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MENA BENCHMARKING REPORT 2014Countries in the Middle East and Northern Africa (MENA) region have undergone many changes and experienced new challenges recently. A strong private sector is critical for being able to respond to these challenges.

MENA Benchmarking Report 2014 aims to benchmark the business environment that private sector companies face in MENA countries. The report focuses on the enhancement of the business environment and performance of SMEs in the region. It contains a macroeconomic analysis of MENA countries, an overview of SME performance in the region and a Business Environment Index, created specifically for this report. The Business Environment Index measures country performance in 5 Policy Areas:

� Institutions

� Infrastructure

� Access to finance

� Innovation, entrepreneurship and human capital

� Market sophistication

The report has been developed by business organisations belonging to the ARAB-EU Business Facilitation Network. The network consists of leading Business Membership Organisations from 15 MENA countries: Algeria, Bahrain, Egypt, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Saudi Arabia, Syrian Arab Republic, Tunisia, United Arab Emirates and West Bank and Gaza. The ARAB-EU Business Facilitation Network encourages discussions on the challenges that companies in the region are facing as well as solutions and policy recommendations to overcome those challenges.

More information about the ARAB-EU Business Facilitation Network as well as a PDF version of the MENA Benchmarking Report 2014 can be found on the network’s webpage: http://ae-network.com

MENABenchmarking Report

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Mena omslag 426,4x297.indd 1 02/01/15 10.16

MENA Benchmarking Report 2014

Published by the Confederation of Danish Industry January 2015 1st edition

www.di.dk/english

Funded by the Danish-Arab Partnership Programme

www.detarabiskeinitiativ.dk

Editors: Iman Awadh, ConsultantTel.: +4533773793 Email: [email protected]

Oleg Izgorodin, Business AnalystTel.: +4533773708 Email: [email protected]

Design and print:fru nielsens tegnestue

ISBN: 978-87-7144-041-6200.1.15


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MENAbenchmarking report 2014

2 � FOREWORD - MENA BENCHMARKING REPORT 2014

FOREWORD

Countries in the Middle East and Northern Africa (MENA) region have experi-enced many challenges recently. The effects of the global financial crisis as well as political uncertainty in the region have reduced the growth potential of many MENA countries. Moreover, with bloated public sectors and state owned enter-prises, the region faces pressing employment challenges.

In such conditions, policies aimed at overcoming structural economic rigidities have become even more important. Reforms aimed at making the economies more open, competitive and diversified could help the region to return to growth levels seen earlier. These changes would also contribute to improving the politi-cal and social environment in the countries.

There is a consensus that a stronger private sector is needed to respond to structural challenges such as youth unemployment. The private sector as well as small and medium enterprises (SMEs) have become a priority for policymak-ers and business communities in our region, who see SMEs and entrepreneur-ship as a mechanism for improving competitiveness, raising incomes, and gen-erating employment. As a result a wide range of supply-side programmes have been initiated. Despite the many supply-side support programmes, there is little research and almost no systematic follow-up studies on the development of the private sector in the region.

In order to assess the development of the private sector, it is essential to have an understanding of the business environment that private companies face each day. The goal of this report is exactly that: it aims to benchmark the business environment and SME performance in the MENA region.

Some MENA countries have made major investments into infrastructure, re-search and innovation recently, while the others are still behind in these terms. We hope that this report will help highlight the strengths and weaknesses of in-dividual MENA countries in terms of their business environment and serve as a useful tool for designing policies aimed at private sector development.

We are therefore very pleased to present this first edition of the MENA BENCH-MARKING REPORT 2014. The report has been developed and drafted by the leading business organisations in the MENA region under the auspice of the ARAB-EU Business Facilitation Network. The network works towards stronger commercial links, a better and more transparent business environment, region-al integration and reform initiatives, which all propel economic growth and jobs in our respective countries.

We hope you enjoy the 2014 report

3MENA BENCHMARKING REPORT 2014 �

Forum des Chefs d'Entreprises (FCE),

Algeria

Bahrain Chamber of Commerce and Industry

(BCCI), Bahrain

Confederation of Danish Industry (DI),

Denmark

Federation of Egyptian Industries (FEI), Egypt

Jordan Chamber of Industry (JCI), Jordan

Kuwait Chamber of Commerce & Industry (KCCI),

Kuwait

Association of Lebanese Industrialists (ALI),

Lebanon

Libyan Businessmen Council (LBC), Libya

Confédération Générale des Entreprises du Maroc (CGEM),

Morocco

Oman Chamber of Commerce and Industry (OCCI),

Oman

Federation of Palestinian Chambers of Commerce, Industry & Agriculture

(FPCCIA), West Bank and Gaza

Qatar Chamber of Commerce and Industry,

Qatar

Council of Saudi Chambers (CSC),

Saudi Arabia

Damascus Chamber of Industry (DCI), Syria

Union Tunisienne de l’Industrie, du Commerce et de l’Artisanat (UTICA),

Tunisia

Sharjah Chamber of Commerce and Industry,

United Arab Emirates

Federation of GCC Chambers (FGCCC)

4 � CONTENTS - MENA BENCHMARKING REPORT 2014


CONTENTS

7 INTRODUCTION

8 MACROECONOMIC ANALYSIS

9 Macroeconomic analysis: Introduction

10 Country performance

32 BUSINESS ENVIRONMENT INDEX

33 Business Environment Index: Introduction

36 Institutions

46 Infrastructure

50 Access to finance

56 Innovation, entrepreneurship and human capital

62 Market sophistication

70 Overall results

72 SPECIAL THEME: SMES IN THE MENA REGION

73 SMEs in the MENA region: Introduction

74 SME performance

80 Main challenges

84 APPENDICES

85 Country profiles

99 Description of terms

100 Methodology

104 List of macroeconomic indicators

107 List of business environment indicators

111 Description of sources

1

MACRO- ECONOMIC ANALYSESINTRODUCTION

�


INTRODUCTION

The inaugural MENA Benchmarking Report is designed as a comparative benchmarking analysis focused on measuring the enhancement of the busi-ness environment as well as the success and performance of SMEs in the MENA (Middle East and Northern Africa) region. The report provides a tool for monitoring the development of the general macroeconomic and business environment as well as SME performance in the MENA region in a timely manner, which allows judging the effectiveness of policies in the countries.

MENA Benchmarking Report is a product of the Arab-EU Business Facili-tation Network – an alliance of 15 leading Business Membership Organisa-tions from the MENA region. The organisations have pledged to work stra-tegically together, promoting relevant policy issues within and between their respective countries. The network serves as a platform from which business associations from the region can discuss the challenges for businesses and identify shared solutions and policy recommendations. A specific emphasis is on improving access to the EU market for businesses in the region. The Arab-EU Business Facilitation Network was launched in 2010 and consists of Business Membership Organisations from Algeria, Bahrain, Egypt, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Saudi Arabia, Syrian Arab Republic, Tunisia, United Arab Emirates and West Bank and Gaza. The Con-federation of Danish Industry (DI) acts as a facilitating organisation in the network.

The report opens with an analysis of the macroeconomic performance of MENA countries. This is followed by an assessment of the business environ-ment: performance of countries in the Business Environment Index, consist-ing of 5 Policy Areas (Institutions; Infrastructure; Access to finance; Inno-vation, entrepreneurship and human capital; Market sophistication), is ana-lysed. An assessment of SME situation in the MENA region follows. Finally, the Appendices provide country profiles, description of terms, methodology of the report, a list of all macroeconomic and business environment indica-tors as well as a list of sources used in the report.

1

MACRO- ECONOMIC ANALYSES

1

MACRO- ECONOMIC ANALYSIS


INTRODUCTION

Aggregate macroeconomic indicators are a useful source of information about the levels of economic development of different countries, their economic policies, business conditions and performance on the global market. Countries and regions across the world have historically experienced different levels of eco-nomic growth, driven by local conditions and govern-ment decisions as well as by global phenomena. For example, the recent financial crisis has had a profound effect on almost every world economy. Therefore, while analysing a specific country’s economic perfor-mance in isolation might be useful, it is extremely im-portant to compare its performance to other countries and regions as well.

The following pages provide data on the economic per-formance of 15 MENA countries in 21 different macro-economic indicators. The indicators are grouped into 9 categories:

� GDP and GDP growth

� Diversification of economy

� Investment

� International trade

� Government finance

� Capital markets

� Price level

� Demographics

� Employment

Each graph, apart from displaying the values for indi-vidual MENA countries, also displays regional averag-es. Averages for GCC and Non-GCC countries, Next 11 countries, BRIC countries, High income countries and the total MENA average are provided. Separate aver-ages for GCC and Non-GCC countries are provided because the countries in these groups have different economic structures (GCC countries have high contri-butions to GDP from the oil sector), and therefore, dif-ferent economic performance.

Next 11 and BRIC countries are included so as to com-pare the developing MENA region with rapidly devel-oping countries from other parts of the world, while High income countries serve as a benchmark of per-formance to which the countries are expected to con-verge in the future. Detailed composition of the groups of countries is provided in the Description of Terms.

Several observations become clear after analysing the data. First of all, GCC countries usually outperform Non-GCC countries. Secondly, MENA countries are experiencing higher economic growth levels than High income countries, but their GDP per capita levels are still much lower. Thirdly, governments of MENA coun-tries mostly run lower budget deficits and have lower overall debt levels than High income, BRIC and Next 11 countries. Furthermore, the MENA region is expe-riencing fast population growth. However, unemploy-ment levels in the region are relatively high, driven mostly by high youth unemployment and low female labour force participation.

10 MACROECONOMIC ANALYSIS - MENA BENCHMARKING REPORT 2014�

Real GDP growth1.a.

-15 -10 -5 0 5 10 15

Non-GCC average

GCC average

Syrian Arab Republic

Lebanon

Egypt

Tunisia

Jordan

Algeria

Bahrain

Morocco


Kuwait

Oman

Saudi Arabia

Qatar

West Bank and Gaza

Libya 11.0

7.7

7.6

6.1

4.8

4.4

4.3

4.0

3.7

2.9

2.7

2.2

2.0

1.7

-12.7

5.6

2.1

Average annual % growth in 2011-2013

High income countries, average

Next 11 countries, average

BRIC countries, average

MENA countries, average

COUNTRY PERFORMANCEGDP and GDP growth

Explanation and justification:Gross Domestic Product (GDP) is one of the main eco-nomic indicators. It measures the total value of goods and services produced in a country over a certain pe-riod of time. Real GDP growth is an indicator of eco-nomic growth calculated at constant prices (eliminat-ing the effect of price changes in the country). In or-der to better reflect the recent economic trends, aver-age annual % growth of Real GDP in the last 3 years (2011, 2012 and 2013) is used instead of analysing 1 year only.

Notes:Data for all countries and years was acquired from the World Bank World Development Indicators database, except for: Kuwait (data for 2013 is from IMF World Economic Outlook database), Syrian Arab Republic

(values are estimates from Institute of International Finance), United Arab Emirates (data for 2013 is from IMF World Economic Outlook database), West Bank and Gaza (data for 2013 is from IMF Middle East and Central Asia Regional Economic Outlook).

Comments:Although Libya experienced the largest average real GDP growth over the last 3 years, its performance has been extremely volatile due to the civil war: -62% in 2011, 105% in 2012 and -9% in 2013. Syrian Arab Re-public, on the other hand, experienced negative real GDP growth in 2011, 2012 and 2013. GDP growth of other MENA countries was higher than the average for High income countries, but mostly lower than the aver-age for Next 11 and BRIC countries.


GDP per capita, PPP 1.b.

0 20 40 60 80 100 120 140

Non-GCC average

GCC average

West Bank and Gaza


Morocco

Egypt

Tunisia

Jordan

Algeria

Lebanon

Libya

Bahrain

Oman

Saudi Arabia


Kuwait

Qatar 132

86

58

54

44

44

21

17

13

12

11

11

7

5

5

59

11

Current international $, thousands





Explanation and justification:GDP per capita based on purchasing power parity (PPP) is defined by the World Bank as "gross domestic product converted to international dollars using pur-chasing power parity rates. An international dollar has the same purchasing power over GDP as the U.S. dol-lar has in the United States". When converted using PPP, GDP per capita is the total value of goods and services produced in a country divided by the country's population, measured in international dollars so that differences in the purchasing power of currencies are eliminated. This allows for an easy comparison of the level of economic development of countries.

Notes:Data for all countries is for year 2013 and was acquired from the World Bank World Development Indicators database, except for: Kuwait (2012 data), Syrian Arab Republic (2010 data from IMF World Economic Out-look database), United Arab Emirates (2012 data), West Bank and Gaza (2012 data).

Comments:Qatar, Kuwait, United Arab Emirates and Saudi Ara-bia have GDP per capita levels above the average for High income countries due to the high contribution of oil exports to their GDP. GDP per capita of other MENA countries is close to the average for Next 11 and BRIC countries.


Diversification of economy

Composition of GDP by sector (% of GDP)1.c.

0 10 20 30 40 50 60 70 80 90 100

Non-GCC countries, average

GCC countries, average





West Bank and Gaza


Tunisia


Saudi Arabia

Qatar

Oman

Morocco

Libya

Lebanon

Kuwait

Jordan

Egypt

Bahrain

Algeria

3

1

1

6

11

78

12

2

1

2

1

6

11

7

9

15

18

9

14

49

64

48

30

20

30

39

71

64

61

33

31

60

24

23

36

38

53

62

41

42

52

46

67

29

73

20

56

34

35

37

49

60

39

69

76

53

52

41

37

47

Agriculture

Industry

Services

Explanation and justification:Composition of GDP by sector shows the proportion of value added in agriculture, industry and service sec-tors of the economy. It provides an overview of the structure of the economy and the level of its diversi-fication.

Notes:Data for all countries is for year 2012 and was acquired from the World Bank World Development Indicators database, except for: Bahrain (DI calculations based on 2012 data from Kingdom of Bahrain Central Infor-matics Organisation), Kuwait (DI calculations based on 2012 data from State of Kuwait Central Statistical Bureau), Libya (2008 data), Oman (DI calculations based on 2012 data from Sultanate of Oman National Centre for Statistics and Information), Qatar (DI calcu-lations based on 2012 data from Qatar Ministry of De-velopment Planning and Statistics), Syrian Arab Re-

public (2007 data), West Bank and Gaza (2011 data), Canada (2008 data), United States (2011 data), Iran (2007 data).

Comments:Developed economies usually have a low share of agri-culture and a high share of services in their GDP. This is true for High income countries, where agriculture contributes only 1% of GDP and services contribute 76%. The composition is mostly different in MENA countries: agriculture still plays an important role in Algeria, Egypt, Morocco and Syrian Arab Republic, while industry occupies by far the largest share of GDP in Kuwait, Libya, Oman, Qatar, Saudi Arabia and Unit-ed Arab Emirates because of large oil extraction sec-tors in these economies. Agriculture and industry are also more important in Next 11 and BRIC countries, compared to High income countries.


Total natural resources rents (% of GDP)1.d.

0 10 20 30 40 50 60

Non-GCC average

GCC average

West Bank and Gaza

Lebanon

Jordan

Morocco

Tunisia

Egypt

Algeria

Bahrain


Qatar


Oman

Libya

Saudi Arabia

Kuwait 55

50

46

42

25

24

24

24

23

12

7

5

3

0

0

42

16





Explanation and justification:Total natural resources rents include oil, natural gas, coal, mineral, and forest rents. Rents are the difference between price and average cost of producing (extract-ing) a commodity. Rents as % of GDP are an indicator of the reliance of economic development on natural re-source production.

Notes:Data for all countries is for year 2012 and was acquired from the World Bank World Development Indicators database, except for: Libya (2009 data), Syrian Arab Republic (2007 data), West Bank and Gaza (2005 data).

Comments:Except for Egypt, Jordan, Lebanon, Morocco, Tunisia and West Bank and Gaza, economies of MENA coun-tries are highly reliant on natural resources. In Kuwait, for example, rents from natural resources amount to 55% of GDP. High income, Next 11 and BRIC coun-tries are much less dependent on natural resources and have more diversified economies.


Investment

Gross fixed capital formation (% of GDP)1.e.

0 5 10 15 20 25 30 35 40

Non-GCC average

GCC average

Egypt

Kuwait

West Bank and Gaza

Bahrain

Libya

Tunisia


Saudi Arabia


Jordan

Lebanon

Oman

Qatar

Morocco

Algeria 31

31

29

28

28

27

27

23

22

21

21

19

18

15

14

23

22





Explanation and justification:Gross fixed capital formation is one of the components of GDP calculation using the expenditure approach. It measures the value of investments made in the econ-omy (acquisition of plants, equipment, construction of infrastructure, etc.). This is an indicator of the contri-bution of investments to total GDP.

Notes:Data for all countries is for year 2013 and was ac-quired from the World Bank World Development In-dicators database, except for: Algeria (2012 data), Bahrain (2012 data), Kuwait (2012 data), Libya (2013 data from IMF World Economic Outlook database), Morocco (2012 data), Oman (2013 data from IMF World Economic Outlook database), Qatar (2013 data from IMF World Economic Outlook database), Syrian

Arab Republic (2010 data from IMF World Economic Outlook database), Tunisia (2012 data), United Arab Emirates (2012 data), West Bank and Gaza (2012 data), Japan (2012 data), United States (2012 data).

