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Economic and Governance Risks to the MENA Region

Economic and Governance Risks to the MENA Region

Economic and Governance Risks came as a no surprise assessment of today’s as well the immediate future of the MENA region. The inefficient state of most countries characterizes all of their public management and related corollaries: i.e., internal violence for some and external dependence for most. Even in the favourable assumption of relatively stable of the latter ones’ authorities, these prove powerless to achieve the objectives they have set themselves, because of the inefficiency of their administration and when these manage to achieve their objectives, it is at a high cost. Here is that Economic and Governance Risks to the MENA Region.

Exogenous factors, such as geo-economic division, climate change and technological threats all pose a particular risk to MENA, but so, too, do hazards that are more regional in nature. According to respondents in the Middle East and North Africa to the World Economic Forum’s Executive Opinion Survey, the top two risks across the region for doing business are “energy price shock” and “unemployment or underemployment.” These risks are largely economic in nature and affected by the health of governance in the region. Similarly, the number five risk, (“fiscal crises”), the number seven risk (“unmanageable inflation”) and the number 10 risk (“failure of financial mechanism or institution”) follow the same pattern of being largely economic in nature and potentially governance-driven.

The top risk, “energy price shock”, comes at a time when some countries have taken steps towards diversification, but the region is still largely a hydrocarbon economy, heavily reliant on revenue from this sector. Oil prices increased substantially between 2017 and 2018, from around USD 50 to USD 75. This represents a significant fillip for the fiscal position of the region’s oil producers, with the IMF estimating that each USD 10 increase in oil prices should feed through to an improvement on the fiscal balance of three percentage points of GDP. However, vulnerabilities to swings in oil prices have not disappeared and are particularly pronounced in countries where government spending is rising. This group includes Saudi Arabia, which the IMF estimated in May 2018 had seen its fiscal breakeven price for oil — that is, the price required to balance the national budget — rise to USD 88, 26 percent above the IMF’s October 2017 estimate and also higher than the country’s medium-term oil price target of USD 70 – USD 80.

It is no surprise, then, that Saudi Arabia remains one of five countries in the region that rank “energy price shock” as the top risk to doing business in the survey, along with Bahrain, Kuwait, Oman and Qatar.

The World Economic Forum in partnership with Marsh & McLennan Companies and Zurich Insurance Group released its Middle East and North Africa Risks Landscape Report, which uses data from the Global Risks Report 2019 and the Regional Risks for Doing Business 2018.

Click here to download the full briefing: Middle East and North Africa Risks Landscape Report >>

Click here to explore additional insights from Guy Carpenter >>

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Lebanon reforms on a sound path but must not stop

Lebanon reforms on a sound path but must not stop

Reuters BUSINESS NEWS in an article dated June 28, 2019, informs that the World Bank stated: Lebanon reforms on a sound path but must not stop.

BEIRUT (Reuters) – Lebanon has taken a sound path with reforms in its 2019 draft budget and power sector but it will have to keep going, World Bank MENA vice president Ferid Belhaj said on Friday in Beirut.

FILE PHOTO: Ferid Belhaj, World Bank vice-president for the Middle East and North Africa, speaks during an interview with Reuters at Africa 2018 Forum at the Red Sea resort of Sharm el-Sheikh, Egypt December 8, 2018. REUTERS/Amr Abdallah Dalsh

The bank and other donors helped arrange pledges of $11 billion in soft loans and aid at a Paris conference last year to build new infrastructure. But the money depends on the Lebanese government launching reforms it has put off for years and tackling its huge debt burden.

“In general … we are optimistic, but at the same time our optimism is cautious because of the economic situation in the region,” Belhaj was cited as saying in a statement from Lebanese Prime Minister Saad al-Hariri’s office after the two met.

Parliament is debating the 2019 draft budget approved by the cabinet last month, a critical test of Lebanon’s will to enact reforms. Leaders have warned of a financial crisis if there are no changes.

The budget aims to cut the deficit to 7.6% of gross domestic product from 11.5% last year. Lebanon has one of the world’s largest public debt burdens at 150% of GDP.

Hariri plans to use the funds from the Paris donor meeting for a 10-year capital investment program that would boost low growth. The country also has plans for about 250 projects which include transport, water and power sectors.

