Migration and Trade in MENA Problems or Solutions?

Middle East and North Africa Migration and Trade in MENA Problems or Solutions? Working Paper Series No. 40 October 2004 The World Bank Produced by...
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Middle East and North Africa

Migration and Trade in MENA Problems or Solutions?

Working Paper Series No. 40 October 2004

The World Bank Produced by the Office of the Chief Economist

Summaries in Arabic and French

by Sara Johansson de Silva Carlos Silva-Jáuregui

Migration and Trade in MENA: Problems or Solutions? by Sara Johansson de Silva Carlos Silva-Jáuregui

October 2004

Discussion papers are not formal publications of the World Bank. They represent preliminary and often unpolished results of country analysis and research. Circulation is intended to encourage discussion and comments; citation and the use of the paper should take account of its provisional character. The findings and conclusions of the paper are entirely those of the authors and should not be attributed to the World Bank, its affiliated organizations, or to members of its Board of Executive Directors or the countries they represent.

Table of Contents Summary 1. Migration in MENA...................................................................................................................3 Internal Migration Is Increasing Pressures on the Labor Market ...........................................3 The Importance of International Migration in MENA ...........................................................4 2. Who Are the MENA Migrants? .................................................................................................7 3. Key Patterns in MENA’s International Migration .....................................................................9 Arab Migration to the Gulf Countries ....................................................................................9 Migration to Europe..............................................................................................................11 4. Prospects for Migration from MENA ......................................................................................14 Prospects on Migration to the Persian Gulf ..........................................................................14 Is Migration to Europe an Alternative? ................................................................................16 5. Looking Forward, Migration Is no Longer a Viable Alternative….........................................20 … Neither Is Public Sector Employment .............................................................................21 6. Can Trade Expansion Be Part of the Solution to the Employment Puzzle in MENA .............22 7. FDI Is Low in MENA ..............................................................................................................25 8. The Role of Trade Expansion in Job Creation .........................................................................26 9. But Transitional Employment Costs May Be Present with Liberalization ..............................30 … And What About Wages..................................................................................................30 10. Are Trade and Migration Substitutes or Complements?..........................................................31 11. Conclusion ...............................................................................................................................34 References ......................................................................................................................................37 Tables Table 1. Table 2. Table 3. Table 4. Table 5.

Estimated Internal Migration from Rural to Urban Areas in Morocco, 1921-2001.........4 Kuwait – Distribution of the Labor Force by Arab and Asian Origin ...........................10 Population from North Africa in Selected EU Countries...............................................13 Public Sector Employment in Selected MENA Countries.............................................22 MENA - Regional Trade Agreements............................................................................24

Boxes Box 1. Box 2. Box 3. Box 4. Box 5.

Counting International Migrants ......................................................................................5 Economic Theory of Migration........................................................................................8 Conflict Driven Migration................................................................................................9 Southern European Migration, EU Accession, and Return Migration...........................17 The Political Economy of Migration..............................................................................33

Figures Figure 1. Figure 2. Figure 3. Figure 4. Figure 5. Figure 6. Figure 7. Figure 8. Figure 9. Figure 10. Figure 11. Figure 12. Figure 13. Figure 14. Figure 15. Figure 16. Figure 17. Figure 18. Figure 19. Figure 20.

Unemployment Rates....................................................................................................1 The Challenge of Job Creation in MENA.....................................................................2 Urban and Rural Population Growth, MENA and Comparators ..................................4 Workers Remittances (Net Inflows) .............................................................................6 Workers Remittances (Net Outflows)...........................................................................7 Saudi Arabia – Net Increase in Foreign Labor Force .................................................10 Average Annual Net Increase in Maghreb Population in France ...............................12 Unemployment in Migration Receiving European Countries.....................................13 Saudi Arabia – Per Capita Oil Revenues ....................................................................15 Labor Force in GCC Countries by Age Group ...........................................................15 Changes in Net Populations 2000-2010......................................................................18 Youth Unemployment in CEE and Baltic Countries ..................................................19 Migrants, Unemployed, and Workers in Manufacturing Sector as Percentage of Total Labor Force in Morocco and Tunisia, Latest Available Year .....................20 Exports and Unemployment, 1995-99 ........................................................................23 FDI Net Inflows, 2000 ................................................................................................25 Tourist Receipts ..........................................................................................................26 Employment and Manufacturing Exports...................................................................27 Employment in Export Processing Zones (EPZ) ........................................................28 Unemployment and Openness to Trade ......................................................................29 Wages and Openness ..................................................................................................31

Summary MENA has an employment puzzle. The region is going through a difficult demographic transition that is putting enormous pressures on its labor markets. MENA countries are increasingly unable to generate the number of jobs needed to absorb their growing young populations. As a result, unemployment has increased considerably during the past two decades, with significant heterogeneity among countries. Migration has been an important safety mechanism to reduce pressures in domestic labor markets in the past, transfer oil rents from the Gulf and increase income prospects for households through remittances. While the economies of the MENA region may have not integrated much via trade, they have done so via migration, which has played the role of both substitute and complement to trade. Migration to the Persian Gulf and to countries in Europe helped reduce the unemployment rates of the region as well as supply needed workers for the Gulf (and Europe). However, there are reasons to believe that this avenue has limited expansion capacity as the two main poles of attraction are reducing the demand for new MENA migrants. Future migration flows can only relief part of the pressure in MENA’s labor markets. Even in the best of circumstances, migration flows are likely to be low compared with the employment requirements in the region and play, at most, a limited and perhaps declining role in solving the employment puzzle of MENA. This paper analyzes migration and trade in the MENA region from the employment perspective and assess to what extent migration and trade can provide a solution to the ever growing employment problem.

‫ﻣﻠﺨّﺺ‬ ‫ﺗﺸﻬﺪ ﻣﻨﻄﻘﺔ اﻟﺸﺮق اﻷوﺳﻂ وﺷﻤﺎل أﻓﺮﻳﻘﻴﺎ ﻟﻐﺰًا ﻣﺤﻴّﺮًا ﻓﻴﻤﺎ ﻳﺘﻌﻠﻖ ﺑﺎﻟﻌﻤﺎﻟﺔ‪ .‬ﻓﻬﺬﻩ اﻟﻤﻨﻄﻘﺔ ﺗﻤﺮ ﺑﻤﺮﺣﻠﺔ دﻳﻤﻮﻏﺮاﻓﻴﺔ اﻧﺘﻘﺎﻟﻴﺔ‬ ‫ﻋﺼﻴﺒﺔ ﺗﻀﻊ ﺿﻐﻮﻃًﺎ هﺎﺋﻠﺔ ﻋﻠﻰ أﺳﻮاق اﻟﻌﻤﻞ ﻓﻴﻬﺎ‪ .‬آﻤﺎ ﻳﺘﺰاﻳﺪ ﻋﺪم ﻗﺪرة ﺑﻠﺪان هﺬﻩ اﻟﻤﻨﻄﻘﺔ ﻋﻠﻰ ﺧﻠﻖ اﻟﻌﺪد اﻟﻼزم ﻣﻦ‬ ‫ﻓﺮص اﻟﻌﻤﻞ ﻻﺳﺘﻴﻌﺎب اﻷﻋﺪاد اﻟﻤﺘﺰاﻳﺪة ﻣﻦ اﻟﺸﺒﺎب اﻟﺪاﺧﻠﻴﻦ إﻟﻰ ﺳﻮق اﻟﻌﻤﻞ ﻣﻦ ﺑﻴﻦ ﺳﻜﺎﻧﻬﺎ‪ .‬وﻧﺘﻴﺠﺔ ﻟﺬﻟﻚ‪ ،‬ازدادت‬ ‫اﻟﺒﻄﺎﻟﺔ آﺜﻴﺮًا ﻓﻲ اﻟﻌﻘﺪﻳﻦ اﻟﻤﺎﺿﻴﻴﻦ ﻣﻦ اﻟﺴﻨﻴﻦ‪ ،‬ﻣﻊ ﺗﺒﺎﻳﻦ آﺒﻴﺮ ﻓﻲ اﻷوﺿﺎع ﻓﻴﻤﺎ ﺑﻴﻦ هﺬﻩ اﻟﺒﻠﺪان‪ .‬وﻟﻄﺎﻟﻤﺎ آﺎﻧﺖ اﻟﻬﺠﺮة ﻓﻲ‬ ‫اﻟﻤﺎﺿﻲ ﺻﻤّﺎم أﻣﺎن ﻳﺨﻔّﻒ اﻟﻀﻐﻮط ﻓﻲ أﺳﻮاق اﻟﻌﻤﻞ اﻟﻤﺤﻠﻴﺔ‪ ،‬وﻳﺤ ّﻮل ﻗﺴﻤًﺎ ﻣﻦ اﻹﻳﺮادات اﻟﻨﻔﻄﻴﺔ ﻣﻦ ﻣﻨﻄﻘﺔ اﻟﺨﻠﻴﺞ‪،‬‬ ‫وﺑﺬﻟﻚ ﻳﺰﻳﺪ ﺁﻓﺎق دﺧﻞ اﻷﺳﺮ ﻣﻦ ﺧﻼل ﺗﺤﻮﻳﻼت اﻟﻌﺎﻣﻠﻴﻦ اﻟﻤﻘﻴﻤﻴﻦ ﻓﻲ ﻣﻨﻄﻘﺔ اﻟﺨﻠﻴﺞ ﺑﻘﺼﺪ اﻟﻌﻤﻞ‪ .‬وﻣﻊ أن اﻗﺘﺼﺎدات ﻣﻨﻄﻘﺔ‬ ‫اﻟﺸﺮق اﻷوﺳﻂ وﺷﻤﺎل أﻓﺮﻳﻘﻴﺎ ﻗﺪ ﻻ ﺗﻜﻮن ﺗﻜﺎﻣﻠﺖ ﻓﻴﻤﺎ ﺑﻴﻨﻬﺎ آﺜﻴﺮًا ﻋﻦ ﻃﺮﻳﻖ اﻟﺘﺠﺎرة‪ ،‬ﻓﺈﻧﻬﺎ ﺗﻜﺎﻣﻠﺖ ﻋﻦ ﻃﺮﻳﻖ اﻟﻬﺠﺮة اﻟﺘﻲ‬ ‫ﻟﻌﺒﺖ ﺣﺘﻰ اﻵن دور اﻟﺒﺪﻳﻞ ﻋﻦ اﻟﺘﺠﺎرة واﻟﻤﻜﻤّﻞ ﻟﻬﺎ ﻓﻲ ﺁن واﺣﺪ‪ .‬ﻓﺎﻟﻬﺠﺮة إﻟﻰ ﺑﻠﺪان اﻟﺨﻠﻴﺞ اﻟﻔﺎرﺳﻲ وﺑﻠﺪان أوروﺑﻴﺔ‬ ‫ﻼ ﻋﻦ إﺗﺎﺣﺔ اﻟﻌﺎﻣﻠﻴﻦ اﻟﻼزﻣﻴﻦ ﻟﻤﻨﻄﻘﺔ‬ ‫ﺳﺎﻋﺪت ﻓﻲ ﺗﺨﻔﻴﺾ ﻣﻌﺪﻻت اﻟﺒﻄﺎﻟﺔ ﻓﻲ ﻣﻨﻄﻘﺔ اﻟﺸﺮق اﻷوﺳﻂ وﺷﻤﺎل أﻓﺮﻳﻘﻴﺎ‪ ،‬ﻓﻀ ً‬ ‫اﻟﺨﻠﻴﺞ )وﻷوروﺑﺎ(‪ .‬وﻟﻜﻦ هﻨﺎك أﺳﺒﺎب ﻟﻼﻋﺘﻘﺎد ﺑﺄن اﻟﻄﺎﻗﺔ اﻟﺘﻮﺳﻌﻴﺔ ﻓﻲ هﺬا اﻟﻤﺠﺎل ﻣﺤﺪودة‪ ،‬ﺣﻴﺚ أن اﻟﻘﻄﺒﻴﻦ اﻟﺮﺋﻴﺴﻴﻴﻦ‬ ‫اﻟﺠﺎذﺑﻴﻦ ﻟﻠﻌﺎﻣﻠﻴﻦ أﺧﺬا ﻳﺨﻔّﻀﺎن اﻟﻄﻠﺐ ﻋﻠﻰ أﺳﻮاق اﻟﻌﻤﻞ اﻟﺠﺪﻳﺪة‪ .‬وﺣﺘﻰ ﻓﻲ أﺣﺴﻦ اﻷﺣﻮال‪ ،‬ﻣﻦ اﻟﻤﺮﺟّﺢ أن ﺗﻜﻮن ﺗﺪﻓﻘﺎت‬ ‫اﻟﻤﻬﺎﺟﺮﻳﻦ ﻣﻨﺨﻔﻀﺔ ﻣﻘﺎرﻧﺔ ﻣﻊ اﻟﻤﺘﻄﻠّﺒﺎت ﻣﻦ اﻟﻌﻤﺎﻟﺔ ﻓﻲ ﻣﻨﻄﻘﺔ اﻟﺸﺮق اﻷوﺳﻂ وﺷﻤﺎل أﻓﺮﻳﻘﻴﺎ‪ ،‬ﻣﻤﺎ ﻳﻌﻨﻲ أن دورهﺎ ﻓﻲ‬ ‫ﺣﻞ ﻣﺸﻜﻠﺔ اﻟﻌﻤﺎﻟﺔ ﻓﻲ هﺬﻩ اﻟﻤﻨﻄﻘﺔ ﺳﻴﻜﻮن ﻓﻲ أﻓﻀﻞ اﻷﺣﻮال ﻣﺤﺪودًا وﻟﺮﺑﻤﺎ ﻣﺘﻨﺎﻗﺼًﺎ‪ .‬وﺗﻘﻮم هﺬﻩ اﻟﺪراﺳﺔ ﺑﺘﺤﻠﻴﻞ اﻟﻬﺠﺮة‬ ‫واﻟﺘﺠﺎرة ﻓﻲ ﻣﻨﻄﻘﺔ اﻟﺸﺮق اﻷوﺳﻂ وﺷﻤﺎل أﻓﺮﻳﻘﻴﺎ ﻣﻦ ﻣﻨﻈﻮر اﻟﻌﻤﺎﻟﺔ‪ ،‬آﻤﺎ ﺗﻘﻴّﻢ ﻣﺪى إﻣﻜﺎن إﺗﺎﺣﺔ اﻟﻬﺠﺮة واﻟﺘﺠﺎرة اﻟﺤﻞ‬ ‫ﻟﻤﺸﻜﻠﺔ اﻟﺒﻄﺎﻟﺔ اﻟﺪاﺋﻤﺔ اﻟﺘﺰاﻳﺪ‪.‬‬

