NEW ENTREPRENEURS AND HIGH GROWTH

ENTERPRISES IN THE MENA REGION

CONCLUSIONS AND POLICY IMPLICATIONS

Antonio Fanelli OECD – Private Sector Development Division

Rome, 17 July, 2012

Research questions and conclusions

Where do MENA economies stand in terms of high performance enterprises vis-à-vis developed and other emerging economies?

While the number of enterprises in MENA is lower than in other emerging markets, the share of high potential enterprises is comparable.

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Research questions and conclusions

What obstacles prevent high potential enterprises in MENA from becoming high performance?

A inefficient and non-transparent regulatory environment, corruption, a lack of external finance, and a shortage of skilled staff.

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Research questions and conclusions

Is there evidence of an incoming new generation of entrepreneurs?

A new generation is indeed emerging. Work experience and high education are critical for success. The gender gap persists but appears to be narrowing. Further analysis is required.

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Research questions and conclusions

Is the business environment conducive to high performance firms? What can public policy do to promote high performance firms and what are MENA governments doing in this regard?

The transition from high potential to high growth is affected by inefficient and non-transparent regulatory environment, a lack of external finance, a shortage of skilled staff, and distorting competition of incumbents.

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Policy implications

Two sets of broad policy recommendations emerge from the report:

1) Improvement of the business environment for all enterprises.

Objectives: To increase the pool of formal enterprises and develop a level playing field.

2) Measures targeted to high-growth enterprises.

Objectives: To facilitate the transition from high potential to high growth and improve growth performance.

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Businesses environment - 1

Five priority areas:

1. Regulatory policy and regulatory simplification in order to lower the administrative burden and to increase competition;

2. Increase competition and diversification in the banking and financial sectors;

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Businesses environment - 2

3. Increase women’s participation in the labour market and in enterprise creation;

4. Legal and judiciary reform to improve contract enforcement;

5. Human capital development to improve skills and promote an entrepreneurial culture.

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High-growth enterprises - 1

Access to finance:

• External equity financing, either provided by business angels, seed funds, venture capital or equity funds;

• Stimulation of the eco-system for equity financing;

• Introduction of credit guarantee facilities for enterprises whose main assets are intangible.

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High-growth enterprises - 2

Skills development

• Tailored publicly-funded training schemes;

• Voucher schemes allowing enterprises to select the trainers or advisors;

• Internship programmes with universities and vocational institutes;

• Hiring programmes for new graduates supported by public funds (i.e. Tunisia).

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High-growth enterprises - 3

Develop linkages programmes:

• Connect high potential SMEs with large companies and multinationals;

• Target the advanced business services sector (ITC, consultancy and accounting services, etc), relatively under-developed in the MENA region;

• Help SMEs in learning how to work with large companies and multinationals and in adopting quality standards.

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High-growth enterprises - 4

Three additional horizontal areas:

•Introduce an active gender policy to reduce the gender gap;

•Ensure the provision of reliable and low cost public services (enterprise/industrial locations, power supply , ITC services, etc);

•Remove obstacles to business entry and expansion through sectorial reviews of the competitive and regulatory environment.

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Final policy implications

There is no magic formula leading to an increase in the number of high growth enterprises;

Policy experience is built through piloting, testing and careful evaluation;

Experimenting could offer new insights and open new perspectives;

The current context provides an opportunity for moving towards a more inclusive and evidence based policymaking.

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Antonio Fanelli Deputy Head OECD - Private Sector Development Division E-mail: antonio.fanelli@oecd.org