The turbulence in resource-rich Middle East and North Africa has been worrying political leaders and businesses across the world. But I believe a process is unfolding that will make the region a more attractive place to do business and invest - especially if it can emulate China's progress over the last two decades.

Demographics - about two-thirds of the region's population is aged below 30 years - is one of the most important long-term drivers of rapid economic growth in the Middle East and North Africa. While this has led economists to forecast a surge in domestic demand in the coming years, the region will reach its true economic potential only if this group of increasingly well-educated people can fulfil their aspirations.

An estimated 40 million jobs need to be created in the next few years in the region - a task that can only be met and sustained if the private sector is unleashed. Governments must now create the right environment for new businesses to blossom, and small companies to grow into national leaders - which means withdrawal of vested interests and providing a level-playing field for all.

Policymakers in the Middle East and North Africa know that economic reform is needed and have been moving in the right direction by reducing red tape and taxes. The recent events, however, may give the much-needed jolt to set the private sector truly free.

That is why I am inspired when I look back at the economic transformation that emerged from Deng Xiaoping's southern tour in 1992, which set the tone for unprecedented economic stimulation and sparked enormous growth in China's private enterprises. In China, private companies have doubled in number to about 40 million over the last two decades, and created 11.4 million jobs in 2009 alone, accounting for 90 percent of new urban employment.

With governments fully focused on job creation, a similar lift-off is possible in the Middle East and North Africa, where state enterprises still dominate the economic landscape.

There is much room for private companies to grow. Private investment rates have stagnated in recent years at around 15 percent of GDP, compared to 30 percent in East Asia. The number of registered businesses in the region, as a proportion of the population, stands at one-sixth the level of the Organization for Economic Cooperation and Development and one-third that of East Europe. As a result, manufacturers in the region face six times fewer competitors in the domestic market than their East European counterparts.

If, as I believe, leaders across the region start to actively promote private enterprises, productivity gains will follow, and the opportunities for inward investment will be huge. This is a time for China and the Middle East to consolidate their relations.

Two thousand years after land and sea routes were established to carry goods, cultures, languages, the arts and religions between East Asia and the Middle East, we are seeing a revival of the "Silk Road".

With free trade talks underway between the six-country Gulf Cooperation Council (GCC) and China, annual trade flows are expected to more than triple to $350 billion by 2020. China recently overtook the United States as the biggest exporter to the GCC countries, with annual exports crossing $60 billion, more than 10 times the level a decade ago. In return, the GCC countries account for 35 percent of China's crude oil imports.

Now investment is taking root. So far the focus has been on energy - Chinese firms have won three of the 11 oil production concessions granted by Iraq and Sinopec was one of the first foreign firms to win a gas concession in Saudi Arabia - but my contact with Chinese officials and business leaders point to greater variety.

Eager to learn, and extending a genuine hand of friendship, they want to set up long-term businesses at all levels - essentially to become part of the region's society and development. Banking, financial services, aviation and land transportation have been particularly interesting for recent delegations.

As China builds up its investment in the Middle East, Chinese entrepreneurs will naturally start to form views on how the region's policies steer economic development, and therefore impact their return on capital.

I believe this will be a positive development as opinions are moulded by experience. The Middle East can learn much from China's development over the last two decades, particularly when it comes to moving up the manufacturing value chain, increasing productivity, building infrastructure and fostering private enterprise.

Confucius said we might learn wisdom by imitation, which is the easiest, and by experience, which is the bitterest, but the third, reflection, is the noblest.

I am in favour of all three.

The author is CEO of Invest AD, a United Arab Emirates company offering investment expertise to institutional investors.

(China Daily 04/08/2011 page9)