Building Knowledge Economies for Job Creation, Increased Competitiveness, and Balanced Development in MENA region

High Level Conference
1-3 December, Tunisia

Dr. Shamshad Akhtar
Regional Vice-President
of
the World Bank
Middle East and North Africa

Your Excellency President Ben Ali,

Mr. Director General of ISESCO,

Your Excellencies Mr. Ministers,

Distinguished Guests,

1. Let me start by thanking His Excellency President Zinelabdine Ben Ali for initiating and presiding over this excellent initiative, and the Government team that has worked with us and ISESCO for the wonderful organization of this conference.  It is a real pleasure for me to visit Tunisia for the first time and have a chance to attend what we all hope will be a very useful and informative conference.  The organization of this conference in Tunisia is a testimony to the commitment of its President to rising to the challenges of job creation, increased competitiveness and balanced development.

2. Let me also express my thanks for His Excellency Mr. Abdulaziz Othman Altwaijri, Director General of ISESCO for the fruitful cooperation between our institutions and for his personal commitment to promoting education, science and technology in the Islamic World.

3. The World Bank is keenly supporting this forum as well as other endeavors of this type to develop and promote better understanding of advantages and merits of KE and how to nurture and foster cross-country collaboration to build knowledge economies.  There is a long standing recognition that knowledge and its appropriate application, transmission and diffusion are critical drivers for enhancing productivity that in turn offers higher and sustainable economic growth. Without knowledge diffusion, the incremental dosage of factors of production such as labor and capital would at best yield diminishing returns.
 
4. Several economies have adopted development strategies to mainstream and integrate technology diffusion and transmission to take full advantage of globalization.  This involves maximizing the benefits from trade and financial integration, labor mobility and technology diffusions, all of which have been made possible by the development of ICT and worldwide interconnectivity.  The new economic growth model advocates appropriate formulation, application and mainstreaming of integrated knowledge in the overall development strategy of the economy.  Key lessons from the successful cases of knowledge economies suggest that knowledge has to be grounded and rooted in education system and supplemented by research and innovation.  Another critical element is to participate to global production networks and outsourcing arrangements. 

5. According to the World Bank’s Knowledge Economy Index measures, MENA region has made progress over the last ten years in terms of rolling out education access and ICT and gradually improving the institutional environment for private-sector led growth.  At the same time, other regions have made even more rapid progress in these same areas –so that the region is further behind comparators and competitors today on the knowledge economy index than it was in 1995.  What is critical to recognize is that a number of MENA countries have yet to develop a well conceptualized strategy for knowledge economy and properly integrate it in their development plans.  This would require adoption of a combination of policies including significant transformation of education sector and the innovation system, the overall ICT infrastructure and the overarching strengthening of economic and institutional regime to properly incentivize private sector led economic diversification.  

6. The World Bank has launched multiple initiatives to support building of the Knowledge-based economies.  Some countries are being offered development policy support to promote Private Sector or Innovation-Driven Growth by aligning the incentive regime and reducing state’s role in production that has nurtured inefficiencies. The World Bank has also launched an Arab World Initiative to address the impediments including inadequate cross border infrastructure that are holding back regional economic integration.  These issues - if addressed - would provide a larger context and ground for promoting knowledge economies in MENA region.  Furthermore two World Bank MENA regional reports also provide perspectives on the reforms undertaken and transformations still needed in two of the Knowledge Economy pillars: The Road Not Travelled in Education Reforms, and Unlocking Private-led Growth in MENA: From Privilege to Competition.

7. Despite impressive achievements in primary education enrollments and tripling of secondary enrollments, a principal barrier to the knowledge economy is the weak quality of education and mismatches between the supply and demand of skills.  None of the twelve MENA countries that took part in the last international TIMSS test of 8th grade math and science achieved above average scores, and overall scores were stagnant as compared to four years previously.  In today’s world, competitiveness depends on firms that employ a well-educated, technically skilled workforce that is capable of adopting new technologies and selling sophisticated goods – hence a priority on higher levels cognitive as well as non-cognitive skills.

8. The scientific base on which the Arab World can build cutting-edge industry is weak. In a region that is home to some of the world’s oldest universities, which have thousands of years of contribution to global knowledge, the Arab Leagues’ share of World scientific journal articles is a little above 0.5 percent.  As a percentage of GDP, Arab countries spend much less on R&D than comparators and competitors. 

9. The World Bank’s work on private sector highlights that significant economic reforms have been launched in the region, but private sector dynamism remains relatively muted to date, particularly compares to East Asian countries.  Private investment across the MENA region increased by a modest 2 percentage points in response to the reforms enacted to date.  MENA’s average number of registered businesses per 1,000 people is about a sixth of that in the OECD, and less than a third of that in Eastern Europe and Central Asia.  The private sector cites partial implementation of reforms and institutional weaknesses as an obstacle to business development.  This highlights the importance of the right incentive framework for allowing the private sector to innovate and grow. 

10. The institutional environment for innovation in the private sector is captured by the regional export statistics.  There has been growth in high tech exports from some Arab states but the starting base was very low.  For example, Tunisia’s high tech exports increased fivefold between 1997 and 2005.  However, it remain relatively small and across the MENA region, high tech exports still account for only 0.6 percent of the total exports, compared to 3 percent for Eastern Europe, 6 percent for Latin America and the Caribbean and 25 percent for East Asia and the Pacific. The most diversified countries in MENA export around 1500 goods--most of them in low-value added sectors, compared to close to 4000 goods in countries like Poland, Malaysia or Turkey. Diversification is even weaker in oil-rich countries, many of which export less than 500 goods.  

15.  In conclusion, let me emphasize that Arab World is endowed with considerable human capital, creativity and resources.  Many countries of the region have already embraced the Knowledge Economy concept, and some are already taking strides towards its realization. The aim of the World Bank is to stimulate and accompany this process.   In addition to supporting the transition to the KE in Algeria, Morocco, Saudi Arabia, Tunisia and Qatar, the World Bank Group is aiming to leverage client country demand with the Group’s knowledge and investment resources. The AWI launched recently by the World Bank is articulated around three pillars all of which can support the region’s growing knowledge economy base:

• Knowledge and capacity building: the AWI will create knowledge on key regional challenges to underpin policy dialogue and project preparation.
  
  
• Regional projects: the AWI will support projects in regional and global trade facilitation and regional infrastructure as well as regional approaches to water management and environmental issues.
  
  
• Harmonization and standardization of policy and regulatory approaches. The AWI will support regional approaches in trade and financial integration, social services and education, as well as public good areas such as environmental management.

14.   Going forward the AWI will focus on activities with significant cross-border benefits, in areas where consistency of policies and actions add to credibility, economies of scale, or potential competition.  We are hoping these endeavors and the countries own development program should help promote knowledge economies of the Region.

Again, let me thank his Excellency President Ben Ali, and all of you involved in this conference for the opportunity to address you here today. I wish you all a productive Conference.