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Executive Summary Arab World Competitiveness Report 2011-2012 A key message from this chapter is that, although FDI is usually identified as a driving factor of employment, the link is far from automatic and direct. Relevant policies can have an important role in making that link happen and increasing its impact on the volume and quality of jobs. Finally, the chapter underlines the pressing need for improving the availability of reliable and complete data to measure the impact of FDI on employment, both direct and indirect, in terms of both the number and the quality of jobs created. In the end, sound policies are built on the basis of sound evidence. It is certain that the Arab Spring provides a unique window of opportunity for the MENA region to leverage its “youth bulge” and introduce the transparent and accountable policies and institutions that will support increased competitiveness and higher living standards. Achieving higher growth and employment will require that the various challenges be tackled through a coordinated and comprehensive strategy that involves governments, the private sector, civil society, and the international community. The region's governments and the international community need to work hand in hand to promote inclusive and sustainable economic growth and employment if they are to fulfil the aspirations of the Arab world's citizens. 8 Approaches to achieving higher economic growth and employment analyzed in this report were the topic of the World Economic Forum Special Meeting on Economic Growth and Job Creation in the Arab World at the Dead Sea in Jordan on October 21-23, 2011, and will be further discussed at the World Economic Forum’s Annual Meeting in Davos-Klosters on January 25-29, 2012.
1. A Time of Opportunities: The Competitiveness Performance of the Arab World By Margareta Drzeniek Hanouz and Miroslav Dusek, World Economic Forum The year 2011 has seen important developments in the Middle East and North Africa (MENA) region. A wave of popular protest demanding more social equity and stronger economic development has led to political change at an unprecedented and unexpected scale. Social unrest affected many countries, but the degree of resulting political change varied across the region. Protests triggered economic, social, and political reforms in a number of countries, and culminated in the resignation of ruling presidents in Tunisia and Egypt and in forceful regime change in Libya. While these events have contributed to uncertainty in the short term, and many countries are set to experience a drop in economic output in 2011, they present great promise for the future development of the countries in question and the region as a whole. A political transition is under way in a number of countries, and reforms aimed at enhancing competitiveness are high on the agenda of many governments and supported by the international community. If such reforms are carried out, the region has the potential to rebound and provide better employment opportunities and improved standards of living for its population. The recent events have placed a spotlight on the importance of job creation for the region, which The Arab World Competitiveness Report 2005 identified as the key challenge for the coming years. In light of the region’s growing population, according to the OECD MENA-Investment programme (see Chapter 2) Arab economies will need to create 25 million jobs over the next decade just to keep employment at existing levels, let alone to reduce the burgeoning unemployment rate. This will require gross domestic product (GDP) growth to reach 5.5 percent on average, one percentage point above the growth of the past decade. Boosting gainful and sustainable private sector employment is therefore arguably one of the most important development challenges for countries in the region. Competitivenessenhancing reforms can be instrumental in this respect, as reforms that enhance competitiveness also support higher levels of formal private sector employment in the long run. At the same time, competitive economies are more productive and are able to maintain higher wages for their populations, thereby raising the standard of living in a sustainable manner. The employment agenda for the region therefore overlaps to a large extent with the competitiveness agenda, although certainly some aspects, such as education or labor markets policies matter more than others for employment creation. Against this background, an analysis of the competitive strengths and weaknesses of the MENA region appears particularly timely. The following chapter analyses the region’s competitiveness based on the findings of the World Economic Forum’s Global Competitiveness Index (GCI). At a time when economic policy in a number of countries is being reshaped, this analysis will provide a reminder of each country’s competitive strengths and identify challenges that will need to be addressed by policy-makers to enhance their economies’ competitiveness going forward, thereby putting them on a higher growth path. World Economic Forum 9
Page 1 and 2: Arab World Competitiveness Report 2
Page 3 and 4: Table of Contents Preface 4 Partner
Page 5 and 6: Partner Institutes Algeria Centre d
Page 7: The successful implementation of an
Page 11 and 12: When benchmarked against the EU, mo
Page 13 and 14: Although taken into account separat
Page 15 and 16: Box 2: The Impact of the Arab Sprin
Page 17 and 18: Table 3: Gulf economies in the GCI
Page 19 and 20: Despite these important advantages,
Page 21 and 22: Despite its undeniable potential, A
Page 23 and 24: Competitiveness of Levantine Countr
Page 25 and 26: Notes 1 For a more detailed discuss
Page 27 and 28: Efficiency Enhancers Pillar 5: High
Page 29 and 30: Notes a. Formally, for a category i
Page 31 and 32: 1.13 Business costs of terrorism To
Page 33 and 34: Macroeconomic environment 3.01 Gove
Page 35 and 36: Higher education and training 5.01
Page 37 and 38: 6.15 Degree of customer orientation
Page 39 and 40: 9.05 Broadband Internet subscriptio
Page 41 and 42: Innovation 12.01 Capacity for innov
Page 43 and 44: Key Challenges for the MENA Region
Page 45 and 46: Unemployment is particularly acute
Page 47 and 48: A bloated public sector has distort
Page 49 and 50: Food and fuel price volatility have
Page 51 and 52: Figure 5. GDP growth in the region
Page 53 and 54: Egypt and Tunisia are expected to r
Page 55 and 56: Trade diversification and intra-reg
Page 57 and 58: Figure 11. Resource-poor countries
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Figure 13. Most FDI outside the ene
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There are significant development o
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Figure 16. Tourism is a key economi
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12 OECD estimates based on ILO data
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IOM (International Organisation for
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I. The Link between FDI and Job Cre
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2. Characteristics of FDI and Job C
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The objectives of the investor also
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Figure 9. Expenditure on education
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Figure 12. VET and CET systems are
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Policies to Involve the Private Sec
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Box 6. Higher Education in Egypt: O
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Box 7. Flexicurity: The Example of
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2. Women’s Integration in the MEN
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In the MENA region, SMEs must impro
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Box 10. Economic Zones in the MENA
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The renewable energy sector's direc
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Tradable business services have sig
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To tap the full potential of the se
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Agosin, M. and R. Mayer. 2000. “F
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Messerlin, P. A. 1995. “The Impac
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———. 2008. “The Road Not Tr
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countries to assess how well their
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About the Authors Iman Al-Ayouty Im
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Acknowledgements The Arab World Com
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