The Financial Crisis, Recovery, and Long-Term Growth in the Middle East and North Africa
A More Dynamic Private Sector Increased openness and liberalization over the past two decades have transformed the economies of MENA from public sector–driven to ones where more than 80 percent of nonhydrocarbon value added is produced by private enterprises. This private sector growth has been fostered by investment climate reforms. For example, Egypt has ranked among the top 10 reformers four times in the past five years on the Ease of Doing Business index published by the World Bank Group, complemented with dramatic changes in taxes, tariffs, selected regulations, and several other key areas of government interaction with private investors. Jordan carried out reforms in 6 of 10 areas measured by the index, and Saudi Arabia has ascended to 13th place in the world among 183 economies evaluated. Among reforms documented by the index, Morocco established a private credit bureau to facilitate access to finance; Tunisia strengthened investor protection and reduced customs processing delays by two days on average; and the UAE sped up its building permit process by putting it online. Despite reforms and a growing role, the private sector has fallen short of transforming MENA countries into diversified, high-performing economies. Private investment rates have stagnated at around 15 percent of GDP, while dynamic regions like East Asia managed to raise private investment rates close to 30 percent—or double the prevailing MENA rates. MENA’s average number of registered businesses per 1,000 people is about a sixth of that in the Organisation for Economic Co-operation and Development (OECD) countries, and less than a third of that in Eastern Europe and Central Asia (World Bank 2009a). Productivity in MENA’s average manufacturing firm is about half that of Turkey’s manufacturers. Limited productivity is reflected in a weak export base. The most diversified countries in MENA export around 1,500 goods— most of them in low-value-added sectors, compared to close to 4,000 goods in countries like Malaysia, Poland, or Turkey. Diversification is even weaker in oil-rich countries, many of which export less than 500 goods (World Bank 2009b). World Bank enterprise surveys of about 10,000 firms conducted throughout the region show that MENA has a higher average age of both
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