3. Contents
Preface 3
Summary – The Promise of a New Generation 4
The Middle East Business Agenda 7
Investing for the Future 10
Global Integration 12
Youth and Understanding 15
Democracy, Peace and Security 18
Summit Outcomes 20
Acknowledgements 22
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World Economic Forum on the Middle East
4.
5. Preface
The World Economic Forum on the Middle East 2006 set out to highlight the “Promise of a New
Generation” against a background of profound challenges. Over 1,100 participants considered multiple
issues, including the conflict in Iraq, the unresolved Israeli-Palestinian problem, heightened tensions over
Iran’s nuclear programme, the impact of higher oil revenues, insufficient investment in essential
infrastructure, slumping securities markets and, most important of all, an uncertain future for the region’s
youth.
The Summit was marked by a new optimism, with more open dialogue than ever before and a genuine
commitment to increasing the role of the private sector. Participants focused on issues that the business
world can credibly address. Moreover, the Summit generated real achievements on the steps needed to
underpin economic success and invest for the future, and outlined a host of commitments for the future.
The encompassing theme placed the challenges and opportunities of an increasingly youthful Middle East at
the heart of the agenda for the first time. Every aspect of policy-making in the region, from job creation to
peace and security affects young people. Strengthened partnerships between government and the private
sector are essential. The Forum introduced students to young regional politicians to discuss the issues that
mattered most to them. The Forum also launched the Egypt Education Initiative to benefit over 800,000
children. In addition, participants brought women’s issues to the fore through the Forum’s Women Leaders
Programme by promoting a five-year action plan to implement private- and public- sector policies
addressing the most pressing challenges women face.
Participants concluded that the private sector has a key responsibility, not just for creating jobs for those
entering the workforce, but also for ensuring that the workforce is productive, healthy and fairly treated
regardless of the political climate. Governments can facilitate the work of the private sector by taking a long-
term view on the investment of the current oil windfall and by allowing businesses more freedom to operate
responsibly within global parameters. Indeed, participants took steps towards launching a private sector-
funded branding campaign for the Middle East and agreed to consider amendments to the Egyptian Open
Skies policy.
As the largest companies expand beyond the Middle East, many countries in the region are seeking to
deepen their economic and political engagement with the rest of the world. The global integration of the
region, through trade, investment and political relations, formed an additional sub-theme in the programme.
Leaders from business and government discussed the steps required to move away from relations based
primarily on oil and security issues towards a more positive and multifaceted global role.
Global integration and harmony must take place on a cultural, as well as economic and political, level.
Enhancing common understanding between faiths and peoples is key to future peace and stability. Conflict
and insecurity in the Middle East continue to pose serious threats to the welfare of the region’s people, with
major global implications. A final series of sessions sought agreement on the essential next steps to
strengthen dialogue and underpin long-term security in order to create an environment in which the next
generation can flourish and prosper.
Regional governments, business and civil society leaders, and especially youth, have taken bold initiatives to
transform the region. The Forum is committed to facilitating these initiatives and actions over the coming
years to uphold the promise of the new generation.
Sherif El Diwany
Director, Middle East and North Africa
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World Economic Forum on the Middle East
6. Summary – The Promise of a New Generation
“It is our conviction that “There must be a stronger
education is a fundamental dialogue between politics
human right and is and business to move the
instrumental in fighting peace process forward.”
poverty, eliminating gender
inequality, as well as Shafik Gabr
Chairman and Managing
introducing democracy.
Director, Artoc Group for
Education is also the best
Investment and Development,
tool to fight ignorance,
Egypt, and Chairman of the Arab
dispel hatred and face
Business Council
terrorism. It has become a
cornerstone for driving the
economy forward.”
Ahmed Mahmoud Nazif
Prime Minister of Egypt
Democracy, Peace and Security
The tight security in Sharm El Sheikh starkly reminded
participants at the World Economic Forum on the
Middle East of the most difficult challenges facing the “This is an era where ground is shifting in the Middle
region: the quest for peace and stability, particularly in East…and it is combined with changing forces of
Iraq and between the Israelis and Palestinians. While globalization. We can help empower. We can help the
process in terms of political engagement. But it has to
the focus was on the “Promise of a New Generation”
come from the people themselves.”
and how to create the 80 million jobs needed over the
next 20 years to stem resentment among youth, there Robert B. Zoellick
US Deputy Secretary of State
was no denying other significant problems, including
tensions over Iran’s nuclear programme, widening
income gaps resulting from sharply higher oil revenues,
anger among the middle class following stock market The deteriorating situation in Iraq, the continuing
slumps and the lack of infrastructure. conflict between the Israelis and Palestinians
(particularly with the election of a Hamas-led
Discussions were candid, and intense debate frequent, Palestinian government) and the rising tensions over
as participants deliberated on five sub-themes: Iran’s nuclear programme confirm that democracy,
Democracy, Peace and Security, the Business Agenda, peace and security remain elusive.
Global Integration, Investing for the Future and Youth
and Understanding. A highlight of the event was, of • While democracy, peace and stability cannot be
course, the meeting of Israel’s Foreign Minister Tzipi achieved instantly, dialogue among relevant parties
Livni and Palestinian Authority President Mahmoud must be stepped up.
Abbas – the highest-level Israeli-Palestinian encounter • Arab countries must manage reform and
in almost a year. liberalization while carefully maintaining stability,
security and fairness.
The Forum launched a number of projects during the • Businesses, politicians and members of civil society
meeting, including the Egypt Education Initiative, a should deepen communication and cooperation.
programme to develop an action plan to address the • Gender equality and youth security are key goals
gender gap, and a private sector-funded branding that will enhance the prospects for democracy,
campaign to counter inaccurate perceptions of the peace and stability in the region.
region. Four major messages emerged. First,
businesses must take the lead in Middle East renewal.