International Monetary Fund officials, who also met Hariri on Friday, urged Lebanon to speed up the process of implementing the projects and program, the premier’s office said.

“Lebanon is going down a sound path when it comes to the reforms at the level of the budget and electricity … but the reforms do not end. They are continuous,” Belhaj said.

The government approved an electricity plan in April that aims to boost generation capacity and bring down subsidies straining state finances.

Reporting by Ellen Francis; Editing by Catherine Evans and Raissa Kasolowsky


Our Standards: The Thomson Reuters Trust Principles.

Making sure there’s ‘No Lost Generation’ among Millennials

Making sure there’s ‘No Lost Generation’ among Millennials

Because it is felt that “Young people are graduating with no clue on how to implement what they have learned,” the UNICEF is making sure there’s ‘No Lost Generation’ among millennials.

By Mariam Nabbout 2019-06-24

The Middle East is plagued with some of the highest unemployment rates among the up-and-coming generation. One reason behind this could be that most education systems in the region do not link what students learn with the knowledge they actually need in the future. 

However, it seems that’s about to change thanks to the efforts of individuals and organizations who are tirelessly working to bridge the gap between learning and earning. This specific issue is at the center of the region’s third annual “No Lost Generation Tech Summit,” which is set to be held in Jordan’s capital Amman on Tuesday and Wednesday. 

The two-day event is primarily organized by UNICEF’s regional office for the MENA region and NetHope – an NGO “eager to make a difference in this world through technological innovation.” It is also “supported by the steering committee for youth from the region, and representatives from the International Labor Organization, the International Rescue Committee, Mercy Corps, the Norwegian Refugee Council, UNESCO, UNHCR and World Vision.”

The summit focuses on presenting tech-enabled solutions attemped to link learning and earning among youth from vulnerable communities across the region. 

The event’s packed agenda is “almost entirely developed and managed by young people who have all pioneered ways to bridge the gap between young people’s schooling and employment.” (These juniors were selected by involved committees after applying for various roles.)

Speaking to StepFeed, a few of these bright young participants told us more about the ambitious initiative and what it means for youth across the Arab world. 

“What makes this summit special is its impact on youth”

Balqees Shahin Al Turk, a 22-year-old Jordanian, has been participating in youth engagement programs and events with UNICEF and other NGOs since 2016. When she learned about this year’s Tech Summit, she immediately applied for a leading role. 

“What makes this summit special is its impact on youth, since youth engagement is very high pre, during and post-summit,” Shahin explained.

There are 75 youngsters from across the MENA region working on this summit, she says. The fact that people her age are organizing such an event and have their voices heard among adults is a boost of self-confidence and energy to work harder.

“The rate of unemployment in the MENA region is about 30% although most of the MENA populations is composed of youth,” which Shahin finds disappointing. A main problem, according to her, is the gap between what young people learn and what real work environment requires. 

“Young people are graduating with no clue on how to implement what they have learned so its quite important to work on minimizing this gap first by figuring out that there is a problem and second by talking about it and trying to find solutions for this and that’s what the summit is about,” she explained. 

“I think the impact on adolescents and youth after the NLG Tech Summit will be wonderful”

For Syrian teens – and those a bit older – it’s not easy to cope with all that’s been lost. “This summit is very important for me as a young person because I have lost a lot of important things like education and my country Syria because of the war,” Saber Al-Khateeb, a 22-year-old Syrian and one of the representatives of youth at the NLG Tech Summit, said.

The summit will bring together “youth, private sector companies, development and humanitarian experts, academic institutions and donors to leverage technology and cross-sector collaboration to connect learning to earning for young people in the region, particularly those affected by the crises in Syria and Iraq,” he explained. 

Al-Khateeb remains hopeful when it comes to learning-to-earning solutions, as he believes proper implementation will lead to a decrease in unemployment rates. 

NLG’s young participants are here to inspire future generations

Speaking to StepFeed, 24-year-old Palestinian Shahenaz Monia, another young participant in the summit, said the gap between learning and earning should be reduced before unemployment rates skyrocket. 

“Never underestimate the power of any opportunities to get more experience,” as these, in her belief, will allow anyone to enhance and hone their skills.

The two-day event will be packed with people from different backgrounds, and with divergent experiences and success stories, which should be interesting and educational to young people.

