A piece of News by Priya Shah come to add to the diverse and countless woes of the MENA region. The social media buzz reflecting the general sentiment that Government Corruption Leads to Youth Unemployment is more than skin deep. It is believed that the new vaccine might eradicate the pandemic and all fossil fuels usage but not cure the peculiar condition of most with prospects of lower quality life.
The MENA region where the UAE rated the least corrupt country, per Transparency International’s Corruption Perception Index (CPI) in 2019 happen to be the least populated areas where Government Corruption appears because of local Youth low levels of Unemployment.
However, in the same region, North African tend to be in the middle of the table with Morocco’s neighbours not precisely to be in a better situation with all current socio-economic upheavals mainly resulting through a generally spread corrupt system of governance.
Algeria and Egypt being notoriously at a much higher level, with Tunisia having the lowest level of corruption could be classed as the most socially street noisy that currently were joined by Iraq and Lebanon. Syria followed by Yemen score worse with significant decliners in corruption diversity.
In the Middle East, Government Corruption Leads to Youth Unemployment
The Middle East boasts one of the largest youth populations in the world. However, corruption and conflict, often instigated by Iran’s influence, have caused economic decline and rampant unemployment. Indeed, the spread of the COVID-19 pandemic has further compounded these problems. Since late 2019, anti-government protests have swept across Middle Eastern nations such as Iraq and Lebanon, seeking to eradicate their corrupt leaders and give rise to a new era of progress and prosperity in the region. However, for this to happen, these conflict-ridden nations must escape from Iran’s expansive influence and invest in economic and social development.
Corruption isn’t a new phenomenon in the Middle East, especially in Lebanon in Iraq, but the rise in anti-government sentiments shows that people have grown weary with their corrupt leaders. Indeed, the struggle to overcome their corrupt institutions and their legacies is proving to be a difficult task. According to Transparency International’s 2019 Global Corruption Barometer for the Middle East and North Africa, the Lebanese people demonstrated the highest perceptions and experiences of corruption out of the six countries evaluated. 89% of these individuals reported that corruption in government was particularly an issue in the country, and 68% believed that most or all government officials were involved in corrupt practices in some way. It is, therefore, no surprise that Lebanon scored a mere 28 out of 100 in the 2019 Corruption Perceptions Index, which assesses public sector corruption. Evidently, political corruption has gradually undermined citizens’ faith in the government, eroding the notion of administrative legitimacy.
Similarly, a comprehensive opinion poll conducted in 2019 found that 82% of Iraqis were concerned or very concerned about the role corruption played at the highest levels of government, and 83% believed that corruption in the country was worsening. While both Iraq and Lebanon have survived numerous conflicts over the years, corruption remains the primary threat to prosperity and stability in the nation.
Both Lebanon and Iraq have been the subject of violent conflicts and Iran’s meddling, exacerbating their stability. Over the past few decades, Iran has sought to expand its influence in the Middle East by embedding itself in domestic affairs, often through the use of proxies. To gain greater control, it utilizes corruption to establish an incentive for those in positions of power to follow the regime’s orders. This has proven beneficial for those in positions of power while leaving ordinary citizens behind. Today, the Ayatollahs have managed to establish a strong foothold of influence in nations like Lebanon, Palestine, Yemen, Syria, and Iraq, yielding greater instability throughout the already vulnerable region.
In Lebanon, Iran has established deep roots in the country’s political system through its proxy Hezbollah, a Shiite political party and military group that has been a significant facet of the Lebanese government since 1992. While Hezbollah remains a major fixture of the Lebanese political system today, its actions prove damaging to the country’s economy. The terrorist organization has adopted many of Tehran’s geopolitical policies, leaving the Lebanese suffering under the numerous sanction regimes, which have ruined the country’s already shaky economy.
In Iraq, Iran saw the apex of the Islamic State insurgency as a prime opportunity to insert itself into the country’s domestic affairs. By aligning itself with Kataib Hezbollah, an Iraqi Shia paramilitary organization that forms the backbone of the pro-Iran Popular Mobilization Units (PMU), it has been able to obtain significant control over Iraq’s political, cultural, and economic life. The Iranian regime has also been able to embed corrupt Iranian intelligence officers in cabinet and military level leadership positions in Iraq. Today, Kataib Hezbollah has been able to establish a sub-state in the country, which undermines the legitimacy of the legitimate state to advance Iranian interests and encourage corruption.
