Lessons from Arab Countries in Transition

Final day policy panel discuss lessons from the experiences of a region in transition

Final day policy panel discuss lessons from the experiences of a region in transition

Chaired by Noha El-Mikawy (Ford Foundation and ERF), the third and final plenary session of the ERF Conference focused on lessons emerging from the experiences of Arab countries in transition. Four speakers, Gouda Abdel-Khalek, George Corm, Paul Salem and Zafiris Tzannatos addressed key issues surrounding the concept of social justice, each offering penetrating insights and unique perspectives on prevalent economic and social conditions in the Arab world and wider MENA region.

Social justice: the cornerstone of equitable development

Gouda Abdel-Khalek (Cairo University), presented on Social Justice: lessons of experience for Egypt. Seeking to elaborate on the meaning behind ‘bread, freedom and social justice’ – a slogan now widely recognised as articulating the desire for change in many Arab countries – Abdel-Khalek’s message was that building foundations for social justice in times of political turbulence is a tricky task; and one beset with challenges. He cited the steady increase in wage related protests before and after 2012 as evidence of the link between social unrest and the poorly performing Egyptian economy.

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The impact of economic and political volatility in the region

What is the impact of economic and political volatility on the economic health of countries in the Arab world generally, and on Foreign Direct Investments specifically? This question was addressed in a parallel session on the second day of the conference.

The first paper presented by Martijn BurgerElena Ianchovichina and Bob Rijkers entitled ‘Risky business: Political instability and Greenfield foreign direct investment in the Arab world, looks at the impact of political instability on Foreign Direct Investment (FDI) inflows into the MENA region.

Based on an analysis of quarterly Greenfield investment flows into MENA countries from 2003 to 2012, the authors explore foreign direct investments that are most affected by political instability. They find that investments in non-resource tradable/manufacturing sectors are very sensitive to political insensitivity but this sensitivity is not found for investments in natural resource sectors and non-tradable activities. In countries experiencing Arab Spring uprisings,  the authors find significant reduction in greenfield investments most starkly in the non-oil manufacturing sector. They argue that political instability is associated with increased reliance on non-tradable sectors and aggravated resource dependence. Political instability, therefore, impedes diversification in the MENA economies while strengthening investment in natural resources and non-tradable sectors.

Focusing on herding behaviours in the region’s stock markets

The second presentation by Mehmet BalcilarRiza Demirer and Shawkat Hammoudeh based on their paper entitled What drives herding in developing stock markets? Relative roles of own volatility and global factors‘,  looked at the influence of economic volatility on herd behavior. In their paper, authors aim to establish the volatility-herding link in the developing stock markets of the oil-rich GCC countries. Unlike the frequent presumption that herding volatility often comes from external factors, the authors argue that there is significant evidence of herding in all Gulf stock markets, with the domestic market volatility being the main trigger for herding behavior.

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Upgrading and formalizing SMEs in MENA

Small and Medium Enterprises (SMEs) play a key role in the economic structure of developing countries. Which makes sense considering that they are mostly over-populated, their governments are low on budgets and inequality of opportunities is only natural. Economically speaking, SMEs constitute a major source of employment and generate significant domestic and export earnings (OECD, 2004).

Dr. Mona Said (Professor of Economics at the American University in Cairo) discusses two of the papers presented in a parallel session during the second day of the ERF 20th Annual Conference, looking at the upgrade and formalization of small and medium enterprises (SMEs) in MENA. The papers presented complementary evidence on the importance of certain factors, such as firm size, sector and degree of education.

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Policy Panel considers the importance of data

The first policy panel of the conference focused on the role of data in and on the region’s trade performance.  Mustapha Nabli chaired a session which heard four decision-makers talk about the need for real time and ‘granular’ data to both understand trends and inform good decisions across the region.

Samir El Gammal, from the Ministry of Trade and Industry, Egypt began by declaring his love of data and warned of the dangers of misinterpretation of ‘even legitimate data sources’.

Caroline Freund, from the Peterson Institute for International Economics, welcomed decision-makers who understand data well enough ‘to know when making a decision based on incomplete data is better than not making a decision because you’re waiting for the perfect dataset’.

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Exporters in MENA – Finding the superstars

There is no development without diversification. Export diversification has an edge.  Countries do whatever they like but if they don’t diversify they are not going to grow – Ahmed Galal, ERF Managing Director

An inclusive development path cannot be more needed in MENA, as political instability continue to shape the economies’ ability to grow and stabilise.  A plea for inclusive growth is loud and clear. Exports is one determinant of growth, and promoting trade is pivotal to its sustainability. Developing countries depend heavily on exports, as a result this makes export development and diversification extremely important. However, countries do not export, but firms do. Hence firm level data is needed to guide that perspective, and provide information regarding firm characteristics and performance.

pre-conference workshop focusing on on export diversification in the MENA region took place today ahead of the opening of the Economic Research Forum’s 20th Annual Conference. The ERF together with the World Bank  are leading a new research program on exporters in MENA. This research program assembles new firm level data which at the moment is considered pretty scarce in the region, and allows researchers to know more about firms and how they export and diversify. Access to data at the firm level allows researchers to account for heterogeneity across firms and to better understand the reasons behind the low export growth and diversification in the region.

