BrazilEconomic integration a $230 billion GDP opportunity for Middle East
The private sector in the Middle East needs to take a more proactive and assertive approach in order to drive growth. That is according to a new report by Majid Al Futtaim, McKinsey & Company, and the World Economic Forum.
Launched in January this year at the 2023 edition of the World Economic Forum, the MENAP Economic Integration Barometer keeps track of the key economic integration indicators in the Middle East, North Africa, and Pakistan region, and the region’s interconnectedness with other world markets.
Having established a baseline for the region’s competitiveness, with comparisons to global averages, the authors conclude that there is a “massive opportunity” for economic development through more free movement of goods, people, capital, and intellectual property.
“In a nutshell, the MENAP region has fallen short to some degree as a regional economic powerhouse vis a vis the global economy,” said Ahmed Ismail, CEO of Majid Al Futtaim, an Emirati retail and leisure holding company that has taken the initiative to develop the Barometer. McKinsey & Company has been selected as knowledge partner.
Analysis of Barometer data shows that setting common standards for a freer flow of capital, data, goods, and services could unlock around $230 billion in GDP. Intraregional exports account for only 2.9% of total combined GDP of the MENAP countries.
Intellectual property is also subject to a similar lack of integration. The flow of intellectual property within the region is only at around 1.4% – that is compared to 62% in the European Union (including Norway, Switzerland, and the UK). This discrepancy is largely due to a lack of pharmaceutical, bio-tech, and aerospace innovation within the region.
The MENAP region receives less foreign investment and has lower levels of investment between its own countries when compared to other regions. However, Dubai and Qatar currently stand out as exceptions, being recognised as among the top global destinations for foreign direct investment for two consecutive years.
Since most of the MENAP region is home to countries that are rich in natural resources but have fewer manufactured goods to export, trade between these countries is lower. Around 22% of the MENAP region’s trade with the rest of the world comes from fossil fuels, with metal resources and chemicals accounting for another 7%.
“The region punches well below its weight. Half a billion of the 8 billion people on this planet live in our part of the world, yet they produce only half of what the global citizen does” said Ismail. From an economic output perspective, while the region is home to 8.5% of the world’s population, it only accounts for 3.4% of global GDP.
“So we see – based on pure math – a $2.5 trillion GDP opportunity just by the MENAP region catching up with global averages.”
The $2.5 trillion GDP opportunity is based on the path that the MENAP region advances the economies of its nations to the point where they classify as “upper middle-income countries”, as per the definition of the World Bank.
The authors recommend the region to first start on the path of economic integration (to unlock the $230 billion opportunity) and then “navigate a terrain of grand visions” to push for further advancements towards the long-term $2.5 trillion opportunity.
The Economic Integration Barometer
An overview of the economic indicators tracked by the MENAP Economic Integration Barometer:
