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Transparency is Key to Weathering Shocks, Investing in Growth, and Enhancing Trust in Government

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— Transparency about critical economic issues — such as public debt and employment — will be the key to driving growth and enhancing trust in the governments in the Middle East and North Africa (MENA) region, according to the World Bank’s latest regional economic update.

The need for greater transparency comes as the MENA region faces unprecedented dual shocks from the COVID-19 (Coronavirus) pandemic and the collapse in oil prices. The shocks have exacerbated already slow economic growth in the region, due, in part, to lack of data transparency.

The new report, entitled How Transparency Can Help the Middle East and North Africa, shows that estimates of the costs of the current crisis are fluid because it is difficult to predict how the global economy, national policies and societies will react as the pandemic spreads. Consequently, estimates of the costs can vary in a matter of days. As an example, the report shows how the spread of COVID-19, along with the collapse in oil prices, brought changes in private-sector and World Bank growth forecasts for 2020. As of April 1, changes in forecasts implied that the costs for MENA were about 3.7% of the region’s 2019 GDP (approximately US$116 billion) compared to 2.1% as recently as March 19.

“More than any other region, MENA is confronting two distinct but related shocks with the spread of the virus and the collapse in oil prices. The World Bank is ramping up efforts to help governments weather these shocks and leave no one behind,” Ferid Belhaj, World Bank Vice President for the Middle East and North Africa, said. “But to bring new hope to citizens, we must learn and change. Across the region, transparency can help lead to growth with enhanced trust in government in the years and decades to come.”

According to the new report, the COVID-19 pandemic is affecting MENA economies across four channels: the deterioration of public health; falling global demand for the region’s goods and services; declines in MENA’s domestic supply and demand because of social distancing measures; and, importantly, falling oil prices. The collapse of oil prices hurts both oil exporters directly, and oil importers indirectly, through declines in regional remittances, investment and capital flows.

The report recommends that countries respond with policies in two parallel steps: address the health emergency and the associated economic contraction; and start in the enactment of transformative and largely budget-neutral reforms such as debt transparency and restructuring of state-owned enterprises.

“Investing in transparency now will break the vicious cycle of distrust and lack of government accountability in the region,” said Rabah Arezki, World Bank Chief Economist for the Middle East and North Africa Region.

In addition to estimating the effects of these latest shocks, the report examines the challenges across MENA that predate the crisis — most notably slow growth. The authors estimate that if the region’s growth of output per capita had been the same as that of typical peer economies over the last two decades, the region’s real output per capita would be at least 20% higher than what it is today.

The report argues that a large part of MENA’s slow growth is due to a lack of transparency. MENA is the only region that has dropped in data capacity and transparency since 2005.

“The decline in MENA’s transparency between 2005 and 2018 is associated with an expected loss of the region’s income per capita ranging from 7 to 14%,” said Daniel Lederman, World Bank Deputy Chief Economist and lead author of the report.

The report highlights two areas where the lack of transparency hinders credible analyses of important issues:

Lack of data transparency hampers credible analyses of MENA’s debt sustainability, which will be an important issue to examine after the crisis. MENA countries vary greatly in their debt reporting standards, and World Bank economists and other external analysts do not have access to vital information about many types of public debt.

Unemployment and informality numbers in the region are ambiguous because MENA countries rely on varying definitions of employment. There is little harmonization — across the region, or with respect to international standards — which affects analyses of informality and unemployment.

On April 2, the World Bank announced an initial surge of support to help countries across the Middle East and North Africa.

The World Bank Group is taking broad, fast action to help developing countries strengthen their pandemic response, increase disease surveillance, improve public health interventions, and help the private sector continue to operate and sustain jobs. It is deploying up to $160 billion in financial support over the next 15 months to help countries protect the poor and vulnerable, support businesses and bolster economic recovery.

Due to the COVID-19 pandemic, economic circumstances within countries and regions are fluid and change on a day-by-day basis. The analysis in this regional report is based on the latest country-level data available as of April 1.

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Post-COVID-19, regaining citizen’s trust should be a priority for governments

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coronavirus people

The COVID-19 crisis has demonstrated governments’ ability to respond to a major global crisis with extraordinary flexibility, innovation and determination. However, emerging evidence suggests that much more could have been done in advance to bolster resilience and many actions may have undermined trust and transparency between governments and their citizens, according to a new OECD report.

Government at a Glance 2021 says that one of the biggest lessons of the pandemic is that governments will need to respond to future crises at speed and scale while safeguarding trust and transparency. “Looking forward, we must focus simultaneously on promoting the economic recovery and avoiding democratic decline” said OECD Director of Public Governance Elsa Pilichowski. “Reinforcing democracy should be one of our highest priorities.”

 Countries have introduced thousands of emergency regulations, often on a fast track. Some alleviation of standards is inevitable in an emergency, but must be limited in scope and time to avoid damaging citizen perceptions of the competence, openness, transparency, and fairness of government.

 Governments should step up their efforts in three areas to boost trust and transparency and reinforce democracy:

 Tackling misinformation is key. Even with a boost in trust in government sparked by the pandemic in 2020, on average only 51% of people in OECD countries for which data is available trusted their government. There is a risk that some people and groups may be dissociating themselves from traditional democratic processes.

 It is crucial to enhance representation and participation in a fair and transparent manner. Governments must seek to promote inclusion and diversity, support the representation of young people, women and other under-represented groups in public life and policy consultation. Fine-tuning consultation and engagement practices could improve transparency and trust in public institutions, says the report. Governments must also level the playing field in lobbying. Less than half of countries have transparency requirements covering most of the actors that regularly engage in lobbying.