“Reform is one of the priorities of the Arab world. All
Next, the region cannot be competitive without equal
countries and societies want to move ahead and have
opportunities for men and women. In addition,
their own views on how to move ahead. Reform is an
democracy, peace and stability cannot be achieved item for all of us to support but we have to be cautious
overnight, but hope for attainment rests with the because of the fragility of the security situation and
uncertainty on the international scene.”
region’s youth, whose future and security must be of
paramount concern. Finally, dialogue must be
Amre Moussa
reinforced to lead to more successful cooperative Secretary-General, League of Arab States, Cairo
action.
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World Economic Forum on the Middle East
7. “We have to dig deeper “The forces of globalization
through technology and create tension just as they
innovation. We must bring create opportunities. These
our people to the standard tensions must be
of global players to compete managed.”
internationally with the best
of nations”. Nemir A. Kirdar
Founder, President and Chief
Executive Officer, Investcorp
Mohammed H. Almady
Vice-Chairman and Chief
Executive Officer, Saudi Basic
Industries Corporation (SABIC),
Saudi Arabia
The Business Agenda Global Integration
Countries in the region must confront obstacles to Global integration will bring both advantages and
economic growth such as bureaucracy, inadequate disadvantages to the Middle East.
infrastructure and limited technological skills.
• Impediments to the Middle East’s integration with
• Tenacious reformers are rewarded with higher the global economy include the negative
growth and more investment. perceptions of the risks investors face, the poor
• The region’s labour markets need to be open and image outsiders have of the region and the lack
flexible. of the systems and infrastructure needed to be a
• To attract more foreign direct investment, global player.
countries should focus on bolstering legal • While political and security risks are significant,
frameworks and cutting red tape to enhance they should not hide the fact that the Middle East
efficiency and productivity. compares unfavourably to other competing
• Economic diversification, increased investment in regions.
information and communications technology and • The private sector should spearhead efforts to
the broadening of the energy sector will boost counter inaccurate perceptions of the Middle
the region’s competitiveness. East, remedy its competitiveness shortcomings
• Young people represent the Middle East’s most and convince people of the benefits of
valuable asset. globalization.
“We need to see more
privatization. If you open “We have to instil values such as tolerance and respect for
your markets and give human rights to make the process [of reform] sustainable,
opportunities to both men successful and genuine.”
and women, this region will
do fantastically well.” H.M. Queen Rania of the Hashemite Kingdom of Jordan
Member of the Foundation Board of the World Economic Forum
Stelios Haji-Ioannou
Chairman, easyGroup, United
Kingdom
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World Economic Forum on the Middle East
8. “We must grow the role of “We need a dialogue to
the private sector. It is listen to the needs of the
important that the private young so we can turn the
sector not only speak out 'youth bulge' into assets we
but it should also do can be proud of.”
something.”
Princess Lolwah Al Faisal
Vice-Chair of the Board of
William R. Rhodes
Trustees and General Supervisor,
Chairman, Chief Executive
Effat College, Saudi Arabia
Officer and President, Citicorp
Holdings and Citibank, USA; Co-
Chair, World Economic Forum
on the Middle East
Investing for the Future Youth and Understanding
Thanks to revenues from high energy prices, many
“How wonderful, how normal and how sacred it is when
Middle East countries have an unprecedented we sit together as brothers.”
opportunity to push forward reforms, while cushioning
Rabbi Awraham S. Soetendorp
the pain that comes with them.
Jewish Institute for Human Values, Netherlands
• The oil price windfall could support significant
restructuring of the region’s economies and mitigate
the negative effects of reform. The promise of a new generation is that they will break
• The region must turn its high liquidity into tangible the cycle of conflict that has bedevilled the Middle East
results, channelling funds to projects that promote for decades.
growth with social equity.
• Capital markets must be developed that allow easier • Education is a key driver of growth. Programmes
access to capital, create more attractive investment must be devised to promote entrepreneurship and
options and promote higher standards of innovation.
transparency and governance. • Reforming education, particularly curricula, will instil
• While the government’s role is to provide a good values in young people and encourage them to
favourable investment climate, the private sector be tolerant and make peace.
should lead the way to reform through corporate • Youth should be encouraged to be civic minded.
social responsibility, sustainable practices and social Government efforts to stifle the use of new
entrepreneurship. technology and communications as a tool of political
activism are likely to prove costly and ineffective. The
best approach is to let ideas flow.
“We must have not only a formula to provide social
services, but also a strong, competitive business model to
survive. A social entrepreneur must integrate social
objectives into the core business, bringing in all players
in the value chain to create benefits for the environment
and communities.”
“Religion is crucial for the peace of the world; it can
Helmy Abouleish
Vice-Chairman and Managing Director, Sekem Group, Egypt either consolidate it or harm and destroy it.”
Lord Carey of Clifton
Former Archbishop of Canterbury, United Kingdom; Member of the
Foundation Board of the World Economic Forum
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World Economic Forum on the Middle East
9. The Middle East Business Agenda
The world’s greatest economies are led by businesses. Which view is correct? For many of the participants at
Although the Middle East and North Africa (MENA) the Summit, the question has already been answered.
countries face enormous obstacles to self-sustaining Where some see only risk, they see opportunity. Where
growth, businesses can play a greater role in others see unemployment and despair, they see a new
promoting reform and global competitiveness. The generation of workers and consumers, who only need
economic reform movement is still in its infancy, and the tools to create wealth and improve their lives.
entrepreneurship and investment are all too often
strangled by bureaucracy, inadequate infrastructures “The region’s greatest asset is its young men and
and limited technological skills. However, the seeds of women,” said Christiaan J. Poortman, Vice-President,
change — and hope — are being planted. Countries Middle East and North Africa Region, World Bank,
that have embraced reform have been rewarded with Washington DC.
accelerated economic growth. A more pragmatic Realizing this promise, however, will take sweeping
attitude on the part of government and private sector changes — political, social, economic, cultural and
leaders has reduced conflict and encouraged psychological. Participants at the Summit focused on
cooperation. This year’s World Economic Forum on the identifying the processes to effect such change.
