Financial Times

World Bank urges sweeping reforms to fight poverty, unemployment
CAIRO - Countries in the Middle East and North Africa (MENA) could ward off a major unemployment crisis in coming years by expanding trade and private investment and generating millions of new jobs, according to a World Bank report released last week.

The report "Engaging with the World: Trade, Investment and Development in MENA" warns that the status quo - public sector-driven and protected economies supported by oil, aid and workers remittances - can no longer generate sufficient growth or jobs, as the experience of the past two decades suggest. Instead, it calls on countries to embrace trade and investment reforms, which promise much faster growth and much needed employment opportunities in the region.

"The region has enjoyed greatest prosperity when it has been open to trade, ideas, innovation and private enterprise, and exploited its potential of location, endowments and spirit of enterprise," says Jean-Louis Sarbib, Vice-President for the Middle East and North Africa Region at the World Bank.

From Morocco to Iran, the region's most important development challenge in the coming decade is to create enough jobs for their rapidly growing workforces. During the 2000-2010 period, the number of new entrants to the labour force will average 4 million a year - double that of the last two decades. Unemployment rates in the region, which average 15 percent today, have doubled in the past two decades and are now among the highest in the world. With countries facing a steady decline in per capita oil revenues, aid inflows and workers' remittances, the need for a viable alternative to public sector employment has become critical.

"Today's entrants into the labour market are young and better educated which means that within a right economic environment, they could provide the basis for rapid and sustained growth, as in the rest of the world," said Mustapha Nabli, Chief Economist for Middle East and North Africa at the World Bank. "But if the environment is constrained, a potential demographic gift could turn into a demographic curse and give way to a social crisis."

A combination of higher non-oil exports and a better investment climate could increase domestic private investment, and generate five to six times the inflows of foreign direct investment, reaching some 3 percent of GDP.

With only one-third active in the labour force today, women represent a huge untapped resource in the region. Experience from around the world suggests that women, particularly the young and well educated, stand to gain from trade and investment climate reforms. These gains are already evident in the garment and textile industry in Egypt, Jordan, Morocco and Tunisia. Provided the economic and social barriers to women in the work force are dismantled, their wider participation in economic life can boost growth and productivity in the region.

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