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Remarks by World Bank Group President David Malpass

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The World Bank at a time when according to the IMF, the MENA region is on track for a recovery, despite some rising social unrest threatening the ‘fragile’ progress of low-income economies, produced the following enthusiastic remarks by World Bank Group President David Malpass address to the Arab Governors of the World Bank Group.

Remarks by World Bank Group President David Malpass to the Arab Governors of the World Bank Group

Let me begin by congratulating Minister Khalil.  Your appointment as Minister of Finance comes at a crucial moment in Lebanon’s history. The World Bank Group will work with you to support the critical reforms needed to address Lebanon’s challenges.   Thank you for mentioning Hela in your opening.  She’s the new IFC Vice President for the region, and I want you all to know the high priority we place on private sector advancement in the region.  All parts of the World Bank Group are making that a high priority.

Dear Governors and distinguished guests, it is a pleasure to be with you again to discuss the challenges and opportunities in your region.  Thank you for your recent annual letter outlining the key and urgent development challenges of the region. Let me also thank our Dean Dr Merza Hassan for helping to convene this meeting and for his unwavering support to the MENA region.

We meet today against a backdrop of uncertainty. The COVID-19 pandemic has led to reversals in development gains in many regions, threatening jobs, social stability – and lives.

MENA was hit particularly hard by Covid 19. Even before the pandemic, growth had stalled, poverty was on the rise, and the social contract between citizens and the state was strained. Climate change adds a further burden to the development challenge.

During my recent visits to the region, to Sudan, Jordan and the Palestinian territories, I saw firsthand the impact of this multi-pronged crisis. I was concerned by low investment levels, high unemployment rates, and low female labor participation rates.

I also saw potential via regional integration, pro-growth investment, and improvements in the enabling environment for business. The recovery in global growth provides opportunities to make positive changes, and I was encouraged by my discussions with officials and businesses.

As you know, MENA is the least economically integrated region in the world. We have expressed our support for any initiative aimed at developing economic ties between countries in the region, and we are thus looking at ways to support the gas and electricity potential connection between Egypt, Jordan and Lebanon.

While we are not in a position to engage in Syria, we nevertheless are concerned about the Syrian people’s economic woes due to the degradation of the situation in the country. Our position has always been to look after the people, and we are doing so for Syrian refugees in Lebanon and Jordan.

In the year leading up to the next annual meetings in Marrakesh, my message will remain focused on the importance of improving access to vaccines; recovering from Covid; overcoming conflict; mitigating and adapting to climate change; containing debt; and creating strong sustainable jobs for the youth of this region.

Morocco has made progress on all of these, and I want to thank you for graciously hosting us in 2022.

As a region, MENA will need to generate 300 million new jobs by 2050. These will be created largely by the private – not public – sector.  Reaching this critical goal of sustainable job creation needs governance and transparency, rule of law, and an attractive business environment.

IBRD, IFC and MIGA are fully engaged. I’m interested in hearing from you where the World Bank Group can position itself better.

As we move toward Marrakesh in 2022 and Cop27 in Egypt, how can the Bank Group assist in making these events a launching pad for more sustained and comprehensive development in MENA?

Thank you again for inviting me and let’s now open our discussion.

The anxiety list for MENA entrepreneurs is long, as is the one curing it

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Hadi Khatib on AMEInfo of 18 September 2021 came up with this deep statement on the anxiety list for MENA entrepreneurs that is long, as is the one curing it

The anxiety list for MENA entrepreneurs is long, as is the one curing it

A research report on the mental health challenges and wellbeing of entrepreneurs due to COVID-19 in the MENA region revealed anxiety has several facets in the minds of these leaders. But all of these insecurities have cures.

  • 55% of startup founders said that raising investment has caused the most stress.
  • More than 95% of entrepreneurs view co-founders as family members and/or friends.
  • Research finds that entrepreneurs are happier than people in jobs.

EMPWR, a UAE-based digital media agency dedicated to mental health and an exclusive mental health partner for WAMDA and Microsoft for startups, published a research report on the mental health challenges and wellbeing of entrepreneurs due to COVID-19 in the MENA region.

