Resource information
This report argues that Middle East and
North Africa (MENA) countries face a critical choice in
their quest for higher private sector growth and more jobs:
promote competition, equal opportunities for all
entrepreneurs and dismantle existing privileges to specific
firms or risk perpetuating the current equilibrium of low
job creation. The report shows that policies which lower
competition in MENA also constrain private sector
development and job creation. The report highlights the
central role of promoting competition to stimulate private
sector growth. However, there is little evidence on the
political economy factors that perpetuate and or accentuate
the lack of competition in the region, nor on the type of
policy distortions that weaken competition and how those
distortions ultimately affect job creation. This report aims
to fill these gaps. It tackles the following questions: what
types of firms create more jobs in MENA?; are they different
from other regions?; what policies in MENA prevent the
private sector from creating more jobs?; how do these
policies affect competition and job creation?; and to what
extent are these policies associated with privileges to
politically connected firms? This report provides evidence
that privileges granted to politically connected firms are
associated with many of the policy distortions that the
literature identifies to weaken private sector growth and
job creation. This report assembles the most comprehensive
firm census database ever put together for the MENA region.
This allows to measure accurate characteristics of and
trends in firms' demand for labor, and provides
reliable representative estimates of both aggregate private
sector job creation and productivity growth determinants.
The report is organized in four chapters as follows: chapter
one analyzes the dynamics and determinants of job creation
and tests whether the fundamentals of job creation in MENA
are similar to those in fast growing developing and high
income countries. Chapter two shows how different policies
in MENA countries shaped private sector competition and thus
the firm dynamics associated with job growth identified in
chapter one. Chapter three documents past industrial
policies in MENA and compare the experiences in MENA with
the experiences of East Asian countries, highlighting how
the differences are linked to policy objective, design, and
implementation. Chapter four analyzes how privileges to
politically connected firms result in policy distortions
that undermine competition and constrain private sector
growth and jobs in MENA. The report concludes by laying out
the implications for policy of the various findings and lays
out the specific areas for policy reform to the roadmap for
more private sector growth and jobs in MENA.
