51795 May 2009 . Number 7 THE E MPLOYMENT CHALLENGE IN THE M AGHREB Najy Benhassine, John D. Blomquist, Mourad Ezzine, of these potential consequences and take them Rebekka E. Grun, Adriana Jaramillo, Nadine T. Poupart, seriously. Joana C. G. Silva 1 Maghreb Government Strategies and Bank Introduction: Generating more and better Response: Strategies in Maghreb countries aim quality jobs with higher productivity probably to take advantage of a stable macroeconomic constitutes the most important challenge the and fiscal situation, coupled with reduced Maghreb countries will face over the next debt exposure to achieve higher growth rates decade. Despite relatively high and sustained (7-8%) and more employment creation. After economic growth since 2004, employment achieving significant progress in improving creation has been insufficient to significantly the business environment and the investment reduce unemployment, or to absorb the flow climate, Tunisia and Morocco are now of youth joining the labor market. As a result, implementing an integrated approach to the unemployment rate remains high among stimulate employment creation, based on the youth, and has been rapidly increasing among Bank's MILES approach. Both countries are secondary education students and university building on a body of analytical products graduates. In addition, most new jobs are of developed in partnership with the Bank over low productivity, often in the informal sector the last few years. Algeria, which is f acing and benefiting the less educated. similar demographic challenges, is less advanced in terms of policy development but The Maghreb Youth Bulge: A Demographic has a keen interest in catching up with the Gift? Similarly to the rest of MENA, the other Maghreb countries and in meeting the Maghreb region is experiencing a demographic challenge. Throughout the demographic "youth bulge" coupled with a Maghreb, the focus is on the following areas: decline in fertility. The resulting decline in the dependency ratio could represent an 1. Investment Climate. All four countries opportunity for accelerated growth and have explicitly adopted private-led further poverty reduction, if adequate growth strategies. Yet, this shift to market- investments in the production factors and based mechanisms and the promotion of appropriate policies in skills development, private entrepreneurship have taken place employment and social protection are put in at different time periods and each country place. If these policies are not implemented, has adopted quite different paces of this demographic situation would likely result reform. Oil largely explains the difference in longer transitions from school to stable between Libya (who's transition to the work, frustrated ambitions among the youth, market mostly accelerated starting in increasing informality in the economy, and 2004), Algeria (a slow, unfinished possibly in political instability. Governments transition that started in the late eighties), and opinion leaders in the Maghreb are aware and Morocco and Tunisia, both of which adopted market-based economies long 1 Najy Benhassine, Senior Economist, MNSED; John D. ago (even if they only accelerated their Blomquist, Senior Economist, MNSHD; Mourad Ezzine, Sector integration into the global economy over Manager, MNSHD; Rebekka E. Grun, Economist, MNSHD; the past decade). Despite these major Adriana Jaramillo, Senior Education Specialist, MNSHD; Nadine T. Poupart, Senio r Economist, MNSHD; Joana C. G. differences between the four countries in Silva, Young Professional Associate, MNSHD. their economic structures and progress in facilitate labor mobility across borders and reforms, they all have in common an accelerate the delocalization of jobs in the investment climate that favors connected Maghreb. businessmen and discourages competition, as well as the entry and exit 3. Active labor market programs (ALMP.) of inefficient firms. Credibility of each Currently, all Maghreb countries offer a government in its commitment to reduce menu of ALMP to facilitate individual the rents in their respective economies (re)insertion into the labor market. The (whether rents benefiting private offer usually contains wage subsidies, the entrepreneurs or state-owned enterprises) facilitation/financing of start-ups, and is weak. Looking forward, the Bank could training and job intermediation. Tunisia develop joint technical assistance activities has made impressive efforts to evaluate its in the four countries on topics of common performance and streamline these interest such as trade legislation and rules programs; rigorous evaluations are of origin. It could also play a leading role underway in Morocco; and Algeria has in identifying and quantifying issues requested Bank support to evaluate its related to lack of competition, arbitrary ALMP portfolio. Both Morocco and policy implementation and policy Tunisia are already in the middle of an uncertainty in the Maghreb countries. overhaul of their ALMP portfolio to shift These sensitive themes are central to towards modern case management, unlocking private sector dynamism in all profiling, and synergies with related four countries, which the Bank could help institutions (e.g. of lifelong learning). The bring to the forefront of each country's Bank is uniquely placed to facilitate policy priorities. international knowledge transfer in this area, for both evaluation and policy 2. Skills Development. While the Maghreb design. In the future, given Tunisia's countries have made excellent progress in relatively advanced reforms, a South- building their human capital base, they South exchange of knowledge is an option still need to achieve a better match the Bank also intends to promote. between the supply of skills and the demand of their national and regional 4. Social Insurance. The Maghreb countries labor markets. This endeavor requires the traditionally combine a strong protection overhaul of their technical and vocational of jobs with a relatively weak protection of education and that of their training the revenues of the unemployed. It is systems (TVET) as well as the administratively difficult, and sometimes modernization of the Maghreb costly, to lay off workers for economic universities to raise them to the European reasons. Once laid off, the unemployed standards of quality and governance. have limited or no revenue protection. For Through the Marseille Center for example, in Tunisia, only those with Mediterranean Integration, there is a previous permanent contracts have access unique opportunity for the Bank to work to a dedicated insurance. The default with partner organizations and countries recourse, for the large numbers on term or to harmonize qualification frameworks for informal contracts, is some minimal technical and professional skills across the revenue assistance or start-up facilitation. Mediterranean region. Similarly, there is When available, pension systems tend to an opportunity to develop widely be unrealistically generous and many recognized academic and professional pension funds in the region are already standards for universities, and to develop running annual deficits. The Bank is well partnership arrangements between placed to respond to