Chapter 5Examining Performance

Thomas Andersson and Abdelkader Djeflat

5.1 Introduction

In this chapter we benchmark the performance of the GCC countries in a numberor areas that have a bearing on STI, entrepreneurship and associated enterprisedevelopment in the knowledge era. We apply standard indicators, mostly takenfrom official statistics. In order to undertake international comparisons in someareas where no such data are available, we also consider the findings of opinionsurveys and informal data sources.

As we will see, a number of issues arise. The indicators are generally at a highlyaggregated level and may not seem to measure precisely what we would like toknow to determine where the countries stand and what the issues are. As isinevitably the case, some of the data are also not entirely new, since there is adelay in the publication of the underlying national and/or international statistics.Given the pace of change in this field worldwide, and also in the Middle East, thisis not very satisfactory, and we will attempt to point out some limitations thatfollow from this state of affairs. The caveats of using opinion surveys were alreadycommented on in the previous chapter. We will, nevertheless, argue that theperformances measured are relevant to help understand the situation and devel-opments at stake, and that the results should thus be taken seriously. On the otherhand, it is also clear that benchmarking of this kind can only provide us with partsof what we need to know and take into consideration, when embarking on policyanalysis and implications of direct relevance to the countries, areas and peoples atstake here.

T. Andersson (&)Jönköping International Business School, Jönköping University, Jönköping, Swedene-mail: thomas.andersson@jibs.hj.se

A. DjeflatUniversity of Lille, 60 Boulevard Vauban, Villeneuve d’Ascq 59800 Lille, France

T. Andersson and A. Djeflat (eds.), The Real Issues of the Middle Eastand the Arab Spring, Innovation, Technology, and Knowledge Management,DOI: 10.1007/978-1-4614-5248-5_5, � Springer Science+Business Media New York 2013

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This chapter is structured as follows. The next section examines the referencepoints for our international comparisons of national performance. From there, weexamine levels of economic growth and development, economic diversification,research and innovation inputs, traditional output measures, education-related mea-sures, ICT aspects, measures related to business development and competitiveness, thequality of scientific institutions, and the quality of government procurement policies.

5.2 Points of Reference

As discussed in the previous chapter, countries may be benchmarked relative torelevant comparators, taking into account their special characteristics and the areabeing studied. The institutional issues are complex, and not easily summarised. Itcan still be hugely beneficial to undertake consistent comparisons of one’s per-formances compared to those other countries which one identifies as mostmeaningful to compare with. For this chapter, we benchmarked the GCC countriesagainst each other, against selected peers in the wider MENA region, against aspecially designed proxy for a relevant EU average and also at times against a fewother relevant comparator countries in other parts of the world.

We used the so-called EU 12 ? 31 as one point of reference, in part because theGCC countries are approaching (and in some cases have already attained) anincome level on a par with the most advanced EU countries, and partly to bepragmatic and obtain an easily available measure. This comparator may be viewedas representative of the ‘‘medium-high-income European segment’’, whileexcluding the largest EU countries which may provide a somewhat less relevantcomparison for the relatively smaller GCC countries.

Depending on data availability, comparisons are also drawn with a few peercountries in the MENA region. Those included here are mostly among the largestand most development oriented, such as Egypt and Morocco. Some comparisons,for example with Yemen, illustrate contrasts in performance but may not beentirely relevant for understanding policy differences due to stark variation inresource availability and political conditions.

As for other comparisons, we identified the following sets of useful compara-tors: (1) Tunisia and Jordan, as competitive countries within the wider MENAregion; (2) China and India, as developing countries which stand out due to theirrapid development in innovative capacity during the past decade or so; (3) Brazil

1 To obtain a relevant comparison for the relatively small, wealthy GCC countries, we usedKAM data ‘‘Aggregate Western Europe’’, relabelled EU12 ? 3, as comparator. This excludes thelargest economies, that are members of the G7 (France, Germany, Italy, UK), but includes thehigh-income ‘‘old’’ EU countries, and also the advanced non-EU high-income European countries(Iceland, Norway, Switzerland). Thus, the average is calculated for: Austria, Belgium, Cyprus,Denmark, Finland, Greece, Iceland, Ireland, Luxembourg, Netherlands, Norway, Portugal, Spain,Sweden and Switzerland.

