Economic Reform Crucial for MENA Countries

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Following are excerpts from a statement by IMF First Deputy Managing Director Stanley Fischer at the Middle East and North Africa Economic Conference held in Cairo, on November 12-14.

The Cairo conference represents an important step on the path of economic development of the Middle East and North Africa region. It is critical for the future of the people of this region that the economic reform process that is unfolding here continue.

I would like to make three points:

* The economic climate in the region is improving, although at different rates in different countries.

* Further reforms are needed in all countries.

* The IMF is committed to this region and will continue to work to support sound economic policies in all MENA countries.

Recent Progress

For a decade or more, the growth performance of MENA as a whole has been disappointing, as many countries in the region failed to integrate sufficiently into the world economy.

While the region has been beset by a host of exogenous shocks, its poor economic performance can be traced largely to poor economic policies. However, in recent years, several countries have begun major reform programs-among them Algeria, Jordan, Morocco, Tunisia, and Egypt.

These policy changes, together with a more favorable external environment, lie behind the improvement in the region's economic and financial conditions this year.

What Needs Doing?

There is no great mystery about what needs to be done to improve growth further. The first requirement is the maintenance of macroeconomic stability. The second is the implementation of structural reforms to increase the efficiency of the domestic economy and integrate it into the world economy.

There is now a strong-virtually universal-consensus on what is needed. In pursuit of further consensus, the IMF's study for this conference presents evidence on growth in MENA countries and focuses on key areas of reform.

Growth in this region will not reach its potential until the rate of investment rises from its average of around 20 percent of GDP toward 25 percent of GDP, closer to the 30-percent-plus common in East Asia. Accordingly, a key challenge is to improve the environment for private sector investment. This is critical for three reasons: foreign investment increases capital accumulation; foreign investment brings in new technology and business methods; and most important, the policies...