If Lebanon and Iraq maintain corrupt regimes and systems, they will not be able to rebuild their economies and offer valuable growth opportunities for their citizens. Indeed, corruption is a major obstacle to achieving economic growth and development. Corrupt regimes and practices negatively impact areas of commerce, the public sector, and daily life including investment protocols, taxation, public expenditure operations, access to and the quality of health and education services and human capital development and retention. This illicit activity also impacts the employment opportunities that are available to a country’s youth, who are usually the backbone of the workforce. Favoritism and bribes often form the pillar of recruitment processes rather than an equitable evaluation of skill sets. For a government to effectively undo the legacies of corruption, it must invest in social and economic development programs that emphasize education in important areas such as digital skills and English language skills. Without these qualifications, a labor force cannot be competitive in the global economic market.
Corruption remains rife in Lebanon and Iraq and it is time to usher in a new era, one that is free from corrupt regimes and their legacies. However, for these renewal efforts to be successful, both Lebanon and Iraq must work to eradicate Iran’s corrupt influence. The people need leaders who invest in the growth of their citizens and who will establish critical social and economic development programs, rather than advancing their own interests.
In Manama, 5G and edge: unlocking new possibilities could have been perceived by all elites of the Gulf media as a reassuring means to help reach landscapes of a better future.
With 5G we’ll see an entirely new range of applications enabled by low latency of 5G and the proliferation of edge computing – transforming the art of the possible, said professional services firm Accenture in a new report.
“5G standards have been finalized late last year. We’ll soon start to see a growing number of devices rolling out across the regions. By 2025, it’s estimated that there will be 1.2 billion 5G connections covering 34% of the global population,” said Tejas Rao, Managing Director – Technology Strategy & Advisory, Growth Markets at Accenture in the company’s Business Functions Blog.
From digital to augmented consumer
The evolution of the consumer is one major leap forward. 3G and 4G helped to create the digital consumer, always connected to the internet through their mobile devices. But with 5G we’ll see an entirely new range of applications enabled by the low latency of 5G and the proliferation of edge computing – transforming the art of the possible. Rather than simply experiencing digital through their devices, consumers will have their experience of the world around them enhanced and augmented through real time data and the technologies such as augmented reality/virtual reality (AR/VR) that it enables through edge computing.
The edge cloud forms
The evolution of the network in this context is synonymous with the evolution of the cloud. So rather than what we typically see today in the public cloud, which is services residing in centralized data centers, those cloud services will move to the edge of a mobile network – the ’edge cloud’ – to drive real time cloud computing capabilities. And that development will support a wide range of new use cases across every industry, with network connectivity itself becoming the platform on which others can build new services and solutions.
From capacity and coverage to network as a platform
Accordingly, we are starting to see the strategic intent of maximizing capacity and coverage that informed network build in the 3G/4G world shift. Instead the focus is now on how to unlock 5G to deliver innovative solutions and services.
With networks no longer having to be the same everywhere, they can be built or sliced to support new use cases and opportunities for specific industries. Today’s web platform companies are already exploring this and making investments in order to capitalize on the transformational changes that 5G’s low latency can offer.
Low latency–currency for the 5G world
Ultra-reliable low latency is the new currency of the network world, underpinning new capabilities in many industries that were previously impossible. And these are not in the realm of science fiction. They are becoming possible today, ranging from real-time language translation to remote robotics and from autonomous logistics to AR-enabled industrial maintenance.
As they plan their future networks, operators need to understand how to intelligently direct 5G network investments from just pure coverage and capacity, and towards unlocking new revenue streams and business value. This is a significant departure from previous generations of network deployment. The network has moved from being a pipeline to instead becoming a platform and gateway for solution innovation and real-time connectivity services.
Partnering and collaboration will become more important than ever as operators sit at the center of new ecosystems developed around the ultra-reliable low latency, real time data at scale and responsiveness that the ‘edge cloud’ delivers.
New landscape of opportunity–and challenge
This emerging landscape of mobile edge networks can unlock many new opportunities to create value. These consist of new services to drive revenue and new possibilities for managing network costs. But the new networks also pose some novel challenges to preserving margins.
Today’s cloud world is characterized by the presence of a limited number of mega data centers in remote locations with data travelling from device to cloud and back again in order to execute a computational process or data analysis. Data typically makes the round trip travelling at 50 to 100 milliseconds over today’s 4G mobile networks.
Data travelling over 5G at less than five milliseconds facilitates the edge cloud and the ability to create new services that it empowers. But achieving that requires a proliferation of micro data centers numbering in the tens of thousands. To support edge capabilities, these will need to be deployed closer to the consumers and enterprises that use them and densely installed in urban settings.
