Private Equity Finance as a Growth Engine: What It Means for Emerging Markets
Great Potential But Reforms Are Needed
By Florence Eid
Florence Eid is vice president and senior economist for the Middle East/North Africa Region at JP Morgan. Formerly, she was professor of finance and economics at the American University of Beirut. She holds a Ph.D. in Organization Economics from the Massachusetts Institute of Technology. She has held visiting professorships at INSEAD and HEC—Paris. She has worked for the World Bank on Latin America and North Africa, the Ford Foundation in New York, and with Save the Children in Beirut. She has been a contributing author to the World Economic Forum’s Arab World Competitiveness Reports (2003, 2005). She is a board, advisory board, and founding member of various organizations that promote entrepreneurship.
Entrepreneurship has long been considered crucial for economic development. An important element of entrepreneurship is the willingness and ability to mobilize private capital from both domestic and foreign sources. The private equity sector in the Middle East and North Africa (MENA) illustrates the role that private capital can play in the development of emerging markets. Data on the employment generation and growth performance of private equity provide evidence that it is an important driver of economic growth globally. This paper draws on initial evidence from the MENA region to illustrate the sector's potential there and in emerging markets generally. It then recommends a new generation of reforms to fuel this growth engine. A survey of MENA’s private equity industry survey conducted for this paper assesses these developments and the sector's need for proactive reforms to support it. It also shows that international financial market interest in private equity finance does not seem to have abated with the recent market bust. The paper concludes by identifying priority areas for future policy and research.
By Florence Eid