Friday,14 December, 2018
Current issue | Issue 1361, (21 - 27 September 2017)
Friday,14 December, 2018
Issue 1361, (21 - 27 September 2017)

Ahram Weekly

A race against time

Director of the Economics Department at the European Investment Bank Debora Revoltella spoke to Niveen Wahish about challenges facing the southern Mediterranean region 

A race against time
A race against time

The southern Mediterranean countries are in a race against time to realise the dreams of their people, Debora Revoltella, director of the economics department at the European Investment Bank (EIB), told Al-Ahram Weekly in an interview. 

Speaking on the sidelines of a conference organised by the EIB in Cairo last week, Revoltella said that one of the main challenges facing the region was keeping the macroeconomic dynamics sound in a fast-changing environment. 

She noted that while most of the countries in the region were anchoring their macroeconomic policies to IMF programmes, it was important that they combined their macroeconomic stabilisation efforts with more inclusive growth.

Many countries in the region used to have subsidies that distorted incentives in the economic system, she said. These not only negatively affected macroeconomic indexes, but also had negative effects on the microeconomic level in the behaviour of firms.

Subsidies incentivise a model that is not socially inclusive in which firms tend to be overcapitalised and tend to hire fewer employees in countries where more jobs are needed, she pointed out. 

Revoltella stressed the importance of making life easier for the private sector to enable it to grow and create more jobs. The simplification of the business environment was what was needed most, she said. 

Some of the reforms that had been implemented had moved in that direction and not in Egypt alone, but there was still a need for further measures to avoid policy conflicts that could be confusing for the private sector.

While acknowledging that reforms take time, she said they also needed commitment. One challenge facing the region was that unemployment was higher than in other comparable regions and the expectations of the people for jobs were high.

According to the International Labour Organisation (ILO), the Middle East and North Africa (MENA) region continues to have high youth unemployment rates of around 30 per cent. The countries of the region needed to transform their economies to create jobs, but this was complicated and would take time, Revoltella said.

However, she stressed that the region had an opportunity to make that happen. The Arab Spring revolutions of 2011 had created this, because “populations were asking for something different and countries cannot ignore them.”

“The cost of doing nothing now is higher, particularly with the technological advancements that have been seen worldwide,” she said. If the region is left out today, it could be left out forever, she warned.

Another issue facing the region is a lack of skills. Europe is also facing this problem, with firms complaining that they cannot find people with the right skills. This means that the education system is not preparing young people with suitable skills for the labour market, risking whole generations being left out and increasing the need to take action on education.  

On the sidelines of the conference, several funding agreements for Egyptian projects were signed and others were promised in the pipeline.

Some 400 million euros worth of agreements were signed that will go towards wastewater and sanitation in Kafr Al-Sheikh. Three other memoranda of understanding were also signed worth 209 million euros for the Kafr Al-Sheikh Kitchener Drainage Project, 172 million euros for a water treatment project in Fayoum, and a 400,000 euros technical grant to the Alexandria Water Company. 

Water projects in Kafr Al-Sheikh also received additional funds from the European Bank for Reconstruction and Development and the European Commission.

The EIB is also expected to contribute 255 million euros in funding for upgrades to the Cairo Metro’s first and second lines. Line three of the Cairo underground previously received 600 million euros. 

The EIB pledged 600 million euros to support small- and medium-sized enterprises (SMEs) in Egypt, Jordan, Lebanon, Tunisia and Morocco. This falls within the framework of the bank’s Economic Resilience Initiative aimed at stimulating investment in the private sector and vital infrastructure, help create opportunities for employment, and improve both living conditions and the business environment by increasing the provision of services like energy, transport, water, sanitation and education. 

According to the bank’s website, in 2016 the EIB provided 1.6 billion euros in the Mediterranean region, of which 60 per cent went to private-sector finance.

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