[Merissa Khurma] Welcome to today’s discussion on the World Bank’s recent Middle East and North Africa Economic Update, “Growth in the Middle East and North Africa”. My name is Merissa Khurma and I’m the Director of the Middle East Program at the Wilson Center here in Washington DC. and I’m delighted to serve as moderator for this event which is being broadcast on World Bank Live. I’d like to also welcome all of our viewers from all around the world who are watching this live stream in Arabic, English and in French. I encourage all of you to participate in this discussion using the hashtag #MENAUpdate. Now, to kick off this program, we will first hear from the World Bank’s Vice President for the Middle East and North Africa region, Dr. Ousmane Dione. Over to you, Ousmane.
[Ousmane Dione] Thank you, Merissa. Let me start by thanking you and also Dr. Tarik Yousef and Professor Chang-Tai Hsieh for joining us today to share their valuable perspective. Thank you Roberta [Gatti] and team for sparkling the work which we are here to discuss today. The October 2024 edition of the Middle East and North Africa Economic Update comes out at a pivotal time as the region is still on conflict. As a World Bank, we believe peace is not just a prerequisite for development, it’s essential. Conflict casts long shadows over a nation’s path to growth and opportunity, and our last report reaffirms this painful reality. Our teams estimate that GDP per capita in conflict affected MENA countries would have been on average 45% higher just seven years after the onset of conflict. This stark loss, equivalent to the region’s progress over the past 35 years, truly gives pause. I’m pausing to remind us that behind these numbers, behind every percentage point we discuss today, are human lives profoundly impacted. I believe it’s essential to add a human dimension to these reports. Behind every statistic is a person, a family, a community facing profound challenges. This reality underscores the Bank’s vital role in supporting recovery, building resilience and renewing hope for MENA’s nations and their people. As we look ahead to the potential opportunities of the region, let me highlight, again, that peace and stability have to be the bedrock of our efforts. This report is an example on how we deliver cutting edge knowledge as a global public good, raising awareness of the immense challenges and advocating for bold action from all stakeholders. It’s not just a challenge. The report also looks at key windows of opportunities where countries can rapidly advance inclusive growth. This is how we leverage knowledge to help client countries prioritize policies, reforms and investment to build thriving economies. Building thriving economies driven by private sector growth, innovations and jobs creation is not just an economic imperative, it’s about fulfilling the dreams of millions. President Ajay Banga recently said during our Annual Meetings that the most effective way to defeat poverty is by creating jobs. A job is more than a source of income. It brings dignity and a sense of purpose. This couldn’t be truer for MENA region. In the next 15 years, 300 [million] young people across the region will enter the job market. The private sector will be key in providing the capital, ingenuity and technology to create opportunities that will shape their future. There are many points in this report that Roberta will delve into, but let me highlight one that is crucial for every country in this region. For economies to truly thrive, women must be included. Women represent half of the population, half of the talent, innovation and a resilience essential to achieving the region’s development goals. Ensuring that participation isn’t just fair, it’s smart economics. There have been significant gains in levels of education for girls and women in the MENA region over the past 50 years. Yet the rate of female labor force participation in the Middle East and North Africa stands at only 19%, the lowest in the world. Closing the gender employment gaps will result in a remarkable 51% increase in per capita income in the typical MENA country. Governments in the region are aware of this and the good news is that action is happening and gain can materialize quickly. Saudi Arabia, for example, increased female labor force participation from 22% to 35% in just a matter of years, undertaking reforms that removed barriers and made an environment more favorable for women to enter the workforce. Jordan has launched the region’s first comprehensive program on women’s economic empowerment by addressing issues such as safe transportation, childcare, training and job opportunities holistically. So, countries in MENA can also leverage their strategic location to boost connectivity not just within the region, but also across the three continent borders. Connectivity is a driver for economic growth, creates ties between people and fosters the diffusion of ideas and innovation. At the World Bank, we are committed to putting the full power of our knowledge, financing and partnership to support transformative development to build a better future for MENA. With those reflections, it is my pleasure now to turn to our country, Chief Economist Roberta Gatti to share the finding of this excellent report. I’m looking forward to the discussion. Thank you.
[Merissa Khurma] Thank you so much, Ousmane, for your insights. Now to delve deeply into the report, I’d like to welcome Roberta Gatti, the Chief Economist for the MENA region and the World Bank, to share more on the key findings. Over to you Roberta.
