The process of political change and transition across much of the MENA region continued into 2013, with a great degree of heterogeneity across countries. The crisis in Syria has escalated and caused massive impact on the inflow of refugees to Lebanon, Jordan and Iraq. The large flow of Syrian refugees is putting immense pressure on these countries’ public resources and stability. After growing dissent, Egypt changed course and embarked on a new transition path following the ousting of its first democratically elected president and the appointment of an interim government. Delays in the new transition roadmap might occur as the current polarized political scene threatens to fuel political tensions and sporadic violence. Security in Yemen is fragile but a national dialogue, the process whereby a new constitution will be drafted in advance of new national elections, was launched and is now in its final stages. In many of the post-revolutionary societies the drafting of new constitutions remains a key, pending issue.
In the tumult of the transition process, levels of public expectations are high and the success of transitions will depend in large part on the ability of new governments to deliver significant improvements in the lives of their citizens. Creating the right environment for growth will be critical as only growth can drive job creation for the large numbers of unemployed, especially young people. Recent political changes will only be meaningful if they lead to concrete social and economic improvements, but to date few election promises have translated into effective policies and outcomes. Throughout the region, unemployment rates have remained high, and in some cases, increased as economies weakened and political instability harmed public and foreign investments, particularly those that support the expansion of labor-intensive tradable activities.
With a population of 355 million and the vast majority of people living in middle-income countries, the Middle East and North Africa (MENA) region came into the Arab Spring with multiple strengths, which included a young and educated population; a strong resource base; and an economic resilience that helped it weather the 2008/9 global financial crisis. Absolute poverty was low with approximately four percent of the population living under US$1.25 a day, but vulnerability was high and the benefits of growth were not shared equally. Economic opportunities were monopolized by a privileged few which led to social frustration and widespread protests that culminated in numerous governments being overthrown between 2010 and 2012.
The regional outlook is shrouded in uncertainty and is subject to a variety of political risks. In 2013, growth in MENA is expected to slow to 2.8 percent from 5.6 percent in 2012, but will strengthen to around 4 percent in 2014. The growth deceleration into 2013 largely reflects pronounced weaknesses in developing oil exporters, especially Libya, Iran, and Syria, as well as the impact of spillovers from the Syrian conflict on Lebanon and Iraq. Growth in the oil importing transition economies of Egypt and Tunisia will also be relatively weak and below potential.
In the short run, weakened macroeconomic fundamentals in MENA’s developing economies are a key challenge. External deficits have persisted and currencies have weakened, despite moves by governments to avoid currency depreciation by drawing down on foreign exchange reserves.
In the longer term, MENA countries still face the structural problems that predate the ‘Arab Spring.’ The region’s main challenge is to create sustainable growth that delivers the quantity and quality of jobs needed. An inclusive and competitive private sector has proven to be one of the most effective and long-term solutions for unemployment, and will be critical in tackling the scale of the problem in MENA. An improvement in the political environment will help too by encouraging much needed investments in the labor–intensive tradable sectors.
In response to the changing political climate in the region, the World Bank Group has developed a new framework for engagement. Along with listening to new governments to build programs of support that meet their specific development goals, the Bank has also expanded its consultations to include a broad range of stakeholders across civil society whose voices were less accessible under earlier regimes. Building on the demands of the Arab Spring and the reform efforts underway, the new framework is based on four main pillars:
- Strengthening Governance through transparency and accountability measures to help create responsive states that are held accountable for their actions;
- Increasing Social and Economic Inclusion of disadvantaged groups through economic measures and enhanced voice and participation (e.g. women and minority groups);
- Creating Jobs, including for youth and women, by providing an enabling environment for opportunity, competition, innovation and entrepreneurship; and
- Accelerating Sustainable Growth through short and long-term policy actions promoting climate-friendly growth to manage stresses on natural resources.
These are complemented with a focus on the cross-cutting themes of Gender, Regional Integration, and fostering a Competitive Private Sector.
Following the above regional priorities, individual strategies and programs developed for the different countries of the region were designed to meet the specific needs of World Bank clients including oil importers and non-GCC oil exporters, technical assistance needs of the GCC countries, and support to the Palestinian territories.