Middle East explored both the positive and negative Among the topics addressed were:
aspects of the region’s business climate and
developed realistic proposals for its improvement. • Labour market reform: Participants agreed that by
reducing artificial job creation barriers and moving
Seen from one perspective, the region seems deeply skilled workers from the public to the private sector,
dysfunctional, torn by war and terrorism, badly lagging the region can unlock the creative energies of its
on many key social and economic indicators and people while discouraging the growth of a
dependent on a handful of resources — especially oil. permanent underclass of low-wage foreign workers
in the more affluent countries of the Persian Gulf.
From another point of view, however, the MENA “What the private sector needs are free, flexible and
countries look like the classic investment bargain — full fair labour markets,” said H.E. Sheikh Mohammed
of under-utilized assets and unrecognized value. As Bin Essa Al Khalifa, Chief Executive, Bahrain
governments embrace market reform and develop Economic Development Board, Bahrain.
their human resources, businesses and investors who
move early could reap outsized returns. In other
words, a turnaround story may be in the offing.
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World Economic Forum on the Middle East
10. Box 1: Red Carpet In, Red Tape Out:
• Economic diversification: Despite the region’s
Rebranding the Middle East
well-publicized security problems, travel and
tourism hold great promise for future growth as
some countries, such as Dubai, are already Egypt is a case study in Middle Eastern tourism. Rich in
proving. However, governments need to clear culture, tradition and history, tourism is growing faster than
away numerous obstacles, such as controls on the world average but overall receipts are slightly declining.
property ownership, restricted national airline This is due mainly to Egypt’s under-developed transport
markets and burdensome visa requirements (see networks, reliance on a few European markets and a lack
Box 1). of tourism promotion spending compared to other resort
destinations.
• Information and Communications
Tourism Authorities Annual Promotional Budgets
Technology: As of 2004, only 41 out of every
(US$ Million)
1,000 inhabitants of the MENA region were
Internet users (see Figure 1). But that picture is
changing, as telecom providers restructure or
privatize and entrepreneurial activity accelerates. 114
However, they require compelling content to build
a consumer base for broadband and other 86
services. “Does the Internet today provide 71
63
[Egyptian families] with the right content that 56
50
42
serves their needs in the local language? The 40
answer is probably no,” said Tarek Kamel,
Minister of Communications and Information
Technology of Egypt. Developing such content,
Thailand
Australia
Singapore
Ireland
Malaysia
Dubai
New Zealand
Egypt
he added, is a task for the whole society, which
is why Egypt is encouraging the convergence of
its entertainment and Internet industries and 11 18 10 10 4 21 21 6
promoting the development of computer clubs
Spend per Acquired Tourist (In US$)
and other grassroots ICT organizations.
Since these issues are pervasive in the Middle East,
business leaders discussed the roles of marketing and
Figure 1: Regional Internet Use branding in promoting the region as a destination for
tourism and inward investment. During a WorkSpace
session, participants considered how the image of the
Only 41 of every 1000 people in the Middle East and North Africa
Middle East might be revolutionized and proposed a
were Internet users in 2004
number of innovative campaign ideas during the process.
Internet Users
in the Middle East and North Africa (per 1,000 people)
45
Participants made a commitment to create a task force of
40
stakeholders from the private sector to fund a marketing
35
30
campaign for the Middle East
25
20
under the banner “Red Carpet
15
10
In, Red Tape Out”. Furthermore,
5
there were private sector
0
2000 2001 2002 2003 2004
commitments to ensure that
sufficient money is available to
fund the campaign. To underpin
the effort, participants suggested bringing Middle Eastern
leaders together to help stakeholders better understand
what the region offers and represents and project Middle
Eastern opinion leaders onto the international stage.
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World Economic Forum on the Middle East
11. “Companies don’t yet know
what is required in terms of
transparency. Everybody is
in the learning process.”
Mohamed A. Alabbar
Chairman, Emaar Properties,
United Arab Emirates; Member
of the Executive Committee of
the Arab Business Council
H.E. Sheikh Mohammed Bin
Essa Al Khalifa
Chief Executive, Bahrain
Economic Development Board,
Bahrain
• Energy: With oil prices hovering close to US$ 70 The economic picture presented at this year’s Summit
per barrel, the energy sector would seem to be the was far from rosy — both in terms of current business
least of the region’s worries. However, most oil- conditions and future growth prospects — although
producing countries have not yet stimulated the there is no cause for despair. The Summit revealed
development of related industries — such as both sides of the picture — the dark as well as the
exploration, oil field support and professional light. In the end, it will be up to the region’s policy-
services — that can boost investment and makers, business magnates and people to decide
employment. “This is one of the most important which one will prevail.
unfulfilled economic potentials in the whole region,”
said Vahan Zanoyan, President and Chief Executive
Officer, The Petroleum Finance Company,
Switzerland.
Box 2: The Women Leaders Programme
• The Role of women: The MENA countries can
never hope to escape the trap of poverty and The Women Leaders Programme of the World
technological backwardness if over half the Economic Forum gathered leaders - both men and
population is excluded from meaningful economic women - from government, business and civil society
activity. Participants debated how to reconcile the to examine the region's gender gap. For the first time,
need to empower women with the region’s prevailing the Forum brought together women ministers from
legal and cultural norms (see Box 2). across the region to construct a five-year action plan
for public- and private-sector policies to address the
region’s gender gap. The action plan will be a publicly
available resource, aimed primarily at promoting
greater cooperation and best practice exchange
among the region's governments in their efforts
towards greater gender equality.
