Farah Hani: [00:00:04] Hello, everyone, and welcome to the Growth Labs Development Talk Seminar. Thank you all for being here. My name is Farah Hani, and I will be moderating today's session with Dr. Razzaz. Just to start briefly about the development talks, the growth jobs development talks as a series of conversations with policymakers and academics working in international development. Our aim is to provide a platform for practitioners and researchers to discuss both the practice of development and analytical work centered on policy. For today's seminar, we're thrilled to welcome Dr. Omar Razzaz, the former prime minister of Jordan, to discuss his experience and insights from managing policy reform in Jordan, we're very honored to have you with us here today. Dr. Razzaz, welcome. [00:00:54][49.9]
Farah Hani: [00:00:57] Before I introduce Dr. Razzaz for today, I would like to mention two things up front. The first thing is, if you want to stay up to date with the growth labs, research events, job opportunities and more, you can visit our website, follow us on social media and sign up to our quarterly newsletter. You can find more information at growthlab.cid.harvard.edu. And second, I'd like to invite you all to attend our next development seminar, which will take place on Wednesday, August 11th, featuring Dr. Indrajit Coomaraswamy, the governor of the Central Bank of Sri Lanka from 2016 to 2019. [00:01:39][41.7]
Farah Hani: [00:01:41] Without further ado, I'd like to introduce today's guest. Dr. Razzaz is the former Prime Minister of Jordan. His career is diverse and spans the public sector, the private sector, non-governmental organizations, think tanks, international organizations and academia. Before becoming prime minister, Dr. Razzaz held several positions in government and policy institutions in Jordan. He served as Jordan's minister of education between 2017 and 2018, and he also was the director-general of Jordan's Social Security cooperation between 2006 and 2010. Dr. Razzaz also served as the chairman of the board of directors of the Jordan Strategy Forum, which is a leading think tank on economic development in Jordan. He was also the chairman of Jordan's Bank in addition to his work in Jordan. Dr. Razzaz also worked at the World Bank and various positions in regions. He was the country manager of the World Bank in Lebanon between 2002 and 2006. And before that, Dr. Razzaz was the Ford Chair Assistant Professor at M.I.T. and the International Development and Regional Planning Program. Dr. Razzaz holds a master's degree from urban and regional planning from MIT and a Ph.D. in planning from Harvard University with a minor in economics and is a postgraduate from the Harvard Law School. [00:03:12][90.5]
Farah Hani: [00:03:14] Just before I hand it over to Dr. Razzaz, we had some opening remarks, I want to explain the format of today's session. Dr. Razzaz will start with a presentation which will then be followed by a series of questions. After those questions, we will open up for Q&A from the Growth Lab team and finally open up for questions from the broader audience. I would like to remind you that if you have any questions, you'd like to ask Dr. Razzaz, please type it in Zoom's Q&A box and make sure to include your name and affiliation and we will pass it over. So without further delay, I will hand it over to you, Dr. Razzaz for the opening remarks. [00:03:53][39.5]
Dr. Omar Razzaz: [00:03:56] Thank you very much for Farah Hani, I'm delighted to be on Zoom with everybody and delighted to associate with the Harvard faculty and students to reminds me of the good old days. But I envy you guys on one thing. You're able to switch off and see if this if the speaker is boring. So we couldn't do that back then. So I'm really looking forward to that. And I hope it's not the boring guy. I was thinking about the audience, in fact, and I realize that this is a diverse group. There are some students who are who know the Middle East and working on Jordan, but many who don't. So it's sort of the introduction at least assumes that you don't know much about Jordan. And I'll make the introduction short and then we can go into deeper questions. And I really look forward to hearing from you as well as well, because as you all know, and I'm sure you're learning that there are so many sides to something and how you approach it. So I'd be very interested in your feedback and your questions and your suggestions as well. So let me try to start a short presentation. Yeah. Is that do you see that is that coming across? Yes, Jordan, good, good, good. And I chose this title because I feel it. I think we're going through it. And I hope you'll see why this the image of of swimming against the tide, not even the current in the turbulent region applies in this case. I'm going to talk about country features for Jordan Regional features, the neighborhood we live in, resilience features of Jordan and where do we go from here and how do we build on the experience that that we've had? And finally, I'll end with global challenges and opportunities. I really won't be able to give this item its fair share, but I hope we can talk about it and the discussion. It's something I'm very interested in. So starting with the country features, Jordan is geographically small country, mostly semiarid land, limited natural resources. We do have, though, the the Jordan Valley, which is a very lush for agriculture, and it allows us to export early products to to Europe agricultural products. Beyond that, the real asset is our population. It's very well educated population and has really contributed to the production and productivity. And I'll talk a little bit more about that and a very important part of the world, a stable political regime. We've just celebrated one hundred years of the establishment of Jordan under the Hashemite monarchy, and it's been very stable. The monarch giving the throne to the son and then to the grandson, et cetera, in that process and in many ways, in many ways unique to this region. And if you look at the indicators, whether they're social, economic, political governance, what have you, Jordan fares relatively well, in fact, above average and most indicators for lower income or lower middle income countries. And that's where Jordan sits in terms of its categorization. So that's a quick a quick sort of introduction of Jordan, where it is and what it is. But if you start looking at the map in front of you, Israel and the West Bank to the to the west, Syria to the north, Iraq to the east, Saudi Arabia to the south, already you can see what sort of a troubled neighborhood we're talking about. And there is very little you can do to stop some forms of contagion, as we will see from from neighborhood effect. So what does a small country with surrounding like this