Tag Archives: governance

Complexification of production as a vector of economic transition and the role of short-term policies

Posted on

FEMISE is pleased to announce the publication of its research project FEM42-07, “The complexification of productive systems as a vector of economic transition in the MENA and the role of short-term policies”, coordinated by Pr. Nicolas Peridy (LEAD , University of Toulon).

Our work shows that the economic complexity of a country can be affected by the performance of its neighbors and then influenced by its own geographical position. However, this process may mask regional phenomena of divergence that must be related to the roles played by national and / or regional public policies, as well as the economic, structural and demographic dynamics (GDP / capita, education, innovation, natural resources, urbanization, …).

The main recommendations are :

  • Support the development of new and highly sophisticated products beginning with providing incentives to produce these new products, and targeting activities that have training effects. In particular, Tunisia and the UAE should develop complex products such as machinery, chemical and electrical industrial clusters
  • Quickly implement training adapted to technological changes
  1. Develop part-time training courses in technical, technological, industrial and service sectors in innovative and high value-added sectors
  2. Develop continuing education in these same sectors
  3. Open corporate training in the acquisition of specific skills in these areas (including WTO training on the role of international trade as a vector of technological sophistication)
  • Reform higher and vocational education
  1. Reinforce the adequacy of training in relation to new professions
  2. Develop partnerships with European, Asian or American universities
  3. Develop public / private partnerships
  4. Use the system of professionalized relocated diplomas
  • Develop innovative sectors (support for certain start-ups, FDI, development of free zones or technological business zones), particularly through a tax incentive policy
  • Improve economic freedom, in particular through administrative simplification laws. This will contribute to the improvement of the business environment related to a labor market reform aimed at making it more flexible, transparent and competitive (labor law)
  • Improve logistics performance with appropriate investments but above all appropriate reforms (commercial facilitation in ports, reduction and simplification of administrative procedures, improvement of the effectiveness of customs controls, automation of procedures, effective fight against corruption, etc.)
  • Improve governance, in particular to fight corruption effectively and promote transparency.
  • Reform taxation to make it simpler, more efficient and more incentive
  • Use sound macroeconomic policies, in particular to reduce the economic vulnerability of MENA countries (sustainable fiscal and fiscal policies, debt management, controlled monetary policies)
  • Improve the management of natural resources (gas, oil, etc.):
  1. use the benefits of natural resources to diversify and sophisticate the economy
  2. develop industrial zones based on comparative advantage in natural resources
  3. provide SME financing facilities and building the capacity of local businesses to accelerate structural transformation
  4. continued improvement of macroeconomic policies to effectively manage the risks associated with Dutch disease and the volatility of revenues from natural resources
  5. create a favorable environment for private investment.

These recommendations can be initiated and implemented quickly by public authorities which must send a strong signal to the economic actors in order to accelerate this process of sophistication of the Mediterranean economies, with the aim of promoting growth and employment, particularly qualified.

 

FEMISE MED BRIEF no5 : Egypt and the WTO Government Procurement Agreement

Posted on

FEMISE is launching its new Policy Brief series MED BRIEF aspiring to provide Forward Thinking for the EuroMediterranean region. The briefs contain succinct, policy-oriented analysis of relevant EuroMed issues, presenting the views of FEMISE researchers and collaborators to policy-makers. 

The fifth issue of MED BRIEF “ Should Egypt join the WTO Government Procurement Agreement (GPA)?” is available here.

Ahmed Farouk Ghoneim (Professeur d'économie, Faculté des sciences économiques et politiques, Université du Caire, FEMISE)

Ahmed Ghoneim (Faculty of Economics & Political Science, Cairo University, FEMISE)

It is also available in Arabic here.

“This Policy Brief, by Ahmed Farouk Ghoneim (Professor of Economics, Faculty of Economics & Political Science, Cairo University), tries to answer the critical question of whether Egypt should join the WTO GPA? The debates on theoretical and policy levels have not reached a clear cut answer regarding the pros and cons of a developing country joining such an agreement. Yet, we try in this policy brief to clarify some of the misconceptions associated with the joining of such agreement, and identify what are the steps needed for membership to be fruitful”

The list of FEMISE MED BRIEFS is available here.

 

The policy brief has been produced with the financial assistance of the European Union within the context of the FEMISE program. The contents of this document are the sole responsibility of the authors and can under no circumstances be regarded as reflecting the position of the European Union.

Good governance a stimulus for trade in Middle East

Posted on

Governance in Middle-Eastern and North African countries is a major factor in their businesses’ ability to trade and participate in the global economy. The quality of institutions correlates with the export performance of companies, as shown by the latest FEMISE report (FEM41-08).

The governance in Middle-Eastern and North African countries is a major factor in their businesses’ ability to trade and participate in the global economy. ©DR

The latest FEMISE publication, “Corporate Performance in Transition: The Role of Business Constraints and Institutions in the South Mediterranean Region” (available here), is structured in three parts.
After analyzing the knowhow and constraints of companies located in the Middle East and North Africa, the report goes on to examine the case of Egyptian companies, looking at the obstacles impeding their performance.