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World Economic Forum on the Middle East
12. Investing for the Future
“How much is the Arab
Box 3: Challenges in the Evolution of
world investing in research
Capital Markets
and development? Much
less than the rest of the
world. We’re not thinking of
Asset managers, regulators, market operators and private-
our grandchildren or our
equity specialists found a common purpose when they
neighbour’s grandchildren.
Investing in the future is met for a WorkSpace session to find ways to enrich and
key.” strengthen Middle East capital markets. Much of the
estimated US$ 2 trillion that has accumulated in the region
Khalid Abdulla-Janahi
has been invested abroad due to an inadequate
Chairman of the Executive
investment infrastructure. Despite this, participants shared
Committee, Shamil Bank of
a vision of more transparent, better-regulated, globally-
Bahrain, Switzerland; Vice-
Chairman of the Arab Business integrated markets and strong regional asset managers
Council
acting as intermediaries for private investors.
The oil price windfall offers countries in the Middle East Despite Great Regional Wealth Much Of It Is
the opportunity to promote and support genuine Invested Abroad
reform. But investing for the future may not be easy,
given the deficiencies in capital markets and the
perceived high-risk business environment. To varying Geographic distribution of assets, 2005
Percent, USD trillions
degrees, countries are stepping up governance
$1.3 – 1.5 $0.5 – 1.1 $1.8 – 2.6
standards, transparency, disclosure and enforcement 100%
of regulations. At this stage, the focus of investments
Outside
should be on projects that will promote growth with 70
Gulf 80
85
social equity. While governments should provide the
right climate, businesses should take the lead in driving
30
investments and pushing for reforms in what could Gulf 20
15
prove to be a significant period of transition for the Private Institutional Total
region.
Wealth held largely outside due to
The unprecedented oil price windfall has led to a sharp • Insufficient local investment opportunities
• Diversification of portfolios
rise in liquidity in the Middle East, as well as increased • Concerns about region’s stability
government revenues in oil-producing countries and
some budget surpluses. The sharp increase in private *Total wealth defined as investable assets in the form of cash and equivalents,
deposits, equities, bonds, real estate and other alternative investments (e.g. hedge
equity funds from US$ 400 million in assets under
funds or private equity).
management in 2000 to more than US$ 1 billion today Sources: McKinsey analysis; Capgemini and Merrill Lynch World Wealth Report 2005;
— some reports claim the actual figure is five times BCG Global Wealth 2004; expert interviews.
that — indicates how much of the region is awash with
cash. Unlike the petroleum boom of the 1970s, much Participants looked forward to capital markets fully
integrated into global markets and enjoying high levels of
of the capital is staying in the region, although some
local investor participation. One vision was of an Arab
estimate that US$ 800 billion or more of Arab money is
economic zone, underpinned by a single monetary policy
invested outside the region (see Box 3).
and a single currency; another was of a regional stock
exchange, with sector diversity and high levels of
“In the Middle East,” lamented Aladdin Saba,
transparency and liquidity (perhaps a Union of North
Chairman, Beltone Financial, Egypt, “we have a
African markets).
problem of too much money chasing too few deals.”
However, participants recognized that the region needs to
This should not be the case, but the lack of deals that overcome significant obstacles, such as weak legal
are attractive to private investors only highlights the systems, poor regulatory framework, inadequate corporate
shortcomings of a region where there is much that governance and underdeveloped financial institutions, in
order to implement any of these visions. In particular, they
needs to be funded. Indeed, this embarrassment of
identified a lack of investor education as a prime cause of
riches could turn into a tragic shame if the region fails
recent volatility in stock markets.
to take full advantage of the oil boom to speed up its
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World Economic Forum on the Middle East
13. global integration and support its transformation — Participants agreed that there are priorities for
in short, to pay for real structural reform and investing. Petroleum producers must abandon their
cushion its pain. overriding focus on oil and diversify, even if the US$
70 per barrel price is an incentive to do otherwise.
There are three concerns about investing — how to The danger is that the errors made during the
raise capital, where to put it and how to retrieve it 1970s boom will be repeated and the windfall
along with earnings. The Middle East is deficient in wasted. At that time, extra revenues were parked
all three aspects. For investors, the entry and exit outside the region, with little deployed for domestic
paths are limited; there is no pan-regional stock development.
exchange of a scale comparable to financial hubs
in Europe, North America and Asia. Regional In one session, Egypt’s Minister of Finance Youssuf
markets lack the disclosure standards and Boutros-Ghali warned that, in times of transition
regulatory discipline afforded by world-class and restructuring, the rich often get richer more
financial centres such as New York and London. quickly. The challenge is ensuring that the benefits
Even public companies are unwilling or unable to of investments and public spending become
provide adequate and reliable information to equitable. That means concentrating on basic
investors, giving rise to volatile performance on public goods that promote growth and benefit as
regional bourses (see Figure 2). many people as possible.
“The absolutely key items are institution building,
Figure 2: Middle East Equity education, infrastructure and health,” said Forum
Indices: Volatile times Co-Chair William R. Rhodes, Chairman, Chief
Executive Officer and President, Citicorp Holdings
and Citibank, USA.
“Companies must have a culture of corporate
social responsibility where they react when there is
a need — for example, after a natural disaster —
but also a proactive process involving ongoing
engagement with community organizations,”
reckoned Mazen S. Darwazeh, Chairman, Hikma
Pharmaceuticals, Jordan. Good citizenship among
Arab enterprises is still developing and investing for
the future should not be the sole responsibility of
government.
