Despite the fundamental differences between the sub-regions and countries of the vast Middle East and Africa region, most of them are united in tackling one very important challenge: economic diversification.
The last global financial crisis demonstrated to these countries the existential importance of a multi-layered economy and the necessity of diversification to become internationally more competitive and resilient to future economic crisis, and to enhance growth and create jobs.
On a broader scale, Africa is becoming increasingly aware of its own potential. Having relied on foreign aid and direct investment (mostly from China) in the recent past, policymakers have apparently understood that any comprehensive diversification strategy is doomed to fail if it is not embedded in a strong legal, economic and structural infrastructure for regional trade and investment. Thus, 22 countries ratified the African Continental Free Trade Agreement (AfCFTA), which came into force on May 30, 2019 and created the world’s largest free-trade zone in World Trade Organization history.
A boost of intra-African trade up to 25% to $70bn (according to the UN Economic Commission for Africa) is expected by 2040, with a significant impact on the continent's competitiveness ranking (so says the IMF). Supported by other initiatives such as the Boosting Intra-African Trade action plan, AfCFTA can become a game-changing framework for a long-term sustainable and inclusive economic diversification strategy.
On a smaller scale, it is always interesting to have an eye on the United Arab Emirates and its innovative and future-orientated diversification strategies. Being already successful in aviation, logistic, trade and tourism, Dubai has earned the status of diversification pioneer in the Gulf region and beyond. Its latest policies show a concentration on digitalisation and Industry 4.0 in combination with talent acquisition, often referred to as 'Skills 4.0'.
In a fast-developing world where digital innovation is disrupting entire economic sectors, innovative power, know-how and digital skills will be crucial for economic diversity and sustainable socioeconomic development. Due to their demographic structure, countries such as the UAE have to attract bright minds and outstanding talents from other countries. The most important task for African countries will be the fight against 'brain drain' as their talents are the guardians of a diversified and inclusive economy in the future.
Mazdak Rafaty is managing partner of Ludwar International Consultancy and SME adviser to the joint Emirati-German Chamber of Commerce. E-mail: email@example.com