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Consensus and capacity-building: Tipping the scales in favor of reform

After a year away, I returned to Morocco for 10 days. I am sure that I will find the visit both challenging and satisfying. My central interest is to better understand the tangible governance issues facing the PJD-led government. It continues to struggle with advancing its agenda through parliament and achieving a consensus among its coalition partners on policies that effectively attack unemployment, the budget deficit, corruption, and social reforms. Most organic laws required to enable reforms promised in the 2011 constitution are still either being drafted or pushed off to a later agenda. And, as Morocco moves towards implementing its regionalization strategy, there is still a long way to go to enable officials and civil society to acquire the skills associated with effective local government.

While the policy debates on issues ranging from the latest version of the media law to subsidy and judicial reforms and strengthening protection for whistleblowers are well reported in the press, many critics are claiming that there are few results after 16 months in office. My assumption is that this is politics as usual in any democracy, especially a hybrid like Morocco. But there is more going on here that I want to explore.

In a country where labor issues can bring thousands of people into the streets, it is remarkable, but not surprising, that a common platform addressing labor mobility, training for work, and an open regulatory environment has not been vetted and moved through parliament yet. As in the US, political leaders seem to have a block against cooperating on issues despite the reality that their constituencies voted for change, not for stalemate.

Morocco badly needs to restructure the labor environment to enable workers to acquire skills and access to jobs while employers will benefit from more flexibility in responding to variable market conditions and a reduction in restraints on employee hiring and firing. This is not to say that important steps have not already been taken. As I’ve written previously, the government is moving incrementally to improve the labor force by broadening and upgrading technical and vocational training and by setting up a system to certify on-the-job skills acquisition. These steps however have not made a significant dent in the unemployment and underemployment rates.

An equally daunting task is focused on reducing and realigning the government’s subsidies to better serve the less well off in a country where a significant portion of the population is in the informal economy. Today, rich and poor equally benefit from fuel and food subsidies and the government is exploring options that not only relieve human needs but also encourage small business expansion. One proposal that I heard last night is to subsidize small farmers rather than the price of imports to the wholesalers. Of course, I asked if this was just another form of welfare that could grow into corporate subsidies, which like in the US distort market prices. But that is not the approach that Morocco is considering. Greater support to local growers would include training and equipment for better crop practices ranging from higher quality seed and watering to the use of fertilizer and more efficient cultivation, storage, and distribution. This would expand their capacity for more production, new employees, and fresh local supplies to market.

Whether it’s better labor practices or rationalizing subsidies, at the heart of the movement to reform is human development. Last week, I met with Mariam, a very capable, multilingual woman IT graduate from the top school in Morocco. She graduated months ago and still doesn’t have a job. Less than 30 percent of her classmates have found employment. One woman friend found an unpaid internship in Turkey through an organization that places capable graduates, for a fee, in positions scattered around the world. Now, Mariam is seriously looking at a position in India…ironic, isn’t it that Morocco is sending its talented young people, at their own expense, to fuel the IT capabilities of other countries.

I can’t help but put these concerns into a larger context – the daunting challenge of building consensus around reform policies that will benefit Moroccans and the simultaneous need to greatly enlarge capacity building training for the grassroots as well as the managers of Morocco. The promised policy of regionalization – devolving power to local governments – requires local communities and their leaders to have skills for administration and governance. The demand for more and better jobs requires policies that enable the transformation of a rigid economic regime into a market-friendly, results-driven, equal-opportunity economy that prioritizes achievement over status. Hopefully, in next week’s posting, there will be some success stories that I can share about where Morocco is heading.

Repairing the neglect of workforce development in the MENA

The World Bank has issued its fourth volume in the series Jobs for Shared Prosperity – Time for Action in the Middle East and North Africa. Well over 300 pages, the study provides its five main messages separately for those who need a super condensed summary. Reading through the messages, I noticed how clear it is that very few results can be achieved without strategies that integrate the resources and talents of the public and private sectors. Drawing on my experiences across the MENA region, there is much to be gained from cross-border sharing of best practices regardless of the differences in the economic profiles of the countries. Let’s look at the region in terms of the key messages of the study.

Message #1: Labor markets in the MENA make poor use of the available human talent and resources, thus inhibiting the economic potential of countries and people in the region. Current political dislocations aside, Arab countries, like much of the developing world, made post-independence choices that centralized economic growth around government institutions. Despite dramatic changes in society since then in population, education, middle class composition, ethnic/minority/gender issues, global market standards, etc., governments were slow to accommodate to the realities of today’s economies. Concurrently, vested interests working with their government counterparts too often dominated the private sector. This cronyism added to the obstacles inhibiting progressive economic policies. Human capital was collateral damage in this scenario since labor had little impact on employment standards in a system of regulated government-social services and little flexibility in labor markets.

Message #2: Change the rules to create a dynamic private sector that capitalizes on the full range of the region’s human capital. Government business regulations have been slow to shed their opacity; end interference in the business of business, and equitably protect the rights of owners and employees. A major incentive towards transparency is that all MENA countries require FDI, which requires attention to rule of law, accountability by government officials, and awareness of environmental impact. The WTO, bilateral trade agreements, and a host of multilateral treaties have helped shine a light on changes that must be made for an economy to be competitive.

Message #3: Let skills flow into productive private sector jobs by realigning employment conditions in both the private and the public sector and rethinking labor regulation. Lower the barriers holding back women who want to work. MENA governments can no longer be the employers of first or last resort. Coddling public sector employees in non-productive jobs limits economic efficiencies and distorts opportunities. Efforts to enhance the employment of youth and women will be advanced through adopting unemployment policies that enable transitions to the labor force and access to services that respect the needs of working families.

