Competitiveness In MENA - Deloitte
How can competitiveness accelerateeconomic growth in MENA?In the Middle Eastsince 1926In the Middle East
Deloitte How can competitiveness accelerate economic growth in MENA?Why do nations compete?The region is aiming at diversifyingand growing its economy to reducedependency on oil, in addition to drivingbetter employment opportunities andlong-term prosperity for citizens. This canonly be achieved by introducing a mindsetof competitiveness, which would createthe foundation for a sustainable economy.With international foreign directinvestment (FDI) shifting to developingeconomies after the global crisis in 2008,followed by the recent drop in oil prices,governments in the Middle East andNorth Africa (MENA), and particularlythose in the Gulf Cooperation Council(GCC) countries, have been focusing onimproving their business environments toposition themselves as key destinationsto do business in attempt to successfullydiversify their economies.Investors around the world have alsostarted venturing into destinationsthat would maximize returns or createcost efficiencies due to a number offactors such as proximity to markets,access to technology, finance or naturalresources, or the cost of doing business.The approach to enhancement ofcountry ranking and improving thebusiness environment to maximizeimpact and returns on the economy canbe summarized in three main stagesfocused on evaluating and enhancingcompetitiveness to win in regional andglobal markets: Collect and define; Execute; Evaluate reforms.Figure 1: Competitiveness modelSystems: Political will Good governance Alignment Reduction of silos Procedural efficiency Resolcing disputesStrategy: Long term national strategy Short term implementationplan focusing on prioritysectors/verticals Establishment ofmilestones Establishment ofresponsibilitiesand accountabilityProsperityInnovation: Infusing creativity andinnovation throughoutsociety Providing funding forinnovation Developing innovationwith strategy and systemsPolicy: Establishment of businessfriendly policies Reduction of bureaucracy Promotion of transparency Zero tolerance for corruptionWhat makes an economy trulycompetitive?According to the IMD WorldCompetitiveness Center, “Competitivenessis the extent to which a country is ableto foster an environment in whichenterprises can generate sustainablevalue.”1 The competitiveness for a nationaleconomy is indelibly linked to prosperityfor its citizens. With this in mind,competitiveness is the outcome whenstrategy, systems, policy, and innovationcome together to spur economicgrowth. The Competitiveness Modelshown in Figure 1 helps explain howcompetitiveness contributes to economicgrowth at a national level.2 The bottom lineis that competitiveness more often thannot leads to productivity growth, whichmeans achieving more output with thesame amount of or fewer resources. Ashas been stated by Nobel Laureate PaulKrugman: “Productivity isn’t everything,but in the long run, it’s almost everything.A country’s ability to improve its standardof living over time depends almost entirelyon its ability to raise its outputper worker.” 3“Productivity is noteverything, but in thelong run, it’s almosteverything. A country’sability to improve itsstandard of living overtime depends almostentirely on its abilityto raise its output perworker.”– Paul Krugman03
Deloitte How can competitiveness accelerate economic growth in MENA?Competitiveness at itscore includes increasesin economic freedomand overall quality of lifethat impact a country’spopulation.What is the effect of competitivenesson an economy?There are many examples that reinforcethe Competitiveness Model highlightedin Figure 1. Competitiveness at its coreincludes increaseing economic freedomand overall quality of life. Countriesthat do not adopt the CompetitivenessModel may increase their rankings ininternational reports, but all too oftenthese initiatives do not lead to increasesin the prosperity of their citizens, asmeasured by the Legatum ProsperityIndex (LPI) report. The LPI report isgenerated by the Legatum Institute,a London-based think tank, whichmeasures national prosperity basedon economic and social wellbeing.4 Asshown in Table 1, BRIC countries (Brazil,Russia, India, China) had super-heatedeconomic growth in the late 1990s andearly 2000s that favorably impactedtheir rankings in major competitivenessreports. However, their momentumslowed down and their movement towardsustained competitiveness actuallydecline from 2010. In other words, theircompetitiveness did not lead to prosperitybecause their reforms did not lead toreal transformation (reinvention) of theireconomies. This is reflected by their latestrankings in key competitiveness-orientedreports, which seem to reflect significantgaps within their competitiveness modelsthat have become impediments tosustained growth.5While one may rightly argue that rankingsin reports are not true indicators ofnational competitiveness, they do providea lens through which one can examinethe factors that drive these rankings. Asformer New Zealand Prime Minister JamesBolger stated many times, “If your countryis competitive, you don’t need the rankingsof reports to let you know. The same istrue if your country is uncompetitive.That being said, they are good platformsto highlight specific issues and to frametough questions that will lead to dialogue,strategy, and action.”In contrast to BRIC, some of the world’smost prosperous countries continue tomake major gains in economic growth dueto the constant process of reinvention.This is illustrated by Table 2, whichhighlights their rankings in major globalcompetitiveness reports. While theirefforts are not perfect, they reflect anapproach to competitiveness that hasestablished a pattern of ongoing increasesin the quality of life and economiclivelihood of their citizens.Table 1: BRIC rankings04CountryWEF GlobalCompetitivenessReport (2018) (x/140countries)WB Ease of DoingBusiness Report (2019)(x/190 countries)Legatum ProsperityIndex (2018) 94China284682
