Private Sector, Key Driver for Growth in the MENA Region

London - The private sector can be an important driver for growth and rising prosperity in the Middle East and North Africa (MENA) if effective policies are put in place to address key challenges across the region, according to a report from three leading international development and financial institutions.

The report from the European Bank for Reconstruction and Development (EBRD), the European Investment Bank (EIB) and the World Bank Group (WBG), asks “What’s holding back the private sector in MENA?”. The document draws lessons from the MENA Enterprise Survey (ES) of more than 6,000 firms in eight countries.

Many of those firms cited political instability, corruption, unreliable electricity supply and inadequate access to finance as factors that were holding them back.

They also said that innovation and growth were constrained by barriers to trade and a scarcity of appropriately trained workers. In many places, they saw a disconnect between firms and formal financing channels, with the result that firms were losing growth opportunities.

The report concludes that “Strategies to support firms in enhancing their productivity, as well as the process of resource reallocation towards more productive firms, should be a high priority for public authorities in the region.”

It highlights four specific areas where policy responses are required: to improve the business environment, to improve access to finance, to achieve better education, employment and skills, and to promote trade, competition and innovation.

The report says that achieving political stability is critical to improving the business environment. “Across many of the economies, tackling corruption and an unreliable electricity supply are also likely to be important priorities.”

“Identifying the impediments and challenges that are affecting the private sector and economic growth in the MENA region will help our institutions support policy reforms that can create a favorable business environment.

From the beginning of our engagement in the region we focused on fostering the development of the private sector through tailored programs, and investment in infrastructure and services, in addition to strengthening competitiveness which is key to addressing unemployment, one of the region’s biggest challenges, particularly among women, the young and educated people,” said Sergei Guriev, the EBRD incoming Chief Economist.

The report shows that while banking sectors in the region are relatively large, a high percentage of firms are disconnected from formal financial channels — they do not apply for credit because they state that they have enough resources. Firms’ access to finance could be improved by developing the capacity of banks to strengthen their credit risk assessment. Credit guarantee schemes might be a way to alleviate collateral constraints, while strengthening secured transaction laws and making collateral registry more efficient would also help. This would support lending to small and medium-sized enterprises, without putting financial stability at risk.

“Finding a way to reconnect banks and firms is crucial to enhance growth opportunities in the region and international financial institutions have the expertise and willingness to complement domestic policies,” said Debora Revoltella, the EIB Chief Economist.

“Support for the private sector in MENA forms a key part of the EIB’s new initiative to build economic resilience in the region as well as to support countries in MENA. This Crisis Response and Economic Resilience Initiative has now been endorsed by EU leaders and will see a substantial stepping-up of traditional activities, with action and investment for growth, jobs, vital infrastructure and social cohesion.”

The report sees considerable scope for improvements in policies for better education, employment and skills, particularly in relation to the employment of women and young people. Policies should remove distortions preventing entry into the labor market for women and provide more focused and targeted education for the young. They should also provide incentives to increase training intensity in firms. At the same time steps to support the emergence and growth of young innovative firms are likely to be particularly positive for the employment of young people.

“Fostering employment and entrepreneurial opportunities, particularly for young men and women, is vital to raise living standards and promote social and political stability. A reorientation of the region’s education system towards learning skills that are rooted in vocational training and relevant for today's world of leapfrogging technology is essential for boosting entrepreneurship and jobs,” said Kaushik Basu, World Bank Chief Economist and Senior Vice President.

In the areas of trade, competition, and innovation, the report notes that increased productivity by firms requires greater openness to international trade, which in turn would be supported by more effective customs and trade regulations — for both imports and exports. Greater competition could also be promoted by reducing restrictions on firm entry and exit, and on foreign investment.

With MAP




  • The Moroccan Gold Eldorado

    The Moroccan Gold Eldorado, a Myth or a Reality?

    Rabat - Recently, a conspiracy theory video about a large gold discovery in Morocco is making rounds online. The video claims that a substantial gold reserve was discovered and is being extracted by a Canadian mining company called Maya Gold and Silver. We Moroccans are very proud human beings, we love our country and cherish...