Résumé La région MENA est confrontée à une problématique de l’emploi. La région passe actuellement par une phase difficile de transition démographique à l’origine d’énormes pressions sur les marchés du travail. Les pays de la région MENA sont de moins en moins en mesure de créer le nombre d’emplois requis pour absorber leurs populations jeunes grandissantes. En conséquence, le chômage a fortement augmenté au cours des deux dernières décennies, avec une hétérogénéité marquée entre pays. La migration a, par le passé, constitué un important mécanisme de protection pour minimiser les pressions sur les marchés intérieurs du travail, transférer les rentes pétrolières du Golfe et développer les perspectives de revenus pour les ménages grâce aux envois de fonds des travailleurs à l’étranger. S’il est vrai que les économies de la région ne sont pas vraiment intégrées sur le plan du commerce par contre elles le sont au plan de la migration, qui a joué le rôle à la fois de substitut et de complément aux échanges. La migration vers le Golfe persique et les pays de l’Europe a contribué à réduire les taux de chômage de la région et à pourvoir les pays du Golfe (et de l’Europe) en main-d’œuvre. Cependant, il est probable que ces débouchés n’ont qu’une capacité restreinte d’expansion, les deux principaux pôles d’attraction limitant la demande pour de nouveaux migrants de la région MENA. Les futurs flux migratoires ne parviendront que partiellement à atténuer la pression sur les marchés du travail de la région MENA. Même dans le meilleur des cas, il est vraisemblable que les flux migratoires seront faibles en comparaison des besoins d’emploi dans la région et, qu’au plus, ils joueront un rôle limité, voire en repli, pour résoudre la problématique de l’emploi dans la région MENA. Le présent document analyse la migration et le commerce dans la région MENA de la perspective de l’emploi et évalue dans quelle mesure ils peuvent fournir une solution au problème croissant de l’emploi.

W

Without any doubt, the greatest challenge facing the economies in the Middle East and North Africa region (MENA) is that of providing good jobs to their young and growing population. But this has proven to be a difficult task. Unemployment in the region has increased by almost 300% during the past two decades. Excluding countries in the GCC, MENA’s rate of open unemployment is now, on average, around 17.5% of the labor force.1 These rates of unemployment are among the highest in the world (see Figure 1) and imply that about 22 million people in the region are without jobs. Furthermore, unemployment among the youth (25 years or younger), women, and fist-time job seekers, is even more pervasive, averaging over twice the national levels. There exist also significant heterogeneity among MENA countries, with Iraq’s unemployment rate at about 50%2 and Kuwait’s at just 1.3%. In addition, informality and underemployment seem to be growing. Figure 1. Unemployment Rates 50 45 40 35 29.1

percent

30 25 20.0

20

17.5

15 9.9 9.5 9.5

10

9.5 6.5

8.1

5

SA

SSA

LAC

OECD

EAP

ECA

GCC

MENA

MENA (w/Iraq)

UAE

Kuwait

Qatar

Egypt

Oman

Bahrain

Saudi Arabia

Jordan

Tunisia

Iran

Morocco

Syria

Lebanon

Libya

Algeria

WBG

Yemen

Iraq

0

Source: Staff calculations

MENA’s challenge is to generate high and sustainable growth, finding new sources of dynamism in the economy to provide good jobs for large numbers of new entrants to the labor force. The challenge of creating sufficient new jobs in the region to cope with the demographic dynamics and reduce unemployment is overwhelming (see Figure 2). According to Keller and Nabli (2002) some 47 million jobs would need to be created over the next decade just to keep pace with new entrants to the job market. In addition, close to 6.5 1 2

GCC has an unemployment rate that is about half of this level. If we include Iraq the unemployment rate in MENA would approach 20% of the labor force. Latest data available is from 1999.

1

million jobs would be needed to reduce the regional unemployment rate by about one half (to 9-10%). This represents 53.5 million combined. The implication of these numbers is that the current employed workforce would have to expand by almost 60% over the next decade, an accomplishment not even achieved by the high performing East Asian economies3 during the height of their employment growth periods. Figure 2. The Challenge of Job Creation in MENA To reduce Unemployment Job Creation Will Have to Accelerate Significantly… Employment growth (estimated and required, to reduce unemployment by half) Annual rates, in per cent

Annual growth rate of working-age population (15-64 years); in per cent

3.5

6 Estimated 1973-94

…Because Fast Growing Working-Age Population is Pressuring MENA Labor Markets

Required 2000-15

1970--2000

3

2000-2015

5 2.5

4

2

3

1.5

2

1 0.5

1

0 World

0 Algeria

Tunisia

Iran

Morocco

Egypt

Arab Countries

European Union

-0.5

Source: Dasgupta et al (2002)

However, the traditional opportunities for labor absorption in the region are diminishing and structural imbalances have emerged, including the observed high unemployment rates, increasing informalization (Wahba (2002)), skills mismatches as reflected on rising unemployment in workers with secondary education (Diwan et al (2002)), segmented labor markets in which high unemployment coexists with sizable immigration flows, and distortions in sectoral allocations of jobs away from services and manufacturing into public sector and agriculture. The main channels of job absorption in use in the past-migration, public sector, agriculture-are no longer promising sources for the needed amounts of new jobs in the future. In the absence of adequate job creation in the formal economy higher unemployment, informalization and potentially growing social conflict could become a major threat to the stability and prosperity of the entire MENA region. This paper analyzes migration and trade in the MENA region from the employment perspective and assess to what extent migration and trade can provide a solution to the ever growing employment problem.

3

China, Hong Kong, Indonesia, Japan, Korea, Malaysia, Singapore, Taiwan, and Thailand.

2

1. Migration in MENA Migration has always played an important role in MENA, being a special characteristic of its labor markets. Migration is defined as a move from one geographical area to another.4 As such, three types of migration are common: (i) residential migration, which occurs when a person (or household) changes its place of residence by moving from one neighborhood to another within the same local area; (ii) internal migration, which occurs when a household moves across large geographical distinct units, such as counties, states, metropolitan areas, provinces or regions, but it remains in the same country; and (iii) international migration, when a household moves across national boundaries. This paper focuses on the latter two types of migration, which are the relevant ones for labor market analysis. Internal Migration Is Increasing Pressures on the Labor Market The dichotomy between internal and international migrants is partly false. As in other developing and developed regions, the mobility of workers and households more generally within MENA countries takes many forms: from rural to rural areas, from urban to other urban areas, and, importantly, from rural to urban areas. The continuous flow of rural workers to urban centers has resulted in a transformation of the geographic and economic map in the region. In 1960, two thirds of the region’s population lived in rural areas. At the end of the century, forty years later, a majority (60 percent) of the region’s population lived in urban areas. Low and volatile income from agriculture is leading workers to leave the agricultural sector. In addition, overall higher education levels put additional pressures for rural to urban migration. With limited alternative employment options in the rural economy workers have increasingly moved on a temporary or permanent basis to the more dynamic urban centers to seek better ways of life through new work opportunities. These internal migratory flows are substantial in MENA and have been increasing. Data on Morocco, for example, shows that over time (i) the flows of rural migrants to urban centers have multiplied; (ii) a larger share of the rural population has become migrants; (iii) there is by now more population in urban areas than in rural areas; and (iv) urban population growth remains high while rural populations have virtually stopped growing (see Table 1). Yet, these figures do not capture transitory movements within the periods and in fact, gross migration rates may be significantly higher.

4

See Borjas (2000), Economics of Migration, International Encyclopedia of the Social and Behavioral Sciences, Section No. 3.4, Article No. 38.

3

Table 1. Estimated Internal Migration from Rural to Urban Areas in Morocco, 1921-2001

Period 1921-1926 1926-1936 1936-1952 1952-1960 1960-1971 1971-1982 1982-1992 1992-2001

Annual flow from rural to urban areas 11,400 17,300 29,000 45,000 67,000 113,000 ---

As % of rural population 2.2 3.0 4.3 5.6 9.5 11.4 ---

Urbanization Rate1/ 12.5 15.1 25.0 28.4 35.0 43.0 50.0 56.0

Population growth Urban Rural ----4.5 1.9 4.5 1.3 3.7 0.8 2.8 0.2

Note: 1/ End of period Sources: CERED (1995), WB data (Urbanization rate and urban population growth, 1960-2001)

The population exodus from rural areas is presently of larger magnitude in MENA than in other comparable Figure 3. Urban and Rural Population Growth, regions. Urban populations are MENA and Comparators growing faster, and rural 4.0 slower, than in other lower middle income countries. The 3.0 Urban Rural rural-urban migration rates are 2.0 higher than in other large 1.0 migrant countries like Turkey 5 0.0 or Mexico (see Figure 3). These high inflows are putting -1.0 pressure on urban centers and -2.0 their environments, social and Gulf* Maghreb* Other LMI** Turkey Mexico MENA* economic infrastructure, and labor markets. This structural Note: *Unweighted averages. ** Unweigthed av. of lower middle income transformation is also a major countries, excluding MENA countries impetus for international Source: WB data migration. As urban centers reach their upper limits on population and labor absorption, rural (and urban) migrants seek opportunities elsewhere. The Importance of International Migration in MENA International migration flows in MENA are characterized by at least four important features: (i) the large scale of worker mobility between countries; (ii) the importance of economic factors, particularly oil revenues driving migration; (iii) regional conflict and insecurity as another source for migration; and (iv) the dominance of two magnets in attracting workers from the region, the Gulf, and the European continent. 5

A notable exception to this trend is Egypt. Since the mid-1980s, rural population growth has again exceeded that in urban areas.

