How Middle Eastern retailers can keep up with E-commerce

How Middle Eastern retailers can keep up with E-commerce

This article is part of the World Economic Forum on the Middle East and North Africa and is co-authored by Abdellah Iftahy, Partner, McKinsey & Company, Franck Laizet, Partner, McKinsey & Company and Zaid Ghazaleh, Associate Partner, McKinsey & Company.

A saleswoman attends to a customer at the cash counter inside a shop at Dragon Mart in Dubai, March 2, 2011. Built in the shape of a dragon, the 1.2 km long and 150,000 sqm large mall is a trading centre with almost 3,950 shops selling mainly Chinese products ranging from office appliances to garments and daily products.  Picture taken March 2, 2011.    REUTERS/Jumana El Heloueh (UNITED ARAB EMIRATES - Tags: BUSINESS) - GM1E73318X601

01 Apr 2019

Traditional bricks and mortar retail is under attack globally. Retailers have struggled to compete with the growing popularity of large-scale competitors such as Amazon and Alibaba. The industry is also in the grip of a revolution powered by digital technology, as people shop online rather than in stores. Millennials comprise the largest internet audience, and will have more buying power than any generation before. But they still want to touch, feel and explore products. Shopping is becoming more of an experiential activity, during which stores compete for consumers’ “share of wallet”.

Middle Eastern retailers and consumer goods companies are even more vulnerable, as the pressure from e-commerce and changes in consumer buying behaviour are compounded by rising costs associated with economic reforms, such as workforce localization, taxes, and increasing fuel and electricity prices. As prices rise, consumer buying power and confidence is becoming subdued.

In fact, our latest survey, conducted in September 2018, reveals that consumers in the Middle East are spending even more cautiously than they have in previous years. They are also more anxious: 80% of survey respondents in Saudi Arabia and 72% in the United Arab Emirates are worried about losing their jobs. In both countries, more than 40% of respondents said they’re cutting down on spending and paying closer attention to prices.

Consequently, traditional retailers have limited levers to operate in response. They have a large fixed base of assets, which they need to rethink as shoppers favour the convenience of purchasing online rather than visiting stores. It is absolutely critical that retailers think about how to operate at maximum efficiency, with a hard focus on cash and working capital, in order to survive to the next stage. They are in a paradoxical moment where their revenues and returns are declining, yet they must invest in technology. It is not always easy to justify this spend with investors. And in thinking beyond the present to the different value propositions and approaches needed to recapture the customer, they must re-skill their employees and recruit new talent.

Customers are now more interested in experiences than products. In considering how to stay with them throughout their buying journey and not just at the end of it, retailers need to make many changes in the way they reach their customer, how they interact with them, what they learn about them, and how they ultimately sell them a product, service or experience. Convenience is also becoming important to consumers as they move their retail activity online. In fact, 50-60% of consumers state that saving time is one of the main reasons why they shop online.


Digital technologies and changing shopping habits are a clear threat to traditional retail business models. But there are positive ways to respond to these trends. To embrace these opportunities, real-estate developers must get closer to consumers and figure out how to meet their evolving wants and needs.

The good news is that by leveraging their assets – physical proximity to consumers, logistics, brand, in-store experience – traditional players still have the right to win. The Middle East has a young population with aspiring lifestyle choices, and with the various macroeconomic transformations taking place, buying power will recover and grow. But retailers must be willing to undertake rapid, radical and lasting transformation when it comes to efficiency, and the ways they embrace technology and offer products.

A transformation can be designed around the following five fundamentals or key success factors.

First of all, the full leadership team – not just the Board and CEO – has to be behind the change required to turn the business around.

Second, this motivation needs to move beyond the boardroom fast and engage the front line, going deep and wide across the organization.

In the Middle East, those two elements are typically in place. It’s the following three that need more focus.

The right structures need to be put in place to ensure that any response is effectively executed and delivered – for example how the business is organized, how governance is implemented, and how objectives and deliverables are executed.

Culture is also important. This is not about how to respond from a technical point of view, but the changes necessary in the mindsets and behaviours of everyone in the organization to make the transformation a success.

The last element is identifying, developing and elevating the best people in your organization, because they are the resource who will take you from point A to point B.

