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2017 | OriginalPaper | Chapter

Family Businesses in the Arab Economic Context

Authors : Marouane Alaya, Sami Basly, Paul-Laurent Saunier

Published in: Family Businesses in the Arab World

Publisher: Springer International Publishing

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Abstract

This chapter offers a review of key economic factors and challenges shaping the economic context in which Arab family businesses operate. Growth, exports, foreign direct investment (FDI), unemployment and countries’ governance are the main aspects analysed in this chapter. In a second step, the major economic opportunities and threats that Arab family business faces will be exposed.

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previous chapter Introduction to “Family Businesses in the Arab World”

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Salaries were significantly increased by Royal decree.

The Cooperation Council for the Arab States of the Gulf (GCC) is a regional intergovernmental political and economic union where Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates are member states.

Unless specifically stated otherwise and given the available data, throughout this chapter, we consider only 15 Arab countries, namely, Algeria, Bahrain Egypt, Iraq, Jordan, Kuwait, Lebanon, Morocco, Oman, Qatar, Saudi Arabia, Sudan, Syrian, Arab Republic, Tunisia and the United Arab Emirates (UAE).

For example, growth volatility (measured by the variance along the period 2000–2014) in Libya and Iraq was, respectively, equal to the dramatic values of 1267 and 333 and seems to be the consequence not only of deep correlation with oil prices but also linked to political turbulence and instability.

A Gini coefficient of 100% expresses maximal inequality, and perfect equality distribution is reached when it is equal to zero.

For example, in the same period, Bahrain and the United Arab Emirates recorded, respectively, a value of 76% and 75%, followed by Qatar (65%), Kuwait (62%), Libya and Oman (58%), Iraq (53%), Saudi Arabia (52%) and Algeria (40%). In nonoil Arab countries, Jordan and Tunisia achieved the highest values (respectively, 48% and 46%), and Sudan represents the minimum ratio of 15% (exports in Morocco, Lebanon, Egypt and Syria account for 31% of the GDP).

The Herfindahl-Hirschman Index (HHI) is a measure of the degree of concentration. It has been normalised to have values ranking between 0 and 1. When the index value approaches 1, it means that a country has a greater reliance on a limited group of exports, while a value closer to zero represents a higher degree of export diversification.

The index values range from 0.54 (Algeria and Qatar) to 0.96 (Iraq).

The average share of intra-Arab exports concerning 20 Arab countries is estimated to be around 21.38%. For more details, see AMF (2016, p. 148).

Kumar and Pradhan (2002, p. 3) noted that “FDI usually flows as a bundle of resources including, besides capital, production technology, organizational and managerial skills, marketing know-how, and even market access through the marketing networks of multinational enterprises (MNEs) who undertake FDI. These skills tend to spill over to domestic enterprises in the host country thanks to a package of capital stock, know-how and technology that could be transferred by a transnational firm to the host economy”.

Developing economies (43.4%), developed economies (56.62%), middle-income developing economies (6.41%) and BRICS (14.53%).

A vertical multinational is a firm with several stages of production located in different countries, where different stages are connected by intermediate product flows, and the majority of finished products are sold in the parent country. A horizontal multinational is a firm with two or more sets of production facilities which are located in different countries to produce the same product or service for local markets (Markusen et al. 1996; Zhang 2000).

Young people are the most affected by the lack of job opportunities, and this is true for the whole Arab region. For example, in Bahrain and the United Arab Emirates, the unemployment of young people (% of total labour force aged 15–24) is, respectively, equal to 10.90% and 10%. In the other countries, the values are distressingly high particularly in Egypt with the highest value of 42% in the region. In Tunisia (31.8%), Syria (30.10%), Saudi Arabia (29.50%) and Jordan (28.80%), the youth unemployment is also important. For Algeria, Kuwait, Lebanon, Morocco and Oman, the value of the youth unemployment is lower but around the critical value of 20% (International Labour Organization, ILO: www.ilo.org).

According to Bonaglia and Fukasaku Kiichiro (2003, p. 12), “natural resource-abundant countries would have a weaker incentive to industrialize, since they can easily earn the foreign exchange needed to finance their imports without industrializing”.

Produced by Daniel Kaufmann (Natural Resource Governance Institute—NRGI—and Brookings Institution and Aart Kraay (World Bank Development Research Group). For more details: http://info.worldbank.org/governance/wgi/index.aspx#home

For example, according to the World Bank (2014), corruption costs Tunisia close to 2% of GDP per year.

According to the data available on the statistics report of the Arab Monetary Fund (AMF 2016, p. 117), the average share of Hydrocarbon in public revenues in Arab countries over the period 2010–2014 is equal to 72.52%.

This is evidenced by the willingness of certain countries in the North to favour “chosen immigration” from the countries of the South and by the plague of brain migration.

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Title: Family Businesses in the Arab Economic Context
Authors: Marouane Alaya
Sami Basly
Paul-Laurent Saunier
Publisher: Springer International Publishing
Book: Family Businesses in the Arab World
Print ISBN: 978-3-319-57629-9

Electronic ISBN: 978-3-319-57630-5

Copyright Year: 2017
DOI: https://doi.org/10.1007/978-3-319-57630-5_2