from political to economic awakening in the arab world: the path of economic integration
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From Political to Economic Awakening in the Arab World: The Path of Economic Integration. UNECE-PAM-UNCTAD Conference on “Harnessing Trade for Growth in the Mediterranean” Palais des Nations, Geneva , Switzerland, 30-31 May 2013 Jean-Pierre Chauffour Lead Economist, world bank. - PowerPoint PPT PresentationTRANSCRIPT
UNECE-PAM-UNCTAD CONFERENCE ON “HARNESSING TRADE FOR GROWTH IN THE
MEDITERRANEAN”
PALAIS DES NATIONS,GENEVA, SWITZERLAND, 30-31 MAY 2013
JEAN-PIERRE CHAUFFOURLEAD ECONOMIST, WORLD BANK
From Political to Economic Awakeningin the Arab World:
The Path of Economic Integration
Background – Deauville Partnership
In wake of Arab Spring, Deauville Summit of the G8 (April 2011) establishes a Partnership between Deauville Partners: G8, Kuwait Qatar, Saudi Arabia,
Turkey, UAE, and 9 associated international and regional financial institutions
Arab countries in transition: Egypt, Jordan, Morocco, Tunisia, and later Libya and Yemen
Deauville Partnership commissions an analytical report “to provide an appropriate framework to enhance trade and FDI”
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4Youth Unemployment Rates
0
5
10
15
20
25
30
35
40
North Africa
Middle East
SA LAC World Sub Saharan Africa
South Asia
East Asia
MENA has highest youth unemployment rate in the world (%)
Source: Regional Economic Developments and Prospects, MENA, World Bank, 2011
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Soaring youth population
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Insufficient economic growth to create enough jobs
Source: From Privilege to Competition, World Bank, 2009
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What are the available policy instruments ?
Fiscal policy Lower revenues Higher social expenditures
Monetary and exchange rate policies Small open economies Declining foreign exchange reserves
Structural policy Subsidies Pension Domestic competition
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Could Trade & Investment be part of the answer?
Trade. MENA could produce more if it were to export more. Excluding oil exports, the MENA region of over 400 million people exports roughly the same amount as Switzerland
FDI. Excluding oil and real estate investment, FDI in manufacturing—the type of investment rich in employment—has remained marginal, accounting for just a fifth of all FDI inflows in the region
Flat share of global exports of goods and services
84%77%
64%
6%11%
17%
1% 3%6%
5% 6%6%
2% 1% 3%2% 1% 3%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1988 1998 2008
LDCSSA
LDCouthSAsia
LDCMNA
LDCLAC
LDCEurope
LDCEastAsia
High income
Source: Regional Economic Developments and Prospects, MENA, World Bank, 2011
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Limited intra-MENA integration Measured by nonoil exports
Asia25%
EU29%
MENA27% RoW
15%
USA4%
EU41%
Asia 14%
MENA 29%USA 6%
RoW 10%
MENA
1998 2008
Source: World Bank (staff calculations), 2011
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FDI inflows surged
-2
0
2
4
6
8
10
12
14
FDI, 1990s FDI, 2000s
Source: Regional Economic Developments and Prospects, MENA, World Bank, 2011
In percent of GDP
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Mainly in real estate and mining
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Egypt Jordan Libya Morocco Tunisia
Tourism
Real Estate
Other Services
Mining
Manufacturing
Source: Regional Economic Developments and Prospects, MENA, World Bank, 2011
Share of greenfield FDI inflows by sector
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13
Domestic private investment has not yet taken off
Source: From Privilege to Competition, World bank, 2009
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A complex business environment(and indicators hide uneven application of rules)
0
25
50
75
100
125
150
175
200
Egypt Jordan Morocco Tunisia Libya (estimates, not official DB
rank)
Doing Business 2012 Ratings for 2011 (and Libya Estimates, 2010)
Starting a business
Dealing with construction permits
Getting electricity
Registering property
Getting credit
Protecting investors
Paying taxes
Trading across borders
Enforcing contracts
Resolving insolvency
Source: Doing Business in a More Transparent World, Doing Business 2012, World Bank Group
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Overall lack of competitiveness
0
1
2
3
4
5
6
7Institutions
Infrastructure
Macroeconomic environment
Health and primary education
Higher education and training
Goods market efficiency
Labor market efficiency
Financial market development
Technological readiness
Market size
Business sophistication
Innovation
Global Competitiveness Index
Egypt
Jordan
Morocco
Tunisia
Source: Global Competitiveness Report, 2011
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Top 5 features of successful emerging economies:
committed, credible, and capable governments
maintain macroeconomic stability
exploit the world economy
let markets allocate resources
muster high rates of saving and investment
Source: Growth Commission Report (2008)
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How to do it? Leadership and Vision
Leadership in both Partnership Countries and partner countries is needed to provide a credible long term vision: the 4 freedom agenda
Leaders will need to promote sustained growth and job creation, in a framework of common values of peace and stability; cannot focus exclusively on short-term priorities: need to demonstrate credibility
The main proposal of the report12
Objective. Expanding market opportunities while undertaking policy reforms needed to seize them, including trade facilitation measures
Expected Result. Deeper integration as an anchor for “meritocratic” domestic reform, sustainable economic growth and jobs creation
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Outline of the report
Section 1: The new global Trade & FDI landscape—dealing with the fragmentation of production (i.e., global value chains)
Section 2: Market access and rules—creating opportunities to trade and invest across borders cheaply, securely and predictably
Section 3: Competitiveness and diversification—implementing complementary domestic reforms of the business climate
Section 4: Trade facilitation and trade finance—oiling the Trade & FDI engine especially for SMEs
Section 5: Inclusiveness, equity and sustainability—making economic integration a sustainable and inclusive long term political economy proposition
What could Deauville Partners do?
The EU could deepen its trade relationships with Egypt, Jordan, Morocco, and Tunisia with the effective implementation of the proposed deep and comprehensive FTAs (DCFTAs).
In a coordinated and coherent approach, and on the basis of its growing political and economic influence in the region, Turkey could similarly deepen its existing Association Agreements.
The GCC could strengthen its relationship with Egypt and Tunisia (Jordan and Morocco have been officially invited to join the GCC), in the framework of a deepened cooperation with the Agadir agreement.
The USA could (a) increase the value of its existing agreements with Jordan and Morocco, and (b) invite Tunisia and, once the appropriate circumstances are in place, Egypt to enter into FTAs.
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What must Deauville Partnership countries (Egypt, Jordan, Tunisia, Morocco, Libya) do?
Parallel implementation of complementary domestic policies as part of a comprehensive reform agenda to improve competitiveness – critical to take advantage from enhanced market access
Put in place institutional mechanisms to negotiate, implement, and evaluate the process of regulatory and policy convergence
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Political economy challenges
Past political legacy with Arab authoritarian regimes
Lack of credibility and trust among partnersEU in economic and financial turmoilLittle room for financial supportUnclear policy direction and vision in Arab
countriesPopulist policies and shortermismPressing political issues dwarfing all
economic priorities
Emulating Turkey
Since anchoring domestic reforms in a comprehensive integration process with the EU, Turkey has created 3 million new jobs
1980
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1986
1988
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1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
0
2000
4000
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10000
12000
MoroccoTunisiaTurkeyJordanEgypt
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Thank youAvailable at https://openknowledge.worldbank.org/handle/10986/12221