Source: Thomson Financial
As Rhodes stressed, “We must grow the role of the
private sector [from the empowerment of women to
To attract more institutional investors and promote remedying the infrastructure deficit]. It is important
stability, markets in the region need tighter that the private sector not only speak out but also
regulations, stricter enforcement and dependable do something.”
rule of law. “Companies don’t yet know what is
required in terms of transparency,” explained “If nobody else can do it, then government should.
Mohamed A. Alabbar, Chairman, Emaar Properties, But it’s not their job to manage,” reckoned Arif M.
United Arab Emirates; Member of the Executive Naqvi, Vice-Chairman and Chief Executive Officer,
Committee of the Arab Business Council. Abraaj Capital, United Arab Emirates. Government
should set the right conditions, but should neither
“Everybody is in the learning process,” added take a lead role in running ventures nor tell
Shaikha Al Bahar, Group General Manager, National enterprises where to invest. Indeed, the private
Bank of Kuwait SAK, Kuwait. “All of us here are sector is leading the current oil boom. There is no
against government intervention to influence prices, reason to turn back: let the power of business and
but the government should lay out the rules.” the markets drive the Middle East’s renewal.
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World Economic Forum on the Middle East
14. Global Integration
“To integrate into the global
economy is a challenge for For the Middle East, the touch of globalization has
every country in the to become an embrace. There has been progress
region.”
— with eye-catching successes in Dubai, Jordan
and Egypt, among others — but the basic
Rachid M. Rachid
Minister of Trade and Industry of impediments remain: negative perceptions of risk,
Egypt
the one-dimensional image outsiders have of the
region and the lack of infrastructure, capacity and
the bricks-and-mortar facilities needed to be a
productive and plugged-in member of the global
economy.
According to the United Nations, the Middle East’s
share of global foreign direct investment rose to
The integration of the Middle East into the global 1.5% in 2004, up from 1% the year before. This
economy will deliver both benefits and was far behind China (9.3%) and Southeast Asia
disadvantages. To make the most of globalization, (4.0%). The trade picture is more troubling. In 1981,
the region must overcome obstacles including the Arab world accounted for 10.7% of world
negative perceptions of risk, the poor image of the exports. Today, its share is down to 4.4%. Take
region and the lack of capacity and necessary away oil and that figure drops to 1.7%.
infrastructure to be a productive part of the global
system. Focus on political and security risks should Image is a problem; many Arab leaders are decried
not obscure the fact that, even without those as inflexible, rich autocrats, their kingdoms
impediments, investors are likely to unfavourably atrophied. H.E. Sheikh Mohamed Bin Mubarak Al
compare the region to other emerging markets. Khalifa, Deputy Prime Minister of Bahrain,
The private sector must lead efforts to rebrand the complained that the Arab world is unfairly tagged
Middle East, address its competitive deficiencies as a source of oil and terrorism. He has a point, but
and convince people that global integration is worth Zachary Karabell, Senior Vice-President, Co-
the risk. Portfolio Manager and Senior Economic Analyst,
Fred Alger Management, USA, made a more
Integration into the global economy is a challenge compelling one. The hard truth is that, even if the
for anyone who dares to buy into the promise of political and security risks disappeared, many
globalization and contend with its risks. There are investors would unfavourably compare the region
potential pitfalls — investment losses, income gaps against other emerging markets, particularly in
and diminished competitiveness. But isolation and
the status quo are not acceptable. As Anoush
Ehteshami, Head, School of Government and
International Affairs, University of Durham, United “A fate worse than globalization is to not to be touched
by it.”
Kingdom, concluded, “a fate worse than
globalization is to not to be touched by it.” Anoush Ehteshami
Head, School of Government and International Affairs, University of
Durham, United Kingdom
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World Economic Forum on the Middle East
15. terms of key investor concerns such as infrastructure, markets. Indeed, the Forum’s platform for Global
ease of access to capital, bureaucratic efficiency and Growth Companies showed heavy interest in global
education (see Figure 3). expansion by Middle East companies (see Box 4), but
called for greater efforts to create policy measures to
Certainly, other regions want to deepen links with the Box 4: The Community of Global
Middle East. The presence in Sharm El Sheikh of the Growth Companies
Prime Ministers of Malaysia and Pakistan, as well as
Twenty leaders of the most rapidly expanding
Figure 3: The Most Problematic
companies in the Middle East convened to discuss
Factors for Doing Business
challenges faced by Global Growth Companies. Global
in the Middle East and North
Growth Companies are companies that have
Africa Countries
demonstrated a clear potential to become leaders in
the global economy within five years. The companies
enjoy a strong industry or regional market presence
14.9%
Inefficient government bureaucracy
access to financing 13.1%
and have both the desire and ability to become a
10.4%
Inadequately educated workforce
global champion.
8.9%
Restrictive labour regulations
Poor work ethic in national labour force 8.2%
7.7%
Tax rates
The assembled executives highlighted the following
7.1%
Tax regulations
Inadequate supply of infrastructure 6.9%
challenges that they face in their continued expansion
0% 2% 4% 6% 8% 10% 12% 14% 16%
and internationalization:
Percent of responses
Source: 2005 World Economic Forum’s Executive Opinion Survey
Source: World Economic Forum's Executive Opinion Survey 2005
To reach the critical size required to access financial
markets and build strong brands, the Middle East will
ministers and senior officials from Japan, India, need to become a less heterogeneous market.
