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What does inclusive growth mean for the people of the Middle East and North Africa?
Last week I was in Abu Dhabi for the opening of the joint World Bank – Arab Monetary Fund course on policies for inclusive growth. The course was offered to mid- and high-level policy makers and government officials working in central banks and ministries of finance in sixteen Arab countries. After the opening remarks, I was scheduled to start the course with two lectures on economic trends and inclusive growth in the region.
I looked forward to the opportunity to engage with a diverse group of Arab policy makers on a topic that is so relevant in the context of the events of the past year. After all, the Arab uprisings were triggered by feelings of frustration, unfairness and humiliation in response to serious governance issues and lack of level playing field in many aspects of life. The Arab people showed that voice, accountability and inclusion matter for political stability and development.
So, I started my presentations expecting participants to show interest in the topic. What I did not expect was that this interest would be so overwhelming. The group was engaged and prepared to ask tough and substantive questions. It was clear that they had given a lot of thought to these issues well ahead of the course. This was a perfect occasion to exchange ideas and discuss what inclusive growth means to the people of the region.
As the day evolved my feelings were validated. The course provided a unique opportunity to connect and learn from each other, and several themes emerged. Inclusive growth in the Middle East and North Africa (MENA) context is about opportunities for more and better jobs, especially for youth; high quality education and innovation; and a business environment that does not favor special interests and in which firms of all sizes can compete on fair terms and access resources, markets and information on level playing field.
One question that came up again and again was about measuring progress with inclusive growth. Some lamented problems caused by insufficient data while others pointed out the perils of drawing conclusions from analysis based on biased data. At this point, I thought how similar we all are in our need to have better access to good quality data for economic analysis. I could not agree more with my colleagues from the Arab world about the need to collect regularly and share information on the state of households and firms in the MENA countries. Designing good inclusive growth strategies rests on rigorous analysis with good quality economic data.
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Thank you Elena. It was very
Thank you Elena. It was [a] very interesting course. I learned a lot of thing from that: Don’t believe the country that announced that have growth in GDP without growth in employment.
An Increase in GDP per capita without unbiased distribution of income means nothing. I like the lecture of diversification, it was very interesting and really we need that in Arab countries. I don’t know [if] we can encourage FDI and on [the] other hand, we need to share them there income (as that happened in some Arab Countries).
Thank you, Elena and thank your college.
Jobs, jobs, jobs
As a 2nd day speaker on the importance of a sound, competitive investment climate and inclusive access to markets (including financial markets), I can attest to the intense interest and engagement of the group gathered for this WBI course. But one question reminded me that we don't just need good data, good policies, and stronger institutions, but also a shift in mindset. The question was roughly, "Why should we increase reliance on private sector jobs, when public sector jobs are so much more stable? Look at the Kodak bankruptcy -- private companies can go out of business, but a worker and his/her family can depend on public employment."
Part of this comment reflects lack of safety nets in labor markets, weaknesses in insolvency, and regulatory rigidities and information failures that impede a smooth transaition of workers from firms that fail to new employment. Part of it may reflect lack of dynamism in private employment, especially in countries facing new uncertainties since the Arab Spring, or suffering from downturns in export markets. Yet part of it reflects a deeply-held mentality, perhaps encouraged by some governments, perhaps encouraged in schools, that public employment is superior to private.
How do we refocus demand for more public employment to demand for a dynamic and inclusive private sector that generates jobs, and education and training systems that equip workers for private labor markets?
Public vs. Private Sector Jobs
Thank you for your comments. Andrew’s point about the preference given in MENA to public sector jobs over private sector jobs came up during the first day of discussions on inclusive growth. Here are a few things we have learned from our work. The public sector is still bigger in MENA than in many fast-growing economies, but there are clear signals that public sector employment growth has slowed down in the region during the 2000s.
So, public sector jobs are harder to find today than ten years ago. This reality implies that people will have to turn to the private sector for jobs even if public sector jobs remain the preferred ones. The transition economies of Eastern and Central Europe went through the process of weaning themselves off of public sector dependence in the 1990s. The mindset back then was similar to the one in MENA today, but the conditions in the economies and the budget constraints made it impossible to sit and wait for a “nice” government position.
Today, the public sector in Eastern and Central Europe attracts only those committed to public service. Wages in the private sector are higher than wages in the public sector, making the private sector the attractive option. In MENA the informal private sector is large. According to a recent World Bank report, the average MENA country produces about a third of its GDP and employs two-thirds of its labor force informally. In such economies, new entrants to the labor force can generally find jobs relatively easily, but many of these jobs are low-paying ones and come without the benefits extended by the public sector.
So, logically, many people would be waiting for public sector jobs. The answer however is not to go back to reliance on the public sector for jobs. MENA countries will have to press forward with reforming and strengthening their private sectors. MENA needs successful large private companies that will boost net creation of high quality jobs (see a blog by MENA Chief Economist on employment and firm size). MENA also needs to level the playing field so that small businesses are allowed to operate and grow in a business environment that does not favor special interests. Mindsets will change when more people become successful entrepreneurs, when the odds are not against the small business and the risks of joining the private sector are worth it.
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