There is no doubt that physical retail is here to stay, and will keep its place alongside the online marketplace. Even e-commerce giants are entering into physical retail, as digital natives invest offline – see Amazon acquiring Wholefoods, and Alibaba’s Hema concept. These new stores have decoupled the notions of “shopping” and ‘“buying”, showing the face of retail is changing. Traditional retailers’ main challenge is to accelerate the pace of transformation, while ensuring they address, in a holistic way, the growth side, cost side, cash side and re-skilling of employees, in order to deliver results.

Read more here.

Have you read?


Advertisements
Invigorating Female Entrepreneurship in Egypt’s Ecosystem

Invigorating Female Entrepreneurship in Egypt’s Ecosystem

For purposes of mainly Invigorating Female Entrepreneurship in Egypt’s ecosystem, a “SHE CAN – 2019” organized by Entreprenelle, kickstarted by Rania Ayman in 2015 as an organization eventing conferences as a mean to empower and motivate women so as help them believe in their ability to change their destiny.

SHE CAN – 2018 was elaborated on by Women of Egypt Mag (picture above) and here is 2019’s as covered by Entrepreneur of today.

The conference held a wide range of panel discussions, talks and workshops on innovative thinking, creativity, technology, raising capital and invigorating female entrepreneurship in the ecosystem.

Egypt’s SHE CAN 2019 Focuses On Failures As Stepping Stones To Success

By Entrepreneur Middle East Staff, Entrepreneur Staff, April 1, 2019.

Entrepreneur Middle East Staff

You’re reading Entrepreneur Middle East, an international franchise of Entrepreneur Media.

Egypt's SHE CAN 2019 Focuses On Failures As Stepping Stones To Success

SHE CAN 2019, a conference dedicated to MENA women entrepreneurs, hosted its third annual edition at the Greek campus, Downtown Cairo, Egypt, with the theme ‘Successful Failures’. Launched by Entreprenelle, an Egypt-based social enterprise which aims to economically empower women through awareness, education and access to resources, the conference held a wide range of panel discussions, talks and workshops on innovative thinking, creativity, technology, raising capital and invigorating female entrepreneurship in the ecosystem.

Gathering more than 5,000 participants and 50 partners, including UN Women, the Swedish Embassy, the National Council for Women, Nahdet Masr, Avon, Orange and Export Development Bank of Egypt, it also highlighted the endeavors of Entrepenelle alumni. It was also an opportunity for aspiring entrepreneurs to learn from sessions featuring tips on pitching business ideas, mentorship, as well as startup competitions. Female-founded startups were also able to showcase their products and services in an exhibition area.

Speaking about the conference focusing on the necessity to experience failure on one’s entrepreneurial path, Dorothy Shea, Deputy Ambassador of the US Embassy in Cairo, commented, “As far as I’m concerenced, the sky is the limit. Women should be able to achieve whatever their dreams are. What I was struck by was this idea of “successful failures,” we need to not fear failure, it’s not a destination, it is a stepping stone to success. Sometimes there can be a fear of failure, but as part of this entrepreneurship ecosystem, they are really trying to move that inhibition away. We learn from our failures and then we take our plans to the next level. I was really inspired by this theme.”

Founded in 2015, Entreprenelle has more than 10 entrepreneurship programs conducted in nine governorates, including Cairo, Alexandria, Mansoura, Minya, Assiut, Sohag and Aswan.

Related: Embracing Failure: Lessons From History’s Most Successful Entrepreneurs

More from Entrepreneur : Next Article

Morocco : By the numbers, a Macroeconomic Data and Trends

Morocco : By the numbers, a Macroeconomic Data and Trends

The Financial Times, a British daily newspaper produced Analyse-Africa recently published the second of its new series on African countries report. It is about Morocco in a Report that is proposed as put in its title Morocco : By the numbers by all relevant numbers, graphics, charts and of course all related explanatory notes, etc.

as per leading global sources on African countries, etc. on its economy, political stability, foreign direct investment, trade, banking & finance, infrastructure, telecoms, labour, education and healthcare.

