Why Doesn't Mena Export More?

While other emerging regions have been thriving, the Middle East and North Africa (MENA) region’saggregate export performance over the past two decades has been consistently weak. Using detailedfirm-level export data from Customs administrations, Champions Wanted explains why. One central finding ofthe book is that the size distribution of MENA’s exporting firms is suggestive of a critical weakness at the top.With the exception of the top firm, MENA’s elite exporters are smaller and weaker compared to their peers inother regions. The largest exporter is alone at the top—Zidane without a team.MENA countries have failed to nurture a group of export champions, which critically contribute to exportsuccess in other regions. Part of the reason behind this weak export performance is the lack of a competitivereal exchange rate. The deleterious effects of an uncompetitive currency can be traced all the way down tothe firm level, hurting expansion at the intensive and extensive margins and preventing the emergence ofexport takeoffs. The lack of heavyweight exporters at the top of the distribution also reflects the region’sfailure to push for trade and business climate reforms energetically.Finally, the region’s prevalent cronyism and corruption under pre–Arab Spring regimes (at least) confirmsthat business-government ties have led to distortionary allocation of favors and rent dissipation bybeneficiary firms, with little evidence that those firms have developed into national champions or helped liftthe region’s export performance. The possibility of state capture in itself should call for caution whenadvocating any form of government intervention. In contrast, some interventions, such as export promotionprograms, show some effects on smaller exporters. However, because these firms are marginal in trade, suchprograms cannot be game changers. More broadly, the success of MENA countries in promoting exportgrowth and diversification, as well as generating jobs, depends heavily on their ability to create anenvironment where large firms can invest and expand exports and new, efficient firms can rise to the top.This book offers some policy leads on how to achieve this goal.