[Roberta Gatti] Thank you, Ousmane, and thank you, Merissa for the kind introduction. Let me share my slides and do let me know, Merissa, if you see the slides in full format. [Merissa Khurma] Yes. [Roberta Gatti] Here we are. Thank you. With the opportunity to share the results of the MENA Economic Update for October 2024, we decided to focus on the question of growth in the Middle East and North Africa. It is joint work with Jesica Torres, Nelly Elmallakh, Gianluca Mele, Diego Faurès, [Mennatallah] Emam Mousa, Ilias Suvanov, and all the country economists in our region, to whom my deepest thanks go. So, let me start with a few figures to try to try to frame the challenge of growth in MENA. The first figure is 1%. And this is the annual average growth rate in GDP per capita that we saw in the MENA region in the past 50 years. Where did this growth bring us? The region grew from 1970 by 62% in terms of income per capita. Is that a lot or a little? Well, for comparison, other emerging and developing economies, income per capita grew four times and the income per capita of high-income countries grew two times in the same period. So, this 1% a year in the past 50 years delivered a level of income per capita which is only one quarter of the income per capita of the frontier economy, which, consistently with the literature in development economics, is considered to be the United States. Now, this frontier seems to be far away. So, our economists did a computation to see what it would take to get even just halfway to the frontier. What they calculated is that it would take an annual growth rate in GDP per capita of 3.8% a year for the next 30 years to get halfway to the frontier. That’s almost four times of what we saw historically. There is a sense that to really boost development in MENA, business as usual is not going to work. And that’s why we decided to focus on growth, and determinants and sources of growth for the region for this economic update. We looked at growth from three complementary perspectives. The first one, which is typical of our reports, is we looked at the short-term outlook. We then delved into the question of conflict. Not only the ongoing conflict that is now centered in Gaza, but also the economic consequences of the conflicts that have plagued the region since the 1990s. We then turn to looking forward. What could be the levers of growth that could accelerate development in the region? I don’t want to spoil the surprise, but actually I think this is a very uplifting part of the report. But let me begin with the short-term outlook. What do we see? We see a fragile growth. What do I mean by that? The forecast that our country economists produce for 2024 is of real GDP growth of 2.2% in the whole region. This is a small uptick vis a vis the 1.8% that we saw in 2023, but it’s also a downgrade from expectations of growth from the growth forecast that we, our country economists, had produced just in the eve of the outbreak of the conflict. Actually, the forecast was of 3.5% rather than the 2.2 that we forecast now. This 2.2% is in line with what we have named over the years as a chronic low growth problem in the region. If we look at the decade before the pandemic, the region was growing at 3.3%, already 1 percentage point higher than what we see now. But other emerging and developing economies were growing at 5.5% in the decade prior. Now, this 2.2% masks significant disparities within the region. It is primarily driven by significant uptick in real GDP growth in GCC countries in the Gulf Council Cooperation countries. And this uptick in growth in GCC comes primarily from the non-oil sector, while the subdued growth in 2023 was coming from OPEC+, putting the brake on oil sector production. On the flip side of this uptick in growth in GCC countries, we see a significant slowdown in growth in the developing part of the region from 3.2% in 2023 to 2.4% in 2024. Both of these forecasts are actually much lower than the forecast that we had a year ago, before the outbreak of the conflict. For GCC countries, we were forecasting a 3.6% growth rate primarily because of expectations of loosening up the self-imposed restrictions on oil production, and for the developing part of the region, we had the forecast of 3.4% instead of the 2.4% that we see now. This was in the wake of reassessing the geopolitics risk in the region and also increased uncertainty. Now, I mentioned uncertainty and what we have done in April and in this issue of the Economic Update was to propose a new measure of uncertainty. We looked at the forecast of growth that the private sector is putting out there every month. We looked at the measure of discordance, of disagreement across these forecasters. When we look at that dispersion, we can take that measure as a proxy for the uncertainty in the region writ large, and what we see is that uncertainty is a feature of MENA. You see the MENA region here, depicted in the deep red line. And you see that between 2015 and the pandemic, uncertainty by this measure was significantly higher in MENA than it was for other country groups. You see in gray other emerging and developing economies, and you see in green high-income countries. Then, with the pandemic, uncertainty shoots up, not surprisingly for all the countries, but then it starts coming down for all country groups with the exception of MENA. And you see in MENA a significant increase in uncertainty, which as of September 2024 was twice as high as in other emerging and developing economies, where instead uncertainty was going down. Clearly, conflict is weighing heavily on the region. And as