A new study issued by the World Bank Group (WBG) Friday said that the Middle East and North Africa (MENA) region's governments "can make significant strides in job creation by reforming policies used to protect politically connected companies".
The study that was launched today and took (Jobs or Privileges: unleashing the employment potential of the Middle East and North Africa) as its title claimed that the region has long struggled to generate enough quality jobs for its large and increasingly educated workforce "but this can be turned around".
It highlighted the central role of promoting competition to stimulate private sector growth and establishes that young and productive firms generate employment in the region's economies yet policies that protect privileged insiders constrains competition, and stifled the growth and productivity of these firms.
The study offers an analysis of the harm to competition caused by privileges to politically connected firms giving an example in Egypt where employment growth declines by about 1.4 percent annually when connected firms enter new, previously competitive sectors.
And according to it, 71 percent of connected firms in Egypt, compared to only 4 percent of all firms, sell products that are protected by at least three technical import barriers.
While in Tunisia, 64 percent of politically connected firms operate in sectors subject to restrictions on Foreign Direct Investment relative to only 36 percent of non-connected firms.
The study highlights a number of economic policy reforms across the region such as reducing the scope of privilege which will require a strong public administration, hired on the basis of merit, to implement the policy changes and build open markets that are resilient to the risk of capture.
It recommends that these reforms be implemented in a transparent and open policymaking environment that keeps citizens aware of government action and allows them to provide inputs into policy.