Deloitte How can competitiveness accelerate economic growth in MENA?Table 2: Top 4 global performersCountryWEF GlobalCompetitivenessReport (2018) (x/140countries)WB Ease of DoingBusiness Report (2019)(x/190 countries)Legatum ProsperityIndex (2018) (x/149countries)United On average, a one percent higher scorefor regulatory quality as measuredby Doing Business is associated withapproximately US 250-500 millionhigher annual FDI inflows.When benchmarking competitiveness, it isimportant to understand how the world’smost competitive countries got to wherethey are and how they remain competitiveyear-after-year even during marketaberrations.In the GCC region, a leading group ofcountries has improved competitivenessaccording to key metrics and rankings inglobal reports, but structural, institutionaland policy deficiencies continue tohamper their efforts.The real story behind competitiveness inthe GCC region will be enabling leadingcountries to sustain their competitivenessthrough a process of strategy, goodgovernance, business-friendly reforms,and innovation that leads to ongoingreinvention and strategic coursecorrections.Institutions argue that while rankingsalone do not signify whether a countryis an advantageous place to invest, theunderlying methodology of the rankingsserves as a representative measure of theoverall regulatory health and businessenabling environment. As the WorldBank noted in a commentary on the2013 Doing Business report: “The casestudies underpinning the Doing Businessindicators focus on small to medium-sizedomestic firms, so the laws, regulationsand practices tracked by the projectare not necessarily relevant to largerforeign-owned firms. But the quality ofthe laws and regulations, and the extentto which this quality is reflected in theirimplementation, may be a useful signal toforeign investors of the overall quality ofthe business environment.”6 On average,a one percent higher score for regulatoryquality as measured by Doing Business isassociated with approximately US 250500 million higher annual FDI inflows.7Within the Middle East, governments aredesigning and investing in programs withthe sole purpose of increasing nationalrankings across multiple indexes. MENAcountries with such initiatives includeEgypt, theKingdom of Saudi Arabia (KSA),the United Arab Emirates (UAE) andMorocco.Assessments of the World Bank andWEF indexes have often centered on theapproach of countries towards improvingrankings--making simple reforms requiredto gain more points without addressingperceptions and core underlying societaland economic issues that could requirestructural changes.Therefore, increasingly, higher rankedcountries are exploring indexesthat capture citizens’ perceptions ofgovernment and business performance(and even lifestyle), including the UnitedNations Sustainable DevelopmentSolutions Network’s World HappinessReport rankings, TransparencyInternational’s Corruption PerceptionsIndex, and the United NationsDevelopment Program’s HumanDevelopment Index.05
Deloitte How can competitiveness accelerate economic growth in MENA?Egypt: Introduced a one-stop-shop forall procedures and improvedprocess of getting electricity as wellas protection of minority investorsby boosting shareholder rights incorporate decision-making Improvements in legal protectionfor businesses and property rightsMorocco: Sucessfully completed extensivereforms including developingonline portals for businessregistration, provision of creditscores, streamlining propertyregistration, increasing corporatetransparency and ownershipregulationsm, and introducing asingle window system forinternational trade A new constitution spurred thediversification of key industries,including manufacturing, finance,and telecoms National government programintroduced subsidy reductions tobenefit from low energy importprices which encouraged FDI andlinkages to global value chainsBahrain: Removed the minimum capitalrequirement, improved access tocredit information, and improvedkey infrastructure for tradewith KSA Ranked 2nd in the world for IslamicFinance; best in the MENA regionfor gender equality across wagesQatar: Removal of the “Kafalah” systemthus freeing up the foreignlabor force Establishment of severaltechnology and innovationfreezones and incubatorsKSA: Launch of national Vision 2030 andmajor reform programs to improvecompetitiveness and the ease ofdoing business Revamp of government serviceprocesses Focus on non-oil sectors (e.g. leisureand entertainment) The Saudi Stock Exchange and Citibankname women as their chief executives Woman appointed as the first Ministeradvisor in the history of KSA Privatization of Saudi AramcoWhat are economic indicatorsand how do they measurecompetitiveness?International competitiveness expertsunderstand the value of analyzing data asa way to measure competitiveness. Thereare two types of data, quantitative andqualitative, typically used in such analyses,as shown in Table 3.Table 3: Data typesQuantitative