Remarks by Angel Gurría, OECD Secretary-General
Egyptian Council for Foreign Affairs
Cairo, Egypt, 27 November 2007
Ladies and Gentlemen,
It is a great pleasure to be here with you at the Egyptian Council for Foreign Affairs. You are an important bridge of communication between Egypt and the world.
My presence here today is the result of two key developments: first, the growing economic importance of Egypt and the MENA countries as active players in the globalisation process; and second, the current transformation of the OECD into a more diverse and global organisation.
Allow me make a few comments on how we perceive globalisation at the OECD; on how we are helping countries to address their main challenges; and in particular on our work with Egypt and the MENA countries.
Globalisation: a double-edged sword
Globalisation has delivered significant progress. Under the current wave of globalisation, the world economy has experienced one of its most dynamic expansions ever ─ growing 20% in the last five years (i). During this period, international trade and investment flows have boosted interdependence and allowed developing countries to connect better to the global economy, lifting millions out of poverty.
The Internet, for example, one of the main tools of globalisation, has opened an ocean of opportunities, generating an unprecedented global exchange of capital, information, knowledge and ideas. With nearly 1.3 billion users (ii), the web is building “the most important highway for human progress” we ever had.
Globalisation is indeed a source of progress, but it has also produced a much more complex world by linking local and global, by blurring the borders between national and international. The future of mankind is being shaped by issues that no one nation can address alone. Multilateral co-operation is instrumental in meeting the key challenges of this new world. Let me cite a few examples.
Globalisation has facilitated the creation of unprecedented wealth, but inequality has increased at the same time. Recent studies report that the richest 2% of the world’s adults own more than half of the global wealth (iii). Within OECD countries, disparities have also grown: between 1994 and 2003, earnings inequalities increased in 17 OECD countries (out of the 20 countries for which we have this information) (iv). We estimate that relative poverty (v) affects nearly 11% of the population in OECD countries (vi). These are issues that touch all countries, both developed and developing.
Poverty is the ultimate systemic risk. The proportion of people living in extreme poverty has been halved since 1980 (vii). Yet, poverty is still widespread and deep-rooted: nearly 3 billion people ─ half the world’s population ─ still subsist with less than 2 dollars a day; 1 billion people don’t have access to clean water; and 2.6 billion do not have proper sanitation services (viii). These are not only figures; these are shattered families, broken dreams, global shame.
The stubborn persistence of poverty and inequality creates the conditions for the expansion of armed conflict, environmental degradation, cross-border diseases, international terrorism and corruption. The solution to this global challenge depends on integrated and collaborative multilateral efforts and the design and implementation of good public policies.
Sustainable development and climate change are also testing our capacity for international co-operation and our creativity as policymakers. The recent Synthesis Report of the Intergovernmental Panel on Climate Change presented in Valencia a few days ago confirmed that 11 of the last 12 years (1995-2006) were among the warmest in the earth’s temperature since records began in 1850. Emissions of green-house gases grew by 70% between 1970 and 2004 (ix). This is doing irreversible damage to our ecosystems; it is also increasing the impact of infectious diseases and extreme weather phenomena.
We must design innovative global solutions that all countries are ready to implement. The OECD has been working actively in this area to develop new analyses and proposals to provide a solid economic and financial footing to the post-Kyoto architecture. As a matter of fact, in February we will be releasing our Environmental Outlook to 2030. Then in June, the OECD Ministerial Council Meeting will provide a forum for high-level discussions on the economics of climate change and present policy options for addressing this critical issue.
International migration, one of the most dynamic features of globalisation, is also high on the policy agenda in many countries of the world. By helping to address economic and social problems, properly managed migration can be part of the solution to the challenges of globalisation in both sending and receiving countries.
These types of global challenges highlight the need for effective multilateral co-operation among countries and strategic thinking by international organisations. Gone are the days when a country could solve its problems in isolation.
The OECD is uniquely positioned to help. Let me mention briefly how we are doing it.
The OECD: making the most of globalisation
The OECD is helping countries to make the most of globalisation. Through a unique system of permanent multilateral dialogue, policy experience sharing and peer pressure, the OECD is developing a common understanding of the major implications of global challenges, as well as innovative solutions to address them. In the process, we identify and disseminate best practices and draw on our ability to build consensus in crucial areas requiring international co-operation.
The OECD is adapting in order to respond more effectively to the challenges of an increasingly interdependent world; it is becoming more global, more inclusive, and more relevant.
The OECD is now initiating the first phase of the enlargement of its membership. Indeed, in the coming weeks we will start accession talks with Chile, Estonia, Israel, the Russian Federation and Slovenia. In parallel, we will strengthen our co-operation with Brazil, China, India, Indonesia and South Africa through enhanced engagement programmes with a view to possible membership.
This is just the first set of countries with whom we will have more structured relationships, and we will be looking to others in the future.
At the same time, we are increasingly working with countries outside our membership – in this regard, I was very pleased that OECD Declaration on Multinational Enterprises last July and joined our Investment Committee.
The OECD is gradually turning into an engine of convergence between economies at all stages of development. This new role of the OECD was endorsed by the G8 leaders in Heiligendamm, when the OECD was asked to act as a “platform” for a dialogue between G8 countries and the major emerging economies on selected topics.
