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"WORLD ECONOMIC FORUM World Economic Forum on the Middle East The Promise of a New Generation Sharm El Sheikh, 20-22 May 2006 INSIGHTS This publication is also available in electronic form on the World Economic Forum’s website at the following address: World Economic Forum on the Middle East report: http://www.weforum.org/summitreports/middleeast2006 (HTML) The electronic version of this report allows access to a richer level of content from the meeting, including weblogs, photographs and session summaries. The report is also available as a PDF: http://www.weforum.org/pdf/SummitReports/middleeast2006.pdf (PDF) Other specific information on the World Economic Forum on the Middle East, Sharm El Sheikh, 20-22 May 2006, can be found at the following links: http://www.weforum.org/middleeast/programme http://www.weforum.org/middleeast/webcasts http://www.weforum.org/middleeastprivate (participants/private site) The views expressed in this publication do not necessarily reflect those of the World Economic Forum. World Economic Forum 91-93 route de la Capite CH-1223 Cologny/Geneva Switzerland Tel.: +41 (0)22 869 1212 Fax: +41 (0)22 786 2744 E-mail: contact@weforum.org www.weforum.org © 2006 World Economic Forum All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, including photocopying and recording, or by any information storage and retrieval system. REF: 200606 Contents Preface 3 Summary – The Promise of a New Generation The Middle East Business Agenda 4 7 Investing for the Future 10 Global Integration 12 Youth and Understanding 15 Democracy, Peace and Security 18 Summit Outcomes 20 Acknowledgements 22 World Economic Forum on the Middle East 1 Preface The World Economic Forum on the Middle East 2006 set out to highlight the “Promise of a New Generation” against a background of profound challenges. Over 1,100 participants considered multiple issues, including the conflict in Iraq, the unresolved Israeli-Palestinian problem, heightened tensions over Iran’s nuclear programme, the impact of higher oil revenues, insufficient investment in essential infrastructure, slumping securities markets and, most important of all, an uncertain future for the region’s youth. The Summit was marked by a new optimism, with more open dialogue than ever before and a genuine commitment to increasing the role of the private sector. Participants focused on issues that the business world can credibly address. Moreover, the Summit generated real achievements on the steps needed to underpin economic success and invest for the future, and outlined a host of commitments for the future. The encompassing theme placed the challenges and opportunities of an increasingly youthful Middle East at the heart of the agenda for the first time. Every aspect of policy-making in the region, from job creation to peace and security affects young people. Strengthened partnerships between government and the private sector are essential. The Forum introduced students to young regional politicians to discuss the issues that mattered most to them. The Forum also launched the Egypt Education Initiative to benefit over 800,000 children. In addition, participants brought women’s issues to the fore through the Forum’s Women Leaders Programme by promoting a five-year action plan to implement private- and public- sector policies addressing the most pressing challenges women face. Participants concluded that the private sector has a key responsibility, not just for creating jobs for those entering the workforce, but also for ensuring that the workforce is productive, healthy and fairly treated regardless of the political climate. Governments can facilitate the work of the private sector by taking a longterm view on the investment of the current oil windfall and by allowing businesses more freedom to operate responsibly within global parameters. Indeed, participants took steps towards launching a private sectorfunded branding campaign for the Middle East and agreed to consider amendments to the Egyptian Open Skies policy. As the largest companies expand beyond the Middle East, many countries in the region are seeking to deepen their economic and political engagement with the rest of the world. The global integration of the region, through trade, investment and political relations, formed an additional sub-theme in the programme. Leaders from business and government discussed the steps required to move away from relations based primarily on oil and security issues towards a more positive and multifaceted global role. Global integration and harmony must take place on a cultural, as well as economic and political, level. Enhancing common understanding between faiths and peoples is key to future peace and stability. Conflict and insecurity in the Middle East continue to pose serious threats to the welfare of the region’s people, with major global implications. A final series