The World Economic Forum on the Middle East, North Africa and Eurasia brought together stakeholders from different but interconnected regions to discuss common challenges and opportunities. More than 1,000 business, government, academic and civil society leaders from over 70 countries brought their energy, intelligence and forward-thinking to Istanbul. The result, as revealed in this report, was a wealth of ideas, opportunities and newly forged relationships spanning countries and continents.
The backdrop of the meeting was a complex set of issues dominating global headlines. Each region faces distinct challenges. The Arab world has seen immense political change over the past 12 months, and the region is struggling to find a new equilibrium that balances its political culture with new freedoms while facing difficult cross-regional economic tests – notably, significant youth unemployment. Europe’s monetary system has been in a constant state of emergency for over two years, with the situation coming to a head as the meeting convened. At the same time, in Russia and across Central and Eastern Europe, democracy is being tested, and countries are facing significant questions about energy security, governance, growth and employment.
Geographically and culturally at the centre of these regions, Istanbul and Turkey itself are in the middle of these complex issues. A fast-growing economy on the periphery of the Eurozone, with half of its exports going to Europe, Turkey’s increasingly influential regional and global roles connect Europe, the Arab world and Asia. Istanbul’s hospitality was a singularly appropriate metaphor for cross-regional optimism.
Under the theme “Bridging Regions in Transformation”, these issues were addressed through a dynamic programme built on three pillars: Harnessing Technological and Social Change; Rising to the Growth and Employment Challenge; and Shaping the New Governance Landscape. Special messages from Prime Minister Recep Tayyip Erdoğan of Turkey, Prime Minister Hammadi Jebali of Tunisia and President Mahmoud Abbas of the Palestinian National Authority emphasized both the challenges and the opportunities in the Middle East, North Africa and Eurasia.
The call for action coming out of the meeting was a drive for cross-regional initiatives and alliances that will provide solutions to these challenges. A number of perspectives were provided by World Economic Forum reports launched at the meeting, including Addressing the 100 Million Youth Challenge: Perspectives on Youth Employment in Arab World in 2012; The Europe 2020 Competitiveness Report; and Euro, Yuan, Dollar Uncertainties.
Participants agreed that the task now is to build on the ideas and initiatives that emerged from the meeting and act with impatience to make them a reality.
President and Chief Executive Officer, EMBRAER, Brazil
Ibrahim S. Dabdoub
Group Chief Executive Officer, National Bank of Kuwait, Kuwait
Muhtar A. Kent
Chairman of the Board and Chief Executive Officer, The Coca-Cola Company, USA
Andrey L. Kostin
Chairman and Chief Executive Officer, VTB Bank, Russian Federation
Chairman, Eni, Italy
Chairman and Managing Director, Haci Ömer Sabanci Holding, Turkey
News from Istanbul
- Harnessing Technological and Social Change
- Rising to the Growth and Employment Challenge
- Shaping the New Governance Landscape
The meeting’s Opening Plenary featured three leaders, each facing complex challenges and an uncertain future, but speaking with optimism and calls for peace, reform and democracy.
Turkey offers a promising model for achieving economic growth and political stability in the face of profound international challenges. Metrics ranging from increasing per capita income to dramatic growth of tourism demonstrate Turkey’s recent successes. The government’s active engagement in foreign affairs – regionally and internationally – has been integral to this economic success.
“Any problem in one country has something to do with another country,” noted Prime Minister Recep Tayyip Erdoğan of Turkey. “When war, conflict, migration, terror … take place in a country next door, those events have an effect on your country.”
This connectedness is particularly evident in the recent influx of refugees from Syria who have settled in Lebanon, Jordan and Turkey. In addition, the impasse in the Arab-Israeli peace process has been an obstacle to achieving regional stability and has diverted resources that could have been invested in promoting social stability.
Despite political challenges, Palestine has seen an increase in private-sector investment, according to Mahmoud Abbas, President of the Palestinian National Authority; Chairman of the Palestinian Liberation Organization Executive Committee. Promoting such economic activity requires partnerships with other governments, businesses and international organizations.
On the subject of Arab-Israeli relations, Abbas said: “Today, we are not at war or at peace [with Israel] … This could go on for decades.” He called for Israel to accept the Arab peace initiative, as it “might not stay on the table forever.
Tunisia, which served as a “cradle” for the Arab Spring movements, has become the focus of international attention as it transitions to democracy. Prime Minister Hammadi Jebali of Tunisia observed that the nation’s political problems were inextricably linked to its languishing economy. Rebuilding a strong foundation for democracy and prosperity will require job creation and the growth of a vibrant private sector. Jebali issued a call to Arab businesses in particular: “You need to invest in democracy.We all need to invest in democracy. We need to support this Tunisian model.”
Currency volatility and fiscal crises have taken a huge toll on global economic stability recently. In particular, the continuing worries about the euro and the pace of economic reforms in China have added to global economic woes.
