São Paulo – The countries of the Middle East and North Africa need to promote political and economic reforms to reduce regional disputes and to promote growth. The countries should seek stability to attract foreign investors who have left the region or who started investing in other nations, according to a report on development and perspectives for the region, disclosed on Thursday (10) by the World Bank.
Study Middle East and North Africa: Investing in Turbulent Times estimates that the Gross Domestic Product (GDP) of the region should grow 2.8% this year, only half of the growth in 2012. Not even the Gulf countries escaped the effects of the conflicts in the region in 2013 and should also grow less than last year.
The bank believes, however, that the GDP of the countries of the Middle East and North Africa can grow up to 4% in 2014, since the political situation is more stable and "transparent". The document points out, however, that there are many "risks" threatening this outlook. Most of them "domestic in nature and linked to political instability".
According to the World Bank’s Chief Economist for the Middle East and North Africa region, Shanta Devarajan, the nations in the area cannot "afford" to neglect the continuing lack of economic growth.
"The absence of significant economic reforms, combined with political and macroeconomic instability, especially in the transition economies, will keep investment and growth below potential not only in the short run, but in the years to come, unless there are remedial actions," she said, according to a press statement by the institution.
In this study, the World Bank divides countries into oil exporters in the Gulf (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates), oil exporters in developing and transition countries (Yemen and Libya), oil exporters in development (Algeria, Iraq, Syria and Iran, which is not an Arab), oil importers in transition (Tunisia and Egypt) and oil importers (Morocco, Jordan, Djibouti, Lebanon and Palestine).
Less investment
According to a survey, the nations of the region failed to receive foreign direct investment (FDI) due to political and economic instability.
From 2006 to 2010, the countries of the Gulf Cooperation Council (GCC) and other Arab nations received more FDI relative to GDP than other emerging nations. From 2010 onwards, however, the Arabs lost FDI to other developing nations. It is worth recalling that the Arab Spring erupted in 2011. According to the bank, in recent years the area has attracted resources only to sectors that are already used to foreign investment.
"Political turbulence has affected the level and composition of FDI, and has skewed flows towards extractive sectors that create the least jobs. At the same time, it has discouraged the high quality FDI in labour-intensive manufacturing and services," shows the bank’s statement.
To return to attracting investment, the World Bank says that the Arab countries, especially those in unstable situations, need to ensure law enforcement, property rights, commit to stability and implement transparent policies to create jobs and ensure a structural transformation in the region.
*Translated by Mark Ament
