Despite its oil resources, the Middle East is falling behind other regions of the developing world, notably the countries of East and South-East Asia. This work examines the economic prospects for the region, considering: the consequences of rapid population growth, including the implications for education and employment; low savings levels; the absence of significant inflows of private capital and foreign investment; fragmentation of the banking system; the basic ecomomic infrastructure and the problems caused by excessive military expenditure; falling oil prices; and budget deficits. Alternative economic directions for the region are examined, and it is argued that both the methods and goals of development have to be reassessed in a region where Islam prevails.