Comments:The share of investment in GDP in MENA countries is mostly above the level of High income countries as more capital investments are still required for eco-nomic development and because industry plays a larg-er role in MENA countries than it does in High income countries. Developing Next 11 and BRIC countries are also characterized by large shares of investment.


Foreign direct investment, net inflows1.f.

0 50,000 100,000 150,000 200,000 250,000

Non-GCC average

GCC average

West Bank and Gaza

Qatar

Bahrain


Algeria

Oman

Tunisia

Libya

Jordan

Kuwait

Egypt

Morocco

Lebanon

Saudi Arabia

United Arab Emirates 9,602

9,298

3,678

2,842

2,798

1,843

1,798

1,784

1,554

1,514

1,500

1,469

891

327

180

7,145

2,257

BoP, current US$, millions





Explanation and justification:Foreign direct investment data provided by the World Bank are "the net inflows of investment to acquire a lasting management interest (10 percent or more of voting stock) in an enterprise operating in an econ-omy other than that of the investor". Net inflows are new investments less disinvestment, expressed in cur-rent U.S. dollars. This indicator shows how attractive the country is to foreign investors due to its openness, quality of workforce, economic and business condi-tions, etc.

Notes:Data for all countries is for year 2013 and was ac-quired from the World Bank World Development Indi-cators database, except for: Algeria (2012 data), Bah-rain (2012 data), Egypt (2012 data), Lebanon (2012 data), Libya (2010 data), Morocco (2012 data), Oman (2012 data), Qatar (2012 data), Syrian Arab Republic

(2010 data), Tunisia (2012 data), United Arab Emir-ates (2012 data), West Bank and Gaza (2012 data), Bangladesh (2012 data), Indonesia (2012 data), Iran (2012 data), Nigeria (2012 data).

Comments:Because of political instability in the region, MENA countries did not attract as much foreign direct invest-ment as Next 11, BRIC and High income countries did. Among MENA countries, Saudi Arabia and United Arab Emirates are the best performers in terms of FDI inflows, Qatar and West Bank and Gaza – the worst.


Exports of goods and services (% of GDP)1.g.

0 20 40 60 80 100

Non-GCC average

GCC average

West Bank and Gaza

Egypt

Morocco

Algeria


Jordan

Tunisia

Saudi Arabia

Oman

Lebanon

Libya

Kuwait

Bahrain

Qatar

United Arab Emirates 95

76

75

71

67

63

62

52

49

42

39

37

36

18

16

66

33





International trade

Explanation and justification:Exports of goods and services measure the value of goods and services provided to other countries. Ex-ports are one of the components of GDP calculation using the expenditure approach. When measured as % of GDP, it indicates the contribution of exports to to-tal value of goods and services produced and sold in a country. Share of exports in GDP is also an indicator of competitiveness of locally produced products and ser-vices abroad.

Notes:Data for all countries is for year 2013 and was ac-quired from the World Bank World Development In-dicators database, except for: Algeria (2012 data), Bahrain (2012 data), Kuwait (2012 data), Libya (2008 data), Morocco (2012 data), Oman (2011 data), Qa-tar (2012 data), Syrian Arab Republic (2007 data), Tu-nisia (2012 data), United Arab Emirates (2012 data),

West Bank and Gaza (2012 data), Japan (2012 data), United States (2012 data), Iran (2007 data), Vietnam (2012 data).

Comments:In oil exporting MENA countries, exports generally ac-count for a much larger share of GDP than in other countries. Egypt and West Bank and Gaza have the lowest shares of exports, indicating a lack of competi-tiveness of local products on the global arena. Over-all, exports are a more important part of GDP in MENA countries than they are in High income, Next 11 and BRIC countries.


Imports of goods and services (% of GDP)1.h.

0 10 20 30 40 50 60 70 80

Non-GCC average

GCC average

Kuwait

Egypt

Libya

Algeria

Qatar

Saudi Arabia

Oman


Bahrain

Morocco

Tunisia

West Bank and Gaza

Jordan


Lebanon 76

74

71

63

58

50

48

38

32

31

29

28

27

25

23

39

35





Explanation and justification:Imports of goods and services measure the value of goods and services received from other countries. Im-ports are subtracted from GDP when calculating it us-ing the expenditure approach. Imports as % of GDP is an indicator of the reliance of the economy on foreign-produced goods and services.

Notes:Data for all countries is for year 2013 and was ac-quired from the World Bank World Development In-dicators database, except for: Algeria (2012 data), Bahrain (2012 data), Kuwait (2012 data), Libya (2008 data), Morocco (2012 data), Oman (2011 data), Qa-tar (2012 data), Syrian Arab Republic (2007 data), Tu-nisia (2012 data), United Arab Emirates (2012 data), West Bank and Gaza (2012 data), Japan (2012 data), United States (2012 data), Iran (2007 data), Vietnam (2012 data).

Comments:In general, MENA countries have large shares of im-ports in their GDP as domestic production is not enough to satisfy all the economy's needs. Lebanon, Jordan and United Arab Emirates have the highest proportions of imports; refined petroleum is one of their main imports. BRIC, Next 11 and High income countries are less reliant on imports.


Government finance

General government gross debt (% of GDP)1.i.

0 30 60 90 120 150

Non-GCC average

GCC average

Lebanon

Egypt

Jordan

Morocco

Tunisia

Bahrain

Qatar


West Bank and Gaza


Algeria

Oman

Kuwait

Saudi Arabia

Libya 1

3

5

7

9

12

22

30

34

44

44

62

88

89

140

9

57





Explanation and justification:General government gross debt includes all liabilities of the government that require payment. Government debt as % of GDP is an indicator of government's in-debtedness, financial stability and solvency.

Notes:Data for all countries is for year 2013 and was ac-quired from IMF World Economic Outlook database, except for: Libya (2006 data), Syrian Arab Republic (2010 data).

Comments:Lebanon's, Egypt's and Jordan's governments are the most indebted among MENA countries, though only Lebanon's debt level exceeds the average of High in-come countries. Oil exporting MENA countries have much lower debt levels. On average, MENA, BRIC and Next 11 countries' governments are similarly indebt-ed.


General government net lending (+)/borrowing (-), (% of GDP)1.j.

-15 -10 -5 0 5 10 15 20 25 30

Non-GCC average

GCC average

Egypt

West Bank and Gaza

Lebanon


Tunisia

Morocco

Jordan

Bahrain

Algeria

Libya

Oman

Saudi Arabia


Qatar

Kuwait 28.9

11.1

10.1

8.3

5.8

1.6

0.1

-4.4

-5.3

-5.4

-5.9

-7.8

-9.5

-13.9

-14.1

10.6

-7.6





Explanation and justification:Net lending/borrowing is a measure of government's fiscal balance, calculated as total government revenue minus total expenditure. Deficits have to be financed either by using existing reserves or by undertaking ad-ditional borrowing. This is thus an indicator of govern-ment's financial stability.

Notes:Data for all countries is for year 2013 and was ac-quired from IMF World Economic Outlook database, except for: Syrian Arab Republic (2010 data).

Comments:Among oil exporting MENA countries, only Bahrain's government runs a fiscal deficit while all other gov-ernments enjoy fiscal surpluses. Other MENA govern-ments experience fiscal deficits, with the largest fiscal misbalances observed in Egypt and West Bank and Gaza. On average, governments of High income, Next 11 and BRIC countries also run fiscal deficits.


Long term sovereign debt rating by Moody's1.k.

West Bank and Gaza


Libya

Algeria

Egypt

Lebanon

Jordan

Tunisia

Morocco

Bahrain

Oman

Saudi Arabia


Qatar

Kuwait Aa2

Aa2

Aa2

Aa3

A1

Baa2

Ba1

Ba3

B1

B1

Caa1

N/A

N/A

N/A

N/A

Explanation and justification:Sovereign debt is used as a mechanism of funding by governments. Moody's assessment of sovereign debt risk is based on four factors: economic strength, insti-tutional strength, fiscal strength, and susceptibility to event risk. Sovereign debt ratings are relative rankings of credit risk which act as indicators of a country's de-fault probability and expected losses in the case of de-fault.

Notes:The provided ratings are the latest available ratings published by Moody's. The agency does not rate Alge-ria, Libya, Syrian Arab Republic and West Bank and Gaza. Moody's database was accessed on August 14, 2014.

Comments:Kuwait, Qatar and United Arab Emirates have the highest sovereign debt ratings (Aa2) among MENA countries, which indicates that the credit risk related to their public debt is the lowest. A rating of Aa2 is the 3rd best rating assigned by Moody's. Egypt has the low-est rating among MENA countries (Caa1), which is a rating assigned to debt with very high credit risk. How-ever, Moody’s changed Egypt’s outlook from negative to stable in October 2014.


Domestic credit to private sector (% of GDP)1.l.

0 20 40 60 80 100 120 140 160 180

Non-GCC average

GCC average

Libya

Algeria


West Bank and Gaza

Egypt

Saudi Arabia

Qatar

Oman

Kuwait


Bahrain

Jordan

Morocco

Tunisia

Lebanon 92

76

73

73

70

59

56

41

37

36

29

24

15

15

11

44

34





Capital markets

Explanation and justification:Domestic credit to private sector as measured by the World Bank is the amount of credit resources provided to the private sector by financial corporations. On one hand, it shows the availability of credit in the economy which is needed for the expansion of business services or other projects. On the other hand, it is an indicator of the level of indebtedness of the private sector.

Notes:Data for all countries is for year 2012 and was ac-quired from the World Bank World Development In-dicators database, except for: Syrian Arab Republic (2007 data), Canada (2008 data), West Bank and Gaza (2011 data from Palestine Monetary Authority).

Comments:Levels of credit to private sector in MENA countries are lower than the average for BRIC countries and much lower than in High income countries. Among MENA countries, Algerian, Libyan and Syrian private sectors are the least indebted, but it also means that obtaining credit in these countries is complicated.


Market capitalization of listed companies (% of GDP)1.m.

0 20 40 60 80 100

Non-GCC average

GCC average

Algeria

Libya


Tunisia

Egypt


Lebanon

Oman

West Bank and Gaza

Saudi Arabia

Bahrain

Kuwait

Morocco

Qatar

Jordan 87

67

55

53

53

51

26

26

24

24

22

20

18

0

0

45

21





Explanation and justification:Market capitalization is the market value of companies (share price times the number of shares outstand-ing). Listed companies are the companies listed on the country's stock exchanges. This indicator shows the level of development of the country's financial markets which is also related to the overall economic develop-ment because access to equity finance is an important growth factor for companies.

Notes:Data for all countries is for year 2012 and was acquired from the World Bank World Development Indicators database, except for: Algeria (DI calculations based on Algiers Stock Exchange data), Libya (DI calculations based on Libyan Stock Market data) and Syrian Arab Republic (DI calculations based on Damascus Securi-ties Exchange data).

Comments:According to this indicator, the most developed fi-nancial market among MENA countries is in Jordan. Values of the indicator for other countries are mostly below the average for BRIC countries, while the aver-age value for MENA countries is below that of all other groups of countries. Therefore, the potential for devel-opment of financial markets in MENA countries is still large.


Inflation, consumer prices1.n.

0 5 10 15 20 25 30 35 40

Non-GCC average

GCC average


Egypt

Tunisia

Libya

Jordan

Lebanon

Saudi Arabia

Algeria

Bahrain

Qatar

West Bank and Gaza

Kuwait

Morocco

Oman

United Arab Emirates 0.9

1.2

1.9

2.6

2.8

3.1

3.2

3.3

3.5

4.0

5.5

6.1

6.1

9.5

36.7

2.7

8.3

Annual %





Price level

Explanation and justification:Consumer price inflation measures the change in the cost of acquiring a specified basket of goods and ser-vices. This is an indicator of price stability. Low posi-tive values of inflation are generally preferred.

Notes:Data for all countries is for year 2013 and was ac-quired from the World Bank World Development In-dicators database, except for: Lebanon (2010 data), Libya (2012 data), Syrian Arab Republic (2012 data), United Arab Emirates (2011 data), West Bank and Gaza (2009 data).

Comments:Consumer price inflation in MENA countries is mostly above that for High income countries, except for Oman and United Arab Emirates. Syrian Arab Republic expe-rienced the largest inflation rates lately due to political instability. Most of the MENA countries have more sta-ble price levels and lower inflation rates than BRIC and Next 11 countries.


Demographics

Population growth 1.o.

0 2 4 6 8 10

Non-GCC average

GCC average

Libya

Lebanon

Tunisia

Morocco

Egypt

Saudi Arabia

Algeria


Bahrain

Jordan

West Bank and Gaza


Kuwait

Qatar

Oman 8.6

7.2

4.0

3.4

3.0

2.2

2.1

2.0

1.9

1.9

1.7

1.4

1.0

1.0

0.9

3.3

1.6

Average annual % growth in 2011-2013





Explanation and justification:Population growth is one of the main demographic in-dicators. It shows how fast the country's population is expanding/declining. In order to better reflect recent trends, average annual % growth of population in the last 3 years is used instead of analysing 1 year only.

Notes:Data for all countries and years was acquired from the World Bank World Development Indicators database.

Comments:Populations of MENA countries on average are expand-ing much quicker than those of High income, BRIC and Next 11 countries. Oman's population growth rate is in excess of 8% and is a result of a lower death rate and a higher birth rate of the local population due to better healthcare as well as a large increase in immigration (expatriates account for more than 40% of the popu-lation).


Population ages 15-64 1.p.

0 10 20 30 40 50 60 70 80 90

Non-GCC average

GCC average

West Bank and Gaza


Jordan

Egypt

Libya

Morocco

Algeria

Saudi Arabia

Tunisia

Lebanon

Kuwait

Oman

Bahrain


Qatar 85

84

77

74

73

71

70

68

68

67

66

63

62

61

57

74

65

% of total





Explanation and justification:Population ages 15-64 as % of total population is an indicator of the percentage share of working age popu-lation which can potentially contribute to the econom-ic development of the country. The larger the working age population is, the lower is the share of population below age 15 and above age 64 that has to rely on the support of others for their survival.

Notes:Data for all countries is for year 2013 and was ac-quired from the World Bank World Development Indi-cators database.

Comments:Qatar and United Arab Emirates have the largest work-ing age populations in MENA countries due to signifi-cant inflows of working age expatriates, while West Bank and Gaza has the lowest working age popula-tion. Averages of MENA and BRIC countries are slight-ly above the averages for Next 11 and High income countries.


Employment

Unemployment, total 1.q.

0 5 10 15 20 25

Non-GCC average

GCC average

West Bank and Gaza

Tunisia

Jordan

Egypt

Algeria

Morocco

Libya

Lebanon


Oman

Bahrain

Saudi Arabia


Kuwait

Qatar 0.6

1.5

3.8

5.6

7.4

8.1

8.3

8.9

8.9

9.0

9.8

11.9

12.2

12.8

23.0

4.5

10.7

% of total labour force (modeled ILO estimate)





Explanation and justification:Total unemployment, as defined by the International Labour Organization (ILO), is the share of the labour force which is without work but seeking employment. This is an indicator of economic activity in the country. High unemployment shows that there is a misbalance between demand for and supply of labour.


Comments:Most MENA countries have unemployment levels which are higher than those of BRIC, Next 11 and High income countries. Unemployment in West Bank and Gaza is much higher than in other MENA countries and exceeds 20%. Qatar and Kuwait have the lowest un-employment levels, which in part is the result of almost full employment of expatriates in these economies.


Unemployment, youth total 1.r.

0 5 10 15 20 25 30 35 40

Non-GCC average

GCC average

Egypt

West Bank and Gaza

Jordan

Tunisia

Saudi Arabia

Bahrain

Libya

Lebanon

Algeria

Oman


Morocco


Kuwait

Qatar 2

9

11

17

19

21

22

23

24

28

28

29

31

35

36

20

28

% of total labour force ages 15-24 (modeled ILO estimate)





Explanation and justification:Youth unemployment, as defined by the International Labour Organization (ILO), is the share of the labour force ages 15-24 which is without work but seeking employment. High youth unemployment is an indi-cator of the inability of the labour market to accom-modate less experienced workers. Unemployed youth cannot contribute to economic growth. High youth un-employment can also result in less innovation and may lead to a loss of competitive advantages of a country.


Comments:Youth unemployment in MENA countries is a major problem as it is higher on average than in BRIC, Next 11 and High income countries. It is most difficult for young people in Egypt and West Bank and Gaza to find employment due to instability in these countries, while only 2% of youth is unemployed in Qatar as a result of significant investments into the modernisation of the education system.


Labour force participation rate, total 1.s.

0 20 40 60 80 100

Non-GCC average

GCC average

West Bank and Gaza

Jordan


Algeria

Lebanon

Tunisia

Egypt

Morocco

Saudi Arabia

Libya

Oman

Kuwait

Bahrain


Qatar 87

79

71

68

64

53

52

50

49

48

47

44

44

41

41

63

47

% of total population ages 15+ (modeled ILO estimate)





Explanation and justification:Labour force participation rate is defined by ILO as the share of the population ages 15 and older that is eco-nomically active, that is all people who supply labour for the production of goods and services. Similarly to unemployment, this is an indicator of economic activ-ity.


