The World Bank has described the education system in Arab countries as "lagging behind" other regions in the developing world, in a report released on Monday.

The report, titled "The Road Not Traveled: Education Reform in the Middle East and North Africa," the World Bank said the region "has not capitalized fully on past investments in education, let alone developed education systems capable of meeting new challenges."

The report recommended that the Arab world institute crucial reforms to education in order to combat unemployment rates.

While the 359-page report did note "significant strides" in the education sector, it said these were compromised in part by "high dropout rates, and by relatively low scores on international tests."

The World Bank identified high unemployment as a major problem facing the Arab world, noting that its labor markets were unable to absorb the growing supply of educated workers.

Palestinians were found by the study to have the highest rate of unemployment in the region at nearly 26 percent, despite also ranking among the highest in adult literacy, at 92.3 percent in 2004.