The State of Entrepreneurship in the Middle East and North Africa

This week, CIPE hosted several of its partners from the Middle East and North Africa (MENA) who were in town to attend the Presidential Summit on Entrepreneurship, as part of President Obama’s Cairo Agenda for improving relations between Americans and the Muslim World. Presentations focused on the state of entrepreneurship and private sector development in Lebanon, Algeria, and Tunisia. Improving the climate, opportunities and funding to aspiring and existing entrepreneurs was an underlying theme throughout the discussion. Here are three other important points that surfaced:

• The role of corporate governance. One of the central obstacles to supporting entrepreneurship is creating greater awareness among local governments of the need to improve the regulatory environment for starting and stopping a business. Corporate governance can serve as a bridge for building the trust necessary to advance private sector interests at the public sector level. Strengthening transparency and good governance in enterprises is a means to raise the credibility and legitimacy of the private sector, thus improving its bargaining position and influence vis-à-vis the state.
• Expectations and risk taking. Successful entrepreneurs are everywhere in the region, yet pathways to success are not always well understood or transparent. Cynicism grounded in common expectations and past experiences tends to view successful businessmen as beneficiaries of nepotism and clientelism. Yet the ubiquity of wasta — social intermediating based on kin, tribal or personal connections — clouds the real successes and efforts which started with nothing more than a good idea. A greater awareness campaign featuring the role of entrepreneurs in creating jobs and launching new industries could help convince youth that there are opportunities out there besides instant celebrity through singing on television or becoming a futball star. This could go hand-in-hand with continued advocacy efforts to provide support and capital to aspiring entrepreneurs.
• Mapping out the informal. Any discussion of entrepreneurship should take into consideration the “informal economy,” which comprises up to half of all economic activity in many countries in the region. This is often where true entrepreneurs turn first due to the red tape and capital requirements necessary to start a registered business. While budding entrepreneurs may get shut out from bank loans, informal workers have their own funding channels that need to be studied. Starting with a deeper look at why entrepreneurs start businesses informally and how they go on to secure capital and market their goods has great potential to inform advocacy approaches for regulatory reform.