112 T. Andersson and A. Djeflat

and Malaysia, as other developing countries with high dependency on naturalresources but noted for success in diversifying their economies through innovationand new high value added activities; and (4) the United States and (as an indi-vidual EU country) Finland. The latter two provide points of reference amongindustrialised nations with a substantial original natural resource core to theireconomic development, but which now are at the forefront of technological andnon-technological innovation.

Throughout, however, we refrain from venturing into consistent comparisonswith all these possible contenders, in order to avoid overloading the figures andtables with data. Outside the MENA region, and apart from the EU comparator(which we have tried to incorporate throughout), we benchmark against the othersselectively in cases where comparison was deemed particularly useful.

5.3 Level of Development

How developed are the countries of the Middle East? The traditional measure inthis area is gross domestic product per person (GDP per capita), which in principleshows the value of all goods and services a country produces in a year, divided byits population. Applying this measure, Fig. 5.1 shows that three GCC countrieshave achieved an income level that is by now considerably above that EUparameter (only Luxembourg, Norway and Switzerland are roughly on a par withthe top performers). The difference is stark compared to other prominent MENAcountries, including Egypt, Morocco and Jordan.

The level attained by the leading GCC countries is obviously closely associatedwith their huge oil and gas revenue. Since these countries also have small popu-lations among which to divide that revenue, the effect is doubly strong. As Fig. 5.2shows, only Saudi Arabia and Egypt have relatively large economies, and neitherbelongs among the very richest societies in the region. As was discussed inChap. 3, natural resource wealth is obviously not sufficient for generating highincomes, even in small countries. Sensible policies are required, too.

Fig. 5.1 GDP per capita[source World Bank (2010).Data are from 2008 or latestavailable]

5 Examining Performance 113

The limitations of the traditional income measures need to be pointed out. Notall goods and services are priced in markets, and thus are either not properlyreflected in the value estimate (such as the public sector) or measured at all. Thisincludes work by mothers and wives at home, subsidiary farming and unrecordedbusiness—all of which goes unnoticed in the formal economy. A significantproportion of people in the GCC, and notably women, are clearly engaged in suchactivities. An estimated 50 % of the workforce in Oman is engaged in the bio-logical resources sector, which accounts for only 3 % of market GDP and 2 % ofthe country’s exports (Ministry of National Economy 2011). These economicactivities, including traditional fishery, clearly have low productivity (though notas low as the statistics would suggest). As for the wider MENA region, there is nodoubt that countries such as Egypt, Morocco or Algeria—not to mention Libya—have even higher levels of undocumented economic activity, leading to anunderestimate of the region’s gross economic output compared to high-incomeEuropean countries.

On the other hand, substantive negative impacts of economic activity also gounrecorded in GDP. A noteworthy example is the presence of extensive degradingeffects on ‘‘natural capital’’ (environmental or ecological resources). All countriesfail to record most of the ongoing losses in that category. Though the precisenumbers are unknown, unofficial estimates point to annual losses in GDP in therange of 3–8 % across the MENA region (Hallegatte et al. 2011). The nature of theimpacts differs between the GCC countries and their peers, but the effects are hugein both cases. The GCC countries are among those with the largest ‘‘carbonfootprints’’ in the world. This aspect is further examined in Chap. 12.

A salient aspect of the MENA region as a whole is a skewed income distri-bution. The countries with relatively low income, but also some of the middleincome countries with large population (e.g. Egypt and Morocco) have largenumbers of poor people, with inadequate access to basic services including basiceducation and health services.

Furthermore, the GCC countries are marked by an extraordinary sectoralconcentration. Figures 5.3 and 5.4 illustrate that the GCC countries suffer fromlow economic diversification, measured by traditional methodologies. The share of

Fig. 5.2 GDP: total amounts[source World Bank (2010)]

114 T. Andersson and A. Djeflat

high-tech exports in total exports, for instance, suggests the presence of a ‘‘Dutchdisease’’ effect, i.e. the crowding out of an open tradable sector. At the income andcost level now attained, the ability of the GCC countries to shift from a traditionalindustrial model based on routinised and mature technologies, to one that isnimble, knowledge intensive and capable of generating economic activities withhigher value added, is of central importance.