RECENT LENDING AND ANALYTICAL WORK
IBRD/IDA lending increased from US$1.51 billion in fiscal year (FY) 2012 to US$2.06 billion in FY13. As of September 26, 2013, the International Development Association (IDA), the Bank’s fund for the poorest countries, current active commitment to Djibouti is US$63 million, and to Yemen, US$953 million. High-value knowledge services to MENA increased from US$10 million in FY12 to US$13 million in FY13. The number of non-lending economic analytic and advisory products decreased from approximately 123 in FY12 to 74 in FY13.
The World Bank Group has also mobilized extensive resources to support neighboring countries in managing the spillovers from the conflict in Syria. A $150 million emergency project was launched in Jordan to assist the government in managing the multiple pressures resulting from the massive refugee influx. A social and economic impact assessment in Lebanon was produced at the request of the Lebanese government which will be used to inform policy decisions and organize international support.
A number of reports have been published recently addressing central themes in the ongoing political transitions. Jobs for Shared Prosperity: Time for action in MENA focuses on the reforms needed to stimulate growth and the jobs that come with it, as well as creating a clear path from school to work. The Way Forward for Social Safety Nets in MENA offers guidelines for shifting limited public funds away from expensive and ineffective universal subsidies toward systems of targeted cash transfers that better protect the poor, and ultimately help them climb out of poverty. Opening Doors: Gender Equality and Development in MENA provides policy proposals for removing the obstacles that have produced the world’s lowest rate of female participation in the labor force. From Political to Economic Awakening in the Arab World is directed at both MENA countries and external partners, with an analysis of how the latter can support the political and economic transformations underway in the region. Building Effective Employment Programs for Unemployed Youth in MENA proposes a reform agenda based on the development of strong partnerships to design and implement programs that respond effectively to employment needs. Fairness and Accountability: Engaging in Health Systems in MENA is a new regional strategy for the building health systems that are inclusive and accountable. EXAMPLES OF RECENT RESULTS
The World Bank has a diverse loan portfolio and a range of projects across the MENA region. Here are a few examples of recent results:
- Social Inclusion: US$100 million in support of Morocco’s Human Development program made significant progress in improving inclusiveness, accountability and transparency of decision making and implementation processes at the local level. Elected officials and civil society representatives account for 67 percent of the local governance committees. A survey of project beneficiaries revealed that 73 percent of men, 71 percent of women and 56 percent of youth reported improved access to basic infrastructure and socio-economic services;
- Private Sector: 4,000 micro and small enterprises in Egypt benefitted from expanded access to credit, and 1,000 rural women now have finance to develop their businesses;
- Energy Efficiency: An US$8.5 million Global Environment Facility (GEF) project, backed up by technical assistance, in Tunisia focused on energy efficiency, helped lower emissions and increase competitiveness. The Industry benefitted from lower production costs and with 710,333 tons of CO2 emissions avoided contributing to a cleaner climate and healthier population.
- Governance: US$500 million helps accelerate Tunisia’s economic recovery and pave the way for stronger inclusive economic growth. An online open budget platform was created to promote transparency of public finances. Reduced red tape in the Ministry of Finance resulted in simplifying procedures by 86 percent. The results of the community scorecards were published on a national scorecard drawing on evaluations from thousands of citizens.
- Education: US$10 million project in Djibouti helped expand school access to more than 7,000 children, by adding and equipping 102 classrooms, and improving the quality of the curriculum with in-service training to 95 percent of teachers and all school directors;
- Water and Sanitation: a US$31 million project in Gaza improved water quality and services for the entire population (approx. 1.6 million) and established an autonomous water utility for more effective management and monitoring.
- Urban Transport: 1.3 million people in Beirut have a better traffic control system, reduced congestion on major corridors, and on-street parking management, all targeting lost productivity and deteriorating air quality.
- Solid Waste: Ongoing support to improve the governance of the solid waste sector in Morocco has professionalized garbage collection services, which now cover more than 66 percent of the urban population and boosted the percentage of collected waste disposed in sanitary landfills by 22 percent.
The World Bank Group stepped up its partnerships with bilateral and multilateral donors, regional development banks, Islamic financial institutions and emerging country donors. Less traditional partnerships are just as crucial: one of the sharp lessons of the recent political awakening has been the urgent need to reach out more consistently and consult across a wide spectrum including civil society, academics, NGOs and the private sector. The World Bank is taking advantage of this new space in which to engage with the conviction that MENA countries cannot be successful without good governance and the participation of citizens; development is richer by far if everyone feels they have a say and a stake.September 2013