Public sector reform in the MENA

Public sector reform in the MENA

The Economic Research Forum published an article (see below) written by Robert P. Beschel Jr. and Tarik Yousef on the Public sector reform in the MENA region with a long and hard look on the achievable governance revolution.

Our thoughts are autocratic and authoritarian regimes here and there plagued by collateral youth bulges and ‘rentier’ organisational systems that bogged down any reach towards a working Democracy in most MENA region countries result in what is described in this article. Historically, these countries opted for Modernity, but the poor institutional quality that ensued leads to heavy bureaucracy here and absent leadership elites there.

The picture above is of the Brookings Institution re-publication of the same article.

Public sector reform in MENA region on the achievable governance revolution

May 4, 2021

Across the Middle East and North Africa, there are countries working to modernise state institutions to make them more efficient, effective and responsive. This column argues that while it is common for Arab governments to look elsewhere for reform ideas, there is a wealth of experience within the region that practitioners should consider. Lessons from public sector reform in MENA from the past two decades suggest that transformative change is possible.

Public sector reform in the MENA
Kuwait's government quits, deepening political deadlock - The Hindu

In a nutshell

  • The revolutionary impulse unleashed by the Arab Spring a decade ago may again sweep through the region once lockdowns are lifted, economies attempt to restart and the full scale of damage to jobs and livelihoods caused by Covid-19 becomes clear.
  • Even if such pressures do not materialise, governments would be wise to not let the opportunity for disruptive change presented by the pandemic to slip by untapped.
  • Arab reformers are embarking on the critical task of ensuring that their governments and public sectors can respond to the pronounced development challenges, both known and unknown, that they will be asked to address during the coming decade.

As we approach the tenth anniversary of the Arab Spring, much attention is rightly being given to the broader governance trajectory of the Middle East and North Africa (MENA) region over the last decade.

With the notable exception of Tunisia, the story is hardly encouraging. The aging autocrats are gone, but many of the heady expectations of that time have given way to the consolidation of authoritarian rule by entrenched elites. The luckiest countries have witnessed merely cosmetic changes on key issues of democracy, transparency and rule of law. The less fortunate have witnessed brutal domestic crackdowns and flagrant human rights abuses. And the truly unlucky have descended into chaos and civil war.

Beyond the public debate over democratic change, another long-standing struggle is taking place as many MENA countries work to reform and modernise state institutions to make them more efficient, effective and responsive – an agenda that is less controversial but no less urgent.

The MENA region is home to some of the largest public sectors in the world, yet the quality of service delivery is often poor. The region trails most other parts of the world (with the exception of South Asia and sub-Saharan Africa) on global indices for government effectiveness, quality of regulation and control of corruption. Even more troubling, it is one of the few places in the world that has actually lost ground on these indices over the past decade.

During the Covid-19 pandemic, MENA governments have rediscovered the critical importance of government institutions. Initially, through a combination of luck and skill, regional countries were able to keep their mortality and morbidity rates well below those of hard-hit regions in Europe, North America and Latin America.

The region witnessed many instances of effective policy coordination across traditionally conflicting bureaucratic structures; several countries also built on earlier investments and expertise in e-governance and m-governance to address challenges such as contact tracing and distance learning. Despite pressing financial constraints, governments were quick to adopt unprecedented fiscal and monetary measures to mitigate at least some of the pandemic’s economic impact on the vulnerable segments of society.

Yet the need for broader institutional reforms that go well beyond those adopted in response to the Covid-19 pandemic is immediate and palpable. As the large-scale protests of 2019 demonstrated, ‘the Arab Street’ is becoming less willing to accept the uneven quality of service delivery, or the preferential treatment of large and well-connected firms. Corruption and cronyism are increasingly being recognised and called out for what they are.

The Covid-19 pandemic has underscored the need for flexible, responsive institutions that can adapt to changing circumstances and coordinate complex policies. At the same time, the recent volatility in oil markets and external remittances has made clear that the region must urgently diversify revenue sources and make government expenditures more efficient.

The public sector challenges confronting the region over the next decade are both clear and massive. To cope with the demographic pressures that are already underway, governments will need simultaneously to expand the scope and quality of services that they provide to their citizens, paying particular attention to lagging regions and under-served communities.

They will need to educate the next generation to compete in a changing global economy. They will need to serve as an attractive destination for capital, providing the business environment that will facilitate foreign and domestic investment. They will need to extend their under-funded healthcare systems to serve neglected regions and populations better. And they will need to be agile enough to respond to a host of cross-cutting threats – from climate change and water scarcity, to global energy market transitions – that will require an integrated, nuanced and sustained response across the whole of government.