They will need to handle the progression from millions to billions of connected devices. And move from remote connectivity to providing ultra-reliable, low-latency capabilities at the edge as data flows accelerate to real-time in order to execute time-sensitive services, from autonomous vehicles to real-time visual analytics.
Deciding where and how to play
As they create these capabilities, operators need to understand where they want to locate the edge and what the operational implications of their choice will be. That means understanding the likely demands of the territories they cover and the use cases for specific industries that are likely to be most relevant.
The one-size-fits-all approach of the 3G/4G world is no longer useful. Instead, operators need to take a more targeted view of where they want to play and the likely returns they can generate from placing much more specific bets than in the past.
Until recently, labour markets in the MENA’s oil-exporting countries were characterized by a large public sector, a small, weak private sector, and depending on the country, a sizable agricultural industry, and a sizable informal sector. But in the case of Iraq like elsewhere in the region, the volatility of oil prices and the pandemic impacted the economy, resulting in a critical situation where bloated public salaries at the heart of Iraq’s economic woes result in increasingly unstoppable youth unemployment. The currently general upheaval in the region, rural to urban and cross-border migration has not helped, leading to an even greater informal market.
Bloated public salaries at heart of Iraq’s economic woes by Samya Kullab is a vivid picture or a series of pictures on life in Iraq as perceived by a locally based journalist.
People shop for clothing at the used-clothes market in Baghdad, Iraq, Tuesday, Oct. 20, 2020. Iraq is in the throes of an unprecedented liquidity crisis, as the cash-strapped state wrestles to pay public sector salaries and import essential goods while oil prices remain dangerously low. (AP Photo/Khalid Mohammed)
BAGHDAD (AP) — Long-time Iraqi civil servant Qusay Abdul-Amma panicked when his monthly salary was delayed. Days of waiting turned to weeks. He defaulted on rent and other bills.
A graphic designer for the Health Ministry, he uses about half his salary to pay his rent of nearly 450,000 Iraqi dinars a month, roughly $400. If he fails to pay twice in a row his landlord will evict him and his family, he fears.
“These delays affect my ability to survive,” Abdul-Amma said.
Iraq’s government is struggling to pay the salaries of the ever-swelling ranks of public sector employees amid an unprecedented liquidity crisis caused by low oil prices. September’s salaries were delayed for weeks, and October’s still haven’t been paid as the government tries to borrow once again from Iraq’s currency reserves. The crisis has fueled fears of instability ahead of mass demonstrations this week.
The government has outlined a vision for a drastic overhaul of Iraq’s economy in a “white paper” presented last week to lawmakers and political factions. But with early elections on the horizon, the prime minister’s advisers fear there is little political will to execute it fully.
“We are asking the same people we are protesting against and criticizing to reform the system,” said Sajad Jiyad, an Iraq researcher.
The white paper’s calls for cutting public sector payrolls and reforming state finances would undermine the patronage systems that the political elite have used to entrench their power.
A major part of that patronage is handing out state jobs in return for support. The result has been a threefold increase in public workers since 2004. The government pays 400% more in salaries than it did 15 years ago. Around three-quarters of the state’s expenditures in 2020 go to paying for the public sector — a massive drain on dwindling finances.
“Now the situation is very dangerous,” said Mohammed al-Daraji, a lawmaker on parliament’s Finance Committee.
One government official said political factions are in denial that change is needed, believing oil prices will rise and “we will be fine.”
“We won’t be fine. The system is unsustainable and sooner or later it will implode,” the official said, speaking on condition of anonymity to discuss internal politics.
Iraq’s activists have called for a march on Oct. 25, expected to draw large crowds, a year since massive anti-government protests first brought tens of thousands to the streets demanded reforms and an end to the corrupt political class.
“As far as meeting our demands, there have been no changes,” said Kamal Jabar, member of the Tishreen Democratic Movement, founded during the protests last year. “To us, the white paper is a joke.”
Abu Ali, a merchant in Baghdad’s commercial district of Shorjah, fears what the following months have in store. The state is the primary source of employment for Iraqis, and civil servants are the lifeblood of his business.
“The delays in salary payments have affected the market directly,” he said. “If these delays continue our business and the economy will collapse.”
Abdul-Amma’s September pay was 45 days late, and he still hasn’t received the October pay that was supposed to come on the first of the month. He worries about the coming months as well.
“I have a history of chronic heart disease, and one of my daughters is also sick,” said the father of four. He pays $100 in medical fees per month.
