Context Since the beginning of 2011, the 20 countries of the Middle East and North Africa (MENA) where the World Bank group is engaged have been experiencing extraordinary change. Whether this has had the watershed effect of events in Tunisia and Egypt or whether the contest for political voice continues, the Arab Spring and the call from citizens for greater voice and accountability opens an opportunity for better governance and potentially profound changes in the region’s political and social landscape. Of the 355 million people of MENA, 85 percent live in middle-income countries, 8 percent in high-income countries, and 7 percent in low-income countries. Prior to the recent popular uprisings, the region made significant progress on key social indicators with an average life expectancy of 70 years (male and female), a primary education completion rate of 90 percent and a under-5 mortality rate of 38/1,000. Absolute poverty was low with approximately 4 percent of the population living under $1.25 a day. Current disruptions to economic life that are accompanying the political changes in MENA can be expected to lower growth in many countries of the region due to a decline in tourism revenue, a wider spread in debt markets, instability in national stock markets and higher subsidies and public sector salaries. Furthermore, the potential for instability in oil-exporting countries could have serious economic impact globally. The protests and popular uprisings across many MENA countries have been driven by fatigue with long-standing authoritarian rule. Citizens have articulated demands for a voice, for social justice, accountability, access to services and a fair shot on a level economic playing field. The MENA region came into its Arab Spring with many strengths too: its youth, its resource base and the economic resilience shown during the 2008/9 economic and financial crisis. Economies across the region were rebounding. Tunisia and Egypt had strong reserve cushions and had benefitted from tourism and foreign flows. The short-term economic impacts of the popular uprisings will be sharply felt but manageable if they can be confined to the short term. In the longer term, MENA countries are profoundly challenged by many of the structural problems that existed before the Arab Spring and indeed drove much of the discontent. Among these is inequitable growth and high unemployment rates (20-25 percent in some countries and steeper for university graduates and women). Poverty is low at the $1.25 level but in Egypt, for example, doubles at the $2.50 mark with millions of Egyptians experiencing the vulnerability and uncertainty of crossing in and out of this threshold. The region’s main challenge, loudly proclaimed now, is to create sustainable jobs. These must be generated by the private sector. The key to this is improving the enabling environment for private sector players, both big and small. Key too is fair competition and a reduction of the privilege which has benefited the elites only. Countries must also deal with long-standing issues such as low and depleting water resources (the region has the lowest renewable resources in the world), and the challenge of food insecurity coupled with high social subsidies. Strategy The World Bank Group stepped up its program in the region following the global financial crisis. IBRD/IDA lending increased from $1.8 billion in fiscal year 2009 to $3.8 billion in FY10 then declined to $ 2.06 billion in FY11. The International Development Association (IDA), the Bank’s fund for the poorest, channeled support to Djibouti of $5.8 million in 2011 – very close to last year’s level. IDA support to Yemen was at $117 million in FY11. High-value knowledge services to MENA increased from $8 million in 2010 to nearly $11 million in 2011. The number of non-lending economic analytic and advisory products increased from approximately 120 in 2010 to more than 140 in 2011. The World Bank prepared reports on regional private sector development, migration and integration and notes on the impact and long-term challenges stemming from the financial crisis as well as the current developments, especially as it related to the employment challenge. With the historic political and economic changes reshaping the region, the World Bank’s support will intensify as demands from countries arise. The World Bank’s strategy and assistance will include a range of products including: Quick budgetary support to meet growing financing requirements; A rapid investment response to support the required poverty interventions; Help with employment generation and special areas programs; Advisory support; Strengthening of institutional capacities; and Provision of entrepreneurship and other training programs.
Key for the sustainability of a manageable transition in MENA countries will be a strengthening of the region’s governance framework (transparency, accountability, and social justice), fostering inclusive growth, establishing sustainable social protection, helping reduce food price volatility and supporting global and regional economic integration. The World Bank Group’s longer-term strategy is focusing its attention in these areas. Results Exchanging Ideas, Searching for Solutions: In March 2011, the World Bank organized the Arab Voices and Views conference. The event was live and webcast in Arabic and English and accompanied by a simultaneous virtual chat and the launch of the new MENA Blog.