Comments:MENA countries on average have lower labour force participation rates than do High income, Next 11 and BRIC countries. This is a result of low female partici-pation rates due to social issues. Among MENA coun-tries, Qatar has the highest participation rate as a large proportion of its population are working age ex-patriates, while Jordan and West Bank and Gaza have the lowest labour participation rates.


Labour force participation rate, female 1.t.

0 10 20 30 40 50 60

Non-GCC average

GCC average


Algeria

West Bank and Gaza

Jordan

Saudi Arabia

Lebanon

Egypt

Tunisia

Morocco

Oman

Libya

Bahrain

Kuwait


Qatar 51

47

43

39

30

29

26

25

24

23

18

15

15

15

13

30

21

% of female population ages 15+ (modeled ILO estimate)





Explanation and justification:Total labour force participation rate usually does not reflect the major differences in participation rates of female and male population. Female participation is usually lower than male participation due to cultural, social and demographic trends. It is therefore impor-tant to analyze gender differences in employment.


Comments:Low total labour force participation rates in MENA countries are a result of low female participation. On average, less than 30% of women are in the labour force in MENA countries, which is much lower than in High income, BRIC and Next 11 countries. As with oth-er labour indicators, Qatar is the best performer with regards to female labour force participation.


Labour force participation rate, male1.u.

0 20 40 60 80 100

Non-GCC average

GCC average

Jordan

West Bank and Gaza

Lebanon

Tunisia

Algeria


Egypt

Saudi Arabia

Morocco

Libya

Oman

Kuwait

Bahrain


Qatar 96

91

87

83

82

76

76

76

75

73

72

71

71

66

66

82

73

% of male population ages 15+ (modeled ILO estimate)





Explanation and justification:Total labour force participation rate usually does not reflect the major differences in participation rates of female and male population. Female participation is usually lower than male participation due to cultural, social and demographic trends. It is therefore impor-tant to analyze gender differences in employment.


Comments:While female labour force participation rates are low in MENA countries, male participation is above that for High income countries and similar to BRIC and Next 11 countries. Once again, Qatar has the highest value of male labour force participation: 96% of men are in the labour force.

1

MACRO- ECONOMIC ANALYSES

2

BUSINESS ENVIRONMENT INDEX

MENA BENCHMARKING REPORT 2014 33 �

INTRODUCTION

Favorable business environment is the key driver of a country’s economic development. Good conditions for starting new businesses or expanding current opera-tions are critical for the successful functioning of the economy. Even though it is impossible to perfectly measure something as intangible as business condi-tions in a country, we believe that the Business Envi-ronment Index, created by DI specifically for this re-port, provides a precise approximation of these condi-tions. It can therefore serve as a useful tool for improv-ing business policies affecting both large companies and SMEs.

The Business Environment Index consists of five policy areas:

A. Institutions

B. Infrastructure

C. Access to finance

D. Innovation, entrepreneurship and human capital

E. Market sophistication

Each policy area, in turn, is composed of several indi-cators. Graphs presented in this chapter display scores in each of the individual indicators for 15 MENA coun-tries as well as regional averages. Averages for GCC

BUSINESS ENVIRONMENT INDEX - MENA BENCHMARKING REPORT 201434�

and Non-GCC countries, High income countries (most developed countries in the world) and Middle income countries (selected based on the proximity of their Gross National Income (GNI) per capita to the aver-age GNI per capita of MENA countries) and the total MENA average are provided. Detailed composition of the groups of countries is provided in the Description of Terms.

Each country is assigned a score on a scale from 0 to 10 based on its performance relative to High income and Middle income countries in each of the indicators. This means that the highest scoring country among all the MENA, High income and Middle income countries gets assigned a value of 10, and the lowest scoring country among all of them gets assigned a value of 0.

� 2.a.1.1 Property rights Page 37

� 2.a.2.1 Intellectual property protection Page 38

� 2.a.3.1 Corruption Perceptions Index Page 39

� 2.a.4.1 Labour freedom Page 40

� 2.a.5.1 Enforcing contracts Page 41

� 2.a.6.1 Starting a business Page 42

� 2.a.6.2 Investment freedom Page 43

� 2.a.7.1 Business costs of crime and violence Page 44

� 2.a.8.1 Protecting investors Page 45

� 2.b.1.1 Quality of overall infrastructure Page 47

� 2.b.2.1 ICT Access Index Page 48

� 2.b.3.1 Getting electricity Page 49


Overall, GCC countries have much higher Business Environment Index scores than Non-GCC countries. Nonetheless, all MENA countries have low scores in Policy area D (Innovation, entrepreneurship and hu-man capital) and Policy area E (Market sophistica-tion). Furthermore, one of the major challenges facing the region is the low level of entrepreneurship. Leba-non and Morocco score highest in Total Entrepreneur-

ial Activity and Established Business Ownership Rate, while many resource rich economies score quite low.On a country level, Qatar and United Arab Emirates get the highest overall Business Environment Index scores. These countries perform very well in Policy area B (Infrastructure), but, similarly to other MENA countries, lose many points in Policy area D (Innova-tion, entrepreneurship and human capital).

� 2.c.1.1 Ease of access to loans Page 51

� 2.c.2.1 Venture capital availability Page 52

� 2.c.3.1 Market capitalization of listed companies Page 53

� 2.c.3.2 Stocks traded Page 54

� 2.d.1.1 Human Development Index Page 57

� 2.d.1.2 Employment in knowledge- intensive services Page 58

� 2.d.2.1 Global Innovation Index Page 59

� 2.d.3.1 Total early-stage Enterpreneurial Activity (TEA) Page 60

� 2.d.4.1 PCT patents, applications Page 61

� 2.e.1.1 Buyer sophistication Page 63

� 2.e.2.1 High-tech and medium- high-tech output Page 64

� 2.e.3.1 Trade freedom Page 65

� 2.e.4.1 Established Business Ownership Rate Page 66

� 2.e.5.1 Creative goods exports Page 67

� 2.e.5.2 Wikipedia monthly page edits Page 68

� 2.e.5.3 Number of video uploads on YouTube Page 69


Institutions are an important part of the business environment. According to World Economic Forum’s 2014 Global Competitiveness Report, the quality of public and private institutions has a large impact on competitiveness and growth of a country: among other effects, it influences investment and wealth distribu-tion decisions as well as impacts the level of costs that organisations have to bear. Such factors as property right protection, level of corruption, business regula-tions and others strongly affect the conditions in which companies operate.

In this report, the level of development of institutions in a country is measured by 9 indicators:

� Property rights

� Intellectual property protection

� Corruption Perceptions Index

� Labour freedom

� Enforcing contracts

� Starting a business

� Investment freedom

� Business costs of crime and violence

� Protecting investors

Overall, MENA countries have a very similar perfor-mance in this policy area to Middle income countries, but score lower than High income countries. As in the other areas, GCC countries outperform Non-GCC countries.

United Arab Emirates, Qatar and Oman are the three top scoring MENA countries when it comes to insti-tutional development. United Arab Emirates is at the top in Corruption Perceptions Index, Labour freedom and Starting a business; Qatar has the highest scores in Property rights and Intellectual property protection. Oman achieves its place among the top three coun-tries by performing relatively well in all the indicators.

INSTITUTIONS


Property rights2.a.1.1.

0 2 4 6 8 10

Non-GCC average

GCC average

West Bank and Gaza


Libya

Lebanon

Egypt

Algeria

Tunisia

Saudi Arabia

Morocco

Oman

Kuwait


Jordan

Bahrain

Qatar 7.5

6.3

6.3

5.6

5.0

5.0

3.8

3.8

3.8

2.5

1.3

1.3

0.0

0.0

N/A

4.7

2.1


Middle income countries, average


Explanation and justification:The extent to which a country’s legal framework allows individuals to freely accumulate private property is one of the most important concerns of workers and inves-tors. The Property rights index measures the degree to which a country’s laws protect private property rights and the extent to which those laws are respected; the likelihood that private property will be expropriated by the state and the independence of the judiciary; the ex-istence of corruption within the judiciary; and the abil-ity of individuals and businesses to enforce contracts.

Notes:The data is from the 2014 Index of Economic Freedom by the Heritage Foundation. Data for West Bank and Gaza is not available.

Comments:Qatar has the best property rights protection among MENA countries, Libya and Syrian Arab Republic – the worst. On average, High income countries perform much better than Middle income and MENA countries in terms of this indicator.


Intellectual property protection2.a.2.1.

0 2 4 6 8 10 12

Non-GCC average

GCC average

West Bank and Gaza

Libya

Lebanon

Algeria

Egypt

Tunisia

Kuwait


Morocco

Jordan

Bahrain

Oman

Saudi Arabia


Qatar 10.0

8.7

7.1

7.1

6.5

6.3

4.0

3.4

3.3

2.2

1.9

1.7

0.0

0.0

N/A

7.3

2.3




Explanation and justification:Countries with strong intellectual property protec-tion usually have higher levels of investment and in-novation. The Intellectual property protection index is based on the following survey question: In your coun-try, how strong is the protection of intellectual prop-erty, including anti-counterfeiting measures?

Notes:The data is from World Economic Forum’s 2014-2015 Executive Opinion Survey (a part of the Global Com-petitiveness Report), which captures the opinions of over 13,000 business leaders in 148 economies. Data for all countries is a 2013-2014 weighted average, ex-cept for Syrian Arab Republic (2011-2012 weighted average). Data for West Bank and Gaza is not avail-able.

Comments:According to senior managers in their respective coun-tries, Qatar has the best intellectual property protec-tion among MENA, Middle income and High income countries, Libya and Lebanon – the worst. On average, MENA countries perform better than Middle income, but worse than High income countries.


Corruption Perceptions Index2.a.3.1.

0 1 2 3 4 5 6 7 8

Non-GCC average

GCC average

West Bank and Gaza


Libya

Lebanon

Egypt

Algeria

Morocco

Tunisia

Kuwait

Jordan

Saudi Arabia

Oman

Bahrain

Qatar


6.9

4.2

4.1

3.9

3.8

3.5

3.2

2.7

2.6

2.0

1.5

0.0

0.0

N/A

4.8

2.2




Explanation and justification:Corruption Perceptions Index is based on questions gathered from 13 different sources. The questions ad-dress transparency, accountability and corruption is-sues in the public sector, such as bribery, auditing of public finances, advertising tenders and jobs, whistle-blower and anti-corruption activist protection, and an-ti-corruption policies. Less corrupt countries have bet-ter functioning markets, attract more investment and generate more entrepreneurial activity.

Notes:The data is from Transparency International's 2013 Corruption Perceptions Index. Data for West Bank and Gaza is not available.

Comments:United Arab Emirates is the least corrupt country among MENA countries, Libya and Syrian Arab Re-public – the most corrupt. MENA countries on aver-age perform better than Middle income countries, but worse than High income countries.


Labour freedom2.a.4.1.

0 1 2 3 4 5 6 7 8

Non-GCC average

GCC average

West Bank and Gaza

Morocco

Egypt

Algeria


Lebanon

Kuwait

Qatar

Tunisia

Jordan

Oman

Saudi Arabia

Libya

Bahrain


7.7

7.1

6.7

6.7

6.3

6.3

5.9

4.9

4.1

3.6

2.6

2.2

0.0

N/A

6.7

2.6




Explanation and justification:Countries with better labour freedom generally have lower unemployment levels. The Labour freedom in-dex is composed of 6 equally-weighted factors: ratio of minimum wage to average value added per worker; hindrance to hiring a worker; rigidity of working hours; difficulty in firing redundant workers; legally mandated notice period; and mandatory severance pay.


Comments:United Arab Emirates has the highest labour freedom among MENA countries, Morocco – the lowest. On av-erage, MENA countries perform better than Middle income countries, but worse than High income coun-tries.


Enforcing contracts2.a.5.1.

0 1 2 3 4 5 6 7 8 9 10

Non-GCC average

GCC average


Egypt

Libya

Jordan

Algeria

Saudi Arabia

Lebanon

Bahrain

Kuwait

Oman


Qatar

West Bank and Gaza

Morocco

Tunisia 5.8

5.5

5.2

4.9

4.5

4.1

3.4

3.3

3.0

3.0

2.9

2.6

1.7

1.3

0.0

3.6

2.5




Explanation and justification:Efficient contract enforcement reduces the importance of the informal sector of an economy, improves access to credit and increases trade. The Enforcing contracts index reflects the efficiency of the country's legal sys-tem. It measures the time, cost and number of proce-dures involved in resolving a standardized commercial lawsuit between two domestic businesses through the local first-instance court.

Notes:The data for all countries is from World Bank's 2014 Doing Business report.

Comments:Tunisia has the most efficient contract enforcement among MENA countries, while Syrian Arab Republic – the least efficient. All MENA countries are below the average for Middle income and High income countries.


Starting a business2.a.6.1.

0 1 2 3 4 5 6 7 8 9

Non-GCC average

GCC average

Libya

Algeria

Kuwait

West Bank and Gaza


Lebanon

Jordan

Qatar

Bahrain

Saudi Arabia

Oman

Tunisia

Egypt

Morocco


7.7

7.0

5.8

5.4

4.9

4.0

3.2

2.9

2.7

1.8

1.7

0.7

0.0

0.0

4.9

4.6




Explanation and justification:The ease of starting a business is positively related to the level of entrepreneurial activity in a country. This index measures the number of procedures, time, cost and paid-in minimum capital required for small and medium-size limited liability companies to formally operate.


Comments:United Arab Emirates is the best performer among MENA countries, Libya and Algeria – the worst. On av-erage, the ease of doing business in MENA countries is similar to that of Middle income countries, but below the High income countries.


Investment freedom2.a.6.2.

0 1 2 3 4 5 6 7 8 9

Non-GCC average

GCC average

West Bank and Gaza


Libya


Tunisia

Saudi Arabia

Qatar

Egypt

Algeria

Kuwait

Lebanon

Oman

Morocco

Jordan

Bahrain 8.3

7.8

7.8

7.2

6.7

6.1

5.0

5.0

5.0

4.4

3.9

3.9

0.6

0.0

N/A

4.8

5.1




Explanation and justification:Countries with more restrictions on investment usu-ally have lower levels of entrepreneurial activity. The Investment freedom index evaluates a variety of reg-ulatory restrictions that are typically imposed on in-vestment: national treatment of foreign investment; foreign investment code; restrictions on land owner-ship; sectoral investment restrictions; expropriation of investments without fair compensation; foreign ex-change controls; and capital controls.


Comments:Bahrain has the best investment freedom among MENA countries, while Syrian Arab Republic has the worst. High income and Middle income countries per-form better on average than MENA countries.


Business costs of crime and violence2.a.7.1.

0 2 4 6 8 10 12

Non-GCC average

GCC average

West Bank and Gaza

Libya

Egypt

Lebanon

Tunisia

Algeria

Bahrain

Jordan

Kuwait

Morocco

Saudi Arabia

Oman


Qatar

Syrian Arab Republic 10.0

9.8

9.8

8.9

7.6

6.9

6.7

6.3

4.9

3.7

2.8

2.7

0.0

0.0

N/A

8.2

2.9




Explanation and justification:High business costs of crime and violence reduce in-vestor confidence in the country. This index is based on the following survey question: In your country, to what extent does the incidence of crime and violence impose costs on businesses?


Comments:According to senior executives in their respective countries, Syrian Arab Republic is the best perform-er among MENA, Middle income and High income countries, Egypt and Libya – the worst. Syria’s per-formance, however, is based on 2010-2011 data and might have changed recently because of the political instability. On average, MENA countries perform bet-ter than Middle income and High income countries.


Protecting investors2.a.8.1.

0 2 4 6 8 10

Non-GCC average

GCC average

Libya

Jordan

Egypt

Qatar


Morocco

Bahrain


Oman

Lebanon

Algeria

Kuwait

West Bank and Gaza

Tunisia

Saudi Arabia 8.9

7.1

5.8

5.4

4.3

4.3

4.3

4.3

3.3

3.3

3.3

2.5

1.4

0.0

0.0

6.7

2.9




Explanation and justification:The Protecting investors index measures three aspects of investor protection: approval and transparency of related-party transactions (extent of disclosure index); liability of company directors for self-dealing (extent of director liability index); and shareholders’ ability to ob-tain corporate documents before and during derivative or direct shareholder litigation. Investors are reluctant to provide funding to companies when investor protec-tion is low.


Comments:Saudi Arabia has the best investor protection among MENA countries, Libya and Jordan – the worst. MENA countries on average are below Middle income and High income countries in terms of investor protection.


Infrastructure has a large effect on the business envi-ronment. According to World Economic Forum’s 2014 Global Competitiveness Report, high development levels of infrastructure significantly impact economic growth and contribute to the reduction of income in-equalities. Quality of transport, telecommunications and energy supply are all important parts of the overall business environment.

In this report, the development of infrastructure in a country is measured by 3 indicators:

� Quality of overall infrastructure

� ICT (Information and communication technology) Access Index

� Getting electricity

In terms of regional performance, MENA countries outperform Middle income countries, but lag behind High income countries when it comes to infrastruc-ture. The score of GCC countries is more than twice as high as the score of Non-GCC countries.