data is typically segmentedinto macro and micro indicators, asshown in Figure 2. Macro indicators06UAE: Establishment of sector developmentfree zones (media, healthcare,technology, trade, manufacturing,and others) Developed major non-oil sectors(e.g. tourism and financial services) Launch of innovative solutions and plans(e.g. hyperloop, flying taxis, etc.) Digital services and e-government Focus on renewables andsustainabilty sectors Launch of the UAE Happiness MinistryOman: Introduced a single windowsolution to facilitate trade Establishment of a one-stop shopand reduced the minimum capitalrequirement Growth in major sectors suchas trade and tourism Establishment of Oman’sInnovation Park MuscatQuantitative dataQualitative dataEconomic statistics that can be tracked year-to-yearInput from individuals or organizations thatprovides anecdotal and/or valid information toaugment quantitative analysisComes from primary data, which is defined as theclosest to the source and/or the most valid data,and secondary data, which is used to validateprimary data and that is data gathered from otherthan primary sourcesTypically gathered from surveys, interviews, andfocus groupsValidity depends on a) appropriateness of the data,b) whether it can be tracked year-to-year, and c)whether it can be validated by a secondary sourceValidity depends on mapping input to quantitativedata and using it only as a mechanism to augmentother research rather than a singular source usedfor analysis
Chemicals, petrochemicals,and oil & gasDeloitte How can competitiveness accelerate economic growth in MENA?Information and communicationstechnologyIndustrial and manufacturingFigure 2: Competitiveness indicatorscatorsMetals, mining, and quarryingacMRanking inkey globalreportsTransport and logisticsTaxationGDPBusinessBudget Healthcareregistrationand life sciencesInvestmentflow t andquality of lifeCost oflivingEducationMWhen data is tracked and maintainedover a number of years, it providesinsight into overall trends regarding acountry’s current state of competitiveness.A competitiveness expert analyzes thecollected data to determine the storybehind the numbers in order to drawconclusions about a country’s competitiveposition. The analysis provides insightinto strategy, policy, or implementationchanges to establish an alternativecompetitiveness course or develop anentirely new one.roinditrack economic trends on a high levelwhile micro indicators track trends withineconomic categories that relate to thesemacro indicators.Energy and waterWorkforceIncomeFinanceE-commerce and tradeWhat are the priority sectors thatMENA countries can focus on to bemore competitive?Chemicals, petrochemicals,and oil & gasInformation and communicationstechnologyIndustrial and manufacturingMetals, mining, and quarryingTransport and logisticsHealthcare and life sciencesTourism, entertaiment andquality of lifeEnergy and waterE-commerce and tradeEmerging sectorsHousing and real estatedevelopmentFinancial servicesSmart citiesEducationWhat are the different approachesto improve regional competitivenesswithin a country?There are many approaches that acountry can adopt to improve thecompetitiveness of its regions. While themajority of countries in the world haveacknowledged the importance of regionalcompetitiveness, some have focused on acircular cumulative causation model thatwas developed by Swedish economistGunner Myrdal in the late 1950s. Myrdalargued that increasing returns in fasterdeveloping regions typically sets inmotion a process where productionfactors, especially human capital, moveaway from lower developing regions toembrace opportunities in those that aremore competitive, thus providing moreopportunity. This is common in emergingmarkets where rural to urban migrationis common, as is movement from lowperforming to high-performing regions.In simplified terms, people go where thereare economic opportunities, whether thatis movement within a country or from onecountry to another.The consequences faced by manycountries adopting this model are thatthey force migration to high-performingregions, which further erodes the abilityof low-performing regions to compete.This can result in lack of competitivenessin low-performing regions, which affectsthe country’s overall competitiveness.Once the national government realizesthis, it attempts to correct the problemby focusing monetary investment and/or incentives on low-performing regions,which then pulls resources away fromhigh-performing ones. This underminescompetitiveness in high-performingregions while typically having only amarginal impact on low-performing ones.Myrdal argued that state intervention interms of policy and resources is requiredto “level the playing field” between regions,Emerging sectorsHousing and real estatedevelopment07
