Progress of Arab Economies in a Changing World
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Arab Planning Institute Kuwait City, Kuwait May 2018
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Progress of Arab Economies in a Changing World
- 1. @wbg2030 worldbank.org/sdgs Arab Planning Institute May 1st 2018 Mahmoud Mohieldin Senior Vice President World Bank Group
- 2. Global Megatrends and Challenges Fragility and violence Shifts in the global economy Climate and resources Commodity cycles Urbanization Source:WorldBank ForwardLook, September2017 Demographic transitions Renewed political debate about globalization Technological disruptions
- 3. There was a demographic turning point in 2010 55 60 65 70 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 World Advanced Economies Emerging Market and Developing Economies Percent of total population that is working age Source: World Bank Global Economic Prospects, 2018 • Higher working-age population shares are associated with higher per capita output growth. • Global demographic trends turned from tailwinds to growth into headwinds around 2010.
- 4. Lagging in human development outcomes Job creation for rapidly growing share of working-age people, mostly youth Populations beginning to age; potential slowdown in growth of labor supply Adapting to aging to maintain living standards The world can be divided into four major demographic groups Most of the global population lives in early- and late-dividend countries and while 78 percent of global growth was from late- and post-dividend countries, 90 percent of global poverty is in pre- and early-dividend countries * World Bank Global Monitoring Report 2015/2016
- 5. Well-managed urbanization can result in better development outcomes Proportion of urban population living in slums, 1990-2010Proportion of population living in urban areas, 1960-2011
- 6. Climate change risks undoing development progress Process of integrating climate resilience into development Index of risk preparation across countriesGlobal disaster losses, 1980–2012 The number of disasters and losses has been rising. Development progress needs to integrate resilience to avoid undoing hard fought development gains
- 7. Commodity cycles exacerbate global economic volatility Commodity price indexes, annual
- 8. The rate of technological advancement is unprecedented
- 9. Violent conflict is increasing and becoming more complex Number of people killed by violent conflict Number of conflicts, by type
- 10. The forcible displacement crisis primarily affects the developing world The global forcibly displaced population The crisis primarily affects the developing world
- 11. The world’s economic center of gravity, 1980–2016, in black, at three-year intervals Reflections on the new global economy: multipolarity 1980 1989 1998 2007 2016 2049 Source: Danny Quah, 2011 Source: McKinsey Global Institute, 2012 Evolution of the earth’s economic center of gravity: 1 CE to 2025
- 12. Is globalization retrenching? Global Gross Financial Flows, 1990-2016 (percent of world GDP) Trade and FDI depth through 2016 Source: Ghemawat, 2017 Source: Ghemawat, 2017 Source: Braga, 2017
- 13. The global risks landscape in 2018
- 14. Regional context
- 15. Growth: a mixed story Source: World Bank Global Economic Prospects, 2018 -2 0 2 4 6 8 10 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 GDP Growth (annual %) World Arab World Developing Countries • Region continued momentum but much more is needed to absorb the large youth population entering the labor market • Factors supporting growth momentum: • World economy continued momentum • Oil prices stabilizing at relatively high level • stabilization policies have restored macro stability • Risks: geopolitical tensions and debt spiral • Medium run: • Fall in oil prices, Arab revolts and continued uncertainty constitute persistent shocks • First phase of adjustment consisted in stabilization policies • Second phase needs to be much more structural and transformative
- 16. Growth: a mixed story Source; MENA Economic Monitor, April 2018 • The most pressing economic challenges facing the region may be the continuing rise in unemployment rates for the youth and public debt levels to finance government deficits. • Vulnerabilities to external shocks, including oil price volatility, are the genesis of that public borrowing, which has reached historically high levels in many countries in MENA. • Borrowing rather than adjusting spending has long been the dominant response in almost all countries in the region. But when debt rises sharply, its sustainability becomes a serious issue. • Indebted governments must pay a large amount of interest, which ultimately increases the budget deficit forcing them to issue more debt.