To help address these challenges, the World Economic Forum’s Strategic Foresight, Europe, Financial Services, Global Risks and Global Agenda Council teams have explored and initiated processes to help stakeholders better understand how these uncertainties may play out and to prepare for plausible yet challenging alternative scenarios. The Euro, Dollar, Yuan Uncertainties report is the synthesis of the insights generated in a process that involved more than 200 policy-makers, private sector leaders and academic experts through discussions and high-level workshops in Brussels, New York, London, Beijing, Davos-Klosters and Dalian.
This dynamic interaction complements a number of related Forum initiatives, including those of the Global Agenda Councils on the International Monetary System, Fiscal Crises and Institutional Governance Systems, the B20 Task Force on the Future of the International Monetary System, and the Remodelling Europe initiative, which intends to deepen policy discussions on providing a more stable economic environment and ameliorating the prospects for growth in Europe.
Despite steady economic and real GDP growth in many Arab countries, a rapidly expanding youth demographic has generated an urgent need for jobs and an environment that is conducive for entrepreneurship.
The Role of Large Employers in Driving Job Creation in the Arab World report focuses on the role of large employers in addressing regional unemployment through skills matching and skills development. The report also explores innovative public-private partnerships and the opportunities for collaboration between large employers, governments and other stakeholders to transform institutional structures and strengthen the economy.
The examples presented in the report illustrate the employment challenges in the Gulf Cooperation Council (GCC) countries. Many of these recommendations can be applied to other economies across the Arab world.
As Arab countries face the two big challenges of economic growth and job creation, the launch of a report on youth employment in the Arab world at the World Economic Forum on the Middle East, North Africa and Eurasia couldn’t be more timely.
In a region where 100 million young people between the ages of 15 and 29 – representing 30% of the Arab world’s population – urgently need gainful and dignified employment, Addressing the 100 Million Youth Challenge – Perspectives on Youth Employment in the Arab World in 2012 provides a direct response.
The report highlights innovative thought leadership, global best practice and actionable recommendations for decision-makers across the region. Based on the work of the 2011-2012 Global Agenda Council on the Arab World, the essays in the report cover topics ranging from social innovation and new approaches to employment to women’s empowerment, access to credit and education reform to enable job creation, with recent case studies from Iraq to Tunisia.
As many European countries are still reeling from the worst economic crisis in more than 50 years, there is an urgent need for competitiveness-based strategies to set the region back on the path to growth.
Europe not only lags behind other advanced economies, but there is also great fluctuation in economic performance among EU member states, with some countries doing well in all areas, while others trail behind. The Europe 2020 Competitiveness Report shows that countries that have a relatively high level of prosperity but lack a knowledge-based, highly productive economy are those that have the highest rates of unemployment. In other words, high levels of prosperity in Europe cannot be sustained in the long term without high levels of competitiveness. The results show that there is much to be done to fully harness Europe’s economic potential.
Launched in Istanbul, The Europe 2020 Competitiveness Report is the first in a series that will assess Europe’s competitiveness, based on the European Commission’s Europe 2020 Strategy, every two years until the end of the decade.
Balancing the Three Axes of Growth
Harnessing Technological and Social Change
From the Arab Spring to cyberwar, financial market innovation to market volatility, individual medicine to genetic engineering – technological progress is wrenching at all aspects of society. How we relate – at every level, from the interpersonal to global governance – is changing exponentially as progress builds on itself.
Smart growth, sustainable growth, risk resilience – these three dimensions provide the basis for policy-makers and leaders to bridge the transformation between the turmoil of today and the promise of tomorrow.
The challenges across the regions are different but interconnected and representative of the new landscape facing leaders across the globe.
The “Facebook revolutions” that occurred across the Middle East and North Africa last year provide the dominant metaphor for the impact of the Internet and social media on national governance. Russia and other CIS countries are building a future based on their heritage of engineering excellence and social innovation. At the same time, Europe’s competitiveness and potential to progress beyond the current economic crisis will be determined by its technological and innovative capacity and its ability to develop, adopt and assimilate new technologies into the way its societies operate and interact.
The challenge for leaders across these regions is to harness the flow of change, keep ahead of it and influence its direction for the social good. Many of the sessions at the meeting were dominated by the duality of technological and social change – on the one hand, technology can bring immense prosperity, create fortunes, bring people together in unprecedented ways and shrink the global community. On the other hand, it creates immense social change and makes unprecedented demands on individuals, families, communities, organizations and states to adjust to a new reality.
Over 12 months ago, a series of revolutions were sparked across the Middle East as images, ideas and messages were communicated instantly through social media, mobile technology and connectivity. The region continues to be shaped by “interconnectedness” and a new regional identity is emerging. In a session on the Arab Spring, one participant pointed out that many young people no longer think of themselves as Turkish, Tunisian, Egyptian or Syrian. New technological innovations are leading to personal and community empowerment, and enabling the emergence of new grassroots solutions.
