Ensuring the private sector has access to markets and the freedom to compete with government-run businesses is needed for sustainable job creation in the Middle East and North Africa, the World Bank has said.
The region requires a more “vibrant” private sector as well as regulatory reforms for the labour and product markets, the Washington-based lender said in a report released on Monday.
“Governments must reshape their relationships towards the private sector, towards workers, and, equally important, towards women,” Ferid Belhaj, the World Bank’s Mena vice president, said.
The report recommended an incremental approach to structural changes and urged governments to focus initially on emerging sectors such as the digital economy and green economy – which have fewer incumbents and powerful interest groups – to minimise political challenges.
Employment in Mena countries rose 1 per cent per year, on average, within private-sector firms, but the female labour force participation of 20 per cent is the lowest in the world, the lender said.
Youth unemployment rate, estimated at 26 per cent, is the highest. Nearly one in three young people (32 per cent) aged 15 to 24 in Mena is not engaged in employment, education or training, according to the report.
More than half the region’s population – nearly 250 million people – are under the age of 30. They are educated and ambitious, looking outward to their peers around the world and demanding decent lives and better government services, the World Bank said.
“Instead of being active in economic sectors, the state must enable a well-regulated competitive private sector,” Mr Belhaj said.
“Instead of controlling worker transitions through an outdated labour code, the state must rethink its social protection and labour market programmes … and instead of guarding the legacy of some historical and social norms, the state in the Mena region must be the faithful guardian of gender equity,” he said.
Most of the region’s economies lack market contestability, the report said. One of the major causes is state-owned enterprises that “play a dominant role and receive preferential treatment” regarding taxes, financing and subsidies.
Several Mena countries rely on middle-skill occupations, and their workers perform fewer tasks that require skills essential for the jobs of the future, such as technical and socio-behavioural skills, the report said.
“Governments in the Mena region can avoid another lost decade for current and future generations by enacting brave and politically feasible reforms,” the report’s co-author, Federica Saliola, lead economist with the social protection and jobs global practice at the World Bank, said.
“The Covid-19 pandemic, as difficult as it has been, is an opportunity to support a resilient and inclusive recovery that generates better jobs while addressing both the immediate devastation wrought by the disease and longer-term challenges.”
To enhance the market contestability, the report recommended governments to reduce the dominance of state-owned enterprises. Examples included eliminating exclusions and exceptions from competition, procurement and tax laws that are applied to private operators.
It also pressed upon reforms in some countries to address restrictions on women working in specific industries, as well as limited working hours for women, unequal pay compared with that of men and the need for women to obtain spousal permission before accepting jobs.
“A dynamic private sector is the cornerstone of good jobs,” said co-author Asif Islam, a senior economist in Office of the Chief Economist, Mena region, at the World Bank.
“The spirit of entrepreneurship and innovation can propel economies down serendipitous paths of prosperity … young people are energised as they participate in the private sector, learn valuable skills and gain a sense of purpose as they become stewards of their own destiny.”
To highlight opportunities that already exist, the report includes seven case studies of young entrepreneurs who have launched job-creating businesses in recent years, despite the challenging backdrop of the Covid-19 pandemic.
They document how men and women from Egypt, Jordan, Lebanon, Morocco, Saudi Arabia, Tunisia, the West Bank and Gaza overcame obstacles, including difficulty obtaining financing and onerous regulations, to launch their businesses.
The people in the case studies include young Jordanian creator of an education platform, a food processing entrepreneur in the West Bank, a Tunisian beverage manufacturer, the founder of a safe carpool system in Morocco, an Egyptian developer of a platform to deliver pharmaceuticals, a Lebanese entrepreneur finding ways to improve the dining experience and a young Saudi creator of an application to increase women’s safety when running errands.