En­abling eco­nomic trans­for­ma­tion in Mideast and North Africa

The Pak Banker - - Front Page -

LON­DON

David Lipton, IMF First Deputy Manag­ing Di­rec­tor ad­dress­ing a meet­ing said I am de­lighted to be here at the Lon­don School of Eco­nom­ics, with its vi­brant tradition of mar­ry­ing up the study of eco­nom­ics and other so­cial sciences, in­clud­ing pol­i­tics, law, and so­ci­ol­ogy. LSE was set up to im­prove so­ci­ety and to “un­der­stand the causes of things,” some­thing we at the IMF strive to do ev­ery day in our work with our 188 mem­ber coun­tries.

To­day, I would like to talk to you about a topic close to my heart and to our work right now at the IMF: the fu­ture of the Mid­dle East and North Africa (which I will re­fer to as MENA). Your in­sti­tu­tion has a long his­tory of study and en­gage­ment with the re­gion, and I look for­ward to shar­ing my thoughts with you on the prospects for sta­bil­ity and pros­per­ity in that part of the world.

We warned of the risks to re­cov­ery from the fis­cal cliff in the United States and the eu­ro­zone cri­sis and we called for ac­tion on both counts. So, you would be right to as­sume that we spend a lot of our wak­ing hours work­ing on the prob- lems of the ad­vanced economies. I will speak about what the IMF is do­ing. And I will also ar­gue that the in­ter­na­tional community as a whole must re­sist the un­der­stand­able pre­oc­cu­pa­tion with its own dif­fi­cul­ties, at this im­por­tant mo­ment when we all need to pro­vide con­crete sup­port for the as­pi­ra­tions of the peo­ple of the Mid­dle East and North Africa for a brighter fu­ture.

The Arab Awak­en­ing started as a rev­o­lu­tion, with a sin­gle self­im­mo­la­tion by a street ven­dor in a ru­ral town in Tu­nisia in De­cem­ber 2010. The next month, the call in Egypt for “bread, free­dom, and so­cial jus­tice” echoed across much of the Arab world and ex­cited ob­servers ev­ery­where. The man­date for change was not just po­lit­i­cal?it ex­tended deep into the eco­nomic sphere. The peo­ple were call­ing for a say in how their coun­tries would be gov­erned and for greater op­por­tu­ni­ties for pros­per­ity and hu­man ful­fill­ment. Now, al­most two years later, MENA’s fu­ture is un­clear. In their re­cent ar­ti­cle en­ti­tled “This is Not a Rev­o­lu­tion,” two prom­i­nent Mid­dle Eastern schol­ars, Hus­sein Agha and Robert Mal­ley, be­gin with the as­ser­tion that in the Mid­dle East “his­tory does not move for­ward. It slips side­ways.” They say aloud what many re­cent ob­servers have been think­ing, that newly elected gov­ern­ments lack a clear di­rec­tion in terms of po­lit­i­cal and eco­nomic re­form and that reli­gious fac­tion­al­ism is re­in­forc­ing in­ac­tion. They warn darkly that the fight for po­lit­i­cal power will block progress on po­lit­i­cal and eco­nomic re­form. One could add that some have doubts about the pace and di­rec­tion of re­forms in coun­tries where lead­er­ship has not changed.

To me a use­ful way to think about the present sit­u­a­tion is that the rev­o­lu­tion in the re­gion could take any one of three al­ter­na­tive paths, as far as the eco­nomic con­se­quences are con­cerned, paths which one could call de­te­ri­o­ra­tion, restora­tion, and trans­for­ma­tion.We could see sta­bi­liza­tion achieved through a re­asser­tion of vested busi­ness in­ter­ests of­fer­ing a respite from erod­ing eco­nomic con­di­tions but con­demn­ing the re­gion to a re­turn to eco­nomic stag­na­tion or at best tepid growth; or we could see a new econ­omy emerge, as newly elected and in­ex­pe­ri­enced gov­ern­ments grad­u­ally find a way to end lin­ger­ing eco­nomic dis­rup­tions and be­gin re­forms to open the way to greater eco­nomic op­por­tu­nity for their peo­ple.

While the first two paths would be un­de­sir­able, they could come to pass. Need­less to say, the third path, trans­for­ma­tion, would be best. How should we as­sess these prospects? What if any­thing can we do to af­fect the out­come? Let me try to ad­dress those key ques­tions.

Stronger em­pha­sis on trade. The over­ar­ch­ing strat­egy to de­liver eco­nomic growth on a scale and timetable that would cre­ate enough jobs and pros­per­ity for the rapidly grow­ing pop­u­la­tions in these coun­tries is eco­nomic in­te­gra­tion.

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