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Open Access Micro Data Initiative (OAMDI)

Good research is impossible without access to reliable micro data. The Economic Research Forum has always known this and consequently, has invested time, effort and money into doing something about it. ERF is now proud to announce what might be one of its most-far-reaching initiatives yet: the Open Access Micro Data Initiative (OAMDI) for the Arab countries, Iran and Turkey.

OAMDI offers researchers several types of micro data that ERF has collected, harmonized and prepared for dissemination in a convenient automated process. The first phase of the initiative covers 17 Household Income and Expenditure Surveys from 3 Arab countries, 3 Labor Market Panel Surveys from Egypt and Jordan, and a data set on micro and small enterprises from 4 countries. More data sets will be available in the near future.

The initiative, which involved cooperation with several regional statistical agencies, is modeled on the World Bank Open Data initiative. To read more about these data sets or to access them, please visit www.erfdataportal.com

Highlights from the ERF’s 19th Annual Conference

The Mena region has definitely changed in the aftermath of the Arab uprising. Although the ascendance of Islamist parties to power might not be to the satisfaction of some, there is no doubt that it has become a reality.

The question is what kind of economic policies Islamist parties are going to come up with and whether their visions are the right ones for development.

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A Glimpse Into the Crystal Ball

The ascendance of Islamist parties to power following the Arab uprisings might not be to the satisfaction of some, but there is no doubt that it has become a reality.  The question is, are they managing the economies they inherited? And to what extent are they likely to adjust and steer their countries towards a better and more robust economy and an effective and democratic political system.

Plenary session 3 - Outlook and Possible Scenarios

Plenary session 3 – Outlook and Possible Scenarios

Following up on discussions held in the previous sessions, on the Causes of the Arab Uprisings and the Rationale for the Rise of Islamist Parties to Power & Comparative Economic Performance in Islamist-Governed Countries, the third and last plenary session was dedicated to discussing the possible scenarios that may result from the Islamist party rule.

The session explored the different paths Islamist parties are likely to follow, as well as the challenges and opportunities they are facing and their ability and willingness to achieve a balance between then neo-liberal economic programs they appear to support and the need for a social justice and income distribution that would respond to the peoples’ demands and expectations following the uprisings. The transition Islamist political parties are experiencing from opposition to ruling power was also discussed at during the session.

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Has Politics Failed the Environment?

Among the most controversial regional questions of our age are how serious is environmental degradation in the MENA countries and why? Simply put, it is because the countries of the MENA region have exhausted their share of natural resources, well beyond the sustainable levels. Environmental problems in the region range from water scarcity, water quality, air pollution, and land degradation to over exploitation of marine resources. Not only do these problems injure the environment but also they has a inverse relationship to inequality and poverty levels.

ERF dedicated a session of the 19thannual conference to a book launch for an extraordinary new publication: Economic Incentives and Environmental Regulations edited by Hala Abou-Ali. Published by Edward Elgar, in cooperation with ERF, this book explores challenges related to water sanitation and hygiene, air pollution, and land degradation in a diversified portfolio of MENA countries. These countries have very different socio-economic profiles, yet they all share the same environmental problems.

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الدين والتنمية الاقتصادية

Original English post by Salma El Meligi, translated by Ramage Nada

إن الربيع العربي منح مكاسب سياسية كبيرة للإسلاميين في كلٍ من مصر وتونس. فقد استفادت الأحزاب الإسلامية من كونها الأكثر تنظيماً، بجانب ما لها من سمعة في كونها بعيدة عن الفساد، ولكنها تواجه الآن تحديات متعلقة بالحكم. إن الحكومات التي تم الإطاحة بها في كل من تونس ومصر، كانت تطبق برامج ليبرالية مع حماية القطاع العام المتضخم وتوجيه الإقراض المصرفي الحكومي. والتساؤل الآن هو ما إذا كانت الحكومات الإسلامية سوف تحيد كثيراً عن هذا البرنامج.

ناقشت الجلسة العامة الثانية للمؤتمر السنوي بعنوان مقارنة للأداء الاقتصادي في البلدان ذات الحكم الإسلامي القضايا التالية: ماذا يحدث عند وصول الأحزاب الإسلامية إلى السلطة؟ هل يمكن لهذه الأحزاب أن تطور  خصائص محددة لسياسات التنمية الاقتصادية؟ وهل ستكون نتائج التنمية مماثلة؟ وما الدروس التي يمكن استخلاصها من هذا التحليل المقارن لدول الربيع العربي؟

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