empowerME monthly newsletter

While some continue to debate the reality of climate change, the world has been grappling with extreme temperatures this summer, hitting their highest levels in over eighty years. According to the Copernicus Climate Change Service (C3S) data, July 22nd marked the warmest day in recent history

What implications does this have for the economies of these regions?

The Middle East and North Africa (MENA) region, despite its rich history, cultural heritage, and significant natural resources, consistently ranks lower in global happiness indices compared to other regions.

How Can the Region Secure a ‘Happier’ Future?

Interest in women’s entrepreneurship in the Middle East and North Africa (MENA) region has grown significantly over the past decade, leading to numerous initiatives aimed at supporting women in starting businesses. Despite the great impact of these initiatives, the growth element is still lacking.

At the Atlantic Council, we try to address some of these gaps through the Women Innovators (WIn) Fellowship.

In the bustling heart of Washington DC, April unfolded as a whirlwind of global economic engagement. Delegations from across the globe, comprising finance ministers and central bank governors, descended upon the US capital for the annual IMF/World Bank spring meetings—a cornerstone event in the calendar of Bretton Woods institutions.

As the global community navigates these turbulent waters, the imperative for coordinated action and steadfast resolve has never been more pressing.

So why are women founders systematically and historically excluded from investment? For starters, investors often treat men and women entrepreneurs differently, focusing on risk when engaging with women and on growth with men. A study revealed that when investors used uniform questions for all pitches, the valuation of men’s proposals dropped while women’s valuations increased, highlighting how undervalued they were.

The truth is, that it’s a strategic imperative that contributes to the growth of national economies. As Melinda French Gates has said, “Gender diversity is not just good for women; it’s good for anyone who wants results.”

Scheduled for March 4th, Saudi Arabia is set to host the third edition of LEAP (LEAP2024), a prominent global technology event in Riyadh, the capital city. The event anticipates the participation of over 1800 influential figures from the technology sector worldwide. The agenda of LEAP 2024 encompasses a diverse range of subjects, including Web 3, EduTech, RetailTech, FinTech, HealthTech, future energy, and smart cities.

There are compelling reasons to believe that Saudi Arabia’s aspirations to becomea pivotal regional, and possibly global, hub for technology and innovation are well-founded.

As we bid farewell to a challenging 2023, ending with the Israel-Hamas war that threatens to expand across the region, chief economists are offering a mixed bag of predictions for the world economy in 2024.

However, the disparity in economic performance across MENA countries is striking: while some countries are facing significant challenges, others are experiencing rapid growth. Why is the economic outlook of the Middle East so divided?

Expo City in Dubai hosted COP28, the United Nations Climate Summit, welcoming approximately 97,000 international delegates. This marked the second Climate Summit held in the MENA region, following last year’s COP27 in Sharm El Sheikh, Egypt.

Overall, COP28 is a success, marking the first explicit text on phasing down fossil fuels, scaling up renewables, and operationalizing the Loss and Damage Fund, which sets out a strong foundation for future commitments aligned with the Paris Agreement.

Warren Buffet famously proclaimed, “It takes 20 years to build a reputation and five minutes to ruin it.” We may be witnessing America’s five minutes as President Biden staunchly supports Israel’s bombardment of Gaza, an increasingly unpopular position, especially among younger people in the United States and many other nations around the world, particularly in the Middle East.

American brands operating in the global marketplace must navigate this changing landscape by carefully considering the impact of a further and more severe decline in America’s soft power in the future. To effectively do this, some key actions should be considered:

Marrakesh played host to the 2023 Annual Meetings of the World Bank and IMF. Morocco admirably fulfilled its role in terms of organization, security, hosting capacity, and the warm embrace of its local culture. During these meetings, whether attendees were present in person or joining remotely, the world eagerly awaited insights from experts, economists, and government leaders regarding the economic prospects for 2023-2024 and beyond. The key questions revolved around whether the global economy would continue to grapple with sluggish growth, high inflation, and elevated unemployment rates.

…there have been three promising developments prominently discussed in most sessions at the Marrakesh meetings:

A few years ago, few outside the world of finance were aware of Saudi Arabia’s Public Investment Fund (PIF), the Qatar Investment Authority (QIA), or Abu Dhabi’s Mubadala. Today, many know them as state-owned investment funds or sovereign wealth funds (SWFs), as they are widely known. With approximately $5 trillion in assets, Gulf SWFs have emerged as a formidable force in global finance

The headline in a recent Wall Street Journal article sums it up: “The Middle East Becomes the World’s ATM.”

Did inflation increase poverty in the Middle East?