Technology has enabled a shift from victimization to ownership, from disgruntlement with the status quo to personal responsibility and drive for change. In the same session on the Arab Spring, it was noted that people now feel a sense of duty to their country, not only as observers or loyal participants, but as actors. One survey shows that 90% of Egyptians feel that if there is a problem in their community it is up to them to fix it. But this new empowerment will be a challenge for many in the MENA region. There is no word for “citizen” in Arabic. Citizens need to learn and understand their new rights and responsibilities and to organize themselves better. Economic challenges will lead citizens to change their expectations of government as the provider of employment and unsustainable consumption subsidies.
This new empowerment opens a frontier for social, economic and governance development: the ability of civil society, government and business to harness the digital revolution and work together to create practical solutions for complex problems. The events across the Arab world hold lessons for other regions.
In the new digital landscape, countries should seek to adjust growth between employment and prosperity, sustainability and risk resilience. The Nordic countries, for instance, have actively structured their technological infrastructure, regulation and institutions to provide the foundation for inclusive societies, not just prosperous ones. For the countries of Eastern Europe, the challenge is to manage the development of a knowledge-based employment structure with a foundation of risk resilience to ensure growth and stability in the long term.
If the Arab world is a metaphor for technologically driven social revolution, the other regions covered in the meeting in Istanbul are equally challenged by change. The nature of a country’s technological infrastructure is now a critical contributor to national competitiveness. In a session on Digital Pathways to Inclusive Growth, participants addressed the challenge of evolving nationally structured and regulated ICT companies with a borderless world of cloud computing, where information flows freely and national regulations do not apply. There are already optimistic signs of cross-regional cooperation in this new world, such as the Trans-Eurasian Superhighway – a fibre-optic cable to run under the Caspian Sea through Azerbaijan.
Across the region, there are vast differences in information infrastructure and systems for technological entrpreneurship, such as capital, investors and education. To use technology appropriately as a tool for innovation, organizations need both a guiding principle and an appropriate ecosystem – an environment where the right talent and skills can be sourced and fostered. Many countries across the regions are actively attempting to create these webs of ideas and interaction. Russia’s Skolkovo Innovation Centre is one example of multistakeholder partnership fostering innovation.
Today, the language of science and technology is providing the basis for new borderless partnerships. Science is based on a universal set of interests and a borderless world of ideas and, as such, science diplomacy can be used as a force for peace. While science diplomacy cannot necessarily solve conflicts, it can maximize opportunities. Despite the political impasse between Israelis and Palestinians, science and technology, for example, remains one of the few areas of cooperation between the Israelis and Palestinians. However, this cooperation is limited and more investment is needed for science diplomacy to make an impact.
As technology changes the social and governance landscape, it has an equally significant influence on the cultural, artistic and spiritual arenas. Culture spreads instantaneously through the digital realm. Art and culture are important tools for exerting national and regional influence, managing messages and enabling and channelling youth. Through digital platforms, writers, filmmakers and musicians can build dialogue with diverse communities of readers, enabling them to create bridges in society. By understanding “the other” and questioning the gap between people, artists are able to create empathy among peoples. This is particularly important in societies where there are religious and cultural tensions.
The relentless wave of technological change rolling across the regions is difficult to ride. But it provides the basis for a new approach to economic and social organization.
Entrepreneurship and Innovation for Employment
Young people are often risk averse and aspire to secure public employment. However, bloated public sector employment is inefficient and not viable in an age of spiralling public deficits and austerity. Young people need training in entrepreneurship and to be encouraged to take risks and start businesses. In the wake of the Arab Spring, policy-makers should focus on encouraging entrepreneurship and access to financing, rather than attempting to mollify disgruntled populations with hand-outs, subsidies and inefficient public sector jobs.
Distrustful of institutions and people, many youth in the MENA region wish to be self-employed and find virtual work appealing. Virtual work is growing rapidly and holds great promise for providing employment for young people generally, and particularly for women and the disabled – both groups suffer from high rates of unemployment due to discrimination and women in the region face difficulties in trying to work outside the home. Web-based jobs allow collaboration with colleagues around the globe and online tools can be used for training. While virtual work can make a significant contribution to youth employment, many young people in the region still do not have access to the Internet.
An anti-austerity backlash by voters across Europe has shaken the Eurozone and deepened doubts about the future of the euro.
Ongoing social unrest and tumultuous elections in Spain, Greece and France underscore how firmly the pendulum of public opinion has swung from austerity towards growth. After four years of deep recession, voters in Greece have rebelled so fiercely against further wage and pension cuts that their country could now be on the verge an exit from the EU. With much of Europe falling into recession, the political dynamic is likely to worsen, further weakening the so-called “axis of austerity” in the north.
As the debate reaches dangerous levels of polarization, what has been lost in the noise is that fiscal discipline and growth are not mutually exclusive. While fiscal policy is likely to remain constrained, there are other levers that policy-makers can use to create jobs and boost growth, including supply side, monetary and exchange rate policies. Turkey provides a positive example of how structural transformations can achieve both fiscal consolidation and growth.
