What Lies Beneath the Slow Economic Growth in the MENA?

What Lies Beneath the Slow Economic Growth in the MENA?

What Lies Beneath the Slow Economic Growth in the MENA? apofeed with “What Lies Beneath the Slow Economic Growth in the MENA?” attempts to elaborate on the current situation that is prevailing in certain MENA countries.

What Lies Beneath the Slow Economic Growth in the Middle East and North Africa?

 

A dynamic private sector is key for the economies of the region to grow out of their currently high debt levels; Unlocking sustainable growth in the region’s private sector requires reforms that facilitate innovation, the adoption of digital technologies and investments in human capital; Reforms to support these objectives must take account of sustainability and the global agenda to limit climate change

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The European Investment Bank (EIB), the European Bank for Reconstruction and Development (EBRD) and the World Bank have published a joint report, Unlocking Sustainable Private Sector Growth in the Middle East and North Africa (MENA(https://bit.ly/3H73CdA). The report analyses constraints on productivity growth and limited accumulation of factors or production in the MENA private sector.

The report is based on the MENA Enterprise Survey conducted between late 2018 and 2020 on over 5 800 formal businesses across Egypt, Jordan, Lebanon, Morocco, Tunisia, the West Bank and Gaza. Historically, economic growth in the Middle East and North Africa has been weak since the global financial crisis of 2007-2009 and the Arab Spring of the early 2010s. Since then, gross domestic product (GDP) per capita has grown by only 0.3% a year in the MENA region. That compares unfavourably with rates of 1.7% on average in middle-income countries and 2.4% in the developing economies of Europe and Central Asia.

Achieving higher and sustainable growth is particularly important in view of other economic challenges facing the region. Public debt has increased considerably over the last decade, accompanied by declining investment. More recently, the coronavirus pandemic has battered the region, further straining public finances. In addition, the Russian invasion of Ukraine affects the MENA economies through higher hydrocarbon prices, risks to food security and declining tourism.

Against this background, it is important that policymakers exploit the potential of the private sector to propel the region towards greater prosperity.

“The spillovers from the war in Ukraine add to structural vulnerabilities in the region. The prospects for global financial tightening, persistently high energy and food prices and concerns for food security come on top of concerns related to weak economic growth and rising debt levels,” said EIB Chief Economist Debora Revoltella (https://bit.ly/2UYJi4s). “When responding to the new shock, MENA countries need to tackle the main structural bottlenecks affecting the region. Reforms that lower regulatory barriers, tackle informal business practices, promote competition, and facilitate innovation and digitalisation are crucial for achieving sustainable economic growth and improving resilience to future shocks.”

The business environment in the MENA region as reported in the survey has been held back by various factors. Political connection and informality are undermining fair competition, bringing economic benefits to a limited number of companies. Management practices lag behind benchmark countries, with a decline in average scores in all MENA countries since 2013.

Customs and trade regulations appear to be more severe barriers for firms in the MENA region than in other countries. Firms need more time to clear customs to import or export than in other countries. The MENA economies depend on high levels of imports compared to low export activities.

Although firms trading in the international market are more willing to develop and innovate processes, only 20% invest in innovation, which can affect the long-term economic prospects for the region.

The region needs to make better use of its human capital. Predominantly, only a few foreign-owned companies invest in training their human capital, and they tend to be digitally connected exporting firms. Additionally, a significant share of companies are not engaging in financial activities with other economic players, opting to self-finance voluntarily.

Incentives for companies to decarbonise are weak, and MENA firms are less likely than their counterparts in Europe and Central Asia to adopt measures that reduce their environmental footprint.

Unlocking sustainable growth in the region’s private sector, the report calls for MENA economies to lower regulatory barriers for businesses, promote competition and reduce disincentives emerging from political influence and informal business practices.

The region is also in need of reforms to facilitate innovation, the adoption of digital technologies and investments in human capital, while being in line with the global agenda to limit climate change, enhance sustainability and protect the natural environment.

Improving management practices can be instrumental to that. “Good management practices can account for as much as 30% of differences in efficiency across countries,” said Roberta Gatti, Chief Economist for the Middle East and North Africa at the World Bank. “Management practices are lacklustre in firms in the region, particularly in those with some state ownership. Improving these practices can have substantial benefits, is not costly, but is not easy. It will require — among others — a change in mindsets.”

