Transcript Mr. Jean-Pierre Chauffour

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
Background – Deauville Partnership
2
 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”
Youth Unemployment Rates
4
MENA has highest youth unemployment rate in the world (%)
40
35
30
25
20
15
10
5
0
North Middle
Africa
East
SA
LAC
World
Source: Regional Economic Developments and Prospects, MENA, World Bank, 2011
Sub
South
Saharan Asia
Africa
East
Asia
Soaring youth population
5
Insufficient economic growth to create enough jobs
6
Source: From Privilege to Competition, World Bank, 2009
What are the available policy instruments ?
7
 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
Could Trade & Investment be part of the answer?
8
 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
4
100% 2%
2%
5%
90% 1%
6%
80%
1%
1%
6%
3%
11%
3%
3%
6%
6%
17%
70%
LDCouthSAsia
60%
LDCMNA
50%
40%84%
LDCLAC
77%
64%
30%
20%
LDCEurope
LDCEastAsia
High income
10%
0%
1988
LDCSSA
1998
Source: Regional Economic Developments and Prospects, MENA, World Bank, 2011
2008
Limited intra-MENA integration
Measured by nonoil exports
5
MENA
MENA
27%
RoW
15%
RoW 10%
MENA 29%
USA
4%
USA 6%
EU
41%
Asia 14%
1998
Source: World Bank (staff calculations), 2011
Asia
25%
EU
29%
2008
FDI inflows surged
6
In percent of GDP
14
12
FDI, 1990s
10
8
6
4
2
0
-2
Source: Regional Economic Developments and Prospects, MENA, World Bank, 2011
FDI, 2000s
Mainly in real estate and mining
7
Share of greenfield FDI inflows by sector
100%
90%
80%
70%
Tourism
60%
Real Estate
50%
Other Services
40%
Mining
30%
Manufacturing
20%
10%
0%
Egypt
Jordan
Libya
Morocco Tunisia
Source: Regional Economic Developments and Prospects, MENA, World Bank, 2011
Domestic private investment has not yet taken off
13
Source: From Privilege to Competition, World bank, 2009
A complex business environment
(and indicators hide uneven application of rules)
14
Doing Business 2012 Ratings for 2011 (and Libya Estimates, 2010)
200
175
Starting a business
150
Dealing with construction permits
Getting electricity
125
Registering property
100
Getting credit
Protecting investors
75
Paying taxes
Trading across borders
50
Enforcing contracts
25
Resolving insolvency
0
Egypt
Jordan
Morocco
Tunisia
Libya (estimates,
not official DB
rank)
Source: Doing Business in a More Transparent World, Doing Business 2012, World Bank Group
Overall lack of competitiveness
15
Global Competitiveness Index
Institutions
7
Innovation
6
Infrastructure
5
Business sophistication
4
3
Macroeconomic
environment
2
1
Market size
0
Egypt
Health and primary
education
Jordan
Morocco
Tunisia
Higher education and
training
Technological readiness
Financial market
development
Goods market efficiency
Labor market efficiency
Source: Global Competitiveness Report, 2011
Top 5 features of successful emerging economies:
16

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)
How to do it? Leadership and Vision
17
 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 report
12
 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
Outline of the report
19
 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?
31
 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.
What must Deauville Partnership countries
(Egypt, Jordan, Tunisia, Morocco, Libya) do?
33
 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
Political economy challenges
22
 Past political legacy with Arab authoritarian regimes
 Lack of credibility and trust among partners
 EU in economic and financial turmoil
 Little room for financial support
 Unclear policy direction and vision in Arab countries
 Populist policies and shortermism
 Pressing political issues dwarfing all economic
priorities
35
12000
Emulating
Turkey
Since anchoring
domestic reforms in a
comprehensive
integration process with
the EU, Turkey has
created 3 million new
jobs
10000
8000
Morocco
6000
Tunisia
Turkey
Jordan
Egypt
4000
2000
0
Thank you
Available at
https://openknowledge
.worldbank.org/handle
/10986/12221