The Middle East, North Africa and Pakistan (MENAP) region should press ahead with economic integration to unlock its potential to generate 80 to 100 million jobs and increase its gross domestic product (GDP) by 50 percent over the next ten years, a new report said.
“When compared to global benchmarks, the MENAP’s private sector is relatively underdeveloped, with few companies operating at critical scale,” said the report published by UAE-based retail conglomerate Majid Al Futtaim, in partnership with the World Economic Forum and consultancy firm McKinsey & Co.
“The road ahead is long and fraught with challenges, but the size of the prize is compelling,” Bejjani said in the report.
According to the report, the total market capitalisation in the MENAP region, which consists of 15 countries, is currently almost ten times lower than that of 15 European countries. Also, in terms of geographical footprint, revenue and other factors, the scale of larger companies in the region is limited compared to Europe.
To unlock the region’s growth potential and stimulate economic integration, the report highlighted selective deregulation, free movement of resources and common standards as the three key elements. These elements can help develop a thriving private sector.
The large-scale firms are essential to drive investments in research and development, upskill employees, and to generate positive spillover effects for small firms within the economy.
The first lever of economic integration is selective deregulation, which would break monopolies, foster healthy competition, drive productivity and value creation.
“Many existing regulatory frameworks across MENAP are designed for traditional products and services, and are therefore regionally highly fragmented. Deregulation can reduce burdensome hurdles for entrepreneurs and organisations alike,” the report said.
The second element, which is the free movement of goods, services, capital and data, would enable frictionless and tariff-free cross-border trade, thus, stimulating higher economic activity at a regional level.
In MENAP region, business leaders see that access to the free flow of people, ease of capital movement and access to financial services are the top three obstacles for expansion within the region.
Overall, MENAP lags behind other economic regions in intra-regional trade, and it performs lower in terms of trade facilitation when compared to OECD, Europe and Central Asia, and the United States.
The third element that is crucial for economic integration is ‘standardised norms,’ which would facilitate operating in multiple markets without additional compliance costs. These consist of documented consensus agreements to be used consistently as rules and guidelines.
“In MENAP, region-wide standards have yet to be defined for industry sectors. The near-term priority should be to harmonise manufacturing, retail, agricultural, financial services and telecom standards, as these are very meaningful economic sectors in terms of contribution to GDP, and offer significant integration potential,” the report said.
(Writing by Nada Al Rifai; editing by Cleofe Maceda)
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