The Arab world must think big about its smallest firms: Amr Adly

Commentary: The Arab world must think big about its smallest firms: Amr Adly - Bloomberg Opinion

13.5.2019

Commentary: The Arab world must think big about its smallest firms: Amr Adly - Bloomberg Opinion

(May 13): After the Arab revolutions of 2011, multilateral institutions in the Middle East and North Africa began to show greater interest in the promotion of small and medium-sized enterprises as a means to inclusive development — the scarcity of which had contributed greatly to the uprisings. Donors, development institutions and banks started or expanded already existing programs for SMEs, usually in the form of credit extension and technical assistance.This appeared logical. After all, SMEs in the region have

Alas, this logic does not fit well into the economic reality in some of the most-populated countries in the region, like Egypt, Tunisia and Morocco (and Syria before the civil war). Here, the vast majority of privately-owned enterprises are neither small nor medium, but rather of a micro size, usually employing less than five or six people and often operating informally. These economies have a very few SMEs, and they account for minute shares in output, employment and investment.

There is a heavy concentration of these establishments in menial trade and service jobs in urban and rural areas, which underlines their very limited access to all types of capital. All four countries are densely populated, and their economies don’t depend on hydrocarbons. They have all undergone considerable rounds of economic liberalization and privatization under the auspices of International Financial Institutions, the European Commission and USAID since the 1980s and 1990s. They have also all ended up with economies that are dominated by privately-owned activities that provide most of GDP and employment.

One of the key hurdles to developing micro-enterprises is the fact that most of them are informal. Most MENA state bureaucracies know next to nothing about the populations of micro-enterprises that operate within them. Moreover, there is considerable mistrust between the two, especially from the side of the micro-enterprises, which suspect that any information-giving on their part will lead to taxation, or might expose them to more corruption and extortion from state officials. This makes such establishments hard to target with development interventions.

Amr Adly is an assistant professor at the American University in Cairo. He is the author of"State Reform and Development in the Middle East."

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