Ousmane already said, it’s very clear that economic indicators cannot capture the devastation that conflict brings to people and society, with loss of lives, tragic displacement of people, destruction of homes, infrastructure and affecting the whole fabric of society. Yet conflicts also bring immediate economic losses. And this is what I will be talking about at the beginning of this section. Let’s look first at what is happening in the West Bank in Gaza. In the midst of a deepening humanitarian Crisis. With about 2 million people displaced, a continuing risk of famine and widespread food insecurity, the economy in Gaza has come to a near halt. Complete near halt. We see here a drop in GDP of about 86% in the first half of the year for the Gaza Strip, but there’s also a significant contraction of GDP happening in the West Bank. The GDP is expected to contract by 23% and this is due to a fiscal crisis. And now the Palestinian Authority is looking at a deficit of 1.8 billion dollars for 2024, which is twice as large what we saw in 2023. And also drops in consumption, which is driven by limitations in mobilities, driven by cancelation of work permits, but also by a much more slower activity in the private sector. Now, the ongoing conflict is centered in Gaza, but has escalated more broadly. Before the recent intensification of the conflict in Lebanon, in September, GDP for Lebanon was projected to be minus 0.1%. However, the impact of the escalation is under assessment by our economists. We know that the conflict has already brought about a significant human toll and a significant toll on infrastructure of the country. So, these downgrades are likely to be quite severe in terms of forecast for GDP per capita in 2024. There have been also repercussions on the economies of other neighboring countries such as Jordan and Egypt. For Jordan, primarily at the moment, and so far through a declining tourism and so arrivals have declined by 6.6% in the first half of 2024 compared to prior. And in Egypt, fiscal revenues decline from the Suez Canal of about 62% in the first half of 2024, vis a vis being the second half of 2023. The global impact of the conflict has been quite muted so far. This is due to a broader global market dynamics. There is a… oil prices are teetering down. They are driven by robust supply of oil, but also concerns over sluggish demand. So, what we’ve been looking at here are the immediate consequences, economic consequences of conflict. However, what we’ve done with the team is to take deeper look to the economic consequences of conflict and we looked in the medium term. So, what we have done is an exercise of counterfactual, trying to understand what income per capita would be in MENA countries that have been conflict afflicted since 1990s if they hadn’t had the conflict. Let me premise this analysis by highlighting the fact that the current conflict that is centered in Gaza comes at the heel of a trend of increased fragility and violence in the region. The instances of conflict have increased twofold since 1990, and the share of worldwide victims of conflict has increased sixfold, making the region the region with the highest share of fatalities from conflict between 2012 and 2018 in the aftermath of the Syrian war. So, when we looked at this counterfactual exercise, we actually found that countries that were afflicted by conflict since 1990s, seven years after the conflict, would have had 45% more income per capita if the conflict hadn’t occurred. Just by measure this is equivalent to 35 years of progress in the MENA region. I’m taking pause and this is something that Ousmane has also highlighted because these numbers are big, and it’s clear that conflict really dials development and that peace is a precondition for growth. Now, withstanding these challenges, the MENA region has tremendous opportunities for growth with peace as a foundation. And this is what I want to turn to next. So, what is driving income growth overall and in MENA? Our economists have implemented what economists call a “development accounting exercise.” This is an exercise where you look at the differences between GDP per capita, let’s say in MENA, or in a single economy in MENA, and the frontier, as I mentioned, as is typical in the literature, the US and you attribute those differences to two key elements. One, factors of production, capital and labor, and the other one is productivity. What the exercise delivered to us, were it made it clear that 60% to 80% of the differences between the income per capita in MENA and the frontier are due to two factors. One, low employment ratios, and the second one, low productivity. Let me turn to employment ratios first. Employment to population ratio is very low in MENA, and what is particularly low is the participation of women to economic activity. This is something that Ousmane has already referred to in his introductory remarks. When you look at this graph, you see the gender gap in labor force participation in MENA vis a vis income comparators. These are gray dots. And what you see is that the gap between men and women in labor force participation is significantly higher in MENA when compared to their income comparators. What would happen if we were to equalize those employment rates? We would get, in the typical MENA economy, a gain of 51% of GDP per capita. That is very large, and this is even larger now that women are increasingly educated and can deliver even more of that growth. Now let me turn to the second bucket, if I may define it as such, of determinants of growth, which is productivity. We can think about productivity in many