As the price of oil falls, the discussion is heating up on what the impact will be for countries in the Arab World – especially online through the popular Arabic hashtag النفط_دون_50_دولار # translating to “oil below US$50 . The World Bank’s Chief Economist for the Middle East and North Africa, Shanta Devarajan, weighs in on the conversation.
Foreign access rarely receives good press. Although over half of the world’s exclusive economic zones are subject to some form of foreign fishing arrangement, there is a perception that industrialized nations are "giving with one hand while taking away with the other." Criticism abounds regarding the role that foreign fleets play in overexploiting coastal state fish stocks, in engaging in illegal and unreported activity, in contributing to conflicts with small-scale fisheries and in generally undermining domestic fishing interests in vulnerable developing economies.
Unleashing the Employment Potential of the Middle East and North Africa
The majority of working-age people in MENA face a choice: they can be unemployed; or they can work in low-productivity, subsistence activities often in the informal economy. In particular, only 19% of the working age people in MENA have formal jobs.
The main reason is that the private sector does not create enough jobs. Between 42% and 72% of all jobs are in micro firms in MENA, but these micro firms do not grow. In Tunisia, the probability that a micro firm grows beyond 10 employees five years later is 3%.
Why has private sector job creation been so weak?
Governments in the Arab world have long subsidized the price of energy. This gives citizens throughout the region access to cheap petrol and diesel, and electricity supplied at below-market rates. But what has been the real impact of subsidies, and do they justify the huge financial burden they place on national budgets? This is a critical question in the Middle East and North Africa (MENA), as the region represents a disproportionate share of the world’s energy subsidies.
If you think the summers in the Middle East and North Africa (MENA) region are hot—think again. Summers are likely to become much warmer. Global temperatures are rising; the question now is by how much and what the impact of them will be. People in the region already face very high summer temperatures—and these could get worse. Compared to the rest of the world, the MENA region will suffer disproportionally from extreme heat.
Half the world’s energy subsidies are in the Middle East and North Africa Region. These subsidies have been criticized on grounds that they crowd out public spending on valuable items such as health, education and capital investment. Egypt for instance spends seven times more on fuel subsidies than on health. Furthermore, the allocation of these subsidies is heavily skewed towards the rich, who consume more fuel and energy than the poor. In Yemen, the portion of fuel subsidies going to the richest quintile was 40 percent; the comparable figure in Jordan was 45 percent and in Egypt, 60 percent.
Public procurement is not among the most popular topics in development circles. However, consider just these three ways in which procurement is probably one of the most indispensable elements that make up a truly capable state:
First, without effective procurement, hospitals wait for drugs, teachers for textbooks, and cities for roads. Whenever a news item surfaces about drugs shortages in hospitals, schools without textbooks or failing road networks, the reader may be looking at a procurement problem. Without efficient procurement, money gets wasted on a very large scale. Many developing countries channel significant proportions of their budgets through the procurement system – even marginal savings can add up very fast. Third, public procurement is a part of the government that citizens see every day. Lack of transparency and corruption in procurement directly affects citizens, and the losses to corruption are estimated in the billions of dollars every year. Corruption in procurement is a big problem that affects rich countries as well.
One of the targets of the Millennium Development Goals for poverty and hunger is monitored in part through a measure called Prevalence of Undernourishment. This is defined in the World Development Indicators (WDI) database as the proportion of the population whose food intake is insufficient to meet minimum dietary energy requirements continuously.
Comparative data (see figure below) show two, somewhat contradictory, aspects of undernourishment in the Middle East and North Africa (MENA) region. During 1991-2012, the MENA region has had very low levels of undernourishment; among developing regions, it is tied for lowest average with Europe and Central Asia. But the average level of undernourishment in the region appears to have worsened over time. The latter is surprising because the MENA region is made up of middle and high income countries (with the exception of Djibouti and Yemen) and has not been subject to any prolonged negative food or income shocks in the past two decades. Indeed, all other regions have experienced a steady decline in undernourishment since 1991.
The Middle East and North Africa region has a large diaspora. According to the latest United Nations estimates, 11 million citizens from the MENA countries lived abroad in 2013. Many of the members of this group hold prominent positions in their adopted countries. They have the potential to contribute to the development of industries in their countries of origin. Executives in multinationals can influence the choice of locations abroad in increasingly defragmented supply-chains. This is especially relevant for members of the diaspora. Seddik Belyamani, originally from Morocco, was Boeing's top airplane salesman, and was instrumental in converting an initial push-back by Boeing’s executives into an interest and a first mover investment in Morocco.
A former hotel owner in one of the region’s major cities, who wants to remain anonymous, tells a story that should have had a happy ending. Her 40-room hotel was doing well. It had built a reputation for excellent service. She decided to capitalize on her success and expand the business by adding a restaurant. This would have provided her with another revenue steam and allowed her to attract more customers, especially foreign tourists. Apart from expanding her business, the need for new kitchen and wait staff would have meant jobs for the local community. It would also have meant more business for local suppliers of everything from food to tablecloths.
With such a long list of potential benefits, who would want to stand in the way?