Europe has the capacity to overcome its crisis and, indeed, emerge stronger and more united. But it is running out of time. Europe urgently needs to outline a broad and convincing growth pact backed by further fiscal integration and specific actions to contain the debt crisis. Previous steps have been incremental and have proved to be “too little, too late”. As the crisis descends into a self-reinforcing vicious cycle, decisive action can no longer be deferred.
Rising to the Growth and Employment Challenge
Needed: 600 Million Jobs by 2022
A lost generation. That’s what the regions are facing if governments, business and civil society do not develop innovative solutions for the current crisis of youth unemployment, which in some countries is as high as 50%.
Worldwide, 75 million young people cannot find work, and the world will need to create 600 million jobs in the next decade to stabilize economies. Many countries have only one significant resource to develop: the human capital of their populations.
Turkey’s economy is demonstrating the economic success that can come from harnessing the productive potential of the workforce, even within a short period of time. The question, then, is how? What conditions are necessary for countries to realize the maximum potential of their people?
Education is a popular answer to this question, but simply reforming school systems and curricula is not enough. Overhauling a nation’s educational infrastructure often requires government mandates, cultural change and significant funding, and it can take decades for a nation to reap the benefits. Further, even when individuals have access to educational opportunities, there is no guarantee of employment. Indeed, thousands of college graduates cannot find jobs. Improving employment opportunities requires not just developing skills but also matching talent to existing jobs.
A number of short-term measures can help to reach this goal. For example, companies can play a greater role in skill development by increasing internships and partnering with competitors and governments to create training centres. Policy-makers can support vocational training programmes and simplify labour regulations.
From a policy standpoint, enabling the mobility of talent could help to meet companies’ existing employment needs. One in four employers in Europe and the MENA region can’t find qualified candidates to fill available jobs. In addition, Europe’s workforce is increasingly ageing: 50 million workers will leave the labour pool in the coming decades. Meanwhile, the Middle East, North Africa and Eurasia suffer from a youth bulge and a huge demand for new jobs. Measures to enable legal migration of workers would help to address these challenges and allow supply to flow to demand. Other strategies include increasing access to short-term visas and improving analyses of skill needs to plan for the necessary labour flows.
Enabling small and medium-sized enterprises (SMEs) is another strategy for achieving job creation. Historically, many nations have focused on the conditions necessary to launch SMEs. However, given that more than half of such businesses fail within the first two years, SME longevity, rather than just creation, should be the focus of policy and investor attention.
Traditional barriers to the growth of new businesses include lack of access to capital and poor infrastructure, particularly in telecommunications. Morocco has focused on improving its ecosystem for SMEs, which has included welcoming foreign businesses to create start-up offices locally.
Financial inclusion also allows more people to enter the workforce and start businesses. Mobile banking, for example, has been tremendously effective in much of Africa, and these models could be more adapted to benefit parts of the MENA region and Eurasia with poor access to banking services. Likewise, sharia-compliant investing is projected to become a
US$ 4 trillion market, and Islamic investment services could be better integrated into financial systems.
Failure to involve women in the workforce overlooks the potential contribution of billions of dollars in economic activity. Governments can play a role in incentivizing companies to hire women, and travel and cultural exchanges can increase knowledge about the social benefits that follow from greater gender equality. Turkey has prioritized policies to increase the workforce participation of women, such as subsidizing initial social security payments for companies that hire women, and its success presents a powerful model for the MENA region.
Bolstering a nation’s human capital is a key component of job creation, but these changes must be situated within a broader ecosystem of economic stability. Volatility in the Eurozone not only poses problems for Europe but also for the Middle East, North Africa and Central Asia as well. Turkey, for example, relies on Europe for nearly half of its exports, and bank failures or further bailouts by the European Central Bank would have spillover effects far beyond the EU.
Austerity policies have helped to restore economic balance in some European nations, but there is increasing concern that the ramifications of these policies – depressed spending, contraction of social services and others – will lead already precarious nations further into recession. Job creation must remain a top priority guiding these fiscal reforms so that affected nations can maintain social stability and rejuvenate languishing economies.
So far, the European Central Bank has been able to prevent widespread economic crisis; however, revenue shortfalls in Greece as well as ongoing problems in Spain, Portugal and Italy will continue to test the Eurozone.
Greater political leadership is needed to develop a unified vision for managing the region’s monetary policies, but it remains unclear how newly elected governments, most recently in France, will affect the EU’s approach to the crisis. Without greater certainty that policy-makers can contain the problems, investors have little incentive to re-engage by investing heavily in the Eurozone.
Significant investments are exactly what it will take to upgrade infrastructure in Eurasia and the MENA region, and these improvements are vital to long-term economic stability. Gulf Cooperation Council nations are the exception – making significant investments from airports to green energy infrastructure – but many non-oil producers lack the access to capital to make the necessary upgrades.
