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How Well did We Forecast 2014?

Shanta Devarajan's picture

A year ago, we polled Future Development bloggers for predictions on the coming year (2014).  Looking back, we find that many unforeseen (and possibly unforeseeable) events had major economic impact. 

We missed the developments in Ukraine and Russia, the spread of the Islamic State in Iraq, the outbreak of Ebola in West Africa, the collapse in oil prices and their attendant effects on economic growth.  At the same time, we picked the winner of the soccer World Cup, and got many of the technology trends right. Perhaps economists are better at predicting non-economic events.

Here’s the scorecard on the seven predictions made:

الوظائف أو الامتيازات

Marc Schiffbauer's picture
Also available in: English

إطلاق العنان لخلق فرص العمل في منطقة الشرق الأوسط وشمال أفريقيا

ثمة خيار أمام غالبية من هم في سن العمل في منطقة الشرق الأوسط وشمال أفريقيا: إما الانضمام إلى صفوف البطالة أو العمل في أنشطة ضعيفة الإنتاجية وتكفي بالكاد احتياجاتهم، وغالباً ما تكون في الاقتصاد غير الرسمي (الموازي). وبوجه خاص، فإن نسبة العاملين في القطاع الرسمي في المنطقة ممن هم في سن العمل لا تتجاوز 19 في المائة.
ويتمثل السبب الرئيسي لذلك في أن القطاع الخاص لا يهيئ فرص عمل كافية. وتبلغ نسبة فرص العمل في الشركات متناهية الصغر التي تعمل في منطقة الشرق الأوسط وشمال أفريقيا ما بين 42 إلى 72 في المائة من إجمالي الوظائف، غير أن هذه الشركات لا تنمو. ففي تونس، نجد أن احتمال نمو شركة ما متناهية الصغر بما يتجاوز 10 موظفين بعد 5 سنوات من تأسيسها تبلغ 3 في المائة.

Jobs or Privileges?

Marc Schiffbauer's picture
Also available in: العربية

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?

Corrosive Subsidies in MENA

Shanta Devarajan's picture

Air pollution in Cairo 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.

Can the Internet Solve Conflict?

Laura Ralston's picture

Buildings in need of repair Over the past decade there has been growing interest in using the internet and other communication technologies for conflict management and peacebuilding. Two key areas have emerged: (1) using publicly available data on events and social dynamics to monitor and predict escalations of tensions or violence, and (2) harnessing the increased access to the internet and mobile telephones to promote positive peace. In both areas exciting innovations have developed as well as encouraging results.

In the first area, perhaps the most comprehensive information source is Kalev Leetaru’s “Global Database of Society” or GDELT Project that “monitors the world's broadcast, print, and web news from nearly every corner of every country in over 100 languages and identifies the people, locations, organizations, counts, themes, sources, and events driving our global society”. The event database alone covers 300 categories of peace-conflict activities recorded in public media since January 1979, while the identification of people, organizations and locations enables network graphing of connections in media records.

لا يتعلق الأمر بالكيفية، بل بالسبب

Shanta Devarajan's picture
Also available in: English | Español | Français

انقضى أسبوع تقريبا دون أن أسمع عبارة "لا يتعلق الأمر بالكيفية بل بالسبب."  ففي مجال إصلاح دعم الطاقة في الشرق الأوسط وشمال أفريقيا، على سبيل المثال، لا يتركز النقاش على ما إذا كان ينبغي إصلاح الدعم (يتفق الجميع على ضرورة ذلك) بل على كيفية إجراء الإصلاح.  وتثار نقاط مماثلة بشأن تنظيم ممارسة الأعمال أو التعليم أو الزراعة أو الصحة. واعترف بأني أنا نفسي كتبت أمورا مشابهة.  ولا يوجد نقص في مثل هذه المقترحات على هذه المدونة.
فالإصلاحات مطلوبة لأنه توجد سياسات أو ترتيبات مؤسسية قائمة باتت معوقة.  لكن قبل أن نقترح كيفية إصلاحها ينبغي أن نسأل لماذا وُجدت هذه السياسة من الأصل، ولماذا استمرت فترة طويلة، ولماذا لم يتم إصلاحها حتى اليوم.  فهذه السياسات لم تأت مصادفة.  ولم تستمر لأن شخصا ما نسي تغييرها.  ولن يتم إصلاحها على الأرجح لمجرد أن أحد صانعي السياسات قرأ كتابا أو مقالا أو مدونة بعنوان "كيف تصلح..."