Companies should also be given incentives to exploit the benefits of participating in cross-border trade and global value chains more broadly, accompanied by better management practices.

At the same time, the state has a duty to ensure that this transition process is just, through measures that help workers to take advantage of opportunities to obtain new, higher-quality jobs linked to the green economy, while also protecting those at risk of losing their jobs. Such measures include labour market policies, skills training, social safety nets and action to support regional economic development.

EBRD Chief Economist Beata Javorcik said: “Climate change creates an opportunity  the MENA region to build up its green credentials and use them as a source of competitive advantage. This will create the much-needed high-quality jobs linked to the green economy.”

Distributed by APO Group on behalf of European Investment Bank (EIB).

Press contacts:
Eva De Francesco
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+352 437 986 637
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Serena Sertore
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Website: www.eib.org/press

 

Lebanese voters are signalling a desire for change

Lebanese voters are signalling a desire for change

Lebanese voters are signalling a desire for change as generally witnessed and felt by all after the country’s latest parliamentary elections. 

Lebanese election sees significant gains for independent non-sectarian politicians

By John Nagle, Queen’s University Belfast and Tamirace Fakhoury, Aalborg University

Lebanese voters are signalling a desire for change, with Hezbollah and its allies losing ground across the country in a parliamentary election.

Just as the recent election in Northern Ireland brought a boost for the non-sectarian Alliance Party, Lebanon’s election saw significant gains for political representatives untethered to sectarian politics. Like Northern Ireland, Lebanon’s political system is set up to share power. Its new parliament will have various sectarian blocs, revolving around Hezbollah and rival party Lebanese Forces, and a sizeable non-sectarian group campaigning on economic issues, social justice and accountability.

Hezbollah, a pro-Iranian Shia-based party, emerged in 1982 largely in response to Israel’s invasion of Lebanon. It gained prominence after the end of Lebanon’s civil war (1975-1990) and its share of parliament seats started rising in the 2000 elections. After the departure of Syrian troops from Lebanon in 2005, its alliance with key political players such as the other Shia-based political party, Amal, and the Christian-based Free Patriotic Movement allowed it to gradually block major policy processes deemed detrimental to its interests such as negotiations on its demilitarisation.

The Hezbollah bloc has lost ground to rivals across the spectrum. Results indicate that the pro-Thawra opposition candidates have made significant gains, capturing up to 13 seats. The Thawra name harks back to October 2019, as the state’s economy went into freefall, when an uprising of ordinary citizens, often called the Thawra, campaigned for all sectarian leaders to resign and for rights for foreign domestic workers, women and LGBTQ+ people.

In this election, the Lebanese Forces party has used widespread anger against Hezbollah and its allies to increase its number of parliamentarians. Lebanese Forces has positioned itself as the main faction willing to contest Hezbollah in the power-sharing government.

Opposition gains have been secured even in areas traditionally seen as Hezbollah strongholds. In 2018, Hezbollah and its allies won 71 seats, making it the biggest faction in the parliament. Hezbollah emerged from Sunday’s election weakened as many voters blame the party for hindering an independent investigation into the Beirut port explosion which killed more than 200 people.

This national election took place as Lebanon struggled with a series of crises beginning in 2019, including an economic meltdown that left more than 75% of the population below the poverty line, in what the World Bank ranks as among the three most severe economic collapses anywhere since the 19th century. The country is also dealing with the aftermath of the port disaster. More recently Russia’s invasion of Ukraine has pushed millions close to starvation because of Lebanon’s heavy dependence on Ukrainian wheat.

Relatives of victims of the August 2020 Beirut port blast carry their pictures during a protest near the port. Reuters/Alamy

Lebanon’s political power-sharing system is deliberately designed to protect the entrenched interests of the state’s powerful sectarian leaders. All seats in the 128-member parliament are reserved on a sectarian basis and the powerful factions have often functioned on behalf of other powers, such as Iran and Saudi Arabia.

For its supporters, the power-sharing system gives guarantees of political representation to the main groups and ensures that no faction can control the government.