Last April, the World Bank revealed its projections for decelerated economic growth in the Middle East and North Africa (MENA). The Bank anticipated a growth rate of 3 percent by the conclusion of 2023, which is a significant drop from the 5.8 percent seen in 2022, and a departure from the average of 7.3 percent observed between 2000 and 2018. Furthermore, the expected real GDP per capita growth by the end of 2023 is just 1.6 percent, down from the 4.4 percent recorded in 2022.

Artificial intelligence (AI) has captured the world’s imagination, extending across age groups, professions, and countries. AI is rapidly transforming the global economy, and the MENA region is no exception, potentially adding $320 billion to the economy by 2030. This growth will be primarily driven by the increased adoption of AI by governments, utilization of AI by businesses across all sectors, and investment in startups developing AI-powered products and services.

So, what should policymakers do? Building immediate national competency and competitiveness in AI is a prerequisite to making appropriate and impactful policy decisions.

Despite notable advancements in technological readiness, the MENA region still lacks behind in terms of innovation. Since 2015, innovation market growth in MENA countries has notably slowed down. Several factors contribute to the existing immaturity of the innovation market in MENA.

Addressing the areas of R&D spending, education, and intellectual property can greatly benefit MENA countries to boost their digital economy and innovation ecosystems.

After astonishing growth in the entrepreneurial ecosystem in the Middle East, with 5,000 startups launched in the last five years, we might witness a slowdown in the creation and scaling of startups. It’s not that innovation has stopped or that young people are not attracted to startups. But as access to capital becomes increasingly challenging, potential founders may find the entrepreneurship path less attainable.

That’s why the startup momentum must continue, as the impact is financial and societal. This is not a decline that the region can afford.

Ten years ago, the United Nations’ General Assembly adopted Resolution 66/281, proclaiming March 20th as the International Day of Happiness. Since then, there has been a growing consensus that the collective success of countries should be judged by the happiness of their nations. There has also been growing research interest in measuring happiness in a standardized way, in line with established socio-economic indicators, such as GDP growth, poverty, and inequality rates.

So, what makes MENA countries “less happy” than others?

As part of our mission, we developed the WIn Fellowship, a program to support women entrepreneurs through extensive capacity building, mentoring, and networking opportunities tailored to their needs while openly tackling vital policy issues that impact their ability to participate meaningfully in their local economies.

As gender equality policies progress throughout the Middle East, networking, role modeling, and mentoring are crucial accelerators to build a sustainable network of successful women entrepreneurs.

Brain drain is a common phenomenon in the global south, where highly educated and skilled individuals leave their native home to a more favorable location with better employment, development, and career prospects elsewhere. While brain drain is largely common in the developing world, including Africa, Latin America, and the Caribbean, it is particularly significant in the Arab World.

So, what can MENA policy makers do to retain talent?

As we bid farewell to a challenging 2022, there is little optimism about the global economy in the year ahead. 63 percent of chief economists from the public and private sectors in a recent survey expect a global recession in 2023, with 18 percent believing it is highly likely. The view from MENA is generally positive but mixed, given the region’s diverse economies.

What does this mean for the year ahead? We will likely witness three trends that will lead to the creation of regional champions in the coming years…

As we say farewell to 2022, and welcome 2023, let’s talk about the Middle East economy, in a nutshell. Generally, this past year has been fairly challenging, not just for the region, but globally as well. As the world attempted to recover from the long-lasting effects of the pandemic crisis, the war in Ukraine started, creating immediate tensions in food and energy prices around the world.

Meanwhile, the climate agenda will continue to dominate the discussion across the MENA region, with an exceptional occurrence where two MENA countries are leading the COP presidency in two consecutive years. Egypt will hand over its COP27 presidency to the UAE at COP28, in November 2023 in Dubai.

The Conference of Parties (COP27) of the United Nations Climate Change Framework Convention (UNFCCC) took place in Sharm El Sheikh, Egypt, earlier this month. An estimated 35,000 delegates from over 190 countries participated in this high-level event. Numerous leaders from around the world also attended the event, including the Secretary General of the United Nations, the President of the United States, the President of the European Commission, the President of the United Arab Emirates, the Crown Prince of Saudi Arabia, and many others.

So, what are the main outcomes of COP27, and what do they mean for the Middle East and North Africa (MENA) region?

Egypt is one of the main MENA countries already suffering the effects of the global economic slowdown. A couple of days after the meetings, IMF Chief Kristalina Georgieva announced an agreement with the Egyptian authorities, subject to approval by the IMF Executive Board in December, on comprehensive economic policies and reforms to be supported by a 46-month Extended Fund Facility (EFF) Arrangement of $3 billion. In return, Egypt will be committed to implement a durable flexible exchange rate policy, expand targeted social protection, and anchor private sector engagement.