ways, but two intuitive ways is to think about it in terms of efficiency of use of resources, and the second one is technological progress. Let me talk about efficiency of use of resources first. There is one very important way in which talent is misallocated in the MENA region. The public sector absorbed a significant, and actually the highest in the world, share of employment in men, 22% vis a vis this other percentage that you see all over everywhere else in Eastern Europe and in Latin America. This is particularly true for women. So, one out of three women who work, works in the public sector, a public sector that has at best a mixed record in terms of productivity. And this number is even higher if we look at individual countries, something like 40% of employed women work in the public sector in Egypt, 64% in Algeria, 71% in Iraq. Our economists computed that the gains from reallocating talent from the public sector to the private sector could deliver gains of productivity that range anywhere between 5% of productivity to all the way to 45% of productivity. These gains will be even higher now that women are more educated, and particularly because educated women tend to disproportionately work in the public sector. Now, this is something that speaks about allocation of resources. I know that it’s something that is very close to Professor Chang-Tai Hsieh’s heart, and builds on his work. So, we’ll have opportunity to discuss this more. But the other side of the story is how to increase technological progress. Essentially, what we see is that the MENA region is lagging behind in both knowledge production and knowledge impact. If we look at even the country that is closer to the frontier in terms of knowledge production, and that’s Qatar, it stands at only 50% of the frontier in terms of scientific publication per capita. If we think about knowledge impact and we can measure it by something as simple as citations, we see that all of our countries are falling behind. Even the country that had the fastest improvement, which is Saudi Arabia in the past 15 years, still continues to lag way behind the frontier. The second dimension where MENA lags behind is the one of data access and transparency. Access to data is fundamental for the circulation of ideas, which in turn is fundamental for more innovation, both absorption, adaptation and creation of innovation. Just to give you an example, only 6 out of 19 economies in our countries publish microdata to calculate something as basic as an aggregate poverty rate. So, the opportunities out there are significant. So, how to go about them? Something that we focus on the report is the role of international trade. The region, because of this, of its geographical location, tends to gain dramatically by improved trade. We just had some basic calculation showing that the region could increase its trade with the EU by two and a half times in terms of non-oil products and in terms of export of non-oil products. This could be actually something like I think three and a half times for Egypt and all the way up to 13 times for Algeria. So, the opportunities are there and these opportunities will bring important spillover of knowledge. The second strategy is really to… And this is something that can be done with a stroke of a pen, improve data access and data transparency, not only to improve the circulation of ideas, but because we’ve seen in the literature that better data access is associated to poor with improved growth, with lower bond spreads and also with improved accountability of the public sector. So, to conclude, we looked at the fragile outlook for growth in MENA. One where conflict is weighing heavily on the region. Both the current conflict with the devastation that is bringing in Gaza, in the West Bank and the escalation in Lebanon, and the conflicts of the past that have really dialed back development for decades in the region. At the same time, there are opportunities there for a most prosperous region. The distortions in our region are large and the opportunities are as large. We talked about allocating better talent, bringing women more from outside of the labor force into the labor force with significant gains, but also reallocating talent from the public sector to the private sector. We talked about the role of innovation and the importance of better production of knowledge and more impactful knowledge. None of these will happen without more and better access to data and transparency. Henceforth, the situation is uncertain and complicated and difficult, but there is a tremendous upside for growth in our region. Thank you so much for the opportunity to present the results of our analysis and I look forward to the discussion. Thank you, and back to you, Merissa.
[Merissa Khurma] Thank you so much, Roberta, for this very rich presentation. Now on to our panel discussion. I would like to welcome our esteemed panelists. Their biographies are on the World Bank website, so I’ll be very brief. So, in addition to Ousmane and Roberta, we’re also joined by Dr. Chang-Tai Hsieh, who’s the Phyllis and Irwin Winkelried Distinguished Service Professor of Economics at the University of Chicago Booth School of Business, and Dr. Tarik Yousef, the Senior Fellow and Director of the Middle East Council on Global Affairs. So, to kick this off, I’d like to turn to you first, Chang-Tai. You have written one of the seminal papers on misallocation and productivity losses. So, based on your research and what you’ve heard from Roberta, how can leveling the playing field between the public and private sectors influence growth in the MENA region?