Message #4: Make young people employable by closing information gaps, improving quality and relevance of skills, and partnering with the private sector in training. These steps have become the mantra of US, international and local government programs to advance employment among young people. An interesting corollary to this focus on training programs is providing recognition to those who have acquired skills informally, through on-the-job experience. Morocco is piloting a program called Validation des Acquis de l’Experience Professionelle (VAEP) to provide accreditation to workers who can demonstrate proficiencies that qualify them for advanced positions. Piloted through a cooperative agreement with the French government, VAEP originally started with the building trades in 2008, was expanded to textiles and clothing in 2011, and is poised to move into hospitality and meat processing. The bottom line is that professional skills validation through transparent proficiency examinations will “make it possible for employees to obtain diplomas or certificates outside of their initial schooling,” according to the article in Le Soir.

Message #5: Use short-term interventions to respond to immediate needs while building credibility and consensus for medium-term, game changing reforms. Demands for jobs, training, market-focused education, and transparency will not be satiated by government promises. Public-private partnerships can be a critical vehicle for identifying quick start-up projects and programs that support jobs for those marginalized and underutilized in current labor markets. Government subsidies for employment can be used more efficiently when tied to needs identified by current and future employers. The success of longer-term reforms of labor regulations, jobs training and education, gender-related policies, and workplace health and safety rules can be facilitated by piloting initial efforts at these reforms in short-term programs that deliver jobs and generate data that supports new policies.

The World Bank’s Jobs for Shared Prosperity, like the Arab Human Development Reports of a decade ago, offers a serious and methodical critique of how to take an under-performing region and enhance its prospects by freeing its most abundant resource – its people – from antiquated and ineffective labor constraints. Empowering employees is at the heart of building local stability and prosperity in the MENA, and it is an agenda that can no longer be postponed.

Indicators Up Yet Gaps Remain in Morocco’s Economic Growth

Over the past two weeks, several stories seem to indicate that Morocco is on the right track for economic growth in 2013. As with the other Maghreb countries, Morocco faces many challenges ranging from quality of labor to a somewhat confusing regulatory environment in attracting foreign investment. Yet, tourism is up over last year, the EU has launched talks for a free trade agreement, a major Moroccan bank has signed a trade finance credit line with the Europeans, and, at least on the economic side, most analysts believe that GDP growth will exceed 3 percent.

Reuters carried the story on the EU’s intention to negotiate a free trade agreement with Morocco as part of the EU’s response to the Arab uprisings. It is significant in that the first treaty will be negotiated with Morocco, another indicator of its perceived stability and commitment to opening its markets further. Trade between Morocco and the EU topped 24 billion euros in 2011, and the EU is hoping to further expand its activities in the services sector as well. The EU’s goal was well stated by Marielle De Sarnez, a French member of the European Parliament, “Smooth negotiations of the free trade agreement are crucial because they serve as an example for other countries in the southern Mediterranean…this agreement will also allow in the long term greater regional integration for the Maghreb countries.”

Her sentiments were echoed by Vice-President of the European Investment Bank (EIB), Philippe de Fontaine Vive, on the sidelines of the EIB’s annual review. He noted that Morocco is the first recipient under a new program of the FEMIP (Facility for Euro-Mediterranean Investment and Partnership) that commits nearly one billion euros of financing “to support the transition to a new form of innovative and more inclusive growth in Morocco.”   More than a dozen major projects were funded in 2012, in areas as diverse as transportation infrastructure (including the extension of rural roads), agriculture, technological innovation, solar energy, education and health sectors, in addition to the medina renovation programs in Fez and Meknes, and coming to Casablanca. He went on to say that “This shows both that the EIB is there to support the process of democratic transition and that Morocco has the capacity in diverse sectors to be able to mount innovative projects, the most emblematic in the year 2012 has been the solar project at Ouarzazate, for which we coordinated the European funding.”

It is the capacity of local agencies and institutions that is the focus of a $75 million trade finance facility between the European Bank for Reconstruction and Development (EBRD) and Banque Marocaine du Commerce Exterieur (BMCE Bank). The financing line is to support international and intraregional trade transactions with both guarantee and cash advance facilities. It will support trade activities by “facilitating the distribution of imported goods and contribute to the overall growth of small and medium-sized enterprises (SMEs).” How this growth is perceived in-country was the focus of an article in the Financial Times by Chris Wright that highlighted the perceptions of fellow travelers on the train from Casablanca to Rabat. Comparing the views of a Brit, a Saudi, and a Moroccan leaves one with the impression that while Morocco is doing better than others affected by the Arab uprisings, it still has many challenges ahead before its recovery and growth are assured.

A key insight into what needs to be done came from Oussama Romdhani, former Tunisian minister of communication. In an article in the World Affairs Journal, he proposed that “A durable recovery will require far-reaching policy reforms addressing the chronic mismatch between educational training and the job market. In this particular concern, US advice and assistance could help North African countries modernize their inefficient higher education and vocational training systems.” The gap between jobs and skills in Morocco continues to draw the attention and resources of both the government and the private sector. It is difficult to attract foreign direct investment without an available qualified workforce that operates within a relatively open and free labor market. The government has initiated a series of programs that address the skills side but still lags behind in freeing up its regulatory environment to facilitate a more dynamic labor sector. Hopefully, as the growth prospects continue to improve, there will be time to address the structural reforms needed in the labor market that will accelerate the trend towards greater prosperity.