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Catalyzing growth: Three things the MENAP region needs to do to make it happen

12 Feb 2020
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12 Feb 2020

The region’s economies are at a crossroads.

Spanning Pakistan to Morocco, the MENAP (Middle East, North Africa, Afghanistan and Pakistan) region contains 8.5 percent of the world’s population. But we only generate 3.4 percent of the global GDP, and just two of our companies make it into the Fortune 500. Estimated growth in 2019 amounted to just 1 percent, and the outlook across the region remains one of low-to-no growth.

We need to act — and fast — to turn around our fortunes, redressing pressing issues such as unemployment, economic inequality and social cohesion in the process.

This was the starting point of a panel discussion I took part in at the World Economic Forum Annual Meeting in Davos, which included political and industry leaders from across the region.

Like the UAE has done for many years, countries such as Egypt — now the fastest-growing economy in the region — are reaping the benefits of re-engineering their economic structures. Others, such as Saudi Arabia, are following a similar model, introducing extensive reforms and public-private initiatives. But getting the whole of MENAP back on track will require a concerted effort to foster a more collaborative and structured approach in all markets.

Here are three key takeaways from the Davos panel on how the public and private sectors can work together to achieve greater economic integration.

1. Intraregional trade and investment

We are not as globally powerful as we could be, because we do not have the scale. Market fragmentation is the biggest inhibitor of our growth.

Most global growth now happens in blocs — take for example the Association of Southeast Asian Nations, the EU or the North American Free Trade Agreement. But trade between MENAP nations represents only about 16 percent of total trade, according to a recent report Majid Al Futtaim produced with McKinsey and Company as its knowledge partner. If you take oil out of the equation, it is less than a third of that. This is in stark comparison to inter-bloc trading figures of 52 percent in Asia-Pacific and 63 percent in Europe.

As my co-panelist, Dr. Rania Al-Mashat, Egypt’s minister of international cooperation, pointed out, our region is very heterogeneous. But I strongly believe that we also have a lot in common, not least our culture and geographic proximity.

To stimulate the same kind of growth and stability we see in Asia and Europe, we need to work in partnership toward a common manifesto of progress. This will require harmonizing our market and industry standards to simplify cross-border operations, enabling free movement of goods, services, capital, people and data.

Greater economic integration will be the single most important driver of growth in MENAP. The report estimates that this could add $231 billion to our regional economy by helping us become globally competitive, attracting talent and investment.

2. Deregulation and incentivizing existing and new businesses

Alongside this, we will need to promote a thriving private sector and grow the number of Fortune 500 companies beyond the current two: SABIC and Emirates Group.

According to McKinsey and Company, emerging market economies that experience high levels of growth share one important characteristic: the presence of large, competitive firms that propel the economy’s growth trajectory.

To nurture the private sector means effective deregulation and less red tape. Only if we deregulate can we eliminate market distortions, foster innovation and better competition and, ultimately, drive growth.

This is not hard. Saudi Arabia recently simplified its visa process for 49 countries to boost its tourist industry, for example. The expected inflows of foreign direct investment into the tourism sector will materially increase from 3 percent of GDP at current allocation levels to 10 percent by 2030.

Enabling more private-public collaboration and, where appropriate, privatizing state-owned businesses also falls into this category.

In the process, public money can be freed up and channeled where it is needed the most; for instance toward entrepreneurship, startup funding, education and infrastructure.

3. Matching jobs with people

The MENAP region produces disproportionate amounts of graduates for the available jobs.

In the Middle East and North Africa, for example, youth unemployment has been the highest in the world for more than a quarter of a century. Young people often search for long periods of time before finding work, which affects their ability to meaningfully participate in society and the economy.

My fellow Davos panelist, Majid Jafar, CEO of Crescent Petroleum, summarized the talent conundrum, saying: “The more educated you are, the less likely you are to have a job.”

Region-wide, we need to create between 80 and 100 million jobs in the next decade. Even in trailblazing Egypt, an annual growth rate of about 8 percent over a period of 10 years would be needed to accommodate the current levels of people entering the workforce.

And while job creation is crucial, I would argue that it is also about ensuring the right people are given the right jobs. Our countries need to realign their educational structures to end the current mismatch of skills. As digitalization progresses, there will be a growing need for a digitally savvy workforce.

The priority here has to be reskilling, but the panelists highlighted the fact that matching people and jobs also requires the redesigning of university courses so that graduates learn the skills that are needed locally, rather than increasing the “brain drain.”

As suggested by Mohammad Ibrahim Shtayyeh, prime minister of the Palestinian National Authority, a move toward a dual system such as Germany’s, which has academic and vocational strands, might also be worth considering.

Not ‘if,’ but ‘when’

As fellow panelist Abdullah Al-Swaha, the Saudi minister of communications and information technology, said during the panel discussion: “Growth in the Middle East is no longer a case of ‘if,’ but ‘when.’”

Once we make progress across the three priorities outlined above, that “when” will be much closer than ever.

• Alain Bejjani is the CEO of Majid Al Futtaim.

Disclaimer: Views expressed by writers in this section are their own and do not necessarily reflect Arab News’ point-of-view
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