On an individual country level, United Arab Emirates, Qatar and Saudi Arabia come out on top in this policy area, with United Arab Emirates being the top scorer in all three indicators.

INFRASTRUCTURE


Quality of overall infrastructure2.b.1.1.

0 2 4 6 8 10 12

Non-GCC average

GCC average

West Bank and Gaza

Libya

Lebanon

Egypt

Algeria

Tunisia


Kuwait

Morocco

Jordan

Saudi Arabia

Qatar

Oman

Bahrain


7.9

7.6

7.6

7.1

6.1

5.6

4.9

4.4

4.0

3.2

1.6

0.0

0.0

N/A

7.5

2.9




Explanation and justification:A high level of infrastructure development is critical for the effective functioning of the economy. The Quality of overall infrastructure index is based on the follow-ing survey question: How would you assess general in-frastructure (e.g., transport, telephony, and energy) in your country?


Comments:According to senior executives in their respective countries, United Arab Emirates has the best infra-structure among MENA, Middle income and High in-come countries, Libya and Lebanon – the worst. On average, MENA countries have better infrastructure than Middle income countries, but worse than High in-come countries.


ICT Access Index2.b.2.1.

0 1 2 3 4 5 6 7 8 9

Non-GCC average

GCC average

West Bank and Gaza

Libya

Algeria

Tunisia


Egypt

Morocco

Jordan

Oman

Lebanon

Kuwait

Saudi Arabia

Qatar

Bahrain


7.4

7.1

6.5

5.9

5.0

4.4

2.8

2.2

1.3

1.3

0.8

0.0

N/A

N/A

6.6

1.2




Explanation and justification:The ICT Access Index is a composite index that equal-ly weighs five indicators: fixed telephone lines per 100 inhabitants; mobile cellular telephone subscriptions per 100 inhabitants; international Internet bandwidth (bit/s) per Internet user; percentage of households with a computer; and percentage of households with Internet access. It measures ICT readiness, which is an important requirement for using and benefiting from ICT.

Notes:The data is from International Telecommunication Un-ion's Measuring the Information Society 2013 report. The data for all countries is for year 2012. Data for Ku-wait, Libya and West Bank and Gaza is not available. Kuwait's value is estimated as the average of its scores in other indicators in the same policy area (indicators 2.b.1.1. and 2.b.3.1).

Comments:United Arab Emirates has the best access to ICT among MENA countries, Algeria – the worst. On aver-age, MENA countries perform slightly better than Mid-dle income, but worse than High income countries.


Getting electricity2.b.3.1.

0 2 4 6 8 10 12

Non-GCC average

GCC average

Algeria

Egypt

Morocco

West Bank and Gaza


Libya

Kuwait

Oman

Tunisia

Bahrain

Lebanon

Jordan

Qatar

Saudi Arabia


9.3

8.7

7.9

7.3

7.2

7.1

6.9

6.9

6.3

5.6

5.3

4.7

4.3

1.9

9.0

4.2




Explanation and justification:Electricity accessibility is critical for encouraging in-vestment, productivity growth and expansion of the economy. The Getting electricity index measures the number of procedures, time and cost for a small to me-dium-size business to get a new electricity connection for a warehouse.


Comments:United Arab Emirates has the best ease of getting elec-tricity among MENA countries, Algeria – the worst. On average, MENA countries have better performance than Middle income, but worse performance than High income countries.


Easy access to finance is a consequence of an efficient financial sector. According to World Economic Forum’s 2014 Global Competitiveness Report, an efficient fi-nancial sector allocates resources to investment pro-jects with the highest expected rates of return, which is critical to productivity growth. Therefore, ease of ac-cess to bank loans and venture capital as well as stock markets play a significant role in the development of a favourable business environment.

Access to finance in this report is measured by 4 indi-cators:

� Ease of access to loans

� Venture capital availability

� Market capitalization of listed companies

� Total value of traded stocks

Overall, MENA countries have a slightly higher score than that of Middle income countries, but a lower score than High income countries. Once again, GCC countries significantly outperform Non-GCC coun-tries. Among MENA countries, Qatar, Saudi Arabia and United Arab Emirates are the top performers. Qa-tar has the highest score among MENA countries in Ease of access to loans and Venture capital availabil-ity, Saudi Arabia – in Total value of traded stocks.

ACCESS TO FINANCE


Ease of access to loans2.c.1.1.

0 2 4 6 8 10 12

Non-GCC average

GCC average

West Bank and Gaza

Libya

Egypt


Lebanon

Algeria

Tunisia

Morocco

Kuwait

Saudi Arabia

Jordan

Oman

Bahrain


Qatar 10.0

9.0

7.6

7.2

5.8

5.7

4.4

4.3

3.6

3.5

3.4

2.1

0.8

0.0

N/A

6.8

2.4




Explanation and justification:The Ease of access to loans index is based on the fol-lowing survey question: In your country, how easy is it to obtain a bank loan with only a good business plan and no collateral? Easy access to financing stimulates business investment and economic growth.


Comments:Qatar has the best access to loans among MENA, Mid-dle income and High income countries, according to local business leaders. The worst access to loans among MENA countries is in Libya. On average, MENA countries have better access to loans than Middle in-come countries, but worse access than High income countries.


Venture capital availability2.c.2.1.

0 2 4 6 8 10 12

Non-GCC average

GCC average

West Bank and Gaza

Libya


Algeria

Egypt

Kuwait

Tunisia

Lebanon

Morocco

Saudi Arabia

Jordan

Oman

Bahrain


Qatar 10.0

8.5

5.8

5.6

5.5

5.3

3.7

3.0

2.8

2.8

1.3

1.1

0.7

0.0

N/A

6.2

1.8




Explanation and justification:Easy access to venture capital encourages entrepre-neurship and positively contributes to the growth of the economy. This index is based on the following sur-vey question: In your country, how easy is it for entre-preneurs with innovative but risky projects to find ven-ture capital?


Comments:According to senior managers in their respective coun-tries, the best access to venture capital among MENA, Middle income and High income countries is in Qatar, the worst – in Libya. MENA countries perform bet-ter than Middle income, but worse than High income countries, on average.


Market capitalization of listed companies (% of GDP) 2.c.3.1.

0 1 2 3 4 5 6

Non-GCC average

GCC average

Algeria

Libya


Tunisia

Egypt


Lebanon

Oman

West Bank and Gaza

Saudi Arabia

Bahrain

Kuwait

Morocco

Qatar

Jordan 5.4

4.2

3.4

3.3

3.3

3.2

1.6

1.6

1.5

1.5

1.4

1.2

1.1

0.0

0.0

2.8

1.4




Explanation and justification:Well-developed financial markets are extremely impor-tant for the establishment of new companies, which, in turn, stimulate entrepreneurial activity and encourage economic growth. Market capitalization is the number of shares of companies listed on the country's stock exchanges multiplied by the share price, expressed as a percentage of the country's GDP.

Notes:Data for all countries is for year 2012 and was acquired from the World Bank World Development Indicators database, except for: Algeria (DI calculations based on Algiers Stock Exchange data), Libya (DI calculations based on Libyan Stock Market data) and Syrian Arab Republic (DI calculations based on Damascus Securi-ties Exchange data). Data for Azerbaijan (Middle in-come country) is based on DI calculations and Baku Stock Exchange information.

Comments:The highest market capitalization to GDP ratio among MENA countries is in Jordan, the lowest – in Alge-ria and Libya. On average, MENA countries perform worse than Middle income and High income countries.


Stocks traded, total value (% of GDP)2.c.3.2.

0 1 2 3 4 5 6 7 8

Non-GCC average

GCC average

West Bank and Gaza

Libya

Algeria


Lebanon

Bahrain

Tunisia

Oman

Morocco


Egypt

Qatar

Jordan

Kuwait

Saudi Arabia 5.3

1.0

0.7

0.6

0.6

0.3

0.3

0.3

0.2

0.1

0.1

0.0

0.0

N/A

N/A

3.1

0.3




Explanation and justification:The total value of stocks traded on a country's stock exchanges as a percentage of the country's GDP acts as a measure of financial market liquidity. Active and liquid financial markets are related to the overall eco-nomic development of the country because access to equity finance is an important growth factor for com-panies.

Notes:Data for all countries is for year 2012 and was acquired from the World Bank World Development Indicators database, except for: Algeria (DI calculations based on Algiers Stock Exchange data) and Syrian Arab Repub-lic (DI calculations based on Damascus Securities Ex-change data). Data for Libya and West Bank and Gaza is unavailable. Data for Azerbaijan (Middle income country) is based on DI calculations and Baku Stock Exchange information.

Comments:Among MENA countries, turnover of traded stocks is largest in Saudi Arabia and lowest in Algeria and Syr-ian Arab Republic. MENA countries perform worse than Middle income and High income countries, on average.


Innovation is a key driver of economic growth of mod-ern developed economies. According to the Global Innovation Index 2014 report, human capital is the fundamental driver of the innovation process – it is in-volved in all stages of innovation. Moreover, modern economic theory considers human capital formation to be the main element of economic growth. Entrepre-neurship is an important driver of economic growth as well. According to 2013 Global Entrepreneurship Mon-itor report, entrepreneurship is often associated with the total well-being of a society. Entrepreneurship is also thought to spur innovation, increase competition and create new jobs.

In this report, the levels of innovation, entrepreneur-ship and human capital are measured by 5 indicators:

� Human Development Index

� Employment in knowledge-intensive services

� Global Innovation Index

� Total early-stage Entrepreneurial Activity

� PCT (Patent Cooperation Treaty) patents, applications per million of population

In terms of regional performance, MENA countries score below both Middle income and High income countries. The score of GCC countries is only slight-ly above that of Middle income countries, while Non-GCC countries have the lowest scores. On a country level, United Arab Emirates, Qatar and Lebanon come out on top among MENA countries. United Arab Emir-ates is the highest scorer in Employment in knowl-edge-intensive services and Global Innovation Index, while Qatar – in the Human Development Index.

INNOVATION, ENTREPRENEURSHIP AND HUMAN CAPITAL


Human Development Index2.d.1.1.

0 2 4 6 8 10 12

Non-GCC average

GCC average

Morocco


Egypt

West Bank and Gaza

Algeria

Tunisia

Jordan

Lebanon

Oman

Libya

Kuwait

Bahrain


Saudi Arabia

Qatar 7.9

7.4

7.1

6.7

6.6

5.6

5.6

5.0

4.3

3.5

3.4

2.3

2.2

1.4

0.0

7.2

2.4




Explanation and justification:HDI measures the average achievements in a country in three basic dimensions of human development: a long and healthy life, access to knowledge and a de-cent standard of living. Index components are: Life ex-pectancy at birth; Mean years of schooling; Expected years of schooling; Gross national income (GNI) per capita.

Notes:The data is from United Nations Human Development Report 2014.

Comments:Among MENA countries, Qatar has the highest level of human development, Morocco – the lowest. On aver-age, MENA countries are slightly better in terms of hu-man development than Middle income countries, but much worse than High income countries.


Employment in knowledge-intensive services (% of workforce)2.d.1.2.

0 1 2 3 4 5 6 7 8

Non-GCC average

GCC average

West Bank and Gaza

Libya

Morocco


Jordan

Oman

Kuwait

Algeria

Bahrain

Tunisia

Saudi Arabia

Qatar

Lebanon

Egypt


6.7

6.2

4.3

4.0

3.5

3.4

3.0

2.9

2.8

2.7

2.2

0.0

N/A

N/A

4.5

4.4




Explanation and justification:Knowledge-intensive services include the following job categories: Managers; Professionals; Technicians and associate professionals; Legislators, senior officials and managers; Administrative workers; Clerical and related workers. The global economy is transitioning to a knowledge-based phase, having previously tran-sitioned from the agriculture-based to the industry-based stage. Employment in knowledge-intensive ser-vices is an indicator of how far the country has transi-tioned into this new phase.

Notes:The data for all countries is from the Global Innovation Index 2014, which uses data from the International Labour Organization, except for Syrian Arab Republic (Global Innovation Index 2013). Data for Jordan, Lib-ya, Oman and West Bank and Gaza is not available. Jordan's value is estimated as the average of its scores

in other indicators in the same policy area (indicators 2.d.1.1., 2.d.2.1., 2.d.3.1., 2.d.4.1.), Oman's value – from indicators 2.d.1.1., 2.d.2.1., 2.d.4.1.

Comments:United Arab Emirates has the highest share of peo-ple employed in knowledge-intensive services among MENA countries, Morocco – the lowest. On average, MENA countries are below Middle income and High in-come countries.


Global Innovation Index2.d.2.1.

0 2 4 6 8 10

Non-GCC average

GCC average

West Bank and Gaza

Libya


Algeria

Egypt

Morocco

Tunisia

Lebanon

Oman

Kuwait

Jordan

Bahrain

Qatar

Saudi Arabia


4.6

4.3

3.3

3.2

3.0

2.6

2.6

2.4

2.2

1.6

0.1

0.0

N/A

N/A

4.4

1.3




Explanation and justification:The Global Innovation Index ranks countries based on their innovation capabilities. The aggregate score is based on 7 pillars: Institutions, Human capital and research, Infrastructure, Market sophistication, Busi-ness sophistication, Knowledge and technology out-puts, Creative outputs. Innovation is one of the main drivers of economic growth and well-being of a coun-try.

Notes:The data for all countries is from the Global Innovation Index 2014, except for Syrian Arab Republic (Global Innovation Index 2013). Data for Libya and West Bank and Gaza is not available.

Comments:United Arab Emirates has the highest innovation score among MENA countries, Syrian Arab Republic – the lowest. On average, MENA countries score lower than Middle income and much lower than High income countries.


Total early-stage Entrepreneurial Activity (TEA)2.d.3.1.

0 1 2 3 4 5 6 7

Non-GCC average

GCC average

Tunisia

Algeria


Egypt


Oman

Saudi Arabia

West Bank and Gaza

Kuwait

Jordan

Bahrain

Libya

Qatar

Lebanon

Morocco 5.9

5.6

4.2

3.7

3.4

3.3

3.1

3.1

2.9

2.8

2.4

2.1

1.3

0.7

0.7

2.7

2.3




Explanation and justification:TEA is measured as the percentage of 18-64 popula-tion who are either a nascent entrepreneur (actively involved in setting up a business they will own or co-own) or owner-manager of a new business (less than 3.5 years old). Entrepreneurial activity encourages in-novation, job creation and increases competitiveness and prosperity of the economy.

Notes:The data is from the Global Entrepreneurship Monitor Report. Values for Algeria and Libya are from 2013, Egypt, Tunisia and West Bank and Gaza – 2012, Unit-ed Arab Emirates – 2011, Saudi Arabia – 2010, Jor-dan, Lebanon, Morocco, Syrian Arab Republic – 2009. Data for Bahrain, Kuwait, Oman and Qatar is not available. Bahrain's value is estimated as the aver-age of its scores in other indicators in the same policy area (indicators 2.d.1.1., 2.d.1.2., 2.d.2.1., 2.d.4.1.),

Kuwait's value – from indicators 2.d.1.1., 2.d.1.2., 2.d.2.1., 2.d.4.1., Oman's value – from indicators 2.d.1.1., 2.d.2.1., 2.d.4.1., Qatar's value – from in-dicators 2.d.1.1., 2.d.1.2., 2.d.2.1., 2.d.4.1. Data for Azerbaijan (Middle income country) is not available as well, so its value is estimated from indicators 2.d.1.1., 2.d.1.2., 2.d.2.1., 2.d.4.1.

Comments:Morocco has the highest entrepreneurial activity among MENA countries, Tunisia and Algeria – the low-est. On average, MENA countries have entrepreneur-ship rates that are similar to those of High income countries, but both of them are below the average of Middle income countries.


PCT patents, applications/million pop.2.d.4.1.

0 1 2 3 4 5 6

Non-GCC average

GCC average

West Bank and Gaza


Algeria

Libya

Jordan

Kuwait

Morocco

Egypt

Oman

Bahrain

Tunisia

Lebanon


Qatar

Saudi Arabia 0.2

0.2

0.2

0.1

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

N/A

0.2

0.0




Explanation and justification:The number of applications filed under the Patent Co-operation Treaty per million population is an indicator of the country's innovation capacity.

Notes:The data is from World Economic Forum’s Global Com-petitiveness Report 2014-2015. Data for all countries is a 2010-2011 average, except for Libya (2009-2010 average) and Syrian Arab Republic (2009 value). Data for West Bank and Gaza is not available.

Comments:Saudi Arabia, Qatar and United Arab Emirates are the leaders among MENA countries in terms of patent ap-plications. In general, all MENA countries have very low numbers of patent applications when compared to High income countries. However, the average per-formance of MENA countries is just slightly below the average of Middle income countries.


Market sophistication is a major indicator of the over-all level of development of the economy as well as the business environment. The level of sophistication of markets has a direct effect on different aspects of the economy, such as innovation, competition, human capital development, efficiency, etc.

