Increased competition is critical to bringing in new ideas, new ways of thinking, new products, new markets, and new approaches, so as to generate new jobs for women, the youth of the region, and for those who live at the bottom of the pyramid. In other words, greater competition will breed greater innovation, and more of the middle income jobs that the region requires. Innovation in its simplest form means simply “Doing Different Things and Doing Things Differently” (DDT-DTD).
Efforts to spur innovation in the private sector lie at the core of the “Facility for New Market Development” (FNMD) project in West Bank and Gaza and its associated follow on project the “Palestine Market Development Project” which is currently under preparation. The projects provide a 50 percent subsidy to firms to help them access new markets, develop new product lines, develop new packaging, in other words, bring innovation into their firms by DDT-DTD.
The recently completed FNMD project sponsored many new and innovative enterprises in a difficult environment. For example, a computer graphics firm in the Gaza Strip purchased new IT software which allowed it to develop a cartoon imaging capacity, in Arabic, for a Saudi audience. Employing between ten and twenty people in Gaza City, the firm has artists and computer graphic designers working side by side to produce exportable products to a regional Arab Market. Another firm in the West Bank capital of Ramallah, produced vehicle-tracking programs which permit truck and taxi firms to track the progress (or otherwise!) of their drivers and truck fleets, throughout the region. And yet another firm supported by the FNMD project, based in Hebron with the great name of Super Nimer meaning Super Tiger in English, has developed steel security doors to such a high quality that it is now exporting these same products to Israel and competing within a market significantly more sophisticated and advanced.
While many companies have been assisted in more rudimentary ways, these three examples demonstrate the power and inventiveness of Palestinian entrepreneurs when they are supported. The new project will learn from the old and develop even better feedback loops for Palestinian entrepreneurs to help new businesses achieve higher market penetration, product development, and new product design. If the first phase was anything to go by– then the Mark II version should be able to take private sector inventiveness and creativity to an even higher level. Greater private sector innovation is required throughout the MENA Region. This, in part, explains why the MENA region (a middle income region on paper), looks more like a lower income (LIC) region in so many ways. Many of MENA’s social and economic indicators are closer to Sub-Saharan Africa’s than to those of Latin America and Eastern Europe. And its private sector is not creating the middle income level jobs that the youth of the region are demanding.
Diversification is a cherished goal of most countries in the region. This is not just true of the hydrocarbon exporters – but is equally true of the non-oil exporters.
Part of the reason is the sheer dominance of hydrocarbon exports (in Iraq, oil and gas represents 98 percent of exports and 89 percent of government revenues). Other reasons are the uncompetitive private sectors which lock out other players (e.g. the Ben Ali regime in Tunisia), restrictions on trade, and limits on FDI. Reduced competition means less innovation in what is produced and what is exported.
Creating an open, competitive, and more innovative region is critical for the growth of middle income jobs so desperately needed throughout MENA. As the World Bank’s Privilege to Competition (P2C) Report indicated, MENA’s private sector is crony capitalistic and non-competitive. The Arab Spring has shaken up this cozy cabal of inside players. What must now take its place is GREATER COMPETITION driving ENHANCED INNOVATION.
Only this way will MENA become a Super Nimer Region.