A worker at a textile mill in El-Mahalla El-Kubra, Egypt. Arab transition countries need to spur growth and jobs and promote fairness (photo: Mohamed Abdel-Ghany/Newscom)
AMMAN CONFERENCE
Countries need to break the vicious circle of economic stagnation and persistent sociopolitical strife, says Ahmed. Key elements of this process include boosting growth and job creation and promoting fairness—topics that will be the centerpiece of a May 11–12 conference in Amman, Jordan, that the IMF is co-hosting with the Government of Jordan and the Arab Fund for Economic and Social Development.
IMF Survey: What is the main objective of the conference and who are the main participants?
Ahmed: Three years have passed since the onset of economic and political transitions in a number of countries across the region. The transitions began with great ambition but, so far, progress has been limited in generating the strong and inclusive growth needed to reduce unemployment and raise standards of living.
At the conference, we will bring together about 200 people from the Arab Countries in Transition and across the region to discuss how the potential for inclusive growth and job creation can be realized in these countries. Participants include representatives from the government, civil society, academia, donor community, private sector, and media. We have also invited experts who have thought about or experienced similar transitions elsewhere in the world to see what lessons can be drawn from their insights.
IMF Survey: What are the main themes of the conference and why did you select them for discussion?
Ahmed: The conference themes include macroeconomic policies, transparency and governance, youth employment, and the business environment. This range of topics reflects the need for structural reforms in a number of areas to generate inclusive, job-rich growth that would benefit all in the society. We know, for instance, that many countries in the region have work to do on increasing transparency and improving the business environment. This is evidenced, for example, by the fact that many small businesses, as a result of the heavy burden of bureaucracy, are forced to operate in the informal sector, which is larger than it is in many other regions. We also know that inflexible labor-market regulations are among the factors holding back job creation in the formal sector. At the same time, countries need to maintain macroeconomic stability along the way—that is, sustainable fiscal and balance of payments deficits, and low inflation—to retain and strengthen confidence of businesses and investors.
IMF Survey: The title of the conference implies that the issue of “fairness” will be a topic for discussion, among other things. Could you explain the priorities to address this issue?
Ahmed: A call for a fairer economic model was one of the key reasons why people came out on the streets three years ago. Fairness in economic policy is partly about how the gains of growth can benefit all people in the society, not only the privileged few. It is also about evenhandedness in access to jobs and opportunities for businesses, whether people are connected or not. That is why the conference will focus on transparency, governance, and the business environment in addition to the more traditional macroeconomic agenda to ensure that people and firms—regardless of whether they’re connected or not to the establishment—can have an opportunity to contribute and prosper.
IMF Survey: According to a recent IMF study, the Arab Countries in Transition risk getting trapped in a vicious cycle of economic stagnation and persistent sociopolitical strife. Could you clarify why this is the case and what can be done to break that cycle?
Ahmed: We know that one of the reasons behind the uprisings in these countries was resentment and unhappiness with the lack of economic opportunity and high unemployment. Unfortunately, over the past three years, unemployment has risen in these countries by more than a million and a half people because of low growth and weak private-sector confidence, which puts investors in a wait-and-see position. Furthermore, economic conditions have deteriorated from transition-related disruptions, regional conflict, an unclear political outlook, eroding competitiveness, and a challenging external economic environment.
The cycle that these countries need to break is one where high unemployment and low prospects for improved living standards lead to social unrest and, sometimes contribute to political instability, which, in turn, leads to lack of confidence on the part of the private sector, low investment, and limited space for economic reform, which together exacerbate high unemployment and low growth prospects.
IMF Survey: Besides the conference, what are the other forms of engagement the IMF currently has with the Arab Countries in Transition?
Ahmed: The IMF has increased its involvement with this set of countries since the beginning of their political transitions in 2011. We support them through technical assistance and training. Last year alone, we had about 60 technical assistance missions and over 36 training events for the Arab Countries in Transition.
We also support them through financial assistance. The IMF is currently supporting national programs in Jordan, Morocco, and Tunisia, and we are in advanced discussions with Yemen on a follow-up program—a successor to the one that the country had with the IMF in 2012.
Finally, we help the Arab Countries in Transition by raising the importance of supporting them in international fora, including those that bring together donors from the region as well as international organizations and the G–8.