The research indicated that startup founders undergo higher levels of stress than the rest of the region, with twice the likelihood of developing depression issues.

55% of startup founders said that raising investment has caused the most stress; the pandemic was the second most-cited reason cited by 33.7% of respondents.   44.2% spend at least 2 hours a week trying to de-stress. 

Other insights, uncovered by the report, include:

  • A good relationship between co-founders can help startups navigate the pandemic-hit market. More than 95% of entrepreneurs view co-founders as family members and/or friends
  • Many entrepreneurs live well below their means to fund their ventures, leading to stress that is detrimental to their health

With only 2% of healthcare budgets in the MENA region currently spent on addressing mental health, the impact of the COVID-19 pandemic on young entrepreneurs and achievers could lead to an economic burden of $1 trillion, by 2030, according to the report.

EMPWR’s MENA partners shared special offers on their mental health services for the region’s entrepreneur community.

From Saudi Arabia:

Labayh is offering the technology ecosystem a 20% discount on their online mental health services for 2 months. Promo code: empwr, with the offer valid until October 29.

From Egypt:

O7 Therapy are offering 50% off their online mental health services, for 50 Entrepreneurs in the MENA region. Promo code: Entrepreneur50, valid until December 1, 2021.

From the UAE:

My Wellbeing Lab is offering 20 one-on-one coaching sessions to entrepreneurs that wish to be coached and helped; alongside unlimited access for any entrepreneur to their “Discovery Lab”, a platform that gives entrepreneurs and leaders insights into their mental wellbeing as well as their teams. Promo code: MWL21.

Takalam is offering 10% off for 3 months. Promo code: Impact.

Mindtales is offering the MENA ecosystem 50% off their services for one month. Their App can be downloaded here.

H.A.D Consultants is offering 20 one on one coaching sessions to entrepreneurs. Promo code: HAD_SME01.

From Oman:

Nafas, a meditation app focused on reducing stress, anxiety, and help with insomnia, is offering access to its platform. Register as a user via this link to redeem benefits. 

Entrepreneurs’ mixed emotions

Entrepreneurs must grapple with uncertainty and being personally responsible for any decision they make. They likely have the longest working hours of any occupational group and need to rapidly develop expertise across all areas of management while managing day-to-day business.

Yet despite all this, research finds that entrepreneurs are happier than people in jobs.

To understand this, a comprehensive and systematic review of 144 empirical studies of this topic, covering 50 years revealed:

1. It’s not all about pay

Work on the economics of entrepreneurship traditionally assumed that entrepreneurs bear all the stresses and uncertainties in the hope that over the long term they can expect high financial rewards for their effort. It’s false.

2. Highly stressful, but…

High workload and work intensity, as well as financial problems facing their business, are at the top of the entrepreneurs’ stress list.

But some stressors have an upside. While they require more effort in the here and now, they may lead to positive consequences such as business growth in the long term. Some entrepreneurs appear to interpret their long working hours as a challenge and therefore turn them into a positive signal.

3. Autonomy is both good and bad

The autonomy that comes with being an entrepreneur can be a double-edged sword. Entrepreneurs can make decisions about when and what they work on – and with whom they work. But recent research into how entrepreneurs experience their autonomy suggests that, at times, they struggle profoundly with it. The sheer number of decisions to make and the uncertainty about what is the best way forward can be overwhelming.

4. An addictive mix

The evidence review confirms that, by any stretch of imagination, entrepreneurs’ work is highly demanding and challenging. This, along with the positive aspects of being their own boss coupled with an often competitive personality, can lead entrepreneurs to be so engaged with their work that it can become obsessive.

So the most critical skill of entrepreneurs is perhaps how they are able to manage themselves and allow time for recovery.  

Stress management tips for entrepreneurs

Identify what the actual source of your stress is. Is it tight deadlines, procurement issues, raising capital, managing investors’ expectations, building a talented team, or delay in landing the first sale for your new startup business?

