São Paulo – Managing director of the International Monetary Fund (IMF), Christine Lagarde, were in Rabat, capital of Morocco, this Thursday (8th) and spoke on the economy of transitioning Arab countries, that means, the ones affected by the Arab Spring of 2011. In a speech at the Moroccan Economic, Social and Environmental Council, she advocated the strengthening of the small and medium-sized companies, middle class and a “middle road” for the roles of government, not too intrusive or too liberal.
“The good news is that the economic situation in the Arab transitioning countries is looking up – higher exports, higher public investment and signs that private investment will rise,” said Lagarde. “Countries like Morocco are reaping the fruits of their efforts by diversifying and spurring both exports and foreign investment – especially in high value-added areas, like cars, aeronautics, and electronics,” she added.
That said, she pointed out that economic stability alone in not enough, as these nations go through a “jarring job crisis”, unemployment rate averaging 13%, with youth unemployment up to 29% entre, one of the highest rates in the world. Since 2012, according to Lagarde, the number of people out of work has jumped by 1.5 million.
For the Fund’s director, these nations have to double the average growth rates, currently at 3%, to have a larger job creation. It is worth noting that the block cited is quite diverse, including countries which did not change regime, such as Morocco and Jordan, to cases such as Syria, which is in civil war.
As such, she recommended the strengthening of the “central pillars’ of economy. One of these pillars is represented by the small and medium-sized companies, which are the backbone of a healthy economy and are the main engines of job creation”.
Lagarde pointed out that in the transitioning Arab nations the formal economy is dominated by a few large firms and the informality rates range from 17% in Jordan to a 35% in Tunisia.
Other main point is the strengthening of the middle class which, according to her, in countries such as Egypt, Jordan and Morocco, has a higher share of the wealth today than in the 960’s. “Let me be frank: the dividends of growth have too often gone to the top, leaving too many others out in the cold”, she said.
The IMF’s director observed that global experience shows that a strong middle class is necessary to drive and economy forward. “A strong middle class makes societies more cohesive, and lays ground for stability and prosperity. A strong middle class is also home to the kinds of entrepreneurs we need for today’s modern economy,” she said.
As regards the state, Lagarde pointed out the governments “need to take a step back from some areas and step forward in others”, that is, to grant less subsidies and expand the social protection. The subsidies to food and fuel are commonplace in the Arab world. She advised the resources should be directed to safety nets, health education and public investment.
“Most importantly, [the state] needs to become less of an employer, and more of an effective and impartial regulator and enabler of the private sector – the ultimate source of good jobs”, stressed the businesswoman.
In Lagarde’s evaluation, strengthening these central pillars means to make the economy more of a “participatory” and less of a “privilege” economy.
Policies
She suggested the adoption of a series of policies for this goal, such as facilitating the opening of companies by reducing the bureaucracy, boosting credit offer, reducing tariff and non-tariff trade barriers, enabling young people to enter the job market, reducing the labor regulations fees and strengthening the women participation in economy.
In this last issue, the IMF’s director said that the difference between male and female contribution to the job market in the Middle East and North Africa is three times larger than in most developing nations. “It is imperative to let women contribute, by removing outdated obstacles and introducing enabling policies”, she pointed out. “After all, it was Ibn Rushd who said that ‘treating women like a burden to the men is one of the reasons for poverty’”, she added, referring to Averroes, Arab philosopher defender of Aristotle’s’ philosophy in the Middle Ages.
Lagarde suggested a bigger transparency and the adoptions of good governance. And that goes for both public and private. According to her, more than half the companies in Middle East and North Africa report having been asked for a bribe.
According to the IMF, the speech of the managing director was a preview of the issues which will be discusses in the regional conference Building the Future: Jobs, Growth, & Fairness in the Arab World , which will be held on the 11th and12th, in Amman, Jordan. The event is promoted by the IMF, Government of Jordan and the Arab Fund for Economic and Social Development.
Lagarde concluded by saying that the IMF is a partner of the transitioning Arab nations seeking for reforms. She declared that the institution delivered 55 technical assistance missions in the region in 2013 and committed more than US$ 10 billion in financial support.
*Translated by Rodrigo Mendonça
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