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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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Lithuania: COVID-19 crisis reinforces the need for reforms to drive growth and reduce inequality

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Effective containment measures, a well-functioning health system and swift public support to firms and households have helped Lithuania to weather the COVID-19 crisis to date. That said, the pandemic still carries significant economic risks, and the recent upsurge in infections is very concerning. Once a recovery is under way, Lithuania should aim to reform public companies, strengthen public finances, and ensure that growth benefits all people and regions, according to a new OECD report. 

The OECD’s latest Economic Survey of Lithuania says that prior to COVID-19, good economic management and an investment-friendly business climate were helping to lift average Lithuanian incomes closer to advanced country levels. While the recession provoked by the virus has been milder than elsewhere – with GDP projected to drop by 2% in 2020 before rebounding by 2.7% in 2021 – Lithuania’s small and open economy will be vulnerable to any prolonged disruption to world trade. Increasing public investment and improving governance at state-owned enterprises could help lift growth and productivity. Other reforms should focus on improving the effectiveness of spending and taxation. Over the longer term, Lithuania should establish a clear debt reduction path and a long-term debt target.

“Lithuania’s sound economic management of recent years, and its swift response to both the health and economic aspects of the pandemic, are helping the country to weather the COVID-19 crisis,” said OECD Secretary-General Angel Gurría. “It is now key to build on these achievements and restart the reform engine to ensure robust, sustainable and inclusive growth for the future.”

The pandemic has exposed high levels of income inequality in Lithuania, where relative poverty is high among the unemployed, the less educated, single parents and older people due to a tax-benefit system that is insufficiently redistributive. The Survey recommends Lithuania to continue providing temporary support to people and businesses hit by COVID-19, as well as to increase regular social support while retaining incentives to work.

In terms of support to the economy, the Survey notes that while Lithuania’s government spending has increased considerably over the past two years, it remains below the OECD average. Public investment also remains low. Given the importance of modernising infrastructure and stimulating crisis-hit demand, the Survey recommends maintaining or increasing current levels of investment and improving investment quality by carrying out rigorous cost-benefit analysis for individual projects. Increasing investment in rural areas, and giving local government more say in tax policy and spending, could help reduce regional disparities and promote inclusive growth.

The Survey also recommends phasing out environmentally damaging fossil fuel subsidies and increasing environmental taxation, which would benefit public finances while helping the shift to a lower-carbon economy.

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United States confirms its leading role in the fight against transnational corruption

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The United States continues to demonstrate an increasing level of anti-bribery enforcement, having convicted or sanctioned 174 companies and 115 individuals for foreign bribery and related offences under the Foreign Corrupt Practices Act (FCPA) between September 2010 and July 2019. The United States is thus commended for a significant upward trend in enforcement and confirming the prominent role it plays globally in combating foreign bribery.

The 44-country OECD Working Group on Bribery has just completed its Phase 4 evaluation of the United States’ implementation of the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions and related instruments.

Given developments since the United States’ last evaluation in 2010, the Working Group made a range of recommendations to the United States, including to:

  • Consider ways to enhance protections for whistleblowers who report potential FCPA anti-bribery violations by non-issuers and provide further guidance on available whistleblower protections;
  • Continue to further evaluate and refine policies and guidance concerning the FCPA;
  • Make publicly available the extension and completion of NPAs and DPAs with legal persons in foreign bribery matters as well as the grounds for extending DPAs in FCPA matters;
  • Continue to evaluate the effectiveness of the Corporate Enforcement Policy in particular in terms of encouraging self-disclosure and of its deterrent effect on foreign bribery; and
  • Continue to address recidivism through appropriate sanctions and raise awareness of its impact on the choice of resolution in FCPA matters.

The report praises the United States for its sustained commitment to enforcing its foreign bribery offence as well as its key role in promoting the implementation of the Convention. This achievement results from a combination of enhanced expertise and resources to investigate and prosecute foreign bribery, the enforcement of a broad range of offences in foreign bribery cases, the effective use of non-trial resolution mechanisms, and the development of published policies to incentivise companies’ co-operation with law enforcement agencies.

The report also notes a large number of positive developments and good practices, such as the DOJ’s reliance on several theories of liability to hold both companies and individuals responsible for foreign bribery, and the United States’ successful co-ordination that has allowed multi-agency resolutions against alleged offenders in FCPA matters. In parallel, the United States has increasingly sought to co-ordinate and co-operate in investigating and resolving multijurisdictional foreign bribery matters with other jurisdictions. Finally, the United States has helped foreign partners build their capacity to fight foreign bribery through joint conferences and peer-to-peer training thus enabling the law enforcement authorities of these countries to better investigate and sanction prominent foreign bribery cases.

The United States’ Phase 4 report was adopted by the OECD Working Group on Bribery on 16 October 2020. The report lists the recommendations the Working Group made to the United States on pages 111-113, and includes an overview of recent enforcement activity and specific legal, policy, and institutional features of the United States’ framework for fighting foreign bribery. In accordance with the standard procedure, the United States will submit a written report to the Working Group within two years (October 2022) on its implementation of all recommendations and its enforcement efforts. This report will also be made publicly available.

The report is part of the OECD Working Group on Bribery’s fourth phase of monitoring, launched in 2016. Phase 4 looks at the evaluated country’s particular challenges and positive achievements. It also explores issues such as detection, enforcement, corporate liability, and international co-operation, as well as covering unresolved issues from prior reports.

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Skills and lifelong learning critical for all workers

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The International Labour Organization has published a new guide for trade unions on skills development and lifelong learning.

The guide “Skills Development and Lifelong Learning: Resource Guide for Workers’Organizations” , published by the ILO’s Skills and Employability Branch and Bureau for Workers’ Activities (ACTRAV) addresses key challenges facing workers’ organizations, including best practices, key priorities and main challenges. It also outlines why trade unions should be involved in skills development and lifelong learning.

According to the guide, building the capacity and engagement of workers’organizations in skills development and lifelong learning, based on a human-centred approach and International Labour Standards, will help build a ‘better normal’ in the post-COVID-19 World.

“What matters in the end, is that ALL workers can acquire the skills of their choice to get jobs and to keep jobs, and to be equipped to face the transitions they will be confronted with over the working life. Skills development and lifelong learning are essential to enhance workers’ capabilities to participate fully in decent work, to contribute to human development, active citizenship and the strengthening of democracy,” said Maria Helena André, Director of the ILO’s Bureau for Workers’ Activities.

The guide is designed for workers’ organizations, trainers, facilitators and ILO officials. It is part of a comprehensive programme of support for workers’organizations in preparation for the 2021 International Labour Conference (ILC), which will discuss skills and lifelong learning. It also paves the way for the general discussion on standing setting for apprenticeships, which takes place at the ILC in 2022 and 2023.

“If the lifelong leaning notion has to become a reality, the link between the world of education and the world of work needs to be very strong, bringing these together, through a process of social dialogue where governments, employers, and workers organization jointly formulate policies and programmes,” said Srinivas Reddy, Director of the ILO SKILLS Branch.

A Global webinar  bringing together workers’ organizations, technical experts, academics and senior ILO officials was held on the November 18th 2020 to launch the guide.

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