Of all the challenges that MENA governments must confront, perhaps the most politically fraught is the reality that their traditional social contract, which trades political acquiescence for public sector jobs, is ultimately a Faustian bargain. The problem with the existing social contract is not merely its lack of fiscal sustainability – although that threat is real and will only get worse with time.

The problem is that this bargain undermines meritocracy and hinders the creation of the sort of high-performing public sectors that will be necessary to address the region’s most pressing economic and social problems. It also creates perverse incentives that undermine other critical objectives, such as labour force diversification.

In a recent collection of in-depth case studies, Public Sector Reform in the Middle East and North Africa: Lessons of Experience for a Region in Transition, we take a deep look at notable examples of public sector reform in the MENA region from the past two decades.

Our assessment provides hope for the region’s future by illustrating that transformative change is possible. And change will be needed. The revolutionary impulse unleashed by the Arab Spring a decade ago and its more recent echoes in 2019 may again sweep through the region once the lockdowns are lifted, economies attempt to restart and the full scale of damage to jobs and livelihoods caused by Covid-19 becomes clear. And even if such pressures do not materialise, governments would be wise to not let the opportunity for disruptive change presented by the pandemic to slip by untapped.

While it is common for Arab governments to look elsewhere for reform ideas, we believe that there is a wealth of experience within the region that practitioners should consider. It may not align perfectly with global knowledge and practice, but neither is it wholly distinct. To the extent that MENA countries differ, it is only in certain areas, and often more by degree than in kind.

The lessons from this experience, both good and bad, will be of great value to the next generation of Arab reformers as they embark on the critical task of ensuring that their governments and public sectors can respond to the pronounced development challenges, both known and unknown, that they will be asked to address during the coming decade.

EAD’s new documentary: ‘Our Sea… Our Future’

EAD’s new documentary: ‘Our Sea… Our Future’

Abu Dhabi Media to air EAD’s new documentary: ‘Our Sea… Our Future’ now that all fossil fuels divestment appears to generalise for reasons known to everyone overwhelmingly. Rediscovering the sea and historical pearl-diving could well be a segment of diversification of the economy. It must be noted that Abu Dhabi-based Future Rehabilitation Centre is not also that far from the sea shore. Anybody sees anything wrong ?

Abu Dhabi Media to air EAD’s new documentary: ‘Our Sea… Our Future’

ABU DHABI, (WAM) — The Environment Agency – Abu Dhabi (EAD) has unveiled its new documentary: “Our Sea .. Our Future,” as a part of its ongoing cooperation with Abu Dhabi Media.

The 35-minute documentary highlights the fisheries sector, which is an integral part of Abu Dhabi’s heritage. The film illuminates the pressure that Abu Dhabi’s fisheries face, and the actions were taken by EAD to contain the impacts of overfishing on the marine environment, to ensure the recovery and renewal of the Emirate’s fish stocks.

The documentary was produced by EAD to highlight the roles of some of its employees and the challenges they face while conducting their various tasks and responsibilities. It also features interviews with EAD experts and specialists who emphasise the importance of fishing, the work undertaken by many Emiratis as a main source of income in the pre-oil era. Despite the ubiquitous development in all aspects of life in the UAE and the wide diversity of income sources, fishing remains one of the main sources of income and a valued traditional craft.

The documentary also showcases the perspectives of various fishermen, who are key partners of the agency.

Mohamed Ahmed Al Bowardi, Vice Chairman of EAD, commented, “Abu Dhabi is one of the key stakeholders in fisheries in the UAE, and the improvement of the fish stock and the abundance of demersal species represent very good indicators of the general condition of the country’s territorial waters in the Arabian Gulf.”

He pointed out that natural fisheries in the UAE, like others around the world, are subject to depletion due to several natural and human factors. Studies conducted by the agency show that the fishing sector in Abu Dhabi faced significant pressures, as the overutilisation of fisheries and the sharp depletion of the fish stock led to a more than 80% decline in the fish stock levels in the country. Moreover, several key commercial species declined to unsustainable levels.

He added, “As part of our efforts to protect the fish stocks and encourage sustainable use of fisheries and marine resources, the agency set several controls to manage fisheries in the emirate in a manner that would increase feasibility to utilise and preserve natural resources.”

Razan Khalifa Al Mubarak, Managing Director of EAD, said, “Fisheries are not only a source of revenues or income, as they also have a significant cultural and historical importance. Therefore, Abu Dhabi’s government considers their protection a key priority.”