4

Although countries in the region have been slow to take part in the process of global economic integration through trade and investment, there has been substantial economic and social integration through the mobility of workers across national boundaries. Labor abundant countries MENA have seen an important share of their workers earn their living abroad. Maghreb workers have sought opportunities in Northern Europe and, to an increasing degree, in Italy and Spain. Workers from Egypt and other Arab Mashreq countries have been recruited for jobs in the resource rich Gulf states. Migration flows have also spurred new waves of replacement migration. As Lebanese and Jordanian workers have left for work in the Gulf countries, Lebanon has received Syrian workers, and Egyptians have worked in the agricultural sector in Jordan. Conflict also generates migration. Egypt has accommodated refugees and workers from the conflict ridden Sudan (Fargues, 2002) Jordan and Lebanon also received refugees from Palestine, and Jordan and Iran from Iraq, just to give some examples. Estimating international migration flows with any precision is notoriously difficult (see Box 1), but one way of identifying the magnitude of international flows is by looking at workers remittances as recorded in the balance of payments. Figure 4 below reveals how important migration income is relative to other types of foreign exchange earnings in MENA, and relative to that of other countries. In fact, MENA countries – especially Egypt, Morocco, Jordan, Yemen, and Tunisia – are globally among the main beneficiaries of workers remittances flows. Box 1. Counting International Migrants Data on migration and on migrants are scarce and unreliable. First, there are great difficulties in estimating migrant flows. Few countries are concerned with counting outflows (or inflows) of their own population, so data are based on recipient countries estimates of foreigners present in the country, either as they show up in census/population registers, or through the number of work and residence permits issued. In addition, registering efforts center on inflows, and not on outflows. Census and population registers will define nationalities but not necessarily length of stay. Residence and work permits describe who has the right to work in a country, but not whether the person is still present in the country. The interpretation of data is also complicated by definitions. When does a visitor become a short term migrant, and when does a short term migrant become a long-term migrant? When does a temporary migrant become a permanent immigrant? When does a migrant become a national? Permanent immigrants and temporary migrants may differ greatly in their motives and how they maintain ties with home countries through e.g. remittances. But until recently, a secondgeneration Turk would still be counted as an immigrant in Germany. Conversely, in other countries, recent migrants who have acquired the host country nationality will no longer be counted. These difficulties are compounded by the fact that data rarely include asylum seekers and that only vague estimates exist of illegal flows. In sending countries, employment or household surveys may note whether there are migrants in the household, but not whether they are international or internal migrants. Specific migrant surveys have occasionally been used to identify migrants and their specific characteristics and motives (e.g. the CAPMAS 1994 survey of migrants from Egypt). Workers’ remittances, although readily available, are also a highly imprecise measurement of the stock of migrants abroad. As research on e.g., Egypt have shown, remittance flows are driven by portfolio considerations and as such sensitive to changes in macroeconomic indicators such as interest rate differentials and exchange rates, although to a lesser extent than capital flows. Moreover, balance of payments recording of workers’ remittances does not include the transfers though informal channels or in-kind transfers which are likely to be substantial. Sources: World Bank (2003c), The Economist ( 2002), El-Sakkha and McNabb (1999)

5

Figure 4. Workers Remittances (Net Inflows) Workers’ Remittances Net Inflows US$ billion, 2000. 1/ 2/

50

9.0

9.0

46

45

8.0

39

40 6.6

7.0

35

6.0

30 4.6

4.0

22

25 3.0

3.0

20

20

2.8 2.1

2.1

2.0

1.5

15 1.2

1.0

9

10

0.8

9 4

5 Turkey

Tunisia

Morocco

Yemen

Egypt

0

Tunisia (20)

Yemen (15)

Jordan (11)

Spain (7)

Morocco (6)

Egypt (5)

Portugal (4)

Turkey (3)

Mexico (2)

India (1)

0.0

Mexico

5.0

Jordan

10.0

Workers’ Remittances Net Inflows as Share of Exports, Selected MENA Countries and Comparators, Average 1996-2000

Notes: 1/ Data is missing for WBG and Lebanon although these countries are likely to be major recipients of remittances. 2/ Global ranking in parenthesis Source: WB data. Workers remittances as recorded in Balance of Payments

The opportunity to send workers abroad has contributed to raising incomes and to significant foreign exchange earnings in MENA and has provided an alternative, albeit of limited magnitude, to unfavorable domestic labor market conditions. Many migrants have also contributed to dynamizing the local economy as they have returned home, bringing back enhanced skills and know-how, established business networks, and savings for investment (McGormick and Wahba, 1997, Diwan et al, 2003).6 The MENA region is also, in itself, a major source of remittances. In terms of absolute levels, only the USA exceeds Saudi Arabia as a net exporter of remittances (see Figure 5). On a per capita basis, the four most important sources of remittances in the world are all from the Persian Gulf region. Much of these remittance flows are the counterpart payments to workers from other MENA countries, although as we will see, that share has fallen over time. Thus, migration flows have served to redistribute oil rents from the Gulf countries throughout the MENA region.

6

Research from _ shows that return migrants tend to be self employed to a higher degree than the average worker (reference).

6

Figure 5. Workers Remittances (Net Outflows) Workers’ Remittances Net Outflows US$ billion, 2000

1.8

18.6

18

1.6

15.4

16

1.6

1.4

14

1.2

12

1.0

10

0.8

8

0.9

0.7 0.6

0.4 2.0

2

1.8

1.7

1.6

1.5

0.2

0.2

1.0

0.2

0.1

0.0

0.0 France

3.2

4

Germany

6

United States

0.6

Maldives

Switzerland

Oman

Bahrain

Bahrain

Oman

Switzerland

Kuwait

Japan

France

Germany

Saudi Arabia

USA

0

Saudi Arabia

0.0 Kuwait

20

Workers’ Remittances Net Outflows per Capita US$ million, 2000

Note: 1/ Data is missing for WBG and Lebanon Source: WB data. Workers remittances as recorded in Balance of Payments

2. Who Are the MENA Migrants? Understanding the characteristics of migrants is important to assess the social and economic effects of migration on both sending and receiving countries. The many forms of migration--family reunification, political asylum, work opportunities--are driven by a host of very diverse social, political and economic motives. Economic research on migration tends to focus on migration as a form of human capital investment (see Box 2) which is made to draw advantage of better income opportunities outside one’s home country as well as to reduce income vulnerability. Within this framework, some key variables have been identified and empirically proved to characterize international migrants relative to the average non-migrant worker. First, migrants tend to be young. Somebody at the beginning of his working life may be better able to afford the fixed cost associated with migration since he will benefit from better income opportunities for a longer period. Second, migrants are better educated. Perhaps educated workers easier learn about work opportunities elsewhere than uneducated workers, and perhaps their transaction costs are lower due to stronger language skills etc.7 Third, migrants are more frequently single men than their non-migrant counterparts (although family reunification still tends to drive female migration). Fourth, migrants tend to originate from a relatively close distance to the host country, or from areas with important cultural, linguistic and economic links, former colonies being the typical example. Fifth, migrant flows tend to be self-perpetuating: once migrant networks have been established in a country, they tend to attract new migrants. All of these factors lower transaction costs, both regarding physical transportation to the new country and search costs once arrived. Evidence is more

7

However, as noted by Borjas et al (1991) migration to the US in the eighties was primarily composed of low skill low education workers.

7

mixed regarding other variables, e.g. unemployment in sending and receiving countries (which arguably should indicate the probability of getting a job). Box 2. Economic Theory of Migration There are a several theories explaining migration decisions. Traditional neoclassical approaches have focused on differences in wages and employment probabilities between areas. This approach has been extended and refined in microeconomic models which are based on individual choices. This strand of research typically regards the act of migration and the associated cost as an investment in human capital. Migration will take place when the expected income differential – influenced by wages but also by employment probabilities – between the home country and the potential host country exceeds the cost of migration. Such migration costs include the monetary value of the transfer (transportation, setting up a new home), the social and emotional costs of leaving one’s home country, and the possible costs associated with restrictive migration policy in the host country. The so called new migration economics considers the migration decision as a family (or household) choice rather than as an individual decision. In this framework, households act to both maximize expected earnings and minimize risks, i.e. smooth income over time. In the absence of well functioning and accessible insurance institutions (for e.g. agricultural credit, unemployment insurance) it may be rational for households to send migrants to work in other markets and use remittances as a form of insurance for bad times. Poor households will be more vulnerable to different income shocks, but also have less access to formal insurance mechanisms. In spite of the weak data on migration flows, migrants and migrant households, a large number of studies have tried to assess the determinants of migration empirically. There appears to be a convergence around the following predictors of migration flows: (+) Income differentials between home and host countries (-) Geographic distance, which increases the cost of transportation and perhaps also cultural differences and therefore discourages migration, (+) Cultural/linguistic similarities, sometimes approximated by colonial ties, which tends to increase the probability of getting a job and perhaps also decrease the emotional cost of leaving one’s home country, (+) Previous migration flows, which may be a proxy for social networks in place. As in the case of cultural similarity, these both lower the economic transaction costs and the emotional costs associated with migration. The effect of initial income is not straightforward. On the one hand, poor households may be in greater need of migrant income than others, on the other hand, prospective migrant may need to have a certain level of income in order to be able to bear the transition cost of moving abroad. The determinants of return migration are less straight forward to fit into the above type of reasoning. Although economic motives (better conditions in country of origin) can be important, other factors, including age, health and family reasons as well as exogenous factors such as tighter immigration policies, tend to be at least as important. Sources: Massey et al (1993), Borjas (2000), Greenwood (1985), Findlay (1989)

The available evidence from MENA support most of these stylized facts. A recent study by the European Commission (2000) focused on surveys of migrants in Morocco and Egypt. Compared to non-migrants, international migrants from these two countries were predominantly men in their 20s and 30s, more often single than non-migrants, and more often lived with their parents before leaving to go abroad. In Egypt, migrants where overwhelmingly male, young, and from rural areas. A majority had completed secondary or tertiary education. This is in contrast to Morocco, where a majority of migrants had only primary education or less. Employment situation at home seemed to be a driving factor: before migrating, migrants had higher unemployment rates than non-migrants or were, in the case of Morocco, outside the labor force altogether. The prospect of better economic opportunities tended to be key in the migration decision, and existing migration networks were decisive in the choice of country. As a result, Egyptian workers headed for the Gulf

8

countries, whilst Moroccan workers predominantly sought work in Europe. However, MENA has also conflict as a source for migration (See Box 3) which is not captured in the study. Box 3. Conflict Driven Migration Population movements within and from MENA have to some extent been fuelled by political instability and armed conflicts. Presently, people from Iraq, Iran, and Algeria are among the largest groups of asylum seekers in Europe. MENA is also a major receiver of refugees from within and from outside the region: There are by now a sizeable number of Afghans in Iran, of Sudanese in Egypt, of Somalis and Eritreans in Yemen, and of Palestinian refugees in Jordan and Lebanon. A prime recent example of the impact of political violence on migration is the war in Lebanon. The conflict, which lasted between 1975 and 1989 engendered a near complete destruction of physical capital and infrastructure, but also a devastating flight of human capital. There are estimates that one million people – around one fourth of the population – left Lebanon during the fifteen years of war. A significant share of the emigrants were the young and highly educated doctors, engineers and technicians, and businessmen. These skilled workers left for work in the United States - the Lebanese population in the United States doubled between 1975 and 1980 - Europe, Latin America, Australia, and the Persian Gulf states. Importantly, the post-war period has seen a large emigration out of the country seeking better economic opportunities abroad. The longstanding culture of emigration among Lebanese and the close ties which the Lebanese Diaspora maintained with the home country facilitated the mass departure. Indirectly even the large scale migration and return migration to the Persian Gulf can be seen as conflict driven, linking the 1973 October war to the oil price shock to the import of manpower to the Gulf states. More directly, the 1991 Gulf war, in turn, led to an exodus of Egyptians from Iraq, a large share of MENA migrants returning from Kuwait, and the expulsion of Yemenis, Jordanians, and Palestinians from Saudi Arabia and other Gulf countries. By way of illustration, some 300,000 Jordanians and Palestinians are thought to have returned to their home country in the aftermath of the Gulf War – equal to 10 percent of Jordan’s population, and 30 percent of its labor force. Sources: Fargues (2002), OECD (2003b), Appleyard (1999)

3. Key Patterns in MENA’s International Migration Migration in MENA takes many forms: internal, intra-regional, mostly from Egypt and other Mashreq countries to the Gulf, but also from Egypt to Jordan, WBG to Israel, and, in the past, from Egypt and Yemen to Iraq, and extraregional, to Europe and other developed areas. The two most important migration flows, however, have been directed to the Persian Gulf countries and to the European continent. Arab Migration to the Gulf Countries Migration from labor abundant Arab countries to the oil producing and more labor scarce Gulf countries has century old traditions (see Seccombe and Lawless, 1986). Already in 1975, expatriates made up between 25 percent of the workforce in Saudi Arabia and 80 percent in UAE. However, the 1970s saw migration flows reach entirely new levels of magnitude. The oil booms of 1973-74 and 1979 dramatically raised public sector revenues in the Persian Gulf countries, and with it the demand for investment spending for upgrading the economic infrastructure. This in turn significantly raised the demand for skilled and unskilled labor. The national labor force, however, was limited in size – in 1975, the total labor force of GCC nationals amounted to 2 million, out of a total population of some 10 million people – and workforce thus had to be imported from elsewhere on a major scale.

9

During the 1970s foreign labor flowed in to fill the gap. Between 1975 and 1985, the foreign workforce in the Gulf almost quadrupled, from 1.1 million to 4.1 million, raising the share of foreign labor force in total from 40 to 70 percent. Saudi Arabia accounted for the largest share of this increase, attracting over 2 million workers over the course of 10 years. Job creation for foreigners thus exceeded that of nationals, by far (Girgis, 2002). During the oil boom years most migrants were recruited from other MENA countries, most prominently Egypt, but also from Yemen, Jordan, Syria, and WBG. There was also a significant inflow of migrant workers from Asian countries including India, Pakistan, Philippines, Bangladesh, and Indonesia, however. Some evidence from Kuwait suggests that work was split between these two main groups of migrants according to skill level and sector characteristics (see Table 2). Arab workers were predominantly employed in the higher end of the skill spectrum, such as technical and scientific jobs, managerial, and in the public administration. Asian workers, in contrast, dominated low skill occupations, such as services. Table 2. Kuwait - Distribution of the Labor Force by Arab and Asian Origin

Technical, Managerial, Clerical and Govt. Trade, services, agriculture, unclassified Production Total

1989 Asian % 22 69 56 54

Arab % 75 31 43 45

Total ‘000 180 350 253 783

Arab % 61 19 32 32

2000 Asians % 34 81 68 67

Total ‘000 176 401 428 1005

Source: Staff estimates, based on Girgis (2002)

With time, population growth and higher education resulted in more GCC nationals entering the domestic labor markets. As in many other MENA countries, educated national workers largely favored, and were duly absorbed in the public sector, which was rapidly expanding and which offered beneficial conditions. As of the mid 1980s, the fall in oil prices sharply reduced exports and brought down growth rates in the GCC countries, while continued population growth at above 4 percent meant that there were many more people who needed to share the shrinking revenues. These trends were exacerbated in by the onset of the first Gulf war in 1990. In response, recruitment of foreign labor slowed down somewhat (see Figure 6) and the composition of the labor force changed.

