3rd issue

Could greater Arab integration help to fill the region’s jobs gap?

Doing Business in the Middle East: An additional US $760 billion in Arab revenue

Could greater Arab integration help to fill the region’s jobs gap?

Is this the answer to creating 6 million new jobs by 2020?

Many international organisations produce economic reports about the Middle East. But still the economic and socio-economic status of the Middle East and the Arab countries continue to deteriorate. Poverty is increasing, unemployment rocketing, things just seem to be getting worse.

So what are we doing with these economic reports? How are decision makers using them? What indicators are used to measure growth or the application of any of these recommendations?  Middle East Business magazine looks at one such report by the UN and its author, Rima Khalaf.

In a recent report, published in February 2014 by the UN and its author Rima Khalaf, Executive Secretary of the Economic and Social Commission of Western Asia (ESCWA), “Arab Integration:  A 21st Century Development Imperative”, it was suggested that economic integration in the Arab region would create six million new jobs by 2020 and increase regional gross domestic product (GDP) by 3%. The report also argues for a unified model for the region, such as the European Union and other regional economic blocs.

Cultivating a dynamic economic environment “would guarantee economic and social gains and ensure their place among the regional blocs that govern the global economy and contribute to shaping international structures and institutions”, the Beirut-based agency noted.

The report utilises studies and economic models to compare potential growth if regional countries integrated, with the effect of maintaining a status quo. It also identifies a number of potential strategies for promoting free trade in services, free movement in capital and workers, and the development of regional production chains.

Arab customs union

In addition, the report presents scenarios for the completion of the Greater Arab Free Trade Area (GAFTA) and the establishment of an Arab customs union would redistribute revenue from tariffs among the various countries.

Under one of the scenarios:

The deepening integration would reduce transport costs for Arab trade and replace a section of migrant labour force with regional workers.

Combined with the creation of an Arab customs union, “would guarantee an increase of three per cent in Arab gross domestic product by 2020 and would reduce unemployment by over four per cent,”according to the findings. This additional growth would generate an additional US $760 billion in Arab revenue, equivalent to more than the total revenue last year of Arab countries in North Africa.

“The report calls argues that these goals are within reach, so long as the political will exist to pursue economic integration as a path towards genuine sustainable development,” ESCWA wrote.

The report follows the release in 2013 of the “Rethinking Economic Growth: Towards Inclusive and Productive Arab Societies,”produced by the UN International Labour Organization (ILO) and the UN Development Programme (UNDP).

Those authors stressed that countries in the region must pay attention in particular to the social consequences of their economic policies, as the recent uprisings against various Arab Governments have exposed a lack of social protection and dialogue between citizens and authorities.

The earlier report suggested that a rethink of growth strategies was required in the region. But were any changes made in its wake? The answer, for the most part, is a resounding no.

Policies pursued over the past two decades enabled countries in the region to tackle debt and inflation and create jobs, but growth lagged behind the rest of the world, and new jobs were concentrated in low productivity sectors. Meanwhile, the private sector remained among the least competitive globally due to low rates of investment, a poor regulatory environment, and widespread nepotism and corruption.

“In 2010, Arabs were more likely to find work than they were two decades ago,” said the lead author of the report, Zafiris Tzannatos. “But the question is what type of work? Workers were increasingly educated but the jobs being created were low-skilled and low-paid. In most countries, workers could not make their voices heard through trade unions or the ballot box.”

The report argued that economic growth in the next decade hinges on good governance, which must improve to attract investment and enable structural and institutional reforms.

“Arabs need an inclusive development model that is grounded in social justice, “said the ILO’s Regional Director for the Arab States, Nada al-Nashif. “This requires macro-policy coherence that can enhance productivity and wages, reformed labour relations to enable workers and employers to participate effectively in decision-making, and expanded social protection systems that provide employment and livelihoods security.”

Policy areas requiring more specific attention include migration management, employment policies and active labour market programmes, as well as greater access to quality education and training.

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