The only way to generate the scale needed is for governments to partner with the private sector and each other to mobilize funds and to access the needed technical expertise. In making these upgrades, telecommunications systems should be a priority.
Against the backdrop of the Eurozone crisis and the recent Arab Spring, sharing best practices in job creation and economic stabilization can benefit the region. Turkey serves as a model for many in the Middle East, North Africa and Eurasia for the way in which it has coupled economic growth and political stability. In particular, the country has benefited from its efforts to include women in the workforce and to tackle challenging banking reform before the economic crisis.
Despite the political and economic challenges in North Africa, some countries are emerging from the Arab Spring with positive economic changes or were already implementing job-creation policies. Tunisia is seeking to expand joint efforts between businesses and the government to train workers. Morocco has taken active steps to support the development of SMEs. Reducing obstacles to free trade is also an enabler of economic growth, and Georgia has made efforts to streamline its customs processes and improve its logistics infrastructure to make it more attractive as a transit hub in the region.
These examples demonstrate the potential for innovative solutions, and meeting the growth and employment challenges of the Middle East, North Africa and Eurasia requires sharing and scaling such approaches. The problems of economic volatility and political strife cannot be contained within any one nation’s borders, but the interconnectedness of the three regions can also become a source of strength. Shared strategies can create the economic and political conditions to realize the potential of nations’ human capital.
Tackling Unemployment in the Middle East
Recent social and political events in the Arab world have contributed to a decline in economic activity and increased unemployment, particularly for youth.
According to the International Labour Organization (ILO), the unemployment rate for young people following the Arab Spring is 27.9% in North Africa and 26.5% in the Middle East. With the population in the Arab world set to grow to 460 million by 2025, the situation could take a turn for the worse, but it also presents a unique opportunity for today’s employers to benefit from young energy and talent.
Creating more and better jobs, especially for youth, is one of the most urgent challenges facing the Arab world today. Although addressing the job creation imperative remains a global and cross-regional issue, there are challenges specific to the Arab world that demand innovative thinking and responses framed within the new regional context.
Governments, the private sector and civil society all have a role to play in tackling the employment challenge.
The Search for Talent
High-quality human resources and the availability of talent are important building blocks for a nation’s long-term competitiveness and sustained growth. Given the scale of the talent crisis, strategic decisions need to be taken now. Countries need to prepare for demographic shifts and a fast-changing labour market environment by defining forward-looking education and migration policies. There are several ways:
- Anticipate future skills shortages through strategic skills planning. Governments and industry associations should analyse capacity and productivity risks for each job type, such as mechanical engineers, and develop policies to mitigate anticipated shortfalls.
- Design inclusive and comprehensive migration policies from students to experienced workers. Governments should ensure the proper integration of migrants, provide them with employment and language support and facilitate the portability of pension and social benefits. The ability to own property is also important.
- Create a new category of short-term visas targeting the highly skilled. Such programmes should offer solutions that are low cost, with fast turnaround and less bureaucracy.
- Foster inclusive societies and working environments. Government policies need to support equal opportunities and empower women, while enforcing anti-discrimination laws.
A Healthy Ecosystem Is the Key to SME Growth
Small and medium-sized enterprises are often considered the backbone of the region’s economy. Indeed, in countries like Morocco, for example, SMEs make up 95% of the economy. A common myth, however, is that increasing the number of SMEs will drive job creation.
Research consistently shows that it is not the number of enterprises, but the growth of the enterprises that matters. This is borne out by an ugly statistic: over 80% of small businesses close down in the first two years of operation. Thus, the problem is not lack of entrepreneurs who form new businesses – the problem is the sustainability, longevity and growth of these businesses. SMEs in the MENA region are held back by limited access to technology, scarcity of capital, political instability and poor governance. Countries like Morocco show how SMEs can thrive by creating an ecosystem that helps bring scale and speed to nascent businesses.
Read more from the sessions here: http://www.weforum.org/EuropeMiddleEast2012/summaries
Bridging the Governance Gap
Shaping the New Governance Landscape
The Middle East, North Africa and Eurasia regions are navigating a profound transformation. Tightly interlinked geographically, politically and economically, they share a common challenge: how to align sustainable economic growth while ensuring social progress.
To achieve this, a new infrastructure for transformation is needed – new models of good governance that are fit-for-purpose to meet today’s realities.
Turkey is at the epicentre of these regions and has emerged as an important bridging power. It offers a promising model for achieving economic growth and political stability in the face of profound international challenges. The dramatic increase in per capita income and the creation of 3.5 million jobs since 2009 are just two examples of the country’s success story. The so-called “Turkish miracle” has been built on solid fundamentals such as good governance, strong fiscal discipline and a thriving private sector.
Turkey in the “Eye of the Hurricane”
However, as Turkey thrives, it is encircled by a gathering storm of economic uncertainty and political unrest. At home, impressive reported growth rates of 8-10% and the country’s healthy current account balance are to a large degree dependent on global energy imports. Price volatility could undermine this prosperity. The country finds itself in the “eye of the hurricane” as its neighbours are mired in economic and political chaos.
