World Bank calls for radical economic reforms in region

11 October 2012

Labour market reform is key to ensure long-term regional stability

Middle East and North African (Mena) governments must implement radical economic reform to deliver long-term stability in the region, according to the Washington-headquartered World Bank.

Increased foreign investment and the reform of education and labour market will reduce unemployment and aid job creation, the bank says in a report set to released shortly.

Such reforms would allow the region’s fast growing youth population to become a driver of growth and prosperity, the report says.

Rates of youth unemployment in Mena are among the highest in the world, while levels of female participation in the workforce among the lowest, the report notes.

The World Bank says the Arab Uprisings of 2011 create an ideal backdrop for reform in the region. “The call for bread, freedom and dignity is a mandate for change in the Arab world, and the expression of immense expectations, on the part of young people in particular,” says Inger Andersen, the World Bank’s vice-president for Mena.

The bank says the current business environment in the region stifles competition. Complex and unevenly enforced regulations, and the difficulty of accessing credit protect a few privileged firms at the expense of potential new competitors.

The World Bank called for labour market liberalisation, to encourage worker mobility and removal of barriers to the recruitment of women. It claims this would open up new job opportunities. It admits that job security could suffer and so unemployment benefits and social safety nets should also be strengthened.

The report proposes scrapping energy subsidies that currently make it cheaper to buy and operate more machines rather than hiring new staff. This idea would be particularly contentious in countries such as Saudi Arabia and Algeria, where the development of downstream industries is based on access to cheap oil or gas.

Meanwhile, pointing out that favourable employment conditions often attract the most talented recruits to the public sector, the report called for public sector salaries and benefits to be brought in line with the private sector to help businesses recruit more of the available talent. The report also urged higher education institutions in the Mena region to tailor courses more appropriate to the labour needs of the private sector.

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