An introductory text sets the background by giving some key dates of the country’s contemporary history such as those of the short and ephemeral French protectorate prior to independence in 1956 before dwelling at length on its relationship with its immediate neighbour Algeria.  It reviews also some of the most obvious aspects of its internal political life to end by Morocco’s reinsertion into the African Union.

Some description of the land and resources held therein are covered in one page.  Demographics details on life expectancy, natality rates, religion, languages, ethnicities, etc. are splashed around for a better visualisation of the country’s human characteristics. Population estimated in 2016 at 32.84 million preponderantly young and with a penchant for emigrating has been noted towards Europe.

Politics and stability ensued in some detail on governance quality with details of the central and local authorities and ranking according to the proposed Mo Ibrahim Index of African Governance.  Morocco comes second to Tunisia after the passage of the Arab Spring.  Corruption and freedom of the press are schematically reviewed as being somewhat lacking in girth and depth.  Not forgetting the importance women in the country’s politics, the status is that these have some way to go to catch up with its neighbours.

The economy as it is expected takes up few pages, starting with an evaluation of the country’s GDP and its ranking over time as compared to other North and sub Saharan African countries.  It is dominated by the agricultural sector and the automotive industry.  The renewables industry has sprung to be an asset which the authorities are tabling on for the future development of the country. Other sector of the economic activities such as trade, banking and finance, state of the infrastructure, the telecoms generally are reviewed and statically ascertained.

Labour, education and healthcare are reported in great details as compared to other neighbouring countries.  The great leap forward is without any doubt the ICT infrastructure that allows an ever increasing number of the population access to the Internet media, social, e-commerce, e-government, etc.

Certain of the trends are highlighted in Morocco’s estimated GDP of $105bn that grew by 1.85%.  Morocco is ranked as the third easiest place in Africa to do business in and that it has in 2016, approximately 11.28 million people employed, with a labour force participation rate of 49%.

Problems of the Rif’s populations enduring difficult relationship with the central authority were not covered though some mention of the Spanish establishments of Ceuta and Melilla were. Conversely, Western Saharan peoples striving for auto determination long lasting issue was duly reported with however a certain impartiality.

Iran moves to opening up for GCC’s businesses

Iran moves to opening up for GCC’s businesses

The proposed article of Paul Ebeling’s on Iran moves to opening up for GCC’s businesses would be best to be prefaced by an introduction to a respectable retrospective of modern Iran as it is striving to pick up speed after coming out of the darkness of years of sanctions.  Read more in A History of Modern Iran .  

In a radical reappraisal of Iran’s modern history, Ervand Abrahamian traces Iran’s traumatic journey across the twentieth century, through the discovery of oil, imperial interventions, the rule of the Pahlavis, and, in 1979, revolution and the birth of the Islamic Republic.  In the intervening years, Iran has experienced a bitter war with Iraq, the transformation of society under the rule of the clergy, and, more recently, the expansion of the state and the struggle for power between the old elites, the intelligentsia, and the commercial middle class.  The author, who is one of the most distinguished historians writing on Iran today, is a compassionate expositor.  While he adroitly negotiates the twists and turns of the country’s regional and international politics, at the heart of his book are the people of Iran, who have endured and survived a century of war and revolution.  It is to them and their resilience that this book is dedicated, as Iran emerges at the beginning of the twenty-first century as one of the most powerful states in the Middle East.  

Iran is open for business, what does it mean for GCC companies?  

In January this year, senior diplomats from around the world formally announced the lifting of sanctions against Iran. In principle this put a definitive end to 37 years of various degrees of sanctions imposed on the country.

Boardrooms of global Fortune 500 companies and regional conglomerates alike have been lit up with debate on what this means for their business over the past 10 months, but two things are certain.

1st, the opening up for the nation to the world is arguably one of the most prolific global business opportunities of our generation.

2nd, the answer to the above question depends heavily on your company’s origin, DNA and risk appetite.

For the majority of the largest European and Asian companies excluding China, this marks a much-awaited opportunity to return to Iran, where many had investments, manufacturing facilities and large-scale operations prior to the financial sanctions made against Iran in 2011.

Chinese and American companies view the current situation as more of a threat, and for different reasons.