Critics point to a number of drawbacks with the system. Some Lebanese people are reliant on their sect leaders to distribute basic services, such as healthcare. Lebanon is further crippled by paralysis and dysfunction, with the government rarely passing any new laws.

Yet, despite many barriers to change, we may be beginning to see cracks in the system to allow anti-sectarian and independent opposition candidates to emerge as a serious force in Lebanon.

In recent years, hundreds of thousands of Lebanese have voiced dissent by taking to the streets to demand an end to the state’s corrupt leaders, branded by protesters as “thieves”.

While the protests eventually ran out of steam, it built a platform for a political movement that has now gained independent parliamentary seats.

While it is tempting to suggest that Lebanon’s election has ushered in significant change, caveats are required. Voter turnout was 41%, lower than in 2018. This may point more to apathy and disillusionment than hope.

Obsolete electoral laws have not kept pace with people’s lives, and may have been a factor in the low turnout. In Lebanon, people must vote in the constituencies where they were born. With fuel prices rising and a crumbling transportation system, many could not travel to their birthplace hours away.

This result could lead to political stalemate and confrontational power-sharing. The parliament could turn into a polarised arena where parties with opposing agendas are supposed to share power. The main factions are likely to disagree on the new speaker of parliament and on the allocation of executive ministerial positions, making it difficult for the council of ministers to address the disastrous economic situation.

Factions are also likely to disagree on the new presidential candidate set to replace current president Michel Aoun five months from now at the end of his term.

Yet there is still room for optimism. The success of these independent candidates demonstrates that anti-sectarian politics can succeed in an environment designed to prohibit it flourishing. Unlikely breakthroughs in sectarian strongholds represent notable and exceptional gains.

Independent candidates have not had the array of tools at the disposal of the major sectarian parties. They do not have the economic clout to court votes or have links to powerful media networks to echo their message. They also can’t ask for support from powerful states, such as Iran and Saudi Arabia. Their candidates are more likely to be harangued and attacked by sectarian factions.

Nevertheless, their victory in Lebanon’s elections has powerful implications. It is one of the key achievements of the 2019 Thawra movement, a landmark episode that many had dismissed for not having achieved very much.The Conversation

John Nagle, Professor in Sociology, Queen’s University Belfast and Tamirace Fakhoury, Associate Professor of Political Science, Aalborg University

Read the original article.
The Conversation

On my radar: Marwa al-Sabouni’s cultural highlights

On my radar: Marwa al-Sabouni’s cultural highlights

On Killian Fox‘s radar: Marwa al-Sabouni’s cultural highlights are brought to light this way in The Guardian of 14 May 2022.

 

On my radar: Marwa al-Sabouni’s cultural highlights

 

The above-featured image is that of Damascus by France 24.

The Syrian architect and writer on the idea of home in Branagh’s Belfast, smart Arab horses in Homs and the joy of lentils in Damascus

On my radar: Marwa al-Sabouni’s cultural highlights

Marwa al-Sabouni

Marwa al-Sabouni is a Syrian architect and writer. Born in Homs in 1981, she was living in the city when the civil war broke out in 2011 and remained there with her young family throughout the worst bombardments. In her memoir The Battle for Home, published in 2016, al-Sabouni wrote about the vital role that architecture plays in the functioning of society and how Syria’s future could be shaped by its built environment. In 2021, she published a second book, Building for Hope: Towards an Architecture of Belonging. Al-Sabouni is guest co-director of this year’s Brighton festival, which runs until 29 May.

1. Film

Belfast (Dir Kenneth Branagh, 2021)

On my radar: Marwa al-Sabouni’s cultural highlights

From left: Caitriona Balfe, Jude Hill, Lewis McAskie and Jamie Dornan in Belfast. Photograph: Rob Youngson/Focus Features

 

 

I watched this at home recently – there are no cinemas in Homs. It’s a film about war and love and friendship, about difficult decisions in a time of crisis. I liked the story and how real the actors made it, but also the way it handled the theme of home, which I very much related to – how the family was torn between staying and leaving. The whole dilemma of what to do, and how different people deal with similar questions and end up with different answers, was explored so well. It’s a great movie.

