From mega-investment to mega-productivity: closing MENA’s conversion gap

Kamran Yeganegi
September 08, 2026

Across the Middle East and North Africa, governments are investing heavily in infrastructure, technology, diversification and new industries. Yet capital accumulation alone does not guarantee productivity growth. As this column argues, the region’s deeper challenge is its ‘investment-to-productivity conversion gap’: ensuring that large-scale investment translates consistently into stronger firms, technological diffusion, skills and better jobs. A different metric of success is required: not how much capital is deployed, but how much productive capability that capital leaves behind.

In a nutshell

MENA economies often demonstrate an ability to mobilise capital and build physical assets; the harder task is creating productive ecosystems around those assets: competitive firms, skilled workers, capable managers, technology diffusion, university-industry links and export capacity.

Mega-investments can be powerful instruments of transformation; but their ultimate success should be assessed not only by their scale, visibility or construction value, but also by the productive capabilities and spillovers they generate over time.

In capital-rich economies, deeper spillovers from big investments should be required; for fiscally constrained economies, scarce capital needs directing to projects with the highest productivity potential; fragile economies must rebuild the institutional and human foundations on which productivity depends.

Across the Middle East and North Africa (MENA), investment has become central to economic transformation. Gulf states are deploying capital into infrastructure, tourism, logistics, advanced manufacturing, artificial intelligence and renewable energy. Elsewhere, countries such as Egypt and Morocco are investing in infrastructure and industrial capacity while seeking greater private investment.

The scale of this ambition is significant. But I believe the region now needs to ask a harder question: not how much it invests, but how much productivity those investments ultimately create.

By productivity, I refer primarily to the ability of economies and firms to generate more value from their existing resources through greater efficiency, technological adoption, skills and innovation. The capabilities discussed below are therefore not productivity itself, but the mechanisms through which investment can generate sustained productivity gains.

The World Bank’s 2025 assessment of the region points to the underlying challenge. MENA’s private sector remains insufficiently dynamic: relatively few firms invest in physical capital, workforce development or innovation, while barriers to firm entry and exit continue to weaken competition and productivity.

The regional evidence supports treating conversion – not investment volume alone – as the central issue. The International Monetary Fund (IMF) analysis for 1995-2023 shows continued capital deepening in the Gulf Cooperation Council (GCC) countries, while describing total factor productivity growth as lacklustre across many MENA economies.

It also estimates that a 1% increase in capital per worker is associated with roughly a two-thirds increase in output per capita across MENA and Central Asia. Capital matters, but its return depends on the technology, competition, skills and institutions surrounding it.

I describe this as MENA’s investment-to-productivity conversion gap. Capital is being mobilised and assets are being built, but the extent to which their benefits diffuse into firm capabilities, technology adoption, human capital, exports and higher-value employment remains uneven.

The region does not simply need more investment. It needs a better mechanism for converting investment into productive capability.

One region, three productivity challenges

There is no single MENA productivity problem.

For capital-rich GCC economies, the main constraint is not access to finance. The challenge is ensuring that large investments generate lasting economic spillovers.

Saudi Arabia illustrates the opportunity as well as the challenge. Vision 2030 has accelerated diversification, investment and non-oil activity; non-oil real GDP grew by 4.5% in 2024, according to the IMF. The longer-term productivity test is whether these investments also generate competitive firms, deeper domestic supply chains, technological capabilities and skills that endure beyond individual projects.

The United Arab Emirates (UAE) provides a complementary example of conversion already under way. IMF estimates show that the non-hydrocarbon share of output rose from 71% in 2010 to 75.5% in 2024. Total factor productivity accounted for around one-third of non-hydrocarbon growth across the periods examined and was its largest contributor in 2021-23.

This suggests that investment can generate broader productivity gains when it is combined with foreign investment, technology adoption and improvements in regulation – while also making the durability and diffusion of those gains the relevant policy test.

For more diversified economies, particularly those facing tighter fiscal or financing constraints, the challenge is different: investment quality and the ability to scale productive private firms become particularly important. Egypt, Jordan and Morocco fall broadly within this group, although their economic structures and policy constraints differ.

Morocco offers a useful illustration. Real GDP grew by 4.9% in 2025, its strongest expansion in more than a decade, supported in part by public infrastructure investment. Yet the World Bank identifies technology diffusion as an important frontier for the next phase of productivity growth. Fewer than one in five Moroccan firms make intensive and integrated use of advanced digital technologies. Closing the digital gap with peer economies could raise aggregate productivity by an estimated 10-15%.

This distinction matters: infrastructure can accelerate growth, but diffusion determines whether growth becomes sustained productivity.

For fragile and conflict-affected economies, the sequence is different again. Where productive assets, institutions and human capital have been severely damaged, restoring basic economic capacity and stability must come before more sophisticated productivity strategies.

A single policy prescription for these three groups would therefore miss the nature of the problem.

Why investment does not automatically become productivity

Capital creates assets. Productivity depends on what economies are able to do with them.

A new logistics corridor produces greater productivity when domestic firms can use it to reach new markets. A technology investment creates broader value when workers and firms acquire the skills to adopt it. Foreign investment generates stronger spillovers when knowledge reaches domestic suppliers. A new industrial zone matters more when local firms can enter its value chains.

The missing link is therefore capability.

MENA economies have often demonstrated an ability to mobilise capital and build physical assets. The harder task is creating productive ecosystems around those assets: competitive firms, skilled workers, capable managers, technology diffusion, university-industry links and export capacity.

Without these transmission mechanisms, mega-projects risk becoming islands of excellence rather than engines of economy-wide productivity.

A productivity test: select, connect, measure

I propose that governments apply a three-stage productivity test to major investments: select, connect, measure.

First, select: before approving a major investment, governments should assess not only its expected impact on GDP, construction activity or direct employment, but also its potential productivity spillovers. Will it transfer technology? Can domestic suppliers participate? Will it create exportable capabilities? What skills will remain after construction ends?

Project appraisal should therefore incorporate productive additionality, not merely project size.

Second, connect: once investment begins, governments should deliberately connect major projects to domestic productive ecosystems. Supplier-development programmes can help small and medium-sized enterprises (SMEs) to meet procurement and quality standards. Universities and vocational institutions can align curricula with emerging industries. Foreign investors can be encouraged to develop local technical and managerial capabilities.

Localisation policies should be designed to maximise capability-building, technological learning and competitive domestic linkages.

Third, measure: governments should reconsider how investment success is evaluated. Dollars invested, kilometres constructed and facilities opened measure activity, but they do not necessarily measure transformation.

Large investments should also be assessed through indicators such as productivity growth, technology adoption, supplier upgrading, export sophistication, wage gains and the emergence of competitive domestic firms.

What governments measure eventually shapes what they optimise.

From investment volume to productive capability

MENA does not suffer from a shortage of ambition. Across the region, governments are attempting economic transformations on an extraordinary scale.

But the next phase should move from the economics of investment volume to the economics of productive capability.

For capital-rich economies, this means demanding deeper spillovers from large investments. For fiscally constrained economies, it means directing scarce capital towards projects with the highest productivity potential. For fragile economies, it means rebuilding the institutional and human foundations on which productivity depends.

Mega-investments can be powerful instruments of transformation. Their ultimate success, however, should be assessed not only by their scale, visibility or construction value, but also by the productive capabilities and spillovers they generate over time.

The region needs a different metric of success: not how much capital is deployed, but how much productive capability that capital leaves behind.

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