x Abu Dhabi, UAEFriday 28 July 2017

Exports key to MENA's future success

The region does not make adequate use of the 21st century's advantages of technology and openness to support growth and create jobs.

In the age of globalisation, the MENA region is falling behind.

The region suffers from a chronic lack of trade competitiveness and does not make adequate use of the 21st century's advantages of technology and openness to support growth and create jobs.

The region suffers in a world of open trade because its export capabilities are at the lower end of the value-added spectrum.

MENA exports have been mainly concentrated in primary and consumer goods - 64 per cent of the region's total exports, compared with only 41 per cent for Asia.

Capital goods, on the other hand, account for only 6 per cent of MENA exports.

These export patterns hold back the region's potential for trade and, as a result, MENA countries trade less with the rest of the world than could be expected.

The region's total exports last year accounted for only 28 per cent of GDP, compared with 56 per cent for Asia (excluding China, India and Japan).

In recent years, MENA has failed to increase its global market share, partly because close to 60 per cent of the region's exports flow to Europe.

This focus has meant MENA has not been benefiting from the high growth rates of the BRICs (Brazil, Russia, India and China).

Given that growth in Europe is projected to continue lagging behind the growth of the BRICs and other emerging markets, it is crucial that MENA redirect its exports to the latter, more dynamic countries to provide the basis for high and sustained growth within the region.

Poor education outcomes and unfavourable business environments also feed into MENA's lack of competitiveness.

Although education enrolment rates in the region are not much different from those of other regions, the quality of education in MENA appears to be much poorer than regions with higher export volumes.

The region's graduates often flock to government jobs because of attractive wages.

And since governments do not place emphasis on the type of degree a graduate has earned, job seekers do not necessarily have the skills required by private companies.

In addition, business environments are not sufficiently conducive to fostering entrepreneurship or a dynamic private sector that can identify and exploit new business opportunities.

Addressing these shortcomings will enhance MENA's trade competitiveness and allow the region to fully benefit from globalisation and the dynamics of today's high-growth regions.

This will lead to sustained growth and job creation - vital for a region that faces the formidable challenge of having to create more than 18 million jobs for its growing labour force by 2020.

Masood Ahmed is the director of the Middle East and central Asia department at the IMF, Washington DC; and Sherif el Diwany is the senior director of the MENA region at the World Economic Forum