 

On my radar: Marwa al-Sabouni’s cultural highlights

2. Novel

The Buried Giant by Kazuo Ishiguro

This is a story set in a fictional version of England many centuries ago. It’s about grudges, and Ishiguro writes about this without naming the feeling, creating a fictional creature – the buried giant – for it as a reference. It’s also about a family’s journey to discover this feeling, and to find a way towards forgiveness. What I loved about this story is the indirect and imaginative way it has of dealing with hidden feelings that we bury deep down in our psyche, and how to access them.

3. Sport

Homs Equestrian Club

On my radar: Marwa al-Sabouni’s cultural highlights

Marwa al-Sabouni’s horse Salah al-Din, a Syrian Arab.

I don’t go out much to busy places, and because of the war we don’t have many places to go. But I do go and ride every day at the equestrian club in Homs. My horse is called Salah al-Din. He’s a very strong horse from a special breed – Syrian Arab horses are among the best in the world for strength, endurance and performance. They are really smart animals and very independent and spirited, which is a humbling experience on a daily basis. The social aspect of the club is disastrous; it’s all about the horses.

4. TV

The Last Days of Ptolemy Grey (Apple TV+)

On my radar: Marwa al-Sabouni’s cultural highlights

Dominique Fishback and Samuel L Jackson in The Last Days of Ptolemy Grey. Photograph: TCD/DB/Alamy

Samuel L Jackson gives a phenomenal performance in this TV series. He plays an old man suffering from dementia who takes an experimental medicine that gains him a few days of lucidity. He uses those precious moments to access his memories and explain to himself the nightmares he had, which are related to racism. The show deals with different questions with great sensitivity, and in the end it’s about true friendship and genuine feelings. For me, it’s the story of the human mind and how precious this gift is.

5. Music

Georges Wassouf

Watch a video for Georges Wassouf’s Ya Al Zaman.

Georges Wassouf is from a rural area near Homs, but his career took off from Beirut. I just love his music – he has a poignant way of speaking about love and a fantastic way of bending the lyrics to express the music. It’s also lovely how his artistic character is so closely related to his real-life character. He’s a very accessible figure who lives among his people, and he didn’t change his lifestyle in a way that would separate him from his own small village. Ahla Ayam El Omr, which translates as Life’s Most Beautiful Days, is one of my favourite of his songs.

6. Restaurant

Naranj, Damascus

On my radar: Marwa al-Sabouni’s cultural highlights

Naranj restaurant in Damascus. Photograph: Peter Horree/Alamy

Homs restaurants are rubbish, but there are plenty of good ones in Damascus. The one that I really like is Naranj, in the old part of the city where the Muslim and the Christian quarters merge. The food is great and the menu is very much based on what’s in season. The breads come right out of the oven, hot and delicious, and I would recommend the lentil dish harrak isbao, which means “the one that burns your fingers” because it’s so delicious that you will dive straight in.

The Guardian

 

Russia and Climate Change benefits

Russia and Climate Change benefits

The news of more than a month now has been and still is that of Ukraine.  The refusal of the latter to get in step and put itself in the lap of the big brother gives us all this crash of landscapes and other nuisances of the country’s built environment. What if Russia played all its cards except that of Global Warming.   Explanations on Russia and Climate Change benefits can play in its favour. After all, Climate Change is Cataclysmic — but not apocalyptic, to say the least.

The above-featured image is for illustration and is of WorldAtlas.

Indeed, it is easy to see that with this, Russia with a good part of its now sterile land set aside because covered with snow for most of the year, will be thawed and possibly turned and transformed into a good land and potentially farms.

Climate change is therefore not negative as it should be for the rest of the planet’s network.  Canada, the Scandinavian countries, Iceland, and Greenland must also benefit.

On the other hand, it is the opposite that is confirmed day by day in its southern parts.  Would this hint at a redistribution of food production around the world?

As everyone should know today, arctic poles and tips of glaciers are melting, seawater rising, temperatures going up, semi-arid lands drying up, desertification advancing in bordering areas, and countless natural disasters among many others are the convincing results that dominate our planet.  Few can deny these anymore.

So, the great Russia, which is only great because it is adjacent to this huge and vast Siberia.  This one with frozen ground and/or covered with snow all-year-round had never allowed any large-scale human settlement, except for some exploitation of natural resources at great expense, here and there. 

