One US presidential election and six years since I stepped down from the board of directors of the Asian Development Bank, one question from the investment community, shareholders and policymakers alike persists: that is, who will join Brazil, Russia, India and China – known as the Bric nations – as the next to capture people's imaginations and investment dollars.
With emerging market economies now contributing, by some measures, a larger share to global gross domestic product than their developed counterparts, more and more investors are looking beyond the United States, Europe and Japan for the next drivers of growth. Indeed, as the economic trajectories of those original four Bric nations shift, is there a nation in the Middle East or North Africa poised to join South Africa in the grouping of nations now known as the Brics? That's a question I anticipate this week in Abu Dhabi as I participate along with several hundred leaders in business, government, civil society and philanthropy at the inaugural Milken Institute gathering in the region.
Mena, after all, is a region known not only as a key force in world energy markets, but also, more recently, for contributions and advances in capital markets, education, healthcare and technology. Beyond financial capital, Mena is also rich in human capital, with a total of about 200 million young people and 65 per cent of the region's population under the age of 25.
The United Arab Emirates may well be a contender as the next Bric. According to the World Bank's Doing Business 2018 report, the country ranks 21st in 190 economies assessed on the ease of starting and operating a local firm. The next best-ranked Mena economies are Bahrain at 66 and Morocco at 69. And according to Transparency International's Corruption Perception Index 2016, the UAE is ranked as the 24th least corrupt out of 176 assessed economies.
Yet around the region and the world, significant challenges remain, even as nations such as Saudi Arabia have begun to embrace change. Recent history has shown the sustainability of reforms in any country remains an issue. Over the last few years, for example, commitments to vital financial and economic reforms around the world have faltered as nations emerged from the global financial crisis.
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In Mena and elsewhere, we must ask leaders four simple questions. Building consensus around the answers will help us shape solutions and address the true constraints to economic growth – the bureaucracy, regulation, interventionism and corruption that too often holds back individual businesses and organisations and ultimately, entire nations and economies.
Firstly, is bureaucracy hindering or fostering economic growth? Whether in Mena, Asia, the Americas, Europe or sub-Saharan Africa, a real fight against bureaucracy is less about new organisation charts and the size of government and more about assessing what works and what does not. Then it is about getting rid of the latter. It is not just the size but also the service quality of the bureaucracy that matters. One step forward will entail building mutual respect between the public and private sectors.
Secondly, how are regulations impacting job creation? Businesses and investors are often challenged by not just too many or too few regulations but also by unequal application and uneven enforcement. Clearly, not all regulation is bad. Basic environmental and labour protections are an example of essential safeguards. But policymakers must ask if near-term job creation and growth are losing out to red tape and regulatory excess. Well-intended regulations that limit access to capital can also reduce the potential for stronger growth.
Thirdly, when is government intervention appropriate? Governments, particularly in the developing world, have long been either praised or criticised – based on your perspective – for seeking to pick winners and losers, often distorting the market in favour of national players. Too often, however, government interventions and inefficiency can go together. In the long-run, policymakers need to ensure interventions, if any, are limited and a matter of last resort. And as nations mature, what was once seen as necessary government involvement should be revisited as new focus is placed on innovation and entrepreneurship. Singapore – home to our Milken Institute Asia Centre – is an example of this.
Fourthly, what more can be done to root out corruption? All governments voice the intent to root out corruption but every nation's long-suffering citizens are perhaps best positioned to judge whether progress is being made in the fight to strengthen judicial systems, improve rule of law and increase transparency. Allegations of favouritism or leniency must be investigated, institutions strengthened and individuals held accountable if there is to be confidence in leaders and systems of governance.
Policymakers everywhere in the world know at some level that the prescription for future growth is simple and straightforward — improve the bureaucracy, regulate fairly, intervene rarely and stamp out corruption. That prescription is neither eastern nor western.
As individual economies and economic systems interact and converge, every nation will find its own way but one destination is clear: a free, accountable and transparent private sector that will drive sustainable development and job creation in the long run.
It is time to get back to the basics of moving the global economy forward.
Curtis Chin, a former US ambassador to the Asian Development Bank and the inaugural Milken Institute Asia fellow, is managing director of advisory firm RiverPeak Group. The two-day Milken Institute Mena Summit will begin on Wednesday