of sessions sought agreement on the essential next steps to strengthen dialogue and underpin long-term security in order to create an environment in which the next generation can flourish and prosper. Regional governments, business and civil society leaders, and especially youth, have taken bold initiatives to transform the region. The Forum is committed to facilitating these initiatives and actions over the coming years to uphold the promise of the new generation. Sherif El Diwany Director, Middle East and North Africa World Economic Forum on the Middle East 3 Summary – The Promise of a New Generation “It is our conviction that education is a fundamental human right and is instrumental in fighting poverty, eliminating gender inequality, as well as introducing democracy. Education is also the best tool to fight ignorance, dispel hatred and face terrorism. It has become a cornerstone for driving the economy forward.” Ahmed Mahmoud Nazif Prime Minister of Egypt “There must be a stronger dialogue between politics and business to move the peace process forward.” Shafik Gabr Chairman and Managing Director, Artoc Group for Investment and Development, Egypt, and Chairman of the Arab Business Council The tight security in Sharm El Sheikh starkly reminded participants at the World Economic Forum on the Middle East of the most difficult challenges facing the region: the quest for peace and stability, particularly in Iraq and between the Israelis and Palestinians. While the focus was on the “Promise of a New Generation” and how to create the 80 million jobs needed over the next 20 years to stem resentment among youth, there was no denying other significant problems, including tensions over Iran’s nuclear programme, widening income gaps resulting from sharply higher oil revenues, anger among the middle class following stock market slumps and the lack of infrastructure. Discussions were candid, and intense debate frequent, as participants deliberated on five sub-themes: Democracy, Peace and Security, the Business Agenda, Global Integration, Investing for the Future and Youth and Understanding. A highlight of the event was, of course, the meeting of Israel’s Foreign Minister Tzipi Livni and Palestinian Authority President Mahmoud Abbas – the highest-level Israeli-Palestinian encounter in almost a year. The Forum launched a number of projects during the meeting, including the Egypt Education Initiative, a programme to develop an action plan to address the gender gap, and a private sector-funded branding campaign to counter inaccurate perceptions of the region. Four major messages emerged. First, businesses must take the lead in Middle East renewal. Next, the region cannot be competitive without equal opportunities for men and women. In addition, democracy, peace and stability cannot be achieved overnight, but hope for attainment rests with the region’s youth, whose future and security must be of paramount concern. Finally, dialogue must be reinforced to lead to more successful cooperative action. 4 Democracy, Peace and Security “This is an era where ground is shifting in the Middle East…and it is combined with changing forces of globalization. We can help empower. We can help the process in terms of political engagement. But it has to come from the people themselves.” Robert B. Zoellick US Deputy Secretary of State The deteriorating situation in Iraq, the continuing conflict between the Israelis and Palestinians (particularly with the election of a Hamas-led Palestinian government) and the rising tensions over Iran’s nuclear programme confirm that democracy, peace and security remain elusive. • While democracy, peace and stability cannot be achieved instantly, dialogue among relevant parties must be stepped up. • Arab countries must manage reform and liberalization while carefully maintaining stability, security and fairness. • Businesses, politicians and members of civil society should deepen communication and cooperation. • Gender equality and youth security are key goals that will enhance the prospects for democracy, peace and stability in the region. “Reform is one of the priorities of the Arab world. All countries and societies want to move ahead and have their own views on how to move ahead. Reform is an item for all of us to support but we have to be cautious because of the fragility of the security situation and uncertainty on the international scene.” Amre Moussa Secretary-General, League of Arab States, Cairo World Economic Forum on the Middle East “We have to dig deeper through technology and innovation. We must bring our people to the standard of global players to compete internationally with the best of nations”. Mohammed H. Almady Vice-Chairman and Chief Executive Officer, Saudi Basic Industries Corporation (SABIC), Saudi Arabia “The forces of globalization create tension just as they create opportunities. These tensions must be managed.” Nemir A. Kirdar