So, would the new IMF deal resolve Egypt’s existing economic problems? The short answer is no. These policies may be necessary, but they are certainly not enough.

Education has been a key indicator of an economy’s growth in innovation and technology for the last 500 years from the Dutch Empire in the mid-17th century to the British Empire in the late 19th century to the United States in the 20th century to China’s awakening in the last several decades. Investment in education has been the foundation of societal and economic transformation and has led to significant long-term gains.

By investing in cost-efficient renewable energy, MENA countries can significantly reduce their extremely expensive energy subsidies, freeing funds for use in education and social welfare for the advancement of their populations.

The Middle East and North Africa (MENA) region is home to the largest hydrocarbon reserves in the world, with the Organization of the Petroleum Exporting Countries (OPEC) member countries possessing almost 60 percent of global crude oil reserves, and 43 percent of global gas reserves. This places the region as a key global player for oil and gas for the foreseeable future.

By investing in cost-efficient renewable energy, MENA countries can significantly reduce their extremely expensive energy subsidies, freeing funds for use in education and social welfare for the advancement of their populations.

The recent war in Ukraine has exacerbated the existing inflationary pressures in the Middle East and North Africa (MENA) region. Based on IMF estimates, the inflation rate in MENA went up from an average of 7.3% in the 2000-2018 period to 14.8% in 2021. Inflation reached particularly high levels in Lebanon, Algeria, and Tunisia.

The MENA countries that have been most affected by the recent inflation spike are the heavy commodity importers and those facing existing economic challengesSo why are heightened inflation rates particularly alarming in MENA, compared to other regions?

Egypt is preparing to host COP 27 in November 2022 in Sharm El Sheikh. The country is expected to receive delegations from numerous countries, in addition to representatives from a wide variety of international organizations, corporations, and non-governmental agencies. As part of preparations for the conference, the Egyptian government and several NGOs have spent millions of dollars to help make Sharm El Sheikh a “green city.”

To address this, MENA countries need to treat climate change as a complex, multifaceted, and interconnected threat, that will not only affect quality of life in these countries, but also have complex and far-reaching multiplier effects on the economic and social fabric of the region.

Reflecting on my recent travels to several countries in the Middle East, the mood in the business community can best be described as cautiously optimistic. While most industry leaders are concerned about inflation and an expected slowdown in demand, they generally feel that the region is better positioned to withstand the volatility. Executives assert this applies to the GCC, where a historically high revenue surplus is replenishing government coffers. Non-oil based economies are also expected to benefit from the spillover effect of continued growth and investment by the oil-based countries in the region.

As the pandemic-fueled liquidity begins to wane and the reality of inflation and higher interest rates sets in, many economies will face considerable challenges. MENA countries are vying to attract global investors and increase FDI, and yet capital flows are reversing from emerging markets to rich countries, specifically the United States, where interest rates are rising to levels not seen since 2018.

Several MENA countries continue to take bold steps to improve their global competitiveness. Those that maintain their momentum will be clear winners in the coming years. History is rich with evidence that periods of economic challenges are followed by periods of historic gains.

We launch our WIn (Women Innovators) Fellowship this month with the inaugural cohort of women entrepreneurs in Saudi Arabia. The WIn Fellowship aims to support women entrepreneurs to increase their chances of success by providing them with the managerial tools, mentoring, and people to people ties to scale their businesses. Our vision is to develop a regional network of WIn Fellows who support one another, build enduring companies, and enact better policies and programs for the advancement of women in business.

Salesforce’s CEO in India, Arundhati Bhattacharya, recently sounded the alarm on the skills shortage in the IT sector, calling it a “crisis.” She was highlighting the increasing competition for workers as more companies accelerate their transition to digital. Interestingly, her biggest competitors are not other large multinational firms but rather well-funded startups. One might assume that this is because India’s youth population (the largest in the world at approximately 600 million) has an entrepreneurial culture of risk taking.

In addition to asking whether young people in MENA have a risk-taking attitude, we should be asking: Is their downside risk acceptable?

This January, two transactions indicated the potential for MENA’s smaller economies to participate meaningfully in the global economy and drive economic growth: Bahrain-based cryptocurrency exchange Rain and Tunisia-based artificial intelligence company InstaDeep raised record-breaking financing rounds by international investors. To put their funding into perspective, Rain’s $110 million financing round accounts for 11 percent of Bahrain’s foreign direct investment in 2020, while InstaDeep’s $100 million financing round accounts for 15 percent of Tunisia’s.