Why Arab countries are the worst performers

Arab States would benefit from placing labor productivity growth at the heart of the strategic priorities of their national development plans, in line with the United Nations 2030 Agenda for Sustainable Development. This is what the International Labor Organization suggests in a report on productivity growth. The latter decreased by 0.8% in GCC countries and by 1.5% in non-GCC countries over the period 2010-2019, compared to a global increase of 2.1%.

Arab countries can turn the post-health crisis recovery into a real opportunity to improve productivity in their economies, through targeted economic reforms. This is what emerges from a report by the International Labor Organization (ILO) on productivity growth in the Arab States. According to ILO experts, this includes placing labor productivity growth among the strategic priorities of national development plans, in line with the United Nations 2030 Agenda for Sustainable Development. The report finds that after three decades of good growth, following the discovery of oil in the early 1950s, labor productivity has declined since the 1980s in Arab economies in general, and in those of the Gulf Cooperation Council (CCG) in particular. The ILO also reports an accelerating decline in productivity over the past two decades. Compared to other regions, the Arab States is now the worst performer globally. According to the document, between 2010 and 2019, productivity declined by 0.8% in GCC countries and 1.5% in non-GCC countries.

By comparison, in emerging and developing countries in other regions, it increased by an average of 3.1% over the same period, while in advanced economies it increased by 1%, with the world average registering a increase of 2.1%. “The main reasons for these downward trends in the Arab States region are lack of economic diversification with reliance on low productivity sectors, failure to invest tax gains in promoting the growth of productivity, and the lack of investment in the qualification of the workforce to meet the new needs of the labor market”, explained Paolo Salvai, principal specialist of employers for the Arab States, who led the elaboration of the report alongside Jose Luis Viveros Añorve, responsible for employers’ activities at the ILO.

Premature deindustrialization

For the authors of the report, the transfer of economic activity from agriculture to manufacturing industry is a major source of increased productivity in emerging economies. The document indicates that most Arab countries have gone through a process of premature deindustrialization, and therefore currently lack a strong manufacturing sector. The economic strategies of most countries in the region focus on low value-added service sectors or on the finance and construction sectors. This has led, according to the ILO, to productivity growth, as services are less capital-intensive and less open to international competition. This undermines economic and productivity growth and strengthens the ranks of the informal labor force.

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