Davos // Middle East business leaders have joined forces with the World Economic Forum (WEF) to launch a strategy to boost private-sector investment and accelerate the pace of economic reform in the region.
The plan, which involves a six-point agenda to modernise economies in the Middle East and North Africa – was unveiled at the WEF’s annual meeting in Davos, Switzerland. It aims to reduce the high levels of unemployment among Arab youth, which is seen as a major driver of continued instability.
Majid Jafar, the chief executive of the UAE’s Crescent Petroleum and a key player in the WEF’s regional business council for Mena, said: “With tighter state budgets and an over-dependence on public sector employment, governments across the region have pledged themselves to much-needed economic reform while calling on the private sector to drive new growth and job creation.”
Mirek Dusek, head of Mena for the WEF, said it was “a critical, exciting time for the region, with economic reform on the agenda in Saudi Arabia and elsewhere. Growth and development are connected to stability.”
The strategy will be a key part of the agenda for the WEF’s meeting on the Mena region, which will resume after a one-year hiatus in Jordan in May.
Imad Fakhoury, the Jordanian minister for planning and international cooperation, said the meeting would showcase his country’s intention to lead the reconstruction of the region. “The potential for rebuilding the region in the next 10 to 15 years is enormous,” he said.
Mr Jafar said the Jordan meeting would include a dialogue on the reconstruction of war-ravaged Syria.
The six-point plan unveiled in Davos comprises: enhancing the efficiency of regional labour markets; modernising bankruptcy and insolvency regulation; simplifying the process of new company start-up; reducing bureaucracy and strengthening government powers to enforce contracts; creating better mediation and arbitration procedures; and promoting systems for good corporate governance.
Mr Jafar said that some of the measures could be introduced fairly easily, for example, in introducing faster company start-up procedures, and that some Mena states, like the UAE, had already introduced some of the measures. “But some countries in the region haven’t even started yet,” he added.
“We have the opportunity to turn the unemployed youth ‘bulge’ into a resource. The regulatory structures in some countries has been holding us back,” he said. On the labour market, Mena ranks as one of the least competitive in the world and the rating for labour efficiency across the region is below the world average, even though the UAE, Qatar and Bahrain score higher than some OECD countries.
“Rigid labour regulation is a significant constraint on private-sector investment and growth and thus on the creation of jobs,” the WEF said.
“Entrepreneurs in Mena are frequently at risk of penal proceedings for management decisions, which increases the fear of business failure, commonly seen as an additional obstacle for entrepreneurship in the region,” it said.
On the ease of corporate set-up, Morocco and the UAE are relatively well ranked in the World Bank’s Ease of Doing Business, but in many parts of the region entrepreneurs encounter “cumbersome processes” in starting a business.
The WEF also identified “inefficient government bureaucracy” as one of the main obstacles to competitiveness. Government bureaucracy “is endemic in every aspect of institutional and economic environments”, it said.
“Dedicated administrative units” should be set up as an interface between government and private-sector business for large corporations and projects of national interest.
The WEF said that there was a need for “alternative dispute resolution process” to avoid costly and time-consuming legal processes, especially in relation to enforcing contracts. “The lack of trust in the ability to enforce contracts together with an inadequate alternative dispute resolution process significantly affect investment and growth.”
Better systems of corporate governance should be put in place, the WEF said. “Anti-corruption laws are necessary to provide a conducive climate for businesses to succeed. To ensure that entrepreneurial ventures are built on strong foundations, it is crucial that proper basic corporate governance frameworks are put in place. Without these, entrepreneurs risk building fragile businesses that stand a lower chance of becoming scalable or sustainable.”
The WEF also announced it has joined up with the International Finance Corporation in a new scheme to recognise entrepreneurial initiative in the region. The 100 Best Arab Start Ups 2017 will be brought together at the Jordan forum in May, where their work will be highlighted and new entrepreneurial techniques analysed. They will also be incorporated into the WEF’s regional and global structures.
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