corruption than oil-rich Gulf Arab states, analysts said.
Speakman said investors also complain about weak corporate governance, unreliable government information, inconsistent regulation and the prohibitive cost of setting up a business.
The minimum capital required to set up a business in the region is about 10 times the gross national per capita income, the highest in the world and almost 20 times higher than developed countries, World Bank figures show.
The conference was organised by the Organisation of Economic Co-operation and Development, an economic think tank of the world's top 30 industrialised nations.