Singapore, France and the US, was testament to this
goodwill and outreach. Local management courses and Masters programmes
must be developed to address the lack of
However, investors’ perceptions matter. “A lot of management talent and brain-drain.
dollars are no longer going to the Middle East now that
Hamas [won the elections in the Palestinian During the next year, the World Economic Forum will
Territories],” Khalid Abdulla-Janahi, Chairman of the conduct workstreams to address some of these issues
Executive Committee, Shamil Bank of Bahrain, and will develop a specific thematic track for Global
Switzerland; Vice-Chairman of the Arab Business Growth Companies at our next meeting in Jordan, in
Council, conceded. “Perception and reality are not May 2007.
always different.”
Distribution of Global Growth Companies
To make sure that they do match, participants at the
Summit took initial steps to launch a private sector-
funded branding campaign for the Middle East under
the banner Red Carpet In, Red Tape Out. The move is
appropriate since the private sector must shed its
complacency. The recent growth of private equity firms
and funds in the region is evidence that business is
stirring.
“For the first time, we have seen a boom in this region
led by the private sector,” said Arif M. Naqvi, Vice-
Chairman and Chief Executive Officer, Abraaj Capital,
United Arab Emirates. Businesses are looking outward,
applying pressure on governments to open up
Source: World Economic Forum
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World Economic Forum on the Middle East
16. assist them. This (in part) explains the growing “When you talk about globalization, it does not
number of regional and bilateral free trade necessarily attract a lot of people,” Rachid
agreements that Arab countries are forging even as acknowledged. “The challenge is how to take the
they participate in multilateral negotiations. Saudi people with us.” To shift mindsets will require
Arabia’s accession to the World Trade Organization integrating global values to turn the new generation
was a recent milestone. into promising globalization-ready citizens. As H.M.
Queen Rania of the Hashemite Kingdom of Jordan
Business is also promoting initiatives, such as put it, “We have to instil values such as tolerance
National Competitiveness Councils, to assess and and respect for human rights to make the process
benchmark competitiveness. Efforts that are [of reform] sustainable, successful and genuine.”
underway to raise standards of governance,
transparency and accountability must be stepped
up. Governments, meanwhile, are eager for
Box 5: Scenarios for the Gulf Cooperation
companies to go global — and enterprises are
Council (GCC) Countries
responding. “This is the first time I have seen my
government support me,” Naguib O. Sawiris, The private workshop held in Sharm El Sheikh was a
Chairman and Chief Executive Officer, Orascom key event in the process of developing scenarios
Telecom Holding, Egypt, declared. examining the evolution of GCC countries within the
Middle East regional and global context. Participants
The makeover of the Middle East, however, has to started with about 50 key drivers identified in a
be designed and driven by the private sector. This preliminary research phase and initially grouped in 10
requires corporate citizenship and daring clusters (see below). Each driver was introduced and
leadership. Fortunately, the region is blessed with a debated among participants and, based on the
large pool of skilled managers and workers. There discussion, additional drivers were introduced while
is also a growing willingness to adopt a others were re-grouped. The objective was to reach a
management mentality that emphasizes human common understanding of all the relevant drivers
resource development and equal opportunity. affecting the region.
Yet business and government leaders will have to The central questions that the scenario project
convince citizens that the benefits of globalization attempts to answer are whether the region will be able
outweigh the risks. Developing a regional scenario to develop and implement a vision to steer itself
road map may help; indeed, the Forum’s private towards economic diversification and prosperity, and
meeting on the evolution of Gulf Cooperation whether
Council (GCC) countries addressed the critical the GCC countries can integrate effectively into the
uncertainties underpinning issues of a fully global context.
diversified, prosperous economy within the global
Top-level clusters of key drivers for
context (see Box 5).
GCC Countries
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World Economic Forum on the Middle East
17. Youth and Understanding
Soraya Salti
Senior Vice-President, Middle
Suzanne Mubarak
East and North Africa, JA
First Lady of Egypt
Worldwide, Jordan
More than half of the Arab world is under 18 years of “Governments must not be afraid of free thinkers,” said
age; over a third is under 13. This demographic poses Soraya Salti, Senior Vice-President, Middle East and
tremendous challenges but also offers great North Africa, JA Worldwide, Jordan. Classes should be
opportunities for the Middle East and North Africa. reformed to encourage critical thinking and dissenting
There is little indication that the region will make up the viewpoints. Arab societies too often stifle creative and
80-90 million new jobs that will be required over the entrepreneurial impulses among young people.
next two decades. However, with new education
initiatives, better inter-generational dialogue and The Forum, which this year included a quorum of
innovative technologies, the youth of today can youth from the region, launched the Egypt Education
become the region’s civic-minded leaders of tomorrow. Initiative whose first phase will benefit 820,000 children
in 2,000 schools and over 300 colleges. Other
Education initiatives include INJAZ, which teaches students about
Improving educational systems remains a crucial the needs of the private sector by bringing students
imperative. According to a 2005 World Economic into contact with the companies themselves.
Forum survey, an inadequately educated workforce
consistently ranked among the most glaring obstacles Peacemaking
to doing business in the Middle East and North Africa. Reforming education to improve job prospects will aid
While unemployment is a huge problem, many in a second youth-oriented goal: creating a generation
companies in the region lack appropriately-skilled of peace-builders. Youth who see a future to live for
employees. Existing programmes must be overhauled will be less likely to seek out a cause to die for. Today,
to incorporate private sector input and vocational young people’s expectations for future employment are
training in order to reduce the current skills gap. lower in the Middle East than in any other part of the
Benchmarks for achievement are needed, as are e- world.
learning programmes, peer-to-peer counselling
initiatives and “second-chance” safety nets so that
every student has ample opportunities to learn and
develop vocational skills.
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World Economic Forum on the Middle East
18. “In the Arab world, we
Box 6: Communicating across the
have a lot of seeds that are
region: The Council of 100
not blooming.”