Figure 5.5 shows the level of expenditure on R&D in those countries for whichofficial data are available, as well as the unofficial estimates for Oman and Qatar.With one exception—Qatar—the GCC countries are way below the EU average inR&D spending. They also, in fact, lag their peers in the MENA region.

Given the scarcity of data, it is difficult to obtain any well-founded picture ofthe nature of R&D systems across the region. It is clear, however, that the mainR&D resources are highly concentrated to a few sectors and also in academia. Insome cases a few industrial research institutes account for a significant share. Thehydrocarbon industry is basically the only sector exposed to fully fledged inter-national impetus through Multinational Enterprises (MNEs) that invest heavily inR&D, including to a varying extent in the GCC region. Even then, the numbers areminiscule when related to the value of economic output. Oman is the only countryin the entire Middle East that has put in place a fully developed open researchgrants system, managed by The Research Council (TRC), to which academicresearchers can apply and be subjected to professional peer review evaluation (Saif2011). Qatar has implemented a partial system of that sort and the UAE severalyears ago decided to do likewise (though has yet to implement it).

In the private sector, there appears to be little investment in proper R&D outsidethe hydrocarbon sector. This does not mean, however, that private companies lackinnovation. Conditions in this area are not well known, but the only CIS carried outin the region thus far (Andersson et al. 2010a) found that Abu Dhabi’s corporatesector appears to compare reasonably well in innovative activity with most countries

Fig. 5.3 Economic diversification (share in percent of largest economic sector in total valueadded) [source World Bank (2010). Data are from 2008 or latest available]

5 Examining Performance 115

in eastern and southern Europe, and also relative the other MENA countries forwhich data are available (Fig. 5.6).

It also appears from that survey, however, that innovative firms active ininnovation are found primarily in three sectors: oil and gas, manufacturing andbusiness services. These also serve as the main markets and partners for others in

Fig. 5.4 High-tech exports as percent of GDP [source World Bank (2010). Data are from 2008or latest available]

Fig. 5.5 R&D expenditures as percent of GDP [source World Bank (2010), except Oman andQatar (informal estimates)]

116 T. Andersson and A. Djeflat

innovation. On average, Abu Dhabi firms appear to lag in collaboration with otheractors in innovation, both locally and internationally. The share of co-operatingfirms among innovative firms is considerably lower in Abu Dhabi than in mostEuropean countries, including in the Mediterranean countries.

The implication is that the GCC countries have not yet raised their R&D to apar with GDP, and also seem to lag in other aspects of innovation. Put differently,innovation has failed to keep up with economic growth (even when compared withthe meagre numbers achieved by the peers among the MENA countries).

The low level of R&D spending is mirrored in weak scores on traditional outputmeasures, such as scientific publications and patents. Table 5.1 suggests the GCCcountries do significantly better than their MENA peers, with the exception ofJordan in the case of scientific publications, but that their lead is insignificantcompared to the gap between them and advanced industrialised countries. Here, theimplication is that higher public investment has translated into somewhat strongerperformances, but not at a level commensurate with the rise in income levels.

Naturally, historical and institutional factors, along with economic structure,need to be taken into account. Chapter 17, among others, discusses some of thefactors that explain current conditions. On the other hand, it should be stressed thatchanges are under way. Some studies have found high growth rates in the scientificoutput in several of the GCC countries, including in Saudi Arabia where severaluniversities are gaining ground in the international league tables. Chapter 10further presents a closer analysis of publication patterns across the region asreflected in cross authorship between the scientists from different countries. Inpatents, the data suggest less of a revival for the GCC countries, although they areahead of their MENA peers who seem to be lacking patents almost completely.

Continous and occasional R&D activitiy in international comparison, firms with more

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Fig. 5.6 R&D activity in large innovative firms in international comparison [source IKED-CISpilot data innovation survey, SCAD (2009), and Eurostat]

5 Examining Performance 117

5.4 Towards the Knowledge-Based Society

Mobility and the availability of skilled labour—and the means through which theyare incentivised—matter crucially. Higher education is critically important foroutcomes in this context, as are upbringing and training—from an early age andthroughout life. The portability of pensions and other social benefits mattersgreatly for job rotation and movement between societal spheres. Traditions andpolicy frameworks influencing family and gender are also highly significant.