“Passing through a hard and long way doesn’t mean you are wrong,” Monia said. “If you believe in something work hard to make it true. It’s okay to feel nervous, it only means you are stretching out of your comfort zone,” she continued. 

Costs of Corruption running deep in the MENA

Costs of Corruption running deep in the MENA

The IMFBlog on May 28, 2019, is about a world phenomenon that seems to still be present in all walk of life throughout the world. The Costs of Corruption running deep in the MENA, have been amplified by the hydrocarbon-related rentier economies to a point where only a defossilisation of the respective economies could somehow reduce their extent. In the meantime, costs of corruption running deep in the MENA seem to go unattended to. Anyway here is this IMFBlog article.

Corruption and Your Money

The costs of corruption run deep. Your taxpayer dollars are lost in different ways, siphoned off from schools, roads, and hospitals to line the pockets of people up to no good.

Equally damaging is the way it corrodes the government’s ability to help grow the economy in a way that benefits all citizens.

And no country is immune to corruption. Our Chart of the Week from the Fiscal Monitor analyzes more than 180 countries and finds that more corrupt countries collect fewer taxes, as people pay bribes to avoid them, including through tax loopholes designed in exchange for kickbacks. Also, when taxpayers believe their governments are corrupt, they are more likely to evade paying taxes.

The chart shows that overall, the least corrupt governments collect 4 percent of GDP more in tax revenues than countries at the same level of economic development with the highest levels of corruption.

A few countries’ reforms generated even higher revenues. Georgia, for example, reduced corruption significantly and tax revenues more than doubled, rising by 13 percentage points of GDP between 2003 and 2008. Rwanda’s reforms to fight corruption since the mid-1990s bore fruit, and tax revenues increased by 6 percentage points of GDP.

These are just two examples that demonstrate that political will to build strong and transparent institutions can turn the tide against corruption. The Fiscal Monitor shines a light on fiscal institutions and policies, like tax administration or procurement practices, and show how they can fight corruption.

The costs of corruption run deep.

Where there is political will, there is a way

Fighting corruption requires political will to create strong fiscal institutions that promote integrity and accountability throughout the public sector.

Based on the research, here are some lessons for countries to help them build effective institutions that curb vulnerabilities to corruption:

Invest in high levels of transparency and independent external scrutiny. This allows audit agencies and the public at large to provide effective oversight. For example, Colombia, Costa Rica, and Paraguay are using an online platform that allows citizens to monitor the physical and financial progress of investment projects. Norway has developed a high standard of transparency to manage its natural resources. Our analysis also shows that a free press enhances the benefits of fiscal transparency. In Brazil, the results of audits impacted the reelection prospects of officials suspected of misuse of public money, but the impact was greater in areas with local radio stations.

Reform institutions. The chances for success are greater when countries design reforms to tackle corruption from all angles. For example, reforms to tax administration will have a greater payoff if tax laws are simpler and they reduce officials’ scope for discretion. To help countries, the IMF has built comprehensive diagnostics on the quality of fiscal institutions, including public investment management, revenue administration, and fiscal transparency.

Build a professional civil service. Transparent, merit-based hiring and pay reduce the opportunities for corruption. The heads of agencies, ministries, and public enterprises must promote ethical behavior by setting a clear tone at the top.

Keep pace with new challenges as technology and opportunities for wrongdoing evolve. Focus on areas of higher risk—such as procurement, revenue administration, and management of natural resources—as well as effective internal controls. In Chile and Korea, for example, electronic procurement systems have been powerful tools to curtail corruption by promoting transparency and improving competition.

More cooperation to fight corruption. Countries can also join efforts to make it harder for corruption to cross borders. For example, more than 40 countries have already made it a crime for their companies to pay bribes to gain business abroad under the OECD anti-corruption convention. Countries can also aggressively pursue anti–money laundering activities and reduce transnational opportunities to hide corrupt money in opaque financial centers.

Curbing corruption is a challenge that requires persevering on many fronts, but one that pays huge dividends. It starts with political will, continuously strengthening institutions to promote integrity and accountability, and global cooperation.

