IMF Survey : IMF Facilitates Debate on Private Sector, Growth, Jobs in Mideast

IMF News, November 27, 2013

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IMF will co-host a conference with the International Financial Corporation and the Council of Saudi Chambers in Riyadh, Saudi Arabia on December 3, 2013.
Conference will bring together private sector business people and academics from the region and elsewhere, as well as representatives of international organizations.
Panelists include representatives from Korea, Turkey, and international organizations with private sector experience.
Conference focus: how to unleash private sector growth, the role of macroeconomic policies, trade, investment, and the business environment.

The private sector accounts for over 60 percent of GDP in most countries in the region.
Since the 1980s, private sector investment in the Middle East and North Africa has averaged between 13 and 15 percent of GDP.
Private investment comparisons: nearly 20 percent in South Asia and 30 percent for East Asia (both saw investment shares accelerate from below 13 percent in the late 1980s).
Bank credit to the private sector in the region is 40 percent of GDP.
Total and youth unemployment rates in the region are 10 and 24 percent, respectively, versus world average rates of 6 and 13 percent.
Female labor force participation rate is 22 percent.

Macroeconomic instability:
- High inflation rates dampen economic growth, especially in oil-importing countries.
- Volatile exchange rates and interest rates depress investment.
Fiscal pressures:
- Large fiscal deficits in some oil-importing countries; deficits often financed from the domestic banking sector, reducing credit availability for businesses and raising borrowing costs.
Low access to finance:
- Banks’ reluctance to supply credit, even to worthwhile projects, hinders private sector growth and job creation.
- Small-and-medium enterprises do not get enough access to credit.
Trade and integration:
- Questions on whether the region is sufficiently open to regional and international trade, exports beyond energy, integration into global supply chains, and capacity to benefit from strong growth in emerging markets, particularly Asia.
Business environment and perceptions:
- Length of time to start a business, ease of access to government services, and negative perceptions of the private sector impede dynamism.
Inclusion issues:
- Labor force participation and employment opportunities for women remain limited, contributing to exclusion and discontent.

The private sector will be central to future development as public-sector-led growth is unlikely to be sustainable given fiscal constraints and inflated public sector wage bills.
IMF seeks to understand issues holding back private sector growth and its ability to create jobs to inform policy advice.
Emphasis on lessons from export-led growth experiences (e.g., Asian experience) and international best practices.

Promote macroeconomic stability to create an environment conducive to business planning, investment, and employment decisions.
Reduce macroeconomic volatility—control inflation and stabilize exchange rates and interest rates—to support higher investment.
Address fiscal deficits and their financing patterns to free up domestic banking sector credit for private enterprises.
Improve access to bank credit, especially for small-and-medium enterprises, to foster private sector growth and job creation.
Enhance openness to regional and international trade and integration into global supply chains to diversify exports beyond energy.
Reform the business environment to shorten time to start a business, improve access to government services, and reduce negative perceptions of the private sector.
Promote inclusive growth by ensuring private sector development benefits youth, women, and small-and-medium sized firms; support women’s independent mobility and equal opportunity in employment to boost participation and productivity.

IMF Survey, November 27, 2013