Even if numbering more than a few, break them down because unmanageable tasks look simpler when broken down into smaller segments. Then, list down how you plan to successfully tackle each issue. Meanwhile, exercising multiple times a week has been rated as one of the best tactics for managing stress.  

Another technique for handling stress is to take a break. Rest as much as you can before going back to continue with the tasks.  It’s also a good idea to reach out to friends, family, and social networks because they are likely to understand what you’re going through and offer words of wisdom and courage.

Stay away from energy-sapping junk food. Eating healthy keeps you fueled for the next challenge. Finally, get enough sleep, and power naps. Sleep helps your body and mind recover.   

Hadi Khatib is a business editor with more than 15 years of experience delivering news and copy of relevance to a wide range of audiences. If newsworthy and actionable, you will find this editor interested in hearing about your sector developments and writing about them. He can be reached at:  hadi.khatib@thewickfirm.com

Fintech industry poised for significant growth in the MENA region

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The MENA region, like much of the undeveloped world, is characterised by an omnipresent Informal Economy with however differing specifics. This label dates back to most countries Planned Economy. So why is now the Fintech industry poised for significant growth in the MENA region? And how?
All world economies have an informal economy, and the duties of all business and governments alike leaders are to sustain, help and assist in its good maintenance and eventual development. Informal Economy is not Black Market and can easily be formalised to become the locomotive of any nation’s economic life. Could Fintech be of serious help here?

Any way, the reasons are tied to those specifics at this conjecture as well summarised by Ayad Nahas below.

The Financial Technology (Fintech) industry in the Middle East and North Africa (MENA) looks well placed to enjoy a period of substantial growth.

  • As many as 69% of adults remain totally unbanked in the region
  • Internet penetration in Saudi Arabia stood at 95.7% in January 2021
  • Fintech is going to be the “game-changer”

Fintech industry poised for significant growth in the MENA region

By Ayad Nahas, Communication Strategist

The Financial Technology (fintech) industry in the Middle East and North Africa (MENA) looks well placed to enjoy a period of substantial growth.

 Part of this growth could come from a large unbanked population.

According to the World Bank, only 8% of adults belonged to the banked population in 2018 and as many as 69% of adults remain totally unbanked in the region.

GCC expatriates with low and middle-income salaries constitute a large proportion of the unbanked such as in the UAE, where around 80% of the population is outside the current financial system.

Yet, regional smartphone and internet penetration is very high, reaching 2 mobile-cellular subscriptions per UAE inhabitant in 2019, while Internet penetration in Saudi Arabia stood at 95.7% in January 2021.

 Regional governments spotted this opportunity and introduced regulation to substantially attract investments into the sector.

 Fintech is a term that describes new technology which seeks to improve and automate the delivery and usage of financial services. At its core, fintech helps companies, business owners, and consumers better manage their financial operations, processes, and lives by applying specialized software and algorithms on computers and, increasingly, smartphones.

 Fintech’s adaptability across a slew of consumer sectors is propelling its widespread acceptability. Managing finances, trading shares, furnishing payments, and shopping online (often on your smartphone) has never been more convenient.

At the forefront of the fintech disruption are agile innovations such as peer-to-peer (P2P) lending and crowdfunding, providing alternative lending platforms, and widening access to fundraising.

While they may currently still need some centralized form of finance, at the minimum, P2P lending and crowdfunding can use fintech and blockchain to quicken the process, avoid paying high banking fees, and garner the interest of digitally-minded Millennials and future Z-generations.   

A recent report by consultancy firm Deloitte also states that the UAE houses over 50% of the region’s fintech companies, with nearly 39% of the population using fintech for P2P money transfer.

According to a report by Crowd Funder, a leading online source for the fintech industry, the number of financial technology companies in the Middle East increased from around 105 companies in 2015 to 250 firms in the year 2021.

Hanna Sarraf, a senior banking executive from the MENA region, said fintech is going to be the “game-changer” that will decide the winners and losers within the financial services industry, globally and in the Middle East, in the short and long terms.  

