Jobs or Privileges: Unleashing the Employment Potential of the Middle East and North Africa

MENA DEVELOPMENT REPORT

Jobs or Privileges

Unleashing the Employment Potential of the Middle East and North Africa

Marc Schiffbauer

Abdoulaye Sy

Sahar Hussain

Hania Sahnoun

Philip Keefer

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Attribution—Please cite the work as follows: Schiffbauer, Marc, Abdoulaye Sy, Sahar Hussain, Hania Sahnoun, and Philip Keefer. 2015. Jobs or Privileges: Unleashing the Employment Potential of the Middle East and North Africa. Washington, DC: World Bank. doi: 10.1596/978-1-4648-0405-2. License: Creative Commons Attribution CC BY 3.0 IGO

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ISBN: 978-1-4648-0405-2

eISBN: 978-1-4648-0406-9

DOI: 10.1596/978-1-4648-0405-2

Cover art: © Aladdin El-Gendy. Used with permission. Further permission required for reuse.

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Contents

Boxes

Figures

Map

Tables

Acknowledgments

This report was prepared by a team composed of Marc Schiffbauer (task team leader), Abdoulaye Sy, Sahar Hussain, Hania Sahnoun, and Philip Keefer. In addition, the following persons contributed to the individual chapters of the report: Ishac Diwan (Chapter 4), Doerte Doemeland (Chapter 1), Bob Rijkers (Chapters 1 and 4), Dalia Al Kadi (Chapter 1), Izak Atiyas (Chapter 1), Ozan Bakis (Chapter 1), Michael Lamla (Chapter 2), and Michael Gasiorek (Chapter 2). Further inputs were provided by Jamal Haider, Hassen Arouri, Huy Nguyen, Karim Badr, Anna Raggl, Yeon Soo Kim, and Caroline Duclos. Clifton Wiens edited the report. Aladdin El-Gendy produced the cover picture of the report. Muna Abeid Salim, Seraphine Nsabimana, and Faythe Agnes Calandra provided administrative support. The report was prepared under the direction of Bernard Funck.

The report benefited from the overall guidance of Shantayanan Devarajan, Chief Economist of the World Bank Middle East and North Africa region, as well as from Caroline Freund and Manuela Ferro.

The team thanks Najy Benhassine (Practice Manager, Trade and Competitiveness, World Bank), Hafez Ghanem (Senior Fellow, Brookings Institution), and Adeel Malik (Research Fellow in Economics, University of Oxford) for their valuable comments. The report also benefited from comments and guidance from Kevin Carey, Ahmed Kouchouk, Tara Vishwanath, Celestin Monga, Daniel Lederman, Mary Hallward-Driemeier, Jorge Araujo, Nikola Spatafora, Aaditya Mattoo, Ana Fernandes, Peter Mousley, Simon Bell, and Randa Akeel.

The team is grateful to the various statistics and research institutions across the region that facilitated access to data and collaborated with the team, including the Institut National de la Statistique in Tunisia; the Ministry of Planning and International Coordination and the Department of Statistics in Jordan; the Central Agency for Public Mobilization and Statistics in the Arab Republic of Egypt; and the Economic Research Forum team, in particular Ahmed Galal (Managing Director) and Hoda Selim (Economist).

The team also thanks Antonio Nucifora, Eric Le Borgne, Orhan Niksic, Sibel Kulaksiz, Umar Serajuddin, Nour Jalal Nasser Eddin, Nada Choueiri, Amir Mokhtar Althibah, and the entire Poverty Reduction and Economic Management Department for supporting the country dialogue and for their collaboration during the preparation of various country analytical works undertaken in parallel to this regional report.

About the Authors and Contributors

Marc Schiffbauer is a senior economist and part of the team preparing the World Development Report 2016 on Internet for Development. He joined the World Bank in September 2009, working in the Poverty Reduction and Economic Management unit in the Eastern Europe and Central Asia region as well as in the Middle East and North Africa region. Before that, he worked for the Economic and Social Research Institute in Dublin, Ireland, and as a consultant for the European Central Bank and the International Monetary Fund on issues related to economic growth, firm productivity, and competition. Marc has a PhD in economics from the University of Bonn in Germany and was a one-year visiting scholar at Universidad Pompeu Fabra, Barcelona, and at the University of British Columbia, Vancouver.

