Private Sector Development

Abstract

This chapter reviews the process of private sector development in SEMC. Noting that the analysis applies to the situation prior to the dislocations of the Arab Spring, we review the record regarding the business climate as well as the attraction of FDI, examine a number of cultural factors that may influence the development of the private sector, and discuss some alternative scenarios for future developments. In the 1990s and 2000s, efforts have been made in all SEMC to encourage private sector development. However, there is a great deal of differentiation within the group. Israel has not only the most business-friendly policy environment but also the most developed private sector, accounting for almost 80 % of employment. The other countries can be divided into two groups: one, including Algeria, Libya, and Syria, where reforms promoting privatization and private sector development have been very limited, and the rest, in which they have been much more extensive (Palestine is, for obvious reasons, a rather special case). A generally poor business environment makes for a large informal sector in almost every country in the region; however, we do not find the cultural factors we examine to be hostile to private sector development.