do? How do you how do you approach development? How do you approach growth? Usually the standard answer for small countries with small markets is you really have to focus on on exports, exports of goods and services because your local market is not a good place to start. It's too small. And that's you can see the challenge already. And I'll go through it right there. OK, so we've seen Jordan. Now what you're seeing is the state. Fragility in the Middle East, there is this indicator of state fragility all over the world and countries and the world are ranged from blue, which is very stable to red, said the dark red essentially failed states. And then there are degrees of fragility. As you can see, the Middle East and North Africa, much of North Africa is shades of red, shades of orange. And and that's a big problem for our region. Jordan is yellow, so better than most countries in the region in terms of fragility. And they measure that we can go into how they measure that it's there on the on their website. But much of the Western world, of course, and eastern where it is, is and that is the other side of the spectrum, sort of yellow, green and dark green and then blue. So what does this mean for us? Well, as we said, it's a fragile region all over with spillover effects of all sorts of features to our south. As you can see, this yellow block is the oil rich countries. And in some ways, this is good for Jordan, but in many ways it isn't. We've had a lot of brain drain from Jordan over the last 40, 50 years. The most creative, if you want the creative class of technicians, engineers, doctors, business people have been attracted to that part, which is fine, but it does affect Jordan. They send remittances, but it does affect Jordan in negative ways in terms of growth. And there's been a lot of literature on the issue of of the sort of one the skilled and highly skilled populations of a country are attracted outside of it. What that happens again. The other factor is oil rich countries can heavily subsidize their products through oil price to energy prices, et cetera. And it becomes hard for Jordan to export to the South because it's competing with with heavily subsidized products. And then to our west occupied territories, Israel and the West Bank, and and and that's a big problem as well, not just politically, as we all know with and we've just seen violence flare about a month ago and lack of address to the Palestinian needs and rights. But even economically, Israel tries to limit Jordan's exports and trade with with the West Bank through various means. And that makes trade to the West as difficult as well. So what does Jordan do at the at this regional level? What has its role been? King Abdullah was there just last week, and if anybody followed aspects of his discussion with President Biden, it's about regional stability. Let's bring stability to the region. Let's build bridges, let's end wars. Let's find ways for the people of the region to to kind of find hope. Let's let's find a break into this stalemate in the Israeli-Palestinian process and give Palestinians some hope of a state of their own. So that's what Jordan has been doing, trying to find bridges between countries and ways to to to find solutions to the many problems that and wars and conflicts that are in the region. So we tend not to. Play partizan roles on the regional level, we tend to stay out of it a little bit, maybe like Switzerland, maybe in Europe, in the in the 40s. And so so that's the regional world that we need nature that we live in. And I'd like to just refer very quickly to the features of resilience that we've had. I mean, if you can just imagine between 2010 to 2020, what has happened. So we start 2010 with the end of the global financial crisis. Right. And that was a global feature everybody suffered and Jordan suffered heavily from that, especially in foreign direct investment. And so we started a decade of external shocks. So you start with that then right after the Arab Spring begins in 2011 from Tunisia and then spreads everywhere. And that, of course, is a shock and in itself to the region. And then we were the only gas supply we had was from Egypt at that time, and it fueled our power generation facilities. So that was interrupted for three, I think, even four years. And the cost on our energy bill was incredible. It was about seven point five billion dollars, I think, almost like the 15, 20 percent of GDP for that whole period. So really significant increase in oil prices. And then the Syrian refugees at one point three million moved to Jordan within a couple of years, putting tremendous pressure on the infrastructure, health and education. But we Jordan, welcomed them with open arms because these were mostly women and children, the fight, the men were fighting the war. But it was really a humanitarian issue that Jordan had to deal with. But in the sense 20 percent of Jordan's population, one point three million or so, and then the Iraq war with ISIS spread to the eastern borders, we had to close our borders in 2014, et cetera. So can you just imagine what within five years the impact of that politically, socially, economically? On Jordan? It was quite a a heavy burden, I guess, to to deal with. And in spite of all that, we've had continued political stability. And we can talk more about that, how that is measured. And I'll show a slide on that macroeconomic stability. There were so many monetary problems in the region as as as you know, Jordan didn't and our macro economy stayed stable. The fundamentals stayed stable. We've always had the fiscal issue and fiscal deficit problem, but it did not increase. In fact, towards 2018 and 19, we were in a program that was starting to close the fiscal deficit gradually and managed debt. We increased exports we couldn't export to Iraq. So we found we had the FDA agreements with the EU, with the US, with Canada and with Singapore, and we started exporting outside the region. And the value added that you need to report referred to the value added of Jordan exports being among the highest in the region. So troubled region. But we've managed to stay alive, essentially to swim against the tide. And in 2018 2019, we started actually taking off and all in all our indicators and by March COVID hit of 2020. so again, we have to deal with the with the effects of that. I'll just share with you a few slides just so that I referred to data as opposed to just talk. This is the worldwide governance indicators and the what the lines you're looking at here, the dotted line is the Middle East and North Africa, average for voice and accountability. Voice and accountability are among the most important measures of governance and political stability. And and there's a lot of literature and a lot of information, a lot of data as as you would