Founder, President and Chief Executive Officer, Investcorp The Business Agenda Countries in the region must confront obstacles to economic growth such as bureaucracy, inadequate infrastructure and limited technological skills. • Tenacious reformers are rewarded with higher growth and more investment. • The region’s labour markets need to be open and flexible. • To attract more foreign direct investment, countries should focus on bolstering legal frameworks and cutting red tape to enhance efficiency and productivity. • Economic diversification, increased investment in information and communications technology and the broadening of the energy sector will boost the region’s competitiveness. • Young people represent the Middle East’s most valuable asset. Global Integration Global integration will bring both advantages and disadvantages to the Middle East. • Impediments to the Middle East’s integration with the global economy include the negative perceptions of the risks investors face, the poor image outsiders have of the region and the lack of the systems and infrastructure needed to be a global player. • While political and security risks are significant, they should not hide the fact that the Middle East compares unfavourably to other competing regions. • The private sector should spearhead efforts to counter inaccurate perceptions of the Middle East, remedy its competitiveness shortcomings and convince people of the benefits of globalization. “We need to see more privatization. If you open your markets and give opportunities to both men and women, this region will do fantastically well.” “We have to instil values such as tolerance and respect for human rights to make the process [of reform] sustainable, successful and genuine.” H.M. Queen Rania of the Hashemite Kingdom of Jordan Member of the Foundation Board of the World Economic Forum Stelios Haji-Ioannou Chairman, easyGroup, United Kingdom World Economic Forum on the Middle East 5 “We must grow the role of the private sector. It is important that the private sector not only speak out but it should also do something.” William R. Rhodes Chairman, Chief Executive Officer and President, Citicorp Holdings and Citibank, USA; CoChair, World Economic Forum on the Middle East “We need a dialogue to listen to the needs of the young so we can turn the 'youth bulge' into assets we can be proud of.” Princess Lolwah Al Faisal Vice-Chair of the Board of Trustees and General Supervisor, Effat College, Saudi Arabia Investing for the Future Thanks to revenues from high energy prices, many Middle East countries have an unprecedented opportunity to push forward reforms, while cushioning the pain that comes with them. • The oil price windfall could support significant restructuring of the region’s economies and mitigate the negative effects of reform. • The region must turn its high liquidity into tangible results, channelling funds to projects that promote growth with social equity. • Capital markets must be developed that allow easier access to capital, create more attractive investment options and promote higher standards of transparency and governance. • While the government’s role is to provide a favourable investment climate, the private sector should lead the way to reform through corporate social responsibility, sustainable practices and social entrepreneurship. Youth and Understanding “How wonderful, how normal and how sacred it is when we sit together as brothers.” Rabbi Awraham S. Soetendorp Jewish Institute for Human Values, Netherlands The promise of a new generation is that they will break the cycle of conflict that has bedevilled the Middle East for decades. • Education is a key driver of growth. Programmes must be devised to promote entrepreneurship and innovation. • Reforming education, particularly curricula, will instil good values in young people and encourage them to be tolerant and make peace. • Youth should be encouraged to be civic minded. Government efforts to stifle the use of new technology and communications as a tool of political activism are likely to prove costly and ineffective. The best approach is to let ideas flow. “We must have not only a formula to provide social services, but also a strong, competitive business model to survive. A social entrepreneur must integrate social objectives into the core business, bringing in all players in the value chain to create benefits for the environment and communities.” Helmy Abouleish Vice-Chairman and Managing Director, Sekem Group, Egypt “Religion is crucial for the peace of the world; it can either consolidate it or harm and destroy it.” Lord Carey of Clifton Former Archbishop of Canterbury, United Kingdom; Member of the Foundation Board of the World Economic Forum 6 World Economic Forum on the Middle East The Middle East Business Agenda The world’s greatest economies are led by businesses. Although the Middle East and North Africa (MENA) countries face