Related Links:
Corruption Disruption

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Construction digitisation to  weather difficult times in the MENA

Construction digitisation to weather difficult times in the MENA

A MEConstructionNews ANALYSIS by Andrew Skudder, CEO. CCS, Guest Author, warning construction firms of the risks of not digitising operations, posted on April 25, 2019, is republished here for its obvious benefits to the MENA’s development.


Construction industry should look to proven tech to weather difficult times

With the Middle East construction sector under growing pressure as a result of a tightening economy, construction companies should be looking at ways to streamline their business processes, improve cash flow management and tighten risk management. Those that sharpen internal processes and systems today will be best positioned for an upswing in government and private sector investment in the years to come.

The sector faces numerous challenges – challenging economic growth, shrinking margins, skills shortages, rising resource and labour costs – which means it’s under pressure to start innovating.

Investment in tech is behind the curve

The challenges the industry faces are compounded by the fact that many construction groups have not digitised operations such as cost-consulting. This means they lack visibility into – and control over – the many variables, changes, people and equipment involved in any construction project.

Middle Eastern construction companies should be looking for ways to use technology to drive higher productivity, achieve cost-savings and improve project management to weather a tumultuous time for the industry. However, the lean years of late, have seen IT spending in the construction industry stagnate, despite the accelerating pace of innovation around the world.

For example, adoption of wearables, 3D printing, driverless heavy vehicles, drones and building information modelling is rising in the global construction sector. To take full advantage of these advanced technologies, many local construction companies will first need to modernise their core back-office systems.

They should be looking towards tried and tested solutions for estimating, project control, enterprise accounting and operational costing. These solutions will enable them to drive down the costs of maintaining legacy applications, help them to become more agile and give them clearer real-time visibility into business performance.

Breaking down silos

Construction performance and progress cannot be monitored on financial data alone; engineering information is just as critical. Engineering control includes generating and managing allowable and actual quantities of resources, wastages, manhours of labour, production of equipment and time for construction activities.

Without digitisation, an organisation has no clear indication of the status of the contract because it doesn’t have real-time visibility into these factors. Today’s business solutions can break down the silos, enabling estimators and accountants to produce real time-reporting, and yet continue to work in the language that is meaningful to them.

Integrated back-office systems spanning procurement, project control, cost estimation, sub-contractor management and accounting give construction companies one source and view of the truth, enabling them to manage an entire project with real-time visibility into costs and performance.

Using this data can help construction firms make better strategic and operational decisions. Data-driven insights can enable them to better manage cashflow and project risks, so they can better predict and mitigate payment delays, rising costs and other challenges. It can also help companies to drive higher levels of profitability through better project planning.

Building a foundation for the future

Looking to the future, a robust business solution is also a foundation upon which construction companies can layer drones, robots, Internet of Things (IoT) sensors, artificial intelligence (AI) and other advanced digital technologies. Such solutions enable construction companies to manage and analyse big data produced by sensors, devices and workers so they can drive productivity and innovation – AI, for example, can help them rapidly process the data to find key insights.

Construction companies should embrace digital transformation to drive higher productivity, improve efficiency and gain a competitive advantage. Transforming their core business with a proven solution will help them prepare for the future, with a possibility that infrastructure spending will show signs of life again in the near future. Now is the time to lay the foundation for the next wave of growth.

Tackling corruption in government could save $1 trillion

Tackling corruption in government could save $1 trillion

The International Monetary Fund (IMF), keeps on pressing on all economic and policy issues of the day in every country. Doing so for all these years, it has, in the end, amassed such knowledge and experience that enabled it to have a worldwide view of the latest trends. Tackling corruption in government could save $1 trillion in taxes, but not only that as we were recently told, it could also resolve many of the plethora of all related issues throughout all regions in the developing and developed world alike. A point in case is elaborated on this particular article that is republished here for its obvious importance, especially for those developing countries of the MENA region. 

Tackling Corruption in Government

By Vitor Gaspar, Paolo Mauro and Paulo Medas

No country is immune to corruption. The abuse of public office for private gain erodes people’s trust in government and institutions, makes public policies less effective and fair, and siphons taxpayers’ money away from schools, roads, and hospitals.

While the wasted money is important, the cost is about much more. Corruption corrodes the government’s ability to help grow the economy in a way that benefits all citizens.