Leaders (C-100)
Nimah I. Nawwab
Sharm El Sheikh,
Poet, Saudi Arabia; Young
Global Leader Egypt, provided an
excellent venue for
fruitful discussions
among the Council of
100 Leaders’ West-
Islamic World
Dialogue community.
Prime Minister
Rabbi Awraham S. Soetendorp, Jewish
Abdullah Ahmad
Institute for Human Values, Netherlands
Badawi of Malaysia
Too often, the skills to get ahead involve networking addressed the C-100 community in their private
meeting, stressing the need for dialogue to be “effective,
alone, and those not born with access are quickly
focused and fruitful, leading to frameworks for concrete
alienated. Labour markets must be opened to
action.”
encourage entry into the private sector rather than
the bloated and non-meritocratic public sphere.
The continued sense of commitment and enthusiasm
Students must be taught the skills for a new
was clearly visible in all the meetings and the
economy. Entrepreneurial training and ground-level
discussions were open, engaging and productive. The
job programmes can work, but must be scaled up. objectives of the meeting were many but included how
to place the C-100 as a hub of knowledge and
“If we want peace,” said Suzanne Mubarak, First information on the state of West-Islamic dialogue and
Lady of Egypt, “we must teach peace.” Curricula continuing discussions on the work of the Education
must be reformed to embrace diversity and teach sub-group to further develop the C-100 Education
Project.
the common values of all religions, rather than the
values of one over another. Certain young people
Members fully endorsed the proposals for using the C-
need to be particularly targeted. A Palestinian youth
100 as a knowledge hub and as a platform for projects
leaving an Israeli prison is at risk of succumbing to
on education, as well as continuing its role as a
intolerance as is his counterpart leaving the Israeli
clearinghouse for action-oriented projects that advance
army. But efforts to teach peace must extend to all
understanding and cooperation. There was tremendous
segments of all societies. Islam has a long history support for many activities, including highly practical
of embracing common humanity, and learning from commitments, such as technical help for creating a
and respecting followers of other faiths. Historically, website and support in organizing local fund-raising
scientific advancement came with cultural events in several cities around the world.
tolerance.
Citizenship
“We should revive values that make this civilization
A recent study revealed that young people are
great,” said Ismail Serageldin, Director, Biblioteca
more politically active in developing countries than
Alexandrina, Egypt. Educational reform should
in the developed world. In a variety of ways, the
encourage a dialogue between cultures rather than
youth of today are already leading the charge
a clash of civilizations. In support of this impulse for
toward free societies in the Middle East and North
cross-cultural understanding, the World Economic
Africa. How the next generation behaves as citizens
Forum agreed to assist developing, under the
will depend on education, but also on how
Council of 100 Leaders (C-100), a web-based
governments, schools and families listen to young
information portal and local communities
people, as well teach them about their rights and
supporting its work in the West and Islamic worlds
obligations (see Box 7).
(see Box 6).
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World Economic Forum on the Middle East
19. Gamal H. Mubarak
Mostafa El Gendy Head, Policy Secretariat,
Member of Parliament, People’s National Democratic Party,
Assembly of Egypt, Egypt
Box 7: Meet the Young: Youth
“Young people have a very big heart,” said Mostafa El
Participation in Middle East
Gendy, Member of Parliament, People’s Assembly of
Egypt, “and are much more open to change than
previous generations.” All too often, however, To better
governments approach youth as a threat rather than a understand the
resource. This leads to mutual mistrust, and means needs of the new
that states squander the political energy of the next generation in the
generation. Middle East, the
World Economic
Pushing this change is the spread of Information Forum invited a
Technology. From blogs to SMS messaging, new number of young
forms of communication mean that millions of young students from the
people can connect instantly across boundaries of region to
culture and nationality. In 2004, only 4% of residents of participate in the
the MENA countries were Internet users. Today, the two-day meeting.
Saeed Al Muntafiq, Chairman of
the Board, Young Arab Leaders,
number has grown slightly and demand for the Internet By actively engaging regional
United Arab Emirates
is booming. politicians from the Forum’s
Young Global Leaders community and participating in
various sessions (including New Approaches to Further
Education, or the Revolution will be Televised), these
students were able to share their vision for the future,
their expectations from current leaders and their
concrete plans for moving the youth agenda forward.
One key area for youth is education. In this context,
launching the Egyptian Education Initiative will help
improve schooling through Information and
Communication Technologies. The initiative will focus
on different levels of education (pre-university, higher
education, lifelong learning and e-learning industry
development), and in its first stage will impact 820,000
students in 2,000 schools and over 300 colleges.
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World Economic Forum on the Middle East
20. Democracy, Peace and Security
Because of the many challenges facing the Middle While results may be slow in coming in some
East today, political and business leaders attending countries, there is overall agreement that reform is
the Forum expressed a strong desire to move necessary and should include participation from all
faster on political participation and dialogue so that facets of civil society, including non-governmental
issues related to democracy, peace and security organizations, women and youth.
can be advanced. While acknowledging that
democracy has been gaining momentum in the According to the IMF, more than half of the Arab
Arab world, many leaders emphasized that change world is under 18 years of age. In the next 15
had to come from societies themselves— on their years, the school-age population of the Middle East
own terms and at their own pace. Much of that will increase by 19% to 13.6 million people. How
change, they said, needs to come through the will they define the future?
participation of civil society.