expect on this issue. So, I chose the Middle East and looked at the different countries in the region that this orange line here is Jordan and you can see from 2010 to 2019, it's been essentially stable now, which is the other country in the whole region that has had similar sort of similar cruising, let's say, altitude is Morocco. So Jordan and Morocco have been kind of moving relatively stable and above regional average, below the global average. Just to be clear, but on a regional basis, now, you can compare countries like Tunis, Tunisia, which have after 2011 jumped on for upwards on the voice and accountability. But so on the political side, they did well for quite a while. But those of you who are following the news has been many governments replaced. Now there is no government and there is a conflict. So the political process is has kind of is uncertain. Let's put it this way. And a number of countries militarized and move down. And there are several countries here that you can see have moved down in terms of voice and accountability. So stable politically in terms of voice and accountability. And when we look at this is covid, we decided to lock down very early in March 18th of 2020. We didn't know exactly what how covid was going to spread. So what did we do? We created a bubble in Jordan and and we focused we kept industry export industry going, but we really controlled our boundaries and our borders and and we did extremely well. So what this chart shows is the number of deaths per million in different countries of the world. And you can see here the first wave hitting many countries, Italy, Spain, the United Kingdom very strongly hardly affected Jordan at all because we had this lock down and we started to open smartly the sectors that either affect our exports or the living, you know, the essentials of of of human beings. Well, but we did get the second wave still better than many other countries. But by the second wave, we were prepared. We had built our infrastructure, our hospitals, our readiness, our clinics, our test kits and our vaccines. So by the time it did come, it was sort of lower than many other countries. And then now everybody's in anticipation of the third wave. But we are we're hoping that we could we will be able to survive it and do well because we're well prepared at many levels. Just to give you a sense of the macro story, after covid, of course, growth rates throughout the world went down, went negative. The United Kingdom was projected to go down by almost 10 percent. Tunisia, seven percent, Saudi Arabia, five point five, Jordan by five, the United States by four point three. These were the projections. Indeed, Jordan went down by three percent only. And that compares very favorably in real terms with with with other countries. So our growth didn't get affected as much. And now we're expecting two percent growth, which is not high, but it's sort of, in fact, relatively low. But it's sort of consistent with what we see our debt increase. Again, most countries debt has increased substantially because they had to borrow Jordan as well. But our debt increase was not sort of significant compared to many other countries. And I'll talk about management of debt a little bit later. Now, I get to the sort of going forward and going forward, we started before covid and then covid interrupted it, so in 2018 and 19 the government sat together and we said, OK, you know, swimming against the tide and staying alive is a fantastic thing. But the population is tired. You're tired when you're swimming, swimming against the tide. You need sort of leap frog of some sort. So what would it take in terms of macro policy, in terms of investments and in terms of labor and market, in terms of all of these sectoral policies? What would it take to help Jordan leap forward? And it mainly has to do with maintaining our macro stability, but really nudging our sectors to towards towards exports and and lowering the cost of production. So we worked on a structural reform matrix. This is like our map. It's been government through government. It's what what we go by and we have all the donors, the both the IMF and the World Bank, but also the USAID and other regional and country donors sitting with us and looking at that that matrix of has items. It has goals, objectives, measurements and timetables. And it starts, as you can, with macroeconomic stability. And the most important part of that was the income tax law, which adjusted the the tax structure in Jordan and put more teeth to deal with tax evasion. And we can talk a little bit more about that if you if you're interested in doing business and competitiveness. We really focused on that. Jordan moved up twenty-nine ranks and the last doing business report, the highest country that moved up up the ranking system. And we did a lot on foreign direct investment and export promotion, establishing a firm co-owned by the private sector and the public sector that helps SME's essentially grow climb up the ladder towards towards exports and labor market reforms. Labor market is the toughest challenge Jordan faces today. We have very high unemployment among amongst youth, and this has been exacerbated during the last year during covid especially that. So, you know, our tourism and transport sectors have been so heavily affected. And these are two sectors that are youth-oriented. Also, female participation in our labor force is low. And this is something structural. And we're working on it. We worked a lot on our safety nets. Recalibrated, how are the International Assistance Fund works? It used to define poverty in a very limited way. And we redefine things to take into consideration self-employed people. So people at home, et cetera, who and families that are suffering from lack of health insurance or lack of ability to pay for tuition and things like that. So really move forward. And Social Security became a much stronger entity through its unemployment scheme. And I'm very happy to say that the number of informal entities, the informal SME's that were out from under the umbrella there used to be around fifty-five thousand companies under the Social Security and that moved up to around eighty-five thousand just in the last year or year and a half as as as a package deal to address covid for the employees and give them income, but at the same time formalize them into the market. Lots of sectoral reforms on tourism, transport, energy, manufacturing, water and agro-business, etc.. All of this has been achieved as well as public sector governance reform. There's been a lot of changes in the laws and regulations that deal with fighting corruption, civil service reform, transparency, accountability, and I can say a lot of things about that. So I will end here with the last slide about, OK, this is all national