[Chang-Tai Hsieh] Thank you. So let me start by saying that I think that the first point mentioned by Roberta, that sine qua non is peace, I mean that should be completely uncontroversial. I don’t think that one can talk about anything else as long as there is conflict. The second part of what Roberta said, which I interpret as once we solve the conflict, the question is what next? And the way I think it’s useful to think about it is to think about the elements of her decomposition and then think about what exactly goes into the different terms that she has on her right-hand side. I think it’s useful to just think more broadly about what exactly is in these terms. So, let me start from the term that she has on the very right-hand side, which is aggregate productivity. I think that’s where to think about your question, which is… There what is being measured in the numbers that her team has put together is essentially gaps in the marginal product of resources between firms. There it’s the basic idea that you have a bunch of firms that are not very productive, but then have access to lots of resources, and that essentially is the way to think about your question. And at the same time, what that necessarily means is that you have a bunch of firms that potentially are very, very productive, but that don’t have access to resources. And then it should be obvious how that is going to cripple your economy. But I also think it’s important to just think about the other terms of the decomposition that Roberta put up and to think about how all these different pieces, you could have different types of misallocations show up in these pieces. So, let me start with like one of the very first terms which is about human capital. I think like a hugely important aspect of human capital is not so much about the average amount of human capital that a person has, but it’s about whether your human… It’s about whether the spending on human capital is going to the right places. That could be just masked by the, the data that we typically look at in terms of human capital. So put simply, I think that there is that potentially you have the issue that you have lots and lots of talented kids who could really benefit from access to human capital, but they don’t get it. They don’t get it because they either don’t go to school or they’re going to schools that are underfunded and at the same time the money is going to schools where the return to schooling resources is low. I think that that’s a hugely important aspect as well. And then you think about the other pieces that she has, which is labor force participation. There the question is whether you have… There it’s about whether you have lots of talent that is for a variety of reasons they’re not working in the market and they’re not living up to their potential. And this is something that the Vice President of MENA also mentioned. I think it’s really important to dig into this because my sense, I’ve not seen any studies that this is potentially a huge issue like, and at least in some of the countries that one has been able to put together this data. For example, one of the countries is the US and one of the things that’s happened in the US is that labor force participation rates of women have gone dramatically up. it’s not just labor force participation, it’s also in terms of the kinds of occupations that women have chosen in the US that has dramatically changed in the last 50 years. And it’s not just, and I also think it’s important to just not think in terms of male versus female, but to think about different groups of people as well. So just about, I think it was about two years ago that I spent two weeks traveling through Jordan. There are two things that struck me as I was just as I was going through the country. One is that a lot of the jobs that one normally sees are occupied by women in most other places in the world, in Jordan, they’re mostly done by men. The other thing that one sees, that you clearly see these groups of people that are, let me say, shoehorned into specific jobs. So, you can think about that as there are potentially lots of people that have talents, but that don’t take advantage of their talents. To go back to what we’ve seen in the US. it’s not just women where labor force participation rates have changed and the occupational structure has changed, but you also see this in terms of minorities in the US as well. One of the things I would just encourage you to do, is to just think more broadly about this notion of misallocation. I think it potentially shows up everywhere, and maybe this is going to get to the other thing that Roberta talked about in order to get some sense of what are the levers that you want to push on? Because you can’t push on everything. You can’t push on everything. You really got to have some sense of where is it, you really got to have data in order to figure out what are the things in which you could just put a little bit of effort and the returns are big, and what are the things which, yeah, there potentially are returns, but it’s a huge amount of work, so let’s not bother with that. Okay, so I’m gonna end there.
[Merissa Khurma] Thank you so much, Chang-Tai. And over to you, Tarik. Building on what you’ve heard so far, we’ve also talked today about closing gender gaps, transforming the role of the public sector, innovation, data access. You’ve been working on this for some time. Are there other strategies for growth for the region? Tarek, you’re muted. If you can unmute yourself kindly.
[Tarik M. Yousef] Yes. Well, good evening to everyone from Doha. Thank you, Roberta, and your team for putting together such an excellent report. I enjoyed reading it. I also welcome very much the spirit and substance of VP Dione in how he outlined the issues both at the macro level and the micro level, especially the focus on conflict and the vision for the future. Your question is about the strategies for growth and models for growth, which I think is also a very relevant question. I’m glad you’ve put it on the table, building on the discussion we’ve had so far. The report, one cannot disagree with the recommendations made in the report as far as one calling for looking at, revisiting, reassessing and doing something about the misallocation of resources that we see and this predominant dominant role of the public sector and all the efficiency and the efficiencies it gives rise to. That’s been a longstanding agenda item for most countries in the region. One can also not disagree with the call and the objective of promoting innovation in this region and thinking about innovation seriously and thinking about the channels through which innovation can be encouraged, whether it’s international trade or data transparency. And I would say last but not least, the need to close the gender gap and make progress there. Again, a long-standing issue that’s been on the agenda. I guess what I would like to