MANAMA: Bahrain is one of the most competitive economies in the Arab world, according to a new study.

The Arab World Competitiveness Report 2018 analyses the competitiveness landscape in the Middle East and North Africa (Mena) region.

Bahrain was praised for its favourable business environment, good institutional framework and modern infrastructure.

The kingdom was also said to have improved the most since 2007 in technological readiness, closing the gap with Organisation for Economic Co-operation and Development countries.

Innovation and higher education and training also improved significantly and Bahrain has reduced its distance from the most advanced economies globally, said the report which was published on Tuesday.

The report derives data from the Global Competitiveness Index 2017–2018 (GCI), which ranked 137 countries based on 12 factors, from education to infrastructure, that are critical for productivity and economic growth.

The UAE (17th globally) has the most competitive economy in the region, followed by Qatar (25), Saudi Arabia (30), Bahrain (44), Kuwait (52), Oman (62), Jordan (65) Morocco (71), Algeria (86), Tunisia (95), Egypt (100) and Lebanon (105).

Investments in infrastructure and connectivity were particularly notable in the GCC countries where, in 2017, the total value of infrastructure projects in the planning or delivery stage amounted to $2.7 trillion.

The report said the gap between the competitiveness of the GCC and other economies of the region, especially the ones affected by conflict and violence, has widened over the past decade.

However, similarities exist as the drop in oil prices of the past few years has forced even the most affluent countries in the region to question their existing social and economic models.

The report, which is the result of a collaboration between the International Finance Corporation, the World Bank and the World Economic Forum, also provides guidance about what can be done to boost competitiveness and economic and social progress in the region.

Calling on Arab economies to urgently diversify and foster entrepreneurial freedom, the report says it is needed to increase opportunities for young people and prepare the region for the transformations of the “Fourth Industrial Revolution”.

“The world is adapting to unprecedented technological changes, shifts in income distribution and the need for more sustainable pathways to economic growth,” said Mirek Dusek, deputy head of Geopolitical and Regional Affairs at the World Economic Forum.

“Diversification and entrepreneurship are important in generating opportunities for the Arab youth and preparing their countries for the Fourth Industrial Revolution.”

The report also says that the way towards less oil-dependent economies is through robust macroeconomic policies that facilitate investment and trade, promotion of exports, improvements in education and initiatives to increase innovation and technological adoption among firms.

“We hope that the 2018 Arab World Competitiveness Report will stimulate discussions resulting in government reforms that could unlock the entrepreneurial potential of the region and its youth,” said IFC chief executive Philippe Le Houérou.

“We must accelerate progress towards an innovation-driven economic model that creates productive jobs and widespread opportunities.”

Results from a survey of leading Arab world entrepreneurs conducted jointly by the World Bank and the World Economic Forum in May 2017 suggest that, in the Arab world, the three domains critical for business success are access to markets (68 per cent), access to finance (66pc) and availability of talent (65pc).

Noting that a number of countries in the region are trying out new solutions to previously existing barriers to competitiveness, the report highlights as an example Bahrain’s new flexi-permit for foreign workers to go beyond the usual sponsorship system that has segmented and created inefficiencies in the labour market of most GCC countries.

It also says that the UAE and Bahrain are the only two countries in the GCC that allow and regulate crowdfunding.

Last year, Bahrain created a legal framework for loan crowdfunding (both conventional and Sharia-compliant) to help SMEs and start-ups while providing governance support for fintech businesses to protect their customers.

avinash@gdn.com.bh