Global warming is remedying all this.  That said, with or without the blessing of the rest of the world, Russia may end up with vast tracts of agrarian mounds.  A situation that will prevail once this skirmish is concluded with not only this direct impact on Russia’s geography but also on its future position as a food giant. 

With a little luck, Ukraine could be able to find itself but with some modestly in the same position of a major supplier of food to the world and if it incorporated into the EU, it will be able to turn the latter, into another great of the new “Food Power”. 

In conclusion, we seem to be at the dawn of a novel distribution of world food shares with the ultimate heavy price still on the countries of the south.

Russia-Ukraine crisis poses a serious threat to Egypt

Russia-Ukraine crisis poses a serious threat to Egypt

The top featured image of Reuters is not only for illustration but meant to draw some attention to one of the most important cause of this traumatic situation of Egypt as well as that of many countries in the MENA region. Russia-Ukraine crisis poses a serious threat to Egypt, that with an over-population still on the rise, has a limited but diminishing arable lands area. Building on farmland coupled a certain lack of control of all real estate developments bear on the lower social classes; those supposed to be at the forefront of food production.


Russia-Ukraine crisis poses a serious threat to Egypt – the world’s largest wheat importer

By Kibrom Abay, The International Food Policy Research Institute (IFPRI) ; Clemens Breisinger, The International Food Policy Research Institute (IFPRI) ; David Laborde Debucquet, The International Food Policy Research Institute (IFPRI) ; Joseph Glauber, The International Food Policy Research Institute (IFPRI) , and Lina Alaaeldin Abdelfattah, The International Food Policy Research Institute (IFPRI)

Russia-Ukraine crisis poses a serious threat to Egypt
Egyptian Prime Minister Mostafa Madbouly pledged to keep food prices in the fair range amid the ongoing conflict between Russia and Ukraine. Photo by Ahmed Gomaa/Xinhua via Getty Images

Russia’s invasion of Ukraine could create a global food security crisis. It is disrupting agricultural production and trade from one of the world’s major exporting regions. This threatens to drive rising food prices still higher and create scarcity, especially for regions most dependent on exports from Russia and Ukraine.

Particularly affected is the Middle East and North Africa – or MENA – region. These Arab countries consume the highest wheat per capita, about 128 kg of wheat per capita, which is twice the world average. More than half of this comes from Russia and Ukraine.

As agricultural and food security experts, we have explored the impacts of the war on the wheat market, focusing on Egypt.

Wheat is a key food item for Egypt, representing between 35% and 39% of caloric intake per person in the last few years. And wheat imports usually account for about 62% of total wheat use in the country.

Despite the government’s efforts following the global food crisis in 2007 to 2008 to diversify sources of cereal imports, the vast majority of cereal imports, between 57% and 60%, come from Russia and Ukraine.

A number of key policy actions are needed that will reduce dependence on Russia and Ukraine in the short term. This will help Egypt’s agriculture and food system to become fairer and more resilient – an absolute necessity in the context of looming threats from climate change, water scarcity and conflict.

Black Sea import disruptions

Egypt is the world’s largest importer of wheat. It imports a total of 12 to 13 million tons every year. With a population of 105 million, growing at a rate of 1.9% a year, Egypt has become increasingly dependent on imports to meet food needs.

Imports of cereal crops have been steadily increasing over the last three decades at a rate higher than that of domestic production.

Egypt’s wheat market and trade regime is largely controlled by government agencies. The General Authority for Supply Commodities, operating under the Ministry of Supply and Internal Trade, usually handles about half of the total wheat imported, while private trading companies handle the other half.

Government agencies are already feeling the impact of the war, which has led to recent cancellation of tenders due to lack of offers, in particular from Ukraine and Russia.

Still, there is no fear of shortage in the coming weeks. In early February, Egyptian MoSit Minister Aly Moselhy said that the country held sufficient inventory to cover five months of consumption. But the outlook beyond that is less clear.

With the abrupt closure of Ukraine ports and current maritime trade in the Black Sea – wheat is transported across the Black Sea – Egypt will have to find new suppliers if Ukraine is unable to export wheat this year and if sanctions against Russia impede food trade indirectly.

Such opportunities are, unfortunately for Egypt, limited.

