The blueprint for successful business climate reforms

Persistence pays off.  This simple motto applies to reforming business environments. Countries in the Middle-East and North Africa (MENA) have been thriving to implement business-friendly reform agendas for over a decade. The World Bank Group’s Doing Business report, which measures business regulations for local firms across 190 economies, provides yearly updates on the (successful) implementation of those agendas. The latest report, released in October 2019, showed that MENA countries implemented a record 57 business-friendly reforms and listed four of the 10 most improved economies world-wide in the ease of doing business: Saudi Arabia, Jordan, Bahrain, and Kuwait. 

Beyond the headlines, the reform count signals deep improvements for businesses operating in the region or looking to do so. This translates, for example, into swifter import and export of goods,  better protection of minority investors, improved access to credit, and easier processes to start and grow a business. Today, it takes on average 124 days to obtain a building permit in the MENA region; that’s 28 days less than among OECD high-income economies. 

These are encouraging numbers. A lot remains to be done even in the areas that are improving in order to offer more opportunities for businesses to grow and create the over 300 million new jobs needed in MENA countries by 2050.  The challenges are significant. Getting credit in MENA remains harder than anywhere else in the world. Trading across borders is still expensive and time-consuming; exporting costs on average $442 and takes 53 hours, three and four times more than the averages among OECD high-income economies. Women entrepreneurs still face higher hurdles compared to men accessing economic opportunities. For example, 13 economies in the MENA region still impose additional procedures for female entrepreneurs to start a business.

Reforming is a long-term process. It is a marathon, not a sprint. Hence, it requires continued and coordinated efforts across government to achieve meaningful reforms . Experts agree that there are a number of factors that comprise a successful reform agenda:

1. Political ownership and leadership of the reform agenda
2. Persistence through the short- to long-term with a well-articulated reform agenda. Reforms do not happen overnight, so countries need to brace for long-term efforts when setting out on the reform journey
3. Adequate institutional setup and coordination between implementing agencies to drive the reform process
4. Constant dialogue and communication with the private sector—the first beneficiary of the reforms and who understand firsthand where the shoe pinches.

I would also add peer learning to this list. At the World Bank Group, we have found that facilitating peer-to-peer learning is a powerful tool to share what works – and what doesn’t -- for reform-minded countries to allow them to learn from good practice and adapt it to their own context. That’s why advisory teams from IFC and the World Bank partnered with UAE’s Federal Competitiveness and Statistics Authority (FCSA) in December in Dubai to host a Technical Deep Dive on the Doing Business 2020 report findings. In this third round of our Deep Dive, senior officials and delegations convened from over 40 countries in Africa, Asia, Europe and the Middle-East. The objective was to dissect the methodology and indicators of the Doing Business report and to share best practice on identifying bottlenecks to private sector development and implementing relevant reforms. This initiative originated in Sub-Saharan Africa in 2017 and is now opening-up to become a global platform.

Countries reform their business environment to attract and retain private investment that will help sustain growth, create jobs and foster inclusive development. Though each country’s reform journey is different, the fundamentals outlined above can make the journey a successful one. That’s a good lesson for the Middle-East and North Africa, as countries in the region look to tackle the next generation of reforms – be more transparent and more inclusive and encourage more competition to enable growth of domestic firms and signal their countries as preferred investment destinations.