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Leaving No Place Behind Within the MENA Is Critical for Economic Growth and Social Inclusion

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Where someone is born in the Middle East and North Africa (MENA) should not determine their ability to succeed in life, according to a new World Bank report launched today at the World Urban Forum (WUF10).

Convergence: Five Critical Steps Toward Integrating Lagging and Leading Areas in the Middle East and North Africa, says that enhancing opportunities and social services in governorates, towns, and villages that are economically distant from large metropolitan areas is key for faster economic growth and social inclusion in MENA. However, leaving no place behind does not mean doing the same policies and investments across the region – actions need to be tailored to local constraints and institutional systems.

“In the Middle East and North Africa, place matters for prosperity. Governments in the region have tried many ways to respond to the needs of people in lagging areas – much money has been spent on investment in these places,” said Sameh Wahba, World Bank Global Director for Urban, Disaster Risk Management, Resilience, and Land.  “To add jobs in poorer areas, policymakers have tried to insert new production facilities into these areas. To meet the need for decent homes and amenities in poor urban neighborhoods, money has been poured into massive housing projects.”

“However,” stressed Wahba, “spatial disparities continue to grow, or are closing more slowly than would be expected given the volume of investment directed to these locations. The main reason: the causes of spatial exclusion are not locational and physical but are economic and institutional.”  

Why is MENA so economically fragmented? The report identifies the following reasons:

Challenging business environments – most lagging areas in MENA have not been able to fully leverage their assets and abilities because the business environment and infrastructure in their cities and towns makes it hard for new firms to start and grow. One reason is that outside the capital city in MENA countries, smaller cities invariably lack the authority to raise their own revenues and to manage local service provision.

Lack of mobility – most residents in lagging areas are “stuck in place,” unable to take full advantage of jobs that more vibrant urban economies offer. Credentialist education systems may be most to blame for making people immobile.

Barriers to trade – MENA’s governments have created formidable obstacles to trade and migration. The main barriers are limits on news and information and practical constraints on travel and trade. For example, visa difficulties, weak infrastructure, and logistics hurdles.

“The Middle East and North Africa is suffering from spatially divergent development. The uprisings of the Arab Spring in part reflected grievances of citizens who were – or were perceived to have been – left behind, particularly by accidents of where they were born,” says Somik Lall, World Bank Global Lead on Territorial Development Solutions, Lead Economist for Sustainable Development in Middle East and North Africa, and co-author of the report.  “Although the trajectory of every nation in the region varies, one stated objective is clear for them all: improve outcomes for people in areas that have been left behind.”

Convergence addresses the economic and institutional causes of these spatial disparities and focuses on five actions that can put countries in the MENA region on a path to territorial convergence:

Strengthen coordination and complementarities across initiatives. Development strategies are more likely to succeed if they are multidimensional, including access to energy, transport, land, and markets—in the same place, whether sequentially or concurrently. A good place to start is by anchoring investments in and around cites.

Redistribute roles and responsibilities across tiers of government. Citizens in different parts of the country have varying needs, and local conditions require flexible service delivery models. Redistributing responsibilities for local revenue generation and local service provision to local governments can make them better equipped and more accountable.

Enable mobility of people between lagging and leading areas. On average, people in MENA are half as mobile domestically as people in other parts of the world. Our research shows that living standards of people moving internally to major cities can increase by an average of 37 percent in the region. Education systems across the region need to be reoriented toward marketable skills.

Build dense and connected cities. Well-functioning cities offer a wide variety of jobs – for women and men. Making land markets in cities more efficient is critical for agglomeration and specialization – two dynamics that enhance job creation and economic prosperity. Whether in larger or in smaller (secondary) cities, agglomeration and specialization require the benefits from high economic density, which concentrates economic activity geographically. For this, the fabric of cities needs to be spatially connected, dense with people, and transit-oriented—not sprawling that perpetuates the dispersion of people and jobs. Planners and regulators can attract firms to invest in cities by reducing frictions such as zoning regulations, impediments to property acquisition and new construction (costs, height limits, density limits), challenges to local business registration and licensing, limits on news and information, and obstacles to developing local business networks.

Enhance market access nationally and regionally. Historically, MENA’s cities were part of economically important global trade networks. Many of these cities persisted into modern times as large urban areas. But governments in the region have managed to shrink the networks from global to local. These networks have, at a minimum, to be expanded to national and regional dimensions. A good place to start would be to improve the links across national borders—reducing tariffs, improving logistics, and facilitating trade, and instituting migration protocols. Such efforts will grow the economies, providing much-needed resources to redistribute in areas left behind.

In fact, the publication encourages regional integration across the MENA region, contending that integration will break down the walls between countries, connect firms to larger markets, and foster ever-larger scale and agglomeration economies specializing in tradable goods and services.