add in the couple of minutes that I have is to also raise questions about the context in which all of these policies are going to be taking place. The context here not necessarily being one that is the political or the institutional, but the context of the international economic system and changes underway that are taking place within the system, changes that are likely to accelerate over the next few years and decades, which I think overall raises questions about development models, growth strategies. There are at least two of these trends that I think matter for this discussion. One is the so called, and people have referred to it in different terms in different ways, but the so called “retreat of globalization” that is now taking place. We see many manifestations of that in just about everything we observe, certainly what we read, ongoing debates amongst intellectuals, economists, etcetera. The other trend that we want to actually also pay attention to because people in the region, governments and countries are paying attention to, is the return of the state, and the return of state intervention in economies. I at least suggest that there are four to five layers of this or dimensions of this that have become quite crystal clear when you unpack things. One is the rise of protectionism. Who would have thought that protectionism in the way we had assumed and worked on for decades is now making a comeback? Tomorrow’s election is going to essentially reveal whether protectionism in the form of tariffs is going to accelerate or it will go on a small steady rate. A second dimension of this, or a second layer of this, are the increasing infusion of national security considerations in economic decisions, in trade decisions, in trade pacts, in trade agreements. Third would be emergence of new geopolitical but also geoeconomic blocs. The BRICS summit just took place a few, less than a few weeks away and it had a lot of economic undertones about policy and direction and orientation. Last but not least, I would say, and this would be how the return of the state is being translated into reality. The return of industrial policy, the emergence of industrial policy with all of its forums, something we had put to bed, we thought, decades ago, and yet it’s making a comeback. Increasingly we’re seeing countries in the region experiment, think through and engage economically and diplomatically in ways that suggest that state intervention is going to be the flavor of how development models and growth strategies are going to be conducted. This is a very different world from the world that most MENA countries got used to over the last three decades. So, putting conflict aside, the geoeconomics, the changing landscape for economic policy, for trade, for the diffusion of technology, all of which suggests that as countries begin to embark on the policies that Roberta and her team have outlined, the context here is going to matter. Thinking about different countries in the region, different capabilities, the conflict conditions versus non conflict countries is obvious. But you have countries with immense financial resources and others without. You have countries that are looking at an energy transition that could accelerate and make life very difficult; and hence, their own approach to innovation, and technological change, and economic policy is going to be different. I’d say thinking about all of these in this context would probably be the next item on this very important agenda that the World Bank has decided to take head on as it thinks about economic policy in the future, as it thinks about specifically growth and how the next few decades will be shaped by both conditions within the countries and policy choices, but also conditions outside the country. Back to you, Merissa.
[Merissa Khurma] Thank you. Thank you so much, Tarik. Chang-Tai, back to you and shifting gears a little bit. The MENA economic updates for the past several years have always raised the importance of data accessibility for the region. You’ve worked on this. What are some of the key factors that countries could learn from using firm level data?
[Chang-Tai Hsieh] I want to say that it’s not just firm level data, but it’s all dimensions of data. It’s all dimensions of data. It’s, I mean, I would say that data is crucial in order to figure out where you want to allocate your, let me say, not so much your resources, but where you want to allocate your administrative efforts. So, the way that I always put it is that when I hear a country give me a long list of things that they’re going to work on, I know automatically that nothing is ever going to happen. I just don’t think that the really effective changes are not ones in which you say that you are going to do 10 things. The really effective changes are ones in which I see policymakers really think hard about all the different choices that they have. And they prioritize. They prioritize and say, this one thing is going to be what I’m going to focus most of my energy on. And then, maybe there’s this one more thing that I am going to work on. But you really got to focus, or otherwise you’re just talking. I mean, you’re talking. And then if you want to focus, you’ve got to make sure that you focus on the right things. You got to make sure you focus on the right things. And then the question is, how do you know that you are focusing on the right things if you have no data whatsoever? So, that’s the way that I would put it to the country. Now, one concern, and this is a real concern that many countries have, I’m going to say one is a real one, which is about confidentiality. And then the other one is a more political one, which is the fear of data transparency is that the data can also be used by the political opponents of the government. I mean that. So, one solution that I’m going to say, countries that have functioned well do it, is that they focus on data, but they set up a protocol in which they make sure that the data is used in a responsible way. I’ll give you just one example. The government of Singapore has a ton of data, but they have set up really, really tight protocols that limit who can access the data, but they use it. They have a system in which that is, if you’re inside the system you can access all that data, and it’s widely used for most of the things that they do. So, I think that in order to make progress on that, I think you’ve got to give assurance, like my experience has been that you’ve got to give assurances not just about confidentiality, but also assurances that the data is not going to be used in a way that would embarrass the government politically.
[Merissa Khurma] Thank you for that. And Tarik, the report paints a very grim picture about the impact of conflict on economic development, but you’ve done a lot of work on this for many, many years. You’re in the region, you’re from the region. Where is the hope for the MENA region?