and we talked about regional, but there is there are lots of lessons to learn on the global level. And I think a lot of the students and faculty are working on that. This is a time to really reflect about what we thought our global system was and what really what it turned out to be. Everybody talked about free trade as a wonderful thing. And then covid comes in and Western countries start hoarding their vaccines. And then the question becomes, what what do we how do we deal with that? Maybe just in time? Shouldn't be the logo we should do just in case we should have more reservoir of and storage facilities, et cetera, and look at our industry. So lots of lessons to be learned at that level, absorbing the refugees as a global good, as a global public good. What is the I have to say there was tons of support for Jordan to meet its obligations in the first two years everybody came through. But there is this thing called donor fatigue. You know, then Syria, Syrian refugees are not they are Syrian itself is not the top item on the news. So people start moving away from that. Now, that's dangerous because refugees are still here and we're still spending on the public services that are provided. And we're happy to do that on moral grounds. But what is the lesson to countries in Africa or Asia when when there is a coup or a failed state or a natural disaster in the country next door, lots of women and children at the border. Do you open and let them in or do you keep that door closed? What is the world's responsibility on this issue? And can we have a global agreement on what countries do? Because the last thing you want is a one or two year kind of enthusiastic response and then donor fatigue. And then the issue grows out of the. Again, the covid itself as a global public bad, can we look at the logistical chain, at the IP and the experience the kind of creating a structure that, which W H O, I think led, but nonetheless was vetoed, I guess, by the US administration back then. Lots of important lessons because we all know this is not the last time we're going to have a pandemic and nobody's safe, as they say, until everybody save. Climate change as a global public good. Our region is going to be one of the most affected regions and south in general by climate change, we lack you know with all the attempts by the EU and the Paris Agreement and the G20, we still see the shortfall in this and the need for rethinking governance of global public goods. I, I should stop here and. Listen to your questions and discuss more. I'm sorry it took longer than intended. [00:31:05][1629.2]
Farah Hani: [00:31:08] Thank you so much, Dr. Razzaz, for these insights and for also sharing with us how you see the past decade for Jordan and how you see today for Jordan and also for the region and the world. So in this presentation, you discussed these events that took place in the world around Jordan, in Jordan over the past decade, starting with the global financial crisis and the events that came after, which clearly harmed growth, put public finances under significant strain, which then led Jordan into a fiscal consolidation program by 2017, which obviously was necessary to maintain macroeconomic stability. And then you said that by 2018 you are looking to kind of reignite growth, attract investments, etc. But then in 2020, the covid pandemic hit and you led Jordan through the first stages of the pandemic, which was an extraordinary shock to the economy. So all these events tell us basically that Jordan and perhaps the entire region are no strangers to volatility, to shocks, to uncertainty. What do you see as necessary actions or priorities for Jordan and maybe the region as a whole to prepare for these future shocks and reduce vulnerability to them? [00:32:16][68.0]
Dr. Omar Razzaz: [00:32:40] OK, let me just briefly talk about Jordan, the region, and maybe go back to some global issues at the level of Jordan, we've learned and we were fortunate that we had facilities, storage facilities and reservoirs for energy, oil and gas, rice and flour and all of that. And we were fortunate that we had a lot of reserves of these things. The lesson learned, we need to expand because when something like this happens, we've seen how countries operate. At the same time, we focused on our pharmaceutical industry and medical equipment and food products and opened the door for them to really expand to exports, but also to switch lines, production lines. And for instance, the garment industry stopped producing garments and started producing face masks and gowns and very quickly and we were able to meet the needs for countries. So you need to act very fast. Our decision to lock down early on with hindsight, it was the right decision. We were not sure when we took that decision because you're always waiting on a life and and and livelihoods. So which is more important, and how do you weigh the two. there is no. But what what what we discovered is acting quickly. The third thing was just the incredible. So everything has to be redefined basically, so because of the spillover effects of everything, so Ministry of Health was not leading this effort necessarily, and because it needed everybody else, it needed the administrative economy, it needed the Ministry of Education to to to to deal with that. We had to see it. Our own CDC, the Centers for Disease Control, which we gave it a lot of area and room to come and say, do this and don't do that. And we had to bring in the security forces on board to think about, OK, where do you open where do you close are and how do you minimize the loss of lessons learned, having a center for crisis management that's equipped with everything you need? We have that was was a plus and allowed this kind of teamwork to take place even if we were sitting in different places at a regional level. It became very clear that the regions, just about every region has a center for disease control, the regional level, and in our part of the world, we don't have that. And that's so important because there are features, common features in virus, viral and bacterial development that are region-specific. So the research and the prevention is very important. And at the global level, what I see now are attempts by countries to come together and and and deal deal with this. But we will face all the collective action problems, you know, free ridership and prisoners, you all the type prisoner's dilemma, all the types of issues that come with these types of problems. And and it has to be addressed. [00:36:30][229.8]
