During the 1980s and 1990s, private investment in the Middle East and North Africa (MENA), on average, showed a decreasing trend. With the liberalization of economies and the acceleration of reforms, private investment increased throughout much of the world in the 1990s. The Middle East and North Africa countries did not follow this pattern. While private investment to GDP declined by 2.4 percent in the region, this rate increased by 4.8 percent in Latin America and the Caribbean (LAC), 15.8 percent in Africa (AFR), 23.4 in South Asia and 14 percent in East Asia (EAP), despite the financial crisis.

This paper addresses the issue of the low level of private investment in the MENA region, with special emphasis on the role of governance. In fact, the MENA countries have on average been characterized by a clear deficit of “good” governance institutions, particularly as regards democratic institutions such as political rights, civil liberties, and freedom of the press. Similarly, the quality of the administration has also been of some concern. These defi-