[Tarik M. Yousef] I’m not sure I can offer a lot of hope at the moment, but I can at least recognize and acknowledge and commend the management at the Middle East and North Africa region of the World Bank and the authors of the report for making conflict the center of attention and center of analysis in an important report in what has been a very difficult year. To my knowledge, and I don’t think I’m wrong, this is one of the first reports produced by a major international financial institution, specifically the World Bank or the IMF, that recognizes the role of conflict, quantifies it, identifies the channels through which it affects growth and development, and provides a very sobering, a very sad and depressing analysis nonetheless on what is happening in the region in the last year and how these conditions, quite frankly, when you think of nine out of 12 countries in the region in the last four years being involved in conflict episodes, that gives you a sense of the magnitude on the scale. Hence, the estimates provided by the report, however draft or unexact they might be, they’re consistent with what we’re observing. I’d say the first thing to say is it’s important to focus on what matters at this point in time, and conflict is exactly what it is. Related also to the discussion we’ve just had on data transparency, I would say if we had more data transparency in the region, if we had greater access to information, to statistics, on a timely manner, in a detailed manner, we would be able to do a much better job of quantifying the impact of conflict and maybe to put together and propose strategies for mitigating conflict. Think about the impact of conflict on consumer sentiment or business sentiment or investment flows. We don’t even have the tools in place to measure these in real time. We often measure them with years of lags at best. And so, linking the two, I think, is one important way of thinking about the importance of studying, tracking, quantifying, and emphasizing to the international community and to actors in the region the role of conflict. I’d say the message that Vice President Dione started with and was also reiterated by everyone, which is an important conclusion that comes out in the report, that peace is a prerequisite for sustainable development. This is said flat out straight and is one of the key conclusions to draw from this. I would say peace is also a prerequisite for growth and thinking about growth moving forward. What the report has not done, and understandably so, is take a stab at the drivers of conflict in the region, whether it is civil unrest, interstate conflict, or more broadly, regional conflict, conditions that we’re observing today in the region and have observed in different times. That’s a much more controversial, perhaps, analysis, but it’s one that has to happen and can be handled systematically and objectively in a way that actually adds to our understanding and helps to identify also where the drivers are and how to best engage in or think about conflict mitigation and conflict prevention and maybe possibly down the line, conflict resolution. One of the other important conclusions in the report, and I would say it comes out towards the end, but it’s worth highlighting, in thinking about what is required to bring an end to conflict. One of the important statements made in the report is that sustaining the peace, achieving peace requires dealing with the underlying drivers of conflict, whether they happen to be societal grievances and cleavages, interstate differences, conditions of insecurity and rivalry and competition. And maybe here, back to you, Merissa. Just to by way of a conclusion, this is where I am less optimistic and less hopeful about the next few years. I would say this is a region that is lacking in any sort of security order. This is a region that has been dealing with conditions of disorder for several years, both bilateral, between states, amongst groups of countries and domestically. It’s a region that’s increasingly being neglected by its partners abroad, whether they happen to be Europe or the US who are standing mostly on the sidelines, absent a regional security order that helps to diffuse resolve, underlining drivers, the underlying drivers of conflict and its instability. I worry that as the world becomes more geopolitical, politically fragmented, as geopolitical competition between big powers escalates, the region will become increasingly a victim and an arena for that competition. States will feel individually much more inclined to take matters into their hand. This is a call for the return of cooperation, of multilateralism, and of thinking seriously about the drivers of conflict and to have the right dialog about resolving them.
[Merissa Khurma] Thank you. Thank you so much. Yeah, you could. Yeah, we just have under. Yeah, please go ahead. Under a minute, because we want to turn to Roberta and Ousmane. Yeah, go ahead.
[Chang-Tai Hsieh] Maybe this is not a thing to think about in polite society, but I’ll just say that I think there is a real opportunity for the countries that are not affected by conflict on what to do in response to the conflict. The point that I’m going to make here is that if I look at historical episodes of societies that have embraced the inflow of people that have been affected by conflict, what I mean, and I really mean the term embrace, fully embrace. These are societies that one decade later, decades later, they really, really prosper as a consequence of this. I’ll give you two historical examples. 1949, there was a civil war in China and there was an influx, a huge, huge influx of refugees into Hong Kong. Ten years later, these refugees basically built modern Hong Kong. The other historical example is 1990, when the Soviet Union that was collapsing, they finally let the Russian Jews go. There was an increase, and it was a huge influx into Israel. This was a 20% increase in the labor force. Ten years later, what you see is this burst of innovation that happened. Obviously, it takes time. It takes time. The initial transition is not easy. It’s not easy. But if you fully embrace it, I think there is a real opportunity, to just use a phrase, that you make lemonade out of lemons. Because ultimately, I’ll just say two things. We can talk about conflict all we want, but at the end of the day, these are forces that are much bigger than us. Like, there’s really, realistically nothing that any of us can do about it. What we can do is, given the situation on the ground, how do we make it, what do we do? The second point is what we really care about is the welfare of people. It’s the welfare of people, not about the welfare of what is produced in a given place in a given piece of land. So, that’s the other thing that I guess I would be thinking about on just going to all the different countries, like, hey, here is this unique opportunity that could really dramatically transform your society for the better if you were to fully embrace it.
