Arab nations need to channel investment into services and manufacturing to create jobs and raise income levels, the World Bank has warned.
Unemployment has risen in parts of the region in the wake of popular uprisings against governments. In both Egypt and Tunisia, joblessness has increased by three percentage points compared to last year.
Historically, the majority of foreign direct investment to the region has headed into property and fuel, the World Bank said in a new report.
"Services and manufacturing are where the action is," says Elena Ianchovichina (CK), lead economist in the Mena region and principal author of the report. "Services have been a source of strength for both income and jobs, in levels and growth, especially in the oil importing countries."
Although manufacturing had also contributed to growth in income and jobs, in Mena the sector was small relative to the scale of manufacturing in Brazil, Indonesia, Malaysia and Turkey, for example, the report said.
Unhappiness at bleak job prospects and low living standards was one of the catalysts of revolts in both Egypt and Tunisia as well as protests in Yemen, Saudi Arabia and Oman.
The unemployment rate in the Mena region is the highest in the world, according to the International Labour Organisation. As many as 10.3 per cent of the region's working age population were out of work, it estimated this year.