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Publications

MSMEs with High-Growth Potential in the Southern Mediterranean: Identifying Obstacles and Policy Responses

MSMEs with High-Growth Potential in the Southern Mediterranean: Identifying Obstacles and Policy Responses

The “Arab Spring”, which took root in Tunisia and Egypt in the beginning of 2011 and gradually spread to other countries in the Southern Mediterranean, highlighted the importance of private sector development, job creation, improved governance, and a fairer distribution of economic opportunities. The developments led to domestic and international calls for the region’s governments to implement the needed reforms to enhance business and investment conditions, modernise their economies and support the development of enterprises. Central to these demands are calls to enhance the growth prospects of micro-, small-, and medium-sized enterprises (MSMEs), which represent an overwhelming majority of the region’s economic activity.

Smaller enterprises are faced with a number of problems across the world. For one thing, they often have limited access to finance, markets and skills, owing to a general lack of collateral, size disadvantages, limited reputation, inexperience, inadequate training and inherent opaqueness of their business models. The MSMEs are also hampered particularly direly by adverse macroeconomic and competitive conditions, suffering substantially more than their larger counterparts during downturns. Moreover, lacking political leverage, smaller enterprises are also more sensitive to governance impediments and suffer asymmetrically from informality and corruption.

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