Limited options

Currently, wheat producers in South America – Argentina in particular – have larger than usual surpluses from the last harvest available to export. Overall, however, it will be difficult to expand the global wheat supply in the short run. About 95% of the wheat produced in the European Union and about 85% of that in the United States is planted in the fall, leaving those regions little room for expanding production in the near term.

In addition, wheat competes with crops such as maize, soybeans, rapeseed, and cotton, all of which are also seeing record high prices. In combination with record-high fertiliser prices (also exacerbated by the Russia-Ukraine conflict), farmers in some regions may favour less fertiliser-intensive crops, such as soybeans.

About 20% of world wheat exports come from the Southern Hemisphere (primarily Argentina and Australia) which typically ship from December through March.

In addition, Canada and Kazakhstan are large producers that harvest in the fall. Over the coming year and beyond, their exports may be able to make up much of the deficit created by the loss from Ukraine production, but at a higher cost due to longer shipping routes and increased transportation costs triggered by higher oil prices.

Rising prices

Rising global wheat prices hit a 10-year high at US$523 per ton on March 7. This is a serious problem for the Egyptian government’s budget and a potential threat to consumer purchasing power.

Even just before the outbreak of the Russia-Ukraine war, prices of commodities in Egypt were increasing. The war has started adding further pressure and consumers are feeling these impacts.

Some countries have already imposed export restrictions in response to rising prices. These trends, coupled with disruptions in Russia’s and Ukraine’s exports, will likely add further upward pressures on prices going forward. Even under the most optimistic assumptions, global wheat prices will remain high throughout 2022 and the trend is likely to persist through 2023, given limits on expanding production.

The Egyptian government has been spending about US$3 billion annually for wheat imports. The recent price increase could nearly double that to US$5.7 billion. This, in turn, threatens Egypt’s Baladi bread subsidy program. This program provides millions of people with 150 loaves of subsidised bread per month. About 90% of the production cost is borne by the government at an annual cost of US$3.24 billion. The program requires about 9 million tons of wheat annually about half of the total wheat consumption in Egypt and three-quarters of Egypt’s wheat imports.

Policy options

In the short term, Egypt needs to diversify its food import sources.

The government is actively exploring this option, while also increasing planned procurement from domestic sources by 38% over last year’s figure. The government has just announced a new and relatively higher buying price for domestic wheat from farmers.

In addition, the government has decided to ban exports of staple foods, including wheat, for three months to limit pressure on existing reserves.

In the long term, Egypt needs to explore options for reducing the gap between domestic supply and demand. Here are some of its options.

Boosting domestic wheat production will be challenging, as Egyptian farmers are already achieving high yields, relying on high input and water use. While there are some opportunities to expand arable land, modernise farming systems and improve water management practices, the country’s principal focus should be to adapt the farming system to address imminent water shortages and climate change threats and increase resilience, rather than unsustainably expanding production.

Reducing the high consumption and waste of bread has significant potential. Egyptians on average consume about 145 kg of wheat per capita annually – double the global average.

Improve the efficiency and targeting of the Tamween food subsidy program. This provides beneficiaries with ration cards for various foods. The program absorbs a large share of imported wheat and vegetable oils. Reforming it could reduce inefficiencies in the wheat sector and the cost of running the program.

In conclusion, the Russia-Ukraine war poses a big challenge to global food security and particularly difficult obstacles for Egypt. The short-term and long-term impacts will of course depend on how the war unfolds and affects exports from Russia and Ukraine over the coming months and years. Impacts on Egypt will also depend on other countries’ responses to global price hikes and cereal shortages.

Egypt can mitigate some of these impacts with short-term actions as outlined above, but major global shocks like the Russia-Ukraine war are also reminders of the need of longer-term reforms and solutions.

Kibrom Abay, Research Fellow, The International Food Policy Research Institute (IFPRI) ; Clemens Breisinger, Senior Research Fellow, The International Food Policy Research Institute (IFPRI) ; David Laborde Debucquet, Senior Research Fellow, The International Food Policy Research Institute (IFPRI) ; Joseph Glauber, Senior Research Fellow, The International Food Policy Research Institute (IFPRI) , and Lina Alaaeldin Abdelfattah, Senior Research Assistant, The International Food Policy Research Institute (IFPRI)

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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