This article is part of a series in which OECD experts and thought leaders — from around the world and all parts of society — address the COVID-19 crisis, discussing and developing solutions now and for the future. Aiming to foster the fruitful exchange of expertise and perspectives across fields to help us rise to this critical challenge, opinions expressed do not necessarily represent the views of the OECD.
Join the Forum Network for free using your email or social media accounts to share your own stories, ideas and expertise in the comments.
A few decades ago, Winston Churchill said “Never let a good crisis go to waste”.
As the world braves one of the most severe crises in our collective memory, all hopes are pinned upon a not-too-distant recovery from the health, social and economic ravages that the pandemic has wrought. On the economic front, one bright spot is that crises can be an opportunity to renew and reinvigorate business ecosystems to rebound on a more innovative footing.
Reducing trade barriers and creating an integrated regional market will be key to MENA’s recovery
Yet the Middle East and North Africa (MENA) region may have difficulties tapping into this post-crisis silver lining unless it makes significant progress on advancing economic and social integration.
Unfortunately, MENA is one of the world’s most restrictive regions in goods and services trade. High transport costs and technical barriers also impede progress and, despite advances in the Gulf and elsewhere, logistics lag, especially when it comes to decreasing the cost of cross-border trading.
Data show that trade volumes have fallen sharply in the region over the past year—by roughly 20%. The downturn particularly affected sectors with complex value chains due to the weakening of the global logistics industry. Getting trade flowing again will be critical to paving the way for a jobs-rich and sustainable recovery in the region.
Use the OECD-WTO Trade in Value Added (TiVA) to compare commercial relations among economies and the process of value creation
Despite improvements in recent years, the MENA region also underperforms in access to credit, which is lower than anywhere else in the world. Trading across borders is expensive and time-consuming: it is, on average, three times more expensive and four times longer than in high-income economies.
Besides Trade and Non-Trade Barriers, additional obstacles remain such as technical and health standards, the lack of uniform standards and harmonisation and pervasive red tape, all of which hinder both international and regional trade, investment flows and the pipe dream of the creation of an Arab Common Market. This is further aggravated by a variety of overlapping bilateral and multilateral trade agreements, which have not been able to create the necessary conditions for trade to ultimately develop.
Opening up markets within the MENA region, and creating an integrated free-trade area, should thus be at the top of policy makers’ priorities to build back better post-COVID.
Social and economic policy reform also needed to strengthen trade integration
To get there, policy makers will need to look beyond trade reform to rethink underpinning social and economic policies.
Administrative reform will be essential in this regard, as institutions play a major role in fostering economic change. For example, reforms to facilitate more e-government could help make government more agile and responsive to the needs of citizens and businesses alike, as well as accelerate entrepreneurship.
Reforms to ease access to finance for firms are also critical. The business ecosystem in the MENA region should endorse multiple and competing sources of finance for micro-, small and medium-sized enterprises (MSMEs), including asset-based finance, alternative forms of debt, crowdfunding, hybrid tools and equity instruments, such as business angels.
A skilled, digitally savvy workforce will also be key to a jobs-rich recovery. Stronger private sector engagement with the vocational education and training (VET) sector at the regional level would enable both parties to ensure that workers have the skills that companies need. According to a recent report by the World Economic Forum, 13.5% of emerging jobs will arise from technology-related business. This will lead to the emergence of 97 million new roles but could cause the displacement of at least 85 million jobs. In the MENA region—where youth unemployment rates are among the highest globally (Palestine 40.1%; Jordan 39.2%; Tunisia 34.4%; Algeria 26.9%; Egypt 24.7%; Lebanon 23.3% etc.), and even higher for young women—it is essential that market entrants have the right competencies. Currently, the region suffers from a labour market mismatch where rising levels of academic achievement among youth are leading to lower employability outcomes. This illustrates that the VET sector in MENA was unable to absorb the COVID-19 crisis and to tackle the issue of reskilling and upskilling the workforce by handling job transition issues.
Read more on the Forum Network: "Towards a Woman-Powered Recovery in MENA: Now is the time to break remaining barriers for women’s empowerment" by Juan Yermo, Chief of Staff to the Secretary-General, OECD
MENA partnering with the OECD to pave the way to a sustainable and inclusive recovery
In the MENA region, as elsewhere, the pandemic has been an accelerator of pre-existing trends (digitalisation, gig data, alternative inclusive finance for impact) but it has also created new strategic needs and opportunities such as reshoring and nearshoring. To seize these opportunities, MENA economies will need to become more resilient.
In recent years, MENA governments have enacted laws and incentives going in this direction. Some examples include the StartUp Act in April 2018 in Tunisia; the new law on incentives and innovation in 2018 in Egypt; and the InnovInvest Fund created in Morocco to finance startups, as well as set up business angel networks, accelerators, incubators, co-working spaces and fablabs. Moreover, before and during the crisis, MENA entrepreneurs have demonstrated they can be innovative and bold to meet changing demands. They have shown their readiness to be at the head of accelerating regional and sub-regional trade.
Including all voices into the reform process will be at the crux of building this resilience in the region to ensure that reforms can take hold and flourish. Involving employers, business support organisations, trade unions, civil society organisations, governments and private sector representatives in reform design and implementation will be at the core of this future strategy.
The OECD’s MENA Competitiveness Programme, and its MENA-OECD Business Advisory Board, provides a valued platform for public-private dialogue for the benefit of this regional ecosystem. Private actors, business associations and chambers of commerce play an important role to support crisis response and recovery.
Twenty-five years after the Barcelona process, and looking beyond the COVID crisis, the time is now to reset the clock in MENA and unleash the talent of its citizens and businesses to drive the robust and inclusive recovery the region needs.
Find more about the MENA-OECD Ministerial Conference “Designing a Roadmap to Recovery in MENA”, taking place on 1 April 2021
Find more about the work of the OECD in the Middle East and North Africa
|Tackling COVID-19||Entrepreneurship||Trade||Competition||International Co-operation|
Whether you agree, disagree or have another point of view, join the Forum Network for free using your email or social media accounts and tell us what's happening where you are. Your comments are what make the network the unique space it is, connecting citizens, experts and policy makers in open and respectful debate.