He points out that new technologies and advanced data analytics are transforming the traditional banking business models from the way banks interact with customers to the way banks manage their middle and back-office operations. 

The global fintech market is expected to reach $309.98 billion at a CAGR of 24.8% by the year 2022 according to many key sources from the banking industry. In the MENA, the fintech industry is expected to hit a record valuation of $3.45 bn by 2026.

The growth of this sector is currently being propelled by the rapid rise in fintech startups as a result of the very high internet penetration in the region. Another major factor is that several traditional banks are undergoing digital transformations or even becoming neo-banks, a trend especially evident in the UAE.

In a survey by the Boston Consulting Group (BCG) last October, 70% of respondents said they are actively searching for a new bank, and 87% said they would be willing to open an account with a branchless digital-only lender.

Today, the UAE is leading the pack in financial technology and developing itself as a digital-first nation when it comes to banking, payments, and fintech, as evidenced by the UAE’s first digital bank to provide both retail and corporate banking services and which will soon be launched and led by Former Emaar Chairman, Mohamed Alabbar.

According to many experts, the fintech market in the MENA region is set to account for 8% of the Middle East financial services revenue by 2022. COVID-19 turned out to be a wakeup call to switch from traditionally deployed financial services to more sustainable finance and technology platforms

The fintech revolution is set to continue to disrupt, and traditional banks must keep up with the pace of technology in order to stay relevant and competitive. In this rapidly evolving, ever-changing market, it’s time to innovate, integrate and accelerate into the future.

Published by AMEInfo on 28 April 2021.

MENA countries weighed down by pandemic debts

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ARAB NEWS‘ article on the MENA countries weighed down by pandemic debts as these have already registered the advent of this pandemic inadvertently hit some declines in real GDP growth from their oil exports reduction. Since the beginning, these had difficulty coping with COVID 19 pandemic prevention for many reasons that are of a logistics nature but structural.

MENA countries weighed down by pandemic debts will struggle to grow – World Bank

  • Average MENA debt to GDP rose 9 points since 2019 to 55% in 2021
  • Countries with low external debt can still borrow cheaply
In early March UAE had the highest percentage of its population vaccinated, at 63.5%. (File/Reuters)Short Url

WASHINGTON, D.C.: The outlook for the Middle East and North Africa has worsened considerably over the past year as countries accumulated debt to pay for pandemic relief measures, leaving them with less to invest in post-pandemic economic recovery, according to the World Bank.

Average debt to GDP in the MENA region rose by 9 percentage points since the end of 2019 to 55 percent in 2021, the World Bank said in a report Living with Debt: How Institutions Can Chart a Path to Recovery in the Middle East and North Africa released on Friday. Debt among the region’s oil importers is expected to average about 93 percent of GDP this year, it said.

MENA economic growth will rebound by 2.2 percent in 2021 after contracting 3.8 percent in 2020, but will be 7.2 percentage points, or $227 billion, lower by the end of this year than it would have been had the pandemic not happened, the World Bank estimates. Real GDP per capita will be 4.7 percent lower in 2021 than in 2019.

“The MENA region remains in crisis, but we can see hopeful signs of light through the tunnel, especially with the deployment of vaccines,” said Ferid BelHajj, World Bank vice president for the Middle East and North Africa. “We have seen the extent to which MENA governments borrowed to finance critical health care and social protection measures, which saved lives and livelihoods, but also boosted debt.”

As of the first week of March, the UAE had the highest percentage of its population vaccinated, at 63.5%, followed by Bahrain at 30% and Morocco at 12.2%, then Qatar at 11.4%, World Bank data shows. Saudi Arabia had a 2.2% vaccination rate.

MENA countries will need to keep on borrowing this year to prop up their citizens’ finances but will face high borrowing costs, particularly those with high debt and low growth, the bank said. However, those with low levels of public external debt, such as Saudi Arabia, Qatar and Morocco, could issue debt at lower rates, it said.

The remedy for the increasingly precarious situation of many of the region’s economies is faster growth that makes it easier to roll over existing debt, the World Bank said. Those that cannot roll over debt face potentially painful restructurings and should enter into negotiations before they hit crisis point, the report advised.

