This year’s World Economic Forum’s regional meeting for the Middle East and North Africa region, as in previous years, landed squarely in the lap of the private sector.
The most prominent conversations at the forum, which took place at the Dead Sea in Jordan this weekend, focused on conflict — as Yemen and Syria continue to suffer — as well as vulnerable populations. Youth unemployment, hovering at around 30 percent across the region, quickly became the focus of many discussions on catalysing economic growth, entrepreneurship and countering extremism.
As political, business and civil society leaders gather in Jordan this weekend for the World Economic Forum on the Middle East and North Africa, Devex takes a look at some of the topics that are likely to dominate the conversation.
The importance of closer collaboration between the countries of the region to simplify business regulations and improve resource management, among other things, was also prominent in discussions.
Yet through these concerns ran a unfiying thread of private sector engagement and the need for more public-private partnerships.
Innovation in the face of necessity
The region’s conflicts have flexed and protracted since the last WEF on MENA in 2015. More than 1.8 million additional people have become internally displaced, placing pressure on host communities to absorb and support those affected.
In the wake of these prolonged conflicts, hosts and donors both within and outside the region have been forced to innovate, to change their mandates and look for alternative forms of everything from energy to education to partnership. This year’s forum was in many ways a showcase of the adage “necessity is the mother of invention,” but it also offered a stark look at what needs to be funded — and fast.
“Private sector investment is very important and no straight answer was given in my discussions yesterday and today about how to attract private sector investment,” Rashid Khalikov, assistant secretary-general for humanitarian partnerships at the United Nations Office for the Coordination of Humanitarian Affairs told Devex. By the second day of the conference, Khalikov said he was still struggling to find tangible solutions for building private sector alliances, but he hoped at least that humanitarian agencies in particular were beginning to be more open about an issue that has traditionally been taboo.
“I think all the agencies involved in humanitarian systems — be it the NGOs, the international or local groups, U.N. agencies — they’re struggling with this issue of attracting private sector investment, and they’re putting their cards very close to their chests because it’s money,” he said.
The few — but robust — examples of successful public private partnerships in the humanitarian sector served as encouraging models for future engagement. Representatives from all sectors agreed that the private sector must expand its involvement in the region to offset the economic effects of the crises, while traditional humanitarian and development organizations for their part must scale up private sector instruments.
“If we want donors and taxpayers in donor countries to look at humanitarianism as something positive, we have to find a new way of framing humanitarian action,” Peter Maurer, president of the International Committee of the Red Cross and Red Crescent, told Devex. The ICRC is preparing to launch the world’s first “humanitarian impact bond” to build three physical rehabilitation centres and help thousands with disabilities.
For the first time, the ICRC is also engaging with the World Bank on responding to the four famines in Yemen, Nigeria, Somalia and South Sudan, hoping to innovate new financial models and derisk private sector intervention in fragile and conflict-affected contexts.
The private sector perspective
From the private sector side, there were a number of examples of companies beginning to engage with areas of the region affected by displacement.
The IKEA Foundation is increasingly becoming a strong voice urging for greater private sector involvement in humanitarian response and smarter ways of providing support to refugees and those displaced by conflict and disaster. Ahead of a visit to Australia in April for the Asia Pacific Humanitarian Leadership Conference, the foundation's CEO Per Heggenes spoke with Devex on IKEA's role in leading change and support for humanitarian responses.
Swedish furniture company IKEA announced the opening of its first solar farm in Jordan’s Azraq refugee camp just in time for the forum. Per Heggenes, chief executive director of the IKEA Foundation, made the case for using alternative energy because of, rather than in spite of, a lack of power infrastructure.
“We embarked on this project in 2014 when we started distributing solar lanterns, at least to give some opportunities for dignity and for children to study at night, but then we moved on to street lamps, which are critical for women’s safety in the camp, and in 2015 we started planning for the solar farm because we want to electrify the whole camp,” Heggenes told Devex.
IKEA’s tentative first steps weren’t initially headed toward powering the whole camp, Heggenes explained, but the investment yielded such obvious and immediate rewards — both for the refugees and in terms of cost-savings — that the company inevitably stayed in the space.
Likewise, PepsiCo touted its PPP with the government of Jordan — the second water-poorest country in the world — to create a water reservoir for conservation and filtering in the south of the country, where resources are strained by 700,000 new Syrian refugees.
“We achieved two years ago our 2025 goal to return more water to Jordan than we consume in the manufacturing of our products in the country,” Sanjeev Chadha, CEO of PepsiCo’s Middle East, North Africa and India regions, told Devex. Chadha explained that the company plans to replicate its success in all countries in which it works by 2025, and that the goal is on track to succeed.
MasterCard also posed a series of foundational questions about how the private sector can engage outside of the traditional corporate social responsibility model, suggesting instead that companies embrace the overlaps between profitability and sustainability.
“There is an enormous movement to understand the connection between profitability and sustainability,” Shamina Singh, president of the MasterCard Center for Inclusive Growth, told Devex. “[It means understanding] that long-term economic growth only happens when you incorporate philanthropy into a larger business model that allows for long-term profitability and long-term sustainability.”
