x Abu Dhabi, UAESunday 23 July 2017

Obstacles that are holding back growth at a time of transition

Arab Spring Economies: Arab transition economies need to cut red tape and corruption to attract much-needed investment and create jobs.

The Arab Spring has brought democracy instead of dictatorship, but with new found freedom comes old responsibilities in job creation.
The Arab Spring has brought democracy instead of dictatorship, but with new found freedom comes old responsibilities in job creation.

DEAD SEA, Jordan // The competitiveness of "Arab Spring" economies has fallen, presenting a hurdle as countries in transition look to stimulate investment to create jobs and close gaping budget deficits.

Excessive visa regulations, corruption and overbearing governments are among the obstacles the region needs to tackle, according to the Arab World competitiveness report, released yesterday at the World Economic Forum's annual regional meeting on the Dead Sea, Jordan.

"This points to the need to unleash competitiveness in the region, open up the economies the way the people have opened up the governments. That is the overriding imperative," said Richard Boucher, the deputy secretary general of the Organisation for Economic Co-operation and Development in Paris, which produced the report with the World Economic Forum (WEF).

Overbearing regulations and restrictive labour movements mean the region creates only 0.6 enterprises for every 1,000 people of working age, Mr Boucher said. In comparison, advanced economies create one or two enterprises for the same number of people.

"There's a lot of small enterprise in the region but they don't grow. That's because of tight regulation, closed markets, rigid labour policies," Mr Boucher said.

Focus since the uprisings has been on what shape political transitions in the region will take. But the need for economic reform is likely to become more pressing as public expectations surge about better job prospects and living standards in the future.

The region needs to create an estimated 25 million jobs by 2020 to accommodate the increasing number of young people joining the labour market. Assessing factors including access to financing and reduction of government red tape, the annual report gauges the performance of the Arab world and other regions.

Once praised by the global investment community for its reform agenda, Egypt slipped from 81st last year to 94th in this year's competitiveness report. Tunisia has fallen from 32nd to 40th. Other countries to have experienced unrest including Syria and Jordan also dropped. Yemen ranked 138th.

The UAE dropped from 25th to 27th in the index.

In comparison, fast-growing Asian economies such as Singapore, Hong Kong and China all performed higher.

"We know to create employment in the region it has to come from the private sector and in order to develop the private sector we know that boosting the economic competitiveness of the region is crucial," said Beñat Bilbao, an economist with the WEF.

Improving competitiveness is becoming a greater priority as the governments of Egypt, Tunisia and Syria face funding gaps, estimated at between US$8 billion (Dh29.38bn) and $10bn each year, according to the Institute of International Finance. But funds from previous years from tourism and other foreign investment have dried up.

Underlining the scale of the deceleration in the competitiveness of Arab Spring countries, many also dropped in a similar report by the World Bank, released last week.

Egypt dropped to 110th this year from 108th in the lender's Doing Business ranking. Tunisia fell from 40th to 46th, with Yemen and Bahrain also declining.