LITERATURE REVIEW

EEE and Arab countries are almost at the same level of economic growth, according to the devel­opment pattern from Kharas (2010). The author of this study identifies four drivers of global economic growth:

• Technological advance of the global pro­duction frontier at the rate of 1.3 per cent per year.

• Catch-up technology in a group of fast growing converges who are in the midst of a process of shifting resources from low to higher productivity activities; the speed of catch-up depends on each country’s in­come level relative to the US.

• Capital accumulation, derived by assum­ing each country maintains its investment rate at its historical average.

• Country specific demographic changes of the 15-64 age group, assuming constant labour force participation rates in each country.

In the past years, countries like Morocco, Al­geria, Tunisia, Libya have become attractive for foreign investment. Until recently, multinational companies looked to the east, when they wanted to establish low-cost offshore production and other operations at the door of Europe. This has led to billions of dollars in investment in the for­mer Soviet bloc countries like Poland, Slovakia, Romania and Bulgaria. However, as wages have risen in Eastern Europe, countries from the Arab region became more attractive.

While their appeal to potential investors may be similar, Eastern Europe and the Arab countries are totally different, both economically and socially.

Moreover, from a social point of view, the ex­communist states of central Europe can be a role model for nations in North Africa and the Middle East in their fight for democracy and freedom of expression.

In the following sections we will discuss the main aspects regarding the knowledge economy indicators for EEE countries, as a benchmark for Arab countries.

The Work Foundation Report Defining the Knowledge Economy reviewed the common defi­nitions used.

However, an industry-based approach has the advantage of being able to draw on official sta­tistics based on internationally agreed definitions of knowledge-based industries. For this chapter, we have drawn on the definitions developed by Eurostat and the OECD (2003).

The Eurostat definition includes high to me­dium tech manufacturing and communications, financial, business services, health, and educa­tion. Eurostat also includes recreational, cultural, sporting services and some travel services (sea and air) that the OECD excludes (OECD, 2005b).

Eurostat also breaks the knowledge service sector down into four groups: high tech services (R&D and computing); financial services; market knowledge services (communications, travel and business services) and other knowledge services (health, education, and recreational and cultural services).

• The OECD Definition: “The knowledge based economy” is an expression coined to describe trends in advanced economies towards greater dependence on knowledge, information and high skill levels, and the increasing need for ready access to all of these by the business and public sectors.

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