But the political will to build strong and transparent institutions can turn the tide against corruption. In our new Fiscal Monitor, we shine a light on fiscal institutions and policies, like tax administration or procurement practices, and show how they can fight corruption.

Political will can turn the tide against corruption.

Corruption helps evade taxes

We analyze more than 180 countries and find that more corrupt countries collect fewer taxes, as people pay bribes to avoid them, including through tax loopholes designed in exchange for kickbacks. Also, when taxpayers believe their governments are corrupt, they are more likely to evade paying taxes.

We show that overall, the least corrupt governments collect 4 percent of GDP more in tax revenues than countries at the same level of economic development with the highest levels of corruption.

A few countries’ reforms generated even higher revenues. Georgia, for example, reduced corruption significantly and tax revenues more than doubled, rising by 13 percentage points of GDP between 2003 and 2008. Rwanda’s reforms to fight corruption since the mid-1990s bore fruit, and tax revenues increased by 6 percentage points of GDP.


Corruption also prevents people from benefiting fully from the wealth created by their country’s natural resources. Because the exploration of oil or mining generates huge profits, it creates strong incentives for corruption. Our research shows that resource-rich countries, on average, have weaker institutions and higher corruption.

Corruption wastes taxpayers’ money

The Fiscal Monitor shows that countries with lower levels of perceived corruption have significantly less waste in public investment projects. We estimate that the most corrupt emerging market economies waste twice as much money as the least corrupt ones.

Governments waste taxpayers’ money when they spend it on cost overruns due to kickbacks or bid rigging in public procurement. So, when a country is less corrupt, it invests money more efficiently and fairly.

Corruption also distorts government priorities. For example, among low-income countries, the share of the budget dedicated to education and health is one-third lower in more corrupt countries. It also impacts the effectiveness of social spending. In more corrupt countries school-age students have lower test scores.

Corruption is also a problem in state-owned enterprises, such as some countries’ oil companies, and public utilities like electric and water companies. Our analysis suggests that these enterprises are less efficient in countries with high levels of corruption.

Where there is political will, there is a way

Fighting corruption requires political will to create strong fiscal institutions that promote integrity and accountability throughout the public sector.

Based on the research, here are some lessons for countries to help them build effective institutions that curb vulnerabilities to corruption:

Invest in high levels of transparency and independent external scrutiny. This allows audit agencies and the public at large to provide effective oversight. For example, Colombia, Costa Rica, and Paraguay are using an online platform that allows citizens to monitor the physical and financial progress of investment projects. Norway has developed a high standard of transparency to manage its natural resources. Our analysis also shows that a free press enhances the benefits of fiscal transparency. In Brazil, the results of audits impacted the reelection prospects of officials suspected of misuse of public money, but the impact was greater in areas with local radio stations.

Reform institutions. The chances for success are greater when countries design reforms to tackle corruption from all angles. For example, reforms to tax administration will have a greater payoff if tax laws are simpler and they reduce officials’ scope for discretion. To help countries, the IMF has built comprehensive diagnostics on the quality of fiscal institutions, including public investment management, revenue administration, and fiscal transparency.

Build a professional civil service. Transparent, merit-based hiring and pay reduce the opportunities for corruption. The heads of agencies, ministries, and public enterprises must promote ethical behavior by setting a clear tone at the top.

Keep pace with new challenges as technology and opportunities for wrongdoing evolve. Focus on areas of higher risk—such as procurement, revenue administration, and management of natural resources—as well as effective internal controls. In Chile and Korea, for example, electronic procurement systems have been powerful tools to curtail corruption by promoting transparency and improving competition.

More cooperation to fight corruption. Countries can also join efforts to make it harder for corruption to cross borders. For example, more than 40 countries have already made it a crime for their companies to pay bribes to gain business abroad under the OECD anti-corruption convention. Countries can also aggressively pursue anti–money laundering activities and reduce transnational opportunities to hide corrupt money in opaque financial centers.

Curbing corruption is a challenge that requires persevering on many fronts, but one that pays huge dividends. It starts with political will, continuously strengthening institutions to promote integrity and accountability, and global cooperation.

Watch a conversation with the authors:

Related links:
Shining a Bright Light into the Dark Corners of Weak Governance and Corruption
Corruption Disruption
Corruption in Latin America: Taking Stock