enormous obstacles to self-sustaining growth, businesses can play a greater role in promoting reform and global competitiveness. The economic reform movement is still in its infancy, and entrepreneurship and investment are all too often strangled by bureaucracy, inadequate infrastructures and limited technological skills. However, the seeds of change — and hope — are being planted. Countries that have embraced reform have been rewarded with accelerated economic growth. A more pragmatic attitude on the part of government and private sector leaders has reduced conflict and encouraged cooperation. This year’s World Economic Forum on the Middle East explored both the positive and negative aspects of the region’s business climate and developed realistic proposals for its improvement. Seen from one perspective, the region seems deeply dysfunctional, torn by war and terrorism, badly lagging on many key social and economic indicators and dependent on a handful of resources — especially oil. From another point of view, however, the MENA countries look like the classic investment bargain — full of under-utilized assets and unrecognized value. As governments embrace market reform and develop their human resources, businesses and investors who move early could reap outsized returns. In other words, a turnaround story may be in the offing. Which view is correct? For many of the participants at the Summit, the question has already been answered. Where some see only risk, they see opportunity. Where others see unemployment and despair, they see a new generation of workers and consumers, who only need the tools to create wealth and improve their lives. “The region’s greatest asset is its young men and women,” said Christiaan J. Poortman, Vice-President, Middle East and North Africa Region, World Bank, Washington DC. Realizing this promise, however, will take sweeping changes — political, social, economic, cultural and psychological. Participants at the Summit focused on identifying the processes to effect such change. Among the topics addressed were: • Labour market reform: Participants agreed that by reducing artificial job creation barriers and moving skilled workers from the public to the private sector, the region can unlock the creative energies of its people while discouraging the growth of a permanent underclass of low-wage foreign workers in the more affluent countries of the Persian Gulf. “What the private sector needs are free, flexible and fair labour markets,” said H.E. Sheikh Mohammed Bin Essa Al Khalifa, Chief Executive, Bahrain Economic Development Board, Bahrain. World Economic Forum on the Middle East 7 • Economic diversification: Despite the region’s well-publicized security problems, travel and tourism hold great promise for future growth as some countries, such as Dubai, are already proving. However, governments need to clear away numerous obstacles, such as controls on property ownership, restricted national airline markets and burdensome visa requirements (see Box 1). • Information and Communications Technology: As of 2004, only 41 out of every 1,000 inhabitants of the MENA region were Internet users (see Figure 1). But that picture is changing, as telecom providers restructure or privatize and entrepreneurial activity accelerates. However, they require compelling content to build a consumer base for broadband and other services. “Does the Internet today provide [Egyptian families] with the right content that serves their needs in the local language? The answer is probably no,” said Tarek Kamel, Minister of Communications and Information Technology of Egypt. Developing such content, he added, is a task for the whole society, which is why Egypt is encouraging the convergence of its entertainment and Internet industries and promoting the development of computer clubs and other grassroots ICT organizations. Box 1: Red Carpet In, Red Tape Out: Rebranding the Middle East Egypt is a case study in Middle Eastern tourism. Rich in culture, tradition and history, tourism is growing faster than the world average but overall receipts are slightly declining. This is due mainly to Egypt’s under-developed transport networks, reliance on a few European markets and a lack of tourism promotion spending compared to other resort destinations. Tourism Authorities Annual Promotional Budgets (US$ Million) 114 86 71 63 56 50 42 40 Malaysia New Zealand Thailand Singapore Ireland 11 Australia 18 10 10 4 21 Dubai 21 Spend per Acquired Tourist (In US$) Figure 1: Regional Internet Use Only 41 of every 1000 people in the Middle East and North Africa were Internet users in 2004 Internet Users in the Middle East and North Africa (per 1,000 people) 45 40 35 30 25 20 15 10 5 0 2000 2001 2002 2003 2004 Since these issues are pervasive in the Middle East, business leaders discussed the roles of marketing and branding in promoting the r..."

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