Chinese firms have greatly benefited from the international sanctions on Iran over the past few years, which provided a window where an inflow of Chinese products flooded the market without much foreign competition. The lifting of sanctions will see an inevitable curtailing of Chinese dominance in this market.

For American companies, the situation is more complicated.

Although US companies’ foreign subsidiaries are technically allowed to engage with Iran, there is still a minefield of regulatory, transparency and legal challenges that have left many hesitant to take even preparatory steps.

Furthermore, the fact that 2016 is a US Presidential election year, and the mounting layers of uncertainty of the future government’s policies towards Iran have left the majority of American companies unable to decide.

So, what does Iran opening up mean for GCC players?

There are both significant opportunities and many challenges, and to understand the complex nature of GCC-Iran ties we must first understand how Iran fits into the macro-economic fabric of the Middle East.

Iran: what’s the big deal?

The excitement felt by foreign companies can be understood when you look at Iran’s economic indicators.

Iran isn’t a stereotypical sanctioned economy, which might be perceived to be underdeveloped. On the contrary, the economy is more diversified than most emerging economies today, and is substantial in size across various indicators.

Despite the sanctions, Iran has maintained the 26th largest GDP in the world at $425-B, between Saudi Arabia (20th at $646-B) and the United Arab Emirates (31st at $370-B). It generates 1.5% of global GDP and is the only country that exported in every single category of exports, as defined by the IMF in 2012-2013.

Iran also boasts a population of nearly 80-M inhabitants, which is equivalent to the population of all 6 GCC countries combined. With a burgeoning middle class, Iranian consumers increasingly have disposable incomes. Moreover, Iran’s predominantly young population is amongst the most highly educated in the region, with 13.3% of the working population having graduated from university.

The country has the highest literacy rates in the region and is the 5th largest producer of engineers worldwide.

Like some of its GCC neighbors, Iran is blessed with natural resources, and in abundance. Iran has the world’s 4th largest proven Crude Oil reserves (4% global share) and the world’s 2nd-largest proven Nat Gas reserves (17.5% global share).

Iran is the world’s 12th largest Crude Oil exporter, as of 2015, and is expected to climb as it increases production.

Souq Iran

Souq Iran

But unlike its GCC neighbors, Iran has managed to build a diversified economy that does not rely solely on its Crude Oil and Nat Gas industry. Though Oil-based revenues still provide 25% of the country’s GDP, the automotive, mining and manufacturing, and agriculture sectors each also command 10% of the economy.

As the national GDP breakdown infers, Iran is blessed with many natural resources besides Oil and Gas; the country holds over 7% of the world’s total minerals. Iran has the largest global zinc reserves and the largest copper deposits and is a large global supplier of iron ore and chromite.

Iran is currently home to the 20th largest automotive manufacturing hub in the world, having produced approximately 1.4-M units in 2015.

Iran is expected to become the biggest market for new car sales in all of the Middle East and North Africa (MENA) by 2020. This translates into big opportunity for automotive manufacturing and automotive aftermarket players in the region.

Elsewhere, the country’s construction sector is still expected to continue at a relatively strong and steady growth rate of 6.1% CAGR from 2016 to 2020.

Driven primarily by residential construction projects, Iran’s construction market is expected to reach $196-B by 2020. Iran is the 13th largest steel producer in the world, and is also the 4th largest cement producer, behind China, India and the USA.

Beyond Iran’s impressive industries, the country’s strategic geographic positioning between Europe, the Middle East, South Asia, and the Far East also works in its favor. And it seems this is more relevant than ever before, as talks of reviving and modernizing the old ‘Silk Road’ trade routes between Asia and Europe have intensified in recent months.

Business opportunities

Iran’s large market spells big opportunity for GCC businesses, which have a number of advantages over global competitors.

The 1st of these advantages is geography.

It comes as no surprise that most Fortune 500 companies that are entering Iran are predominantly doing so via the UAE or Turkey – primarily due to proximity and logistical ease, as well as ease of communication, travel and management of business operations.

Secondly, the GCC has already established grey channels into Iran.

Many foreign companies are surprised when they first visit Iran and realize the market is flush with their products and the products of all their competitors. The UAE and the wider GCC have acted as Iran’s unofficial backdoor during the sanctions, and distribution and supply chain channels are already carved out in these markets. The challenge will be to keep these channels open once official channels are developed.