Farah Hani: [00:36:34] Thank you. Agreed, and you mentioned when you started answering the question that. A lot of these decisions come with significant trade-offs, and we are very interested in your experience with that particular kind of dilemma when doing reform in Jordan. So I want to shift the discussion a bit to talk about the lessons of doing reform and the trade-offs that come when you are doing reform. And to start, you came into government following a popular backlash to a tax legislation that was put forward by your predecessor, which was planned, studied, researched, Right. But didn't have the support it needed. And I would imagine the moment you and your government came into office, you were under immense pressure and scrutiny since the first minute. So we're very curious about how you navigate these competing priorities, like protecting Jordanian households while at the same time delivering or achieving on the technical objective, which back then was preventing fiscal deterioration and containing the balances. [00:37:51][77.2]
Dr. Omar Razzaz: [00:37:54] Well, I'm smiling because I'm curious as well. And you all this one looks back and says, could we have done it differently if I had an advice to any of the students who are preparing yourselves to be in government? Try not to start your government period with new tax law, OK? Having said that, I look back and I realize I would have I would have done it again, but maybe, maybe somewhat differently. The issue was that the Jordan tax system was broken, was not efficient, was not functional. There was a lot of evasion. And the bulk of tax revenues came from sales tax, from value added tax. And for those of you who work on this issue, you know that sales tax are regressive. They are not fair. You put the sales at 16 percent, you take the 16 percent from the rich man and you take a 16 percent from the poor man. So it is one of the most regressive and unjust forms of tax. And that was our biggest form of revenue. Income tax, in contrast, is a progressive form of tax because it's very it creates levels of income. And it I'm sorry, it creates different levels of taxes depending on the level of income. So we we designed it such that 80, 90 percent of the population would not be affected negatively by the income tax. So we were very and we put all sorts of instruments to really make tax evasion and avoidance harder. The problem was in the following, we wanted to explain this to people, that the majority of people would not be affected and it would actually, over time, help us reduce the other the sales tax and change the balance between the two. But we had two problems. One, the IMF was in a hurry. We had a program that needed. So we need we with our government came in June, mid-June. By September, we had to meet that obligation. So we started to explain the issue. But I have to say, as usual, with reform, you had very strong interest groups against it. The business, the large businesses, the large and a lot of the professional groups who had not who had been evading taxes and all sorts of ways to do that. So. So I think the lesson learned, I, I would say governments need to take tough actions at times, and some of them might not be very popular. But try your best to explain the what you are doing to the to the population and try not to be limited with that, with the with the short timeframe as a result. [00:41:04][189.8]
Farah Hani: [00:41:08] And that gives us a lot to ask about. I do have questions about what you mentioned about communications, but first I wanted to to say, given that we're talking about this tax reform back then, that wasn't the only tough decision or situation you faced during your time as prime minister. You dealt with other situations of popular demand or pressure in response to certain policy decisions that you wanted to make. For example, we know that towards the end of 2019, Jordan witnessed a teacher strike demanding raises to to their wages, while your government was arguing to tie some of these raises to performance. Similar question, perhaps. What did you learn from of these instances that you incorporated in your strategy or you would recommend incorporating? [00:41:59][51.1]
Dr. Omar Razzaz: [00:42:09] I reflect on this a lot as well. I was a Minister of Education before I became a Prime Minister, so I knew the teachers union very well. We used to have regular meetings with meetings once a month at least, and we agreed about most things that they really would. We were all for a salary increase. They had very legitimate requests related to health insurance and things like that. So and we signed agreements with them. We signed two agreements with the with the with the union. The problem is where does the problem start? And this is with unions, some unions, not just in Jordan, but all over the world is sometimes so it's not just about the professional agenda and the issue of the members of the union. Sometimes it takes a. Populist kind of tenor, a populist that starts to take on political issues that are outside the realm of the union, and that complicates things because instead of talking about salaries and benefits, you start to talking about sort of national policy and foreign policy and this and that. And they have the right to do that as citizens, definitely, but not through a union, a professional union. So that becomes one problem. The other problem, and that's where I think we were very clear is. It's legitimate to raise your issues and use all the tools that you have to pressure each other to kind of get get what you want, but closing of schools for extended periods of time or any public service, for that matter, should not be one of the tools that unions use, because then if you allow that as one of the tools or one of the cards, then what's next is that hospitals is a clinic, is it power stations? Is it is it water services? We really that that was one issue in a reflecting. On what the outcome was, we did raise the salaries of teachers, but in every way, not only we knew what the gap was in for teachers, but we knew for other public services as well, for specialists in health and what have you. So we did a comprehensive review and we raised salaries, but we also linked it to performance. And that was that was critical because we that's that's the way to go. So my and with this to say there is always a possible win-win scenario as opposed to a zero-sum, but sometimes we lack of knowing how to negotiate gets us into a zero-sum and sometimes a a lose-lose scenario, which is which is unfortunate. [00:45:19][190.5]
Farah Hani: [00:45:23] Thank you to kind of continue on this last point to you made about negotiating and also what you said earlier about explaining to people the value of reform. What role do you think communication and dialog could play in and increasing the effectiveness and success, chances of reform? And if you have any examples of successful or maybe failed reforms which succeeded or failed based on the communication strategy, would be very happy to hear. [00:45:56][33.0]
