Stakeholder capitalism - what is it, and how can it help the Middle East and North Africa?

Even before COVID-19 there was a growing buzz around stakeholder capitalism - the idea that a wide group of people, not just shareholders, should have a stake in corporate success. The pandemic has supercharged this idea.

In this context, a roadmap has been brought together that could have real benefits for the economies, businesses and communities of the Middle East and North Africa (MENA) region.

The Forum’s Principles of Stakeholder Capitalism for the Middle East and North Africa is a roadmap for more inclusive economic growth in the region, and is backed by some of MENA’s foremost decision makers, in government, business and civil society.

Below, Mirek Dusek, the Forum’s Head of Middle East and North Africa, explains the group - and the benefits that such cross-border collaboration could bring.

Q. What is this roadmap about - and why is it needed?

Mirek: What we've done here is bring together an exceptional group of leaders that we work with at the World Economic Forum. Among them are government ministers and CEOs of major companies, but the group also includes journalists and others who really care about the future of the region. They are people who are using this moment to speak truth to what the situation is and where it could be in the future.

My work has focused on the MENA region for over 13 years and I've always thought about it as a region of two systems. The first is a legacy system defined by a bloated public sector, closed economies controlled by family oligopolies and perennial social and political fragility. But the second system is forward-looking and characterized by entrepreneurial zeal, a dynamic private-sector landscape, a technology-savvy youth population and globally competitive economies. Most of the region’s population arguably live in a hybrid reality of being exposed to both systems.

I've always thought about this as a question of how do we make sure that we overcome the gravitational forces of some historical legacies to really enable these pockets of excellence to take off?

Q. Has COVID-19 changed the way the MENA region looks at stakeholder capitalism?

Mirek: I think at the core is the realization that COVID-19 has affected everyone. No one is immune, wherever you are. And so in terms of a response, we need to act together to overcome it.

Businesses alone can’t overcome it. Countries alone can’t overcome it. They need to collaborate to overcome a centennial challenge like COVID-19 or any other risks that might come down the line.

Stakeholder capitalism is about helping us all. That's the philosophy behind it.

Q. Is the challenging COVID-19 economic backdrop increasing pressure for change in the region?

Mirek: In short, yes. We all saw the fall in demand for energy and the price drops that came with it. Oil is around $40 per barrel now as COVID-19 lockdowns disrupt economies and increase the number of people working from home.

This is obviously of huge consequence to an oil-producing region. Even for countries that are not so energy rich, they may have secondary exposure in terms of some of their workers employed in neighbouring oil-based economies. So it is important for the region as a whole.

Tourism is also a big industry in the MENA region and compared to the recent past, visitor levels are very low. So some of the foundations of industries and economies are being affected fundamentally.

On the positive side, we are dealing, particularly in the Gulf, with economies that have fiscal space and the ability to really invest in the future. And they have been investing in technology and in other industries. The question is; how do you make sure that you really turbo-charge these plans?

Q. So which economic changes could have the biggest impact?

Mirek: In the spirit of stakeholder capitalism, we first need to make sure that COVID-19 stimulus packages are used in a strategic way to diversify the economies of the region and enable them to be truly inclusive - particularly for young people. This is crucial where there is high youth unemployment.

Secondly, in recent years we have seen promising movements on how we can integrate women more in the economy and in society. There have been amazing trailblazers in many corners of the region. Mainstreaming this is now imperative.

Thirdly, in order for economies to really be competitive, they need to be at the forefront of smart manufacturing. We also need to build champions for the digital economy - for example by having an ecosystem for start-ups where data is dealt with in such a way that really encourages growth of such companies and innovation.

Fourthly, parts of the MENA region also lack connectedness of economic systems. We need to ask, how easy is it to do business across borders? How much are nations trading with each other? Are there things we can do to facilitate more investment to increase trade? Importantly, how can we facilitate the mobility of people across the region’s borders?

Q. How is the Forum helping the MENA region?

Mirek: On the skills front, we have been working with the governments of the UAE and Oman through “skill accelerators” which create a national coalition from government, business leaders and academia to enable students and employees to acquire the skills needed for the jobs of the future.

We are also enabling a Closing the Gender Gap accelerator in Egypt, which works using a similar framework, to clear the obstacles to the participation of women in economic activity and to reduce gender-based inequality in the workplace.

We will keep demonstrating the importance of the fourth industrial revolution through our affiliate centres. There are currently centres in Dubai, Jerusalem and Riyadh, and there may be more in the future.

Q. Is this all about economics?

Mirek: I think the economy is certainly a key factor, but it’s not the key factor.

Because I have been privileged to have these discussions with MENA communities regularly, I believe that the personal dimension is also a key, if not the key aspect.

Many of the region’s leaders realise that you are only as successful as the society around you, and you're just as vulnerable as the society around you as well.

Q. These plans are ambitious - are they realistic?

Mirek: These ideas are big - and they are not easy. But they are not naive either. We all know why some of the entrenched problems in the MENA region exist, but the signatories to the roadmap are people that have a can-do attitude. They want to use the COVID-19 disruption as a catalyst to positively disrupt the economic and social situation in the region going forward - so that prosperity can be shared.

I am optimistic that this stakeholder capitalism group can help us to achieve this.