Tackling Barriers to Private Sector Progress: International Economic Analyst Moin Siddiqi Looks at Some of the Ways in Which Obstacles to the Development of Small to Medium Business Enterprises (SMEs) in the Middle East and North Africa (MENA) Might Be Overcome, Backed by Information from the World Bank, the OECD and the IMF

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Companies around the developing world face a host of institutional and physical barriers when engaging in business enterprise, from lengthy delays in obtaining permits and licences in some countries to dealing with heavy red tape--or worse, corrupt government officials--in others. The opportunity cost in terms of economic growth and job creation can be enormous, with small and medium-sized enterprises (SMEs)--the engines of wealth creation--frequently suffering the worst of the impact.

The Arab region is not immune from these constraints as evident in a recent World Bank report, From Privilege to Competition: Unlocking Private-Led Growth in the Middle East and North Africa, which pinpoints the underlying reasons for the relatively low level of private sector investment--chiefly: excess state intervention in banking and land management; overreliance on an oil/gas industry, leading to a lack of diversification; deficiencies in the credit market; higher taxes; an inadequate skills base, partly caused by brain drain and lower spending on higher education and technical training; corruption (i.e. bribes to 'get things done'); cronyism; and unreliable basic infrastructure outside the Gulf states for supporting output facilities and handling exports.

The overall level of private investment in the MENA region has remained stagnant over the past two decades at just 15% of gross domestic product (GDP)--less than one third of the average in most other developing areas (except sub-Saharan Africa). Moreover, …