- 17. Demographics: More (educated and female) youth entering the labor market Source: World Bank Global Economic Prospects, 2018
- 18. Demographics: But there is abnormally low labor force participation Source: World Development Indicators, 2018
- 19. The SDGs present a major opportunity for transformation Global development agendas serve as a guide for countries to determine their national development path MDGs (2000-2015) SDGs (2016-2030) Goals/Targets/Indicators 8/21/60 17/169/~230 Priority Areas Human Development Holistic: Economic, Social, Environmental Scope Developing Countries Universal
- 20. Countries’ most frequently identified priorities* require an integrated approach * Based on analysis of statements made during the UN High Level Political Forum, July 2017; in no particular order Sequencing implementation of goals within context of national priorities Working in partnership to determine national development strategy Coordinating within governments; across and within ministries Securing enough financial resources and efficiently allocating them Data availability and institutional capacity Localizing and implementing the goals at the local level Incorporating and mainstreaming gender Integrating action on climate change
- 22. The SDGs are interlinked and data is critical to understand those relationships Japan’s goals interlinked to SDG 1
- 23. Data is crucial to understanding how trends are shifting
- 24. “Data is the new oil” * Members of the Global Partnership for Sustainable Development Data
- 25. Until there is a sustainable business model for data, it will not be used efficiently
- 26. The shape of successful national data systems in the future Source: Data for Development: An Evaluation of World Bank Support for Data and Statistical Capacity, Independent Evaluation Group, World Bank, 2018 Institutions Based on Organizations that Have Data that Are Users Who Are Data Uses • Open data laws • Rights to privacy • Accountabilit y to users • Broad outreach to society • Harmonized data conventions • Budgetary autonomy • Trained staff • Adequate installations • Connected databases • Early warning systems • International partnerships • Up to date • Disaggregated • Easy to manipulate and visualize • Accessible in remote areas • Georeferenced • Contestable • From integrated data sets • Connected • Data literate • Diverse (e.g., • academics, CSOs, media, local and central governments) • Planning • Policy making • Monitoring • Targeting • Research • Advocacy • Lobbying • Citizen empowerment
- 27. The key components of financing sustainable development Source: World Bank Group, 2015
- 28. Components of a sound financial sector Consumer/ Investor Protection Effective Regulations Financial Literacy Financial Innovation Mobilize Savings and Allocate Investments Legal framework to enhance trust, confidence in financial contracts and transactions 28
- 29. How can the private sector get involved? $24.4 trillion in low-yield government securities More than $10 trillion invested in negative interest rate bonds $8 trillion sitting in cash How much is out there?
- 30. Financing sustainable development Source: World Bank, 2018 When a project is presented, apply the “Cascade”. You should ask: “Is there a sustainable private sector solution that limits public debt and contingent liabilities?” If the answer is... Promote such private sector solutions • TheWorld Bank could play an important role in supporting the government to advance appropriate private sector solutions. i.e. though analytical support, technical assistance for relevant reforms and capacity building, project identification and preparation support, project structuring, and support to the government in negotiations with the private sector Ask whether its because of: • Policy or regulatory gaps or weaknesses? If so, provideWBG support for policy and regulatory reforms. • Risks? If so, assess the risks and see whether WBG instruments can address them. YES NO
- 31. Several business themes provide major opportunities in a world economy heading for the SDGs
- 32. Financial Inclusion 30% 37% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Algeria Bahrain Egypt Iraq Jordan Kuwait Lebanon Libya Mauritania Morocco SaudiArabia Tunisia UAE WestBank&Gaza ArabWorld ArabWorld(ex.GCC) GCC 2014 2017 Adults with an account (% age 15+) 48% 26% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Algeria Bahrain Egypt Iraq Jordan Kuwait Lebanon Libya Mauritania Morocco SaudiArabia Tunisia UAE WestBank&Gaza ArabWorld ArabWorld(ex.GCC) GCC Men Women Account ownership varies in the Arab world Adults with an account (% age 15+), 2017 Arab world has large gender gaps in account ownership
- 33. Exponential changes in IT are disrupting industries & creating new opportunities Why Blockchain ? Drones Artificial Intelligenc e Blockchain & Distributed Ledger Technologies Big Data & Analyti cs Internet of Things Platform Revolutio n Applications : • Finance (e.g. remittances; P2P Payments) • Record Keeping • Identity Management • Smart Contracts • Sharing Economy (P2P market) • Crowdfunding • Governance • Supply Chain Auditing • Protection of Intellectual Property Cloud Computing Robotic s Quantum Computing Transparent Decentralized Immutable Cost Effective Robust 33
- 34. Two-thirds of unbanked adults globally own a mobile phone
- 35. Fintech will be critical 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2017 2014 2017 2014 2017 2014 2017 2014 2017 2014 2017 2014 2017 2017 2014 2017 2017 2014 2017 2014 2017 2014 2017 2014 2017 Algeria Bahrain Egypt Iraq Jordan Kuwait Lebanon Libya MauritaniaMoroccoSaudi Arabia Tunisia UAE West Bank & Gaza Did not make or receive digital payments in the past year Made or received digital payments in the past year
- 36. Domestic savings can help reduce poverty and drive economic growth Key drivers •Influence savings behavior: introduce savings accounts for all students •Improve real income through: • increasing total factor productivity, • increasing labor efficiency, and • maintaining price stability •Reform public social security •Enhance commercial insurance systems •Mobilize digital/biometric ID systems •Realize the potential of fintech
- 37. The Human Capital Project “How much human capital will a child born today acquire by the end of secondary school, given the risks to health, education and social protection that prevail in the country where she was born?” Three main indicators, reflecting building blocks of the human capital: 1. Survival –Will kids born today survive to school age? 2. School – How much school will they complete and how much will they learn? 3. Health –Will kids leave school in good health and be ready for further learning and/or work?
