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Middle East countries recognize competitiveness as a cornerstone of their economic growth strategy

Article by Arthur Bayhan, member of TCI Board of Directors
Globalisation is a reality that countries in the Middle East can no longer escape and competitiveness is the only way to benefit from globalization and not become its victim.

Indeed, the most of the countries in the region started developing competitiveness initiatives which reflect into the fact that the governments of the Middle East see the globalisation as an opportunity but not as a threat.

Competitiveness is the key to the future of the Middle East and its ability to thrive in the new economic conditions. Competitiveness has become the economic imperative for both business and government leaders alike. The Middle East countries future competitiveness in the world economy will require active responses from business representatives, government leaders, academicians and civic leaders of these countries. Competitiveness will require action at the regional, states, provincial and district levels. Competitiveness will also require a change in mindsets. Industry will need to focus more on its customers and less on the Government for the basis of its competitiveness. Government will need to listen to the private sector and remove impediments that raise the cost of doing business.

The competitiveness should chalk out different strategies to achieve its objective of helping Middle Eastern economies to effectively compete for their products in global markets.

Why is competitiveness so important?

• With increasing mobility of skills, technology and financing, raising a country's competitiveness is critical to building and sustaining economic growth and increasing prosperity
• Increasing a country's competitiveness requires creating a secure, stable and efficient environment for doing business coupled with world class standards in quality, labor and the environment. The results are clear: increased productivity and prosperity for the economy, leading to higher wages, more and better jobs across the population.

The concept of competitiveness in other countries began to take root as early as the beginning of 1980s. The USA created the "US Competitive Council" to effectively compete with Japanese companies for not loosing their stake at the international market. An initiative that proved highly successful.

Soon many countries followed the USA by setting up similar bodies in the process benefited from the concept.

The importance of the concept of "competitiveness" can be gauged from the fact that the Paris-based Organization for Economic Cooperation and Development (OECD) in its 2006/2007 reports has advised member countries to invest in innovation and competitiveness.
Many of the most competitive countries conduct annual competitiveness reports. Ireland, for instance, has been publishing an annual competitiveness report for many years. During this time the country has developed to be the second most prosperous country in Europe in income per capita behind Luxembourg. Singapore as well, with the highest income per capita in Asia, sees value in documenting and tracking the state of its competitiveness. The United States Congress formed a Competitiveness Policy Council which provided guidance to policy makers. China is a stronger country today because of their admirable economic achievements.

Expanded awareness of competitiveness initiatives

A decade after the U.S. Congress scrapped the US Competitiveness Council, President Bush is again focusing the attention of his government on this theme via his American Competitiveness Initiative (ACI). The European Union has set up a competitiveness program, the so called Lisbon Agenda to enhance the competitiveness of the European economies. In Asia, countries such as India, Malaysia and Pakistan have formulated competitiveness as a cornerstone of their economic growth strategies.
In the countries of the Middle East, there has been increased focus on competitiveness as the key to prosperity. The Arab world now has its competitiveness report which is prepared annually by the World Economic Forum. Egypt has been publishing its own report for the past three years which is used as a centerpiece for discussions between the public and private sector leadership. Jordan has recently created a "competitiveness observatory". Saudi Arabia has started with a substantial programme to put Saudi Arabia under the top 10 ranked countries by 2010. Dubai is working to establish the Dubai Competitiveness Council to position the Dubai Economy on a more competitive global footing. Similar initiatives are being undertaken by Abu Dhabi, Qatar, Oman and Kuwait.
Indeed, the Middle East countries, specifically the Golf Cooperating Council member countries are concentrated on economic development, boosting regional competitiveness for their economic growth and are trying to diversify their economies looking for other resources of income beside the oil. Indeed oil and non-oil countries of the Middle East have been diversifying their economies with the following notion:

• Developing notion that the Oil will not last forever
• Investing the financial abundance for sustainable competitiveness
• Diversify economy
• Raised awareness that Competitiveness is key to improving living standards
• Recovery of world leadership
• Inter-governmental economic cooperation
• Middle Eastern investment becoming catalyst in Islamic and non-Islamic countries

They are doing so by:

1. Taking advantage of their location trying to build a hub for air and see trafficking. To promote investment and trade. Dubai and Qatar.
2. Being a hub for trade and financial Centres : Dubai, Bahrain
3. Promoting a regional competition for economic development in the members Golf Cooperating Countries (GCC).
4. Developing the tourism sector: United Arab Emirates (specifically Dubai), Qatar, Bahrain and Oman.
5. Investing heavily in Asian and European countries for additional future incomes.

The Global Competitiveness Report (GCR) of the World Economic Forum recognises the Middle East countries efforts to promote competitiveness for a sustained economic growth. According to the GCI 2007, the improvements could be seen in the following benchmarked areas: Institutions, Infrastructure and Macroeconomy.

Way Forward

According to the GCR of 2007, in the coming years the countries of the Middle East should put more emphasis on the areas of Health and Primary Education, Higher Education and Training, Technological Readiness, Business Sophistication, Innovation

As these countries improve their economic situation, stakeholders demand access to better information and analyses on issues influencing the economy. In the United States and Europe, there is a long history of independent economic research organizations that provide thorough and unbiased economic indicators on which to base policies and business strategies. The "wise men" economic research institutes in Germany, the independent think tanks in the United States, economic and innovation and technology-focused organizations in the Nordic European countries, and the development institutes in several other Asian countries are prime examples. These organizations undertake research, compile data, and provide analyses of key economic and business trends. In addition, given the increasing interdependence of economies within the world's major regions, there has been an increase in region-wide activities to organize and disseminate data, and best practices. The Competitiveness Learning Platform sponsored by the European Union is model based on this approach.

Despite the best efforts of domestic and international organizations operating in the Middle East region, at present, the nations have only limited resources devoted to research and analysis. As a result, policy makers, researchers, and business people often must make weighty decisions with less information and analytical backup than their counterparts. This puts Middle Eastern policy makers and managers at a severe disadvantage in a rapidly evolving world economy.

Increased integration requires more regional coordination and networking
With industry value chains spanning economies, regional integration is a priority for the competitiveness of the region and relations with its trading partners. Lesser developed economies are taking the initial steps to transforming their business environments, but many lessons can be transferred from their neighbours in the do's and don'ts of building competitiveness in the region.
Despite the recovery and significant development since the financial crisis, much of the region's economic potential remains untapped.

The current economic growth programmes of the GCC governments and their concentration on the regional competitiveness and endeavour to obtain more stakes in the international market demonstrates the strong interest in the subject of competitiveness.

Arthur Bayhan
Director, TCI Board of Directors