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3.3.4. Barriers to Economic Growth, SME Development and Exports in MENA Countries
IMF, World Bank and other reports covering different aspects of competitiveness from education
standards and quality, through to the robustness of institutions, and favourable business framework
conditions, suggest that countries in the MENA region do not perform well when these indicators are
used. Education outcomes together with the quality of education tend to be lower than those in other
regions. There is also a shortage of skills required to operate effectively in the global arena due probably
in part to an excessive reliance on government jobs and less on the private sector.
External Barriers
Business Environment and Structural Barriers
A business environment that is conducive to supporting dynamic private sector growth, entrepreneurship
and innovation, is also seen as being important for firms engaged in international trade. The World Bank
Ease of Doing Business Report indicates that MENA countries lag behind their Asian counterparts. This
could be due to the regulatory and legal environments which have not kept up with developments
elsewhere. A higher proportion of resources being spent on consumption (for example civil service
wages) and less on investment, as a percentage of GDP (in comparison with Asian countries), could
account for the absence of favourable framework conditions.
Saudi Arabia’s oil and gas exporting strengths also exposes its vulnerability to changes in prices in this
commodity market, increasing concerns over fossil fuel consumption, the growing availability of
alternative fuel sources, and the weakening of the economies of the traditional destination countries in
Europe. Despite the growth in demand for oil from China and other Asian economies, other factors
mentioned above are beginning to affect the industry. Previous dependency on oil has meant the neglect
of other industries.
Yemen’s problems are different. As a poor country it cannot rely much on oil exports not least because its
production capacity is low compared to most oil producing countries. Recent surges in oil prices may
provide temporary respite but it will need to adopt a pro-active strategy for promoting its other exports
including coffee and salted fish. It is possible that some of this will need to be done in conjunction with
other countries in the region. Given it strategic location in the Bab-el –Mandap, shipping services and
logistics could also play a part in overcoming the obstacles to exports and to economic development it
faces now and in the future.
Despite the relatively high levels of industrial diversity which helps the country to buck the MENA trend
in either over reliance on oil or limited economic activity, there is limited evidence of Egypt’s capacity of
exports in many of the industries which have benefited from structural reforms and FDI. Egypt remains a
country with little industry. With its diverse natural reserves (gold, minerals, iron, oil and gas), the oil and
gas-related activities together with the secondary sector, account for just over a third of the GDP. Egypt is
the world’s sixth largest exporter of natural gas. Finally, the tertiary sector represents around 50 % of the
Egyptian GDP and employs 45% of the population. It is largely dominated by revenues from
telecommunications and from tourism (the tourist industry brings nearly USD 11 billion in annual
revenues). The growth trajectory has been affected by the recent political crisis in the country.
A reliance of larger oil industry businesses, their technologies and management skills, has also resulted in
a shortage of labour and entrepreneurial capacity for the nurturing of alternative sectors especially the
new added value service or knowledge-based industries. The deficit in the ‘soft infrastructure’
compromises the country’s capacity to push firms to the frontiers of competitiveness in the local market
let alone see them as efficient operators in the exports market. A range of government actions aimed
precisely at addressing these issues including the improvement of education standards and achievement