Growth is not fast enough across the Middle East to deliver the jobs and rising incomes desired by the population. Unemployment is chronically high and rising. The number of people without jobs has increased by more than 1 million since 2010, with one in four young people now out of work.
Much of the focus has been on what governments can do to improve the outlook for growth and jobs. This is understandable, as governments have played a central role in the economies of the region through public sector employment and investment and the role of state-owned enterprises in key sectors of the economy.
However, while governments will remain critical to the growth process going forward, their role and focus needs to change. With budget positions stretched close to breaking point in many countries, the room for additional government spending is limited. While there remains scope to support growth through well-planned public investment programs if financing is available, government policies need to increasingly focus on creating an environment in which the private sector can thrive. Private businesses need to be empowered to take over the mantle of growth and drive the economies of the region forward.
The Middle East has many positive attributes that should support a strong private sector—a young workforce, increasing access to technology, a unique geographic location linking several continents, large natural resource endowments, and rich tourist destinations. Yet, the private sector in the region has lacked the dynamism to propel growth to the levels seen in other regions of the world. It has been stifled by government interventions, a lack of competition in domestic markets, inadequate infrastructure, an inability to integrate fully into rapidly growing overseas markets, and of course by the security concerns and political uncertainties that are unfortunately present in so many countries.
The agenda to improve the business environment includes ensuring simple, transparent, and even-handed treatment for companies, greater transparency and accountability of public institutions, ensuring equal access for all to government services, adequate skill-building and incentives for employment, access to finance to help spur entrepreneurship and private investment, and greater trade integration, both within the region and in the world economy. Better infrastructure and a stable economic environment are also critical. Fiscal and monetary policies need to focus on delivering low inflation and avoiding the large swings in economic growth that create uncertainty and make firms reluctant to invest and create jobs. The over-riding objective is to make the economies more dynamic, competitive, and fair.
Businesses will need to work hand-in-hand with governments to ensure constraints are identified and reforms effectively enacted. Reforms will mean that the ways of doing business will change, with new areas of opportunity needing to be sought both within and outside the region. Vested interests will need to be overcome so as to harness the ingenuity of the private sector and open opportunity for all, and business leaders should be seen as part of the solution rather than part of the problem.
The International Monetary Fund (IMF) will be co-hosting a conference in Riyadh, Saudi Arabia, on December 3 with the Council of Saudi Chambers and the International Finance Corporation (IFC) on how the private sector in the Middle East can contribute more to economic growth. The conference will bring together the IMF, the IFC, and business people from across the region to talk about the opportunities for private sector development, how the business environment can be improved, and how businesses can help the region meet the challenges it faces.
The IMF was established to promote international financial stability and monetary cooperation, and thereby facilitate international trade and promote high employment and sustainable economic growth. These goals have never been more important than now. As the IMF continues to develop and adapt its policy advice to member governments and look for ways to contribute to a reduction in the unacceptably high rates of unemployment, this conference will provide a unique opportunity to hear first-hand from the business people who will be crucial to the future success of the region.
If the aspirations of the people in the Middle East are to be met, a more dynamic private sector is needed. The reforms to achieve this are often complex, politically difficult, and take time to pay off. Nevertheless, beginning the process is vital for restoring confidence, propelling private sector activity forward, and creating much-needed jobs.