The third part of the report, coordinated by economics professor Inmaculada Martínez-Zarzoso, underlines the importance of governance in the companies’ ability to export or import.As part of the ambitious study, the FEMISE economists looked at bilateral exports between 189 trading partners and 19 exporting countries between 1996 and 2013. It transpires that, while democracy and well-functioning institutions are a prerequisite, the business environment not only has an influence on productivity, but also has an effect on the performance of the economy as a whole. Both the trading environment and the institutional framework impact corporate performance and the country’s economic vitality.

The importance of consistent governance in facilitating trade

The study shows that, in the wake of the Arab Spring, new criteria came to the fore. Thus, invoicing and accounting are seen as determining factors in boosting exports.

The business world needs a stable environment, especially where property rights are concerned. Respect for the rule of law, fighting against corruption and an efficient administration boost business relations. Furthermore, two countries with similar governance will see a positive effect on their export levels.

“Similar regulations and the rule of law boost exports in the Middle East. Policies aimed at freeing up trade could therefore be targeted at trading partners with similar norms of governance,” the document states, adding that each of the six governance indicators has a positive impact on bilateral trade.

For more on this timely subject, please download the report available here.

Article produced in partnership with Econostrum.

To subscribe to the Econostrum Newsletter : http://www.econostrum.info/subscription/

Corporate Performance in Transition : The Role of Business Constrains and Institutions in the South Mediterranean Region

Posted on

Note: The research project comprises three papers:

Paper 1. Labor skills, institutions and firm performance in developing countries

Paper 2. Business environmental constraints in MENA countries with a special focus on Egypt

Paper 3. Exports and governance: Is MENA different?

This report aims at analyzing the recent trends in corporate performance and economic success in Southern Mediterranean countries at the firm and country level. More specifically, it aims at identifying and evaluating the potential factors that may trigger and foster economic changes in the region, focusing in particular on the role played by skill constraints, the business environment and the institutional setting in explaining economic performance, measured as productivity, sales growth rates and exports, as well as quantifying their relative importance. Firstly, we investigate different sources of economic performance steaming from factors that are internal and external to the firm. At the firm level, the business environment encompasses features relative to the work force, legal, regulatory, financial, and institutional system of a country and therefore it has an impact on the performance of firms and industries.

Secondly, since the business environment affects firms and country performance, then we proceed with an empirical investigation at the country level as well. The common underlying assumption is that firms and countries facing ‘better’ business environments and institutions can be expected to perform better.

The main novelty of this report is to produce empirical evidence covering the transition period on the conditions that influence private sector performance and country level exports in the South Mediterranean region in comparison to other regions/countries that also went through an economic and institutional transition in the past. As a result, the study provides the tools for designing appropriate development policies.

This report is structured into three parts: the first part focuses on skills and resource characteristics of firms and the role of the main perceived constrains to do business at the firm level. Micro survey data is used to explore the impact of labor skills and other firm-specific characteristics on firm performance, measured as sales growth rates, in 135 developing countries. The analysis uses a consistent and large data set from the World Bank’s Enterprise Surveys. The results show that labor skills and firm-specific characteristics are significant predictors of firms’ performance. However, the predictive power of labor skills and the firm-specific characteristics is significantly affected by national economic and non-economic factors. Indeed, the national levels of economic, financial and human development as well as income inequality, along with domestic conditions of regulatory governance and other institutions as well as legal and social heterogeneity, all have a role to play in determining firms’ performance. The results show that the classification of firms as labor skill-constrained or not in developing countries can be better assessed on the basis of both micro-level and macro-level factors.

The second part of the report specifically focuses on the main obstacles that MENA firms, and in particular Egyptian enterprises, face to do business in their country and investigates to what extent the constraints affect firm performance. Firm’s performance is measured as Total Factor Productivity (TFP) and labour productivity (LP). Our analysis evaluates the effects of the different business indicators, obtained from the World Bank Enterprise Survey using firm level data from manufacturing firms, on TFP/LP. A number of control variables commonly used in the empirical literature are also included in the model. The main results indicate that access and cost to finance, tax rates, regulatory policy uncertainty, the price of land and basic infrastructures, such as access to water and electricity, are among the most relevant factors for Egypt. These findings have important policy implications, in particular for policy makers and will help them decide what sort of specific actions can be taken to reduce the main obstacles and consequently to pave the way for manufacturing Egyptian firms to become more competitive. The analysis is also extended to other countries in the region, namely Lebanon, Jordan, Morocco and Tunisia and the environmental constrains before and after the Arab Spring are compared. The main findings indicate that regulatory and policy uncertainty, corruption and crime have become more important obstacles after 2011 for most firms in these countries.

The third part focuses on the country-level analysis and investigates the role of the quality of institutions and its different dimensions in the selected countries in explaining export performance. It aims at analysing whether higher quality of economic governance rewards economy performance and facilitates the integration of the MENA region in the world economy. A gravity model of trade augmented with governance indicators is estimated using bilateral exports among 189 trading partners and also for 19 MENA exporters over the period from 1996 to 2013. The main results show that, individually, each of the six governance indicators in the exporting and the importing countries considered has a positive effect on bilateral trade. However, the results for MENA exporters slightly differ. Governance in the importing countries seems to be less relevant for MENA exporters than for the rest of exporters. The effect of country pair similarity in governance indicators indicate similar levels of regulatory quality and the rule of law in exporter and importer countries favours exports of MENA countries. Similarities in voice and accountability also foster exports in the average exporter, but it does not seem relevant for MENA exporters.