  • Qatar's Emir Sheikh Tamim bin Hamad Al-Thani

    Qatar: How the Tables Are Turning in The Gulf

    Rabat - Amidst harsh sanctions and a long list of demands from its neighbors, Qatar’s ability to thrive under pressure may prove to be problematic for Saudi Arabia. As Saudi Arabia and its coalition attempt to wait out Qatar, the recent spat in the Gulf continues to become more and more global, and severely against...

  • FILE - In this Jan. 20, 2015 file photo, a plume of steam billows from the coal-fired Merrimack Station in Bow, N.H. If the nation doesn’t do more, the U.S. probably won’t quite meet the dramatic heat-trapping gas reduction goal it promised in last year’s Paris agreement to battle climate change, according to a new study. (AP Photo/Jim Cole, File)

    Climate Change : If You Can’t Measure It, You Can’t Fix It

    Chefchaouen - Climate change is happening at home and around the world. Chefchaouen is doing its part by embracing clean energy climate solutions and engaging its citizens in climate action. When it comes to fighting climate change, cities and local leaders are best positioned to lead that charge. Local leaders from coastal to landlocked communities are...

  • 20

    India Orders Internal Probe into Mistaken Use of Morocco-Spain Border Picture

    Hyderabad - The Indian Ministry of Interior on Wednesday ordered an internal investigation to find out how a picture of Morocco-Spain border was used in its annual report to show floodlights along the India-Pakistan border. What is most embarrassing is that the annual report of previous years was tabled during the Budget Session of Indian...

  • Amid Growing Tension, Thousands of Moroccans Stage Pro-Rif March in Rabat

    Neglect in Harsh Soil: The Deep Roots of the Rif Crisis

    Rabat - The ongoing protests in northern Morocco started almost eight months ago, but they have their origin in nearly a century of violent repression by the state. The Rif has, in spite of itself, got involved into a peaceful revolt since the death of the fishmonger Mohcine Fikri at the end of October 2016, a...

  • Tamim Bin Hamad al Thani emir of Qatar

    The Qatar Crisis: What Does It Mean?

    Rabat - The recent diplomatic fallout between Qatar and the rest of the Middle East could have serious economic and geopolitical consequences across the globe. Earlier this week, Qatar’s diplomatic crisis took an extreme turn as several Arab states severed diplomatic ties with the Gulf nation.  The original list of countries in the coalition against...

  • Moroccans spend Laylat al-Qadr, the 26th day of Ramadan, at the Hassan II mosque in Casablanca.

    Ramadan: Not just Abstinence from Daily Intakes 

    By Abdellatif Oudra Rabat - The observance of Ramadan, one of the five pillars of Islam, compels Muslims to fast from sunrise to sunset. But it is not just about abstaining from food or drink.  Ramadan, the ninth month of the Islamic calendar, is observed in commemoration of the revelation of Qur’an to the prophet Mohammad,...

  • Morocco Threatens to Terminate Agriculture Agreement with Europe

    Morocco and the EU: Managing the Future

    Rabat - Morocco enjoys proximity to Europe and is at an advantage of being favoured by the European Union as a close partner on political, economic, and cultural levels. Historical archives and political legacies tie Morocco directly with at least three influential European countries: France, Spain, and England. Demography, kinship, and immigration compel other EU...

  • The Educational and Cultural Implications of the Arab Spring

    The Educational and Cultural Implications of the Arab 'Spring'

    Rabat - In the last ten years or so, the Arab world has seen unprecedented collapses in the realms of politics and economy, among others. World NGOs regularly release area-specific rankings, in which Arab nations commonly rank at the bottom of lists in education, human rights, and income for instance while they top those of...

  • Thousands Hold Peaceful Demonstration in Memory of Mouhcine Fikri

    Al Hoceima and the Pedagogical Exercise

    Ottawa - What makes a democracy different from non-democracy? This is the classical and historical question asked by philosophers over the centuries and deeply questioned in the discipline of political science. Democracy cannot prevent inequality as the case in the United States where inequality is the highest globally. Democracy cannot stop corruption like in Brazil...