Middle East business reforms worst in the world

MIDDLE EASTERN countries rank in the bottom third of the world in terms of business regulatory and financial sector reforms, according to a recently published World Bank report.

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By  Rhys Jones Published  April 24, 2005

MIDDLE EASTERN countries rank in the bottom third of the world in terms of business regulatory and financial sector reforms, according to a recently published World Bank report. The study, on economic developments and prospects in the region, shows there has also been little success in improving public administration and public sector accountability. While the region had made impressive strides in reducing tariff and non-tariff trade barriers, “progress in improving the business climate ... has been the weakest in the world,” the report stated. “The economic and regulatory reforms that [Middle East and North African] governments are now finding difficulty in moving forward are precisely the kinds of reforms which need the support and involvement of key actors such as the private sector, labour unions and other segments of civil society,” said Christian Poortman, World Bank vice president for the region. Furthermore, the report states that Middle Eastern countries are failing to create employment opportunities for an estimated 100 million job-seekers who are set to enter the labour market in the next 20 years. Jobless rates have fallen to 13.4% of the labour force from around 15% in 2000, causing alarm that employment growth in the region remains too slow. The report stated that the Middle East needed to sustain 6% to 7% annual growth rates to meet the needs of its labour force, which is expanding by around 3% a year. “Strong growth [in the MENA region] over the last two years does not change the fundamentals for this region,” said Mustapha Nabli, World Bank chief economist for the region. “We are still talking about a region with limited private sector activity and employment creation, limited integration into the global economy and strong dependence on volatile oil markets,” he added. Economic momentum in the region over the last two years averaged 5.6%, compared with growth of 3.6% in the 1990s. However, the report maintained that such a pace was still not sufficent to meet demands for job creation. It said the MENA economies needed to become less regulated, more private sector-oriented and less dependent on oil exports. The World Bank said 97% of the growth gains in 2003 and 2004 were driven by just four countries: Saudi Arabia, Iran, Algeria and the United Arab Emirates. “In fact, nearly half of the region actually experienced growth downturns relative to the 1990s,” the report stated. The development lender said the most recent energy price surge, and the resulting windfall for the oil-rich Middle East and North African region, “in many ways evokes memories of the oil price booms of the 1970s and 1980s. With those memories emerge questions of what the fallout of this current oil boom will be,” it read. Growth is also set to slow to 4.9% this year and moderate further to 4.3% in 2006 as oil prices ease a little. However, Nabli praised governments across the region for showing restraint with their extra money, noting many have saved it or used it to pay down debt. This, he said, could soften the blow of any future energy price fall.

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