TOPIC OF THE WEEK - TWEEK
ARAB SPRING PRODUCES BUDDING ENTREPRENEURS
HAS THE ARAB SPRING PROVIDED A CLIMATE FOR BUSINESS?
Renee Horne – London 27 October 2011
More than eight months ago a surge of protests swept through parts of North Africa and the Middle East. This revolutionary wave known as the ‘Arab Spring’ or ‘Arab Uprising’ saw political turmoil that could spell economic disaster for the region. However, for most oil-exporting countries the rise of oil prices has led to higher growth and stronger fiscal and external balances. Despite the increase in government spending, anticipated real GDP growth is at 4.9 per cent in 2011 and 3.9 per cent for 2012. Indeed, the political unrest across the Arab world has increased pressure on governments to boost economic growth and provide jobs for restive populations. Whether governments are willing to make sweeping reforms is questionable, as there are fears of a resurgence of the Arab Spring. Reforms might be slow, but there are signs that the Arab Spring has catalysed a powerful wave of innovation and entrepreneurs. ..Read more….
A BUDDING ENTREPRENEURIAL SECTOR
According to the International Labour Organisation, the Arab World has one of the highest youth unemployment rates in the world, close to 24%. Young business professionals are hopeful that the Arab Spring will foster a positive entrepreneurial climate, which could be one of the solutions to the region's youth unemployment problem. This was the catchphrase at the First Arab International Forum for Young Entrepreneurs and Businessperson held in Beirut, Lebanon. The forum seeks to open a channel of communication and networking among all participants from different sectors and countries while providing exciting opportunities to establish strong collaboration for young entrepreneurs. Indeed the Arab spring has reenergised the youth to start believing in themselves. Many who wanted to leave their countries in search of better opportunities abroad are now starting their businesses on home ground. For example, Yasmine el-Mehairy has now joined the ranks of Egypt’s newest business class, instead of leaving Egypt she stayed and started up a business called SuperMama, an Arabic language Website for women that has 10 local employees. Mehairy told the New York Times, that ‘if they can topple Mubarak, what else can they accomplish?’ However while they dream of becoming successful entrepreneurs, there are still some outstanding issues. The success of the entrepreneur depends on a good business environment and this, to some extent ultimately depends on government backing and urgent reforms.
GOVERNMENT SHAKE UP
The Arab World is still at a crossroads, as governments are making cautionary reforms, as they fear the wrong move provides the climate for further unrest. However, the Arab Spring has spurred governments to spend more. Saudi Arabia, for instance, announced US$130 billion of additional public spending. It also appears that privatisation plans have been scaled down. The Saudi government’s original intent was massive private participation of major projects such as building railways and new industrial zones. Algeria responded to the Arab Spring with public sector wage rises, more generous food subsidies and assistance to the young unemployed. More radical moves in Jordan, as the cabinet and the reserve bank governor were sacked. However, it’s unclear whether the new Prime Minister, Awn Al-Khasawneh, an international jurist, will transform economic policy. In Libya, the focus will still be on energy as the major money spinner; however, the interim government has said there will be greater support for new businesses. The interim government plans to change a considerable part of the industry, including the two mobile phone operators and shipping, which were controlled by Muammar Gaddafi's family. Also, there will be greater transparency when it comes to the awarding of licences and government contracts. In Morocco, there’s a similar shake up, the government has pledged to enforce greater transparency and show impartiality with businesses owned by the monarchy, the biggest private stakeholder in the economy. The Moroccan government is also considering selling more state held shares in Moroccan companies. However, in Tunisia plans to privatise and liberalise the economy has come to a halt. There’s still a great deal of uncertainty in Tunisia, as the aftermath of the recent elections has seen violent clashes between Tunisian troops and hundreds of protesters in the town of Sidi Bouzid. The protests flared after candidate lists of a party contesting the elections were disqualified because of alleged financial irregularities. Moving onto Egypt, the interim government is debating on how to reform the corruption prone system which costs about $US5.5 billion a year. Government reform policies will wait until after the elections in 2012. There is an indication that business reform is on the cards, but privatisation is also on hold due to alleged shady state asset sales and business deals in the past. There appears to be stalling from Arab governments with regards to privatisation and business reform, hence the slow pace of policy reform could spell disaster for the budding entrepreneur! Have your say….