Other initiatives like the recently launched Partnership for Democratic Governance or our work on Aid for Trade with the WTO reflect the new role of the OECD as a global player. Our collaboration with the MENA countries is an eloquent example of our commitment to broadening dialogue and co operation.
The OECD and MENA relations
The relations with the MENA countries are increasingly important for the OECD. Over the past three years, through our Good Governance for Development Initiative and the MENA-OECD Investment Programme, the OECD has been working with the countries of the region on improving their governance capacities and becoming attractive locations for investment.
This dialogue is also helping to widen the perspective of the OECD, and fulfil its missions of becoming more plural and transforming globalisation into a more inclusive and balanced process.
The MENA-OECD Investment Programme has made important progress in assessing developments in the regulatory environment, including key challenges in areas related to investment policy, investment facilitation, taxation, financial sector development, corporate governance and women’s entrepreneurship.
Through the Initiative on Governance for Development, Arab and OECD countries have strengthened the regional policy dialogue, increasingly involving their national administrations in order to build a critical mass of committed reform actors.
And the results of reform efforts in the MENA countries are already beginning to show.
The regional economy has been growing steadily. After increasing by 5.9 per cent in 2004 and 2005, the regional GDP grew at a solid 6.2 per cent in 2006; with some economies in the region experiencing double-digit growth. Last year, MENA regional exports reached more than 800 billion dollars (x) and foreign direct investment inflows amounted to 59 billion dollars, more than quadrupling in the past three years (xi). Profiting from these trends, unemployment has gone down from 14.3 per cent in 2000 to 10.8 per cent in 2005 (xii).
Egypt has been a leader in driving this progress. In recent years, tax rates have been lowered and the base broadened; privatisation has been revived; and significant headway has been made in financial sector reform (xiii). Egypt has also made remarkable advances in reducing red tape and facilitating entrepreneurship. In fact, the World Bank’s “Doing Business 2008” study has just placed Egypt as this year’s top reformer globally (xiv).
As a result, economic growth has surged to a twenty-year high of 7 per cent in 2006 (xv). Inflation fell sharply in 2005 and real interest rates turned positive. External trade has thrived, turning into an important engine of growth which accounted for 50% of GDP in 2006 (xvi).
And this time the expansion has become more broad-based, with construction and services now increasing at a healthy pace. Foreign direct investment inflows increased more than fifteen-fold between 2001 and 2006, and reached over USD 9 billion in just the first three quarters of the 2007 financial year (xvii). This is up from around half a billion dollars per year before 2003/2004.
In the coming years, the great two challenges for the MENA countries will be the implementation of reforms and transforming macro-economic achievements into social progress. The MENA region still faces great challenges in reducing poverty and inequalities.
The increasing participation of the private sector must be accompanied by an increasing participation of women in economic activity. With only 28% of women participating in the labour force in 2006, this is still a major pending challenge for the region (xviii).
Going forward, Egypt can continue to bring to bear its experience and leadership, to the benefit of the region as a whole and as a bridge between East and West. The Council for Foreign Affairs can make a difference.
Ladies and Gentlemen:
Globalisation is a great opportunity. We must empower our citizens to participate and benefit from this process. The best way to achieve this objective is by building a stable macro-economic framework, while at the same time creating the conditions for investment, competitiveness and productivity to flourish.
Raising the educational levels of our population is as important as improving the climate for private investment. This will help foster innovation, an essential ingredient for improving economic performance.
The OECD is eager to pursue its work with Egypt and the MENA countries, and we look forward to our continued co-operation.
Shukran – Thank you very much.
(i) During the period 2001-2006.
(ii) WORLD INTERNET USAGE AND POPULATION STATISTICS by Internet World Stats.com.
(iii) According to a recent study by WIDER of the UN University, on The World Distribution of Household Wealth.
(iv) OECD Database.
(v) A measure of relative poverty defines "poverty" as being below some relative poverty threshold. An example is when poverty is defined as households who earn less than 50% of the median income is a measure of relative poverty.
(vi) 2000 data from the Directorate from Employment, Labour and Social Affairs.
(vii) Binay Bhargava, “Introduction to Global Issues”, The World Bank, 06/28/2006
(viii) According to World Bank data.
(ix) Summary for Policymakers of the Synthesis Report of the IPCC Fourth Assessment Report
(x) Global figures for all the MENA countries from the Abu Dhabi Chamber of Commerce and Industry, “Middle East and North Africa Economy”, March 2007.
(xi) OECD, “Making Investment Reforms Happen: Launch of the Second Phase of the MENA-OECD Investment Programme”, Briefing Note by DAF/INV/MENA.
(xii) World Bank Overview of MENA countries.
(xiii) “Egypt Country Assistance Evaluation” by The World Bank’s Independent Evaluation Group.
(xiv) World Bank Press release, “Egypt is Top Performer in Doing Business 2008”.
(xv) “Egypt Country Assistance Evaluation” by The World Bank’s Independent Evaluation Group.
(xvi) Exports in 2006 reached 20.6 billion dollars, while imports reached 33.1 billion. The GDP at market exchange rates stood at 108 billion dollars. Data from The Economist Factsheet on Egypt, 31 October, 2007.
(xvii) OECD, “OECD Investment Policy Review of Egypt, 2007”, p.9
(xviii) Taljeh Livani, World Bank, “Middle East and North Africa: Gender Overview, 2007”, p3.