Mena urged to focus on human capacity amid growth divide

Resource-rich countries in the Middle East and North Africa (Mena) have seen relatively low and non-inclusive economic growth with high levels of macroeconomic volatility, thus calling for human capacity building in public administrations, according to an International Monetary Fund (IMF) working paper.“While resource-rich countries in Mena have maintained high levels of income per capita, they have performed poorly when going beyond the assessment based on standard income level measures”, it said, highlighting that during 1970-2008, real gross national income per capita rose 18 times in the GCC (Gulf Co-operation Council), 9 times in the non-GCC, and about 10 times in the emerging group.Not all the countries in the Mena region – which accounts for 55% of global oil and 29% of natural gas reserves - are alike regarding the importance of natural resources in their economies. The GCC comprises natural resource–rich, labour-importing countries. Non-GCC nations - Algeria, Iraq, Libya and Syria - are natural resource–rich, labour-abundant, while the emerging group comprises natural resource–poor countries such as Egypt, Jordan, Morocco, and Tunisia.“They (Mena nations) have experienced relatively low and non inclusive economic growth, as well as high levels of macroeconomic volatility,” the paper said, noting that over the last five decades average per-capita GDP growth in both GCC and non-GCC natural resource–rich countries was almost zero, and the volatility of their output growth was twice as high as resource-poor countries in the region.Although important improvements in health and education have been made, the quality of the provision of public goods and services remains an important source of concerns, the IMF paper said, arguing that “the success of economic reforms in Mena rests on the ability of those countries to invest boldly in building inclusive institutions as well as high levels of human capacity in public administrations.”One area of concern in Mena countries is the potential lack of financial development which in turn could explain, at least in part, the difficulties faced by the private sector, it said, adding that in the GCC countries, financial sector development has been quite rapid but was subject to pronounced boom and bust cycles tightly linked to oil price fluctuations.Countries endowed with natural resources such as oil and gas are faced with important short and long term economic challenges, in the short term. Those economies face highly volatile revenues derived from resource exports, rendering difficult the conduct of macroeconomic stabilisation policies and in the long term, resource-rich countries have, on average, experienced a lower rate of economic growth compared to resource-poor countries, the paper said.“The Mena region is not immune from those challenges,” said the working paper authored by Rabah Arezki and Mustapha K Nabli.The ongoing political and social developments in the Mena region have contributed to put inclusive growth - and not solely the rate of output growth - on top of the policy and research agenda.The World Bank has said Mena’s total labour force experienced an unprecedented expansion - from 104mn workers in 2000 to an estimated 146mn by 2010 and to an expected 185mn by 2020.By all accounts, the region has “so far failed” to create the millions of jobs needed to absorb this rapid expansion of the workforce, resulting in it experiencing the highest level of unemployment in the world, the paper said, quoting International Labour Organisation (ILO).Finding that the youth bore the brunt of the unemployment problem, it said ILO estimates that the ratio of youth to adult unemployment in 2011 was exceptionally high at 4 for the Mena region compared to 2.8 globally.“In spite of Mena’s rapid economic growth performance over the last decade, the lack of economic inclusiveness has certainly been a key factor driving the ongoing social instability in the region,” the report said.Although in principle, resource-rich countries in the region are well placed to mobilise their public finances to ignite long-term economic growth that will benefit all the citizenry, it said “the track record of Mena resource-rich countries has been poor, however, as we document in this paper.”