Abdoulaye Sy is an economist in the Macro and Fiscal Management Global Practice at the World Bank and currently works in the Middle East and North Africa region where he is the country economist for the Islamic Republic of Iran and Djibouti. Abdoulaye joined the World Bank in September 2011 as a Young Professional, first as an economist in the Sustainable Development Department in the Latin America and Caribbean region, later joining the Poverty Reduction and Economic Management unit in the Middle East and North Africa region. Abdoulaye has a PhD in agricultural and resource economics from the University of California–Berkeley and holds master’s degrees in science and economics from the Ecole Polytechnique, the Paris School of Economics (PSE), and the Ecole Nationale de la Statistique et de l’Administration Economique (ENSAE).

Sahar Hussain joined the World Bank as an economist in February 2013 in MENA’s Poverty Reduction and Economic Management unit. Prior to that, she worked for the Egyptian Centre for Economic Studies in Cairo as an economist on issues related to the economics of transitions, competition policy, and energy subsidies. She was also an economic consultant for the Planning Commission of Pakistan. Sahar has a master’s degree in development economics and policy analysis from the University of Nottingham and a bachelor’s degree from the London School of Economics.

Hania Sahnoun is an economist and consultant. She joined the team preparing the World Development Report 2016 on Internet for Development. She has worked with the World Bank as a consultant since 2004. Hania holds a Diploma of Advanced Studies in economics from the University of Pantheon–Paris I in France.

Philip Keefer is a principal advisor of the Institutions for Development Department of the Inter-American Development Bank. He was formerly a lead research economist in the Development Research Group of the World Bank. The focus of his work, based on experience in countries such as Bangladesh, Benin, Brazil, the Dominican Republic, Indonesia, Mexico, Peru, and Pakistan, is the determinants of political incentives to pursue economic development. His research, on issues such as the impact of insecure property rights on growth; the effects of political credibility on policy; and the sources of political credibility in democracies and autocracies; and the influence of political parties on conflict, political budget cycles, and public sector reform, has appeared in journals such as the Quarterly Journal of Economics and the American Political Science Review.

Ishac Diwan is currently a research fellow at Paris Sciences et Lettres. He taught previously at the Harvard University Kennedy School of Government and at New York University. He has held several positions at the World Bank—in the Research Complex, the Middle East Department, and the World Bank Institute—and in Addis Ababa then in Accra as the country director for countries in East Africa and then in West Africa. His current research interests include growth strategies, the political economy of private sector development, and the analysis of public opinions, with a special interest in Africa and the Middle East. He directs the Economic and Political Transformation program of the Economic Research Forum.

Doerte Doemeland is a senior economist in the Macroeconomics and Fiscal Management Global Practice. Before that, Doerte was a senior economist in the Development Research Group of the World Bank. The focus of her work, based on experience in Albania, Bulgaria, Malawi, Mexico, Nigeria, Senegal, Tunisia, Uganda, and Uruguay, is on the determinants of economic growth and poverty reduction resulting from trade and competitiveness, structural change, or productivity growth.

Dalia Al Kadi is an economist in the Macroeconomics and Fiscal Management Global Practice at the World Bank. She joined the World Bank’s Poverty Reduction and Economic Management unit in the Middle East and North Africa Department in February 2013. Before joining the World Bank, Dalia was a project manager at the Executive Council in Abu Dhabi, where she advised the government on economic policy and strategy. She was also a management consultant for McKinsey & Company and advised clients in the banking, telecom, and public sectors in the Middle East and Pakistan. Dalia has an MPA in international development from Harvard University.

Bob Rijkers is an economist in the Trade and International Integration Unit of the Development Research Group at the World Bank. He is interested in political economy, trade and labor market issues. He holds a BA in science and social sciences from University College Utrecht, Utrecht University, and an M.Phil. and D.Phil. in economics from the University of Oxford.

Abbreviations

Overview

Middle East and North Africa (MENA) countries face a critical choice as they strive to generate greater private sector growth and more jobs: promote competition, provide equal opportunities for all entrepreneurs, and dismantle the current system of privileges for connected firms or risk perpetuating the current equilibrium of low job creation. This report shows that policies that stifle competition and create an uneven playing field abound in MENA and are a major constraint on private sector growth and job creation. These policies take different forms across countries and sectors but share several common features: they limit free entry in the domestic market, exclude certain firms from government programs, increase the regulatory burden and uncertainty for firms without connections, insulate certain firms and sectors from foreign