Figure 6. Saudi Arabia - Net Increase in Foreign Labor Force (millions) 2.5

2.0

1.5

1.0

0.5

0.0 75-85

85-95

As labor markets have tightened, Source: Staff estimates, based on Girgis (2002) Arab migrants in the GCC countries have come to face competition from two ends of the skill-wage spectrum. The more skilled

10

migrant labor have increasingly competed with nationals for jobs in the public and private sector. As oil prices fell, the public sector in these countries no longer could afford to expand at its previous rate, which in turn raised unemployment rates. Opportunities in the administration closed for foreigners, and pressures increased also for the private sector to hire nationals. The nationalization of the labor market became an explicit policy, spelled out in e.g. the Saudi and Kuwait five year plans from the 1980s (Birks et al, 1986, Evans and Papps, 1999).8 The demand for foreign labor has not leveled off significantly. In 1990, foreigners still dominated all sectors except public administration (Evans and Papps, 1999). At the lower pay end, however, Arab migrants have been unable or unwilling to compete with cheaper labor from Asian countries, especially in the services sector. Partly these trends are explained by substantial differences in likely reservation wages between Asian and Arab workers. Income levels (as approximated by GNI per capita) in Bangladesh and Pakistan are one tenth of those of Saudi Arabia, but also less than half of those of Egypt and Jordan (WB data, 2003)9 These strong forces slowed down the flow of Arab migrant workers to the GCC countries after 1985, and changed the composition of the workforce to the detriment of Arab workers. By way of illustration, between 1989 and 2000, the number of Arab workers in Kuwait fell by 30,000 while, at the same time, the number of Asian workers increased by 250,000 (Girgis, 2002). Migration to Europe Western Europe has been the key destination for Maghrebian migration in the post Second World War era. Colonial ties and with it commonalities along cultural, linguistic, administrative and transportation dimensions, initially made France the most important recipient, followed by Belgium. Data from the French census show that from the 1950s and onwards, the number of immigrants from Algeria, Morocco and Tunisia in France grew rapidly, as did the share of workers from Maghreb relative to other countries (Verhaeren, 1995). During the industrial boom of the 1960s, these migrant flows intensified as Northern European countries – including Germany, Switzerland, the Netherlands, Belgium, France, Sweden - actively recruited workers from southern Europe (Spain, Portugal, Italy, Greece, Yugoslavia), Turkey, and the Maghreb to take up low skill jobs in the industrial sector. Between 1968 and 1975, the Maghrebian population in France increased by as much as 60,000 people per year. Algerians dominated the earlier inflows; however, as of the mid1970s, Morocco became the main sending country (see Figure 7).

8

9

The policy of nationalizing jobs is often know as Saudiization but exist to some extent in most countries, albeit to a varying degree. In Kuwait, there are explicit restrictions on non-nationals working in the public sector. In other GCC countries, nationalization policies have goals but no explicitly defined measures in place. Thus, the 1990-1995 five year plan of Saudi Arabia stated an expected increase of Saudis of 7.5 percent in the workforce, however, this did not happen. GNI as obviously not a very good proxy of expected earnings. Comparisons of real wages in agriculture, construction, and services would be more relevant but data is not available.

11

Figure 7. Average Annual Net Increase in Maghreb Population in France (in thousands) 70

Algeria

Morocco

Tunisia

60

50 40 30 20 10

0 1946-54

1954-62

1962-68

1968-75

1975-82

1982-90

-10

Source: Census as reported in Verhaeren (1995)

As the economic dynamism in Europe slowed down during the 1970s and 80s, labor markets tightened considerably. Unemployment rose steadily in the traditional recipient countries. In France, from less than 2 percent in 1970 to over 10 percent in 1985. In Holland from 1 to 13 percent, and the picture was similar in other countries (see Figure 8). As work opportunities for immigrants in the industrial formal sector dried up, more restrictive immigration policies were implemented across the European continent. The slowdown in the European economies was mirrored in a slowdown in the North African countries. With worsening labor market conditions at home, the demand for migration in North African countries has remained high. With the front door-legal economic immigration-closed, other forms of migration have taken over, in the form of family reunification, asylum seekers, and illegal migration. At the same time, the direction of migration has shifted from Northern Europe to the Southern European countries. In particular Italy and Spain, formerly exporters of labor, have become increasingly attractive as their income levels have risen and their economies have converged towards the other European countries. Moreover, their long coastlines with the Mediterranean have provided easier access to Europe for illegal migrants. Importantly, the inflows of Maghreb workers into the Southern European countries have occurred even as unemployment soared among nationals (see Figure 8). Although Spanish unemployment rates hovered between 15 and 25 percent in the 1990s – the by far highest unemployment rate in Europe – the number of Moroccan workers legally residing in Spain increased from 9,000 in 1990 to over 80,000 in 1999 (OECD, 2003b)10. The

10

Refers to legal residents but includes those who became legal residents through the 1991-1993 regularization programs.

12

simultaneous growth of national unemployed and foreign, often illegal, labor, hints to a highly segmented labor market along skills and nationality dimensions. Figure 8. Unemployment in Migration Receiving European Countries Unemployment Rates (labor force aged 15-64), Old Recipient Countries

Unemployment Rates (labor force aged 15-64), New Recipient Countries

16

30

14

25 12 France 10

20

Italy

Holland

Spain

Belgium 8

15

6

10 4

5

2 0

0 1970

1975

1980

1985

1990

1995

2000

1970

1975

1980

1985

1990

1995

2000

Source: OECD (2003a). Data for Belgium only available from 1983 onwards

Table 3. Population from North Africa in Selected EU Countries (in thousands)

Source Country Algeria Morocco Tunisia Egypt Total North Africa Total Foreign Pop. North Africa (% of total foreign)

Belgium 1985 2000 10 8 124 107 .. .. .. .. 134 114 846 862 16

13

France 1982 1999 805 478 441 504 191 154 .. .. 1437 1136 3714 3263 39

Recipient Country Italy Holland 1985 2000 1985 1998 .. .. .. .. 3 160 116 111 4 46 3 1 7 33 .. .. 14 238 119 113 423 1388 556 668

35

3

17

22

17

Spain 1985 1999 .. 14 6 200 .. .. .. .. 6 214 242 896 2

24

Note: For Italy and Spain, includes residents with legal permits only, but includes foreigners who benefited from several regularization programs (check!) Source: Staff estimates based on OECD (2003b)

As a result, population originating from Maghreb, and particularly from Morocco, has increased sharply in Spain and Italy in the past 20 years, while it has fallen both in relative and absolute terms in the traditional recipient countries (Table 3). Population from Algeria, Morocco, Tunisia (and, in the case of Italy, Egypt), now account for between 13 and 35

13

percent of the total foreign population in the five key recipient countries, even without taking into account illegal immigrants in Spain and Italy.11 4. Prospects for Migration from MENA It is clear that past waves of migration have fulfilled an important role in terms of reallocating labor within and outside the region, generating revenues and reducing economic and social pressures arising from insufficient job creation in some countries, supplying labor force to the Gulf and helping share the revenues from oil. Could migration flows help lower unemployment in MENA over the short and medium term? Several factors are likely to encourage migration from traditional sending countries in MENA. Differences in income between the sending and receiving countries are likely to persist. Pressures on their labor markets are high and often increasing. Strong social networks--a major determinant of migration--are in place in Europe and the Persian Gulf countries to facilitate migration and job search. Clearly, prospects for migration will depend on whether there will be sufficient demand for MENA migrants in traditional recipient countries. However, tighter immigration cum recruitment policies in the Persian Gulf and in Europe, compounded by competition from other migrant regions, particularly Asia, will restrict access for MENA migrants. But more importantly, migration cannot be the solution for the employment problem of MENA. Even migrant flows above those recorded in the past are not likely to reach the magnitude required to resolve the labor market problems of the region. Prospects on Migration to the Persian Gulf The prospects for regional migration---to Gulf countries from other MENA countries--will most likely continue to hinge on oil revenues and their effect on labor demand, as well as competition in the labor market from nationals and migrants from other regions. Arab migration to the Gulf has slowed down considerably since the mid-80s--in fact, the shrinking labor market in the Persian Gulf after the 1990-1991 Gulf war has contributed to worsening labor market outcomes by pushing up unemployment rates in e.g. Egypt and Jordan. These emerging downward trends are not likely to be reversed. Oil revenues--the key source of public investment funds and, by extension, of labor demand--are on a downward trend (see Figure 9). Migration can not remain a vehicle for distributing oil rents within the region, because there are simply less oil rents to distribute and more competition in the Gulf for those rents. As the revenue pie is shrinking and its contenders increasing, competition in the Gulf labor markets is also likely to continue to rise at both ends of the spectrum. For higher skills, there is competition from a rapidly growing and increasingly educated national labor force as 11

Estimates of illegal migrants are by nature scarce and unreliable. For example, estimates for illegal Moroccan aliens in Spain in the end of the 1980s range between 60,000 and 90, 000 (Bodega et al, 1995).

14

well as from Asian migrants. The low-skills spectrum is already dominated by non Arab workers. Figure 9. Saudi Arabia – Per Capita Oil Revenues (in US$ thousand) 12.0

11.0

10.0

9.0

8.0

7.0

6.0

5.0

4.0 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

Source: World Bank, 2003c. “Trade Investment, and Development in the Middle East and North Africa: Engaging with the World”

The labor force is projected to increase by some 4 million people over the next ten years in the Gulf countries (2.8 million in Saudi Arabia alone), and this factor is driven by higher number and more participation of young workers (see Figure 10). Figure 10. Labor Force in GCC Countries by Age Group (in million) Labor Force in GCC Countries, Actual and Projected (million), by Age Group 14.0

12.0 20-39 15-19 & 40-64

10.0

8.0 8.0 5.1 6.0 5.0 4.0 2.9 2.0

0.0

4.4 1.2 0.9 1970

5.3

2.7 1.4 1980

1990

Source: ILO

15

2000

2010

These workers are also more skilled than previous generations. Youth literacy rates in Saudi Arabia have increased from 56 percent in 1970 to 93 percent in 2001, and gross school enrolments in secondary education has increased from 12 to 70 percent over the same period. As a result they are more likely to compete with migrant workers from other countries in MENA. As mentioned earlier, the explicit policy of nationalizing jobs--will affect Arab migrants most. The replacement of foreign (Arab) workers in public sector jobs by GCC nationals is well underway. The very characteristics that made Arab workers attractive for higher skill jobs in earlier periods, such as language skills and cultural affinity are now working against them, since they can more easily be replaced by the national work force. Import of lower skill labor may likely continue in GCC countries, especially for household services. This niche is already virtually dominated by Asian workers, however, whose relative income gains from migration remain much above that of Arab workers. In addition, the increasing skill level and English language proficiency of Asian workers is also increasing their competitiveness more generally. (Evans and Papps, 1999). Is Migration to Europe an Alternative? Demographic trends would favor migration from MENA to Europe. The demographic outlook in Europe differs dramatically from that of MENA countries. According to ILO projections, the number of potential workers-people between ages 20 and 65--will increase (on a net basis) by 1 million in the EU-15 member states between 2000 and 2010. The group of people in retirement, age 65 and above, will increase by 3.6 million over the same period, however. Specifically, the group of young potential workers, between 20 and 39 years of age, will diminish by some 13 million in total in these countries. These increasing dependency ratios will potentially have important negative effects on both public and private savings and investment rates as a rapidly ageing population will need to be supported. Replacement migration provides the only means of rejuvenating the workforce. Projections by the United Nations Population Division suggests that migration into EU would need to be doubled to keep the working age population constant, but would need to be tenfolded for dependency ratios not to worsen. More will be needed in the very long run to replace original migrants that will age as well or return to their native countries. Europe is expanding, but it is not clear that the ten new EU members (or other CEE members in line for accession like Bulgaria and Romania) could or would fill the demographic gap of Western Europe.12 First, as will be discussed below, there is evidence that trade liberalization of high-income countries with middle-income countries tends to foster economic convergence and discourage migration. This is confirmed by previous periods of enlargement (see Box 4). Second, the demographic structure and trends of the Central and Eastern European countries is in fact very similar to that of previous members. The trends head in the same direction as the old EU members: working age populations will shrink, especially in the younger segment--which should also be the people most prone to migrating. Third, increasing FDI to CEE and Baltic countries is likely to reduce migration pressures. Figure 11 below illustrates that (i) the difference in net population increases by 12

The ten new EU countries are: Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, the Slovak Republic and Slovenia. Bulgaria and Romania are still in the accession process.

