© The World Bank

Growth in the Middle East and North Africa was robust in 2006, with real GDP rising 6.3 percent. This extraordinary growth—the strongest in more than 10 years—occurred despite the difficult conditions affecting many countries, particularly the conflict-affected areas of Iraq, Lebanon, and the West Bank and Gaza. Strong oil revenues and the ongoing European recovery provided the momentum for growth, allowing per capita GDP to rise 4.2 percent despite large increases in the population. Sustaining growth at current rates will depend primarily on advances in the structural reform agenda and on a more even distribution of resources to reduce the high vulnerability to poverty.

The overall environment for business in the region improved during fiscal 2007 as a result of reforms undertaken in several countries, including the Arab Republic of Egypt, Jordan, and Morocco. Despite some initial steps toward public administration and civil service reforms, however, governance remains a challenge, and the participation of civil society, including parliamentarians, remains weak.

Job creation in the private sector is increasing, but large differences exist across the region, with unemployment declining in some countries and rising in others. Women and youth continue to be overrepresented among the unemployed. Employment rates for women and youth average about 47  percent, the lowest in the world.

World Bank Assistance

The World Bank approved nearly $692 million in IBRD loans and $216 million in IDA commitments for the region. In addition, the Bank provided $85 million in special financing to Lebanon and to the West Bank and Gaza; Iraq received $100.5 million in grants from the Iraq Trust Fund. Knowledge services and policy advice continue to represent a significant portion of the Bank’s support for the region. Synergies within the World Bank Group and partnerships with civil society, the private sector, and other development partners continue to play a key role in the Bank’s effectiveness.

The Bank’s regional strategy addresses five key areas: governance, private sector development, water, education, and inclusion.

Improving Governance

World Bank support to governance and anticorruption programs in fiscal 2007 was $59.8 million. In addition to lending, governance support was provided through recipient-executed trust funds and reimbursable technical assistance to strengthen public sector management and fiduciary systems in Algeria, Jordan, Lebanon, Morocco, Tunisia, the West Bank and Gaza, and the Republic of Yemen; improve results monitoring in Algeria and Jordan; and build capacity in procurement in Djibouti, Tunisia, and the West Bank and Gaza.

Private Sector Development

Across the region, the World Bank continued its efforts to improve the investment climate and increase trade competitiveness. In Egypt, Bank-supported reform of the business environment resulted in the creation of a “one-stop shop” at the General Authority for Investment. By bringing together 20  government entities under one roof, the time and cost of obtaining licenses for investment projects is reduced in order to match international best practices and thereby boost investment. The Bank is also supporting the privatization of banks in Egypt. In Morocco, the Bank is supporting financial sector reforms. In the Republic of Yemen, where Bank support encouraged adoption of the Extractive Industries Transparency Initiative guidelines and enactment of a good-practice procurement law, the Bank is providing technical assistance to strengthen the regulatory framework against corruption.

The Bank is also supporting key infrastructure to enable private sector development, especially in energy. In Morocco, energy sector reform was supported by a $100 million energy development policy loan. Iraq’s severe power shortages were addressed by a $124 million project in the south and a $40 million hydropower project in the Kurdish region.

Strengthening Water Management

Private sector participation is one of the main thrusts for World Bank Group assistance in the sector. In Egypt, the $145 million West Delta project is supporting a partnership alternative with the private sector to manage scarce water resources more efficiently. The Bank is also supporting cross-border cooperation on water management through support to the Nile Basin Initiative, the Arab Water Council, and the Arab Water Management Institute. In February 2007, the Bank released the study Making the Most of Scarcity, which emphasizes options for improving water management and services. (See www.worldbank.org/mna.)

Education and Inclusion

The World Bank’s approach in the Middle East and North Africa focuses on empowering communities to play a more effective role in supporting development, particularly women’s economic rights and opportunities. The Bank is financing several community-driven projects, including the Municipal Infrastructure Project in Lebanon and three projects in the West Bank and Gaza that focus on rehabilitating municipal services, strengthening the capacity of nongovernmental organizations, and empowering community-based networks to support the sustainability of service delivery.

The Bank is providing policy advice to strengthen and improve the targeting of social safety nets in Egypt, the Islamic Republic of Iran, Jordan, the Syrian Arab Republic, and the Republic of Yemen. In Tunisia, the Bank is supporting higher education reform with a $76 million loan. In Jordan, the World Bank completed the $34 million Higher Education Development Project to improve the quality, relevance, and efficiency of higher education. In Morocco, the Bank approved a $100 million IBRD loan to finance the National Initiative for Human Development Support Project, which supports access of vulnerable groups to social and economic services and promotes inclusiveness, accountability, and transparency of local decision-making and implementation processes.

In Egypt, Jordan, and Morocco, the Bank is collaborating with IFC to expand women’s economic opportunities through business networking and training. In Iraq, the Bank is assessing the viability of implementing microfinance initiatives that would benefit and support the needs of households headed by women, particularly low-income women.

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