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Scaling-up the Inclusive Growth Agenda in the Arab Region

Remarks by Christine Lagarde, Managing Director, International Monetary Fund

Marrakesh, Morocco

January 30, 2018

As prepared for delivery

Introduction

Good morning everyone! Mesdames et messieurs, bonjour. Marhaban bikum.       

Thank you, Jihad for that generous introduction. I also want to thank the Prime Minister and the Kingdom of Morocco for their generous hospitality, and our partners – the Arab Fund for Economic and Social Development and the Arab Monetary Fund – for the excellent collaboration.

It is a great pleasure to be in Marrakesh – a city founded by a woman, Zaynab Nefzaouia, who saw it thrive to become the capital of the Almoravid.[1] The city’s cultures and colors have captivated the imagination of writers and travelers over the millennia.

As an old proverb from the Maghreb says: “Qarri emra’a, tikhlaq balad.” Educate a woman, you create a nation.      

Like this city, the proverb is a powerful reminder of how societies can flourish when all have access to opportunity – to work, to innovate, to grow. Opportunity to harness the region’s potential – its young population and pool of talented women. Opportunity to trade and connect through this global crossroads.

Fostering opportunity for all will help achieve the inclusive growth the region needs – now more than ever.

1. The Region Needs Inclusive Growth Now More Than Ever  

Since our last conference in Amman in 2014, countries in the region have placed job creation and inclusive growth at the heart of their reform agendas. There has been progress – though not enough.

Many are clearly struggling with “how” to scale up reform implementation, and turn these priorities into outcomes. How can we fulfill the aspirations of the region’s youth, restore hope in the future, and increase trust among its people?

More than 27 million young people in the region will join the workforce over the next five years, a region where youth unemployment is the highest in the world, averaging 25 percent.

More than 60 percent of citizens perceive that connections – or wasta – determine whether or not you find a job.[2]  

The public dissatisfaction that is bubbling up in several countries is a reminder that even more urgent action is needed.

The good news is that the stronger global economy offers a window of opportunity for reforms.

IMF economic projections released last week show that global growth is at a decade high, reaching 3.7 percent in 2017, and is expected to accelerate further to 3.9 percent this year and 3.9 next year as well. Some 120 countries representing three-quarters of global GDP are participating in this cyclical upswing.

In this region, growth is also expected to pick up. But at 3½ percent in 2018 and 2019, it is well below the average 5.6 percent achieved during 2000-2008. Clearly, conflicts and lower commodity prices are taking a toll.

Yet these factors should not stop us from acting. On the contrary, more action is needed.

2. Adjustments and Transitions – Important Progress, More Is Needed

There are many promising examples of action across the region – of countries making progress on reforms. Several are taking steps to improve economic and financial access for youth and women, or promoting private sector development.

If replicated, they offer the prospect of a more prosperous and inclusive future. Let me elaborate with some examples.  

First, many countries are leveraging technology to advance economic and financial inclusion.

Fintech startups in the region have increased seven-fold since 2009, mostly in Egypt, Jordan, Lebanon, and the United Arab Emirates.

Jordan, for example, introduced eFawateerCom, an electronic platform that allows people to pay bills online and from ATMs. It processes more than one million transactions a year and connects people with more than 70 online billers.

Small entrepreneurs in the region are also using technology to match job seekers with business needs. Saeed Alfagieh, a winner of our youth innovation contest, showed how technology can help, even in a trying conflict situation such as Yemen.

A second area of progress: several countries have taken steps to improve the business environment, cutting red tape and promoting small and medium enterprises.

In the case of Morocco, the improvement in the business climate and the creation of the Free Trade Zones in Casablanca and Tangiers have generated some 85,000 jobs in the automotive industry. And now close to 45 percent of car parts for the auto sector are sourced from local suppliers.

Still, small and medium enterprises in the region face considerable challenges in scaling up, in part due to limited access to finance and weak legal frameworks.

Overall, while there is encouraging progress, implementation needs to be accelerated, broadened, and scaled-up across the whole region.

So how can our work in this conference help?  

3. Opportunity for All – A Policy Agenda for the Region

This conference has brought together representatives and experts from more than 20 countries in the region. It provides a forum for public officials, private sector representatives, and civil society to share their experiences in overcoming obstacles to faster implementation of inclusive growth policies.

It is also an opportunity for the IMF and other international organizations to listen to your views, especially on how to operationalize inclusive growth agendas.

I was struck by the positive energy, quality of discussions, and ideas generated at the i-labs yesterday.

I look forward to today’s sessions in light of these findings, and am confident that we will finish with an actionable agenda for advancing inclusive growth.

As of now, I see the contours of this agenda revolving around the following three priorities.

Priority 1: How to create a vibrant private sector for higher growth and more jobs

The old model where the state is employer of first resort is no longer viable. The private sector needs to step in and step up, and in some aspects government actions can help. This means leveling the playing field for private firms by combating corruption, increasing competition, and taking advantage of global trade and new technologies.

It also means firms investing more within the region, paying their fair share of taxes, and collaborating with the public sector to improve infrastructure.

Priority 2: How to support excluded groups

Integrating youth, women, rural populations, and refugees requires targeted policies. This means preparing people for jobs in the economy – through better education and active labor market policies that help youth and women find meaningful employment.

Financial inclusion can also be an important empowering agent, especially for women. And as I have said so often, including women financially and economically is a potential global game-changer.

I look forward to my conversation after lunch with remarkable women from across the region, and to discussing practical solutions to close gender gaps.

Priority 3: How to use fiscal policy to invest in people and infrastructure

Fiscal policy can and must be redesigned to support inclusive growth in the region. Today, social spending – on social safety nets, health and education services – is less than 11 percent of GDP. This compares to 19 percent in emerging Europe. Infrastructure needs are also large in many countries.

The question is then how to increase spending on social services and infrastructure when budgets are so tight? A key priority is building broader and more equitable tax bases. All must pay their fair share, while the poor must be protected.

And if countries can make progress in moving away from the state being the employer of first resort, as mentioned above, this too can help make room for high-return social and infrastructure outlays.

******

The discussions yesterday make it clear that inclusive growth is a shared responsibility between government, the private sector, and society at large, including its youth and its women. It requires collective wisdom and collective action.

Engaging those most directly affected by reforms is critical. Why? Because this kind of dialogue fosters trust and builds ownership to ensure that these reforms can be sustained and have a lasting impact.

Conclusion

Let me conclude with a thought from Khalil Gibran, my favorite Lebanese poet.

Your children are not your children. They are the sons and daughters of Life's longing for itself.”

Today’s youth are the Arab region’s greatest potential. We must heed their aspirations and rise to their expectations.

Shukran!

[1] Founded c1070 by Zaynab Nefzauoia who was married to Youssef Ibn Tachfin, founder and first sultan of the Almoravid dynasty.

[2] Arab Barometer Survey 2017.

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