Market sophistication in this report is measured by 7 indicators:

� Buyer sophistication

� High-tech and medium-high-tech output

� Trade freedom

� Established Business Ownership Rate

� Creative goods exports

� Wikipedia monthly page edits (per million population 15–69 years old)

� Number of video uploads on YouTube (scaled by population 15-69 years old)

In this policy area, MENA countries have the lowest score when compared to Middle income and High in-come countries. GCC countries outperform Non-GCC countries, but still have a lower score than that of Mid-dle income countries. Among MENA countries, Qatar, Bahrain and United Arab Emirates are the top per-formers. Qatar is the highest scorer in Buyer sophisti-cation, United Arab Emirates – in Trade freedom.

MARKET SOPHISTICATION


Buyer sophistication2.e.1.1.

0 2 4 6 8 10 12

Non-GCC average

GCC average

West Bank and Gaza

Libya

Egypt


Algeria

Morocco

Tunisia

Lebanon

Kuwait

Oman

Jordan

Saudi Arabia

Bahrain


Qatar 9.6

7.2

5.4

3.7

3.7

3.5

3.0

2.6

2.4

1.8

1.7

0.8

0.0

0.0

N/A

4.9

1.0




Explanation and justification:Buyer sophistication affects market efficiency: more demanding customers force companies to be more in-novative and customer-oriented, which increases their competitive advantage. The Buyer sophistication in-dex is based on the following survey question: In your country, how do buyers make purchasing decisions? (low values – based solely on the lowest price; high values – based on a sophisticated analysis of perfor-mance attributes).


Comments:As seen by senior managers in the country, Qatar has the highest buyer sophistication among MENA coun-tries, Libya and Egypt – the lowest. Buyers are less so-phisticated on average in MENA countries than they are in Middle income and High income countries.


High-tech and medium-high-tech output2.e.2.1.

0 1 2 3 4 5 6 7 8 9

Non-GCC average

GCC average

West Bank and Gaza

Libya

Kuwait

Tunisia

Oman

Algeria


Jordan

Qatar

Egypt

Lebanon


Bahrain

Morocco

Saudi Arabia 4.9

4.2

4.2

3.9

3.0

2.9

2.7

2.5

2.4

1.5

1.4

0.8

0.4

N/A

N/A

3.8

2.5




Explanation and justification:High-tech and medium-high-tech output is measured as a percentage of total manufactures output on the basis of OECD classification of technology intensity. It shows the level of production sophistication of the economy and how effective it is at converting knowl-edge and human capital into high-tech products.

Notes:The data for all countries is from the Global Innova-tion Index 2014. Data for Algeria, Bahrain, Libya, Syr-ian Arab Republic, United Arab Emirates and West Bank and Gaza is not available. Algeria's, Syrian Arab Republic's and United Arab Emirates' values are esti-mated as the average of their scores in other indicators in the same policy area (indicators 2.e.1.1., 2.e.3.1., 2.e.4.1., 2.e.5.1., 2.e.5.2., 2.e.5.3.), Bahrain's value – from indicators 2.e.1.1., 2.e.3.1., 2.e.5.1., 2.e.5.2., 2.e.5.3. Data for Botswana (Middle income country) is

not available as well, so its value is estimated from in-dicators 2.e.1.1., 2.e.3.1., 2.e.4.1., 2.e.5.1., 2.e.5.2., 2.e.5.3.

Comments:Saudi Arabia has the highest proportion of high-tech and medium-high-tech output among MENA coun-tries, Kuwait – the lowest. On average, MENA coun-tries perform worse than Middle income and High in-come countries.


Trade freedom2.e.3.1.

0 2 4 6 8 10 12

Non-GCC average

GCC average

West Bank and Gaza

Morocco

Algeria

Tunisia

Egypt


Saudi Arabia

Lebanon

Kuwait

Bahrain

Oman

Jordan

Qatar


Libya 9.3

8.8

8.2

8.2

7.9

7.9

7.5

7.3

7.0

6.7

6.4

4.4

4.1

3.7

N/A

7.6

5.5




Explanation and justification:Trade freedom is a composite measure of the extent of tariff and non-tariff barriers that affect imports and exports of goods and services. Trade barriers have a negative effect on the productivity of companies and consumer choice. This leads to lower economic effi-ciency and growth.


Comments:Libya has the best trade freedom among MENA coun-tries, Morocco – the worst. On average, MENA coun-tries perform slightly worse than Middle income and much worse than High income countries.


Established Business Ownership Rate2.e.4.1.

0 1 2 3 4 5 6

Non-GCC average

GCC average


West Bank and Gaza

Libya

Saudi Arabia

Egypt

Tunisia

Jordan

Algeria


Oman

Kuwait

Bahrain

Qatar

Morocco

Lebanon 5.3

4.9

4.6

4.2

3.3

2.8

1.6

1.1

1.0

0.7

0.6

0.5

0.3

0.1

0.0

1.3

1.5




Explanation and justification:Established Business Ownership Rate is measured as the percentage of 18-64 population who are currently owner-manager of an established business, i.e. own-ing and managing a running business that has paid sal-aries, wages, or any other payments to the owners for more than 42 months. Discontinuation of activities is an important aspect of entrepreneurship. This indica-tor measures the sustainability of entrepreneurial ac-tivity in a country.

Notes:The data is from the Global Entrepreneurship Monitor Report. Values for Algeria and Libya are from 2013, Egypt, Tunisia and West Bank and Gaza – 2012, Unit-ed Arab Emirates – 2011, Saudi Arabia – 2010, Jor-dan, Lebanon, Morocco, Syrian Arab Republic – 2009. Data for Bahrain, Kuwait, Oman and Qatar is not avail-able. Bahrain's value is estimated as the average of its

scores in other indicators in the same policy area (in-dicators 2.e.1.1., 2.e.3.1., 2.e.5.1., 2.e.5.2., 2.e.5.3.), Kuwait's and Oman's values – from indicators 2.e.1.1., 2.e.2.1., 2.e.3.1., 2.e.5.1., 2.e.5.2., 2.e.5.3., Qatar's value – from indicators 2.e.1.1., 2.e.2.1., 2.e.3.1., 2.e.5.1., 2.e.5.2., 2.e.5.3. Data for Azerbaijan (Middle income country) is not available as well, so its value is estimated from indicators 2.e.1.1., 2.e.2.1., 2.e.3.1., 2.e.5.1., 2.e.5.2., 2.e.5.3.

Comments:Lebanon has the highest Established Business Owner-ship Rate among MENA countries, United Arab Emir-ates – the lowest. On average, MENA countries have lower rates than High income and Middle income countries.


Creative goods exports (% of total trade) 2.e.5.1.

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5

Non-GCC average

GCC average

West Bank and Gaza

Libya

Qatar

Oman

Algeria

Bahrain


Saudi Arabia

Kuwait


Lebanon

Egypt

Jordan

Morocco

Tunisia 2.5

1.0

0.7

0.4

0.4

0.3

0.2

0.1

0.1

0.0

0.0

0.0

0.0

N/A

N/A

0.1

0.5




Explanation and justification:Total value of creative goods exports, net of re-exports (current US$), over total trade is aimed at measur-ing the international reach of creative activities in the country. Creative activities spur innovation and eco-nomic development.

Notes:The data for all countries is from the Global Innova-tion Index. Data for Algeria, Egypt, Jordan, Oman and Saudi Arabia are from 2012, Bahrain, Lebanon, Qatar, Syrian Arab Republic and Tunisia – 2011, Morocco – 2010, Kuwait – 2009, United Arab Emirates – 2008. Data for Libya and West Bank and Gaza is not avail-able.

Comments:Tunisia has the highest level of creative goods exports among MENA countries, Algeria, Oman and Qatar – the lowest. Creative goods exports are much lower in MENA countries on average than they are in Middle in-come and High income countries.


Wikipedia monthly page edits 2.e.5.2.

0 1 2 3 4 5 6 7

Non-GCC average

GCC average

West Bank and Gaza

Libya


Algeria

Morocco

Egypt

Oman

Tunisia

Jordan

Lebanon

Saudi Arabia

Bahrain


Qatar

Kuwait 1.9

1.8

1.4

1.2

1.2

0.8

0.8

0.5

0.4

0.4

0.3

0.2

0.0

N/A

N/A

1.3

0.3




Per million population 15–69 years old

Explanation and justification:Wikipedia page edits serve as an indicator of online creativity and the level of innovation in the country.

Notes:The data for all countries is from the Global Innovation Index 2014. All values are for year 2013. Data for Lib-ya and West Bank and Gaza is not available.

Comments:Kuwait has the highest number of Wikipedia edits per million population, Syrian Arab Republic – the lowest. On average, MENA countries perform worse than Mid-dle income and High income countries.


Number of video uploads on YouTube 2.e.5.3.

0 2 4 6 8 10

Non-GCC average

GCC average

West Bank and Gaza

Libya

Algeria

Oman

Tunisia

Morocco

Egypt

Jordan


Qatar

Lebanon


Bahrain

Kuwait

Saudi Arabia 7.1

6.5

6.3

5.7

5.5

5.4

5.2

4.4

4.3

3.9

3.9

3.6

2.0

N/A

N/A

6.4

3.8




Scaled by population 15-69 years old

Explanation and justification:YouTube video uploads measure online creativity as well as the level of innovation in the country.

Notes:The data for all countries is from the Global Innova-tion Index 2014. All values are for year 2013, except for Lebanon and Syrian Arab Republic (2012). Data for Libya and West Bank and Gaza is not available. Data for Uruguay (Middle income country) is not available as well, so its value is estimated as the average of its scores in other indicators in the same policy area (in-dicators 2.e.1.1., 2.e.2.1., 2.e.3.1., 2.e.4.1., 2.e.5.1., 2.e.5.2.).

Comments:Saudi Arabia has the highest level of YouTube uploads per capita among MENA countries, Algeria – the low-est. On average, performance of MENA countries is below that of Middle income and High income coun-tries.


Overall, Qatar has the highest Business Environment Index score. Its overall score is above the averages for MENA, GCC, Non-GCC and Middle Income coun-tries. Qatar only scores below the average for High In-come countries. United Arab Emirates takes the 2nd place, losing out by only a decimal point. As with Qa-

tar, the country’s overall performance is only below that of High Income countries. United Arab Emirates achieves a very high score in the Infrastructure Policy Area. Saudi Arabia ranks 3rd; its relative strength is in the Infrastructure area as well.

Country

OVERALL RESULTS

MENA countries

Qatar 6.2 7.8 6.2 4.2 4.6 5.8 1

United Arab Emirates 6.6 9.2 4.8 4.2 3.9 5.7 2

Saudi Arabia 5.6 7.6 4.9 3.8 3.5 5.1 3

Bahrain 5.4 7.5 4.2 3.4 4.2 4.9 4

Oman 5.9 6.3 3.7 2.8 2.8 4.3 5

Jordan 4.7 5.6 4.3 2.7 3.0 4.1 6

Kuwait 4.3 5.9 2.9 3.1 3.3 3.9 7

Lebanon 2.9 4.1 2.0 3.9 3.6 3.3 8

Morocco 4.6 4.2 2.9 1.6 2.8 3.2 9

Tunisia 4.5 3.9 2.0 2.0 2.1 2.9 10

Syrian Arab Republic 2.5 3.7 1.1 1.2 2.4 2.2 11

Egypt 2.5 2.4 1.0 2.5 2.1 2.1 12

Algeria 2.8 1.7 1.2 1.5 1.5 1.7 13

Regional averages

MENA countries 4.6 5.6 3.3 3.1 3.0 3.9 --

GCC countries 5.7 7.7 4.7 3.8 3.6 5.1 --

Non-GCC countries 3.0 2.8 1.5 2.1 2.2 2.3 --

High income countries 7.8 8.3 6.3 6.8 6.1 7.1 --

Middle income countries 4.5 4.5 3.1 3.5 4.2 4.0 --


MENA countries

Qatar 6.2 7.8 6.2 4.2 4.6 5.8 1

United Arab Emirates 6.6 9.2 4.8 4.2 3.9 5.7 2

Saudi Arabia 5.6 7.6 4.9 3.8 3.5 5.1 3

Bahrain 5.4 7.5 4.2 3.4 4.2 4.9 4

Oman 5.9 6.3 3.7 2.8 2.8 4.3 5

Jordan 4.7 5.6 4.3 2.7 3.0 4.1 6

Kuwait 4.3 5.9 2.9 3.1 3.3 3.9 7

Lebanon 2.9 4.1 2.0 3.9 3.6 3.3 8

Morocco 4.6 4.2 2.9 1.6 2.8 3.2 9

Tunisia 4.5 3.9 2.0 2.0 2.1 2.9 10

Syrian Arab Republic 2.5 3.7 1.1 1.2 2.4 2.2 11

Egypt 2.5 2.4 1.0 2.5 2.1 2.1 12

Algeria 2.8 1.7 1.2 1.5 1.5 1.7 13

Regional averages

MENA countries 4.6 5.6 3.3 3.1 3.0 3.9 --

GCC countries 5.7 7.7 4.7 3.8 3.6 5.1 --

Non-GCC countries 3.0 2.8 1.5 2.1 2.2 2.3 --

High income countries 7.8 8.3 6.3 6.8 6.1 7.1 --

Middle income countries 4.5 4.5 3.1 3.5 4.2 4.0 --

Total score Rank

72 SPECIAL THEME: SMES IN THE MENA REGION - MENA BENCHMARKING REPORT 2014�

3

SPECIAL THEME: SMES IN THE MENA REGION


SMEs account for a significant part of private sector firms in the MENA region, hence their activity plays an important role for the development of the economy, productivity and economic growth as well as job cre-ation. While internationally comparable SME data is not readily available due to different SME definitions and measurement approaches in different countries, it is still possible to compare the development levels of SMEs in MENA countries to some extent. The World Bank and International Finance Corporation (part of World Bank Group) provide some useful SME statis-tics and reports on a national level.

The following pages present data on the definitions of SMEs in MENA countries, their size breakdown, num-ber of SMEs per 1000 people, SME employment and loans granted to SMEs. Regional averages for GCC and Non-GCC countries, Middle income and High income countries are presented as well, whenever they are available. The composition of Middle and High income countries is the same as in the Business Environment Index and is described in more detail in the Descrip-tion of Terms.

As the definitions of SMEs differ among the countries, precise conclusions from this data cannot be drawn. However, it still provides a useful overview of SME de-velopment in the MENA region and can be used as a starting point for SME policy creation. Overall, Micro SMEs account for the largest share of SMEs in the ma-jority of MENA, Middle income and High income coun-tries. Small and medium enterprises are much rarer. When it comes to the number of SMEs per 1000 peo-ple, MENA countries lag behind Middle and High in-come countries. The same tendency can be observed in SME employment as a percentage of total employ-ment. The ratio of SME loans to total loans is much higher for GCC than Non-GCC countries, while the to-tal percentage of SMEs with a loan or line of credit is lower in the MENA region than in other regions.

The main challenges for SME development in the re-gion are:

� Low female labour force participation, including the fact that women are mostly employed in the public sector

� High youth unemployment levels and long un-employment spells due to skills mismatch and lack of linkages between education systems and the needs of the private sector

� Financing constraints and weak financial infra-structure hamper the development of the sector

INTRODUCTION


MSME definitions by number of employees, unless otherwise noted

Country Micro MSMEs Small MSMEs Medium MSMEs

M E N A C O U N T R I E S

Algeria < 250 N/A N/A

Bahrain 1-9 10-19 20-99

Egypt 1-5 6-10 11-100

Jordan 1-4 5-19 20-99

Kuwait N/A projects with capital projects with capital

<150,000 Kuwaiti Dinar <500,000 Kuwaiti Dinar

Lebanon 0-9 10-49 50-99

Libya N/A N/A N/A

Morocco 1-9 10-49 50-199

Oman 1-5 6-20 21-100

Qatar N/A <10 N/A

Saudi Arabia 0-9 10-59 60-199

Syrian Arab Republic N/A N/A N/A

Tunisia 1-9 10-49 50-249

United Arab Emirates <5 5-49 50+

West Bank and Gaza 1-9 10-49 50-99

SME PERFORMANCE

Explanation and justification:The table provides official country definitions of Micro, Small and Medium MSMEs by number of employees, unless otherwise noted.

Notes:The data is from Micro, Small and Medium Enterprise Country Indicators (MSME-CI) database, which is maintained by International Finance Corporation (part of World Bank Group). The data was last updated in 2010. Data for Libya and Syrian Arab Republic is not available.

Comments:Definitions of micro, small and medium enterprises vary greatly by country. While the differences are not large in the definitions of Micro MSMEs, small and me-dium MSMEs are defined differently across the coun-tries when it comes to the number of employees. Some countries use turnover instead of the number of em-ployees to define MSMEs.


MSME size breakdown, %3.a.