3rd and perhaps most importantly, companies in the Gulf know how to operate in volatile and high-risk emerging markets. This is why many GCC companies have done well in emerging Asia and Africa. Due to the ability of GCC companies to take these risks, regional companies have an opportunity to enter Iran faster than their foreign rivals.

Finally, there are a number of sectors where GCC companies are primed to flourish.

For starters, the bank and financial sectors in the GCC are expected to witness an increase in longer-term business opportunities. The region’s top construction players which may be suffering from the contraction of the sector at home might also find a welcome respite in Iran.

Construction growth in the country is primarily driven by the residential segment – accounting for 45% of the market – due to a severe shortage of housing stock. The demand stands at 1.5-M housing units per year, of which Iran is able to provide less than 50%.

Infrastructure projects and construction of manufacturing plants are also expected to see sharp growth rates that cannot be met with local capacity alone.

Thus, all adjacent industries, from the excavators and heavy machinery sector to the construction materials sector, will be prime growth segments.

iran-industry-skyline

Potential risks

iran-industry-skyline

Opportunities outweigh the risks in most instances for GCC companies, but there are still risks and restrictions to be aware of.

First and foremost, opening Iran to the world will mean that Iranian industries will begin to compete more fiercely with Gulf businesses. Major industries where Iran and the GCC will compete include Oil and Gas, petrochemicals, aluminum, machines, engines, pumps, and dairy products.

In Oil and Gas exports, for example, Iran will directly compete with Saudi Arabia, the UAE and Qatar to become the energy importer of choice with lucrative Oil-importing nations such as China, Japan, South Korea and India, as well as Europe. This will be an ever-growing challenge, as Iran is the only country in the world as cost-effective as Saudi Arabia in Oil and Gas production.

Secondly, Iran will bring fierce competition for FDI (foreign direct investment).

As the Iranian government continues to develop policies that deter foreign entities from becoming an import-only partner to Iran, many large multinationals may decide to build local manufacturing facilities for their regional operations, instead of bringing this investment to the GCC.

Another challenge facing Gulf companies planning to operate in Iran has to relate to the marketing and origins of their products. Though Iranians have a strong demand for European, North American and Japanese products, there is little to no consumer affinity towards products produced in the Gulf or products with Arabic content. This may require many Gulf companies to invest in re-branding their products entirely to enter this promising neighboring market.

Iran’s regional gateway

The UAE has the highest trade exchange with Iran amongst its GCC peers, earning over $32-B in export value in 2014, and over $8.7-B in Q-1 of 2015 alone. The emirates accounts for more than 80% of Iran’s trade with the whole of the GCC.

Oman is the 2nd major GCC trade partner.

Many analysts suggest that the removal of sanctions on Iran will have a positive effect on the UAE economy over time, with trade between the countries likely to increase between 15-20 per cent. The International Monetary Fund (IMF) forecasts that $13bn will be added to the UAE’s economy as trade between the two countries steps up between now and 2018.

Some have argued that Iran opening up could see jobs move from the UAE directly to Iran, but the majority of Iran’s imports are likely to continue to go through Dubai’s Jebal Ali Free Zone Port.

Furthermore, Iranian businesses have a major presence in the UAE, with around 8,000 Iranian traders and trading firms registered in the emirates, according to the Iranian Business Council. Ethnic Persians are estimated to account for roughly 10 per cent of Dubai’s population of two million. The UAE also has a strong commercial presence in Iran, with leading companies such as RAK Ceramics, Majid Al Futtaim Group and Mammut Building Systems operating there.

Diplomatic and commercial relations

Iran and the GCC countries have economic incentives to expand their trade relations, but diplomatic and geo-political concerns are likely to play an important role as well.

Looking specifically at relations between Iran and the UAE, there exists one major unresolved conflict between the two countries. The UAE has challenged Iran’s sovereignty over three islands in the Arabian Gulf. In addition, the UAE’s close economic and political ties with Saudi Arabia led to the emirates downgrading diplomatic ties with Iran following the storming of the Saudi Arabian embassy in Tehran in January of this year.