[Merissa Khurma] Thank you so much for adding those very important interventions. We have a few minutes to go. Roberta, under a minute, if you can share one thing that surprised you as you worked on this installment of the Middle East Update.
[Roberta Gatti] I don’t know, Merissa, I don’t know that surprise is the right word because I was saddened by what I saw on the human side. And as an economist in terms of consequences of the conflict, I was sobered when we calculated the numbers of how much conflict has weighed down on the development of the region. And at the same time, looking at these different opportunities for growth that are out there to be seized by our countries, I was, I think I was uplifted. And so, I had these contrasting sentiments. I guess that’s how I would unpack the surprise in under one minute. But let me get back to you, Merissa, and thank our discussants for all this food for thought that will stay with us and will inform our work. Back to you, Merissa.
[Merissa Khurma] Thank you so much, Roberta. And I want to turn to Ousmane for closing remarks. Ousmane, over to you.
[Ousmane Dione] Thank you, Merissa, and thank you also for our discussion. This has been an extremely good, thought provoking and important conversation. And really, I want to express my sense of gratitude to Dr. Tarik Yousef and Professor Chang-Tai Hsieh. If I had just one or two takeaways from this extremely important conversation is that unless there is stability, unless there is peace, it’s extremely difficult to get to growth and it is extremely difficult to make progress. We have seen it from the numbers and I do agree with Dr. Tarik Yousef that understanding the drivers of conflict, the root causes of conflict and the way through which perhaps it can help with respect to looking at solution and resolution is fundamentally important. But we also do know, Dr. Yousef, that this is not a subject without controversy. The fundamental question is how to balance it in order to make sure stakeholders see the rationale behind in terms of the quest for peace and stability and what it means going forward. Second is when it comes to the World Bank specifically, we have seen how the MENA region has faced over the years, series and succession of shocks. We want to continue to be on the side of the MENA countries in navigating these crises. There is one thing which I think all of us over this conversation would agree, and it is a fundamentally clear one, which is in a period of crisis, in a period of conflict, first and foremost, it is the poorest and the most vulnerable which are the hardest hit by this crisis. So, for us as a multilateral institution is fundamentally important. Remaining apolitical is fundamentally important. Being on the side of countries of finding solutions to these crises is key, especially in helping people. Helping people, especially the poorest and the most vulnerable, to deal with immediate and urgent needs. That is key, but also it is important, and this is where the balancing act become also a bit complicated on how to deal with urgency, with immediate needs, while not losing focus, losing sight on how the medium and longer-term perspective with respect to development have to be kept going forward. That is this two-pronged approach which we at the World Bank are really striving for. Helping countries to deal with immediate and urgent needs of people in a period of conflict or in a period of crisis, but also looking at the medium and longer term. We do know that that cannot be just done by one single institution alone. This is where partnership becomes fundamentally important. That is also what we are striving for, to work with different partners across the world, different institutions on how we will be able to leverage our voices, leverage our resources, our knowledge in order to support client countries in MENA. Ultimately, there is a point which really goes to my heart, which is also how we can start changing the narrative of the region. Yet despite the crisis we are facing, despite all the challenges, one can and should see the prospect of hope, a better future for young generation in this region, a generation who can really tap in innovations, a generation who can tap on better knowledge and a generation which can also economically strive through better jobs, and jobs which really can help them see a better future going forward. This is part of the agenda which we would like to continue focusing on and working with as many people possible across the region, but also internationally like our two discussants today, Dr. Yousef and Professor Chang-Tai Hsieh, whom I wanted again to reiterate my sense of thanks and gratitude. Thanks to all those who have been following us this morning, again with much appreciation. Thank you, Merissa.
[Merissa Khurma] Thank you so much, Ousmane, for reminding us about the importance of partnerships and the hope for the region. Thanks to all our distinguished speakers. To Roberta, as we’ve heard from you, Roberta, the economic outlook for the region is weighed by heightened uncertainty. And while conflict, of course, casts long shadows on economic development, but you’ve also identified some opportunities for growth in the MENA region. So, thank you all for joining the broadcast and please visit worldbank.org/MENA to read the report. Thank you.