Building Partnerships: The Islamic Development Bank participated in the World Bank’s Arab Financing Facility for Infrastructure, and the African Development Bank supported the regional Concentrated Solar Power Initiative. The World Bank also worked in cooperation with the Arab Monetary Fund in preparing the region’s flagship report on the financial sector. European nations are consulting on a range of issues focused on creating economic opportunities. Japanese partners are helping the region address youth issues in Egypt, Tunisia, and other countries.
Supporting Countries of the Gulf Cooperation Council and Related Countries: The increase in oil and gas prices boosted the revenues of the Gulf Cooperation Council (GCC) countries. However, most of the GCC countries have sharply increased spending on subsidies and public sector wages in response to public uprisings in parts of the region. Current projections are that the fiscal impact of increased expenditures should be manageable, given the recent rise in hydrocarbon prices.
The World Bank’s program in GCC has been focused on delivering knowledge and expertise to the governments of the Gulf and expects to be responsive to new demands. The World Bank’s Reimbursable Technical Assistance program expanded in 2011 as Kuwait and Saudi Arabia programs grew and new programs emerged. In 2010, the World Bank signed a framework agreement on social safety nets with Bahrain. In the United Arab Emirates, the World Bank is working on macro and fiscal capacity and labor markets in the United Arab Emirates. The World Bank’s program in Oman reflects a growing emphasis on education. In Qatar, it is working on a portfolio including enhancing macro and fiscal management capacity and a significant program on business and trade facilitation. Supporting Other Oil Exporters: Algeria’s non-oil and gas sectors and related revenues continued to grow in 2011. The World Bank provided technical assistance to Algeria, largely fee-based-services, focused on economic diversification, assessment of public expenditures, and social and economic policies. Work is also ongoing on narrowing spatial disparities and enhancing development in disadvantaged regions. In Iraq, a Development Policy Loan (DPL) is being prepared focusing on competitiveness and improved governance. The World Bank also provided key analytic pieces on the financial sector, public procurement, and fiscal federalism. The Bank’s technical assistance in Syria, now suspended, had focused on economic growth and social protection. Although the Republic of Yemen was granted $117 million in IDA funds, the current political upheaval has placed projects on hold. Assisting Oil Importers: The World Bank conducted significant analytical work on Egypt, Morocco, and Tunisia in 2011, particularly on economic governance and social safety issues. World Bank’s technical assistance and financial support to Egypt to assist in the transition period are ongoing. Projects in fiscal 2011 included a $200 million Second Integration Sanitation and Irrigation Project, $330 million in additional financing for the national railways restructuring project, and a $100 million farm irrigation project. In Jordan, a DPL has been prepared for presentation to the Board in September 2011. The DPL will focus on transparency and accountability, budget and debt management, efficiency of public sector spending, and private sector-led growth. In Lebanon, two projects were approved in fiscal 2011 – the Greater Beirut Water Supply Project and the $40 million Second Education Development Project. Major Bank lending in Morocco include the Morocco Urban Transport DPL ($140 million), the Agriculture (Maroc Vert) DPL ($206 million), and a $140 million Solid Waste DPL ($140 million). In May 2011, the World Bank worked with Morocco to commission 2,000 megawatts of solar power generation capacity by 2020. World Bank support for Tunisia in 2011 included a $500 million multisectoral DPL with a strong focus on transparency and accountability. Also approved were a $50 million employment DPL and a $42 million Northwest Mountainous and Forested Areas investment loan.
Supporting West Bank and Gaza: Competent economic management and significant donor support allowed the economy of the West Bank to grow 7.6 percent in 2011, up from 7 percent in 2010. In Gaza, growth is expected to reach 15 percent in FY11 but the focus will remain on humanitarian support, the provision of basic social services and basic infrastructure services.
Partners The World Bank Group stepped up its partnership with bilateral and multilateral donors, regional development banks, Islamic financial institutions and emerging country donors. The partners worked to support countries in the region as well as to develop a number of regional level initiatives such as the five-country $5.5 billion Concentrated Solar Power program ($750 million from the Clean Technology Fund) under the Bank’s Arab World Initiative. It has supported governments and regional organizations with conferences and workshops. One of the sharp lessons of the recent political awakening has been the urgent need to reach out more consistently to civil society, including academics, NGOs and the private sector. The development of MENA countries cannot be successful without good governance and the participation of citizens; development in which everyone feels they have a say and a stake.
All dollar figures are in US dollar equivalents. Updated September 2011 For more information, please contact:
In Washington
Tina Taheri Moayed, ttaheri@worldbank.org |
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