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PSMEC - Private Sector - S1 01 Khaled Al-Aboodi


The Private Sector Middle East Conference, Riyadh, Saudi Arabia, Dec 3rd, 2013. Hosted by the Saudi Chambers of Commerce -- Session 1 - Khaled Al-Aboodi, President, Islamic Cooperation for the …

The Private Sector Middle East Conference, Riyadh, Saudi Arabia, Dec 3rd, 2013. Hosted by the Saudi Chambers of Commerce -- Session 1 - Khaled Al-Aboodi, President, Islamic Cooperation for the Development of the Private Sector -

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  • 1. The Private Sector in the Middle East: Challenges and ICD’s Contribution By Khalid Al-Aboodi, CEO, Islamic Corporation for the Development of the Private Sector (ICD), IDB Group The Conference on Economic Growth, Government Policies and the Private Sector December 3rd, 2013 – Riyadh, Saudi Arabia
  • 2. A Triple Transition in the Middle East  Today, the region is undergoing a transition on three fronts:  Political transition  Social transition  Economic transition  However, there are still significant issues associated with all three transition efforts, particularly with the boosting the private sector development
  • 3. Two Key Economic Challenges of the Middle East  Focusing on economic transition side, the region is facing with two main challenges, which have worsened after the Arab Spring:  Unemployment issue  Development of the private sector
  • 4. Unemployment is the Top Challenge  The unemployment is a structural problem that has persisted in the region for decades.  The share of the public sector in the economy is relatively higher (20-40%) and labor regulation is more restrictive compared to other developing countries.  Unemployment is substantially higher and stagnant among young people (over 25%).  The region’s female labor force participation rate is only 26%.  The number of new entrants into the labor force is growing rapidly, given the demographic structure and natural growth rate.
  • 6. The Role of the Private Sector in Development  The private sector is now recognized as a critical driver of economic development.  Overall, the role of the private sector in development can be summarized in the following categories:  Promoting economic growth  Providing new job and reducing unemployment  Providing critical goods and services  Paying taxes and supporting government operations  Allocating credit resources efficiently
  • 7. Current Status of the Private Sector in the Middle East: Quick Facts  The private sector in the region contributes to 50-70% of the total jobs.  The number of new firms created (total business density) is 1 per 1,000 working-age people, compared to 4 in advanced countries.  There are about 20 million Micro, Small and Medium Enterprises (MSMEs) in the MENA region of which only 10% operate in the formal economy.  The average ratio of domestic credit to private sector as a share of GDP is only 40% for the region, whereas the world average stands at around 120%  Bank loans to SMEs in the MENA region account for about 8% of total loans in 2011.
  • 8.  There are a number of region-specific challenges of the private sector:  Low level of SMEs creation  Low level of access to finance  High family-oriented business  Low level economic diversification  Low productivity and lack of innovation  Weak macro-institutions and governance
  • 10. ICD’s Vision and Mission  Established: in 1420H (1999) as an independent entity within the IDB Group.  Vision: is to be a major player in the development and promotion of the private sector as a vehicle for economic and social growth and prosperity in Islamic countries  Mission: is to complement the role played by IDB through     Providing Islamic financial services and products Promoting competition and entrepreneurship in member countries Advising governments and businesses Encouraging cross border investments Suriname Kazakhstan Azerbaijan Uzbekistan Albania Turkey Kyrgyzstan Tunisia Lebanon Syria Tajikistan Palestine Iraq Turkmenistan Algeria Jordon Kuwait Morocco Iran Pakistan Libya Bahrain Mauritania Bangladesh Qatar UAE Egypt KSA Mali Senegal B.Faso Niger Oman Gambia Chad Yemen Sudan Guinea Benin Nigeria Cameroon Djibouti G. Bissau Maldives Brunei Malaysia Sierra Leone Ivory Coast Gabon Uganda Indonesia Mozambique
  • 11.    Regional Distribution of ICD’s Cumulative approvals since inception Products: The financing & investment products offered by ICD, provides private sector firms with access to financial resources in the form of credit and equity participation. Services: ICD also provides a wide variety of advisory services to governments, and public and private entities of member countries in a variety of areas (i.e., project finance advisory, raising Sukuk and development of Islamic capital markets) Approvals: Since inception, ICD has approved more than $3 Billion worth of financing to around 300 projects in 36 member countries. Sub- Regional Far East and Saharan Projects Pacific and West 9% 4% Africa 12% MENA 54% South Asia 9% Central Asia & Europe 12%
  • 12. •Saudi Arabia & Tunisia SME Funds •Palestine Ijara Company •Mauritania Leasing Company •Arab Leasing & Investment Company •Qatar SME Authority •Libya SME Development •Yemen Special Economic Zones •Saba Islamic Bank •Islamic Finance Institutions Program Islamic Financial Channels Direct Financing Activities Enabling Environment Partnership •Arabio-Equity •Al-Nouran Sugar Company •Al Manafea Real Estate •Jordan Pharmaceutical Company •Middle-Income Housing Development Fund •Arab Fund •African Development Fund •IFC •OFID. •Syndications
  • 13.  Corporatization of the Private Sector  Addressing the SMEs challenges by governments and MDBs  Building Know-how and Managerial capacity  Regulatory Environment  Addressing the labor issues