Band 16, Heft 3

Power supply in developing countries is often characterized by unreliability and inefficiency, resulting in disruption costs for operating firms. The extents of power outages in the Middle East and North Africa (MENA) region are more significant compared to other geo-economic regions. This paper examines the effects of power outages on the performance of manufacturing firms in the MENA region using a firm-level dataset derived from the World Bank’s Enterprise Surveys (WBES) database. Firm performance is represented by sales, employment, and productivity growth rates. The extents of power outages are depicted by objective measures characterizing durations and frequencies of power outages, and by perception-based measures reflecting firms’ perceived severity of power outages. The results emphasize the adverse consequences of power outages for the performance of manufacturing firms in the MENA region. They also suggest that different patterns of power outages have varying implications for firm performance, and that the effects of power outages exhibit variations with firm size.

This paper documents for the first time the considerable increase of bilateral and multilateral financial institutions’ support to small- and medium-sized enterprises (SMEs) in the Middle East and North Africa (MENA), following the political unrest and civil strife across the region since 2011. Focusing upon intermediated lending, the main financing channel, it assesses the underlying economic logic and implementation of this kind of SME financing. It is found that SMEs’ contribution to economic development is insufficiently well understood and, to some extent, has been misinterpreted, which implies that development banks’ lending operations lack appropriate targeting to achieve economic and social lending objectives. A review of the academic literature on financial exclusion and development finance, moreover, concludes that the lenders’ reliance upon large, often foreign-owned, commercial banks is not likely to achieve the desired developmental impact.

In the literature, it has been common to use credit risk scores to investigate impacts of external sources of risk and political institutions on foreign investment location choice-decisions. However, only a few studies have specifically examined the relationship between importing country’s credit risk scores and exports. Side stepping the limited availability of statistics on ECAs activities in the Arab countries, this paper investigates empirically the relationship between merchandise exports and credit scores of importing countries. Based on a gravity equation augmented with the risks of default on international payments, measured by intra-country risk ratings, the principal contribution of the present research is to scrutinize the impact of commercial and political risks on merchandise trade in the Arab region. The findings suggest that in the absence of insurance contracts against the risk of defaulting payments, firms are more likely to export to countries with higher prior probabilities to secure payments. It logically follows that provisions of export credit guarantees well targeted towards reducing buyer risks are likely to boost-up exports.