Europe – a model of integration for more than 50 years – is facing an existential crisis much deeper than the current debt crisis. Structural challenges are eating away at its strengths and, as other regions’ competitiveness accelerates, the EU’s vulnerabilities are exposed.
The Middle East is unstable in the wake of the Arab Spring, with the rise of Islamist parties, and Syria is embroiled in an escalating conflict. Even Tunisia, considered the cradle of the Arab Spring and a model of transition to democracy, faces political challenges inextricably linked to its languishing economy. Russia, with the return of Vladimir Putin as president, is under the watchful eye of an increasingly demanding middle class and Iran’s nuclear ambitions remain worrisome.
The nexus of religion and politics is being scrutinized as fearful secularists and Western observers consider the rise of Islamist parties and their impact on the outcome of the Arab Spring. But several participants pointed out that people across the Arab world are united: they want freedom and democracy, jobs, economic progress and education. If Islamist parties do not deliver on institution and nation-building, they will not be re-elected.
A conducive regional environment is needed if democratic transitions across the MENA region are to bring peace and if people’s aspirations are to be realized. Several Arab leaders called on the international community to speak with one voice and act with a “new seriousness” to find a Syrian solution. The escalating crisis, with thousands of people being killed, is another litmus test for the international community in the face of a stalemate at the UN Security Council.
However, Syria is an extremely complex crisis. Its citizens have the same demands as other Arab countries in transition after suffering years of repression, yet the lack of a unified opposition is a weak link that gives the Syrian regime “ammunition”. Several panellists decried this notion and pointed out that the status quo is the root of instability and that the lack of a unified opposition should not be used to legitimize the regime.
Despite the challenges of transition and conflict, Arabs are longing for democracy and prosperity and there is hope that fledgling governments will not disappoint their citizens. Polls show a new sense of ownership – in Egypt, 90% of respondents said that if there is a problem in their community, it is up to them to fix it.
Russia in Transition
Russia is a leading power in the region and its growing middle class is watching as President Putin reassumes the seat of power. Will the government pull off the growing number of reforms on the table? The past decade has seen a doubling of GDP, which has sparked demands for political reforms and broader participation in the system.
Russia’s entry into the World Trade Organization bodes well for its economy. The general sentiment is that membership will boost growth significantly in the long term by enhancing the efficiency of industry and driving institutional reform. However, like Turkey, Russia’s dependence on energy production, which accounts for 60% of GDP, poses an increasing threat to the economy, and there are few signs that diversification is working.
Russia’s future development is critical to its neighbours in Central Asia and the Caucasus. President Putin is courting them with a proposed Eurasian Union, modelled on the EU. However, many of these nations are creating economic and political ties with China and the United States.
More than half of chief executive officers in Turkey and Germany are concerned about energy costs and the EU has been scrambling to diversify its energy sources. The Nabucco pipeline, expected to route gas from Azerbaijan (and eventually from Iraq, Turkmenistan and Egypt) through Turkey into Eastern Europe and Austria, could be delayed and the Nord Stream offshore natural gas pipeline from Russia to Germany is controversial.
New oil and gas pipelines are needed to address demand for reliable and secure supplies. Iraq needs greater political stability, more internal security and deeper market economy reforms to become a reliable oil and gas supplier. Meanwhile, landlocked Kurdistan, with its reserves of 45 billion barrels of oil, plans to export one million barrels a day by 2015 and two million by 2019, but it will need the cooperation of its neighbours.
As the world’s appetite for energy increases and hydrocarbons dwindle, countries will increasingly turn to nuclear and green solutions, although both are controversial – the former has an uneven safety record and the latter is likely to require government subsidies.
Rooting out Corruption
Challenges faced by newly democratic governments across the regions in rooting out corruption include ousting mafias that occupy powerful positions in politics and business. The emphasis in many countries emerging from recent democratic revolutions is on dealing with past corruption. However, several participants emphasized the importance of switching the focus to the future.
Examples include enshrining the Tunisian anti-corruption commission in the new constitution and efforts in the Egyptian parliament to provide legislative solutions to endemic practices. Countries could look to Kyrgyzstan as a model for creating a new anti-corruption agency.
Europe, the Middle East, North Africa and Central Asia all face the challenge of developing good – or better – governance infrastructure. Examples across the regions abound. But as many participants pointed out, governance depends largely on leadership and an engaged citizenry.
In the Arab world, governments and their people are on a long journey from police states to civil states and, hopefully, thereafter to effective states – from no accountability, stifled media and cronyism to democratic societies with popular institutions and free markets.
In parallel, the financial crisis is demanding a new global governance structure for financial regulation. But as one participant pointed out, this is going to require political leadership, courage and vision.
