WEF has a plan, but it is up to the Middle East to make it happen

Organisation knows what the GCC has to do to meet the challenges of today’s changing times, but can the MENA do it?
By Jennifer Bell
Sun 21 May 2017 08:44 AM

The World Economic Forum (WEF) has emphasised how the MENA region needs to rethink, refocus, respond to a changing world, and realise what it can achieve, as it prepares to host a global gathering of thought leaders in the Middle East.

More than 1,000 representatives from government, business and civil society convened at one of the region’s most historic locations – the Dead Sea in Jordan – for the World Economic Forum on Middle East and North Africa,.

They will do so amid a message from the WEF that, if challenges are recognised and accepted, transformation – which the organisation claims has “never been as fast and complex as it is today” – does not have to mean trepidation, despite the many pressing issues that the region faces.

These include tumbling oil prices that have eaten away at government revenues and squeezed budgets and priorities (making the need for economic diversification even more urgent); a constant state of geopolitical flux; and humanitarian issues including the ongoing refugee crisis and the situation in Syria, Iraq, and Libya. The WEF has also highlighted how the MENA region’s youth require both employment and empowerment if they are to shape the future of the region.

The organisation has also pointed out how, if the region chooses the right path, it can lead to bright horizons and the securing of a global advantage.

According to the WEF, the digital age – or ‘Fourth Industrial Revolution’ – is opening up new avenues for Middle Eastern nations and their young populations to remodel and re-energise their economies and societies by embracing and maximising technology; in turn, creating new jobs, inspiring entrepreneurship and propelling growth. The WEF believes that the appetite and impetus for reform and innovation exists throughout the region.

Findings of the ‘Mastercard’s Impact of Innovation Study 2016’ that surveyed consumers in Egypt, Kenya, Saudi Arabia, South Africa and the United Arab Emirates, provide such evidence. The report reveals that consumers in the region are optimistic about the effects of digitisation and more open to embracing innovative solutions. For example, mobile payment readiness is the highest globally at 73 percent and the region has the highest ratio of enthusiastic followers at 33 percent. The report also highlights the region’s demand for innovation in most areas, ranging from education and transport to commerce, finance, hotel and restaurant industries.

Each of these topics, and more, are at the centre of discussions between decision-makers from countries in the GCC, the Levant and North Africa – as well as key stakeholders from the US, Europe, East Africa and other regions – in Jordan. Designed to shape the future agenda for an array of key areas – employment, infrastructure, education, gender and energy – and analyse how greater public-private sector collaboration can drive positive change across MENA, the meeting places these goals in the context of three crucial themes: enabling innovation and entrepreneurship through the Fourth Industrial Revolution; building inclusive economies; and supporting humanitarian efforts and diplomatic dialogue.

The WEF has already produced a wealth of information, analysis and insight on the region’s current economic landscape and its potential future path.

In a report titled ‘The Future of Jobs’, it identified a “perfect storm of business model change” spanning all industries, creating new fields of employment while disrupting traditional ones, generating a need for new skills and potentially paving the way for new gender dynamics in the workplace. For the GCC, it marked out new energy supplies and technologies as the trend with the most impact on industry, and saw an expectation that this will have a positive effect on future employment within GCC nations.

However, it also defined barriers to this positivity becoming reality: resource constraints; a lack of alignment between workforce and innovation strategy; and insufficient understanding of what disruptive change means and brings. In addition, while the vast majority of employers whose opinions were canvassed for the report felt strategies for change in the GCC were “suitable”, the priorities for making it happen were made clear: investment in re-skilling employees; collaboration across industry and with educational institutions and providers of vocational training; attracting foreign talent to augment home-grown capacity; supporting mobility and job rotation; targeting female talent; and offering apprenticeships.

The WEF has acknowledged the difficulties of achieving such change against the economic jolt the Middle East experienced through the end of the oil boom. In a 2016 WEF article, Shabbir Dastgir, Senior Lecturer in Economics at the University of Huddersfield in the UK, suggested that in the GCC, not even sovereign wealth funds, relatively stable currencies and large currency reserves were sufficient in themselves to stave off budget deficits, state-subsidy reductions and a slowdown in the region’s energy and construction sectors.

While some sectors decline, he said, others could grow, with the health sector – where resources and expertise are needed to cater for the GCC’s spiralling population – being among them. But he warned: “Across the GCC economy as a whole, the growing, young population cannot be accommodated entirely by the public sector.

“Government programmes to increase the share of Gulf nationals in the labour market may well spill over into the private sector.”

According to Dorit Probst, official writer at the annual meeting of the World Economic Forum in Davos, Switzerland, held in January this year, the Fourth Industrial Revolution “holds the solution to many of the difficulties faced by countries in MENA, such as sluggish economic growth, high unemployment and security concerns”.

Davos 2017 emphasised that this change will not happen easily, and is dependent on a concerted effort by governments and the private sector to drive it forward. It recognised that MENA nations are embracing digital transformation “at varying paces”, with the ambition of the likes of Saudi Arabia and Tunisia countered by the caution of such countries as Egypt. But the meeting also suggested that while the Middle East is perceived to be lagging behind in terms of its ICT infrastructure, this may present an opportunity, allowing its countries to “leapfrog” current IT systems and adopt the latest innovations.

Experts at Davos explained that building a MENA ecosystem that nurtures technological transformation requires various elements, including a conducive policy framework, quality IT infrastructure, government and societal will and an education system that nurtures the right skills. But as Probst noted: “With the right guardrails to guide the technological revolution, Arab countries can realise the potential of a digitally enabled future.”

In this regard, public-private sector collaboration plays an unprecedented role, as Raghu Malhotra, Mastercard’s Middle East and Africa President, pointed out during his last participation in WEF Africa this month: “Governments or the private sector alone cannot build sustainable economies that benefit all segments of the society. Stronger ties of cooperation and partnership are needed to provide all the industry stakeholders with a robust framework that enables them to leverage technology and individual expertise and combine efforts in a way that creates an overall positive impact.”

Meanwhile, the WEF has pinpointed the MENA region’s potential in the field of clean, renewable energy as a possible key route to economic diversification, due to the fact that “nearly every country has enough sunlight to support a thriving solar industry”, its coastal climate is ideal for windfarms, and the infrastructure cost associated with tapping into these sources of energy is falling.

There are “encouraging signs” in this area, according to the WEF, as more MENA countries set ambitious renewable energy targets and look to cultivate the industries that can enable them to be met. But it also suggests that many nations are “just scratching the surface”, and that encouraging more private sector involvement, seeking international support and building a favourable regulatory backdrop can “foster the development of a vibrant renewable energy industry in the region”.

In terms of investment, however, the WEF has been emphatic about where this most needs to be directed in the Middle East – young people.

This standpoint was illustrated in a December 2016 op-ed for the organisation by the Institute for State Effectiveness’ Director and Co-Founder, Clare Lockhart, and Senior Fellow Mina Al-Oraibi, highlighting how “war, economic stagnation, and displacement” have drained optimism from Arab youth.

Crystallising the findings of the 2016 Arab Human Development Report, it focussed on the need for an “inclusive macro-economic framework” that ensures equality of participation in, and benefit from, Middle Eastern economies; transparent and accountable institutions; fresh analysis of the role of states in delivering services and engaging with citizens; and giving young people an “identity and voice” through the employment, education and nurturing of skills that allows them to find their place in, and contribute to, their society.

Lower oil prices and budget shortfalls have affected growth throughout the GCC.

The digital age is opening up growth opportunities for countries in the Middle East.

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