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World Bank says more private sector reform needed in MENA

CAIRO: Members of the region’s private sector are not all competing on a level playing field, according to a World Bank report released Monday. Success depends too often on “privilege and vested interest instead of competitiveness, Shamshad Akhtar, vice president of the World Bank’s MENA region, said at a conference where the results of the …


CAIRO: Members of the region’s private sector are not all competing on a level playing field, according to a World Bank report released Monday.

Success depends too often on “privilege and vested interest instead of competitiveness, Shamshad Akhtar, vice president of the World Bank’s MENA region, said at a conference where the results of the study were announced.

Staff from the World Bank gathered in Cairo to discuss a report about the state of the private sector in the Middle East and North Africa.

The report, titled “From Privilege to Competition: Unlocking Private-Led Growth in the Middle East and North Africa, takes a hard look at governments’ failures to implement the kind of reforms that the private sector needs to flourish.

Akhtar gave added urgency to her comments, noting that the region needs to generate 40 million new jobs over the next 10 years to meet the demands of the growing workforce.

So far, she believes, the private sector has not been able to pull its weight in moving the region forward economically.

“The private sector has actually fallen short in transforming countries in the Middle East and North Africa, she said.

While Akhtar and others on the panel did give some praise to the region, and Egypt in particular, the panel’s assessment was generally biting, offering a departure from the typical cheeriness these sorts of events tend to breed.

The survey that Akhtar and others from the World Bank presented, which looked at the competitiveness of the private in the MENA region, also compared the region to the private sector in other regions.

And MENA didn’t fare well.

According to the report, the private sector only represents 15 percent of GDP in the region. That’s compared with 30 percent in East Asia.

When Senior Economist for the World Bank, Najy Benhassine, showed a chart of the diversity of exports from countries around the world, each country in MENA fell below the trend line.

“The best MENA performers export around 1,500 goods – most of them low in technological content – compared with close to 4,000 in countries like Poland, Malaysia or Turkey, said a release from the World Bank that summarized its report.

One of the major reasons that MENA’s private sector continues to fall short, said Benhassine, is because of government failure to implement reforms.

Benhassine praised the Egyptian government’s reform efforts and noted that many regional governments had passed laws of reform. The problem, is said, is that these reforms are not being applied fully and fairly, in real terms, to the economy.

“The problem has been with the quality of the reform, he said, “the quality of the implementation of the reform.

Close to 60 percent of businesses surveyed in the region said they do not think the rules and regulations are applied fairly across the board.

The report also put together a macroeconomic index of reforms, aimed at rating each country on its track record of reform.

Egypt finished fourth in the region, behind the Yemen, Algeria, and the UAE. Despite the strong showing regionally, though, Egypt’s reforms remained far behind most of the East Asian countries.

The MENA region also lacks sufficient competition in industry, the report said. In portion of the report, it was reported that MENA had a median of 10 local competitors in industry. The region came in second to last in this regard, beating out only Africa.

Europe, by contrast, boasts about 50 local industrial competitors on average.

After a fairly bruising assessment of the private sector in the region, Benhassine offered a handful of suggestions for improving reforms.

First, he said, it’s important to “get at the rents, meaning that governments should remove formal barriers to entry for businesses, reduce conflicts of interest between public servants and investors, and address monopolies.

Institutional reform, he said, is also key. Governments must, he argued, reform the public sector by increasing transparency and accountability. They should also strengthen the process of policy making.

While MENA did not perform well in the survey, Egypt ended up at the strong end of a weak field. By the World Bank’s standards, though, the region has a long way to go.

Topics: FJP

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