Oman and Iran share close diplomatic, economic and military ties, upholding a tradition of cooperation that dates back to the Shah of Iran’s regime. The sultanate played a key role in the 2013 secret talks between the US and Iran, which paved the way to the current removal of sanctions.

Oman also signed an accord with Iran in early 2014 to construct a $1-B Nat Gas pipeline from Iran to Oman.

Qatar and Kuwait also have close relations with Iran; all three are members of OPEC, the Non-Aligned Movement, and the Organisation of the Islamic Conference. The two countries also generally refrain from criticizing Iran’s domestic and foreign activities.

Bahrain and Saudi Arabia are the two GCC states that have the most strained relationship with Iran. Bahrain-Iran relations have been under pressure since the Iranian Revolution and the 1981 discovery of a planned Iran-sponsored coup. However, in recent years, Bahrain has begun taking steps to improve relations.

Its relations with Saudi Arabia’s have been troubled, as both countries aspire for a leadership role in the Islamic world. The political differences between Riyadh and Tehran are stark, with little sign of rapprochement in the near future.

That said, there has been some economic activity between the two rival countries. Trade stood at a mere $215-M in 2015, mainly comprised of Iranian exports, but look closely and you can find a small number of notable Saudi businesses either directly or indirectly established in Iran via official distribution channels.

These include strategic investment holding group Savola Group, SABTEC,  a subsidiary of Saudi Arabia’s largest public company SABIC, fast food chain Al-Baik, Saudi Ceramics Company, and Al Abdulatif Carpets.

In summary

While entering Iran might not necessarily be straight-forward, right or possible for every business in the GCC, its opening up to the world is one of the most significant global business opportunities of our generation, it is one many businesses in the Gulf should at least consider.

Erika Masako Welch, business development director for the Middle East at Solidiance

Paul Ebeling, Editor

 

 

Doing Business Report 2017

Doing Business Report 2017

The recently published Doing Business Report 2017 of the World Bank, has generally undergone some methodological changes over that of last year, to better reflect the business climate in the countries covered by the classification.  Labelled Equal Opportunity for all, these include notably indicators such as tax procedures before and after declaration and equal opportunity facilitation.

As per The Times of India Economic Times the definition of Ease of doing business is an index published by the World Bank. It is an aggregate figure that includes different parameters which define the ease of doing business in a country.  It is computed by aggregating the distance to frontier scores of different economies. The distance to frontier score uses the ‘regulatory best practices’ for doing business as the parameter and benchmark economies according to that parameter.

For each of the indicators that form a part of the statistic ‘Ease of doing business,’ a distance to frontier score is computed and all the scores are aggregated. The aggregated score becomes the Ease of doing business index.

Indicators for which distance to frontier is computed include construction permits, registration, getting credit, tax payment mechanism etc. Countries are ranked as per the index.

Amongst the Middle East and North African countries, fifteen out of the 20 economies have implemented at least a reform facilitating Business Environmental Climate last year. The largest number of reforms implemented by the economies of the region focused on the simplification of the Business Creation (with 9 reforms) followed by the improvement of cross-border trade facilitation.

Thanks to sustained reform efforts, Morocco is 68th overall and Tunisia 77th out of 190.  Algeria came at 156th but as for Morocco and Tunisia, it nevertheless has improved its absolute score.

The full report and data relating to the MENA region are available at  Doing Business 2017 Equal Opportunity for all – Regional Profile 2017 – MENA. From Washington, USA October 26th, 2016 TradeArabia produced this account of the report with a particular on the countries of the GCCs.  Here it is reproduced for its clear and unambiguous treatment of the report.

UAE tops in ease of doing business in MENA  

The United Arab Emirates (UAE) is the Middle East and North Africa (MENA) region’s top ranked economy in ease of doing business, with a global ranking of 26, followed by Bahrain (63) and Oman (66), finds the World Bank Group’s annual report.

Based on reforms undertaken, the UAE and Bahrain are also among the global top 10 improvers.

The pace of business reforms in MENA accelerated considerably in the past year, despite conflict and turmoil in the region, finds the report.