The Road to Energy Security
In a rapidly changing world, there is one certainty: the need for energy – notably oil and gas – will keep rising. According to international estimates, demand for oil and gas will expand by over 50% in the coming 25 years, fuelled by economic growth in the Middle East, North Africa and Asia.
Ensuring stable supplies of energy in all its forms is one of the major challenges facing consumers and producers. Energy corridors, principally pipelines, are a key part of the equation as consumers and producers seek security in diversification of energy sources and markets.
Given its geography, Turkey is strategically placed to be a conduit for supplies. “Turkey is ideally placed to benefit both itself and its neighbours,” said Taner Yildiz, Minister of Energy and Natural Resources of Turkey.
The European Union is keen to reduce its dependency on Russian gas imports and has developed the Southern Gas Corridor plan to transport central Asian gas into Europe. An energy corridor between the Caspian Sea and Europe could lead to greater competition in terms of supply and lower gas prices for European consumers.
Europe teeters on the edge of an economic and political precipice. Yet participants were surprisingly upbeat about the future of the European project – over the long term. In a session on European Integration, participants saw the project emerging from its crisis and prospering within a few years.
Vittorio Grilli, Vice-Minister of Finance of Italy, said his country is facing “tough choices” for the next six months but, in two to three years, “should emerge stronger”. Italy has to think differently about its relationship with the European Union. “The euro is a happy ending of 50 years’ journey, but it is just the beginning. We switched gears. The internal market progresses slowly, but it progresses. The velocity at which further integration happens must increase – a main challenge and a main problem.”
Egemen Bagis, Minister for EU Affairs and Chief Negotiator of Turkey, reminded participants that no crisis lasts forever. “Cheer up, we’ve seen worse and you’ve seen worse. This crisis will be over, too. Per capita prosperity is still the highest in the world. The EU has a set of values that unites us and those are the right values to carry us into the next generation,” he said. “The 27 countries that implemented EU rules and regulations became more prosperous, transparent and dynamic. Remember that the EU itself is a peace project.”
At the same time, there is great frustration with European leadership. “There has been too much intellectual discussion,” said Sir Michael Rake, Chairman, BT Group, United Kingdom. “We’ve spent too much time focusing on the Lisbon Treaty rather than the Lisbon Agenda. Europe is facing huge competition from the South and the East in a globalized economy. It is very difficult for politicians to deal with this. It takes huge courage to say the truth clearly and to follow up on it. It will require huge levels of leadership to bring us together now.”
Affirmative Gender Policies for Sustainable Growth
Fatma Sahin, Minister of Family and Social Policies of Turkey, is credited with introducing policies that have significantly improved the lot of Turkish women. She talks with Saadia Zahidi, Senior Director and Head of Constituents at the World Economic Forum, about the changes she has made and the reasons for them.
Zahidi: Turkey is one of the fastest-rising countries in the World Economic Forum’s Global Gender rankings, although from a low base. What are the key reasons for the rapid changes for women?
Minister Sahin: Sustainable development, improvement and growth. Today, policies on gender parity are indispensable. And ensuring powerful and equal participation for the empowerment of society. The economy, health, education, justice, social security and social policies are interrelated. Turkey has continued its rate of growth despite the current economic depression; thus, this determination will surely reflect on gender indicators.
In the past decade, Turkey has achieved great improvements in every field. We have focused on human development, which is the fundamental dynamic of development. Education is a benchmark for accomplishments in all areas; as the level of education increases, the rates of women’s employment and active participation in decision-making step up too.
Zahidi: Your ministry has developed innovative policies to encourage businesses to hire and retain female talent. Can you tell us more about these policies?
Minister Sahin: Higher women’s participation in labour is an objective and can be achieved with equitable regulations and by finding solutions to problems in education, traditional work-sharing approaches, domestic responsibilities and childcare.
We have also enacted regulations with the New Labour Code and Revenue Law, which mean that women working from home are exempt from taxes. Through the New Employment Stimulus Package in 2009 and the Employment Package in 2008, we legislated to increase the employment of women and youth; 20,741 women have benefited since August 2011. With the Law 6111 (the “Bag Bill”) of 2011, there has been positive discrimination to provide job opportunities for women.
Zahidi: As traditional family structures change, how are the needs of working parents being met?
Minister Sahin: To enable women’s employment on a permanent basis, we have been making efforts to help women to harmonize their domestic and business life in accordance with their family structure. Because they lack proper conditions, women can’t focus on their jobs and they worry about their maternal or domestic responsibilities.
Through a protocol signed with the Ministry of Science, Industry and Technology, we are developing kindergartens for women working in industrial zones and presenting a daily care service within the framework of measures on the compliance of family and business life. Through a protocol signed with the Ministry of Labour and Social Security, we are aiming to expand these kindergarten services.
Zahidi: There are still many cultural barriers to women’s education and empowerment, particularly evident in the urban-rural divide. What programmes are being developed to empower rural women?
