The Interplay of Water Scarcity and Sectoral Efficiency: Insights from MENA Countries

Abstract

To support more sustainable resources and climate policies, this study jointly evaluates and compares performance of the industrial and agricultural sectors under water scarcity in 15 MENA countries from 2018 to 2021. The research employs a Dynamic Network Slack-Based Measure Data Envelopment Analysis (DN-SBM DEA) framework to assess the efficiency of the industrial and agricultural sectors. The model includes carbon emissions as an intermediary variable linking the two sectors, viewing industrial emissions as having a negative impact on agricultural output. Additionally, forest area, known for its carbon-neutral properties, serves as a proxy for long-term ecological contribution. Water availability is incorporated as a key input to reflect its scarcity in the region. The results reveal that, on average, the industrial sector is more efficient (0.926) than the agricultural sector (0.720). The average total efficiency is 0.792, indicating moderate performance with significant variation among countries, which highlights the structural heterogeneity across the region. The average total productivity is 1.018, suggesting a generally positive trend, with more than half of the countries showing improvements in their total factor productivity. Bahrain, Palestine, Libya, Saudi Arabia, and the UAE achieve the highest efficiency levels, while Iran (0.418) and Iraq (0.389) experience notable declines, mainly because of stagnation and war in both sectors. These findings highlight the need for integrated policies that treat industry, agriculture, water, and forests as parts of the same system, so MENA countries can raise efficiency in both sectors while moving onto a low carbon, climate resilient development path.