Figures 5.7, 5.8 and 5.9 present selected cross-country comparisons of human-capital-related performance. It is immediately clear that the GCC countries havedone well in quantitative terms compared to others in the MENA region. The highrate of illiteracy in Morocco (reportedly 44 % of the population), where we havealready noted the desperate situation of girls’ education in rural areas, is a case inpoint. Yemen is only slightly better off on this count and also displays a lowerlevel of enrolment in senior secondary school than the rest of the region.

The GCC countries have escaped the gravity of the illiteracy problems thatcontinue to plague the wider MENA region. Expenditure on tertiary educationvaries markedly, as seen from the comparison between Oman and Kuwait with theEU average, shown in Fig. 5.10. Here, Kuwait is at a higher level, whereas Omanis lower on the ladder. Figure 5.11 suggests there are limited differences in

Table 5.1 STI output

Country All publications/million people2009–2011

Articles published/million people2009–2011

Patents granted by USPTO/million people average2005–2009

GCC Kuwait 864.1 699.3 3.5UAE 910.1 665.8 1.6Bahrain 641.9 480.8 0Oman 541.5 423.8 0.5Saudi

Arabia529.6 437.1 0.9

OtherMENA

Jordan 795.2 677.3 0.1Egypt 244.7 198.1 0.1Morocco 166.2 124.5 0.1Algeria 179.2 138.7 0.01Yemen 18.6 15.4 0

OtherWorld

EU12 ? 3

5,505.5 3,883.0 74.7

UK 7,550.4 4,788.3 64.8US 5,238.2 3,321.6 308.8Korea 6,441.9 5,096.2 151.1Japan 2,420.3 1,762.6 284.9Malaysia 929.3 649.4 5.6

Source ISI web of science (http://apps.webofknowledge.com), The World Factbook (CIA)

118 T. Andersson and A. Djeflat

expenditure per student at secondary and primary level within the MENA region,compared to the higher EU level, especially when it comes to secondary school.Such numbers say nothing about quality, however. Examining enrolment rates,technical skills and various indicators of other skills, several studies haveconcluded that the GCC countries continue to perform weakly when compared

Fig. 5.7 School enrolment atsecondary and primary level(enrolments as percent ofrelevant age group) [sourceWorld Bank (2010). Data arefrom 2008 or latest available]

Fig. 5.8 Illiteracy rates(percent of adult population,15+) [source World Bank(2010). Data are from 2008 orlatest available]

Fig. 5.9 Gross tertiaryenrolment (percent ofrelevant age group) [sourceWorld Bank (2010). Data arefrom 2008 or latest available]

5 Examining Performance 119

with their prime peers in the MENA region, and even more so relative theemerging Asian economies (Nour 2005; Arezki and Nabli 2012).

Modern communications infrastructure is now an important driver of change,both because of the connectivity it brings for all kinds of professionals, includingin science and research, and also for private companies and individuals. Acces-sibility, quality and functionality, along with the downward pressure on cost andprices arising from the articulation of customer demand presented with viableconsumer options, are essential for information exchange and networking.

Figure 5.12 highlights the relatively low presence of secure servers in the GCCcountries, indicating a remaining digital gap between the most advanced Europeancountries and the MENA region in this respect. Figure 5.13, on the other hand,sends another message. The number of Internet users is higher in the UAE andBahrain than the EU comparator level but significantly lower in the other MENAcountries. More spectacularly, mobile subscription penetration is considerablyhigher in several of the GCC countries, whose population now belongs among themost wired in the world. The other MENA countries lag far behind in this regard,although mobile telephony and ICT use is advancing rapidly across the entireregion.

With convergence well advanced in the GCC (85 % of mobile subscribers hadinternet access as of 2010), the region is at the forefront of the information societyin several respects. Half of the population under 25 across the MENA region isestimated to be active in social networking. Twitter is intensively used in the UAEand SMS traffic has exploded across most of the region. This does not necessarilymean that content quality is as advanced, though. Education plays its inevitablepart. The continued weak presence of content in Arabic language is another aspect,which means that the many less educated who understand little or no English havefew sources of information that is accessible for them. Measuring the value ofinformation use and its impact on the general population is far from straightfor-ward, though its widespread impact on attitudes and behaviour is there for anyoneto see in the Arab Spring itself. This matter was touched upon in Chap. 2 and willbe returned to in Chap. 7.