Of benefit to the whole region would be enhanced debt reporting transparency and financial market vulnerability monitoring, it said. MENA countries should reveal all their borrowing, including those from China, as should debt become exposed during periods of distress it will be added to the public tally just as they are negotiating with lenders, the report said.

“Economic growth remains the most sustainable way to reduce debt,” the report said. “Boosting economic growth requires deep structural reforms to raise the productivity of the existing workforce and to put idle working-age people in jobs. Many MENA countries that have characteristics associated with ineffective fiscal stimulus, such as high public debt and poor governance, could consider fiscal reforms early in the recovery from the pandemic.”

Colluding With the Corrupters

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Michael Young in an interview, with David Linfield who argues that international donors are benefiting existing power structures in the Middle East. It is all about Colluding With the Corrupters.

Preamble

Corruption spread deep and for some time in the MENA region with social, political, and economic implications, but with differing penetrations rates. All because the area can divide into two types of governance. The autocratic monarchies live with side by side with the so-called republics. Few of these latter countries know a higher degree of corruption than the first-mentioned countries. In any case, all have made the fight against corruption a priority by passing laws and adopting strategies to combat crime. But in vain.
Colluding with the Corrupters could quickly summarise a situation where such deviant behavioural attitudes originators can be traced back out of the region.

  • January 29, 2021

David Linfield is a visiting scholar in Carnegie’s Middle East Program. He is on sabbatical from the U.S. Department of State, where he is a career foreign service officer. Linfield recently wrote a commentary for Carnegie, titled “International Donors Are Complicit in Middle Eastern Elites’ Game.” In mid-January, Diwan interviewed him to discuss his article, and more generally to examine the anti-elite feeling that has permeated protests throughout the Middle East in the past year, notably in Iraq, Jordan, and Lebanon. The views expressed by Linfield are his own and not necessarily those of the U.S. government.

Michael Young (MY): You’ve just written a commentary for Carnegie, titled “International Donors Are Complicit in Middle Eastern Elites’ Game.” What is your argument in the piece?

David Linfield (DL): My argument is that the United States and other international donors have put significant clout and resources behind promoting economic liberalization in the Middle East, while they have been hesitant to put similar emphasis on political reforms. By political reforms I mean boosting transparency, combating corruption, and empowering elected officials. International actors have partly justified this approach by suggesting that economic reforms are a better way of promoting stability and less risky than political changes. But I contend that recent events in the region suggest that these policies are making violent, sudden change in the region more likely, not less so.

When adopted in the context of authoritarian political systems, economic reforms such as privatization have tended to benefit existing power structures, exacerbating economic inequality and citizen-state tensions. The World Inequality Database now ranks the Middle East as the most unequal region in the world. While economic inequality has decreased worldwide since the 1990s, it has remained constant in the Middle East.

By supporting policies that have inadvertently led to such entrenched inequality, while neglecting political reforms, international donors have contributed to citizens’ frustrations with their relative economic status while leaving them without peaceful institutional means of expressing their grievances. This is all a recipe for instability, which is the opposite of what donors want.

MY: You write that “[e]merging solidarity among previously competing groups, grounded in [economic inequality]” is a feature of the growing resentment of elites in the Middle East. Are you suggesting, to borrow from Marxist jargon, that we are seeing the emergence of a sort of class consciousness in certain countries that may have revolutionary potential?

DL: Most of the protests in the Middle East since 2018 have focused on economic inequality and corruption. Whereas previous demonstrations in the region tended to consist of a homogeneous ethnic group—whether from a particular religious sect, region, or group of tribes—these recent protests have been more diverse.

Common frustrations with inequality appear to have led people from lower-income communities to demonstrate in common cause—albeit sporadically and tentatively—against what they see as a corrupt and multisectarian elite that has failed them. We have seen this happen most explicitly in Iraq, Jordan, and Lebanon.