Like IKEA, she said MasterCard subscribes to the belief that philanthropy doesn’t need to mean donating dollars: Greater value is added when the private sector simply does what it does best — making use of its data or analysis capabilities, for example.
Managing investment risk
Arif Naqvi, Founder and Group Chief Executive of the Gulf-based impact investor Abraaj, encouraged traditional investors to do just that: Use investment sense to truly plumb the depths of communities to assess risk and opportunity.
He recalled during a session titled “Finding the $100 billion for Infrastructure,” that banks initially balked at Abraaj’s plans to invest in the dairy industry in Turkey, which at the time was facing unrest in the wake of the 2016 presidential elections.
“I responded to [the banks] actually on CNN that day saying, ‘Turks are going to drink milk irrespective of who governs them,’” Naqvi said.
“The reality is you’ve got to have a local understanding of where opportunity and risk lies. People worry about emerging market currencies as being a source of disruption — the reality is, it’s not that they’re weak, it’s that the U.S. dollar is strong,” he said.
By flipping “the equation on its head,” Abdel-Wadood said investors can solve a lot issues by applying practical, sensible outcomes, and rethinking the lender and borrower relationship by coming up with “a more fundamental understanding of where opportunity is and where the risk lies.”
Still, all agreed that more is needed. Even in parts of the country unaffected by conflict, the private sector cannot always solve obstinate governance and resistance to change.
The role of governance
“We are so limited in what we can bring in, and we are constantly having to change because of what is or isn’t allowed,” Fayed Husseini, manager of Shurook, a company in the Palestinian Territories working on water access, told Devex.
Without a fundamental change in the relationship between Israel’s government and the Palestinian private sector, Husseini said, initiatives such as his will be limited in scope. Likewise, government subsidy and the lack of disincentives for improving agricultural practices continue to stand in the way of water conservation efforts.
Across the region, government should play an important role as a facilitator and source of encouragement for private sector investment, Dimitris Tsitsiragos, vice president of new business at the International Finance Corporation told Devex, but currently it tends to dominate when it comes to large, infrastructure projects.
“The government has to create more space and give more opportunities to the private sector, this is a region where state-owned enterprises dominate in many ways, and I think there is room for more private sector activity,” he said.
Tsitsiragos said the private sector is “vibrant” in the MENA region, and despite the need for improved governance and an increase in opportunities for training, “this is a healthy private sector.”
The same needs apply to building the private sector with entrepreneurship. With “inclusive growth” a key theme at the forum, much hope was pinned on the region's burgeoning startup scene, to ensure economic opportunities for those social groups currently lacking them — young people, women and refugees.
Delegates pointed to common benefits for government, business and individuals alike of bringing these marginalised groups into the formal economy.
Conditions in the Middle East are ripe for fostering social enterprises: A host of social challenges that government can't meet and a burgeoning youth population full of energy but facing dire employment prospects. Devex talks to Ahmad Ashkar, founder and chief executive officer of the Hult Prize Foundation, about what's needed for the sector to take off in the region.
About half of the population of the Middle East and North Africa is aged below 24 years, with youth unemployment hovering at around 30 percent. The role that unemployment can play in political and economic instability put it top of the agenda. Many people in countries such as Jordan and Lebanon worry that the influx of refugees has added to the pressure on job markets.
Similarly, the low level of female participation in the labor forces of the Middle East and North Africa was raised numerous times as limiting the potential of the economy. The proportion of women in work is less than 15 percent in several countries of the region.
But delegates highlighted that, provided with the right conditions, these groups offer an enormous economic opportunity for the region.
Singh of the MasterCard Center for Inclusive Growth told Devex that “this region is unique because of ... the absolute opportunity that is offered by the age demographic” and that if host countries can harness the entrepreneurial appetite of refugee populations, “everyone starts to generate more income.”
The 22-year-old Crown Prince Hussein of Jordan called for investment in youth enterprise to unlock this entrepreneurial potential.
“For young people everywhere, including those who form the large majority in my region, transformation is the reality we were born into. For us, continual innovation is part of the rhythm of life,” he told WEF participants at the opening plenary. “We grew up embracing new technologies, apps and processes that give us new ways to connect, and learn, and work.”
But what entrepreneurial Arab youth need now, he said is financial and moral support “so they can create their own impact. They need your help to advance and scale their projects, so they can see for themselves the difference they can make.”
In addition to investment, the founders of 100 Arab startups who were invited to attend the forum repeatedly stressed the need for regulatory reform to support early stage businesses.
Speaking at the closing session, Ambareen Musa, founder of souqalmal.com — the Middle East's leading comparison website — spoke strongly of the need to unify regulations across the region to make it easier for young businesses to expand across country borders.
Crown Prince Hussein called for “a region-wide support system for opportunity, access and hope” to “drive radical change across this region and ultimately drive radicalization out.”
“If we all play our part, ” he said, “it can be a once in a generation chance … to release the talent, energy and hopes of millions of men and women.”
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