Deloitte How can competitiveness accelerate economic growth in MENA?which makes sense in theory, but canonly be so if a country understands thecompetitiveness of its regions and thushas a clear picture of what needs to bedone to address inequities.The commitment of countries to track,analyze and thus understand regionalcompetitiveness is more consistent withthe endogenous growth theory thatwas developed by Nobel prize-winningeconomist Paul Romer and others. Thistheory postulates that accumulation ofknowledge generates increased returns.Thus, enhancing regional competitivenessoccurs when leaders harness strategyand resources that lay the foundation forEnhancing regionalcompetitiveness occurswhen leaders harnessstrategy and resources.sustainable regional competitiveness.This requires a re-thinking of Myrdal’smore spatially-oriented approach toinstead focus on the broader areas ofpeople and institutions, as such adoptinga “spatial blindness” approach.Figure 3 provides an overview of Myrdal’sand Romer’s theories of regionaldevelopment, the latter of which benefitsfrom the “spatial blindness” approach.In fact, some have described “spatialblindness” as a version 2.0 of Romer’sfrontier growth assumption within theendogenous growth theory. Also includedare examples of countries that haveutilized each concept.Figure 3: Overview of regional competitiveness stitutions5Financing6Innovation7Reforms8Countries utilizingthe theoreticalmodel/approachCumulative causation theory12345678ParityFocuses on helpinglow-performingregions catch upTakes a more spatialapproach and holisticone (Regional Approach)Targets support forinstitutions in lowperforming regionsProvides incentivesfor investment in lowperforming regionsDoes not infuseinnovation as partof the developmentprocessTargets reformson ous growth theory12345678PerformanceFocuses on assetswithin a region asbuilding blocks forinvestment andcompetitivenessAligns skills andresources behindsectoral strategy thatfocuses on regionalassets (Skills Approach)Targets supportfor institutions andorganizations thatcan enhance regionalassets for growthProvides non-regionalspecific incentives tobuild on sectoral assetsand to align education,skills, infrastructure, et alFocuses onvalue-addedinterventionsand creation ofhigh-value jobsTargets reformson strategies andactions that public,CyprusSpatial blindness approach12345678PeopleDoes focus ongeography, but onbuilding overallcompetitivenessthrough the nexusof regional assetsand emergingopportunitiesFocuses on increasingthe prosperity andquality of life of citizensby focusing reformsand resources onbuilding the capacityof people (PeopleApproach)Targets support forsystems across theboard so that allinstitutions in a regioncan gain capacity,visibility and goodgovernanceProvides funding tobuild the capacity ofpeople, institutions, andinnovation throughoutthe country, targetingspecific interventionson regions based ontheir value propositionsInfuses innovationin every strategy andaction, leveragingtechnology andpromoting creativityTargets peopleinstead of geography. Removesroadblocks thatprevent individualgrowth and qualityof lifeFinland,NewZealand,Denmark,Ireland08
Deloitte How can competitiveness accelerate economic growth in MENA?What is the successful model that theKingdom of Saudi Arabia adopted todeliver competitiveness?On October 24, KSA officially launchedthe National Competitiveness Center(NCC) accompanied by the World Bank’sannouncement on KSA’s Ease of DoingBusiness ranking, which witnessed anexceptional improvement moving up 30places to rank 62nd globally. A total of 62reforms were submitted, out of which 28were accepted, helping enhance KSA’sranking in 9 out of 10 pillars, such aspaying taxes, pro
competitiveness reports. While their efforts are not perfect, they reflect an approach to competitiveness that has established a pattern of ongoing increases in the quality of life and economic livelihood of their citizens. Table 1: BRIC rankings Country WEF Global Competitiveness Report (2018) (x/140 countries) WB Ease of Doing Business Report .
THE MENA-OECD COMPETITIVENESS PROGRAMME Launched in 2005 at the request of governments of the Middle East and North Africa (MENA), the MENA-OECD Competitiveness Programme is a unique, well established and recognised platform for cutting-edge policy dialogue, peer learning and capacity building across 18 countries.
MENA's average youth unemployment rate is still considered among the highest in the world with a 2% increase from last year's rate. Overview of youth unemployment in MENA region Unemployment rate in the MENA region 2017 In percentages Comparison of youth unemployment rates by region 2017 In percentages 30% 19% 13% 11% 0% 20% 40% MENA .
The MENA Investment Policy Briefs are targeted at policymakers in the MENA region and regional and international organisations working on implementation of policy reforms. The purpose of this Policy Brief is to summarise the financing challenges faced by innovative entrepreneurs in MENA countries and identify which role MENA governments could .
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MENA economies have been following that trend, concluding 622 bilateral investment treaties worldwide (approximately 22% of all the BITs concluded), including 81 with other MENA economies (intra-MENA BITs), as shown in Figure 1. For purposes of comparison, developed countries account for 63% of all BITs, Asia and Oceania for 41%, Africa overall .
Competitiveness in context - Essay Competitiveness and disparities The analysis of the relationship between competitiveness and inequalities adds an additional level of complexity to the debate. The ambiguity in defining competitiveness in sections of the literature, for example, makes it difficult to shed light on the linkages. In the European .
BIOGRAFÍA ACADÉMICA DE ALFREDO LÓPEZ AUSTIN Enero de 2020 I. DATOS PERSONALES Nacimiento: Ciudad Juárez, Estado de Chihuahua, México, 12 de marzo de 1936. Nacionalidad: mexicano. Estado civil: casado. Investigador emérito de la Universidad Nacional Autónoma de México, por acuerdo del Consejo Universitario, con fecha 21 de junio de 2000. Sistema Nacional de Investigadores. Nivel III .
