Arab countries have problems with youth unrest, urbanisation, social inequality and political instability, to name but a few. However, participants in the session "The Role of Financial Institutions in Supporting the Real Economy", held on 8 November 2013 at the MENA Economic Forum in Marseilles, believe significant changes are under way.
"The revolutions have had an effect on foreign investment in the Mediterranean region," explains Emmanuel Noutary, Managing Director of Anima Investment Network. "The Gulf states are coming to the rescue during this transition by getting involved in major projects." Other backers are doing the same. "We are the biggest investor on the continent," claims Amani Abou-Zeid of the African Development Bank (ADB). The ADB has injected $17 billion of funding into North Africa.
However, the institution also supports the rise of the financial sector, SME support funds and harmonised regulations. Ms Abou-Zeid says that "weak inter-regional trade is costing the area 2-3% in GDP. This trade must be encouraged."
Harmonising and relaxing obligations
Morocco is already on the right track, according to Saïd Ibrahimi, Chairman of the Moroccan Financial Board, which created Casablanca Finance City to group together investment banks, services companies, multinationals, etc. This financial centre aspires to be a hub for the economic development of the Maghreb and West Africa. "We have built an entire ecosystem," claims Mr Ibrahimi. "In Morocco there are no restrictions on foreign companies in terms of owning subsidiaries or repatriating capital gains."
In the United Arab Emirates, Sharjah is also relaxing its stance by proposing two free-trade zones. "We must be careful not to over-regulate so that investments come to Sharjah and don't go elsewhere," explains Marwan Al Sarkal, executive director of Sharjah Investment and Development Authority.
Emmanuel Noutary believes there are now many different sources of finance: "300 funds were dedicated to the Mediterranean region in 2008, and this had risen to more than 600 in 2011 owing to the emergence of dozens of regional funds." He sees a problem, though: "Too few are interested in seed capital and risk capital, despite start-up businesses being the recruiting ground for tomorrow."
There is, however, support for new businesses in the form of business incubators such as Wiki Start Up in Tunisia, Berytech in Lebanon and Oasis500 in Jordan.
Islamic finance, which is still a marginal industry according to Anima, could be another way to get projects of the ground. "Morocco is considering a specific framework for collaborative finance that could satisfy some of the needs of investment and investors," says Saïd Ibrahimi.