She added, “We cannot underestimate the importance of early response to protect the marine resources for the current and next generations. After fish caught in the UAE were sufficient to meet the population’s needs, we are now depending heavily on importing to bridge the widening gap between supply and demand. Therefore, we took strict actions and controls that would ease the pressure off fisheries in the commercial and recreational sectors.”

Dr. Shaikha Salem Al Dhaheri, Secretary-General of EAD, said, “This documentary enabled us to highlight some of the main threats facing fisheries in Abu Dhabi, and the internationally-recognised efforts taken by the agency, in cooperation with its partners to manage the fish stocks. Those efforts resulted in creating multiple marine reserves, in addition to deploying a system for licencing commercial and recreational fisheries, and regulating the use of fishing equipment, in addition to imposing a seasonal ban to protect fish during the breeding season. The agency also set a minimum size for fish to be caught for some of the key types and prohibited unsustainable fishing methods.”

According to her, policies, procedures, and administrative controls were taken by the agency led to significant improvement in the fish stocks of some of the main commercial species that were depleted. EAD hopes for further improvement as the compliance with current policies and measures continue in a manner that helps achieve the desired outcomes of environmentally sustained fisheries.

Acting General Manager of Abu Dhabi Media Abdul Raheem Al Bateeh Alnuaimi, said, “With its contribution to the community, Abu Dhabi Media is keen to consolidate its leading position through raising the community’s awareness of various topics and initiatives, as well as reaching its target audience through its various media channels.

“Through airing this documentary, we aim to support environmental and cultural initiatives, highlighting the efforts made by the government to preserve Abu Dhabi’s environment and biodiversity. ‘Our Sea…Our Future’ documentary highlights the efforts of the Environment Agency and the concerned authorities in addressing the environmental challenges resulting from overfishing.”

This is the second documentary produced by EAD about marine resources in the UAE. The first one was “Our Sea .. Our Heritage” produced in 2019 which highlighted the condition of fisheries in the UAE and the long-term protection and recovery plan for fisheries.

WAM / Esraa Ismail / Mohd Aamir

 

Corporate net zero: we need a more sophisticated approach

Corporate net zero: we need a more sophisticated approach

Ian Simm, Founder & Chief Executive at Impax Asset Management, writes about achieving a Corporate net-zero possibly through a more sophisticated approach required of all, big or small corporations of all countries. So here it is.

Corporate net zero: we need a more sophisticated approach

The private sector holds the key to decarbonising the economy over the next quarter century. As countries set “net zero” or equivalent targets backed by carefully designed roadmaps for sectors such as energy, transportation and food, there’s a widespread assumption that “national net zero” should mean “net zero for all”, including “corporate net zero” (CNZ) for today’s businesses.  Although there are some benefits to unpacking national net-zero targets in this way, there are also several important drawbacks. A more sophisticated approach is urgently required.

Ahead of the COP26 conference in Glasgow later this year, governments are likely to set or raise national targets for decarbonising their economies. In much of the world, the private sector will mobilise to serve rapidly expanding markets, for example for electric vehicles or plant-based food. Experience suggests that we’re about to witness a huge amount of creative destruction as entirely new industries are born, nascent sectors flourish and demand for products and services we once considered permanent fades, threatening or even destroying what have been large companies – a fate similar to landline-based telephony or, potentially, to cash-based transactions.

As the opportunities and risks linked to climate change become mainstream for many companies and their stakeholders, corporate net-zero targets have several attractions. Faced with a simple message that they should develop, analyse and act on specific climate change opportunities and risks, management teams will not only identify ways to improve the company’s risk-adjusted returns but may also produce or facilitate breakthroughs for their customers or suppliers, for example by placing bulk orders for low-carbon products. 

Similarly, multiple CNZ commitments across a sector may enable discussions around possible collective action, for example the establishment of clusters to generate and consume “green” hydrogen. Early action by companies can encourage governments to develop further their policies to mitigate climate change, while corporate pledges may unlock capital to catalyse new climate-friendly activities, for example in nature-based solutions.

The drawbacks of a blanket adoption of corporate net zero

And yet there are several crucial drawbacks to the blanket adoption of corporate net-zero targets. 

First, and most obvious, is the definition and interpretation of net zero. Apart from the ambiguity around each entity’s pathway to net zero (i.e. “how much, by when?”), the role for offsets is contentious – for example, should a cement manufacturer be able to account for the carbon benefits of its investments in peatland restoration, or if we allow this, does that create a moral hazard (to pollute)? And how should low-carbon technologies be treated: for example, when a new wind farm is built, does it really make sense that the entity purchasing the electricity gets the carbon benefit while the investor (or wind farm owner) receives no such boost to their own carbon accounting?