Dr. Omar Razzaz: [00:45:59] Well. I think the best reference on that academic references Professor Heifetz's work on how important it is to engage in adaptive leadership as opposed to technical. And I'll just compare the story I told about income tax reform and how little time we had to explain why we're doing it. And it gave it sort of put us in a in a weak spot vis a vis interest groups that were simply trying to protect, you know, avoid their losses in this. If I can bring up the example I've had in Social Security, as you mentioned in the introduction, I headed Social Security for four years in Jordan. And on my first day, I looked at the actuarial study by the ILO and it said that was two thousand seven. And that study said in twenty seventeen the Social Security will start bleeding severely and you will start losing its capital and its ability to cover its retirees over time. And I looked at that and said, OK, we have to do something. And I briefed the government and I sat and but I, I couldn't convince neither the unions nor the private sector nor the government that they were on the board of Social Security of the need to change now, in a nutshell, the old system, you at the age of forty-five, you could retire, get 80 percent of your previous salary essentially, and then go back and work again. So if you look at it, even, you know, you don't need an actuarial study that shows you that the system cannot be sustained because there is much more money going out than money going in. But when I faced that resistance, I realized that and this applied to my work in the World Bank before and later with that, we often technocrats tend to immediately come up with a solution and start trying to sell the solution before people understand that there is a problem to begin with. And so we had to go back to square one. And I invited the unions one by one. And I went out to every part of Jordan explaining just what the problem is, why the current scenario is not sustainable, and why is it if we continue as such, you will get your seven-year pension now until you're maybe 60 or 65, but there might not be money once everybody was on the same page in defining the problem. The process changed completely. So we were discussing solutions, do we increase age so and we able to listen we to members, we added two new parameters or two new insurances. One was maternity benefits for pregnant women and was on and the other was unemployment insurance, which served us tremendously later during covid. So we came up with something that was not anybody's first choice, but we came up with somebody that something that achieved most of our of the objectives of the other. So this was a this took two or three years, but it put Social Security on a sustainable path, a vast difference between that and what happened with income tax it during covid. And going forward, we relied a lot in government on the Economic and Social Council, which again, was a platform that brought civil society, the private sector, the unions and the public sector to discuss all sorts of things. [00:50:03][243.7]
Farah Hani: [00:50:08] Thank you. With that, I will shift the conversation a bit to talk about the international development field and the role it plays. My first question on that is that you personally had a long career in public policy before being appointed the prime minister. So you you worked in the World Bank as the country manager for Lebanon. You directed the Jordan strategy firm. So you had spent a lot of time thinking about the challenges facing Jordan and the region before for quite some time before you took a leadership role in the government. How has this career and these different institutions prepared you to be a prime minister? And what were some of the unseen or unexpected challenges? [00:50:54][46.8]
Dr. Omar Razzaz: [00:50:59] As you said Farah, my experience in academia, international organizations and in Jordan Strategic Forum and was mostly about public policy. In various sectors, the macro, the micro, the fiscal, the health, education, Social Security. But what it wasn't in politics per se as much in Arabic, the word for politics is siasa and the word for policy is siasa. It's the same word, but I discovered just how different these are because if you come with my background kind of thinking about structural change and things that will yield value and benefits five years down the road or 20 years down the road, etc., That's from a policy perspective. So you're creating the structural transformations, changing laws, et cetera, while the crude politics, if you will. And I'm saying crude, not all politics is like that is very different. It's sort of horse-trading, kind of appeasement, finding, you know, wanting to cut ribbons every day, every day, etc. very short term. And that has to do with the horizon of that. So if you're coming that those of you are coming from a public policy background to prepare yourself for a bit of a shock in dealing with sort of politics with all it's the kind of the bad aspects of it, but also the good that we've been good to aspects of it, actually. Have to do with one communication, and I think. You know, if I can stress the three things that a politician should do, more of what a policy person is, really explain and listen and explain and listen and really listen, not just kind of really listen and see. What is it that is bothering people really about this? And this is something we can do about it. I can't emphasize that enough. The other aspect that somebody who comes from academia or research sort of into office is maybe I can stereotype things a little bit, that some of us are idealists and, you know, and for those, it's very, very hard to go into politics because you it's all about, you know, the politics is the art of the possible in that sense. So but but I think it's important for idealists to enter into politics because otherwise it's just pragmatists who are saying, OK, anything works and, you know, OK, whatever works works. So there is a combination of having your own eye, keeping your own ideals awake, in a sense, but realizing that this process is about finding common ground and choosing your battles. You can't open all fronts all at the same time. So how do you choose your battles? How do you understand who your allies are? And how do you mitigate the effect of those who are against you? Maybe because either they don't understand or their interests that they sort of they lose as a result of this reform. So so in a sense, you're you're trying to be a realist between pragmatism and idealism. You want to hold to your ideal values. You want to see what can be done, but you don't want to give up your ideals and become somebody who's just sort of operates sort of maneuvers and operates things and pushes problems to the front. So my two cents worth. [00:54:56][237.1]
