Four Vital Pillars for Rebuilding Arab Economies

Four Vital Pillars for Rebuilding Arab Economies

According to estimates by the International Monetary Fund (IMF), the Middle East will begin to rebound this year, rising from a sinkhole caused by the twin crises of a pandemic and sustained low oil prices.

A rebound of just under 3% pales in comparison to the global average of more than 5%, but it injects much-needed optimism, slightly clouded by wobbly vaccine rollouts in the region’s poorer states. For governments in the Arab world, however, successfully managing COVID-19 and facilitating a smooth return to post-pandemic “normal” is just the beginning.

The pandemic and the downturns it has induced have revealed serious resilience gaps in societies and economies across the region that may have deepened existing crises, in addition to a further erosion of already dismal levels of confidence in the public in their governments. It is therefore not surprising to see a mobilization in the development of ambitious long-term visions and plans for reforms, transformations and diversification in the region. However, Arab states run the risk of repeating the mistakes of using the same flawed decision-making frameworks and foundations to craft policies intended to help the majority, while excluding most of them from their deliberations.

For most of the Middle East to succeed in achieving the ideals of well-governed states with empowered citizens participating fully in knowledge-based economies, the key is not to repeat the old to invent something new. For example, abrupt top-down reforms and abrupt cuts in subsidies or other social protections can be beneficial for the short-term fiscal outcome. But without proper planning, communication and progressive implementation, they risk creating new socio-economic crises or sparking protests among the desperate, poor and marginalized. The same goes for bottom-up approaches, which attempt to empower the forgotten and excluded but fail to recognize or address systemic problems.

COVID-19 has not only prompted rethinking of the most effective ways to restructure economies or reorient societies, it has also made it clear that the old ways of doing things, from a political point of view, are no longer viable. . If Arab states want to succeed, the answer lies in the four pillars of women, youth, technology and education. To be sure, there is already a litany of literature, research and calls from global institutions such as the World Bank and the IMF, strongly urging governments in the Middle East to tap into their human capital, invest in technology and to reform education. However, where there is compelling data and justification, there is a lack of political will to develop policies accordingly, given how pursuing certain changes clashes with deeply rooted cultural norms or perceptions, that disproportionately affect women and girls.

A society, and by extension its economy, cannot go this far without the full participation of half of its population.

In the Middle East, only 24% of women are unemployed outside the home, compared to 60% in the countries of the Organization for Economic Co-operation and Development (OECD). Gender-based discrimination in laws and social norms costs the region an estimated $575 billion a year, and failing to harness the talents of working-age women means lost economic potential and less economic growth. For example, it is estimated that the GDPs of Lebanon and Egypt could be nearly 30% higher with the elimination of economic gender gaps by empowering women enough for greater economic participation. Any post-pandemic recovery goals or long-term vision of diverse and productive economies should not jeopardize the recent modest gains in women’s participation, an unintended consequence of working from home during the pandemic. In fact, they should take advantage of this by encouraging companies to hire more women.

It is no secret that the Middle East is endowed with rich human capital, much of which is trapped in informal sectors that are now weighing on economic growth and complicating post-pandemic recovery. If the Middle East is to move closer to realizing the grand ambitions of knowledge-based economies, fueled by an inclusive, diverse and highly literate workforce, it must also tap into youth demographics. Two-thirds of the population in the Middle East is under the age of 35, and this same age group is one of the fastest growing demographic groups in the world. By 2030, there will be over half a billion youths and young adults in the Arab region alone, which will require massive job creation efforts. The World Bank estimates that Middle Eastern economies will need to create up to 300 million jobs by 2030.

Given the already bloated public sectors and ongoing reforms to shrink them, traditional preferences for public employment are no longer the answer. The only solution is to encourage the growth of small and medium-sized enterprises (SMEs), requiring massive and sustained state support for the private sector, instead of treating it as a tool of clientelism or a vehicle for corrupt practices. There are many ways to support small businesses, from formalizing areas of work and entrepreneurship in the informal sector to reducing bank loan rates for SMEs. There is simply no greater alternative or source of new employment opportunities beyond aggressively expanding the private sector and encouraging the hiring of young people.

According to estimates by the International Monetary Fund (IMF), the Middle East will begin to rebound this year, rising from a sinkhole caused by the twin crises of a pandemic and sustained low oil prices.

Hafed Al-Ghwell

To unleash all this potential, unprecedented education reforms and even wider adoption of new technologies are needed more than ever. Decades of efforts to transform education in the Arab world may have improved enrollment rates and gender parity, but they have failed to generate wealth, prosperity, productivity and income stability. To change this, Arab states will need to address systemic and deep-rooted historical, cultural, political and social tensions that wreak havoc on national curricula, as well as the quality of education and its delivery. Nor is it about changing the way children learn, but about transforming labor markets so that graduates can find jobs with the right skills to reduce the huge gaps that are currently contributing to rising rates unemployment.

COVID-19 has not only triggered crises, it has also acted as an accelerator of technological innovations, some of which are changing perceptions about healthcare, mobility, education and even the way people work. . In addition, a global climate change agenda has encouraged governments to develop strategic initiatives to trigger energy transitions towards renewables and to pursue economic diversification programs to develop knowledge economies.

This is where investments in technology have a more significant impact, especially if states support the development of local talent, innovation or entrepreneurial solutions.

Technology is at the heart of the knowledge economies that some Middle Eastern economies are considering, but it also contributes to the other three pillars. For example, technological innovations in education are improving knowledge delivery, efficiency and retention while creating platforms for women and youth to work and/or study remotely.

Ultimately, inclusive economic growth and development needs trust between citizens and their government, as well as with the private sector.

It is fundamental, reciprocal and omnipresent because when it is present, the achievement of the proposed reforms and objectives will be possible. When it is absent, however, no grand plan or ambition will yield significant gains. Fortunately, there is no greater commitment to rebuilding trust than governments taking bold and unprecedented action that delivers tangible benefits and lasting positive impact on the lives and livelihoods of the general public.

  • Hafed Al-Ghwell is a Senior Fellow at the Foreign Policy Institute at the Johns Hopkins University School of Advanced International Studies.

Disclaimer: The opinions expressed by the authors in this section are their own and do not necessarily reflect the views of Arab News

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