John Panzer World Bank February 2007 Global Economic Prospects, 2007 Managing the Next Wave of Globalization in North Africa.

John PanzerJohn Panzer

World BankWorld Bank

February 2007February 2007

Global Economic Prospects, 2007Global Economic Prospects, 2007Managing the Next Wave of Globalization in North AfricaManaging the Next Wave of Globalization in North Africa

Growth in developing countries will remain strong, Growth in developing countries will remain strong, boosted by improved policies and favorable financial boosted by improved policies and favorable financial conditionsconditions

Growing role of developing countries in the next 25 Growing role of developing countries in the next 25 yearsyears

Significant opportunities –yet countries and firms will Significant opportunities –yet countries and firms will have to work hard to seize them have to work hard to seize them

Medium-term outlookMedium-term outlook

0

10

20

30

40

50

60

70

80

1980 2005 2030

US$2001 trn

Source: World Bank simulations with Linkage model.Source: World Bank simulations with Linkage model.

GDP of high-income and developing countries GDP of high-income and developing countries

Developing countries

High-income countries

$72 trn

23%

31%

Developing countries share in global economy will rise Developing countries share in global economy will rise as global integration intensifiesas global integration intensifies

16%

But at the global level, not everyone may take full advantageBut at the global level, not everyone may take full advantage

2005

2030

0

5

10

15

20

25

30

35

40

East-AsiaPacific

South Asia Europe &Central

Asia

MiddleEast &NorthAfrica

Sub-Saharan

Africa

LatinAmerica &

Carib.

Per capita incomes as percent of high-income countriesPer capita incomes as percent of high-income countries

NoteNote: Ratio of PPP-adjusted per capita incomes relative to high-income average. PPP is fixed at base year (2001) level.: Ratio of PPP-adjusted per capita incomes relative to high-income average. PPP is fixed at base year (2001) level.SourceSource: World Bank simulations with Linkage model.: World Bank simulations with Linkage model.

Realizing the potential of global integration requires an Realizing the potential of global integration requires an affirmative policy response – domestically and globallyaffirmative policy response – domestically and globally

Domestic policies crucial to attract knowledge, technology and investment to Domestic policies crucial to attract knowledge, technology and investment to accelerate growth accelerate growth

Savings (opportunities from population transition) Savings (opportunities from population transition) Mobility of resources – capital and people (protect workers-not jobs)Mobility of resources – capital and people (protect workers-not jobs) Leverage the demand and resources of the global economyLeverage the demand and resources of the global economy

Multilateral collaborationMultilateral collaboration

Remove barriers: Doha Development AgendaRemove barriers: Doha Development Agenda Open RegionalismOpen Regionalism Use development aid to support integrationUse development aid to support integration

Source: Staff calculations, based on data from IMF World Economic Outlook

North Africa - 6North Africa - 6

Exports of goods (excluding oil) as share of world trade, country Exports of goods (excluding oil) as share of world trade, country averagesaverages

16 High Performers16 High Performers

To take full advantage of global growth, North Africa must integrate To take full advantage of global growth, North Africa must integrate further in the global economy in goods tradefurther in the global economy in goods trade

0 . 0 0 %

0 . 2 0 %

0 . 4 0 %

0 . 6 0 %

0 . 8 0 %

1 . 0 0 %

1 . 2 0 %

1 . 4 0 %

High performers also expanded market share in High performers also expanded market share in services…but North Africa has notservices…but North Africa has not

0 .0 0 %

0 .1 0 %

0 .2 0 %

0 .3 0 %

0 .4 0 %

0 .5 0 %

0 .6 0 %

0 .7 0 %

0 .8 0 %

0 .9 0 %

Exports of services as share of world trade, country Exports of services as share of world trade, country averagesaverages

16 High Performers16 High Performers

North Africa - 6North Africa - 6

Source: Staff calculations, based on data from IMF World Economic Outlook and United Nations COMTRADE

High growth countries use global production chains to High growth countries use global production chains to drive exports…North Africa improving but lagsdrive exports…North Africa improving but lags

Share of parts and components in total exports of goods Share of parts and components in total exports of goods and servicesand services

North Africa - 6North Africa - 6

16 High 16 High PerformersPerformers

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

Source: Staff calculations based on UNCTAD World Investment Report

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

4.00%

4.50%

5.00%

Annual FDI inflows as percent of Annual FDI inflows as percent of all FDI flows to low and middle all FDI flows to low and middle income countries, country income countries, country averagesaverages

High growth countries have been successful High growth countries have been successful in attracting FDI, but North Africa’s share is in attracting FDI, but North Africa’s share is decliningdeclining

North Africa - 6North Africa - 6

16 High 16 High PerformersPerformers

How can North Africa capitalize on these opportunities?How can North Africa capitalize on these opportunities?Tariff reforms must go further Tariff reforms must go further

0 . 0 0 %

5 . 0 0 %

1 0 . 0 0 %

1 5 . 0 0 %

2 0 . 0 0 %

2 5 . 0 0 %

3 0 . 0 0 %

1 9 9 5 2 0 0 5

U n w e i g h t e d a v e r a g e t a r i f f s

N o r t h A f r i c a

1 2 H i g hP e r f o r m e r s *

Source: UNCTAD, TRAINS

*) Due to data limitations, Maghreb countries only comprise Algeria, Egypt, Morocco and Tunisia. In the case of *) Due to data limitations, Maghreb countries only comprise Algeria, Egypt, Morocco and Tunisia. In the case of Algeria and Morocco, 1997 tariff data had to be used instead of 1995. The group of high performers was Algeria and Morocco, 1997 tariff data had to be used instead of 1995. The group of high performers was restricted to the 12 countries for which tariff data was available.restricted to the 12 countries for which tariff data was available.

Services liberalization is needed to promote trade and Services liberalization is needed to promote trade and investment flows, cut costs and drive key productivity gains.investment flows, cut costs and drive key productivity gains. Maghreb lags behind comparator countries in contestability of key service sectorsMaghreb lags behind comparator countries in contestability of key service sectors Liberalization of backbone services is essential to improve competitiveness Liberalization of backbone services is essential to improve competitiveness

(telecom, financial, transport, energy)(telecom, financial, transport, energy) Regulatory reform also needed to improve regulatory framework and service Regulatory reform also needed to improve regulatory framework and service

efficiencyefficiency

Source: World BankSource: World Bank

Reducing Logistics costs is essential for making North Reducing Logistics costs is essential for making North Africa more competitiveAfrica more competitive

L o g is t i c s P e r c e p t io n I n d ic a t o r s

00 . 5

11 . 5

22 . 5

33 . 5

44 . 5

S I N 1 G R C2 9

T H A3 1

C H L3 2

T U R 3 4

P O L4 0

J O R 5 2

T U N6 0

M R T 6 7

M O R9 4

E G Y9 7

S E N1 0 1

Y E M1 1 2

A L G1 4 0

Source: World BankSource: World Bank

Reduce tariffs and non-tariff barriersReduce tariffs and non-tariff barriers Integration and harmonization with EU and Integration and harmonization with EU and

neighbors through open regionalismneighbors through open regionalism Reduce cost of backbone services through Reduce cost of backbone services through

liberalization and competitionliberalization and competition To extent possible focus on protecting workers To extent possible focus on protecting workers

but not jobsbut not jobs

The Way Forward – Policies to Support The Way Forward – Policies to Support Export Growth and CompetitivenessExport Growth and Competitiveness