0 10 20 30 40 50 60 70 80 90 100

Middle income countries average

High income countries average

MENA average

Non-GCC average

GCC average

West Bank and Gaza


Tunisia


Saudi Arabia

Qatar

Oman

Morocco

Libya

Lebanon

Kuwait

Jordan

Egypt

Bahrain

Algeria

78 13 9

98 2

89 9 2

98 2

98 2

81 13 6

21 49 31

9 59 32

59 38 3

97 3

35 43 22

90 7 3

57 29 15

79 18 3

84 15 1

N/A

N/A

N/A

N/A

N/A

Micro

Small

Medium

MSME definitions by number of employees, unless otherwise noted

Country Micro MSMEs Small MSMEs Medium MSMEs

M E N A C O U N T R I E S

Algeria < 250 N/A N/A

Bahrain 1-9 10-19 20-99

Egypt 1-5 6-10 11-100

Jordan 1-4 5-19 20-99

Kuwait N/A projects with capital projects with capital

<150,000 Kuwaiti Dinar <500,000 Kuwaiti Dinar

Lebanon 0-9 10-49 50-99

Libya N/A N/A N/A

Morocco 1-9 10-49 50-199

Oman 1-5 6-20 21-100

Qatar N/A <10 N/A

Saudi Arabia 0-9 10-59 60-199

Syrian Arab Republic N/A N/A N/A

Tunisia 1-9 10-49 50-249

United Arab Emirates <5 5-49 50+

West Bank and Gaza 1-9 10-49 50-99

Explanation and justification:The graph shows the number of companies in each country by their size, as a percentage of the total num-ber of MSMEs in the country.

Notes:The data is from Micro, Small and Medium Enterprise Country Indicators (MSME-CI) database, which is maintained by International Finance Corporation (part of World Bank Group). The data was last updated in 2010. Data for Algeria, Kuwait, Libya, Qatar and Syr-ian Arab Republic is not available.

Comments:Micro MSMEs account for the largest share of MSMEs in the majority of MENA countries. The only excep-tions are Saudi Arabia and Tunisia, where small MS-MEs take up the largest share. Micro MSMEs are also the most popular type of MSMEs in Middle income and High income countries.


MSMEs per 1000 people3.b.

0 5 10 15 20 25 30 35

Non-GCC average

GCC average


Libya

Tunisia

Lebanon

Oman

Qatar

Kuwait


Algeria

Bahrain

Morocco

Jordan

West Bank and Gaza

Saudi Arabia

Egypt 31.2

30.3

26.8

25.6

25.4

25.2

18.2

15.3

12.4

10.2

3.8

3.4

0.6

N/A

N/A

22.1

22.1




Explanation and justification:The number of MSMEs per 1000 people is an indicator of the prevalence of SMEs in the country.

Notes:The data is from Micro, Small and Medium Enterprise Country Indicators (MSME-CI) database, which is maintained by International Finance Corporation (part of World Bank Group). The data was last updated in 2010. Data for Libya and Syrian Arab Republic is not available.

Comments:The largest number of MSMEs per 1000 people is in Egypt, the lowest – in Tunisia. On average, MENA countries have less MSMEs per 1000 people than Mid-dle income and High income countries.


MSME employment (% of total)3.c.

0 10 20 30 40 50 60 70 80 90

Non-GCC average

GCC average

Tunisia


Libya

Kuwait

Qatar

Oman

Lebanon

Algeria

Saudi Arabia

Morocco

Jordan

Egypt


Bahrain

West Bank and Gaza 82.0

72.7

39.5

31.2

31.0

21.6

19.5

13.9

12.3

5.9

5.5

4.5

N/A

N/A

N/A

20.8

21.0




Explanation and justification:The graph shows the percentage of the country's em-ployees who work in MSMEs.

Notes:The data is from Micro, Small and Medium Enterprise Country Indicators (MSME-CI) database, which is maintained by International Finance Corporation (part of World Bank Group). The data was last updated in 2010. Data for Libya, Syrian Arab Republic and Tunisia is not available.

Comments:The largest share of employed people working in MS-MEs is in West Bank and Gaza and Bahrain, the lowest – in Kuwait. On average, less people are employed in MSMEs in MENA countries than in Middle income and High income countries.


SME loans/total loans3.d.

0 5 10 15 20 25 30 35

Non-GCC average

GCC average

Libya

Algeria

Qatar

Bahrain

Saudi Arabia

Oman

Kuwait



Egypt

West Bank and Gaza

Jordan

Tunisia

Lebanon

Morocco 34

16

15

13

6

5

4

4

2

2

2

1

1

N/A

N/A

2

15


%

Explanation and justification:The number of loans granted to SMEs as a percent-age of the total number of loans granted in the country shows how easy it is for SMEs to obtain loan financing.

Notes:The data is from the research paper "The Status of Bank Lending to SMEs in the Middle East and North Africa Region", published by the World Bank and Un-ion of Arab Banks in 2010. Data for Algeria and Libya is not available.

Comments:The percentage of loans granted to SMEs is highest in Morocco and lowest in Qatar. On average, the num-bers are much higher in Non-GCC countries than in GCC countries.


Explanation and justification:The figure shows the percentage of firms in a region which have a loan or a line of credit from a financial institution, with separate values for SMEs and large firms.

Notes:The data is from the research paper "The Status of Bank Lending to SMEs in the Middle East and North Africa Region", published by the World Bank and Un-ion of Arab Banks in 2011.

Comments:The percentage of firms with a loan or a line of credit is the lowest in the MENA region for both SMEs and large firms. In other regions, access to finance is better. Lat-in American and Caribbean firms have the best access to finance among the included regions.

Eastern Europe and Central Asia

SMEs

Large firms

% of firms with a loan/line of credit from financial institution3.e.

41%

21%

20% 42%

45%

44% 68%

28% 58%

38% 55%

63%

Middle East and North Africa

Africa

East Asia and Pacific

Latin America and Caribbean

South Asia


The research has found that improvements in the lev-el of education among women in the region have not been translated into higher employment and entrepre-neurship rates. Low female labour force participation remains one of the main obstacles to the development of private sector and economic growth in many MENA countries. Even though female participation rates im-proved in most of the MENA countries in the last 10 years, they are still much lower than in other regions.

Bahrain, Kuwait, Qatar and United Arab Emirates are the leading countries in the region in terms of female labour participation. Still, only less than 50% of women actively participate in the labour market in these coun-tries. The situation in other countries is less favourable: only 20%-30% of women are active, and improvements have not been significant in the last 10 years. It is also important to note that women are mostly employed in the public sector where they earn higher wages than they could expect to earn in the private sector.

MAIN CHALLENGES

a. Low female labour participation:

Our research identified three main challenges for the development of SMEs in the MENA region:

a. low female labour participation

b. high youth unemployment and skills mismatch

c. access to finance


Labour force participation rate, female3.f.

10 20 30 40 50 60

West Bank and Gaza


Tunisia


Saudi Arabia

Qatar

Oman

Morocco

Libya

Lebanon

Kuwait

Jordan

Egypt

Bahrain

Algeria

Source: World Bank WDI

12

36

18

13

45

20

29

25

24

40

16

19

24

35

15

39

24

15

43

23

30

26

29

51

18

25

47

1511

13

2002

2012

% of female population ages 15+(modeled ILO estimate)

A recent report by The World Bank, “Opening Doors: Gender Equality and Development in the Middle East and North Africa“ (2013), highlights a gender equality paradox in the region. It claims that even though MENA countries have made significant progress in improving female education and health, these improvements have not led to higher female participation in the economic and political life. The report provides several possible explanations for the paradox. First of all, not enough jobs are created in the private sector to accommodate

an increasing number of highly educated women. In ad-dition to this, the skills that women acquire during edu-cation are often different from what the private sector jobs require. Moreover, there are still significant social, cultural and legal constraints for women in the region. Female employees can be often seen as less productive and more expensive than male employees. All of these issues have a negative effect on female entrepreneur-ship and employment, which in turn limits the econom-ic development of the region.


High youth unemployment is another outcome of in-efficiencies in the MENA labour markets. Youth un-employment rates are much higher than total unem-ployment rates in all MENA countries. Young people face significant challenges in Bahrain, Lebanon, Libya, Qatar and Syrian Arab Republic. Duration of youth un-employment is also an issue: young people are usually more likely to switch jobs, thus their unemployment duration is quite low. This is not the case in the MENA region, however, especially for well-educated youth. Long youth unemployment spells destroy even more economic value. A report by World Economic Forum titled “Address-ing the 100 Million Youth Challenge: Perspectives on Youth Employment in the Arab World in 2012” pro-vides several explanations for the phenomenon:

� Demographics: improvements in health provi-sion have resulted in low mortality and high birth rates, which has led to fast population growth and an increasing amount of young people enter-ing the labour force every year – the labour mar-ket cannot accommodate all of them.

� Mismatch of skills: even though the number of educated people has risen significantly, the qual-ity of education in the region remains not well adapted to the requirements of the labour market.

� Rigid labour markets: labour market regulations are more restrictive in the MENA region than in other parts of the world, which makes it more dif-ficult to hire new workers and fire badly perform-ing ones.

� Large public sectors: high wages and employ-ment rates in the public sector distort the labour market as the more efficient and dynamic private sector cannot compete with the less efficient and dynamic public sector.

Total and youth unemployment rates3.g.

0 10 20 30 40 50 60

West Bank and Gaza


Tunisia


Saudi Arabia

Qatar

Oman

Morocco

Libya

Lebanon

Kuwait

Jordan

Egypt

Bahrain

Algeria

Source: World Bank WDI

14

32

16

16

19

29

26

10

9

26

15

52

3

17

16

5

18

7

6

7

13

13

3

5

10

6

25

1

9

6

Total unemployment

Youth unemployment

%, 2012 (modeled ILO estimates)

b. High youth unemployment:


SMEs in the MENA region also face financing con-straints. A joint survey by the Union of Arab Banks and the World Bank, titled “The Status of Bank Lending to SMEs in the Middle East and North Africa Region” (2011), made the following conclusions:

� Lending to SMEs: lending volumes to SMEs are low in the region, amounting to only about 8% of total lending. There are significant differenc-es between GCC and Non-GCC countries as well: the share of SME lending amounts to 2% in GCC and 13% in Non-GCC countries. This can be ex-plained by the structural differences between oil and non-oil economies. Oil-based GCC econo-mies mostly consist of large companies, making it harder for SMEs to compete for financing.

� Obstacles to SME financing: surveyed banks in both GCC and Non-GCC countries identified the lack of SME transparency and weak financial in-frastructure as the main constraints to financing SMEs.

� Public vs private banks: private and public banks both occupy about a half of the SME lend-ing market in MENA countries. Lack of financial infrastructure could be the reason behind the low engagement of private banks in the region. Pub-lic banks, on the other hand, employ riskier poli-cies towards SME financing.

c. Access to finance:

84 APPENDICES - MENA BENCHMARKING REPORT 2014 �

APPENDICES

A


This chapter provides a one-page overview of the performance of each of the MENA coun-tries that have been ranked in the Business En-vironment Index. The first section of each profile presents the basic macroeconomic data for the country:

� GDP per capita, PPP (current international $, thousands)

� Population (million)

� Inflation, consumer prices (annual %)

� Unemployment, total (% of total labour force) (modeled ILO estimate)

� Foreign direct investment, net inflows (BoP, current US$, millions)

� General government gross debt (% of GDP)

The data comes from the most recent editions of the World Bank’s World Development Indica-tors and International Monetary Fund’s World Economic Outlook. The values for each coun-try are from the latest year for which the data is available.

The second section of the country profile pre-sents the country’s performance summary in the Business Environment Index. Its ranks and scores in each of the Policy Areas and the over-all score are displayed, as well as a “spider web” graph which compares the performance of a specific country with the average performance of Middle income and High income countries. Finally, a few comments about the country’s performance are presented.

COUNTRY PROFILES


High income countries

Middle income countries

Algeria

A. Institutions

B. Infrastructure

C. Access to finance D. Innovation, entrepreneurshipand human capital

E. Marketsophistication

0

1

2

3

4

5

6

7

8

9

10


Policy Area Rank Score (out of 13) (0 to 10)

A. Institutions 11 2.8

B. Infrastructure 13 1.7

C. Access to finance 11 1.2

D. Innovation, entrepreneurship and human capital 12 1.5

E. Market sophistication 13 1.5

Overall rank/score 13 1.7

Comments

Overall, Algeria ranks 13th out of 13 MENA countries in the Business En-vironment Index. Its scores in all Policy Areas are below those of Middle income and High income countries. Algeria achieves its highest score in the Institutions area.

BASIC FACTS

GDP per capita, PPP (current international $, thousands), 2013 13.3

Population (million), 2013 39.2

Inflation, consumer prices (annual %), 2013 3.3

Unemployment, total (% of total labour force) (modeled ILO estimate), 2012 9.8

Foreign direct investment, net inflows (BoP, current US$, millions), 2012 1,500

General government gross debt (% of GDP), 2013 9.2

Algeria




Bahrain

0

1

2

3

4

5

6

7

8

9

10

A. Institutions

B. Infrastructure











Comments

Overall, Bahrain ranks 4th out of 13 MENA countries in the Business Environment Index. Its scores in all Policy Areas, except for Innovation, entrepreneurship and human capital as well as Market sophistica-tion, are above those of Middle income countries. However, Bahrain's scores in all Policy Areas are be-low the scores of High income countries. Bahrain achieves its highest score in the Infrastructure area.

BASIC FACTS





Foreign direct investment, net inflows (BoP, current US$, millions), 2012 891


Bahrain




Egypt

A. Institutions

B. Infrastructure



0

1

2

3

4

5

6

7

8

9

10









Comments

Overall, Egypt ranks 12th out of 13 MENA countries in the Business Environment In-dex. Its scores in all Policy Areas are below those of Middle income and High income countries. Egypt achieves its highest scores in the Institutions and Innovation, en-trepreneurship and human capital areas.

BASIC FACTS







Egypt




Jordan

A. Institutions

B. Infrastructure



0

1

2

3

4

5

6

7

8

9

10









Comments

Overall, Jordan ranks 6th out of 13 MENA countries in the Business Environment Index. Its scores in Institutions, Infrastructure and Access to finance areas are above those of Middle income countries. However, Jordan's scores in all Policy Areas are below the scores of High income countries. Jordan achieves its highest score in the Infrastructure area.

BASIC FACTS







Jordan




Kuwait

A. Institutions

B. Infrastructure



0

1

2

3

4

5

6

7

8

9

10









Comments

Overall, Kuwait ranks 7th out of 13 MENA countries in the Business Environment Index. Its score in the Infrastructure area is above that of Middle income countries. However, Kuwait's scores in all Policy Areas are below the scores of High income countries. Kuwait achieves its highest score in the Infrastructure area.

BASIC FACTS







Kuwait




Lebanon

A. Institutions

B. Infrastructure



0

1

2

3

4

5

6

7

8

9

10









Comments

Overall, Lebanon ranks 8th out of 13 MENA countries in the Business Environment Index. Its score in the Innovation, entrepreneurship and human capital area is above that of Middle in-come countries. However, Lebanon's scores in all Policy Areas are below the scores of High income countries. Lebanon achieves its highest score in the Infrastructure area.

BASIC FACTS







Lebanon




Morocco

A. Institutions

B. Infrastructure



0

1

2

3

4

5

6

7

8

9

10









Comments

Overall, Morocco ranks 9th out of 13 MENA countries in the Business Environment Index. Its score in the Institutions area is above that of Middle income countries. However, Morocco's scores in all Policy Areas are below the scores of High income countries. Morocco achieves its highest score in the Institutions area.

BASIC FACTS







Morocco




A. Institutions

B. Infrastructure



Oman

0

1

2

3

4

5

6

7

8

9

10









Comments

Overall, Oman ranks 5th out of 13 MENA countries in the Business Environment Index. Its scores in the Institutions, Infrastructure and Access to finance areas are above those of Mid-dle income countries. However, Oman's scores in all Policy Areas are below the scores of High income countries. Oman achieves its highest score in the Infrastructure area.

BASIC FACTS







Oman




Qatar

A. Institutions

B. Infrastructure



0

1

2

3

4

5

6

7

8

9

10









Comments

Overall, Qatar ranks 1st out of 13 MENA countries in the Business Environment In-dex. Its scores in all Policy Areas are above those of Middle income countries, but below the scores of High income countries. Qatar achieves its highest score in the Infrastructure area.

BASIC FACTS





Foreign direct investment, net inflows (BoP, current US$, millions), 2012 327


Qatar




Saudi Arabia

A. Institutions

B. Infrastructure



0

1

2

3

4

5

6

7

8

9

10









Comments

Overall, Saudi Arabia ranks 3rd out of 13 MENA countries in the Business Environment Index. Its scores in all Policy Areas, except for Market sophistication, are above those of Middle in-come countries. However, Saudi Arabia's scores in all Policy Areas are below the scores of High income countries. Saudi Arabia achieves its highest score in the Infrastructure area.

BASIC FACTS







Saudi Arabia





A. Institutions

B. Infrastructure



0

1

2

3

4

5

6

7

8

9

10









Comments

Overall, Syrian Arab Republic ranks 11th out of 13 MENA countries in the Business Environment Index. Its scores in all Policy Areas are below those of Middle income and High income countries. Syrian Arab Republic achieves its highest score in the Infrastructure area.

BASIC FACTS











Tunisia

A. Institutions

B. Infrastructure



0

1

2

3

4

5

6

7

8

9

10









Comments

Overall, Tunisia ranks 10th out of 13 MENA countries in the Business Environment Index. Its scores in all Policy Areas, except for Institutions, are below those of Middle income countries. Tunisia's scores are also below the scores of High income coun-tries. Tunisia achieves its highest score in the Institutions area.

