MENA › MENA Ministerial Brief
Even before the onset of the global economic and financial crisis, the Middle East and North Africa (MENA) region faced important socio-economic challenges. Among them, absorbing a rapidly growing population into its labour markets (an estimated 100 million jobs will need to be created by 2020 to accommodate these new entrants) has been at the core of governments’ concerns. Although the crisis has had comparatively less of an effect on the region, its repercussions are now posing a growing threat to MENA countries’ capacity to attain the necessary levels of economic growth, both to generate sufficient employment opportunities and to meet the demands of a population in search of higher levels of welfare. Regional responses to favour economic growth and higher standards of living are needed. To this end, a favorable business climate and efficient governments delivering sound public services are essential ingredients –and this may entail adapting policies to today’s new realities. MENA and OECD Ministers, along with representatives from business and civil society, came together at the MENA-OECD Ministerial Conference in Marrakech on 23 November 2009 to seek concrete solutions to these challenges. They built on five years of partnership and dialogue between MENA and OECD governments within the framework of the MENA-OECD Initiative. In this moment of global economic concern, the Initiative meets at the highest political level to convey a clear message: MENA and OECD economies will work together to deliver solutions to their citizens and to the business community.
Even before the crisis, MENA countries faced serious socio-economic challenges…
In recent years, policy makers in the MENA region have redoubled efforts to accelerate employment creation. However, current demographic trends – where an increasingly young population is now seeking to enter a labour market already suffering from persistent high unemployment levels – mean that millions of jobs will need to be created to meet demand. The importance of employment creation reaches far beyond labor markets, as large-scale unemployment threatens the region’s social contract. The lack of employment is aggravated in several countries by the weak performance of key public services, such as education or health, which impedes the development of human capital and reduces the opportunity for citizens to play an active role in the economy.
...requiring sustained and high growth rates to create employment and provide resources for public goods
To achieve such employment creation and to promote public and private investment in essential services, continual growth rates of 6-7% are widely considered necessary. While many MENA economies have grown at such rates until the advent of the crisis, sustaining them will require fundamental improvements to business environments. Such reforms are prerequisites for sustained private sector activity, thereby supporting the goal of growth and employment creation. Good governance frameworks are essential in this regard in order to create an enabling environment for economic growth and social development. The capacity of governments to facilitate growth and distribute its dividends, while promoting social inclusion, are without a doubt at the forefront of regional needs.
The global crisis and ensuing recession have set the bar even higher
The onset of the global financial crisis in 2008 and the resulting recession have undermined the region’s ambitious growth and employment targets. The impact of the crisis has been less severe in the MENA region than in developed economies. However, its negative impacts have been felt, albeit unevenly, across the region. While resource-rich countries have been able to substitute private capital inflows with government spending, resource-poorer countries have seen their main sources of revenue severely affected: FDI inflows have dropped abruptly; tourism, a major contributor to GDP in some countries, has declined; remittances have dried up; some banks have been affected, although not as severely as in the developed economies; and real estate and other major projects have been stalled. This has been compounded by the effects of slowing global trade on the region.
The effects of the crisis may be long term, even if the recession itself is short-lived
The effects outlined above have indeed slowed down growth in the MENA region, although growth rates are projected to be positive for 2009. However, even if the region manages modest growth throughout the crisis, the effects of a one-year slowdown from 7% to 4% are carried forward perpetually, making the employment target of 40 million by 2020 increasingly less attainable. In other words, the crisis has reached the MENA region and will have serious long-term effects – even if growth rebounds.
MENA policymakers will struggle to meet their objectives
These developments complicate the policy agenda of governments in the region. As outlined above, the crisis has made it more difficult to deliver on growth, employment creation and other policy goals. If unemployment continues to rise while growth rates, private capital inflows, and official development assistance continue to drop, fewer resources will be left to assist the most vulnerable populations of the MENA region, especially women and the young. In such a context, it is even more important that governments are able to deliver public services effectively. The progress achieved in governance and business climate reforms over past years requires continuous support to remain sustainable and to have a lasting impact on the welfare of MENA societies.
The MENA region must maintain momentum for reform
At this critical stage, a more vocal participation of the MENA countries in the global policy dialogue is essential to ensure that governments make the right policy choices. To this end, strengthened partnerships between MENA and OECD economies can help pave the way for an economically and socially sustainable future. Paradoxically, it is even possible to say that the crisis may indeed generate opportunities for the region. Moments of crisis can accelerate reform agendas, as obstacles to implementation can be overcome when the need for immediate policy responses is better understood. Peer support is helpful in such a context, as it helps the necessary reflection to integrate lessons learned during the crisis into revitalised programmes for reform. The severity of the global financial crisis has caused some to question the main tenets of pre-crisis reform agendas. However, the general thrust towards better business regulation, lean administrative structures, transparency and good governance all remain at the centre of positive development strategies.
Public governance and business climate reform are collaborative, inclusive efforts
Long term public governance and business climate reforms can only be achieved by bringing citizens, the business community and governments around the table. Together, concerned stakeholders can work to ensure successful implementation of the policies needed for a stronger, cleaner and fairer economy: attractive investment promotion and protection strategies; effective public service delivery; sound regulatory frameworks; a strong and reliable tax system; good governance of public finances; a well developed financial sector; good corporate governance; and enhanced performance and integrity of public institutions.
The MENA-OECD Ministerial Meeting is a unique opportunity to shape the road ahead
The MENA-OECD Ministerial Conference, held in Marrakech on 23 November 2009, was a unique opportunity for dialogue among MENA and OECD Ministers dealing with investment and public governance policies, and closely involved representatives from business and civil society. Together, these participants developed action-oriented strategies to face the future with a strong reform agenda in place. The MENA-OECD Ministerial Conference of the MENA-OECD Initiative was graciously hosted this year by the Government of the Kingdom of Morocco. A Declaration was issued at the end of the meeting with inputs received from the regional Working Groups of the OECD-MENA Initiative and the specialised networks set up during the last years. A Business Forum and a Governance Day was held the previous day, on 22 November 2009, to open key issues for wider discussion among stakeholders.