The World Economic Forum on the Middle East took place earlier this week in Sharm El-Sheikh. A state-of-the-art convention centre, hurriedly constructed in eight months to the surprise of everyone, hosted the event. If anything, the forum proved that Egypt could do anything it puts its mind to, report Sherine Bahaa and Niveen Wahish from Egypt's top Red Sea resort Aggressive partnership The Arab private sector has yet to realise its full potential Job creation took centre-stage at the World Economic Forum (WEF) meeting held in Sharm El-Sheikh earlier this week. The labour force in the Middle East and North Africa region is projected to rise to 200 million within the next 20 years. Some 60 million people are under the age of 25 in the region, with 90 million jobs needed in order to maintain current standards of living, according to Nemir Kirdar, president and CEO of Investcorp, a global investment group. Policy-makers need to be more aggressive in creating jobs in order to bring down unemployment rates to more sustainable levels. Kirdar stressed that governments cannot continue to drive economies and that "the private sector has to be part of the market." William Rhodes, chairman and CEO of Citicorp Holdings and Citibank believes that the role of the private sector should be to become more active in creating projects that will attract investors. He added that they can capitalise for this purpose on the funds created by the oil boom. But this could be easier said than done. The private sector in the Arab region is seen to face a multitude of problems. Even Egypt, which has seen an improvement on the macro-economic level suffers constraints, according to Samir Radwan, the managing director of the Economic Research Forum. Radwan who is lead author of the Egyptian Competitiveness Report showed that on the level of global competitiveness, Egypt moved up from 81st to 50th place among 117 countries in the 2005-2006 report which was launched at the WEF meeting. Where it is lacking, he said, is on the enterprise performance indicators. These include the sophistication of an enterprise, its ability to penetrate international markets, and to undertake innovation, research and development. Measures of global competitiveness also include the ability of an enterprise to adopt international standards in production, respect of standards, the environment, and social responsibility. Radwan underscored two constraints in particular in the performance of the private sector. The first is that the quality of human resources in Egypt is at a disadvantage, compared to its competitors. "We can argue that wages are low, but productivity is also low and the skills needed by businesses are not available." Radwan suggested that this could be dealt with in the long run with the proper training and suitable education system. "But this takes time," he admitted. Meanwhile, "quick fixes" are needed in the form of crash courses. "This is a technique that is widely used by the Chinese and Malaysians," Radwan said. The second constraint which impedes the Egyptian private sector's performance is that there is no coherent system of innovation. "This is part of education, of the media, and of opening up society. There should be an incentive for creativity." Such is the case, not only in Egypt, but in the Arab world as a whole, he said. But there are also efforts underway to change this situation. Elias Bou Saab, executive vice- president of the American University in Dubai, in this respect mentioned the Young Arab Leaders (YAL), a non-governmental organisation comprising the membership of some 300 young Arab men and women. He said that last year YAL, while participating in the Clinton global initiative, launched the Arab Business Challenge. This aims to develop the entrepreneurship for the youth who have a good business idea, but do not have the money to launch it. They received 1,000 entries of which only two will be selected over several phases. Each winner will win up to $1 million to launch the project. YAL also launched the Arab Business Angels Network. This network will keep a databank of the feasible projects that were not lucky enough to win the $1 million. Anyone who is interested in supporting these initiatives can get access to this data, and cooperation can be set up between the two parties. "There is no lack of ideas, but a lack of communication on how they can be brought to life," Bou Saab said. Another impediment to the private sector, according to Mustafa Nabli, regional chief economist of the World Bank, is that in most countries confidence in the private sector is still lacking. "The combination of bureaucratic and social constraints, and perceptions that the private sector is not really 'up to it' inhibits the private businesses in general." But Nabli added that compared to the rest of the world, in the Arab world in general, setting up a business, operating it, and disengaging from the local market is complicated. Access to credit is also still difficult, and requires a multitude of guarantees and collaterals, particularly in the non- Gulf Cooperation Council countries. Private equity funds also have a role to play in financing projects. Khaled Rashed, vice-president of Abraaj Capital Limited, an asset management company based in Dubai points out, however, that private equity funds seek a transparent environment "where regulations are clear cut". They also look for business-friendly governments. "The markets which they enter must also have a clear exit, or a market which is deep enough to absorb the companies they create, whether through the stock market or other equity funds or strategic investors". Rashed said that "much of this is already starting to happen in Egypt" particularly with the speed at which privatisation is taking place. "It is a private equity heaven," he said. Rashed also said that he believes that enterprenurship can be developed further, not only through education, but as well by "incubation through venture capital firms" as well as the government. He added that such firms must be encouraged to venture into non-traditional sectors that have not been tapped before. Radwan of ERF reiterated a similar view, when he added that the private sector also needs to play a greater role in the industrial sector, where its involvement is still minimal. "This would make industry an engine of growth and job creation," Radwan said.