Farah Hani: [00:54:58] Thank you. That was super enlightening to stay on the same maybe topic the IMF and the World Bank are super important partners, right to every country during its development process. You personally have been on both sides of the table. So you are a member of the World Bank. And later, you are the Director of Social Security, Minister of Education and Prime Minister. How do you see, given these different sites that you saw on, how do you see the role of these institutions and countries like Jordan, particularly in supporting the country, in addressing the trade-offs that come with reform? And whether you think there are any changes to their approach that is necessary to increase their effectiveness and make sure that the impact they have a sustained. [00:55:52][53.7]
Dr. Omar Razzaz: [00:55:56] OK, let me start by saying and having been on both sides of the aisle, if you will. There is no love lost by countries and populations of the world to the World Bank and IMF, and that is to be expected actually, because when do we call on these institutions? When we are in trouble? So in a sense, they're a bit like the hospital or the doctor who comes in and sometimes administers bitter pills. So there is an association by the population of of of these institutions with the hardship that we go to. In fact, very often they're only invited when when countries face problem, but countries don't that are growing and don't have monetary and fiscal problems don't need the World Bank. Having said that. I've seen very bad relationships and very good relationships and very good use of the facilities that are available at the World Bank and the IMF and I have seen very bad use of these resources. One, sometimes if a country formulates very strongly and diagnoses its problem and says, OK, here's what here's what happened, here is our problem, here is how we're going to solve it. We need the IMF support on the short term and with the facility to address our fiscal issues. And we need maybe World Bank support and the energy sector, the water sector, maybe the health sector, etc. That's what we need. This is the best kind of relationship when the country defines the agenda. There are other scenarios where these institutions are invited and the country is either divided or doesn't, you know, just kind of puts out the problems on the table but does not offer the solutions. And then when the World Bank or the IMF say, OK, why don't you do X, Y and Z, they go to their population and they say the World Bank told us to do that. Or the IMF told us to do that. Countries are sovereign entities and they need to be responsible for their actions. If they don't believe in something that they're doing, they should tell their population and these institutions that we don't believe in these actions. So it is important to have a sort of effective institutions in government that diagnose and put solutions and engage in the kind of dialog that we were talking about with their own population. And I have a lot of respect for countries that say this is our program, not the IMF program, not the World Bank. This is our program because we believe in it. And here are the benefits of. [00:59:00][183.2]
Farah Hani: [00:59:05] Thank you for that and last question from me, Dr. Rasas, before we open up for questions from the growth lab team and the audience in a slightly different than what we've been discussing, but we couldn't let you go without getting your thoughts on on some of the issues that we know are important for Jordan and for the region. So the question is, we know that Middle Eastern countries registered the highest levels of youth unemployment in the world. And this reality, it coexists with very low levels of participation. We'd like to know, how do you think about this problem and what you think is possibly a step in the right direction on this agenda? [00:59:47][42.5]
Dr. Omar Razzaz: [00:59:51] Farah, this is the biggest problem that Jordan faces and many countries in the region, especially with youth, and it's an inheritance from a, if I can use the term rentier era and the Arab world where, you know, we had lots of natural resources and we spent them and we hired people in the public sector, and that was sort of the social contract. Where are you? In the public sector? We give you education and health and that's all that is that you should ask for. Don't ask for anything else. Now, that's drying up definitely for Jordan. And we knew we never had natural oil to begin with, but we had a lot of external aid that has now dried up completely. So you have a bloated public sector, a smaller private sector and very low female participation and youth participation, low job creation in Jordan. There is a particular problem, which has been that the private sector, especially in agriculture, construction and some of the more traditional transport, things like that, relied on cheap foreign labor. So we have... foreign labor is almost... in Jordan is about a million workers, about twice or three times the number of unemployed Jordanians, but it's not that Jordanians can replace them because we've gotten ourselves into a vicious cycle, low wage, low capital, low productivity, low quality in the agricultural sector and in the construction sector. So. One problem is the demand side, our private sector needs to grow and gets weaned off the idea that it can hire foreign workers and not give them the proper treatment as per the law and pay Social Security and all of these expenses for them. So at least to create equilibrium between them and their Jordanian counterparts on the on the supply side our youth have gotten more used. I'd say that the idea that, no, you're not going to find a job in the public sector where you can sit behind a desk and smoke a cigarette, you need to go. You need to acquire the skills necessary for what the market demands. So we started working on a school-to-work transition program. Unfortunately, most of our schools and universities don't prepare students for the for the labor market. They threw out with your degree and don't have the right skills. So there is a program that we're working on to reskilling, upskilling and helping students and help female participation in the labor force, but also all the self-employment we had rigid self-employment mechanisms that we're working on and allowing people to participate in Social Security even on part-time basis or home-based. So but that remains the toughest challenge, because the gap between those entering the labor market and the jobs created by the labor market is the gap is huge. And it will take. We need to be clear that take five years to a decade to really bring the, Close that gap. [01:03:20][209.3]