recent demands for Northern and Southern institutions. The support in these areas, and to facilitate achievement of these goals would raise knowledge transfer from successful the quality of the human capital in the reformers, such as Chile. south of the Mediterranean space, May 2009 · Number 7 · 2 5. Further integration into the Euro- development. To promote higher growth and Mediterranean economic space. private investments rates, it proposes three Economic integration holds a huge strategic policy areas: potential for job creation in the Maghreb. · Deepening the structural reforms that The health sector provides a powerful have promoted the global integration illustration of what could happen. With of the Tunisian economy over the past the right policies and investments, the 15 years; quality of care in the Maghreb could · Transitioning into a high value-added become competitive and offer a realistic products and services based economy; and efficient alternative to European · Continuing to promote income health care systems, which are under distribution, and equity of increasing pressure to control costs. This opportunities and services for the would create "good quality employment" entire population. for thousands of qualified and unemployed health care professionals in The Bank is ready to engage in a multi- the Maghreb. A harmonization with sectoral support to address the issues related Europe of the qualification standards of to skills development, science and technology trained health professionals could also and innovation, active Labor Markets and create mutually beneficial migration Social Protection measures for the flows. This is already happening on a unemployed. To achieve greater donor small scale and there is wide recognition harmonization, the Bank will partner with the of the potential for development. EU, which is in the process of preparing a 60 million Euro grant to support employment. Country Perspective The CPS discussion may also lead to a request for a skills and employment DPL. Tunisia. The Tunisia strategy for employment creation emphasizes the importance of the service industries, which have the potential to Morocco. The Moroccan Government and the generate large numbers of medium and highly private sector adopted a "Pacte National pour skilled jobs. The reform and development of l'Emergence Insustrielle 2009-2015," which the service industries will follow the same defines the shared responsibilities of the State pattern as the successful industrial reforms and the private sector for developing 6 undertaken during this decade: modernization priority industries (off-shoring services, car, of the legal and regulatory framework, space and aeronautic, electronic, textile and investments in efficiency gains, liberalization leather and agro-business). The Pacte also of trade, and integration with Europe through aims to strengthen competitiveness in all the adoption of European norms and sectors, including in tourism and construction. production standards. In addition, the This strategy is expected to result in the Government has just issued a new decree to creation of 220,000 jobs, which would lead to a reform the framework for ALMP policies. significant reduction in urban youth unemployment. However, the success of the The 5-year Development Plan of 2010-2014, Pacte will largely depend on a strengthened currently under preparation, aims to articulate human capital base, which has been identified the policies and investment programs that by Moroccan business associations as a key support this strategy. The Plan emphasizes constraint to investment and growth. A the interaction and articulation between pension reform/social insurance TA is Growth, Employment and Skills ongoing. A Skills Development and Labor Development, and aims to set up the Market Project integrating higher education, foundations for a knowledge economy. It TVET, labor market policies and social recognizes the need for highly skilled human protection reforms is being discussed as part resources and proposes to enhance the of the CPS preparation. Such an operation education and training system, and to could support key reform initiatives as promote innovation and research and follows: May 2009 · Number 7 · 3 · Education and training. Since 1999, the Algeria. The Bank has been engaged in multi- Government has embarked in a year technical assistance programs to comprehensive reform of the education strengthen the Algerian pension system and and training system but its foster employment creation. The work on implementation encountered delays. The pensions has included actuarial training using 2009-2012 Emergency Plan, recently the PROST model and an analysis of the main approved, aims to put the reform back on sustainability issues and options for reform. track and is supported by multi-donor At the request of the Government, the Bank financing, including a $100 million Bank prepared a policy note assessing recent trends loan (currently being negotiated). Higher in the labor market, current labor market education reforms concentrate on (a) regulations and existing active labor market improving quality and relevance to labor programs, and an analysis of income market needs in order to reduce protection systems for workers in Algeria. A unemployment among university second policy note assesses the barriers to job graduates; (b) the promotion of research creation and training provision by the private to meet the needs of a knowledge-based sector and the relationship to fiscal economy; and (c) system improvement constraints. The Bank has recently received a (governance, human resources and M&E, request from the Government of Algeria for etc.). In addition, an Emergency Plan for reimbursable technical assistance for, among TVET was developed by the Ministry of others, impact evaluation of policies and an Labor and includes inter alia measures to analysis of safety nets and subsidy impacts. improve the supply, quality and relevance of programs to the emerging sectors. · Labor markets. The Ministry of Labor is engaged in a series of reforms and actions Contact MNA K&L: Nadir Moh ammed, Di recto r, MNA Operati o nal aimed at: (i) increasing the impact of C o re Servi ces Uni t active labor market programs through David Steel, Manager, MNA Devel o pm ent better evaluation and improved design; Effecti veness Uni t (ii) strengthening the quality and scope of intermediation services; (iii) developing a Regio nal Qui ck No tes Team : better understanding of the dynamics of Omer Karasapan, Dina El-Naggar, Roby Fields, the labor market to inform Najat Yamouri, and Aliya Jalloh education/training/retraining contents; Tel #: (202) 473 8177 and (iv) facilitating labor mobility through The MNA Quick Notes are intended to summarize income rather than job protection. lessons learned from MNA and other Bank Knowledge and Learning activities. The Notes do not · Social security. Finally, the Government is necessarily reflect the views of the World Bank, its keen on expanding its social security board or its member countries. system (currently covering only 27% of the labor force), and on reforming the pension system to lower the high tax wage and increase sustainability. May 2009 · Number 7 · 4