Among the countries at the second stage of development, Tunisia and Oman are the best performing Arab economies while Egypt is the regional best performer in the third group of countries.
This year's report has expanded coverage to 13 Arab economies - Algeria, Bahrain, Egypt, Jordan, Kuwait, Libya, Mauritania, Morocco, Oman, Qatar, Syria, Tunisia and UAE.
Libya, Oman and Syria are assessed for the first time.
Rankings are presented in three country groups according to the stage of development to enable benchmarking against peers in other parts of the world.
"The high energy prices of the past few years have brought the Arab world the highest growth rates in nearly three decades," said the report, written by economists including Margerita Drzeniek Hanouz of the Geneva-based World Economic Forum and Tarik Yousef from the Dubai School of Government.
Tunisia is strong in education, and has stable and efficient public institutions, according to the report.
The UAE, at rank 29, has sound economic management that has helped strengthen public institutions, the report said.
Qatar ranks 32nd in the group of 40 most advanced economies. In regional comparison, it shows a relatively good track record with respect to education at all levels, the report says.
Still, economic growth could delay the changes Arab governments need to make their economies more competitive while oil producers remain vulnerable to a decline in oil prices, the report said.