 Strengthening governance must be prioritised to tackle global challenges while harnessing the potential of new technologies. In 2018, only half of OECD countries had a specific government institution tasked with identifying novel, unforeseen or complex crises. To be fit for the future, and secure the foundations of democracy, governments must be ready to act at speed and scale while safeguarding trust and transparency.

 Governments must also learn to spend better, according to Government at a Glance 2021. OECD countries are providing large amounts of support to citizens and businesses during this crisis: measures ongoing or announced as of March 2021 represented, roughly, 16.4% of GDP in additional spending or foregone revenues, and up to 10.5% of GDP via other means. Governments will need to review public spending to increase efficiency, ensure that spending priorities match people’s needs, and improve the quality of public services.

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Sweden: Invest in skills and the digital economy to bolster the recovery from COVID-19

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Sweden’s economy is on the road to recovery from the shock of the COVID-19 crisis, yet risks remain. Moving ahead with a labour reform to facilitate adaptation in a fast-changing economic environment, and investing in digital skills and infrastructure, will be crucial to revive employment and build a sustainable recovery, according to the latest OECD Economic Survey of Sweden.

The pandemic triggered a severe recession in Sweden, despite mild distancing measures and swift government action to protect people and businesses. GDP fell by less than in many other European economies in 2020, thanks to reinforced short-time work, compensation to firms for lost revenue and measures to prop up the financial system, but unemployment still rose sharply. Solid public finances provided room for further stimulus in 2021 to buttress the recovery.

 The Survey recommends maintaining targeted support to people and firms until the pandemic subsides, then focusing on strengthening vocational training and skills and increasing investment in areas like high-speed internet and low-carbon transport. Addressing regional inequality, which is low but rising, should also be a priority as the recovery takes hold.

 The Survey shows that Sweden has been among the most resilient OECD countries in the face of a historic shock. Yet, like other economies, it faces challenges from demographic changes and the shift to green, digital economies. Investments in education and training, and labour reforms along the lines negotiated by the social partners, will support job creation and strengthen economic resilience. Building on Sweden’s leadership in digital innovation and diffusion will also be key for driving productivity.

 After a 3% contraction in 2020, interrupting several years of growth, the Survey projects a rebound in activity with 3.9% growth in 2021 and 3.4% in 2022 as industrial production resumes and exports recover. The recovery in world trade is bolstering the Swedish economy, however the country remains vulnerable to potential disruptions in global value chains.  

The pandemic has aggravated a mismatch in Sweden’s job market, with unfilled vacancies for highly qualified workers coinciding with high unemployment for low-skilled workers and immigrants. The public employment service needs strengthening to provide better support to jobseekers, including immigrants and women, and labour policies should strike the right balance between supporting businesses and workers and supporting transitions away from declining businesses towards growing sectors.

A rising share of youths and older people in the population, especially in remote areas, is affecting the finances of local governments, which provide the bulk of welfare services. Strengthening local government budgets and ensuring equal welfare provision across the country will require providing tax income to poorer regions more efficiently and raising the economic growth potential across regions through investments in innovation. Improving coordination between government entities and reinforcing the role of universities in local economic networks would help achieve that aim.

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Fewer women than men will regain work during COVID-19 recovery

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Generations of progress stands to be lost on women and girls' empowerment during the COVID-19 pandemic. Photo: ILO

Fewer women will regain jobs lost to the COVID-19 pandemic during the recovery period, than men, according to a new study released on Monday by the UN’s labour agency.  

In Building Forward Fairer: Women’s rights to work and at work at the core of the COVID-19 recovery, the International Labour Organization (ILO) highlights that between 2019 and 2020, women’s employment declined by 4.2 per cent globally, representing 54 million jobs, while men suffered a three per cent decline, or 60 million jobs. 

This means that there will be 13 million fewer women in employment this year compared to 2019, but the number of men in work will likely recover to levels seen two years ago. 

This means that only 43 per cent of the world’s working-age women will be employed in 2021, compared to 69 per cent of their male counterparts. 

The ILO paper suggests that women have seen disproportionate job and income losses because they are over-represented in the sectors hit hardest by lockdowns, such as accommodation, food services and manufacturing. 

Regional differences 

Not all regions have been affected in the same way. For example, the study revealed that women’s employment was hit hardest in the Americas, falling by more than nine per cent.  

This was followed by the Arab States at just over four per cent, then Asia-Pacific at 3.8 per cent, Europe at 2.5 per cent and Central Asia at 1.9 per cent. 

In Africa, men’s employment dropped by just 0.1 per cent between 2019 and 2020, while women’s employment decreased by 1.9 per cent. 

Mitigation efforts 

Throughout the pandemic, women faired considerably better in countries that took measures to prevent them from losing their jobs and allowed them to get back into the workforce as early as possible. 

In Chile and Colombia, for example, wage subsidies were applied to new hires, with higher subsidy rates for women.  

And Colombia and Senegal were among those nations which created or strengthened support for women entrepreneurs.  

Meanwhile, in Mexico and Kenya quotas were established to guarantee that women benefited from public employment programmes. 

Building forward 

To address these imbalances, gender-responsive strategies must be at the core of recovery efforts, says the agency. 

It is essential to invest in the care economy because the health, social work and education sectors are important job generators, especially for women, according to ILO. 

Moreover, care leave policies and flexible working arrangements can also encourage a more even division of work at home between women and men. 

The current gender gap can also be tackled by working towards universal access to comprehensive, adequate and sustainable social protection. 

Promoting equal pay for work of equal value is also a potentially decisive and important step. 

Domestic violence and work-related gender-based violence and harassment has worsened during the pandemic – further undermining women’s ability to be in the workforce – and the report highlights the need to eliminate the scourge immediately. 

Promoting women’s participation in decision-making bodies, and more effective social dialogue, would also make a major difference, said ILO. 

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