Middle East and North Africa Face Historic Crossroads

IMF Blog, November 27, 2012

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Author: David Lipton
Date: November 27, 2012
Situation: Almost two years since the Arab Awakening began, the Middle East and North Africa (MENA) are in flux with fledgling democracies, renewed violence, and uncertainty about the region's economic future.
Framing device: The region could follow one of three alternative economic paths:
- Economic deterioration, if political squabbling prevents stabilization and reform.
- Stabilization through a reassertion of vested business interests, producing respite but leading to stagnation or tepid growth.
- Emergence of a new economy, if newly elected governments end disruptions and undertake reforms that broaden economic opportunity.

Core problem highlighted:
- "the non-oil exports of the whole region, are $365 billion, about the same as the exports of Belgium, a country of 11 million people, compared with the 400 million people who make up the Arab world."
Implication:
- Low non-oil exports constrain access to global markets, limit job creation, and force reliance on limited domestic markets.
Political mandate:
- The Arab Awakening encompassed demands for political voice and greater opportunities for prosperity and human fulfillment.

Strategic economic directions:
- Move away from state-dominated to private investment.
- Shift from protected industries and rent-seeking to export-led growth and value creation.
- Make the private sector the main source of growth by enabling access to global markets.
Process guidance:
- Engage in a dynamic, participatory dialogue with political and thought leaders to develop a roadmap and transformation strategy.
- Ensure reform plans draw on perspectives of all stakeholders; technical soundness alone is insufficient without broad popular understanding and acceptance.
Examples cited:
- Tunisia: dynamism observed during the author's visit; leadership committed to rebuilding.
- Turkey: cited as an inspiring example of fundamental economic reform producing a vibrant emerging market and a growing middle class.

Types of support recommended:
- Adequate financing, trade access, and policy advice.
- Capacity building, trade, and investment support from G-8 countries, regional partners (e.g., Gulf Cooperation Council countries), and international and regional development banks.
- Deep market access for trade in products and services from the European Union and the United States for countries undertaking fundamental reforms.
- Investment catalyzed by bilateral and regional partners and by institutions such as the European Bank for Reconstruction and Development to act as trailblazers into new sectors and markets.
IMF role and recent actions (as described):
- In the past year, the IMF provided a total of $8½ billion in loans for Jordan, Morocco, and Yemen.
- Reached a staff-level agreement on a $4.8 billion support package with the government of Egypt.
- Providing policy advice or technical assistance to Tunisia and standing ready to provide financing if needed.
- Providing policy advice and technical assistance, including to Libya.
- Core IMF focus: stabilization.
Rationale:
- Investments and support would catalyze economic transformation and serve the economic and security interests of the international community.
Conclusion:
- "I believe one thing is clear: the region deserves our support now."

Non-oil exports of the whole region: $365 billion
Population of Belgium (comparison): 11 million people
Population of the Arab world (comparison): 400 million people
IMF lending in the past year for Jordan, Morocco, and Yemen: $8½ billion
Staff-level agreement with Egypt: $4.8 billion support package
Author’s personal detail: Under the previous regime Prime Minister Hamadi Jebali spent 15 years in prison—10 of them in solitary confinement.
IMF membership: The IMF is an organization of 191 countries.

Source: IMF Blog post "Middle East and North Africa Face Historic Crossroads" by David Lipton, November 27, 2012.