16

age group is in fact very similar whether or not the new members are included and (ii) these European demographics thus stand in contrast to the North African countries. Working age populations in Algeria, Egypt, Morocco, and Tunisia, will increase by 22 million in total, and the group of young workers (20-39), which could be seen as potential migrants, will increase by as much as 11 million over the same period. Box. 4. Southern European Migration, EU Accession, and Return Migration Up until the 1980s, the Southern European countries were important senders of international migrants. Workers were recruited from Greece, Portugal, Spain and Italy together with the Maghreb and Turkey for the industrial sector in Northern Europe in the 1960s. When demand for foreign labor fell in the wake of the recession in the mid 1970s, migration flows sharply slowed down. Before the accession of Greece, Spain and Portugal to the EU (Greece in 1980, Spain and Portugal in 1985) there were widely held concerns that northern Europe labor markets would be oversaturated by foreign workers. This did not happen: when the European economies picked up again in the 1980s, Southern European workers did not follow suit. As an illustration, between 1986 and 1991, the number of Spanish workers in France fell by 15 percent. Empirical work suggests that both the initial spur in migration from Southern Europe, and the subsequent slowdown, were driven by economic growth and income convergence. In connection to the accession to EU, between 1980 and 1988, foreign direct investment more than tripled in Spain and Portugal and exports increased rapidly over the same period. In a poor country, migration would tend to initially increase with growth, as potential migrants acquire the financial means and the level of education necessary to take the step to go abroad. But as conditions at home improve, the incentive to migrate is reduced and some of the migrants return home to their preferred country of residence. This would explain the “migration hump”, i.e. the inverse u-pattern observed in migration rates over time in the Southern European countries. Instead of providing new migrants, these countries have become a destination for returning nationals as well as other migrants from other countries. Sources: Faini and Venturini (1994), Borjas (2000), Diwan et al (2003), OECD (2003b), WB data (2003f)

In addition, income differentials and migration networks will continue to be an important pole of attraction of MENA workers into EU labor markets. In spite of these arguments, the prospects for large scale migration from MENA to Europe is in all likelihood small. Migration has become contentious issue in Europe, influenced by a host of social, economic and political factors. The more important arguments put forward against increased migration in Europe relate to labor market conditions and cultural identity. Foreign workers are seen as providing undue job and wage competition, with a large pool of long term unemployed Europeans, with low skill workers whose wages may be depressed, and with the prospective workers from the new wave of accession countries. Aside from labor market effects, there are also concerns that large inflows of foreigners will threaten to efface the cultural identity of the original European population. As a result, there is no strong political constituency for mass immigration. Already limits to labor mobility have been imposed on new EU members. Moreover, labor market policies, and the adjacent migration policies, are likely to focus first on accommodating workers from the new member countries, even if these end up being more limited in number than currently expected in the EU countries. Irrespective of the validity of the arguments against migration to Europe from MENA countries, it is clear that these fears are shaping labor market policies in Europe, which have,

17

due to the still high unemployment rates, restricted even the free movement of workers from the enlargement group.13 Figure 11. Changes in Net Populations, 2000-2010 Net Population Increase (million people) by Age Group, 2000-2010, European Union (excluding and including applicant accession countries), North Africa, and Turkey 1/ 30

20

10

0

65+

-10

40-65 20-39 < 20

-20

-30 EU (15)*

EU (25)**

North Africa

Turkey

Notes: 1/ EU (15)* is defined as the countries in the European Union before the recent accession wave. EU (25)** is the current composition of the European Union including the recent accession countries. North Africa is defined as Algeria, Egypt, Morocco, and Tunisia Source: Staff estimates, based on ILO (2002)

But most importantly, migration from MENA to Europe could not be large enough to seriously reverse the trends in ailing labor markets in MENA, or indeed to rejuvenate the European population. Employment dependency ratios14 in Europe have deteriorated gradually since the 1970s. UN projections estimate that by 2010 there will be two people for each potential worker. If adjustments are made for actual labor force participation rates and for unemployment, the dependency ratios will be worse. The improvement in dependency ratios in Europe can only be attained if migration rates increases dramatically and/or population growth explodes. As argued by critics of the idea of replacement migration, such a turn of events would in fact result either in a near complete replacement of the original population (through migration) or in unsustainable population growth (Coleman, 2001 and 2002.). Such a policy is hardly realistic or politically feasible.

13

14

While the movement of labor is among the four essential freedoms in the EU, the fear of potential massive migration from poorer new EU member countries--from Central Europe and the Baltics— and its consequences on labor markets in Europe has imposed a transition period on free labor movements. Like with previous enlargements, this basic freedom has been delayed for a number of years in contrast with free movement of goods, services and capital. We refer to the relationship between the total population and the economically active population.

18

In addition, labor and migration policies in Europe are likely to focus first on the recent enlargement countries. The recent accession process placed limitations on labor movements from new EU members. Unemployment in Central and Easter Europe and Baltic countries is to a large extent composed of youth, which are likely to compete for migration jobs in the future, further limiting the space for migration from the MENA region into Europe. Youth unemployment rates in Central Europe and the Baltics are high (see Figure 12) and unless these countries generate enough opportunities for their young workers, there is going to be a strong tendency for them to seek better economic opportunities in the Western Europe. While growth and FDI in the new EU members may increase employment opportunities at home, it is unlikely that the EU will open its borders to more legal migration from MENA while limiting it from its own (new) members. This will be another contributing factor to slow down formal migration from MENA into the EU. Figure 12. Youth Unemployment in CEE and Baltic Countries Bulgaria Slovak Rep Poland Latvia Lithuania Romania Czech Rep Slovenia Estonia Hungary 0

5

10

15

20

25

30

35

40

percent

Even if migration flows from MENA were allowed to surpass levels recorded in the past, it would probably not provide enough jobs for MENA workers. In spite of the importance of migration in MENA compared to other regions, the number of migrants remains small compared to the regional labor force and the challenge of employment creation which lies ahead. As an illustration, presently, the (official) number of Moroccan workers in Europe is equivalent to 4.4 percent of the total labor force in Morocco. The number of Tunisians is less than 4 percent of the total labor force. Even in Egypt--the single most important source of international migrants in the MENA region--estimates suggest that international migrants (heading for any country) at the most made up 8-10 percent of the labor force in 1990s (European Commission, 2000). This must be considered in a setting

19

where the rates of unemployment in these countries reach between 12 and 15 percent, not taking into account pervasive underemployment in rural areas (see Figure 13). Figure 13. Migrants, Unemployed, and Workers in Manufacturing Sector as Percentage of Total Labor Force in Morocco and Tunisia, Latest Available Year 20 18 16

M ig ra n ts in E u ro p e

1 7 .3

U n e m p lo y e d

M a n u fa c tu rin g s e c to r

14

1 1 .6

12

1 5 .3

1 1 .8

10 8 6

4 .4

3 .6

4 2 0 M o ro c c o

T u n is ia

Note: For Morocco, refers to total industrial sector. For each receiving country, OECD reports only the largest categories of workers by nationality, hence, there may be smaller numbers of Moroccans, Egyptians and Tunisians in other countries which are not taken into account here. Sources: Staff estimates based on OECD (2003b), ILO (2003), Morocco Department of Statistics (2002) and World Bank data (2003 f)

5. Looking Forward, Migration is no Longer a Viable Alternative… As mentioned above, migration provided an important safeguard to higher unemployment in MENA during past decades, particularly in the 1970-1980s. Without it, the rates of unemployment and sub-employment in some countries in the region would have been much higher as well as the social pressures associated with them. But this option for employment abroad seems to be closing. Indeed, migration appears to have reached its peak in the 1980s and leveled off somewhat since.15 The main avenues for migration from MENA to Europe and the GCC, are no longer taking as much of MENA’s excess labor supply as before. In Europe, high unemployment rates during the 1980-90, pressures arising from inflows from other regions and countries in the world (Turkey, Asia), and concerns about potential inflows from new EU accession countries, has contributed to a tightening of restrictions on migration in European countries. Falling oil prices in the 1990s and rising unemployment among nationals in the GCC countries, combined with competition from cheaper unskilled labor from Asian countries is also limiting the potential for migration from the Maghreb and the Mashreq to the Persian Gulf.16 The recent surge in oil prices does not seem reverting this trend. As a result of these factors, the capacity of MENA to export their excess supply of labor is diminishing and unemployment levels are thus increasing. But more importantly, migration cannot be the unique solution to MENA’s employment

15

16

Accordingly, Egyptian immigrant workers, which account for about 10% of the workforce, have been stagnant since 1997. Workers remittances have also fallen considerably as proportion to GDP since the early 1980s. See Girgis (2002).

20

demographic dynamics. Even during the best of times, migration only represented a small proportion of the required jobs needs. …Neither Is Public Sector Employment Public sector was and remains the primary source of jobs in the MENA region. Public sector employment played a critical role as a safety net to buffer labor markets against high unemployment rates in the past, particularly during the oil boom years. Table 4 illustrates extent of this practice and presents the share of public sector employment in the MENA countries where data is available.17 The government’s role in the provision of jobs to its citizens has long been taken for granted in the Arab countries, regardless of their economic orientation or whether the government has openly declared a commitment to the hiring of graduates in higher educational institutions, as in the case of Egypt and to a lesser extent Morocco. The Egyptian public sector employment scheme guaranteed public sector jobs to graduates of vocational secondary schools, higher education institutes, and universities.18 A similar but less comprehensive program is that of the Moroccan government which provides “temporary employment” to the university graduates in the public sector, theoretically as a stage towards moving to another job, but practically such employment often turns out to be permanent.19 Other countries in the region also have explicit or implicit schemes for public sector employment (e.g. Jordan) that generate large distortions in the allocation of labor resources.

17

18

19

As a benchmark, the International Labor Organization has concluded that “in most developing countries, the [share of government employment in the labor force] does not exceed 6 percent, while in most advanced industrialized countries, it is above 15 percent.”. World Labor Report, 1989. volume 4: 49. This benchmark figures are measured differently from the data in Table 7.4 in two respects. First, the table reports public sector employment as a proportion of total employment while the benchmark figures are related to the size of the labor force. Second the table refers to the total public sector including government service and public sector enterprises, while the benchmark refer to the government service only. Making the comparison appropriate by accounting for the unemployed would lead us to discount the figures in that table by at most 20%, which would still leave the countries listed in the table with a sizable public sector in comparison with other developing or developed countries. Moreover, the public enterprise sector is sizable only in Egypt and Algeria, and adjusting their figures would still leave a significant government service sector, in comparison to wither developed or developing countries. See Handoussa, Hiba: “The Burden of Public Sector Employment and Remuneration: the Case of Egypt”, in Government and its Employees: Case studies of developing countries, edited by Wouter Van Ginneken, Published for the ILO by Averbury. Amerah, Mohamed: “Major Employment Issues in Arab Countries, Mimeo. The Royal Scientific Society: Seminar on Employment Policy in Arab Countries, Amman, Jordan, June 1990.

21

Table 4. Public Sector Employment in Selected MENA Countries (percent of total employment) Country

Year

Male

Female

Total

Egypt

1976 census 1986 census 1982 1979 census 1987 survey 1970 census 1986 1989 1984 1981 census 1970 census 1985 census 1984 1986 census 1987

25.4 28.4 29.2 38.3 43.7 15.7

51.6 66.1 55.4 65.9 53.7 15.0

40.2 74.6 85.2

67.7 86.7 96.6

36.9

34.9

27.2 32.2 31.6 40.3 44.7 15.6 15.9 55.7 23.4 44.0 75.0 87.5 59.8 36.7 53.8

Jordan Syria North Yemen Algeria Tunisia Bahrain Kuwait Oman Qatar Saudi Arabia

Sources: ESCWA Population and Labor Force Statistics (with some exceptions, Saudi Arabia, North Yemen, and Oman from other sources (which ones?)).