BASIC FACTS







Tunisia




A. Institutions

B. Infrastructure




0

1

2

3

4

5

6

7

8

9

10









Comments

Overall, United Arab Emirates rank 2nd out of 13 MENA countries in the Business En-vironment Index. Its scores in all Policy Areas, except for Market sophistication, are above those of Middle income countries. United Arab Emirates also score higher than High income countries in the Infrastructure area, where it achieves its highest score.

BASIC FACTS









BRIC is an acronym developed by Goldman Sachs for emerging economies of Brazil, Russia, India and China, whose share in the global GDP is expected to grow signifi-cantly in the future.

DI is an acronym for The Confederation of Danish Industry. It is a trade organisa-tion and an employers' association, which acts to ensure that the Danish business community has the optimum basis for competing, developing and manufacturing in Denmark and internationally. DI acts as a facilitating organisation in the Arab-EU Business Facilitation Network.

GCC countries are the members of the Cooperation Council for the Arab States of the Gulf, a regional economic and political union. The members are: Bahrain, Ku-wait, Oman, Qatar, Saudi Arabia and United Arab Emirates.

High income countries are the economies of Canada, France, Germany, Italy, Ja-pan, United Kingdom and United States, also known as G7 countries, and Denmark.

MENA countries referred to in this report include the countries from the Middle East and Northern Africa region which participate in the Arab-EU Business Facilita-tion Network. The countries are: Algeria, Bahrain, Egypt, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Saudi Arabia, Syrian Arab Republic, Tunisia, United Arab Emirates and West Bank and Gaza.

Middle income countries are the countries from different continents, selected by the authors of this report based on the proximity of their GNI per capita to the aver-age GNI per capita of MENA countries. The countries are: Azerbaijan, Botswana, Brazil, Chile, Czech Republic, Iran, Lithuania, Malaysia, Mexico, Poland, Russia, South Africa, Thailand, Turkey and Uruguay.

MSMEs are Micro, Small and Medium Enterprises.

Next 11 are a group of countries that were selected by Goldman Sachs and are be-lieved to rival the economic growth of G7 countries in the future. The countries are: Bangladesh, Egypt, Indonesia, Iran, South Korea, Mexico, Nigeria, Pakistan, the Philippines, Turkey and Vietnam. Data reported for Next 11 countries in this report excludes Egypt as it is already included in the list of MENA countries.

SMEs are Small and Medium Enterprises.

DESCRIPTION OF TERMS


Macro-economicindicators

GDP and GDP

growth

Employment Diversificationof economy

Demographics

Price level

Capitalmarkets

Governmentfinance

Investment

Internationaltrade

Choice of data and sourcesThe macroeconomic data presented in the report was selected so as to provide a detailed overall picture of each of the countries’ economic and demographic conditions. The data comes from internationally rec-ognized sources, mostly World Bank and Internation-al Monetary Fund; it is internationally comparable; and it is based on the latest available data (2012 or 2013 for most of the countries; when these values are

not available, the last known value is used). All the data sources and the full list of indicators are provided in the end of this report.

Structure of the analysisIndividual macroeconomic indicators are grouped to-gether into 9 categories based on what they measure. The categories are shown in the scheme below.

METHODOLOGY

Macroeconomic Analysis

Categories of macroeconomic indicators


Choice of data and sourcesSelection of indicators for the Business Environment Index was based on five criteria:

� Relevance: an indicator must have a clear effect on the business environment in which the com-panies operate

� Precision: an indicator must measure a certain aspect of the business environment precisely and with little variation

� Availability: an indicator must be easily obtain-able from reliable international sources

� Coherence: indicators must be interrelated, i.e. when they are combined into a single index, the index must be an accurate representation of the business environment

� Continuity: indicator values must be renewed regularly by the primary sources; ideally, they should be published annually

Similarly to macroeconomic data, the data for the Business Environment Index comes from internation-ally recognized sources, such as World Bank, World Economic Forum, Transparency International, etc. The data is based on the latest available information from the original sources. All the data sources and the full list of indicators are provided in the end of this report.

Structure of the indexAfter the individual indicators were selected, they were grouped together into sub-areas and 5 policy areas: Institutions; Infrastructure; Access to finance; Innova-tion, entrepreneurship and human capital; Market so-phistication. These policy areas and sub-areas are pre-sented in the figure on the next page.

No aggregate scores are computed for the categories: each macroeconomic indicator is presented separate-ly. Values presented for the indicators are the original values from the initial data sources.

Calculation of averagesFor two of the macroeconomic indicators (GDP growth and Population growth), average annual % growth in the last 3 years is used instead of the data for one year only in order to better reflect recent trends. A simple average is calculated using the arithmetic mean for-mula:

where i = the year of the data value (1 to 3), Vi = data value for year i.

Most charts in the report show regional averages (MENA average, BRIC average, Next 11 countries av-erage, High income countries average). In order to ar-rive at the final average value for the region, values for individual countries are weighted by 2012 GDP at Pur-chasing Power Parity (data source: World Bank) using the following formula:

Where i = number of countries in the region (1 to n), GDPi = GDP at Purchasing Power Parity for country i, Vi = data value for country i.

The only exception to the above formula is the cal-culation of regional averages of the indicator GDP per capita, PPP, where values of individual countries are weighted by their 2013 population instead (data source: World Bank).

Business Environment Index

ViAverage value = ∑i =1

3

ni =1

GDPi

GDPi(

31

ViRegional average = ∑i =1

n

∑ )

ViAverage value = ∑i =1

3

ni =1

GDPi

GDPi(

31

ViRegional average = ∑i =1

n

∑ )


Computation of the index

Institutions

A.1. Property rights

A.2. Intellectual property rights

A.3. Corruption

A.4. Hiring and firing

A.5. Efficiency of legal system

A.6. Ease of doing business

A.7. Stability

A.8. Corporate governance

Access to finance

C.1. Ease of access to finance

C.2. Venture capital

C.3. Depth of capital market

Infrastructure

B.1. Overall infrastructure

B.2. ICT Infrastructure

B.3. Electricity

Innovation, entrepreneurship

and human capital

D.1. Human capital

D.2. Innovation

D.3. Entrepreneurship

D.4. Patents

Market sophistication

E.1. Buyer sophistication

E.2. Production sophistication

E.3. Globalisation

E.4. Business ownership rate

E.5. Creativity

Raw data in each of the indicators for each of the coun-tries has been normalized on a scale from 0 to 10 using the min-max method. When low values of the indicator are considered to be bad and high values are consid-ered to be good, the following formula is used:

Actual value – Minimum value

Maximum value – Minimum value * 10

When low values are considered to be good and high values are considered to be bad, the following formula is used:

Maximum value – Actual value

Maximum value – Minimum value * 10

Countries from all regions (MENA, High income and Middle income countries) are included in the calcula-tion of the minimum and maximum values. This means that the highest scoring country among all the MENA, High income and Middle income countries gets as-signed a value of 10, and the lowest scoring country among all of them gets assigned a value of 0. For ex-ample, if the lowest scoring country is among the Mid-dle income countries, none of the MENA countries will get a score of 0.

Policy areas and sub-areas of the Business Environment Index


When the normalized scores for individual indicators are computed, the scores of each of the countries are aggregated into the score of that country in a particu-lar policy area. For this purpose, the simple arithmetic average is used. For example, if the policy area con-sists of 5 individual indicators, the score for a coun-try in that policy area is a simple average of the 5 in-dicators. Once the policy area scores are computed, they are further aggregated into the final score – the Business Environment Index. Again, the final score is a simple average of the scores in 5 policy areas. This ensures that each of the policy areas is given an equal weight, since assigning different weights for different policy areas would introduce a large degree of subjec-tivity into the index. A summary of the overall structure of the Business Environment Index is provided below. When the country lacks data for more than 2/3 of the indicators, its score in sub-areas and the total score are not reported as this would introduce a significant amount of bias to the index. For this reason, Libya and West Bank and Gaza are not ranked in the report. However, their scores in individual indicators are pre-sented as long as the data is not missing.

Those countries which do not lack data for more than 2/3 of the indicators are ranked in the report. For each of these countries, missing data values are calculated as a simple arithmetic average of a country’s normal-ized scores in those indicators of the same policy area for which data for the country is available. As an exam-ple, if Policy Area A consists of 4 indicators and a coun-try lacks data for 1 of them, its score in this indicator would be computed as a simple average of its scores in the remaining indicators in Policy Area A.

As in the macroeconomic analysis, regional averages for MENA, High income and Middle income countries are displayed in the graphs. These are weighted aver-ages calculated on the same basis – each country’s value is weighted by its 2012 GDP at Purchasing Pow-er Parity. Libya and West Bank and Gaza are exclud-ed from the calculation of the average value for MENA countries as their data is missing in many indicators.

BUSINESSENVIRONMENTINDEX

Inputs

WEF GlobalCompetitivenessReport

GlobalEntrepreneurshipMonitor

GlobalInnovationIndex

World BankDoingBusiness

HeritageFoundation

TransparencyInternational

UN HDI

ITU

Reports/databases Raw and normalized data Policy area scores Final score

Selection ofindicators Normalization Policy areas

Equal weights Output

A

E

Institutions

Innovation, entrepreneurship and human capital

Infrastructure

Access to finance

Market sophistication

D

B

C

Structure of the Business Environment Index


LIST OF MACROECONOMIC INDICATORS

GDP and GDP Growth 1.a. Real GDP growth (average annual % growth in 2011-2013)

Gross Domestic Product (GDP) is one of the main economic indicators. It measures the total value of goods and services produced in a country over a certain period of time. Real GDP growth is an indicator of economic growth calculated at constant prices (eliminating the effect of price changes in the country). In order to better reflect the re-cent economic trends, average annual % growth of Real GDP in the last 3 years (2011, 2012 and 2013) is used instead of analysing 1 year only.

Data sources: World Bank, Institute of International Finance

1.b. GDP per capita, PPP (current international $, thousands)

GDP per capita based on purchasing power parity (PPP) is defined by the World Bank as "gross domestic product converted to international dollars using purchasing power parity rates. An international dollar has the same purchasing power over GDP as the U.S. dollar has in the United States". When converted using PPP, GDP per capita is the total value of goods and services produced in a country divided by the country's popu-lation, measured in international dollars so that differences in the purchasing power of currencies are eliminated. This allows for an easy comparison of the level of economic development of countries.

Data sources: World Bank, IMF

Diversification of Economy1.c. Composition of GDP by sector (% of GDP)

Composition of GDP by sector shows the proportion of value added in agriculture, in-dustry and service sectors of the economy. It provides an overview of the structure of the economy and the level of its diversification.

Data sources: World Bank, National statistical offices

1.d. Total natural resources rents (% of GDP)

Total natural resources rents include oil, natural gas, coal, mineral, and forest rents. Rents are the difference between price and average cost of producing (extracting) a commodity. Rents as % of GDP are an indicator of the reliance of economic develop-ment on natural resource production.

Data sources: World Bank

Investment1.e. Gross fixed capital formation (% of GDP)

Gross fixed capital formation is one of the components of GDP calculation using the expenditure approach. It measures the value of investments made in the economy (ac-quisition of plants, equipment, construction of infrastructure, etc.). This is an indicator of the contribution of investments to total GDP.

Data sources: World Bank, IMF

1.f. Foreign direct investment, net inflows(BoP, current US$, millions)

Foreign direct investment data provided by the World Bank are "the net inflows of investment to acquire a lasting management interest (10 percent or more of voting stock) in an enterprise operating in an economy other than that of the investor". Net inflows are new investments less disinvestment, expressed in current U.S. dollars. This indicator shows how attractive the country is to foreign investors due to its openness, quality of workforce, economic and business conditions, etc.


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International Trade1.g. Exports of goods and services (% of GDP)

Exports of goods and services measure the value of goods and services provided to other countries. Exports are one of the components of GDP calculation using the ex-penditure approach. When measured as % of GDP, it indicates the contribution of ex-ports to total value of goods and services produced and sold in a country. Share of ex-ports in GDP is also an indicator of competitiveness of locally produced products and services abroad.


1.h. Imports of goods and services (% of GDP)

Imports of goods and services measure the value of goods and services received from other countries. Imports are subtracted from GDP when calculating it using the ex-penditure approach. Imports as % of GDP is an indicator of the reliance of the economy on foreign-produced goods and services.


Government Finance1.i. General government gross debt (% of GDP)

General government gross debt includes all liabilities of the government that require payment. Government debt as % of GDP is an indicator of government's indebtedness, financial stability and solvency.

Data sources: IMF

1.j. General government net lending (+)/borrowing (-), % of GDP

Net lending/borrowing is a measure of government's fiscal balance, calculated as total government revenue minus total expenditure. Deficits have to be financed either by us-ing existing reserves or by undertaking additional borrowing. This is thus an indicator of government's financial stability.

Data sources: IMF

1.k. Long term sovereign debt rating

Sovereign debt is used as a mechanism of funding by governments. Moody's assess-ment of sovereign debt risk is based on four factors: economic strength, institutional strength, fiscal strength, and susceptibility to event risk. Sovereign debt ratings are relative rankings of credit risk which act as indicators of a country's default probability and expected losses in the case of default.

Data sources: Moody’s

Capital Markets1.l. Domestic credit to private sector (% of GDP)

Domestic credit to private sector as measured by the World Bank is the amount of credit resources provided to the private sector by financial corporations. On one hand, it shows the availability of credit in the economy which is needed for the expansion of business services or other projects. On the other hand, it is an indicator of the level of indebtedness of the private sector.

Data sources: World Bank, Palestine Monetary Authority

1.m. Market capitalization of listed companies (% of GDP)

Market capitalization is the market value of companies (share price times the number of shares outstanding). Listed companies are the companies listed on the country's stock exchanges. This indicator shows the level of development of the country's finan-cial markets which is also related to the overall economic development because access to equity finance is an important growth factor for companies.

Data sources: World Bank, National stock exchanges

Price Level1.n.Inflation, consumer prices (annual %)

Consumer price inflation measures the change in the cost of acquiring a specified basket of goods and services. This is an indicator of price stability. Low positive values of inflation are generally preferred.


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Demographics1.o. Population growth (average annual % growth in 2011-2013)

Population growth is one of the main demographic indicators. It shows how fast the country's population is expanding/declining. In order to better reflect recent trends, average annual % growth of population in the last 3 years is used instead of analysing 1 year only.


1.p. Population ages 15-64 (% of total)

Population ages 15-64 as % of total population is an indicator of the percentage share of working age population which can potentially contribute to the economic develop-ment of the country. The larger the working age population is, the lower is the share of population below age 15 and above age 64 that has to rely on the support of others for their survival.


Employment1.q. Unemployment, total(% of total labour force) (modeled ILO estimate)

Total unemployment, as defined by the International Labour Organization (ILO), is the share of the labour force which is without work but seeking employment. This is an in-dicator of economic activity in the country. High unemployment shows that there is a misbalance between demand for and supply of labour.


1.r. Unemployment, youth total(% of total labour force ages 15-24) (modeled ILO estimate)

Youth unemployment, as defined by the International Labour Organization (ILO), is the share of the labour force ages 15-24 which is without work but seeking employment. High youth unemployment is an indicator of the inability of the labour market to ac-commodate less experienced workers. Unemployed youth cannot contribute to eco-nomic growth. High youth unemployment can also result in less innovation and may lead to a loss of competitive advantages of a country.


1.s. Labour force participation rate, total (% of total population ages 15+) (modeled ILO estimate)

Labour force participation rate is defined by ILO as the share of the population ages 15 and older that is economically active, that is all people who supply labour for the production of goods and services. Similarly to unemployment, this is an indicator of economic activity.


1.t. Labour force participation rate, female (% of female population ages 15+) (modeled ILO estimate)

Total labour force participation rate usually does not reflect the major differences in participation rates of female and male population. Female participation is usually lower than male participation due to cultural, social and demographic trends. It is therefore important to analyze gender differences in employment.


1.u. Labour force participation rate, male (% of male population ages 15+) (modeled ILO estimate)

Total labour force participation rate usually does not reflect the major differences in participation rates of female and male population. Female participation is usually lower than male participation due to cultural, social and demographic trends. It is therefore important to analyze gender differences in employment.


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A. InstitutionsA.1. Property Rights

2.a.1.1. Property rights

The extent to which a country’s legal framework allows individuals to freely accumulate private property is one of the most important concerns of workers and investors. The Property rights index measures the degree to which a country’s laws protect private property rights and the extent to which those laws are respected; the likelihood that private property will be expropriated by the state and the independence of the judici-ary; the existence of corruption within the judiciary; and the ability of individuals and businesses to enforce contracts.

Data sources: Heritage Foundation

A.2. Intellectual Property Rights

2.a.2.1. Intellectual property protection

Countries with strong intellectual property protection usually have higher levels of in-vestment and innovation. The Intellectual property protection index is based on the following survey question: In your country, how strong is the protection of intellectual property, including anti-counterfeiting measures?

Data sources: World Economic Forum

A.3. Corruption

2.a.3.1. Corruption Perceptions Index

Corruption Perceptions Index is based on questions gathered from 13 different sourc-es. The questions address transparency, accountability and corruption issues in the public sector, such as bribery, auditing of public finances, advertising tenders and jobs, whistleblower and anti-corruption activist protection, and anti-corruption policies. Less corrupt countries have better functioning markets, attract more investment and generate more entrepreneurial activity.