Farah Hani: [01:03:25] Thank you so much, Dr. Razzaz, for answering these questions. Thank you. Yes, we will start with questions from the Growth Lab team and the director, Dr. Ricardo Hausmann, is here to ask some questions. [01:03:40][15.5]
Ricardo Hausmann: [01:03:42] Well, Dr. Razzaz, what a pleasure to have you with us, to listen to you, to listen to your wisdom. [01:03:50][7.7]
Dr. Omar Razzaz: [01:03:52] So good to see you. [01:03:53][0.8]
Ricardo Hausmann: [01:03:53] It was great to meet you when you were Prime Minister and to work with you. I have two questions for you in the first one is you mentioned in your voice and accountability and then, you know, all the problems with reforms. I wanted to ask to you if there was more voice and accountability in Jordan, which are the voices that are currently under-represented and which are the voices that are currently overrepresented. And maybe among the voices that are very significantly represented are the voices of the aid community. So I was wondering, you mentioned Tunisia as a case in which, you know, voice and accountability went up, but the equilibrium was less stable. And so I was just just your thoughts on on a move towards more voice and accountability? What voices would be heard and what of the current voices that are being heard and which ones would be better down in? And the second question is more on advice from you to us. you know, we've talked about the IMF, the World Bank, et cetera. You know, in an organization like us, the Growth Lab, what can we do to add value to what we do or, you know, how can how should we approach our work, you know, having had the experience of working with us and we stop there. [01:05:47][113.9]
Dr. Omar Razzaz: [01:05:51] Ricardo. Very good to see you here. The growth lab has been amazing and helping us think through scenarios. It's always I think also it's it's Professor Heifitz who talks about the importance of looking at the problem from the balcony. I guess the way he sort of and we don't have the luxury of looking at things sometimes from a distance from a bird's eye view. This is exactly what you and your team have provided. And in fact, you've pointed us to a few problems down coming down the road that we hadn't even paid attention to. And we didn't realize what the scale of until you kind of pointed and said, OK, look at that. So it's very important to have that type of sort of professional not vested a think tank that helps us look at policy options. It's exactly scenario setting and looking at the experience of other countries and looking at the specificities. In a sense, we've had locally, we were relying a lot on the on the ECOSOC Economic and Social Council to help out with that. But we did lack, to a large extent, a bit kind of the think tank aspect, the kind of the rigorous analytical analytics that that go with that. So I think my advice, I'm going backwards. My advice would be to look at the Matrix, our five year matrix that we have developed, and and help us make sure that we've got everything covered that we do. We have a blind spot somewhere to something that's coming down the road. We all are seeing the pace of development, the sort of twenty-first century jobs, the fourth industrial revolution, the how that's changing the labor market, what kind of things we need to be focusing on in our universities, all of that. We can be myopic sometimes and not see what's happening around the world and not be able to explain it well to the public. So I think you can help us both with that early kind of warning signals and also with dealing with things we're already facing, but need better policies and applications now. And the hardest the harder question is the first question, and I referred to last so that I can think about it a little bit more voice and accountability. If we had more, what would differ? I think. Relatively speaking, Jordan's problem is not so much in voice, although there's always more voice that needs to to to be heard from the governments, from outside Amman, from lower-income groups, those who are not getting quality services, quality education, quality health care systems and quality services. And therefore, you fall into the vicious cycle of poverty. And you might have your sons and daughters graduate from high school or even go to university, but still not be able to to break the poverty cycle. So so there is an element of voice. But I have to say, for those who don't know Jordan in Jordan, we do have a parliament that is widely representative, that a lot of the parliamentarians come from the governorates and from remote areas. So it's not that I worry about, it's the accountability. I think on voice we can make some improvements, but on accountability, we need to make a lot of improvements. And that's partly I think King Abdullah has formed a committee and and asked them to start working towards a government that our parliamentary elected governments so that you have better accountability structures going forward. We tried during my government to make ourselves accountable, even though so by putting very clear objectives for the year and indicators on a quarterly basis and also to create mechanisms for feedback. So people who were not getting the services they expect could go online and and put in a claim. And then we created the mechanism for them to get an immediate response and for somebody to follow their case, et cetera, et cetera. But this was all really putting together, in my view, the early elements of accountability. So that people themselves can judge. Whether this government is doing what it needs to do some ways to go and adhere to accountability structures, but I'd have to say we all know that this transition process isn't easy and you have to manage it quite well. [01:11:48][357.1]
Ricardo Hausmann: [01:11:50] Thank you. [01:11:50][0.2]
Farah Hani: [01:11:53] I can wrap up. Thank you so much, Dr. Razzaz, for being with us, and thank you, everyone, for joining and apologies for those who ask questions in the Q&A. But we didn't have the time to get to those Dr. Razzaz if you have any final remarks before we wrap up. [01:12:10][17.3]
Dr. Omar Razzaz: [01:12:14] Farah and Ricardo and the Harvard thank you so, so much for this opportunity, and I do see that there are a number of Q&As that have that out on my screen and I would be more than happy to to address them after the session. So but this was a great opportunity. And you asked these tough questions that forced me to think a lot and maybe to reflect even more on on the issues that we're facing. So thank you very much and most welcome. And in Jordan anytime. [01:12:47][32.8]
Farah Hani: [01:12:49] Thank you. And thank you for this opportunity and for sharing the insights with us. Really appreciate it. OK, thank you, everyone. And we really look forward to seeing you on the 11th of August for our next development seminar. Have a great day. Thanks. [01:12:49]