Irrespective of the reason why government’s used public employment as a policy, it has become apparent, particularly during the last decade that such policies are increasingly less sustainable and impede the good functioning of both public sector organisms and labor markets. Even more, they do not provide a viable alternative to solving the employment problem in MENA. Witness are the long waiting lists, often spanning ten years before getting a guaranteed government job in Egypt, or the segmented nature of the Jordanian labor market with high unemployment rates and large inflows of migrants in some sectors of the economy. MENA’s public sector cannot continue to absorb large cohorts of new entrants to the labor market. If anything, public employment retrenchment would have to be implemented, in part to reduce the wage bill emanating from the public sector, which is high and exceeds that in private sector manufacturing, but also as a mechanism for better allocation of resources. 6. Can Trade Expansion Be Part of the Solution to the Employment Puzzle in MENA? If migration and public sector employment are to play a lesser role in the future as absorbers of new labor market entrants--and large numbers of new jobs need to be created in the region in the coming decade--is there room for trade expansion in MENA countries and can it step up the pace of job creation? The goal of trade policy is to improve the quality of life of the population, including the quantity and quality of jobs. While there may be transitional costs to trade liberalization, as labor is dislocated from protected sectors, and firms adjust to harder competition, over the medium term employment gains are achieved and unemployment rates fall, as GDP growth expands and the fruits of trade liberalization mature (see Figure 14). Wages in more open

22

economies do better than in others, due to access and more aggressive adoption of new technologies and demand for higher skill levels in the labor force. New jobs being created in more open economies tend to be “good” in the sense of demanding more of workers in terms of human capital.20 Figure 14. Exports and Unemployment, 1995-99 E xports and U nem ploym ent 1995-99

4 D ZA

3.5

MAR

Unemployment

3

JO R

2.5

EGY

LB N

2 1.5 1 0.5 0 2

2.5

3

3.5 4 To tal E xpo rts/G D P

4.5

5

5.5

S ource: U nem ploym ent ILO ;trade W D I-W B . B oth axis present the average level for the period in logs.

World merchandise trade has grown at an annual rate of about 9 percent during the 1990s, and developing countries are gaining strength in global (non-energy) merchandise export markets, with their market share increasing more that 7 percentage points over the 1990s.21 However MENA has been lagging other regions of the world in benefiting from the trade bonanza, in part because of higher protection of domestic markets than most other regions, but also because of excessive labor market regulations, poor investment climate and bottlenecks created by inefficient and costly services and procedures. These behind the borders restrictions have limited MENA’s capacity to benefit more from globalization. But is there room for trade expansion in MENA? According to the Trade, Investment, and Development in the Middle East and North Africa: engaging with the World Report, World Bank (2003c), the MENA region has a large potential for expanding trade, as many indicators point to the underperformance of trade in the region. Non-oil exports are about one-third of expected potential levels using a diverse set of models. Openness to manufacturing imports is also one-quarter below expected levels. Gravity models of trade suggests that actual trade is some one-third of the potential, given the unique favorable characteristics of this region, all of which should favor dramatically higher levels of trade.22 20 21 22

See de Ferranti et al (2002), From Natural Resources to the Knowledge Economy, Trade and Job Quality, Washington DC. See World Bank (2001), Global Economic Prospects and the Developing Countries, Washington DC. These are: small size (only 2% of world incomes and 5% of world population), low-incomes (MENA countries fall in the bottom one-half of world income distribution), relatively low wages (in the bottom one-

23

MENA should be trading significantly more than it does. Moreover, structural reform policies that successfully remove some of the key barriers to trade and investment should allow the region to achieve its potential and spur much faster growth in output, jobs, productivity and wages. Many countries in the MENA region, including Algeria, Egypt, Iran, Jordan, Morocco and Tunisia, and some of the Persian Gulf countries are under achievers in trade. These countries trade significantly less than their potential, both with respect to each other and with respect to their most important trading partners outside MENA. Intra-regional trade rose significantly between 1992-1997, but still remained below predictable levels, especially if we take into consideration the large amount of existing bilateral and multilateral trade agreements in the region (see Table 5). Table 5. MENA - Regional Trade Agreements

Algeria Tunisia Egypt Syria Jordan Lebanon

MOROCCO AMU GAFTA, AMU, Xn GAFTA, X GAFTA GAFTA, X GAFTA GAFTA

ALGERIA

TUNISIA

EGYPT

SYRIA

GAFTA, X GAFTA GAFTA, Xn GAFTA GAFTA

GAFTA GAFTA, Xn GAFTA, X GAFTA

GAFTA GAFTA, X GAFTA

JORDAN

LEBANON

AMU

Xn

GAFTA, Xn GAFTA GAFTA GCC YES YES NO YES YES YES YES EU Med Note: AMU = Arab-Maghreb Union; Signed in 1989 among Algeria, Libya, Mauritania, Morocco & Tunisia. Not yet implemented. GAFTA = Signed in 1998 among Morocco, Tunisia, Egypt, Jordan, Libya, Syria, Iraq, Saudi Arabia, United Arab Emirates, Qatar, Bahrain, Oman, Kuwait, and Lebanon. X = Bilateral Trade Agreement. Xn = not implemented EU Med = Bilateral agreement with European Union. GCC includes Bahrain, Kuwait, Oman, Saudi Arabia, Qatar and the United Arab Emirates. Source: Adapted from World Bank (2003c).

In MENA trade agreements have not yield expected results (like NAFTA or the association agreements between the EU and Central European countries in the early 1990s) because there has not been enough political resolve to allow the competitive effects of regional trade agreements to substantially influence production and employment decisions. In addition, many bilateral trade agreements are still not implemented. As a result, they have not been an instrument for more efficient allocation of resources. Moreover, political economy factors to support greater regional trade integration are weak. Countries that do have larger intra-regional trade and stand to gain from greater free trade (such as Jordan, Lebanon or Syria) are small to influence regional outcomes, while countries with higher regional weights (such as Egypt, Algeria, Iran) or with well-established trade partners outside the region (like Morocco, Tunisia) have fewer incentives to make regional trade agreements a priority, thus reducing the effectiveness of such agreements. half of world wages), improving education, close proximity to a high-income neighboring region (EU) and other characteristics such as common borders, language, colonial ties and related factors, and the presence of a number of formal trade agreements with high-income countries and with each other.

24

Unilateral trade liberalization in conjunction with behind the boarder reforms could also play a critical role to enhance resource allocation and boost growth and employment. However, little political resolve for this option is present in the MENA region. In part due to the factors mentioned above, non-oil trade with the European Union and the United States is only one-sixth of potential levels, and at the sub-regional level, both the Maghreb and the Mashreq trade very little with each other. They also trade little with their most important external partners. Only the GCC countries showed high and rising trade with the MENA region and with each other according to World Bank (2003c). But even in the GCC countries, actual trade remained some one-quarter of that expected for GCC trade with the EU. 7. FDI Is Low in MENA FDI and trade go together and have important synergies. These synergies, however, have not materialized in the region. FDI flows to the region are quite low, at about one percent of total net inflows to developing countries, and concentrated in just a few number of countries. Excluding the GCC countries, MENA received about US$2.8 billion in FDI in 2000 of which Egypt alone accounted for 41 percent (US$1.2 billion), Tunisia accounted for 27 percent (US$750 million), Jordan for 19 percent (US$560 million) and Lebanon accounted for 10 percent (US$300). The rest of the region received only small amounts of FDI and Yemen even negative flows. Trade and FDI go hand in hand. FDI brings with it access to foreign markets, new technologies, and cheaper sources of capital. At the same time FDI, in combination with an enabling investment environment, tends to generate large spillover effects in receiving countries, spurring local supply chains and technology transfers that benefit local economies and boost job opportunities at home.23

23

Figure 15. FDI Net Inflows, 2000

Tunisia 25%

Algeria 0%

Egypt, Arab Rep. 41% Syrian Arab Republic 4% Morocco 0% Lebanon 10%

Jordan 19%

Iran, Islamic Rep. 1%

A good example of the potential effects of FDI and the associated synergies can be found in the SkodaVolkswagen venture in the Czech Republic. The venture not only turned around the company and improved its efficiency and the quality of its products, it also generated a network of suppliers that after a few years, and as a result of the high demands on quality by the new company, enhanced their quality control and became exporters in their own right. Today they are not only local suppliers to SkodaVolkswagen, but they produce auto parts for other firms in the region.

25

8. The Role of Trade Expansion in Job Creation All the evidence presented above points to an untapped resource in the MENA region. MENA has great potential for growth in non-oil manufacturing trade, which can help diversify its economies, reduce risk and volatility, and create employment. Given the rich history of the region, there is also potential for growth in tourism practically everywhere (see Figure 16), but particularly in countries like Algeria, Yemen and Iran, which have not been able to tap on this important sector at its potential.24 In addition, there is prospective for enormous growth in trade in services in most countries of the region, but this requires deeper integration. The EU Med agreements can be a first step that could be expanded to deeper integration in services with the EU. All these areas have the potential to generate growth and large amounts of new jobs in MENA. Figure 16. Tourist Receipts

(% of total exports) 50

8.0

7.9

6.0

6.0

35

3.9

3.7

3.6

25

22.0 22.5

20

1.8

1.4

1.0

31.3

30

15.8

16.9 17.7

18.5

15

5

2001

2001

2001

2001

2000

2000

2001

2001

2001

2000

1998

2001

0.6

0.4

0.3

0.2

43.6

40

10

2001

2000

2001

2000

2000

Tourism receipts in M ENA countries 2001

45

5.0

5.9

7.2

Tourist receipts (% of GDP)

9 8 7 6 5 4 3 2 1 0

7.1 6.0 6.7

6.6 1.0

0 LAC

EAP

SSA

MENA

LBN

GRE

EGY

MAR

JOR

TUR

TUN

SYR

BHR

Sources: W DI-W orld B ank

IRN

OMN

YEM

KWT

DZA

LBY

DZA KWTYEMOMN IRN MEX AREWBG IDN EGY LBN BHR SYR TUR MAR JOR TUN Source: WDI-WB

4.7 0.4 0.5 0.5 0.9 1.0

Trade expansion, in the form of rising manufacturing exports, has been an important source of growth in developing countries (see Figure 17). The left panel of Figure 17 illustrates the positive correlation between employment and exports in the manufacturing sector in Morocco, Mexico and Indonesia. In these, and other countries that successfully integrated into global markets, export-led growth has brought large employment dividends in the medium-term. Other countries (right panel) that have not been able to expand their export base, have seem no growth in employment.

24

See World Bank (2003c)

26

Figure 17. Employment and Manufacturing Exports Morocco

Egypt

Employment in manufacturing and Export in manufacturing /GDP

Employment in manufacturing and Total Exports/GDP

Percent 1.4

3.3 3.1

(% of Working age population)

4.5 4 3.5 3 2.5 2 1.5 1 0.5 0

1.2

2.9 1

2.7 2.5

0.8

2.3

0.6

2.1

0.4

1.9 0.2

1.7 1.5

Employment in manufacturing (Left axis)

Mexico

25 20 15 10 5 0

Tunisia Millions Constant pesos (1995)

(% of Working age population)

0 1991

1992

1993

1994

1995

1996

1997

1998

96

95

19

19

93 94 19

92

19

19

90 91 19

89

19

19

87 88 19

Poland Employment in manufacturing and manufacturing exports/GDP

Employment in manufacturing and Total Exports/GDP (% of Working age population)

Percent

4 3.5

(% of Working age population)

Employment in manufacturing (Left axis)

2

20

2.5 2

8 1.5 6

10

0

Exports in manufacturing (% of GDP)

10

1

4

1 0.5

3

Employment in manufacturing (Left axis)

12

15

1.5

Percent

14

30 25

Export (% of GDP) (Rigth axis)

86

Source: Employment data are from Unido, Exports and Working age population data are from WDI World Bank. Exports includes good and services

1999

Indonesia

3

19

19 3000

19

100000

80

3200

19

200000

Employment (left axis)

50 45 40 35 30 25 20 15 10 5 0

Exports (% of GDP) (Rigth axis)

Employment in manufacturing (Left axis)

84 85

300000

Percent

19

3600

83

400000

19

3800

10 9 8 7 6 5 4 3 2 1

82

500000

19

4000

3400

Employment in manufacturing and Total Exports/GDP

600000

Exports of goods (right axis)

81

4200

19

Persons (000)

2.5

30

Source: Employment data are from Unido, Exports and Working age population data are from WDI World Bank. Exports includes good and services

Source: Employment data are from Unido, Exports and Working age population data are from WDI World Bank. Exports includes good and services

1990

40 35

Exports (% of GDP) (Rigth axis)

19 80 19 81 19 82 19 83 19 84 19 85 19 86 19 87 19 88 19 89 19 90 19 91 19 92 19 93 19 94 19 95 19 96

1996

1995

1994

1993

1992

1991

1990

1989

1988

1987

1986

1985

1984

1983

1982

1981

1980

0

Percent

5

2

0

0

1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996

0.5 0 1990

Source: Employment data are from Unido, Exports and Working age population data are from WDI World Bank. Exports includes good and services

1991

1992

1993

1994

1995

1996

1997

1998

Source: Employment and Manufacturing exports data are from Unido Working age population data are from

Source: Staff calculations

27

Export processing zones have also proven to be attractive poles of job creation in countries like Mauritius, Costa Rica and Dominican Republic.25 Even in Jordan the qualified industrial zones (QIZs) have generated new employment opportunities and helped Jordan revive its export sector and tap new export markets.26 Moreover, QIZs are starting to have a positive effect on known gender imbalances. Like in the maquiladora industry in Mexico and elsewhere, employment in these zones tend to attract higher female labor participation.27 Figure 18. Employment in Export Processing Zones (EPZ)

Source: Rama (2003)

But, as mentioned above, in general the employment effects in MENA out of globalization have been limited despite recent efforts to liberalize the trade regime and even when exports increased. Aside from the concentration of MENA’s non-oil exports in low value-added products whose growth has a minimal impact on labor and the capital-intensive nature of hydrocarbon sectors, the likely reasons for this lie outside of the trading system. In particular, the limited inflow of FDI has reduced the impact of trade liberalization and overvalued exchange rates have undermined the competitiveness of output and costs. But with 25 26

27

See Rama (2003) Globalization and Workers in Developing Countries, manuscript. Qualifying Industrial Zones were introduced to Jordan in the wake of the Jordan-Israel peace treaty. According to al Khouri (2001) they have proven to be an interesting model of industrial development. This is especially the case when Jordan’s high unemployment and sluggish exports are considered. QIZs have helped to provide jobs for thousands of people and to spur the sale of the kingdom’s manufactured goods abroad. They revived the export industry in 2002, and with it the economy’s growth rate, attracted FDI, redirected exports to new markets, changed the composition of exports from traditional commodities (phosphates) to manufactured goods with higher value added, and increased the participation of women in jobs. QIZ employment-creation has been more effective than that of traditional FTZs. Moreover, in terms of the types of jobs created and the technologies and training being applied, the situation looks also superior to that of traditional FTZs. The maquila industry in Mexico attracted a labor force primarily composed of women. By 1980 about 77 percent of the maquila employment were women. While this share has declined over the past two decades to 55 percent, as employment in the sector increased by over a ten-fold, women continue to dominate the maquila employment.

