Strategy
The Arab spring has deepened the region’s development challenges. It has also brought renewed attention to the economic and political consequences of unemployment and, more specifically, youth unemployment.
Regional economies continue to be state-dominated in comparison to the rest of the world, and the public sector remains the employer of first and last resort. But governments have fewer resources and can’t continue to play this role. Promoting private sector-led growth is critical.
The private sector is a critical driver of growth and job-creation.
However, the private sector needs people with the right skills. Many education systems in MENA do not provide the training needed by the labor market today.
Of all the lending that banks do in the region, only about 8 percent goes to SMEs. SMEs are the backbone of any economy.
Female labor force participation in MENA is the lowest in the world, according to the ILO, and female unemployment is also among the highest in the world (~16%).
The fundamentals of region remain strong. These include: a young population eager to work, a strategic location between East and West, considerable investment opportunities. Despite short-term vulnerabilities, IFC and other investors see the region’s longer-term potential.
IFC’s immediate focus has been to restore confidence in the private sector.
What IFC is Doing
IFC has committed over $2.4billion (including mobilization) since January 2011, boosting investors’ confidence and demonstrating that the region has a long term potential.
Assuming the political situation stabilizes and new governments are supportive of private sector development, IFC expects to invest up to $6 billion, including $2 billion in mobilization, in the Middle East and North Africa over the next three to four years.
IFC signed several significant transactions recently including a loan to support the construction sector in Iraq (Lafarge), a transaction to improve access to high-quality generic medicine (Hikma), and one to help increase access to finance for small and medium enterprises (BankMuscat).
IFC’s advisory work is fully integrated into many of our investments and initiatives. Advisory services are helping companies improve their corporate governance, advice on public-private partnerships in infrastructure, help smaller businesses access credit, and improve the regulatory framework for private education.
IFC is focusing on making business more inclusive to women and youth — especially through access to finance, education, MSME and Business Edge training programs. On September 10th 2011, as part of a G8 action plan for the region, 10 International Financial Institutions (IFIs), including IFC, agreed to set up a mechanism with rotating secretarial responsibilities to help support the economic pillar of the Deauville Partnership. The economic pillar calls for promoting private-sector-led growth and job creation, amongst other things.
IFC, working with partners, has launched new initiatives to help the region:
- Arab Financing Facility for Infrastructure (AFFI) in partnership with the World Bank and the Islamic Development Bank to provide access to long-tenor financing for infrastructure projects.
- The e4e Initiative for Arab Youth aims to create private education programs tailored to the needs of the job market
- The MENA SME Facility is expected to channel $550 million and a host of advisory services to smaller businesses over the next five years.
Updated March 2012
Media contact: E-mail: Rmustafa@ifc.org
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