Building a New Investment & Business
Environment in the Arab World
Arab Economic Forum, May 2011
Thomas Jacobs, IFC
May 27, 2011
International Finance Corporation
World Bank Group
 IFC, IBRD, IDA,
MIGA, ICSID
 Created in 1956
 AAA/Aaa rating
 Invested $13
billion in FY10
IFC Mission
To promote sustainable
private sector investment in
developing countries, helping
to reduce poverty and
improve people’s lives.
What does IFC do?
 Invests via loans & equity
 Mobilizes capital from others
 Provides Advisory Services
Why do we do it?
 To promote open, competitive markets in
emerging markets
 To support companies & other private
sector partners where there is a gap
 To help generate productive jobs & deliver
essential services to the underserved
 To mobilize other capital that can
contribute private enterprise development
What’s behind the “Arab Spring”?
Insufficient Voice and Accountability
High Rates of Unemployment
(Lower rank indicates worse score)
Unemployment rate (%)
Syria
30
Tunisia
25
Yemen
Egypt
20
Jordan
*
MENA has the lowest female
labor force participation rate
in the world
15
Lebanon
Turkey
10
Brazil
India
5
0
10
20
30
40
50
60
70
Source: World Bank Governance & Anti-Corruption Indicators
0
EAP
Access to Finance Lowest in the World
ECA
LAC
SA
MENA
MENA
(Youth)
MENA
(Female)
% of firms with a loan credit from a financial institution
 17% of population living <$2/day
 High clustering around poverty line – increases
vulnerability of poor to shocks
 MENA population growing rapidly
 48 million jobs needed over the next decade
 Voice and accountability worsened over the
last decade in almost all MENA countries
 Labor skills mismatch causing frustration
among educated youth
Employment: (the?) Major issue in Arab World
 48 million jobs needed over the next 10 years MENA
 Jobs will have to come from the private sector
 Public agencies and state-owned enterprises cannot create
sufficient jobs in a sustainable manner
 Private enterprises will only invest and create jobs within a
conducive business environment
Investment climate weaker in
lower-income countries
Doing Business has been an important catalyst of business
environment reforms in the MENA region
Saudi Arabia
Bahrain
United Arab…
Qatar
Tunisia
Oman
Kuwait
Egypt, Arab Rep.
MENA
Yemen, Rep.
Jordan
Lebanon
Morocco
Iran, Islamic Rep.
West Bank and Gaza
Algeria
Syrian Arab Republic
Djibouti
Iraq
11
28
40
50
55
57
74
94
96
105
111
113
114
129
135
136
144
158
166
Source: Doing Business 2011
Little diversification in Arab economies
….. and MENA exports tend to have a low technological input.
Main Pillars of New Business Environment
Services and Moving up
the Value Chain
Micro and Small Scale
Enterprise Development
PPPs in Infrastructure
and Social Services
Competition and
Innovation
Growth
Employment
All underpinned by an ….
Enabling Investment Climate
Efficient Financial Markets
Economic Integration in the Arab World
And an increasing focus EAST and SOUTH (Asia and Africa)
1. Promote Competition & Reform Structures
A. Remove the rents
• Eliminate barriers to entry; open trade and investment.
• Reduce conflicts of interest between public servants & investors.
• Address competition issues (such as monopolies).
 Example:
Promote the creation of competition authorities
B. Reform institutions & processes
• Increase transparency, accountability, measurability.
• Modernize public sector & cut out red tape.
 Example:
Improve governance & transparency while simplifying to
make it easier for firms to start and operate.
2. Strengthen policy-making &
encourage innovation
C. Improve process of policy-making
• Establish sustainable and robust process of private sector consultation.
• Streamline decision-making and improve inter-ministerial coordination.
 Create public-private dialogues that engage stakeholders in common goal
D. Innovate through knowledge
• Support new product development with a higher technological input.
• Harness the Power of the Diaspora for ideas, capital and connections.
• Increase use of ICT in production processes & products/service mix.

Concentrate efforts on knowledge sectors -- ICT, health care, education…
3. Improve climate for PPPs
E. Focus on regulatory framework & education
• Infrastructure is a major constraint for most MENA countries
• $100B/year of investment in infrastructure needed to sustain 5% growth.
• Power, transport, education, health care, water, etc.
 Create dedicated PPP units and pilot specific transactions
G
A
P
$100B / yr for
Infrastructure
needed
across MENA
Actual
Investment
$60B – 70B
per year
More and Better
Public Investments
More Private
Investments - PPPs
4. Concentrate on MSMEs
Over 95 percent of MENA enterprises are MSME’s – the majority of which
are microenterprises – employing less than 5 to 10 workers ……
Size breakdown (% of all MSMEs)
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Source: WB MSME Country Indicators
Medium
Small
Micro
4. Services & Moving up the Value Chain
MENA:
 Can’t compete with Asia & Africa for high labor content products.
 Should focus on products with a higher skill content – and are
produced further up the value chain.
 ICT and services (education, tourism, health care, etc) offer
considerable scope and potential for further development.
 Improving technological content of goods produced will also add
value to MENA produced goods.
Deepen regional integration
Intra - Arab integration
remains a challenge….
Source: WDI
WBG’s Arab World Initiative:
fosters economic integration and knowledge sharing
Re-Focus EAST and SOUTH
Focusing increasingly more on the highest
growth region – and the proximate region
with the greatest growth potential.
The new business environment must:
 Promote competition
 Be more inclusive, esp. for youth & women
 Leverage private sector resources
 Enable greater investments in infrastructure
 Invest in knowledge
 Focus on MSMEs
=> CREATE SUSTAINABLE JOBS
ً‫شكـرا‬, Merci, Thank You