28

appropriate reforms (see World Bank 2003c), the region would enhance its ability to harness the positive impact of trade liberalization on employment. Given the enormous gap in export performance in the region, World Bank (2003c) estimates that just closing in half the merchandise export gap could generate and additional 4 million jobs over five years and increase women’s labor force participation at the same time. Pro-competitive reforms that facilitate entry by new firms can generate additional employment opportunities for skilled and unskilled workers who are now waiting for government jobs, employed by governments in low-productivity jobs or in threatened importcompeting private manufacturing. Because services often cannot be traded, increasing access to service markets is likely to require the entry of foreign competitors through FDI. This will not only lead to the introduction of new technologies that improve efficiency and competitiveness, but also entail the hiring of domestic labor. By creating more opportunities for the employment of skilled workers, services liberalization would also help address the structural imbalances in MENA labor markets, especially the exceptionally high rates of unemployment for educated workers and the young. Overall, trade could be a very important source for new jobs and the attraction pole to shift employment in the region from public and agriculture to private and services. In the long run, open economies grow faster, have better wages, have lower rates of unemployment, and also less unemployment variance (see Figure 19). There seems to be a pattern of high dispersion of unemployment rates in more closed economies, and convergence towards a relatively narrow range in more open economies. This relative stability is in contrast with the popular perception that opening to global competition generates more unemployment. Figure 19. Unemployment and Openness to Trade

29

8. But Transitional Employment Costs May Be Present with Liberalization Trade expansion holds the promise of job creation and income growth in the medium term. Because export opportunities for the region are large, the benefits of trade expansion in terms of job creation could be considerable. But evidence on the short-term benefits of trade on employment (and wages) is not always clear-cut because trade expansion comes in may different ways.28 For the developing world, it often relies on liberalization of domestic markets and sectors that may, in the short term, result in labor reallocation--between sectors and industries--and even displace jobs in import-competing sectors. This can act against any positive short-term effects on jobs coming from increasing trade. Moreover, if reforms aimed at expanding trade are part of more comprehensive reform program intended to improve competitiveness and efficiency, they can produce short-term adjustment costs. So, globalization can create losers and not just winners. Curry and Harrison (1997) measure the effect of a large trade reform in Morocco on labor market adjustment and profit margins, finding great heterogeneity in employment response (according to firm characteristics such as ownership and export orientation) but only small effects in the shortterm. Revenga (1997) finds that most of the adjustment in Mexico’s trade liberalization came in wages, and not employment reduction in the short term. Haouas and Yagoubi (2002) find that in the case of Tunisia, employment and wages in both the exportable and importable sectors increase in the long-term, but wages in the exportable sector declined in the short term. While trade liberalization can be associated with job losses in formerly protected sectors integration with world markets is also associated with substantial job creation, especially in export oriented activities. In many regions, a large fraction of the newly created jobs is held by young women from rural areas, giving impetus to women’s participation in formal labor activities. In addition, trade expansion can also be the result of higher FDI flows, liberalization of services, and reduction of red tape and bottlenecks, thus having the potential of being a win-win situation even in the short-term. …And What About Wages? Openness to trade can have a negative impact on wages in the short run, but it only takes a few years for this effect to change sign. Studies indicate that wages grow faster in economies that do integrate with the rest of the world (see Figure 20).29 Moreover, the impact of FDI is highly positive on wages, even in the short-run, stressing the importance of a good investment climate. As a result, policies to integrate an economy with the rest of the world will be more beneficial to workers if they succeed in attracting investors from abroad.

28

29

See Harrison and Leamer (1997), Revenga (1997) for the effect on wages and employment of the trade liberalization in Mexico, Currie and Harrison (1997) for the effects of trade reform in Morocco and Haouas and Yagoubi (2002) for Tunisia.. See Freeman, Oostendrop and Rama (2001) which show that wages grew at twice the speed in globalizers than non-globalizers during the 1980s and 1990s.

30

Figure 20. Wages and Openness

Source: Rama (2003)

The benefits from globalization are not evenly distributed across workers, however. A number of studies reveal an increase in the wage premium to skills. Moreover, FDI appears to have an even stronger impact on the returns to education than openness to trade. Openness to trade also seems associated with a narrowing of the gender gap in earnings. 9. Are Trade and Migration Substitutes or Complements? The theoretical basis for understanding the relationship between trade and migration is the well known Heckscher-Ohlin theorem.30 This factor-price-equalization-relationship states that under perfect competition international trade will bring about equalization in the relative and absolute returns to homogenous factors across nations. As such, international trade is a substitute for the international mobility of labor. More trade implies less migration in the standard Heckscher-Ohlin setting. However, complementarity between migration and trade can be achieved if one imposes identical factor endowments in both countries but relaxes one of the following assumptions of the Heckscher-Ohlin model: (a) constant returns to scale, (b) identical technologies, (c) perfect competition, and (d) no domestic distortions. Then, free trade does not result in factor-price equalization.31 As a result, trade and migration can be complements, not substitutes. On the empirical side, however, no clear cut relationship has been found.32 30 31

32

See Samuelson (1948), International Trade and Equalization of Factor Prices, Economic Journal, June 1949, pp. 165-184. See Markusen (1983), Free Movements and Commodity Trade as Complements, Journal of International Economics, No. 14, pp. 341-356. Other studies also find complementarity between movements of goods and labor, including Schiff (1995), and Faini and Venturini (1993). See Nassar and Ghoneim (2002) which analyze migration and trade flows in Tunisia, Morocco, Egypt and Jordan and study the so called south-south and south-north patterns.

31

In the presence of relatively free labor mobility, convergence of incomes proceeds faster than with trade alone, and welfare gains are larger and more direct as people move from poorer to richer countries. However, labor mobility in practice is far from free, with receiving countries imposing significant and rising restraints for a number of political economy reasons, that are generally far more restrictive than for trade. Migration, has become an issue of concern in a number of countries (see Box 5). In the EU, for instance, parties advocating strong restrictions on immigration have made important gains in recent years. The same phenomenon is found in Australia, in the US and in Canada. In addition, labor mobility is restricted by the cost of migration, a reason why the poorest don’t migrate. The movement of people differs from the movement of goods and services because people create attachments. They tend to feel closer to those with whom they share social capital--including customs, values, language, history and culture--and they interact with them at lower cost. Consequently, migration generates externalities. There are also significant other costs at the household level that may also hold back labor mobility in practice.33 As a result, despite its absolute large size and visibility, the actual levels of labor migration, even in the largest sending countries in the region such as Algeria or Egypt, are small.34 Only a small fraction of the annual increment of labor force is able to migrate abroad (although over time, the accumulation of labor force abroad may become more substantial, approaching 10-15). Worldwide, net migration from poor countries is annually less than 1 person per thousand population (UN, 2002). In the MENA region, it about 1.5 persons per thousand population. The potential negative implications of the Euro-Med initiative for MENA’s unskilled and semi-skilled workers suggest that EU restrictions on migration from MENA could aggravate the unemployment problem in the region in addition to creating political disincentive for reform and global integration. If there is any degree of complementarity between trade and migration the agreed framework for cooperation between MENA and the EU could be amended to accommodate managed flows of workers from MENA, especially those who complement emerging shortages in the EU’s labor markets. Already such proposals are being considered in the context of migration from East and Central Europe.

33

34

Adams (1991) argues that in the MENA region migration costs are very high and have a negative impact on migration flows. He finds that the average cost of migrating from rural Egypt to Iraq - including the subsistence cost required for the two-month period that was necessary on average to find a job in Iraq - was close to US$500. Because of the cost of obtaining a number of expensive permits, the migration cost to Saudi Arabia was about US$1,000 or twice the cost of migrating to Iraq. These figures are extremely high considering that the average monthly wage for the people surveyed was only US$65. Thus, the migration cost to Saudi Arabia (Iraq) was equivalent to a fifteen (eight) month salary for these (potential) emigrants. Even inside the same borders migration is not large enough to equalize factor prices. This could be the result of high start-up/mobility costs, social capital and available safety nets.

32

Box 5. The Political Economy of Migration The political economy of migration is a complicated one because perceptions, more than facts, dominate the public opinion, and affect policy making. Migration has become a contentious issue rather than an embracing agenda. In industrialized countries, an immigrant population that is growing in size and visibility is making an impact on society as a whole. In some of the largest European recipient countries such as Belgium, France, the Netherlands and Sweden, the foreign born population now makes up more than 10 percent of the total. France, for instance, is no longer the land of the descendents of the Gaulois, but one with a diverse population that includes, among others, migrants from the Maghreb. In countries like Germany and the United States, foreign population growth is around 3-4 percent, much above national averages. As a result, in many countries the strong presence of foreigners is becoming an important concern for the national psyche. In fact, the political implications of migration flows may well exceed its economic effects. Especially in Europe, apprehensions about the cost of migration center around three questions: (i) the impact on labor markets; (ii) the impact on social welfare costs; and (iii) the impact on cultural identity. Recipient countries have concerns that foreign workers will increase job competition by undercutting wages, which would both increase unemployment among nationals and lower their wages and standards of living, especially for unskilled workers. Indeed, in countries like Spain and France, high unemployment rates co-exist with a large immigrant population. But the United States and Canada, on the other hand, have accommodated even higher shares of immigrant populations and maintain low unemployment rates. Overall, there is no clear evidence on the impact of migration on employment or wages because in recipient countries, as this depends on the size and type of migrants (low vs high skills). Within countries, generally, migrants tend to cluster in places where labor markets are tight and wage levels higher, suggesting that they are complementing at the lower skill end rather than substituting for national workers. In fact, those who are most at risk of losing out could well be previous immigrants, whose skill levels more closely resemble those of new immigrants. Another and in some sense contrary argument against migration is that migrants do not look for work but for a state that is willing to support them. The concern is that countries or regions with higher benefits, either for the whole population or for migrants in particular, will become so called “welfare magnets” and attract more migrants who come to take advantage of a generous system. If migrants are over-represented in social welfare, the cost will be primarily born by the nationals. The fact that non nationals generally have more children, and in EU, lower higher unemployment rates, reinforces the perception that migration flows are driven by a skewed incentive system. Finally and perhaps most importantly, there is a growing debate about national identity and the assimilation and integration of migrants. Should migrants adopt the language, values and traditions of the receiving country or keep their own cultural identity? The potential for a clash of values between national and foreign residents exist when different cultures converge and diversity is not embraced. The importance of migrant networks in attracting new migrants, and the fact that family reunification has become the single most important reason for legal immigration into US and Europe, means that countries, regions and cities tend to specialize in one or a few nationalities. This polarization slows down the integration process as it gives rise to strong and visible migrant groups, often with different cultural, religious and social values than the host nation. As a result, there is concern that the cultural identity and social values of the national populations will be overshadowed if migration expands, or if the current population of migrants do not embrace the national culture. Notwhistanding who is right or wrong, these issues are shaping public policy vis-à-vis migration an are likely to affect the probability that MENA would continue to see Europe (and other regions) as potential sources for labor demand. Sources: The Economist (2002), Borjas (1999), Eurostat (2003), Zavodny (1997)

Even in the absence of relatively free labor mobility, trade and migration can act sometimes as substitutes. Successful trade raises incomes and employment in poorer countries and over time by reducing gaps with richer countries, induces a fall in net outmigration pressures (e.g., in Spain, Portugal, Ireland, and in Korea and Thailand among developing countries), while unsuccessful trade-growth outcomes are matched by rising labor migration pressures. The impact on unemployment, however, will depend on the net effect of more domestic jobs via trade, but less migration too. Empirically, Alburo (1998) finds support for substitution between goods and labor exports in a comparative study of