“If we empower civil society to fill the political
In the Middle East, democracy, peace and security vacuum, the next generation will have choices and
seem as elusive as ever; compared to other can exercise their freedom. This is the way to
regions, the challenges of reform are great. democratization,” said Mona S. Zulficar, Attorney-
However, many political and business leaders are at-Law, Shalakany Law Office, Egypt.
making decisions that are defining a long-term
vision of stability and prosperity for their countries Zulficar and others underlined the importance of
and region. With much of the dialogue at the World gender equality, noting that there can be no
Economic Forum on the Middle East focused on democracy without women sharing fairly in the
unrest in Iraq, the unresolved Israeli-Palestinian process. According to the Inter-Parliamentary
conflict and growing fears of a nuclear Iran, there
was a sense of urgency for countries to increase Box 8: Dialogue on Peace and Security
the dialogue in a changing Arab world (see Box 8).
During the World
“The challenge is to make change irreversible and Economic Forum
sustainable,” stated M. Shafik Gabr, Chairman and on the Middle East,
Palestinian
Managing Director, Artoc Group for Investment &
Authority President
Development, Egypt: Chairman of the Arab
Mahmoud Abbas
Business Council; Co-Chair of the World Economic announced an
Forum on the Middle East. Gabr and others see internal dialogue
democracy, peace and security as interconnected, aimed at unifying
the Palestinian
but that achieving these objectives will take time. It
political landscape
was widely acknowledged that reform is taking
in light of Palestinian Authority President Mahmoud
place in the region, but that there is no “one-size- increasing friction Abbas and Israeli Deputy Prime Minister Tzipi
fits-all” approach. and violence Livni
between rival
parties.
The challenge in the Arab world is to manage
change in a way that preserves the best in society,
“The dialogue is about unifying political positions,” said
giving ordinary people greater freedom and choice President Abbas. While announcing the dialogue,
while ensuring security and protection from Abbas reiterated his determination to seek a two-state
injustice. Many in the region realize the scope of solution, reject violence and resolve the Palestinian-
Israeli conflict through a peace process, in particular,
these challenges and many governments are
by implementing the UN-supported roadmap.
already taking important steps towards economic,
social and political reform; others are following. “We have no way before us but to continue the peace
process,” said Abbas. “Israel should accept our call to
“There are going to be problems and setbacks, but return to the negotiating table.”
A meeting between Israeli Deputy Prime Minister Tzipi
in any reform process leaders will have to make
Livni and Palestinian Authority President Mahmoud
difficult choices,” said Gamal H. Mubarak, Head,
Abbas took place during the Summit, the first high-
Policy Secretariat, National Democratic Party, level meeting between the two sides in eleven months.
Egypt. “Any political party or leader has to change
how they communicate if they want to convince “The meeting was very important,” Livni said. “A
meeting between Israel’s Prime Minister and Abbas will
people about the importance of a vision. People
be the next step.”
need to see results.”
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World Economic Forum on the Middle East
21. “Home-grown decisions are unifying the Palestinian political landscape in light of
lasting. Imposed decisions
increasing friction and violence between rival parties.
will not stand the test of
time.”
On the subject of Iraq, some participants at the
Shaukat Aziz Summit looked at the formation of the new
Prime Minister of Pakistan
government in Iraq — which includes the three main
factions: Shiites, Sunnis and Kurds — as progress,
despite ongoing violence. However, other participants
remained unconvinced that democracy, peace and
stability would move forward as long as occupation
continued.
“Despite the conflicts that still afflict this region, the
Union, women hold only 6.8% of parliamentary seats in future appears bright and full of promise,” concluded
the Arab states. At the Summit, the Women Leaders Egyptian President Hosni Mubarak. “Multilateralism
Programme of the World Economic Forum brought and democratic international conduct are needed to
together, for the first time, women regional ministers, foster collective security and peace.”
who made a commitment to develop a five-year action
plan for public and private sector policies to address
the region’s gender gap.
Box 9: Global Risks and the Middle East
Democracy in the Arab world has been gaining
momentum, but many acknowledge that the process Before the Summit, the Global Risk Programme of the
has to be “home-grown” if it is to succeed. World Economic Forum surveyed business participants
about their perception of the broader strategic risk
“All [Arab] countries and societies want to move ahead environment in which they lead their corporations.
and have their own view on how to do so,” explained
Amre Moussa, Secretary-General, League of Arab Most respondents identified the escalation of violence
States, Cairo. “Reform is something that we support, in the Middle East and the rise of terrorism as key
but we have to be cautious because of the fragility of concerns. Violence and terrorism are a major concern
the security situation and uncertainty on the for almost 80% of those responding, supporting the
international scene.” argument that Middle East economies and business
communities can only prosper in a more stable political
This view is supported by the World Economic Forum’s environment.
survey on the Middle East, which showed that 41% of
participants said escalating violence in the Middle East Over 25% of corporate leaders spend more than 10%
was a major strategic concern for business (see Box 9). of their company’s budget on ensuring business
Other participants echoed the sentiments of the Arab continuity and attempting to diversify activities across
League Secretary-General, stressing that resolving locations in order to balance their risk portfolio. Over
conflicts in the region — particularly the situation in Iraq 25% of business leaders turn to the World Economic
and the Palestinian-Israeli conflict — is important if Forum to identify broader strategic risks when faced
democracy in the Arab world is to move in the right with a strategic decision for their company.
direction and to mitigate some of the effects of
How concerned is your company about
instability. these potential threats?
Although conflicts in the region are far from being
resolved, there were positive signs of movement in the
Escalating Violence 41%
right direction. The Forum brought top Palestinian and
Terrorism
Israeli leaders together for the first time in eleven 38%
months, which may pave the way for the President of Nuclear proliferation 26%
the Palestinian Authority and the Prime Minister of Israel Protectionism 21%
to resume political negotiations. In addition, the 0% 10% 20% 30% 40% 50%
President of the Palestinian Authority, Mahmoud Abbas, major strategic concern
announced the launch of an internal dialogue aimed at
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World Economic Forum on the Middle East
