The Arab World’s Entrepreneur Ecosystem Entreaty

MENA stock markets mostly languished through July, with notable exceptions Saudi Arabia and Tunisia up 20% and 40% respectively, as Egypt disappointed as the main core universe component with a 5% loss. Kuwait jumped over 10% on an increased frontier weighting as Saudi shares graduate next year after MSCI’s latest review. Jordan and Lebanon were flat as millions of Syrian refugees stay in place despite the Assad and Russian governments’ hints at safe return and imminent large-scale reconstruction without identified guarantees or funding. Gulf equities are also preparing for competing standard debt gauge entry as JP Morgan finesses criteria for EMBI expansion. A dozen regional economies have yet to create emerging-market caliber entrepreneurial conditions for the “Fourth Industrial Revolution,” according to the latest joint World Bank-Economic Forum competitiveness report. It urges a new generation social contract since commodity riches can no longer support public sector employment and subsidies, amid a demographic youth bulge with still low female labor force participation. The private business enabling environment lags across the board in education, technology and financial sector development. Opinion surveys show around half of respondents decrying income inequality and political governance, and worrying about cyber-attacks and natural resource shortages. The area’s competitiveness index barely budged the past decade, even though Qatar, Saudi Arabia and the UAE rank in the top 30 of 135 countries. Morocco, Algeria and Lebanon slipped the most, and of the dozen pillars measured, only infrastructure and technology showed progress with financial market regression. Gulf Cooperation Council members are behind in training and labor markets, and automation has not translated into innovation. Resource-poor countries like Jordan and Tunisia have better diversification track records, but widespread state intervention in administration and ownership remains an obstacle. Work forces are not equipped for physical, digital and biological overlap that will characterize future business, and traditional bank lending cannot serve emerging entrepreneurs.

Oil and gas exports have accounted for two-thirds of the total, with education quality a key impediment in view of low math and science test scores. Small business credit is limited, with the share at the bottom of all developing regions. Only Africa and South Asia perform worse on the World Bank’s Doing Business scorecard, and high customs and non-tariff barriers hurt trade disconnected from global supply chains. Sound macroeconomic management is a precondition, but micro reforms are lacking from improved logistics to export finance help. Richer countries should liberalize industries for foreign and private entry, while fragile states at the opposite scale should consider dedicated enterprise zones and payments system modernization. Young companies of three to five years are the big job sources and formation rates increased the last decade but still lag the world average, especially when the UAE is excluded. A regional entrepreneur survey last year highlighted market, finance and talent access as the chief priorities for policy and practical steps. Angel investment networks have been launched in the Gulf, Lebanon, Egypt and Morocco to provide seed capital, but cross-border and women’s integration continue to stall and may demand cultural as well as operational transformation, the study suggests.