- 38. Source: Data calculations from local government statistics 86 provinces have a population of over 10 million 78 countries have a population of under 5 million 181 provinces have a population of over 5 million Assessing social risk and its mitigation should be conducted at the local level *Analysis conducted on developing countries The practice of sustainable development
- 39. Source: Municipal Finances Handbook: Managing Local Expenditures, Morrell and Kopanyi 1.Preschool education 2.Primary and secondary school 3.Health care 4.Social assistance and poverty alleviation 5.Public order and civil protection 6.Infrastructure and public services 7.Environment protection 8.Social, cultural, recreational expenditures 9.Local economic development 10.Social housing 11.Urban development 12.Civil security 13.Transfer to sub-local government entities 14.(subsidies, grants, equity, in-kind) 15.Loan repayment 16.Interest charges 17.Guarantees called (paid by the municipality) Sample Municipal Budget 1. Property tax (rates) on land and/or buildings 2. Tax on the transfer of immovable property 3. Tax on motor vehicles 4. Local sales tax and/or tax on the sale of local products (or surcharge) 5. Tax on local businesses and services 6. Tax on electricity consumption (surcharge) 7. Tax on nonmotorized vehicles 8. Tax on tourism, hotels, restaurants, and entertainment 9. Tolls on roads, bridges, etc., within the limits of the local government 10.Charges for public works & public utilities such as waste mgmt, drainage, sewage, & water supply 11.Charges for markets and rents for market stalls 12.Charges for the use of bus stations and taxi parks 13.Fees for approval of building plans and erection and re-erection of buildings 14.Fees for fairs, agricultural shows, cattle fairs, industrial exhibitions, tournaments, and other public events 15.Fees for licensing of businesses, professions, and vocations 16.Fees for other licenses or permits and penalties or fines for violations 17.Fees for advertisement 18.Fees on sales of animals in cattle markets 19.Fees for registration and certification of births, marriages, and deaths 20.Fees for education & health facilities established or maintained by the local govt 21.Fees for other specific services rendered by the local government 22.Rent from land, buildings, equipment, machinery, and vehicles 23.Surpluses from local commercial enterprises Expenses Revenues
- 40. Localization of Urban Development: The case of China Localization of Urban Development in China Reforming land management and institutions Creating a mobile and versatile labor force with equal access to a common standard of public services Placing urban finances on a more sustainable footing while creating financial discipline for local governments Improve the revenue base of local governments by mainstreaming a property tax on housing Improve the intergovernmental grants system Establish an explicit framework for local government transactions Reform the financial sector to enhance fiscal discipline of local governments Reforming urban planning and design Managing environmental pressures Improving governance at the local level Timing, sequencing, and monitoring
- 41. Localization of Urban Development Kenya: A government funded drought insurance program brings satellite based insurance to Kenyan pastoralists and farmers using mPesa. Indonesia: A program is being implemented to enhance the capacity of local governments to improve efficiency and effectiveness of local public spending. Also implemented the PNPM program: community driven development U.K. Midlands Successful locally owned businesses help develop local markets, create innovation, success and redistribution in a self-reinforcing cycle Colombia:
- 42. lends to governments of middle-income and creditworthy low-income countries provides interest-free loans, or credits, and grants to governments of the poorest countries provides loans, equity, and advisory services to stimulate private sector investments in developing countries provides political risk insurance and credit enhancement to investors and lenders to facilitate FDI in emerging economies provides international facilities for conciliation and arbitration of investment disputes 1944 International Bank for Reconstruction and Development (IBRD) 1960 International Development Association (IDA) 1956 International Finance Corporation (IFC) 1988 Multilateral Investment Guarantee Agency (MIGA) 1966 International Center for the Settlement of Investment Disputes (ICSID) The World Bank Group
- 43. worldbankgroup.org/sdgs Follow us on twitter @WBG2030 Mahmoud-Mohieldin on @wbg2030 worldbank.org/sdgs Warwick Economics Summit February 3, 2018 Mahmoud Mohieldin Senior Vice President World Bank Group
Notes de l'éditeur
