The purpose of this paper is to shed light on the political economy aspects of state-owned-enterprises (SOEs) governance and privatization in the Middle East and North Africa (MENA) region. In particular, the paper presents an overview of privatization in the region and examines the extent to which SOEs operate at arm's length from the public sector and the motives for this behavior. Showing empirically the region’s relative reticence on privatizing public assets, the paper highlights the political economy aspects contributing to this impasse, offers Lebanon as a case study, and suggests a policy framework for successful reform of SOEs. Highlighting the lack of sustainable drives for SOEs reform and privatization in the region and the need for better governance systems based on the rule of law, property rights protection, and combating corruption, the paper proposes policy options to deal with privatization and improve the governance of SOEs through advocating a state-owned enterprise governance framework. This framework suggests subjecting SOEs to regulation and supervision of more than one government entity as opposed to only one ministry of custody. This should help to ensure a level-playing field in the industry and reduce the pressure on SOEs to heed to political pressures. 1. Introduction The Middle East and North Africa is a region of enormous resources that are deemed underutilized and sometimes grossly mismanaged, mainly as a consequence of public sector dominance and poor governance systems. Hence, privatization and state ownership pose controversial issues in the region, and much of this contention is rooted in the political and economic makeup of its regimes. As such, progress in this area, or the lack of it, may be explained by the influences of factors including the “public choice” theory arguments of malevolent public bureaucrats and politicians, partisan politics, corporate governance practices, globalization of trade and finance, and conditionality attached to structural adjustment programs by multilateral development institutions. Indeed, developments in the region in the past two years, and in particular the so-called Arab Spring, indicate that absent profound progress on reform and no tangible socioeconomic benefits are to be anticipated, thereby engendering disruptive social unrest. The recent violent “outrage revolutions” that have erupted in Tunisia in December 2010 and inundated the Middle East have been a striking evidence of the impossibility to sustain the existing paradigm of state control, long-lasting regimes, inheritance
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