Middle Eastern and North African countries need to reform their civil services and promote women in the labour market, said an IMF official.
"Size and productivity of the public sector need to improve," Nemat Shafik, the deputy managing director of the IMF, said yesterday. "Don't increase the wages too much in the public sector and encourage the private sector to create jobs."
Speaking on the sidelines of the fifth annual Women in Leadership Forum Middle East and Africa in Dubai, Ms Shafik talked about the challenges facing women in Mena and ways regional economies can help women achieve their economic potential.
In Gulf countries, including the Emirates, 80 per cent of women are employed in the public sector.
"It is unsustainable at the current levels," Ms Shafik said referring to regional public sector's employment capacity.
She also recommended flexibility in employment regulations to encourage the private sector to create jobs. High severance payments and the inability to let go of people discourage private firms from recruiting more people, according to Ms Shafik.
The public or government sector is still the preferred employer for women and men in Mena, with wages almost 30 per cent higher than in the private sector and with flexible work hours for women, according to Ms Shafik. Globally, private sector wages are 20 per cent higher than in the public sector, she said.
Employment rates in the public sector, however, vary widely among countries in the region. In Morocco 10 per cent of the workforce is employed in the public sector compared with 80 per cent in the Gulf, according to the World Bank.
About 3.8 million people, including Emiratis and expats, are employed in 285,000 firms in the private sector in the UAE, the Ministry of Labour said in March. Data for the number of people working in the public sector were not available.
Quality of graduates and access to lending need to improve to encourage the private sector to create more jobs and take the pressure off the public sector, Ms Shafik said.
"Quality is still a problem," she added. "Many graduates do not have the right skills for the business sector."
"Only 10 per cent of firms in Mena have access to banks, among the lowest in the world," she said.
Creation of jobs in the private sector is necessary as Mena countries face slower annual GDP growth this year and next.
This year the IMF lowered the expected rate of the economic growth of oil-exporting countries, which includes the UAE, Algeria, Libya, Iraq and Iran, to 3.2 per cent from 5.7 per cent in 2012. It is projected at 3.7 per cent for next year.
For Gulf countries, the annual GDP growth is projected at 4 per cent this year, down from 6 per cent last year. It is projected to stagnate at 4 per cent next year.
This is barely enough to keep creating jobs at the rate of demand growth, the IMF official said.
When it comes to gains in educational levels among women, Mena and particularly the Gulf have done well, growing the fastest in the world, Ms Shafik said.
As a result gender imbalance is felt the most among youths with unemployment rates among women as high as 40 per cent in many countries in the region.
"Mena countries have wisely invested in women's education but they are not yet fully tapping into their potential to contribute to growth and prosperity," Manuela Ferro, the director for poverty reduction and economic management in Mena at the World Bank, said in March.