Data sources: Transparency International

A.4. Hiring and Firing

2.a.4.1. Labour freedom

Countries with better labour freedom generally have lower unemployment levels. The Labour freedom index is composed of 6 equally-weighted factors: ratio of minimum wage to average value added per worker; hindrance to hiring a worker; rigidity of work-ing hours; difficulty in firing redundant workers; legally mandated notice period; and mandatory severance pay.


A.5. Efficiency of Legal System

2.a.5.1. Enforcing contracts

Efficient contract enforcement reduces the importance of the informal sector of an economy, improves access to credit and increases trade. The Enforcing contracts in-dex reflects the efficiency of the country's legal system. It measures the time, cost and number of procedures involved in resolving a standardized commercial lawsuit be-tween two domestic businesses through the local first-instance court.

Data sources: World Bank Doing Business

A.6. Ease of Doing Business

2.a.6.1. Starting a business

The ease of starting a business is positively related to the level of entrepreneurial activ-ity in a country. This index measures the number of procedures, time, cost and paid-in minimum capital required for small and medium-size limited liability companies to formally operate.


LIST OF BUSINESS ENVIRONMENT INDICATORS

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2.a.6.2. Investment freedom Countries with more restrictions on investment usually have lower levels of entrepre-neurial activity. The Investment freedom index evaluates a variety of regulatory restric-tions that are typically imposed on investment: national treatment of foreign invest-ment; foreign investment code; restrictions on land ownership; sectoral investment re-strictions; expropriation of investments without fair compensation; foreign exchange controls; and capital controls.


A.7. Stability

2.a.7.1. Business costs of crime and violence

High business costs of crime and violence reduce investor confidence in the country. This index is based on the following survey question: In your country, to what extent does the incidence of crime and violence impose costs on businesses?


A.8. Corporate Governance

2.a.8.1. Protecting investors

The Protecting investors index measures three aspects of investor protection: approval and transparency of related-party transactions (extent of disclosure index); liability of company directors for self-dealing (extent of director liability index); and sharehold-ers’ ability to obtain corporate documents before and during derivative or direct share-holder litigation. Investors are reluctant to provide funding to companies when investor protection is low.


B. InfrastructureB.1. Overall Infrastructure

2.b.1.1. Quality of overall infrastructure

A high level of infrastructure development is critical for the effective functioning of the economy. The Quality of overall infrastructure index is based on the following survey question: How would you assess general infrastructure (e.g., transport, telephony, and energy) in your country?


B.2. ICT Infrastructure

2.b.2.1. ICT Access Index

The ICT Access Index is a composite index that equally weighs five indicators: fixed telephone lines per 100 inhabitants; mobile cellular telephone subscriptions per 100 inhabitants; international Internet bandwidth (bit/s) per Internet user; percentage of households with a computer; and percentage of households with Internet access. It measures ICT readiness, which is an important requirement for using and benefiting from ICT.

Data sources: International Telecommunication Union

B.3. Electricity

2.b.3.1. Getting electricity

Electricity accessibility is critical for encouraging investment, productivity growth and expansion of the economy. The Getting electricity index measures the number of pro-cedures, time and cost for a small to medium-size business to get a new electricity con-nection for a warehouse.


C. Access to FinanceC.1. Ease of Access to Finance

2.c.1.1. Ease of access to loans

The Ease of access to loans index is based on the following survey question: In your country, how easy is it to obtain a bank loan with only a good business plan and no collateral? Easy access to financing stimulates business investment and economic growth.


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C.2. Venture Capital

2.c.2.1. Venture capital availability

Easy access to venture capital encourages entrepreneurship and positively contributes to the growth of the economy. This index is based on the following survey question: In your country, how easy is it for entrepreneurs with innovative but risky projects to find venture capital?


C.3. Depth of Capital Markets

2.c.3.1. Market capitalization of listed companies

Well-developed financial markets are extremely important for the establishment of new companies, which, in turn, stimulate entrepreneurial activity and encourage eco-nomic growth. Market capitalization is the number of shares of companies listed on the country's stock exchanges multiplied by the share price, expressed as a percentage of the country's GDP.


2.c.3.2. Total value of traded stocks

The total value of stocks traded on a country's stock exchanges as a percentage of the country's GDP acts as a measure of financial market liquidity. Active and liquid finan-cial markets are related to the overall economic development of the country because access to equity finance is an important growth factor for companies.


D. Innovation, Entrepreneurship and Human CapitalD.1. Human Capital

2.d.1.1. Human Development Index

HDI measures the average achievements in a country in three basic dimensions of hu-man development: a long and healthy life, access to knowledge and a decent standard of living. Index components are: Life expectancy at birth; Mean years of schooling; Ex-pected years of schooling; Gross national income (GNI) per capita.

Data sources: United Nations

2.d.1.2. Employment in knowledge-intensive services

Knowledge-intensive services include the following job categories: Managers; Profes-sionals; Technicians and associate professionals; Legislators, senior officials and man-agers; Administrative workers; Clerical and related workers. The global economy is transitioning to a knowledge-based phase, having previously transitioned from the ag-riculture-based to the industry-based stage. Employment in knowledge-intensive ser-vices is an indicator of how far the country has transitioned into this new phase.

Data sources: Global Innovation Index (prepared by World Intellectual Property Organization, Cornell University, Business School INSEAD)

D.2. Innovation

2.d.2.1. Global Innovation Index

The Global Innovation Index ranks countries based on their innovation capabilities. The aggregate score is based on 7 pillars: Institutions, Human capital and research, Infrastructure, Market sophistication, Business sophistication, Knowledge and tech-nology outputs, Creative outputs. Innovation is one of the main drivers of economic growth and well-being of a country.


D.3. Entrepreneurship

2.d.3.1. Total early-stage Entrepreneurial Activity (TEA)

TEA is measured as the percentage of 18-64 population who are either a nascent en-trepreneur (actively involved in setting up a business they will own or co-own) or own-er-manager of a new business (less than 3.5 years old). Entrepreneurial activity en-courages innovation, job creation and increases competitiveness and prosperity of the economy.

Data sources: Global Entrepreneurship Research Association

D.4. Patents

2.d.4.1. PCT patents, applications/million pop.

The number of applications filed under the Patent Cooperation Treaty per million popu-lation is an indicator of the country's innovation capacity.


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E. Market SophisticationE.1. Buyer Sophistication

2.e.1.1. Buyer sophistication

Buyer sophistication affects market efficiency: more demanding customers force com-panies to be more innovative and customer-oriented, which increases their competi-tive advantage. The Buyer sophistication index is based on the following survey ques-tion: In your country, how do buyers make purchasing decisions? (low values – based solely on the lowest price; high values – based on a sophisticated analysis of perfor-mance attributes).


E.2. Production Sophistication

2.e.2.1. High-tech and medium-high-tech output

High-tech and medium-high-tech output is measured as a percentage of total manu-factures output on the basis of OECD classification of technology intensity. It shows the level of production sophistication of the economy and how effective it is at converting knowledge and human capital into high-tech products.


E.3. Globalisation

2.e.3.1. Trade freedom

Trade freedom is a composite measure of the extent of tariff and non-tariff barriers that affect imports and exports of goods and services. Trade barriers have a negative effect on the productivity of companies and consumer choice. This leads to lower economic efficiency and growth.


E.4. Business Ownership Rate

2.e.4.1. Established Business Ownership Rate

Established Business Ownership Rate is measured as the percentage of 18-64 popu-lation who are currently owner-manager of an established business, i.e. owning and managing a running business that has paid salaries, wages, or any other payments to the owners for more than 42 months. Discontinuation of activities is an important as-pect of entrepreneurship. This indicator measures the sustainability of entrepreneurial activity in a country.

Data sources: Global Entrepreneurship Research Association

E.5. Creativity

2.e.5.1. Creative goods exports

Total value of creative goods exports, net of re-exports (current US$), over total trade is aimed at measuring the international reach of creative activities in the country. Crea-tive activities spur innovation and economic development.


2.e.5.2. Wikipedia monthly page edits (per million population 15–69 years old)

Wikipedia page edits serve as an indicator of online creativity and the level of innova-tion in the country.


2.e.5.3. Number of video uploads on YouTube (scaled by population 15-69 years old)

YouTube video uploads measure online creativity as well as the level of innovation in the country.


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“Addressing the 100 Million Youth Challenge: Perspectives on Youth Employment in the Arab World in 2012” is a report by the World Economic Forum published in 2012.

www3.weforum.org/docs/WEF_YouthEmployment_ArabWorld_ Report_2012.pdf

Algiers Stock Exchange is the security exchange where Algerian companies are listed. www.sgbv.dz/index.php?lang=eng

Baku Stock Exchange is the security exchange where Azerbaijani companies are listed. www.bfb.az/?lang=en

Damascus Securities Exchange is the security exchange where Syrian companies are list-ed.

www.dse.sy/index.php

Global Entrepreneurship Research Association’s Global Entrepreneurship Monitor pro-vides an annual assessment of the entrepreneurial activity, aspirations and attitudes of in-dividuals across a wide range of countries. It is the largest ongoing study of entrepreneurial dynamics in the world.

www.gemconsortium.org/docs/ 3106/gem-2013-global-report

Global Innovation Index is a report published by The World Intellectual Property Organiza-tion (WIPO), in collaboration with Cornell University and the Business School INSEAD. The report is aimed at better measuring and understating innovation, as well as providing the tools to promote long-term output, productivity and job growth.

www.globalinnovationindex.org/ content.aspx?page=gii-full- report-2014

Goldman Sachs is a global investment banking, securities and investment management company.

www.goldmansachs.com

Heritage Foundation’s Index of Economic Freedom is a report which measures economic freedom of 186 economies throughout the world based on 10 quantitative and qualitative factors.

www.heritage.org/index/

Institute of International Finance (IIF) is a global association of around 500 financial in-stitutions from 70 countries. IIF’s Regional Overview on Middle East and North Africa pro-vides analysis on the region’s economic situation and prospects.

www.iif.com/emr/mena

International Monetary Fund’s (IMF) Middle East and Central Asia (MECA) Regional Economic Outlook (REO) provides analysis on recent economic developments and pros-pects for countries in the region. IMF is an organisation of 188 countries which is focused on promoting global cooperation, economic growth, and reducing poverty.

www.imf.org/external/pubs/ft/reo /2014/mcd/eng/mreo0514.htm

International Monetary Fund’s (IMF) World Economic Outlook (WEO) database con-tains macroeconomic data, IMF staff's analysis and forecasts for the majority of the world’s countries.

www.imf.org/external/ns/cs.aspx?id=28

International Telecommunication Union's Measuring the Information Society Report identifies key ICT developments, tracks the cost and affordability of ICT services and ranks countries’ performance with regard to ICT infrastructure.

www.itu.int/en/ITU-D/Statistics/ Pages/publications/mis2013.aspx

Kingdom of Bahrain Central Informatics Organisation is the official statistical bureau of Bahrain.

www.cio.gov.bh/CIO_ENG/ default.aspx

Libyan Stock Market is the security exchange where Libyan companies are listed. www.lsm.ly/English/Pages/default.aspx

Moody’s is a corporation which provides credit ratings and research covering debt instru-ments and securities, as well as tools for credit and economic analysis and financial risk management.

www.moodys.com

DESCRIPTION OF SOURCES

http://www3.weforum.org/docs/WEF_ YouthEmployment_ArabWorld_ Report_2012.pdf




Micro, Small and Medium Enterprise Country Indicators (MSME-CI) database is main-tained by International Finance Corporation (part of World Bank Group) and provides the latest global snapshot and historic data back to 20 years on the definitions of MSMEs, their number, size breakdown, share of employment and sector distribution in 132 world economies.

www.ifc.org/wps/wcm/connect/Industry_EXT_Content/IFC_Ex-ternal_Corporate_Site/Industries/Financial+Markets/msme+finance/sme+banking/msme-countryindicators

“Opening Doors: Gender Equality and Development in the Middle East and North Africa” is a report published by The World Bank in 2013.

openknowledge.worldbank.org/bit-stream/handle/10986/12552/751810PUB0EPI002060130Opening0doors.pdf?sequence=1

Palestine Monetary Authority is an independent public institution responsible for the for-mulation and implementation of monetary and banking policies, safeguarding the banking sector and ensuring the growth of the national economy.

www.pma.ps/en-us/home.aspx

Qatar Ministry of Development Planning and Statistics is the official statistical bureau of Qatar.

www.qsa.gov.qa/eng/index.htm

State of Kuwait Central Statistical Bureau is the official statistical bureau of Kuwait. www.csb.gov.kw/Default_EN.aspx

Sultanate of Oman National Centre for Statistics and Information is the official statistical bureau of Oman.

www.ncsi.gov.om/NCSI_website/NCSI_EN.aspx

“The Status of Bank Lending to SMEs in the Middle East and North Africa Region” is a policy research working paper published jointly by The World Bank and The Union of Arab Banks in June 2010.

siteresources.worldbank.org/INT-MNAREGTOPPOVRED/Resources/MENAFlagshipSMEFinance12_20_10.pdf

Transparency International’s Corruption Perceptions Index measures the perceived levels of public sector corruption in 177 countries. It is the most widely used indicator of corrup-tion worldwide.

cpi.transparency.org/cpi2013/

United Nations’ Human Development Index (HDI) is a summary measure of average achievement in key dimensions of human development: a long and healthy life, being knowledgeable and having a decent standard of living.

hdr.undp.org/en/data

World Bank’s World Development Indicators (WDI) is a collection of internationally-com-parable global development data compiled by the World Bank – an international bank fo-cused on fighting poverty and promoting economic growth by providing financial and tech-nical assistance to countries.

data.worldbank.org/products/wdi

World Bank’s Doing Business Report presents quantitative indicators on business regula-tions and the protection of property rights that can be compared across 189 economies. The report focuses on benchmarking the regulations that affect private sector firms, in par-ticular small and medium-size enterprises.

www.doingbusiness.org/reports/glob-al-reports/doing-business-2014

World Economic Forum’s Global Competitiveness Report assesses the competitiveness landscape of 144 economies. The report is the most comprehensive assessment of national competitiveness worldwide and provides insights into the drivers of productivity and pros-perity across countries. It also includes the Executive Opinion Survey, which captures the opinions of over 13,000 business leaders in 148 economies.

www.weforum.org/reports/global-com-petitiveness-report-2014-2015

DISCLAIMERAll maps presented in the report are provided for informational purposes only and do not constitute the recognition of any territories under international law. Authors of the report do not guarantee that the maps are accurate and reflect the current status of all territories.

http://www.ifc.org/wps/wcm/connect/Industry_EXT_Content/IFC_External_Corporate_Site/Industries/Financial+Markets/msme+finance/sme+banking/msme-countryindicators





http://openknowledge.worldbank.org/bitstream/handle/10986/12552/751810PUB0EPI002060130Opening0doors.pdf?seq




http://siteresources.worldbank.org/INTMNAREGTOPPOVRED/Resources/MENAFlagshipSMEFinance12_20_10.pdf




http://cpi.transparency.org/cpi2013/

http://hdr.undp.org/en/data

http://data.worldbank.org/products/wdi

http://www.doingbusiness.org/reports/global-reports/doing-business-2014

http://www.doingbusiness.org/reports/global-reports/doing-business-2014

http://www.weforum.org/reports/global-competitiveness-report-2014-2015

http://www.weforum.org/reports/global-competitiveness-report-2014-2015

MENA Benchmarking Report 2014

Published by the Confederation of Danish Industry January 2015 1st edition

www.di.dk/english

Funded by the Danish-Arab Partnership Programme

www.detarabiskeinitiativ.dk

Editors: Iman Awadh, ConsultantTel.: +4533773793 Email: [email protected]

Oleg Izgorodin, Business AnalystTel.: +4533773708 Email: [email protected]

Design and print:fru nielsens tegnestue

ISBN: 978-87-7144-041-6200.1.15


MENA BENCHMARKING REPORT 2014Countries in the Middle East and Northern Africa (MENA) region have undergone many changes and experienced new challenges recently. A strong private sector is critical for being able to respond to these challenges.

MENA Benchmarking Report 2014 aims to benchmark the business environment that private sector companies face in MENA countries. The report focuses on the enhancement of the business environment and performance of SMEs in the region. It contains a macroeconomic analysis of MENA countries, an overview of SME performance in the region and a Business Environment Index, created specifically for this report. The Business Environment Index measures country performance in 5 Policy Areas:

� Institutions

� Infrastructure

� Access to finance

� Innovation, entrepreneurship and human capital

� Market sophistication

The report has been developed by business organisations belonging to the ARAB-EU Business Facilitation Network. The network consists of leading Business Membership Organisations from 15 MENA countries: Algeria, Bahrain, Egypt, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Saudi Arabia, Syrian Arab Republic, Tunisia, United Arab Emirates and West Bank and Gaza. The ARAB-EU Business Facilitation Network encourages discussions on the challenges that companies in the region are facing as well as solutions and policy recommendations to overcome those challenges.

More information about the ARAB-EU Business Facilitation Network as well as a PDF version of the MENA Benchmarking Report 2014 can be found on the network’s webpage: http://ae-network.com

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