- both oil producers and oil importers have suffered. Producers rely heavily on oil revenue and have experienced a sharp fall in income since the price decline that began in 2014. Non-oil producers may have had a reduction in oil import expenses but they have also experienced a decline in grants, remittances, regional trade, financial services, and tourism. Rigidities in expenditure, a volatile revenue base, and weak fiscal institutions have added to regional woes, making a fiscal response to shocks difficult. Borrowing rather than adjusting spending has long been the dominant response in almost all countries in the region. But when debt rises sharply, its sustainability becomes a serious issue. The indebted governments must pay a large amount of interest, which ultimately increases the budget deficit forcing them to issue more debt. Recent estimates by the IMF and the World Bank show that the already high ratio of debt to GDP will increase substantially across the region this year. In some GCC countries, such as Bahrain, the ratio will climb to close to 100 percent. The 2018 debt-to-GDP ratio in other GCC countries is expected to remain at levels high enough to be deemed critical under IMF criteria (Figure 1.4). The same is true of other indebted countries such as Egypt, Morocco, Algeria, Tunisia, and Yemen. The debt situation in Lebanon combined with its high fiscal deficit remain at unsustainable levels estimated at 153.4 percent of GDP. While the debt burden in Iran, UAE, and Djibouti is low (green area in Figure 1.4), it remains elevated in Jordan and Qatar leaving them in an unhealthy situation (yellow area in Figure 1.4) in the short term.
- EU Data Privacy Laws History: The Data Protection Directive is an EU directive (adopted in 1995) to regulate the processing of personal data within the EU. The General Data Protection Regulation (adopted in April 2016) will supersede the Data Protection Directive and will be enforceable starting on 25 May 2018. The General Data Protection Regulation (GDPR): is a regulation by which the European Parliament, the Council of the EU and the European Commission intend to strengthen and unify data protection for all individuals within the EU, extending the scope to all foreign companies processing data of EU residents. It also addresses the export of personal data outside the EU. This increased territorial scope is the biggest change to the regulatory landscape of privacy. It harmonizes data protection regulations throughout the EU, making it easier for non-European companies to comply with these regulations; however, this comes at the cost of a strict data protection compliance regime with severe penalties of up to 4% of worldwide turnover or €20 million, whichever is higher. The GDPR aims primarily to give control back to citizens and residents over their personal data and to simplify the regulatory environment for international business by unifying the regulation within the EU. The GDPR also brings a new set of "digital rights" for EU citizens in an age of an increase of the economic value of personal data in the digital economy. Unlike a directive, it does not require national governments to pass any enabling legislation, and is thus directly binding and applicable Scope: According to the European Commission, "personal data is any information relating to an individual, whether it relates to his or her private, professional or public life. It can be anything from a name, a home address, a photo, an email address, bank details, posts on social networking websites, medical information, or a computer’s IP address." It applies to all companies processing the personal data of data subjects residing in the Union, regardless of the company’s location Consent: The conditions for consent have been strengthened, and companies will no longer be able to use long illegible terms and conditions full of legalese, as the request for consent must be given in an intelligible and easily accessible form, with the purpose for data processing attached to that consent. Consent must be clear and distinguishable from other matters and provided in an intelligible and easily accessible form, using clear and plain language. It must be as easy to withdraw consent as it is to give it. Data Subject Rights: Breach Notification: Under the GDPR, breach notification will become mandatory in all member states where a data breach is likely to “result in a risk for the rights and freedoms of individuals”. This must be done within 72 hours of first having become aware of the breach. Data processors will also be required to notify their customers, the controllers, “without undue delay” after first becoming aware of a data breach. Right to Access: Part of the expanded rights of data subjects outlined by the GDPR is the right for data subjects to obtain from the data controller confirmation as to whether or not personal data concerning them is being processed, where and for what purpose. Further, the controller shall provide a copy of the personal data, free of charge, in an electronic format. This change is a dramatic shift to data transparency and empowerment of data subjects. Right to be Forgotten: Also known as Data Erasure, the right to be forgotten entitles the data subject to have the data controller erase his/her personal data, cease further dissemination of the data, and potentially have third parties halt processing of the data. The conditions