Lall highlighted that, “All levels of government have roles to play – the national, the provincial, and the local.  By requiring that interventions across the board be responsive to the basic needs of all, we can bring more people in forgotten places into jobs than ever before.”

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Transition to Low-Carbon Rice Will Help Vietnam Meet Its Emission Target

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Moving to low-carbon rice production offers the highest potential for Vietnam to meet its goal of cutting methane emissions by 30 percent by 2030 while boosting the competitiveness of a strategic export item, a new World Bank report says.

The report, titled “Spearheading Vietnam’s Green Agricultural Transformation: Moving to Low-Carbon Rice,” suggests that Vietnam can transform the rice sector by cutting GHG emissions, improving resource efficiency and yields, boosting resilience, and diversifying production. Such transformation will require significant investment and major policy reforms to align incentives and coordinate behaviors of stakeholders at all levels.  

The agricultural sector, despite all its successes, is an important contributor to GHG emissions in Vietnam,” said Carolyn Turk, World Bank Country Director for Vietnam. “It has reached a point where a transition to lower-carbon modes of farming is imperativethe longer it takes to switch, the higher the costs will be. Experience suggests that government has a catalytic role to play in driving the green transition through strategic allocation of public investment and strengthening the enabling environment for private sector participation in a modern, green agriculture sector.”

Rice, which is Vietnam’s most important crop and grown on more than half of its agricultural land area, accounts for 48 percent of the agriculture sector’s GHG emissions and over 75 percent of methane emissions. Based on conservative estimates, improving water management and optimizing application of inputs such as seeds, fertilizers, and pesticide can help farmers maintain or increase yields by 5 to 10 percent and reduce input costs by 20 to 30 percent, thereby boosting net profits by around 25 percent. More importantly, these improved techniques would also help cut GHG emissions by up to 30 percent. Such approaches were successfully piloted in over 184,000 ha of rice farming under the Vietnam Sustainable Agriculture Transformation Project financed by the World Bank.  

 “These methods have been proven effective,” said Benoît Bosquet, World Bank Regional Director for Sustainable Development in East Asia Pacific. “If we can scale them up in the whole agricultural sector, they will help Vietnam progress towards its 2050 net-zero greenhouse gas emissions target.

The report highlights five short- to medium-term policy areas to accelerate the transition to low-carbon agriculture, including ensuring policy coherence and plan-budget alignment, repurposing policy tools and public expenditures, promoting public investments, strengthening institutions, and enabling the private sector and other stakeholders to participate.

The report was launched at the “Integrated Climate Resilience and Sustainable Development of the Mekong Delta” workshop, co-organized by the Ministry of Agriculture and Rural Development and the World Bank in Can Tho on September 24.

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World Bank calls for urgent climate action in Latin America and the Caribbean

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A new World Bank report calls on countries in the region to take urgent action to help reduce the impacts of climate change and set a path for the transition to low-carbon economies.

According to the report,A Roadmap for Climate Action in Latin America and the Caribbean 2021-2025, climate-related disasters such as hurricanes, droughts, fires, and floods are becoming increasingly frequent and intense in the region and are the cause of enormous economic losses. Latin America and the Caribbean (LAC) is among the regions most vulnerable to the destructive power of such events, with annual costs due to disruptions in energy and transport infrastructure equivalent to 1 percent of regional GDP and up to 2 percent in some Central American countries.

Furthermore, climate change is expected to have negative impacts on productivity and harvests in several countries in the region. This could exacerbate acute food insecurity, which increased rapidly during the COVID-19 pandemic to affect more than 16 million people across the region, with many families at risk in 2022 due to higher inflation and food prices. Without action, by 2030, up to 5.8 million people could fall into extreme poverty as a result of climate change, and by 2050 over 17 million people could be forced to leave their homes to escape climate impacts.

Countries in LAC have a unique opportunity to act swiftly and lead the change towards more resilient and low-carbon economies that foster a better future for their people,” said Carlos Felipe Jaramillo, World Bank Vice President for Latin America and the Caribbean. “The World Bank has long been a strong partner to the region and as part of our long-term commitment to achieving sustainable and inclusive development, we have stepped up our support, providing about $4.7 billion in climate-related financing during the last year.”

The region is responsible for 8 percent of global greenhouse gas emissions. The agricultural sector, together with changes in land use and deforestation, accounts for 47 percent of emissions in LAC, well above the global average of 19 percent. Energy, electricity consumption and transportation account for another 43 percent of emissions. The report emphasizes opportunities in these areas for both economic growth and services with lower emissions as key to accelerating climate action and leading an urgent transition to low-carbon economies to avoid the irreversible effects of climate change.

“This report offers an ambitious and urgent roadmap for transformative climate action in the region, building on country climate priorities and commitments and focusing on adaptation and resilience, while supporting countries to achieve their low carbon development goals,” said Anna Wellenstein, Regional Director for Latin America and the Caribbean in sustainable development. 