Second is capital inefficiency. To ensure there’s sufficient “creative destruction” as we reset our economy, we need to avoid hampering the essential sunsetting of certain activities in favour of new ones. The law of diminishing returns predicts that, as companies implement efficiency measures and cost-competitive technologies to reduce their emissions, they will need to consume more and more capital to save the next tonne of carbon, for example, steel manufacturers seeking to switch to direct hydrogen reduction. At the same time, companies producing alternative products, for example construction materials based on wood, may offer much higher financial returns on an equivalent amount of capital with much lower risk. Faced with a choice, investors are likely to prefer the latter.

Third, skills. To pivot successfully to entirely new activities, today’s companies need to harness alternative expertise. For example, can today’s oil majors with their competence in seismology and the handling of liquids, realistically develop a competitive advantage in the development of power projects and in electricity trading to outcompete today’s power generators? 

Fourth, value chain effects. Notwithstanding the challenges of measuring so-called “Scope 3” emissions, a company that pursues a net-zero position without concern for its customers or even its suppliers may unwittingly hold back climate change mitigation across the “system” (i.e., the wider economy).  For example, if the renewable energy supply required to enable a manufacturer of insulation material to become net zero costs significantly more than the fossil fuel supply it used previously, the price of its product will rise, thereby reducing its potential to assist customers with their energy savings. 

Fifth, the “someone else’s problem” effect. It’s too easy for today’s management team to commit a company to long-term targets that they personally won’t be around to deliver on.

And lastly, confusing signals. As decarbonisation progresses, management teams may be faced with a conflict between achieving financial objectives and delivering on the company’s net-zero pledge. This may not matter at the outset, but once the “early wins” in emissions reduction have been secured, difficult conversations about the trade-off between financial and environmental outcomes are, in my view, inevitable.

Climate change resilience first

So, what’s to be done? A sound starting point is to use “corporate net zero” as an agenda item for a deeper discussion on climate change between companies and their investors. But rather than starting that conversation by simply insisting on the adoption of net-zero targets, investors should seek to assess whether the company is already or aiming to become “climate change resilient” using the framework recommended by the Taskforce on Climate-Related Financial Disclosure (“TCFD”) which covers both emissions reductions and physical climate risks. 

This should cover the four areas outlined by TCFD: 

  • First, governance: what changes has the company considered and made to ensure that climate change issues are managed comprehensively over a long timeframe?
  • Second, strategy: how has the company’s business strategy evolved in response, what alternatives has management considered and what will be the impact on the company’s expected return on invested capital? 
  • Third, risk and opportunity: has the company mapped out the key changes in these areas arising from climate change and implemented programmes to monitor them over a long timeframe?  
  • And fourth, metrics, targets and reporting: is the company’s planned reporting in this area likely to provide decision-useful information to shareholders and other stakeholders?

These conversations should lead to a comprehensive, rational plan for each company to manage climate change issues over time, tailored to its individual circumstances. For some, the optimal result will be to adopt a (simple to communicate) corporate net-zero target described in a way that avoids the drawbacks discussed earlier.  For others (and in particular, in hard-to-abate sectors), a more appropriate response would be (a) a business plan focused on the efficient use of capital in the context of a wider set of risks, (b) imaginative and proactive collaboration with peers and government to shape new markets, and (c) clear communication with all stakeholders. 

We need to be careful that “corporate net zero” does not turn into “one-size-fits-all”. The failure to take a thoughtful and sophisticated approach to these issues is likely to result in management confusion, muddled or misleading external communication and perhaps most significantly, the misallocation of capital. Now is the time to get our proverbial ducks in a row!Report this

Published on Linkedin

The current enthusiasm for “corporate net zero” is understandable, but there are significant drawbacks that are set to lead to confusion and unintended consequences. My take on why, in the face of climate change, companies should follow TCFD guidance and reporting, prioritising sound strategy and resilience.

Ian Simm

Read more in Ian Simm‘s 8 articles

Ensuring a Stronger and Fairer Global Recovery

Ensuring a Stronger and Fairer Global Recovery

Mohamed A. El-Erian writes that ensuring a Stronger and Fairer Global Recovery is required for a better and more satisfactory tomorrow. The two ginormous economies of the World would lead it that way. Here is what he says about that.

Ensuring a Stronger and Fairer Global Recovery

2 April 2021

Although tough trade-offs are sometimes unavoidable, there is a way for policymakers to maintain a robust global economic recovery in 2021 and beyond while simultaneously pulling up disadvantaged countries, groups, and regions. But it will require both national and international policy adaptations.