It’s not the How; It’s the Why

Shanta Devarajan's picture
Also available in: Español | Français | العربية

Hardly a week goes by without my hearing the statement, “It’s not the What; it’s the How.”  On the reform of energy subsidies in the Middle East and North Africa, for instance, the discussion is focused not on whether subsidies should be reformed (everyone agrees they should be), but on how the reform should be carried out.  Similar points are made about business regulations, education, agriculture, or health. I confess to having written similar things myself.  And there is no shortage of such proposals on this blog
Reforms are needed because there is a policy or institutional arrangement in place that has become counterproductive.  But before suggesting how to reform it, we should ask why that policy exists at all, why it has persisted for so long, and why it hasn’t been reformed until now.  For these policies didn’t come about by accident.  Nor have they remained because somebody forgot to change them.  And they are unlikely to be reformed just because a policymaker happens to read a book, article or blog post entitled “How to reform…”

Africa's McTipping Point?

Borko Handjiski's picture

Three quarters of a century since the opening of the first McDonald’s, the fast food chain operates around 34,000 outfits in around 120 countries and territories across all continents. In Sub-Saharan Africa (SSA), however, – a region of 48 countries and almost a billion people - only South Africa and Mauritius have been able to attract this global food chain.
This peculiarity cannot be explained only by the fact that the region is poor. The company has found a market in about 30 countries with GDP per capita of less than US$ 3,000 (in constant 2005 US$) at the time of their first McDonald’s opening. Hamburgers, Cheeseburgers, and Big Macs are also on offer in a dozen of low-income countries as well. When the first McDonald’s opened in Shenzhen in 1990, China’s GDP per capita was less than US$ 500 per person. Of course, Shenzhen’s per capita income was several times higher, but the company has also found a market in Moldova since 1998 when the GDP per capita of the 3 million person country was less than US$ 600 per capita. There are many cities in SSA today that have higher income, population concentration, and tourists than what Chisinau had in 1998; yet they do not have a McDonald’s. As a matter of fact, 22 SSA countries today have higher income per capita than what Moldova or Pakistan had when the first McDonald’s opened there, and 15 of them have higher income per capita even than what Indonesia or Egypt had at their McDonald’s openings (see chart).

Education as if Economics Mattered

Shanta Devarajan's picture

Children outside school. Bangladesh Education in developing countries is facing problems at all levels:

At the primary level, despite gains in enrollment, the quality is appallingly low.  In Tanzania and India, some 20-30 percent of students in 6th grade could not read at the 2nd grade level. Not surprising since in these countries, teachers in public primary schools are absent 25 percent of the time.  When present, they are in-class teaching only 20 percent of the time.

At the secondary level, the performance of students from the Middle East and North Africa  in international tests such as TIMS is significantly below the developing country average.

At the tertiary level, universities are chronically underfunded and not training students for jobs that the market is demanding - reminiscent of the Woody Allen line, "The food in this restaurant is terrible and the portions are too small."

Growth Without Apology

Shanta Devarajan's picture

 Chhor Sokunthea / World BankFrom time to time, countries experience rapid economic growth without a significant decline in poverty. India’s GDP growth rate accelerated in the 1990s and 2000s, but poverty continued to fall at the same pace as before, about one percentage point a year. Despite 6-7 percent GDP growth, Tanzania and Zambia saw only a mild decline in the poverty rate. In the first decade of the 21st century, Egypt’s GDP grew at 5-7 percent a year, but the proportion of people living on $5 a day—and therefore vulnerable to falling into poverty—stagnated at 85 percent.

In light of this evidence, the World Bank has set as its goals the elimination of extreme poverty and promotion of shared prosperity. While the focus on poverty and distribution as targets is appropriate, the public actions required to achieve these goals are not very different from those required to achieve rapid economic growth. This is not trickle-down economics.  Nor does it negate the need for redistributive transfers. Rather, it is due to the fact that economic growth is typically constrained by policies and institutions that have been captured by the non-poor (sometimes called the rich), who have greater political power. Public actions that relax these constraints, therefore, will both accelerate growth and transfer rents from the rich to the poor.

Some examples illustrate the point.