Scaling-up the Inclusive Growth Agenda in the Arab Region

IMF News, January 30, 2018

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Remarks by Christine Lagarde, Managing Director, International Monetary Fund.
Marrakesh, Morocco — January 30, 2018.
Opening framing: inclusive growth requires providing opportunity to work, innovate, and grow for all, with special emphasis on youth and women.

Finding: Since the 2014 Amman conference, job creation and inclusive growth have been central to reform agendas, with progress, but not enough.
Key statistics and facts:
- More than 27 million young people in the region will join the workforce over the next five years.
- Youth unemployment in the region averages 25 percent.
- More than 60 percent of citizens perceive that connections – or wasta – determine whether or not you find a job.[2]
- IMF global projections (released last week from the speech):
- Global growth reached 3.7 percent in 2017.
- Global growth is expected to accelerate to 3.9 percent this year and 3.9 next year as well.
- Some 120 countries representing three-quarters of global GDP are participating in this cyclical upswing.
- Regional growth expectations:
- Growth is expected to pick up, but at 3½ percent in 2018 and 2019 it is well below the average 5.6 percent achieved during 2000-2008.
- Drivers of weaker regional performance: conflicts and lower commodity prices.

General assessment: Many promising steps have been taken (financial and economic access, private sector development), but implementation needs to be accelerated, broadened, and scaled-up.
Examples of progress:
- Fintech and technology:
- Fintech startups in the region have increased seven-fold since 2009, mostly in Egypt, Jordan, Lebanon, and the United Arab Emirates.
- Jordan’s eFawateerCom processes more than one million transactions a year and connects people with more than 70 online billers.
- Small entrepreneurs use technology to match job seekers with business needs (example: youth innovation contest winner Saeed Alfagieh in Yemen).
- Business climate and SME environment:
- Morocco: improvement in the business climate and creation of Free Trade Zones in Casablanca and Tangiers have generated some 85,000 jobs in the automotive industry.
- Close to 45 percent of car parts for the auto sector in Morocco are sourced from local suppliers.
- Constraints remaining:
- SMEs face limited access to finance and weak legal frameworks that inhibit scaling up.

Priority 1: Create a vibrant private sector for higher growth and more jobs
- Move away from the model where the state is employer of first resort.
- Actions: level the playing field, combat corruption, increase competition, leverage global trade and new technologies.
- Expectations of firms: invest within the region, pay their fair share of taxes, and collaborate with the public sector on infrastructure.
Priority 2: Support excluded groups (youth, women, rural populations, refugees)
- Policies: better education, active labor market policies to help youth and women find employment.
- Financial inclusion highlighted as a powerful tool, especially for women; including women economically and financially described as a potential global game-changer.
Priority 3: Use fiscal policy to invest in people and infrastructure
- Current social spending and needs:
- Social spending – on social safety nets, health and education services – is less than 11 percent of GDP.
- This compares to 19 percent in emerging Europe.
- Challenge: increase spending on social services and infrastructure when budgets are tight.
- Key policy direction: build broader and more equitable tax bases so that all pay their fair share while protecting the poor.
- Fiscal gains from moving away from the state-as-employer model can create space for high-return social and infrastructure outlays.

Conference role: forum for public officials, private sector, and civil society from more than 20 countries to share experiences and operationalize inclusive growth agendas.
Importance of dialogue: engaging those affected by reforms fosters trust and ownership, increasing the sustainability and impact of reforms.
Observation from conference: positive energy, quality of discussions, and actionable ideas (i-labs cited as source of findings).

Central message: Today’s youth are the Arab region’s greatest potential and their aspirations must be heeded.
Closing quote referenced: “Your children are not your children. They are the sons and daughters of Life's longing for itself.” — Khalil Gibran.
Closing word: Shukran!

Remarks by Christine Lagarde, Managing Director, International Monetary Fund; Marrakesh, Morocco; January 30, 2018.