But to the architects of the reform paper, he is part of the problem: Public sector bloat is first in line for reform.
“We hope the civil service and bureaucracy will recognize a need for change,” Finance Minister Ali Allawi told The Associated Press in a recent interview.
Iraq relies on oil exports to fund 90% of state revenues. Those revenues have plunged to an average $3.5 billion a month since oil prices crashed earlier this year.
That’s half the $7 billion a month needed to pay urgent expenses. Of that, $5 billion is for public sector salaries and pensions, according to Finance Ministry figures. Iraq also imports nearly all of its food and medicine; with foreign currency reserves at $53 billion, the World Bank estimates the country can sustain these imports for another nine months. Foreign debts account for another $316 million.
Poor productivity of public workers is the heart of the issue, Allawi said.
“We’ve ended up with a low productivity, high-cost public sector that doesn’t really earn its keep,” he said. “In one way or another this issue has to be tackled by either reducing numbers, which is politically difficult, reducing salaries … or increasing productivity.”
The white paper calls for public sector payments to be reduced from 25% of GDP to 12% but doesn’t detail how. Officials said one step may be to restore taxes on civil servants’ benefits that previous administrations had lifted.
To meet month-to-month commitments now, the government has had to borrow internally from its foreign currency reserves. A request of a second loan of $35 billion was sent to parliament, drawing criticism from lawmakers.
Haitham al-Jibouri, head of parliament’s Finance Committee, said in televised remarks that if borrowing was the government’s only plan he would fetch a shopkeeper from Bab al-Sharqi, a commercial area in the capital, to do the finance minister’s job.
Parliament’s endorsement of the loan and the reform paper is crucial for the government to avoid a full-scale economic crisis.
But this will prove difficult with elections slated for next June, since factions want to hand out jobs to maintain their constituencies.
“Whoever decides to push ahead and support reforms first will lose out, they will also need to convince other political players who will also lose out,” said Jiyad. “That is a tough sell.”
Al-Kadhimi’s advisers privately acknowledge the challenges of having the system that produced such mismanagement and corruption be its own savior.
One official recalled a remark made by the finance minister at a meeting of a high-level committee tasked with managing the crisis.
He looked at the room of officials charged with halting the country’s fast spiral toward insolvency and said, “I can’t believe this was done for 10 years and none of you did anything to stop it.” There was silence.
The answer to What is the State of Human Capital in the MENA Region? is given by Keiko Miwa, Regional Director, Human Development, Middle East & North Africa – World Bank and Jeremie Amoroso, Strategy & Operations Officer, Human Development, Middle East & North Africa – World Bank.
The World Bank recently released the Human Capital Index 2020 (HCI). This update covers 174 countries—17 more than when the index was first launched in 2018. Not surprisingly, the HCI scores among MENA countries vary widely from 0.67 in the United Arab Emirates (UAE) to 0.37 in Yemen. Countries affected by conflict, such as Iraq and Yemen, score low on the index, which poses an important question on how to support the protection and enhancement of human capital even in the midst of conflict.
Looking at the 10-year trend, the HCI improved in 11 out of 14 MENA countries (with available data). Morocco, Oman, and the UAE registered the largest gains in the HCI during this period. School enrollment—at the preprimary and secondary levels—as well as harmonized test scores and adult survival, are the main drivers of the region’s HCI improvements. During this period, girls surpassed boys in educational attainment. On the other hand, enrollment declines in primary and lower-secondary school outweighed gains in other components of HCI for Kuwait, Tunisia, and Jordan.
Figure 1. Change in HCI 2020 and HCI 2020 in MENA countries
Source: World Bank. 2020. The Human Capital Index 2020 Update: Human Capital in the Time of COVID-19.
Note: Arrows indicate a decline in the HCI between 2010 and 2020. Data unavailable for Yemen, Iraq, Lebanon, and West Bank and Gaza for HCI 2010. See World Bank’s list of countries/economies by region.
WHAT’S NEW IN THE HUMAN CAPITAL INDEX 2020?
The HCI 2020 update introduces the Utilization-Adjusted Human Capital Index (UHCI). This is quite relevant in several MENA countries since there is a large gap between human capital and labor market outcomes. The utilization of human capital accounts for the fact that when today’s child becomes a future worker, she may not be able to find a job (Basic UHCI). And even if she can, it might not be a job where she can fully use her skills and cognitive abilities in better employment that increases her productivity (Full UHCI). When adjusting for the proportion of the working-age population who are employed, MENA’s HCI value declines by at least one-third—from 0.57 to 0.32 (Basic UHCI) and 0.38 (Full UHCI). Low female labor force participation rates in MENA countries are a key factor for the region’s low Utilization-Adjusted HCI.
