World Bank. Challenges of Conflict and Industrial Policy for Development
The chapter Challenges of Conflict and Industrial Policy for Development analyzes the complex economic environment of the Middle East, North Africa, Afghanistan, and Pakistan (MENAP) region. It focuses on how ongoing conflicts, political instability, and structural weaknesses affect economic performance and limit development opportunities. The report also explores the potential role of industrial policy as a tool to foster resilience and long-term growth in such fragile contexts.
Impact of conflict on economic development
Conflict is identified as a central constraint on economic progress in the MENAP region. It disrupts production, damages infrastructure, and discourages both domestic and foreign investment. Additionally, conflict weakens institutions and reduces governments’ capacity to implement effective policies.
The report highlights that these conditions create persistent challenges such as unemployment, low productivity, and limited economic diversification. As a result, many economies in the region struggle to achieve sustainable growth.
Industrial policy in fragile contexts
Industrial policy in conflict-affected settings requires a different approach compared to more stable economies. The report suggests that traditional, broad interventions are less effective in these environments due to institutional limitations and political risks.
Instead, policies should be more targeted and adaptable, focusing on rebuilding key sectors and supporting economic activities that can operate despite instability. Strengthening basic infrastructure and institutional capacity is also essential for any industrial policy to succeed.
Strategic approaches for development
The chapter outlines several strategic options for promoting development in the MENAP region. One approach is prioritizing sectors that generate employment and can contribute to economic recovery. Another is improving the business environment to encourage private sector participation.
The report also emphasizes regional integration and international cooperation as important factors. These can help countries overcome domestic constraints and access larger markets, technology, and investment opportunities.
Industrial policy and long-term resilience
Industrial policy is presented not only as a tool for growth but also for building resilience in fragile contexts. By supporting diversification and strengthening productive capacity, governments can reduce vulnerability to external shocks and conflict-related disruptions.
The report suggests that aligning industrial policy with broader goals such as social inclusion and stability is crucial. This includes creating jobs, reducing inequality, and fostering economic opportunities that can contribute to long-term peace.
Conclusion
The chapter concludes that while conflict poses significant challenges, carefully designed industrial policy can support economic recovery and development in the MENAP region. Success depends on realistic, context-specific strategies, strong institutions, and sustained commitment to reform.
Reference
World Bank. (2026). Challenges of conflict and industrial policy for development. En Middle East, North Africa, Afghanistan & Pakistan Economic Update. World Bank. https://doi.org/10.1596/978-1-4648-2328-2