CAMBRIDGE – An old joke about tricky trade-offs asks you to imagine your worst enemy driving over a cliff in your brand-new car. Would you be happy about the demise of your enemy or sad about the destruction of your car?

For many, the shape of this year’s hoped-for and much-needed global economic recovery poses a similar dilemma. Absent a revamp of both national policies and international coordination, the significant pickup in growth expected in 2021 will be very uneven, both across and within countries. With that comes a host of risks that could make growth in subsequent years less robust than it can and should be.

Based on current information, I expect rapid growth in China and the United States to drive a global expansion of 6% or more this year, compared to a 3.5% contraction in 2020. But while Europe should exit its double-dip recession, the recovery there will likely be more subdued. Parts of the emerging world are in an even tougher position.

Much of this divergence, both actual and anticipated, stems from variations in one or more of five factors. Controlling COVID-19 infections, including the spread of new coronavirus variants, is clearly crucial. So is distributing and administering vaccines (which includes securing supplies, overcoming institutional obstacles, and ensuring public uptake). A third factor is financial resilience, which in some developing countries involves preemptively managing difficulties from the recent debt surge. Then come the quality and flexibility of policymaking, and finally whatever is left in the reservoirs of social capital and human resilience.

The bigger the differences between and within countries, the greater the challenges to the sustainability of this year’s recovery. This reflects a broad range of health, economic, financial, and socio-political factors.

In a recent commentary, I explained why more uniform global progress on COVID-19 vaccination is important even for countries whose national immunization programs are far ahead of the pack. Without universal progress, leading vaccinators face a difficult choice between risking the importation of new variants from abroad and running a fortress economy with governments, households, and firms adopting a bunker-like mindset.

Uneven economic recoveries deprive individual countries of the tailwind of synchronized expansion, in which simultaneous output and income growth fuels a virtuous cycle of generalized economic well-being. They also increase the risks of trade and investment protectionism, as well as disruptions to supply chains.

Then there is the financial angle. Buoyant US growth, together with higher inflation expectations, has pushed market interest rates higher, with spillovers for the rest of the world. And there is more to come.

European Central Bank officials have already complained about “undue tightening” of financial conditions in the eurozone. Rising interest rates could also undermine the dominant paradigm in financial markets – namely, investors’ high confidence in ample, predictable, and effective liquidity injections by systemically important central banks, which has encouraged many to venture well beyond their natural habitat, taking considerable if not excessive and irresponsible risks. In the short term, high liquidity has pushed cheap funding to many countries and companies. But sudden reversals in fund flows, as well as the growing risk of cumulative market accidents and policy mistakes, could cause severe disruptions.

Finally, uneven economic recovery risks aggravating the income, wealth, and opportunity gaps that the COVID-19 crisis has already widened enormously. The greater the inequality, particularly with respect to opportunity, the sharper the sense of alienation and marginalization, and the more likely political polarization will impede good and timely policymaking.

But, whereas the old joke hinges on the unavoidability of tough trade-offs, there is a middle way for the global economy in 2021 and beyond – one that maintains a robust recovery and simultaneously lifts disadvantaged countries, groups, and regions. This requires both national and international policy adaptations.

National policies need to accelerate reforms that combine economic relief with measures to foster much more inclusive growth. This is not just about improving human productivity (through labor reskilling, education reforms, and better childcare) and the productivity of capital and technology (through major upgrades to infrastructure and coverage). To build back better and fairer, policymakers must now also consider climate resilience as a critical input for more comprehensive decision-making.Sign up for our weekly newsletter, PS on Sunday

Global policy alignment also is vital. The world is fortunate to have benefited initially from correlated (as opposed to coordinated) national policies in response to the COVID-19 crisis, with the vast majority of countries opting upfront for an all-in, whatever-it-takes, whole-of-government approach. But without coordination, policy stances will increasingly diverge, as less robust economies confront additional external headwinds at a time of declining aid flows, incomplete debt relief, and hesitant foreign direct investment.

With the US and China leading a significant pickup in growth, the global economy has an opportunity to spring out of a pandemic shock that has harmed many people and, in some cases, erased a decade of progress on poverty reduction and other important socio-economic objectives. But without policy adaptations at home and internationally, this rebound could be so uneven that it prematurely exhausts the prolonged period of faster and much more inclusive and sustainable growth that the global economy so desperately needs.

MOHAMED A. EL-ERIAN, President of Queens’ College, University of Cambridge, is a former chairman of US President Barack Obama’s Global Development Council. He was named one of Foreign Policy’s Top 100 Global Thinkers four years running. He is the author of two New York Times bestsellers, including most recently The Only Game in Town: Central Banks, Instability, and Avoiding the Next Collapse.