It is well known that cost influences Internet and mobile telephony penetration.Figure 5.14 compares country scores as of 2010 using an index that weighs price

Fig. 5.10 Expenditure perstudent as percent of GDP percapita, primary, secondaryand tertiary level [sourceWorld Bank (2010). Data arefrom 2008 or latest available]

120 T. Andersson and A. Djeflat

levels for fixed telephony, mobile and Internet services. As expected, prices in theGCC countries are in most instances highly competitive and basically on par withthe EU. In the MENA countries, the situation is different.

It should be underlined that the price variation across countries generally haslittle to do with income disparities and differences in affordability of infrastructureper se. Rather, the main determinant is the quality of policymaking, and the degreeto which sound management have ensured effective public goods infrastructure,coupled with regulatory reforms to break the rigidity of state monopolies. It is notleast crucial that governments have opened up for competition in the developmentand launch of new applications and services. A strong correlation exists todaybetween the underlying policy environment and Internet and mobile telephony useacross countries worldwide (UNCTAD 2011).

An important ongoing development in ICT use is also that which is popularlyreferred to as ‘‘e-Government’’, or ‘‘e-participation’’. The purpose here is to useICT for better diffusion and greater relevance of public services, and also to raisethe ability for citizens to voice their concerns and demands, while making sure thatpublic authorities are sensitive and responsive. In this area, several of the GCCcountries have made remarkable progress in just the few last years, indeed to agreat extent since after the Arab Spring broke out. In particular, the UAE has

Fig. 5.11 Expenditure perstudent, as percent of GDPper capita, primary andsecondary level [sourceWorld Bank (2010). Data arefrom 2008 or latest available]

Fig. 5.12 Secure Internetservers, per million people.[source World Bank (2010).Data are from 2008 or latestavailable]

5 Examining Performance 121

launched and rapidly improved the ‘‘UAE e-Government Portal’’, which bringstogether under one umbrella all public services offered to business people andcitizens. The country has advanced from 86th place in the WSIS ranking based onof e-Participation index in 2010, to just 6th place in the 2012 version (NationalCommittee 2012). Qatar and Oman have likewise developed electronic fora forcitizens to contact authorities with ideas for improvement, with the promise that allproposals will receive a response (ITU 2012).

Business start-ups and the growth of new enterprises are also very important forenabling innovation. However, red tape often hinders the establishment of newbusiness and increased competition throughout the economy. Figure 5.15 showsthe latest available official statistics for the number of days it takes to start up anew business. Here, the GCC countries compare well with the EU average. Theyalso tend to offer less burdensome conditions than their MENA peers, although the

Fig. 5.14 ICT Price Basket. [source measuring the Information Society, ITU (2009, 2011)]

Fig. 5.13 Users of ICT, per 100 people. [source World Bank (2010) and UNCTAD (2010). Dataare from 2009 or latest available

122 T. Andersson and A. Djeflat

difference is modest. Kuwait, with its continued opaque business conditions, is anoutlier in this respect.

No official statistics are available to offer a comprehensive measurement ofbarriers to private sector activity. Hence, it is necessary to look at other sources ofinformation to gain an understanding of conditions. The most carefully watchedand studied source in this regard is the Global Competitiveness Report, whichcompiles a league table of countries in a number of dimensions related toeconomic and business sector competitiveness, based on interviews with businessrepresentatives and officials around the world. Needless to say, this information issubjective and tells us more about impressions and views than facts. Notwith-standing the caveats, it is useful to review the report’s findings, if for no otherreason than that they are observed and taken into account by such a large numberof actors, including in the market place.

Figure 5.16a and b show the latest conclusions on the relative weight of dif-ferent barriers to business activity in a few GCC countries (and also in a few otherMENA countries). Note that the figures only indicate the relative weight placed onvarious hurdles by respondents in each country. Nevertheless, interesting obser-vations can be made.