The report highlights several priority areas in key sectors for new and accelerated climate action:

  • Managing landscapes, agriculture and food systems that include deforestation-free value chains
  • Decarbonizing power generation, transport systems and manufacturing while reducing infrastructure disruptions
  • Making cities more resilient to climate shocks and reducing urban emissions

While supporting cross-cutting actions that:

  • help vulnerable populations adapt to climate change and achieve just and equitable transitions to low carbon economies; and
  • promote green growth while reducing financial sector risks and anticipating market transitions.

In FY22, the World Bank provided US$4,691 million for climate action in the region, in projects such as:  

  • Climate Resilient and Sustainable Agriculture (Belize)
  • Resilient Connectivity and Urban Transport Accessibility (Haiti) 
  • Enabling a Green and Resilient Development Policy Financing (Peru) 
  • Second Disaster Risk Management Development Policy Credit (Honduras) 
  • Belgrano Sur Passenger Railway Line Modernization Project (Argentina)

The targets of the Roadmap for Climate Action in Latin America and the Caribbean 2021-2025 are grounded in the World Bank Group’s Climate Change Action Plan (CCAP) and fully integrate all parts of the World Bank Group to work with a broad range of partners in the development of multisectoral solutions. 

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Jobs outlook highly uncertain in the wake of Russia’s war of aggression against Ukraine

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OECD labour markets bounced back strongly from the COVID-19 pandemic, but the global employment outlook is now highly uncertain according to a new OECD report.

Russia’s war of aggression against Ukraine has caused lower global growth and higher inflation, with negative impacts on business investment and private consumption.

The OECD Employment Outlook 2022 says that while labour markets remain tight in most OECD countries, lower global growth means employment growth is also likely to slow, while major hikes in energy and commodity prices are generating a cost of living crisis.

Since the low point of the pandemic in April 2020, OECD countries have created about 66 million jobs, 9 million more than those destroyed in a few months at the onset of the pandemic. The OECD unemployment rate stabilised at 4.9% in July 2022, 0.4 points below its pre-pandemic level recorded in February 2020 and at its lowest level since the start of the series in 2001.

The number of unemployed workers in the OECD continued to fall in July and reached 33.0 million, 2.4 million less than before the pandemic.

Looking at individual countries however, the unemployment rate in July remained higher than before the pandemic in one fifth of OECD countries. In a number of countries, labour force participation and employment rates are also still below pre-crisis levels. Moreover, employment is growing more strongly in high pay service industries, while it remains below pre-pandemic levels in many low pay, contact-intensive industries.

“Rising food and energy prices are taking a heavy toll, in particular on low income households,” OECD Secretary-General Mathias Cormann said. “Despite widespread labour shortages, real wages growth is not keeping pace with the current high rates of inflation. In this context, governments should consider well targeted, means-tested and temporary support measures. This would help cushion the impact on households and businesses most in need, while limiting inflation impacts and fiscal cost of that policy support,” he said.

Tight labour market conditions mean that companies across the OECD are confronted with unprecedented labour shortages. In the European Union, almost three in ten manufacturing and service firms reported production constraints in the second quarter of 2022 due to a lack of labour.

Nominal wages are not keeping pace with the rapid rise in inflation. The real value of wages is expected to decline over the course of 2022, as inflation is projected to remain high and generally well above the level expected at the time of relevant collective agreements for 2022. The cost of living crisis is affecting lower-income households disproportionally. They have to devote a significantly larger share of their incomes on energy and food than other groups and were also the population segment falling behind in the jobs recovery from the COVID-19 pandemic.

In these circumstances, supporting real wages for low-paid workers is essential, according to the report. Governments should consider ways to adjust statutory minimum wages to maintain effective purchasing power for low paid workers. Targeted, means-tested, and temporary social transfers to people most affected by energy and food price hikes would also help support the living standards of the most vulnerable.

In the current circumstances, active discussions between governments, workers and firms on wages will also be key. None of them can absorb the full cost associated with the hike in energy and commodity prices alone. This calls for giving new impetus to collective bargaining, and for rebalancing bargaining power between employers and workers, enabling workers to bargain their wage on a level playing field.

Countries should step up their efforts to reconnect the low-skilled and other vulnerable groups to available jobs. About two thirds of OECD countries have increased their budget for public employment services since the onset of the COVID 19 crisis. However, more funding is not enough: employment and training services need to be integrated, comprehensive and effective in reaching out to employers and job seekers.

Improving job quality for frontline jobs should be an urgent priority for governments. More than half of OECD countries set up one-time rewards to compensate workers in the long-term care sector for extra work during the pandemic. Yet less than 30% of countries have increased pay on an ongoing basis.

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