Demands for Transformational Change

1. Demands for Transformational Change Mohammad Pournik UNDP Regional Centre for Arab States, Cairo November 2011

2. Processes of Exclusionary Development • Undermining traditional use rights to land • Exclusion of particular population groups from social and economic benefits • Neglect of interior regions • Unaccountable and non-responsive governance mechanisms • Control of markets by politically well connected businesses • Lack of access to finance for SMEs

3. Impact of Exclusionary Processes on Youth • 24% average rate of unemployment amongst Arab youth, twice the global average and 2.5 times the general unemployment rate • Rising rates of unemployment amongst educated youth with the rate rising from insignificant levels in 1980s to substantially higher rates than for uneducated youth • Hence education no longer guarantee of upward social mobility • Increasing concentration of youth in informal activities

4. Manifestations of Unequal Development • Increasing sub-national disparities in Egypt • Very slow reduction in regional inequalities in other countries • Increasing concentration of valuable agricultural land • Persistently high rates of income and human poverty in rural areas • Declines in the quality of public health and education services • Focus of subsidies on regressive fuel subsidies • High rates of working poor in rural areas • High rates of youth and female unemployment, particularly amongst graduates

5. General Measures • A New Social Contract of Mutual Accountability of State and Citizens • A new developmental vision • An inclusive political system • A competitive and transparent market • A capable and accountable State • Inclusive Growth: employment focused and regionally balanced growth • Effective regional economic integration

6. Participatory and Accountable Governance Mechanisms • Participatory Development of Long Term Developmental Visions • Participatory and effective planning systems, including sub-national plans • Better links between planning and budgeting • Open budget initiatives • Transparent public procurement processes • Right to information

7. Fiscal Policy • Raise tax revenues, particularly direct taxes, to fund services provision and reduce inequality • Reduce wasteful untargeted subsidies • Recast food subsidies to support local producers and a varied diet • Increase expenditures on social and physical infrastructure • Aim for higher levels of budget deficits in the medium term to fund productivity enhancing investments

8. Differentiated Approaches and Country Groupings • High Income Countries are aware of problems and have the means to deal with them • Middle Income Countries, include diversified economies plus Algeria, share common problems but can mobilize resources to respond to them • LDCs, despite differences in terms of access to natural resource revenues face daunting problems and need additional external support

9. Middle Income Countries • Have a focus on youth unemployment problem and graduate job seekers in particular • Identify niche manufacturing and service activities to support structural transformation • Promote scientific research and generation of knowledge • Improve quality and relevance of tertiary education • Improve productive, transport and communication infrastructure in deprived regions • Remove impediments to women’s economic participation • Expand provision of social protection measures to the informal sector

10. Middle Income Countries 2 • Promote high value added agricultural products such as organic food for exports • Expand rural IT facilities in particular to support development of non-farm activities for educated youth and slow down rural exodus • Promote high value services such as medical tourism, financial and consulting services and international level higher education services • Improve quality of public health services

11. Building Alliances for Change • Dealing with rise in demands for immediate social justice at a time of effective economic recessions due to uncertainty induced reductions in investment • Dealing with vested interests in current subsidy schemes • Overcoming institutional and intellectual inertia • Sequencing of reform measures • How to develop a culture of responsible citizenship