Minister Sahin: We have passed several laws to eliminate the victimization of women in the agricultural sector. The Turkish Civil Code addresses the concept of family patriarch, stipulating that “spouses lead the marriage together”. There have also been amendments to our social security laws, which mean that all self-employed women who are over the age of 22 and work in the agricultural sector will be covered in any circumstance. Likewise, men who have turned 22 will be included in the process.
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The Great Debate: Istanbul as a Financial Hub?
In a dynamic TV debate, participants discussed the factors for success for financial hubs. As the economic power shift continues, it is inevitable that more financial centres will emerge in developing countries. But economic growth does not automatically lead to the creation of international financial centres.
“We have the human capital and the location. As the private sector, we strongly support the vision of Istanbul as a financial centre,” said Ferit F. Sahenk, Chairman, Doğus Group, Turkey. For Ibrahim S. Dabdoub, Group Chief Executive Officer, National Bank of Kuwait, there are only three major financial centres in the world – New York, London and Singapore.
All these centres have the advantage of operating in a single currency (US$) and language (English). Arif M. Naqvi, Founder and Group Chief Executive, Abraaj Capital, defended the growth of Dubai as a regional centre, but said there is room for Istanbul to do the same. He added that it is time to stop talking about emerging markets and refer to global growth markets instead.
Ali Babacan, Deputy Prime Minister for Economic and Financial Affairs of Turkey, noted that the Turkish economy is growing strongly, buoyed by reforms carried out ahead of the global crisis.
Istanbul is seeking to form alliances to take advantage of the expected trend towards new financial centres. The International Finance Corporation has picked Istanbul as its regional centre, and Microsoft also has a big operation here.
The World Economic Forum wishes to thank the Government of Turkey for serving as host country of the World Economic Forum on the Middle East, North Africa and Eurasia. The Forum would particularly like to thank Minister Egemen Bagis and his team at the Ministry of EU Affairs for their support.
The World Economic Forum would also like to thank Doğuş Group for hosting the Opening Reception on 4 June; SOCAR for hosting the Community Lunch on 5 June; and CNN Türk for hosting the Farewell Reception on 6 June.
In addition, the World Economic Forum would also like to express its gratitude to Cuneyd Zapsu and his team for their invaluable support.
The World Economic Forum wishes to recognize the contribution of the following companies as Partners and Supporters of the World Economic Forum on the Middle East, North Africa and Eurasia.
- Abraaj Capital
- Accel Partners
- AUDI AG
- Bahrain Economic Development Board
- Bahrain Mumtalakat Holding Company
- Booz & Company
- CA Technologies
- Clifford Chance
- The Coca-Cola Company
- Deutsche Bank
- Doğuş Group
- The Dow Chemical Company
- Ernst & Young
- GDF SUEZ
- Hewlett-Packard Company
- Intel Corporation
- JPMorgan Chase & Co.
- Mahindra Satyam
- Marsh & McLennan Companies (MMCo)
- McKinsey & Company
- METRO GROUP
- Microsoft Corporation
- National Bank of Kuwait
- The Olayan Group
- Omnicom Group
- Publicis Groupe
- Saudi Basic Industries Corporation (SABIC)
- SK Group
- Standard Chartered
- System Capital Management
- Thomson Reuters
- Vision 3
- VTB Bank
- Zurich Insurance Group
- Arab Bank
- Dabbagh Group
- EFG Hermes Holding
- Group DF
- Abdel Hadi Abdullah Al-Qahtani & Sons Group of Companies
- Angermayer, Brumm & Lange Group
- BNP Paribas
- Burgan Bank
- Crescent Petroleum
- Dana Gas
- Dubai International Financial Centre
- International Bank of Azerbaijan
- Majid Al Futtaim Group
- OTKRITIE Financial Corporation
- Palestine Telecommunications Company
- (Paltel Group)
- Qtel Group
- Saudi Telecom
- Tamer Group
- Waha Capital
- Xenel Group
- Doğuş Group
- Doğan TV Holding
The event page of the World Economic Forum on the Middle East, North Africa and Eurasia provides access to a richer level of content from the meeting, including videos, photographs, session summaries and webcasts of selected sessions.
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More information on the World Economic Forum on the Middle East, North Africa and Eurasia in Istanbul, Turkey on 4-6 June 2012 can be found using the following links:
Highlights of the meeting can be viewed here:
The report was written by Mary Bridges, Michael Hanley and Dianna Rienstra with Janet Hill and Mark Schulman. The Forum would also like to thank the summary writers for their work at the World Economic Forum on the Middle East, North Africa and Eurasia.
- Anastassia Aubakirova, Head of Russia and CIS
- Miroslav Dusek, Director, Head of Middle East and North Africa
- Stephen Kinnock, Director, Head of Europe
Editing and Production
- Ann Brady, Associate Director, Head of Editing
- Michael Hanley, Editorial Director
- Janet Hill, Senior Editing Manager
- Kamal Kimaoui, Director, Head of Production and Design
Norbert Schiller, Dana Smillie and Monique Jacques