In its global country rankings of business efficiency, Doing Business 2017 awarded its coveted top spot to New Zealand, Singapore ranks second, followed by Denmark; Hong Kong SAR, China; Republic of Korea; Norway; United Kingdom; United States; Sweden; and Former Yugoslav Republic of Macedonia.

Released yesterday (October 25), “Doing Business 2017: Equal Opportunity for All” finds that 15 of the Mena region’s 20 economies implemented a total of 35 reforms to facilitate the ease of doing business. This is a significant increase from the annual average of 19 reforms during the past five years.

“The acceleration of business reform activity in the Middle East and North Africa is noteworthy, considering the severity of challenges faced by many governments in the region,” said Rita Ramalho, manager of the Doing Business project. “It is particularly encouraging to see economies in the region carry out reforms in the area of Getting Credit, which remains harder in the Middle East and North Africa than anywhere else in the world.”

Taking steps to strengthen the credit reporting system, Morocco, for example, began providing credit scores to help banks and other financial institutions assess the creditworthiness of borrowers. However, getting credit remains a major obstacle for entrepreneurs in the region as collateral regimes are highly restrictive.

The region also performs poorly in the area of Starting a Business. For example, starting a business in the region costs 26 percent of income per capita on average, compared with 3 percent in OECD high-income economies. However, economies in the Middle East and North Africa region are taking steps to improve the process for start- ups and, in the past year, nine economies carried out reforms in the area of Starting a Business.

For the first time, the report includes a gender dimension in three indicators: Starting a Business, Registering Property and Enforcing Contracts. The report finds that the Middle East and North Africa fares poorly on the new gender measures, with 70 percent of the region’s economies imposing more regulatory hurdles for women entrepreneurs than men. For instance, in Saudi Arabia, three extra procedures are required for married women to start and operate a business. One requirement in Saudi Arabia is that married women must hire a man to manage the business.

The report also features an expanded Paying Taxes indicator, which now covers post-filing processes, such as tax audits and tax refunds. The economies of the Middle East and North Africa generally perform well in these new areas. A notable exception is Lebanon, where compliance time for a VAT refund is considerably high, taking 45 hours.

Bahrain implemented reforms in the areas of Starting a Business, Getting Credit and Trading Across Borders. It made the start-up process easier for entrepreneurs by drastically reducing the minimum capital requirement from 190 percent of income per capita to 3 percent. Bahrain also improved access to credit information by legally guaranteeing borrowers’ right to inspect their own data, and made exporting easier by improving infrastructure and streamlining procedures at the King Fahad Causeway.

Morocco and the UAE undertook five reforms each during the past year. Morocco made Starting a Business easier by introducing an online platform to reserve a company name and reducing registration fees. And it strengthened minority investor protections by clarifying ownership and control structures and by requiring greater corporate transparency.

The UAE implemented risk-based inspections during construction, thereby joining the 13 other economies in the world implementing this best-practice feature. The UAE also made it easier to start a business by streamlining name reservation and articles of association notarization and merging registration procedures.

Globally, a record 137 economies around the world adopted key reforms that make it easier to start and operate small and medium-sized businesses, the report said.

The new report finds that developing countries carried out more than 75 percent of the 283 reforms in the past year, with Sub-Saharan Africa accounting for over one-quarter of all reforms.

The report cites research that demonstrates that better performance in Doing Business is, on average, associated with lower levels of income inequality, thereby reducing poverty and boosting shared prosperity.

“Simple rules that are easy to follow are a sign that a government treats its citizens with respect. They yield direct economic benefits – more entrepreneurship; more market opportunities for women; more adherence to the rule of law,” said Paul Romer, World Bank Chief Economist and Senior Vice President. “But we should also remember that being treated with respect is something that people value for its own sake and that a government that fails to treat its citizens this way will lose its ability to lead.”

Doing Business data points to continued successes in the ease of doing business worldwide, as governments increasingly take up key business reforms. Starting a new business now takes an average of 21 days worldwide, compared with 46 days 10 years ago. Paying taxes in the Philippines involved 48 payments 10 years ago, compared to 28 now and in Rwanda, the time to register a property transfer has dropped from 370 days a decade ago to 12 days now. –

TradeArabia News Service