33

Philippines, Thailand and Korea. Aldaba (2000) similarly finds evidence for a negative relationship between trade and migration in the Philippines. In MENA, Nassar and Ghoneim (2002) find that trade and migration seem to be strong substitutes in Egypt, weak substitutes in Morocco and strong complements in Jordan and Tunisia. Exporting goods, rather than labor, has been one of the key premises behind the NAFTA agreement, with net job gains in Mexico. Even if migration is generally restricted, it can still be used as an important policy tool and safety net in richer countries to complement trade policies in poorer countries, especially in a temporary adjustment phase.35 It can support trade in the medium-term---by allowing a window of trade reforms to proceed in poorer countries (when the employment outcomes may be still fragile), boosting integration between receiving and sending countries (language, familiarity, proximity, networks and investment), and utilizing demographic transition differences. This was true for the historical period of convergence of incomes and employment within industrial countries (Williamson, 1991), and is probably the case for the MENA region today. 9. Conclusion MENA has an employment puzzle. The region is going through a difficult demographic transition that is putting enormous pressures on its labor markets and on the economies of the region. MENA countries are increasingly unable to generate the number of jobs needed to absorb their growing young populations. As a result, unemployment has increased considerably during the past two decades and reached almost 20 percent on average, with significant heterogeneity among countries. MENA has the second largest unemployment rate in the world, just surpassed by Sub-Sahara Africa. These developments imply that about 22 million people in the region are without a job. Unemployment rates are much higher than the regional average for new entrants and women, and skills mismatch is pushing a number of workers with secondary education increasingly in the unemployment lines. In addition, informality is growing, as formal labor markets are unable to keep with the challenging demographic flows. Traditional avenues for job creation in the region are loosing impetus. Agriculture can no longer sustain its share of employment and as distortions in factors and product markets are slowly removed, including the pricing of water for agriculture use, the competitiveness of the agro sector could diminish, reducing even more opportunities for jobs. Already large rural-urban flows are taking place as young (and more educated) workers seek better employment opportunities in urban centers. Needed reforms in the sector to move from subsidized crops that cannot compete in world markets to high value added fruits and vegetables, as in Chile, have been constrained by a lack of vision and political economy consideration.

35

See Diwan et al (2002)

34

The public sector, a traditional avenue for employment in the past, cannot continue to absorb additional people.36 The social contract that offered secured jobs in the public sector is no longer valid. Already in several countries public sector employment has been frozen, eliminating any capacity for expansion. If anything, public sector employment is more likely to diminish rather than increase in the coming years. Migration has also been an important safety mechanism to reduce pressures in domestic labor markets, transfer oil rents from the Gulf and increasing income prospects for households through remittances. While the economies of the MENA region may have not integrated much via trade, they have done so, to a large degree, via migration. Migration played the role of both substitute and complement to trade. Migration to the Persian Gulf and to countries in Europe helped reduce the unemployment rates of the region as well as supply needed workers for the Gulf (and Europe). However, there are reasons to believe that this avenue has limited expansion capacity as the two main poles of attraction are reducing their demand for MENA migrants. On the one hand, Persian Gulf countries have less oil rents to share and more domestic demands. Oil revenues have declined in real terms during the past two decades. In addition their own national work force is much more educated and demanding jobs—primarily in the public sector. Moreover, unemployment rates in the Gulf have also grown, with Bahrain and Oman unemployment at just under 10 percent, while Saudi Arabia’s unemployment rate reached 12 percent. There is, in addition, competition from other regions in the world (particularly Asia) for jobs in the Persian Gulf, and strong dominance of Asian workers on low skills jobs. All this indicates that there will be limited capacity of the Gulf to attract more migrants from other parts of the MENA region. Europe also does not look too promising. Despite unfavorable demographics in Europe—with an aging population, low fertility rates, and declining dependency ratios— migration from MENA to that region does seem to have lost its momentum. High and persistent unemployment rates in Europe—particularly among the young in the future enlargement and the new EU states—are shaping public opinion and policy toward more restrictive immigration laws. This, in combination with public concern about the cultural identity of Europe are likely to place additional obstacles to migration from MENA countries. But most importantly, even without these additional restrictions, migration can only relief part of the pressure in MENA’s labor markets. Even in the best of circumstances, migration flows have been and are likely to continue to be low compared with the employment requirements in the region. Migration, at most, will play a limited and perhaps declining role in solving the employment puzzle of MENA. If the traditional prospects for job creation are dull, is there any way out of the employment puzzle? The answer is yes. Competitive pressures from the world economy--along with domestic pressures for new and better job opportunities--are the most 36

See World Bank (2003) Better Governance For Development in the Middle East and North Africa: Enhancing Inclusiveness and Accountability Report.

35

likely forces to trigger change. Untapped employment and real output growth potential exits in MENA from global trade integration. The prospects for trade expansion in non-oil sectors is huge given the intrinsic characteristics of the region and its countries. MENA has great potential to expand trade in manufactures and services, including tourism. These areas are still underachievers and if tapped with the proper supporting policy framework could help in addressing the employment challenge of the region. Accelerating trade integration could help MENA in transiting from public to private sector led growth, from oil to non-oil sources of dynamism, and from protected domestic markets to competitive world markets. Trade could also help to move the MENA economies from agriculture and public employment into industry and services, where the future of the region’s employment opportunities are likely to reside. But for trade to be and effective development tool, supportive macroeconomic policies need to be in place and trade policy will need to address at-the-border trade barrier, as well as behind-the-border reforms, including regulatory bottlenecks and the investment climate to enhance supply response.37 Trade expansion could bring a large assortment of job opportunities to the region. In combination with a stable macroeconomic environment and one that encourages private investment and participation, including FDI, it could produce a winning situation for the region, boosting growth and employment. The gains from trade liberalization could be significant and the costs manageable. However, as with any policy reform there could be winners and looser in the short-term, so transition costs need to be minimized and effective safety net policies adopted to cope with them. Overall, trade expansion is the one of the best option to cope with the employment problem in MENA. Under the current conditions, with a regional employment of about 75 million, a labor force of about 93 million and an assuming and employment elasticity to GDP of about 0.638 an additional one percentage point in growth generated by exports in the nonoil sector or in services, could produce about 450,000 new jobs in the region. World Bank (2003c) estimates that with reasonable assumptions trade could directly and indirectly generate about 4 million jobs in the next five years. This additional job opportunities could make a major dent in the number of unemployed in the region. Trade alone will not solve all of the employment problems of the MENA region. However, it will help reduce the pressures that unemployment and demographic trends are placing in the region, and at the same time improve the overall conditions in which MENA countries operate.

37 38

See World Bank (2003) for a comprehensive proposal of trade policy and investment climate improvement measures. World Bank (2003c).

36

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MENA Working Paper Series No. 1

Has Labor Migration Promoted Economic Integration in the Middle East? June 1992. Nemat Shafik, The World Bank and Georgetown University.

No. 2

The Welfare Effects of Oil Booms in a Prototypical Small Gulf State. September 1992. Ahmed Al-Mutuwa, United Arab Emirates University and John T. Cuddington, Georgetown University.

No. 3

Economic and Social Development in the Middle East and North Africa. October 1992. Ishac Diwan and Lyn Squire, The World Bank.

No. 4

The Link Between Trade Liberalization and Multi-Factor Productivity: The Case of Morocco. February 1993. Mona Haddad, The World Bank.

No. 5

Labor Markets in the Middle East and North Africa. February 1993. Christopher A. Pissarides, The London School of Economics and Political Science.

No. 6

International Competitiveness of the Private Industry and the Constraints to its Development: The Case of Morocco. June 1993. Hamid Alavi, The World Bank.

No. 7

An Extended RMSM-X Model for Egypt: Quantifications of Market-Oriented Reforms. September 1993. Karsten Nimb Pedersen, The World Bank.

No. 8

A Report on the Egyptian Tax System. October 1993. Mark Gersovitz, Roger H. Gordon and Joel Slemrod, The World Bank.

No. 9

Economic Development and Cooperation in the Middle East and North Africa. November 1993. Ishac Diwan and Lyn Squire, The World Bank.

No. 10

External Finance in the Middle East: Trends and Prospects. December 1993. Ishac Diwan, John Underwood and Lyn Squire, The World Bank.

No. 11

Tax Incidence on Agriculture in Morocco (1985-1989). April 1994. Jean-Paul Azam, CERDI, University of Auvergne, Clermont-Ferrand (France) et CSAE, Oxford (U.K).

No. 12

The Demographic Dimensions of Poverty in Jordan. August 1994. Chantal Worzala, The World Bank.

No. 13

Fertility and Family Planning in Iran. November 1994. Rodolfo A. Bulatao and Gail Richardson, The World Bank.

No. 14

Investment Efficiency, Human Capital & Migration A Productivity Analysis of the Jordanian Economy. May 1995. Gaston Gelos, Yale University, Department of Economics.

No. 15

Tax Effects on Investment in Morocco. August 1995. David Sewell, Thomas Tsiopoulos and Jack Mintz, The World Bank.

No. 16

Reconstruction in Lebanon: Challenges for Macroeconomic Management. April 1999. Daniela Gressani and John Page, The World Bank.

No. 17

Towards a Virtuous Circle: A Nutrition Review of the Middle East and North Africa. August 1999. Regional HNP Knowledge Management, The World Bank.

No. 18

Has Education Had a Growth Payoff in the MENA Region? December 1999. Lant Pritchett, The World Bank.

No. 19

Rationalizing Public Sector Employment in the MENA Region. December 2000. Elizabeth Ruppert Bulmer, The World Bank.

No. 20

Achieving Faster Economic Growth in Tunisia. March 2001. Auguste T. Kouamé, The World Bank.

No. 21

Trade Options for the Palestinian Economy: Some Orders of Magnitude. March 2001. Claus Astrup and Sébastien Dessus, The World Bank.

No. 22

Human Capital and Growth: The Recovered Role of Educational Systems. April 2001. Sébastien Dessus, The World Bank.

No. 23

Governance And The Business Environment In West Bank/Gaza. May 2001. David Sewell, The World Bank.

No. 24

The Impact of Future Labor Policy Options on the Palestinian Labor Market. June 2001. Elizabeth Ruppert Bulmer, The World Bank.

No. 25

Reform and Elusive Growth in the Middle-East – What Has Happened in the 1990s? July 2002. Dipak Dasgupta, Jennifer Keller and T.G. Srinivasan, The World Bank.

No. 26

Risks and Macro-Economic Impacts of HIV-AIDS in the Middle East and North Africa: Why waiting to intervene can be costly. July 2002. David A. Robalino, Carol Jenkins and Karim El Maroufi, The World Bank.

No. 27

Exchange Rate Regime and Competitiveness of Manufactured Exports: The Case of MENA Countries. August 2002. Mustapha Kamel Nabli and Marie-Ange Véganzonès-Varoudakis, The World Bank.

No. 28

Governance and the Investment Climate in Yemen. September 2002. Arup Banerji and Caralee McLiesh, The World Bank.

No. 29

Exporting Labor or Goods? Long-term Implications for the Palestinian Economy. October 2002. Claus Astrup and Sébastien Dessus, The World Bank.

No. 30

Poverty and Transfers in Yemen. December 2002. Dominique van de Walle, The World Bank.

No. 31

Yemen and the Millennium Development Goals. March 2003. Qaiser Khan and Susan Chase, The World Bank.

No. 32

Making Trade Work for Jobs : International Evidence and Lessons for MENA. July 2003. Dipak Dasgupta, Mustapha Kamel Nabli, Christopher Pissarides (LSE), and Aristomene Varoudakis, The World Bank.

No. 33

Opening up Telecommunications to Competition and MENA Integration in the World Economy. July 2003. Carlo Maria Rossotto, Khalid Sekkat and Aristomene Varoudakis, The World Bank. Growth, Private Investment and the Cost of Doing Business in Tunisia. February 2004. Anós Casero, Paloma, and Aristomene Varoudakis. The World Bank.

No. 34 No. 35

Current World Trade Agenda - Issues and Implications for the MENA Region. May 2004. Dipak Dasgupta, Mustapha Kamel Nabli, T.G. Srinivasan and Aristomene Varoudakis, The World Bank.

No. 36

Reforms and Growth in MENA Countries - New Empirical Evidence. May 2004. Mustapha Kamel Nabli, and Marie-Ange Véganzonès-Varoudakis, The World Bank.

No. 37

Gainers and Losers from Trade Reform in Morocco. August 2004. Martin Ravallion and Michael Lokshin, The World Bank.

No. 38

Fiscal and Public Debt Sustainability in Egypt. September 2004. Pedro Alba, Sherine El-Shawarby and Farrukh Iqbal, The World Bank.

No. 39

Trade and Foreign Exchange Liberalization, Investment Climate and FDI in the MENA Countries. September 2004. Khalid Sekkat and Marie-Ange VéganzonèsVaroudakis, The World Bank.