Kuwait stands out as marked by problems in regard to political process andcorruption, whereas Saudi Arabia and Oman reportedly meet with challenges inthe labour market. In the wider MENA region, firms in Morocco place relativelygreater weight on corruption as an issue, whereas in Algeria the emphasis is oninefficient government and in Yemen on the labour market. Based on these results,Table 5.2 presents parts of the concluding assessment of the Global Competi-tiveness Report. The position of the GCC countries, to the left, has hugelyimproved from a few years ago. The GCC is clearly ahead of its MENA peers,shown on the right, in almost every dimension, even though Kuwait is rankedsomewhat lower than the other GCC countries (except in macroeconomic stability,where it comes first in the region).

Much of the benchmarking presented in this chapter until this point has focusedon performance rather than policy. Figure 5.14 could be seen as an exception, due

Fig. 5.15 Number of daysneeded to start a business.[source World Bank (2010).Data are from 2008 or latestavailable]

5 Examining Performance 123

to the pervasiveness of the link between regulatory reform and user prices in IT.While the boundaries are not clear-cut, many other performances could, in prin-ciple, be independent (at least in part) of policy. Table 5.3 may be viewed asreflecting policy outcomes rather strongly though, since scientific institutions aregenerally set up and funded primarily by governments and because public pro-curement in itself represents a specific policy tool in support of technical progress.This table shows the global rankings of the MENA countries made by the WorldEconomic Forum (with 1 denoting highest performance worldwide). Qatar isranked the highest in the region on both accounts, with Saudi Arabia second forquality of scientific institutions and the UAE second in procurement. The GCCcountries are generally well placed, except for Bahrain in scientific research andKuwait in public procurement. In almost all cases, the GCC countries and also thebroader MENA region perform a lot better in procurement policy than they do inscientific institution quality.

Fig. 5.16 The most problematic factors for doing business (a) source the Global Competitive-ness Report 2011–2012. (b) Source WEF Global Competitiveness Report 2011–2012

124 T. Andersson and A. Djeflat

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5 Examining Performance 125

5.5 Concluding Remarks on Policy

This chapter has benchmarked the performance of the GCC countries versus acombination of peers in the MENA region, a European comparator and, for variousindicators, some other selected countries around the world that may providevaluable comparison in the specific case.

On the whole, we found that the GCC countries, having benefitted significantlyfrom oil and gas revenue, have attained a relatively high-income level and haveinvested, and demonstrated progress, in several areas, including investment ineducation and ICT use. By contrast, despite the significant increase in resourcesinvested in education, the indications are that the quality of skills continues to lag,also relatively less affluent medium-economy peer countries in the MENA region.Further, their progress in science, technology and innovation has been poor. Insome respects, the lag in data probably hides more substantial results in the lastfew years, for instance, in the case of scientific publications. On the other hand, itappears that the region continues to be confronted with a range of fundamentalchallenges in this area which still need to be addressed if substantial progress is tobe possible.

It should be stressed that the performance measurement in this chapter tells uslittle about ‘‘good’’ or ‘‘bad’’ when it comes to the merits of individual policies.

Table 5.3 Ranking of MENA countries regarding quality of research institutions and govern-ment procurement of advanced technology products

Quality of scientific researchinstitutions

Government procurement of advanced technologyproducts

Ranking RankingQatar 22 Qatar 1Saudi Arabia 37 United Arab Emirates 3Tunisia 38 Saudi Arabia 10United Arab Emirates 45 Oman 11Iran, Islamic Republic 52 Tunisia 14Oman 57 Bahrain 22Kuwait 75 Jordan 57Turkey 89 Iran, Islamic Republic 60Morocco 93 Turkey 62Algeria 96 Morocco 71Jordan 98 Egypt 86Egypt 110 Kuwait 90Bahrain 117 Syria 119Libya 125 Algeria 123Syria 127 Libya 126Lebanon 130 Mauritania 136Mauritania 137 Lebanon 139

Note marked in bold: GCC countries.Source WEF Global Competitiveness Report 2010–2011

126 T. Andersson and A. Djeflat

Apart from these countries’ achievements in attaining competitive prices for ICTuse and the international ranking of scientific institutions and procurement poli-cies, much of the analysis reveals rather little on the extent to which policies(rather than other determinants) have led to the observed state of affairs. A range offactors, including the actions undertaken by governments, firms and citizensmingle with the influence of market forces, institutions, culture and mindset inshaping conditions for innovation and a prosperous society.

5 Examining Performance 127