Some of the slogans used in recent protests in these countries do indicate the emergence of class consciousness. When the Jordanian Teachers Union threatened to strike in summer 2020, they framed their plight as a class struggle against those who had “looted the country.” The 2019 Lebanese protests included slogans like “down with the rule of the thieves.” Iraqi protestors in 2019 and 2020 told media outlets that their struggle was about taking the country back from “thieves.”

MY: In light of your assessment, how have the traditional fault lines among Middle Eastern populations that regimes have manipulated to retain power—things such as sectarian, tribal, or regional divisions—fared in what you describe as a changing environment?

DL: The traditional fault lines in Middle Eastern societies are still very much present. Emerging class-based tensions have not fully supplanted preexisting divisions based on ethnicity, religion, and tribalism, but rather now coexist alongside them more than before. That said, the trendlines I described earlier suggest that class-based divisions will continue to grow in relative importance and have the potential to reshape existing political alliances and divisions.

In addition to the demonstrations I mentioned earlier, another indicator of the power of class solidarity is a 2019 experiment by researchers from the University of Pittsburgh and the Lebanese Center for Policy Studies. The study, which assigned hundreds of Lebanese people into different conversation groups having varying compositions based on sect and class, found that when Lebanese people gathered with other members of the same class, they exhibited markedly less support for sectarian politics.

It’s too early to craft a comprehensive assessment of how emerging class-based tensions will interact with longer-standing societal divisions in the Middle East. One reason that we’ll have to observe for a longer period is that Covid-19 shifted the focus dramatically from political and economic challenges to the health crisis. But given that the pandemic exacerbated economic inequality, with lower-income communities bearing the brunt of related economic disruptions, we probably won’t have to wait long before class discussions reemerge.

MY: If the problem is that economic liberalization has reinforced elites, what are you recommending as an alternative approach by Western donors? And what makes you think that such an approach would have any chance of working?

DL: The alternative approach I’m recommending is for international donors to incorporate measures to promote transparency and combat corruption into existing economic liberalization efforts. These political reforms are also good for business and economic growth—as noted by the International Monetary Fund (IMF) and World Bank reports I cite in my article. The IMF’s recent insistence that Lebanon address corruption before receiving additional loans is a positive step to putting teeth behind their analysis.

Other helpful steps would include pushing to empower the many weak legislatures across the region beyond their current rubber-stamp roles, which would provide an alternative to protests for frustrated publics. If international donors put the same clout behind good governance that they have behind economic liberalization, they’ll make peaceful and durable progress more likely in the Middle East.

MY: Are you not reading too much into anti-elite solidarity? Ultimately, states in the region have shown that they will resort to violence in order to survive and societies have often gone back to being silent. Why will this change?

DL: Ruling elites in the region have demonstrated that they are willing to go to extreme measures to maintain their benefits. I am not suggesting that elites will somehow decide that they should altruistically begin to share resources with the rest of society. Rather, as your question implies, I am arguing that the elite behavior of concentrating power and resources is an unsustainable strategy that will ultimately foment violence and harm everyone’s interests, including those of the elite.

Autocratic regimes tend to resort to violence when they feel they have run out of other options, but rely more often on nonviolent coercion and intimidation to maintain daily control. By the time regimes turn to violence, it tends to be a prelude to their loss of control—or a stage where they are nearing that.

The strategy of international donors focusing their influence and resources on economic liberalization instead of good governance has not succeeded in bolstering stability and strengthening citizen-state relations. Instead, the policy has exacerbated class-based tensions and increased the prospects of unrest.

These trends are not linear: demonstrations in the region against economic inequality and corruption have ebbed and flowed. Ruling elites remain intent on doing everything they can to outmaneuver these latest challenges to their vested interests. Longer-standing societal tensions based on sect, region, and tribe also continue to simmer and remain exploitable by elites. But the overall direction of the region is still toward economic liberalization in the midst of authoritarian entrenchment. As long as that remains the case anti-elite solidarity is likely to build. International donors are inadvertently contributing to these increasing citizen-state tensions. Instead, they could be fostering more durable change that would make the region more stable and prosperous for everyone.