for erasure, as outlined in article 17, include the data no longer being relevant to original purposes for processing, or a data subjects withdrawing consent. It should also be noted that this right requires controllers to compare the subjects' rights to "the public interest in the availability of the data" when considering such requests. Data Portability: GDPR introduces data portability - the right for a data subject to receive the personal data concerning them, which they have previously provided in a 'commonly use and machine readable format' and have the right to transmit that data to another controller. Privacy by Design: Privacy by design as a concept has existed for years now, but it is only just becoming part of a legal requirement with the GDPR. At its core, privacy by design calls for the inclusion of data protection from the onset of the designing of systems, rather than an addition. More specifically - 'The controller shall ... implement appropriate technical and organisational measures … in an effective way ... in order to meet the requirements of this Regulation and protect the rights of data subjects'. Article 23 calls for controllers to hold and process only the data absolutely necessary for the completion of its duties (data minimisation), as well as limiting the access to personal data to those needing to act out the processing. Data Protection Officers: Currently, controllers are required to notify their data processing activities with local DPAs, which, for multinationals, can be a bureaucratic nightmare with most Member States having different notification requirements. Under GDPR it will not be necessary to submit notifications / registrations to each local DPA of data processing activities, nor will it be a requirement to notify / obtain approval for transfers based on the Model Contract Clauses (MCCs). Instead, there will be internal record keeping requirements, as further explained below, and DPO appointment will be mandatory only for those controllers and processors whose core activities consist of processing operations which require regular and systematic monitoring of data subjects on a large scale or of special categories of data or data relating to criminal convictions and offences. Importantly, the DPO: Must be appointed on the basis of professional qualities and, in particular, expert knowledge on data protection law and practices May be a staff member or an external service provider Contact details must be provided to the relevant DPA Must be provided with appropriate resources to carry out their tasks and maintain their expert knowledge Must report directly to the highest level of management Must not carry out any other tasks that could results in a conflict of interest. Source: EU GDPR website
- Governments could help by moving payments of wages, social benefits, and pensions into accounts. In Iraq, for example, about 1.5 million unbanked adults receive government payments in cash despite owning a mobile phone. Businesses could do the same with their wage payments. Roughly 8 million unbanked adults in Egypt work in the private sector and get paid in cash despite owning a mobile phone, as do nearly 2 million unbanked adults in Morocco.
- Objective: The Human Capital Project is designed to help countries improve their education, health and social protection systems to raise the next generation of well-equipped and healthy people. Methodology: To meet this objective the WBG has been developing an international metric to capture the indicators of human capital. The metric will eventually be accompanied by a ranking of countries. The ranking is meant to spur more demand for countries to invest in human capital.
- Kenya: Both programs aim at supporting county governments by providing financing and capacity support by instilling incentives that support better governance and service delivery. Indonesia: Together with WBG, there is also a flagship study on urbanization and a national plan to upgrade slums, ensure affordable housing, water, sanitation, and solid waste management. National Program for Community Empowerment (PNPM) is the govt’s flagship community driven development program. Objective is to improve the economic and social welfare of the poor and expand employment opportunities through community consultation, empowerment and capacity building at the local level Malaysia: In Voluntary National Review, their next steps are: localising SDGs at sub-national levels by replicating the national multi-stakeholder governance structure at state levels Also, the WBG has a recent RAS for Malaysia titled: Study on Federal-Local Relations: Options for Devolving Responsibility for Improved Service Delivery. Description: Identify a series of policy options that could increase the financial and technical capacity of local governments (cities and municipalities) to assume more responsibilities for economic planning and public service delivery, while also increasing accountability to citizens for the quality and efficiency of service delivery. Have received letter of interest and draft TOR in late October 2017.