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2. Opportunities and Challenges in the MENA Region Figure 3. Entrepreneurship is lagging at the regional and at the individual country level A. Firm entry density by region 2004-2009 averages B. Firm entry density in selected economies 2004-2009 averages Arab World Competitiveness Report 2011-2012 48 High income Europe & Central Asia Latin America & the Caribbean South Asia East Asia & Pacific Middle East & North Africa Sub-Saharan Africa 0,79 0,77 0,63 0,58 1,31 2,26 0 1 2 3 4 4,21 Source: World Bank 2010a, and Klapper and Love 2010. Note: Entry density is calculated as the number of newly registered limited liability firms in the corresponding year as a percent of the country’s working age population. Findings from the MENA-OECD Investment Programme Working Group on SMEs and Entrepreneurship (2011a) confirm that the limited development of entrepreneurship in MENA can be explained by at least three factors: (1) high barriers to doing business, particularly for smaller firms (e.g. corruption, complex licenses, rigid labor laws, high taxes, and unfair competition); (2) cultural norms in which entrepreneurial activity is seen by young graduates as second-best compared with employment in the public sector, which offers more job security; (3) the very low participation of women in the labor force and in entrepreneurial activity. 27 MENA economies need to step up their efforts to provide a more enabling business environment and to promote entrepreneurship and the development of small and medium enterprises (SMEs) – with a particular focus on gender-specific barriers to entrepreneurship. 10,0 9,0 8,0 7,0 6,0 5,0 4,0 3,0 2,0 1,0 0,0 1,42 1,02 0,98 0,59 0,45 0,13 United Kingdom Canada Sweden Russia France Chile Brazil Oman Germany South Africa Tunisia Turkey Morocco Mexico Jordan Nigeria Algeria Indonesia Egypt India Pakistan
Food and fuel price volatility have contributed to protests in resource-poor countries Apart from the structural weaknesses outlined above, the Arab Spring has also been triggered by exceptional spikes in food and fuel prices, which have most powerfully affected the low- and middle-income sectors of society. 28 High inflation, the product of a high dependence on fuel and food imports, also represents a major challenge for resource-poor countries. Consumer price inflation has remained high since the oil and fuel price spikes of 2007-08. As shown in Table 1, most countries registered higher inflation rates in the period 2006-10 than in 1996-2005. This is particularly the case in Egypt, which registered an inflation rate of 5 percent during 1996-2005 and a significantly higher rate of 11 percent during 2006-10. A notable exception to high inflation has been Morocco, which has kept consumer price increases below 3 percent. Inflation rates have remained comparatively higher in resource-poor countries, which import significant amounts of food and fuel and which do not have the financial resources of resource-rich countries to implement compensatory measures, such as subsidies and lowered food import tariffs, without hurting their government finances (Figure 4). The most affected have been low- and middle-income population segments, which devote large shares of their revenues to food and energy items, as compared with wealthier segments of society. Given the rising incomes and expanding middle class in major emerging countries and the continuing instability in the MENA region, it is likely that recent fuel and food price peaks signal longer-term price increases. Moreover, the implementation of compensatory measures as a result of the Arab Spring, particularly the increase in food and fuel subsidies, will add further pressure to the already negative fiscal balances of those countries (see the following section on economic performance and the impact of the Arab Spring). Table 1. Inflation, average consumer prices, percentage change Economy 1996-2005 2006-2010 Difference Algeria 4.6 4.1 -0.5 Bahrain 0.7 2.7 2.0 Djibouti 2.0 5.2 3.2 Egypt 5.0 11.0 6.0 Iraq n/a 17.4 n/a Jordan 2.6 5.8 3.2 Kuwait 1.8 5.4 3.7 Lebanon 2.5 5.2 2.7 Libya -0.6 4.7 5.3 Mauritania 6.1 5.9 -0.2 Morocco 1.6 2.2 0.6 Oman 0.1 5.7 5.6 Qatar 3.6 6.7 3.1 Saudi Arabia -0.1 5.3 5.5 Syria 2.3 7.5 5.2 Tunisia 2.9 4.1 1.2 UAE 3.1 7.0 3.9 Yemen 13.2 10.5 -2.7 MENA 3.0 6.5 3.4 Source: IMF 2011d. World Economic Forum 49
Page 1 and 2: Arab World Competitiveness Report 2
Page 3 and 4: Table of Contents Preface 4 Partner
Page 5 and 6: Partner Institutes Algeria Centre d
Page 7 and 8: The successful implementation of an
Page 9 and 10: 1. A Time of Opportunities: The Com
Page 11 and 12: When benchmarked against the EU, mo
Page 13 and 14: Although taken into account separat
Page 15 and 16: Box 2: The Impact of the Arab Sprin
Page 17 and 18: Table 3: Gulf economies in the GCI
Page 19 and 20: Despite these important advantages,
Page 21 and 22: Despite its undeniable potential, A
Page 23 and 24: Competitiveness of Levantine Countr
Page 25 and 26: Notes 1 For a more detailed discuss
Page 27 and 28: Efficiency Enhancers Pillar 5: High
Page 29 and 30: Notes a. Formally, for a category i
Page 31 and 32: 1.13 Business costs of terrorism To
Page 33 and 34: Macroeconomic environment 3.01 Gove
Page 35 and 36: Higher education and training 5.01
Page 37 and 38: 6.15 Degree of customer orientation
Page 39 and 40: 9.05 Broadband Internet subscriptio
Page 41 and 42: Innovation 12.01 Capacity for innov
Page 43 and 44: Key Challenges for the MENA Region
Page 45 and 46: Unemployment is particularly acute
Page 47: A bloated public sector has distort
Page 51 and 52: Figure 5. GDP growth in the region
Page 53 and 54: Egypt and Tunisia are expected to r
Page 55 and 56: Trade diversification and intra-reg
Page 57 and 58: Figure 11. Resource-poor countries
Page 59 and 60: Figure 13. Most FDI outside the ene
Page 61 and 62: There are significant development o
Page 63 and 64: Figure 16. Tourism is a key economi
Page 65 and 66: 12 OECD estimates based on ILO data
Page 67 and 68: IOM (International Organisation for
Page 69 and 70: I. The Link between FDI and Job Cre
Page 71 and 72: 2. Characteristics of FDI and Job C
Page 73 and 74: The objectives of the investor also
Page 75 and 76: Figure 9. Expenditure on education
Page 77 and 78: Figure 12. VET and CET systems are
Page 79 and 80: Policies to Involve the Private Sec
Page 81 and 82: Box 6. Higher Education in Egypt: O
Page 83 and 84: Box 7. Flexicurity: The Example of
Page 85 and 86: 2. Women’s Integration in the MEN
Page 87 and 88: In the MENA region, SMEs must impro
Page 89 and 90: Box 10. Economic Zones in the MENA
Page 91 and 92: The renewable energy sector's direc
Page 93 and 94: Tradable business services have sig
Page 95 and 96: To tap the full potential of the se
Page 97 and 98: Agosin, M. and R. Mayer. 2000. “F
Page 99 and 100:
Messerlin, P. A. 1995. “The Impac
Page 101 and 102:
———. 2008. “The Road Not Tr
Page 103 and 104:
countries to assess how well their
Page 105 and 106:
About the Authors Iman Al-Ayouty Im
Page 107 and 108:
Acknowledgements The Arab World Com
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