Socio-economic and cultural factors, labour market characteristics, financial wealth, and the quality of institutions play a strong role in the emergence of entrepreneurship in a society, writes Lois Stevenson in ‘Private Sector and Enterprise Development: Fostering growth in the Middle East and North Africa’ (www.idrc.ca).
Citing studies, she reminds that entrenched cultural perceptions and attitudes regarding risk, economic security and socially-valued occupations, education systems, the nature of employment options and the incentive structure can be major hindering or supporting influences. “The determinants of entrepreneurship can be influenced through a variety of interventions geared to create awareness of entrepreneurship as an option; profile entrepreneurs as role models; open doors to opportunity; reduce fear, uncertainty and disincentives; and provide access to the necessary resources for establishing an enterprise, such as counselling, advice, financing, training, information and technical support.”
Deterrents
An important caution that the author sounds is that certain government policies and actions can, inadvertently or otherwise, deter entrepreneurial activity. She observes that disincentives to entrepreneurship can be found in the taxation and regulatory environment, labour laws, social security regimes, bankruptcy laws, the system of property rights, financial markets, and the intellectual property regime.
The case of Yemen shows how the government can intervene to remove some of the disincentives. “A one-stop-shop (OSS) for investors was launched in 2008 by the General Investment Authority (GIA), and efforts were undertaken to make it easier to obtain municipal licences and register with the Chamber of Commerce and the tax office,” reports Stevenson. “A Tax Simplification Project was launched in 2009 to eliminate tax exemptions in the customs, income tax, and investment laws, and reduce corporate and personal income tax rates…”
Attracting FDI
A section on ‘foreign direct investment performance’ rues that consistently from 1989 onwards the MENA region has been less successful in attracting FDI than others, with only a slight increase in the share of global FDI since 1970. This, as the author notes, signals a lack of business opportunities, an unattractive local business environment or higher risk perceptions. She also points out that most of the regional FDI has been directed to the non-tradable sectors, such as real estate, housing and tourism, and very little into export-oriented manufacturing.
Realising the importance of FDI, most of the countries in the region offer generous tax incentives and holidays, the book acknowledges. “They have implemented measures to reduce customs procedures and costs; built QIZs, free trade zones, industrial parks and technology zones, amended investment laws to improve incentive structures and processes; established investment promotion agencies; modernised commercial laws…”
But these are not enough, other areas of the economy must be strengthened if MENA countries are to effectively compete for FDI, the book instructs. This, as Stevenson elaborates, will necessitate a skilled labour force, a base of developed SMEs to act as partners with and suppliers to foreign firms, flexible labour laws and good analysis of the investment opportunities in the country.
Educative reference.
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