Figure 2. The average MENA HCI value declines by more than a third when accounting for the proportion of the working-age population who are employed.
RISKS TO HARD-EARNED HUMAN CAPITAL
COVID-19 has cascaded into education shocks and the worst economic recession since World War II. At the height of the pandemic, almost 84 million children were out of school in MENA, and now countries that started to open schools are now reconsidering their decision due to the second wave. This could result in the loss of 0.6 years of schooling (adjusted for quality). Nevertheless, some MENA countries took early actions and adopted innovative measures to continue education. In Jordan, for example, the private sector and education officials collaborated to develop an education portal and dedicated TV channels for virtual lectures in Arabic, English, math, and science for grades one through 12. And Saudi Arabia’s universities achieved unprecedented results as more than 1.2 million users attended over 7,600 virtual classes, totaling 107,000 learning hours.
The HCI 2020 update uses data gathered as of March 2020—prior to the COVID-19 pandemic. It serves as a baseline for policymakers to track changes in human capital and inform policies to protect and invest in people through the pandemic and beyond. Previous pandemics and crises taught us that their effects are not only felt by those directly impacted, but often ripple across populations and, in many cases, across generations. COVID-19 is no exception. As a result, the region can—and must—build on its human capital progress amid the turmoil in three key ways.
First, the MENA region needs to continue building its human capital even during the pandemic or conflict. Crisis response measures that emerged out of necessity—such as distance learning and telemedicine—present new opportunities for building back better and differently the “new normal.”
Second, many countries in MENA have shown their sharp focus on protecting human capital by ramping up cash transfers and strengthening social safety nets since the onset of the pandemic. However, stronger efforts are still needed to preserve the human capital of internally displaced persons and refugees and to foster social inclusion for economic mobility.
Third, utilizing human capital is important to the immediate recovery and long-term development of MENA—the region with the highest youth unemployment in the world at more than 25 percent. Utilizing human capital requires job-focused policies as concerns about the future of work grow louder.
The HCI 2020 update shows that many MENA countries have made meaningful human capital progress over the past 10 years. As the pandemic threatens these precious gains, investment in human capital is more important than ever. Governments in MENA have launched promising initiatives that will help to build a better future. When today’s children in MENA become adults, hopefully, they will see how their region of the world turned the unprecedented crisis in 2020 into an opportunity to build stronger human capital.
The outlook for MENA’s current account and fiscal balances also deteriorated sharply. Driven largely by lower oil export revenue, a drop in fiscal revenue, and the large increase in fiscal expenditure required to respond to the health crisis, the region’s current account and fiscal balances in 2020 are forecast at -4.8% and -10.1% of GDP respectively, much worse than the forecasts in October 2019. Public debt is projected to rise significantly in the next few years, from about 45% of GDP in 2019 to 58% in 2022.
In dealing with the COVID-19 pandemic, the top priority is responding to the health crisis while aiming to preserve consumption and production capabilities. If financially feasible, countries should postpone fiscal consolidation until recovery is well underway. Reallocating spending to deal with the immediate impacts of the crisis and making such spending more efficient, for example, by proactively reducing leakages to ensure relief measures reach the intended beneficiaries can help create fiscal space. In the medium run, there is a strong need to boost productivity to restore growth and stabilize the debt. A powerful way to do that would be to pursue profound institutional reforms that would reshape the role of the state, promote fair competition, accelerate the adoption digital technology, and pursue regional integration, which is the focus of this report.
CHAPTER I: Coping with a Dual Shock in the Middle East and North Africa
Countries in the Middle East and North Africa (MENA) face both a COVID-19 pandemic and a collapse in oil prices. Trade volumes are estimated to have fallen sharply. Preliminary data for April from the United Nations Conference on Trade and Development suggests a roughly 40% decline in trade for the region. The downturn is expected to accelerate in sectors with strong value chains, particularly in electronics and automotive products.
CHAPTER II: Reviving Middle East and North Africa Regional Trade Integration in the Post-COVID-19 Era
Trade openness can be significant in achieving inclusiveness. However, to promote growth that benefits all segments of society, trade reforms must move in parallel with other policy reforms. The benefits of trade openness might otherwise be canceled by other economic and social measures. The contributions of trade openness to inclusive growth can be uneven and cannot be understood without considering how it affects all factors of production, benefiting some and hurting others.
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