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Press Briefing on the Middle East and North Africa

Washington, D.C., April 17, 2005


MS. RIZA: Well, good morning and thank you for being with us here again. As you know, this is a press conference, one of the press conferences that we hold during both Annual Meetings and Spring Meetings, and usually during these conferences, for those of you who have been with us before, we try to give the media an update of what is going on in the Region.

This year, you are going to have a bonus, because we're also launching the 2005 Economic Development and Prospects Report for the MENA Region, and here with me today, we have three people who will address this issue. Immediately to my right is our Vice President for the Middle East and North Africa Region, Christiaan Poortman. Next to him is our chief economist, Mustapha Nabli. And next to him is Jennifer Keller, who is the principal author of this report.

I will ask Mr. Poortman to start with some remarks, and at the same time, I think we're going to--you'll find as you go out copies of the report outside, and at the same time, you can get them through So, Mr. Poortman.

MR. POORTMAN: Well, thank you, and let me also welcome you to this press conference. It's a good opportunity for us to be able to exchange views with you about developments in the Region, and as you know, there are many developments, economic developments, obviously, and political developments in the Region.

But let me first of all say that I'm indeed very pleased, as Shaha said, that I can introduce to you this new publication of the Region, this report, as she said, the MENA Economic Development Prospects. We see this very much as a first in an annual series that will highlight the major economic trends in the Region over the last year or so and also consider the Region's short and medium-term and longer-term economic prospects.

The report does not only look at the broad economic developments but also tries to measure progress that has been made in the Region on the structural front, i.e., dealing with structural reform. As some of you may know, this report comes on the heels of what we call four flagship reports that we put out during the Annual Meetings in 2003 in Dubai, and in those reports we in the MENA Region laid out what we considered the fundamental economic transitions that the Region had to make in order to meet this extraordinary challenge that it faces over the next two decades and beyond in terms of employment creation.

You probably know the statistics: in the next 20 years, the Region will need to create about 100 million jobs to keep pace with the labor force entrance and to bring down the current high levels of unemployment. Meeting this challenge will require growth rates in the range of 6 to 7 percent per annum for a very sustained period of time. Achieving these rates of growth will require actions, lots of them structural adjustment actions, which were laid out in these development reports.

Against this backdrop, as I said, we also took the opportunity to look at what has been happening on the structural reform front in MENA, and in order to really gauge whether the recent developments are putting into place the foundation, so to say, to meet these extraordinary development challenges in the Region.

But I'd like to leave you with the other basic message in the report, which is that clearly, there has been a tremendous positive economic shock to the Region with regard to oil prices. The dramatic rise in prices over the last two years obviously takes us back to similar experiences in the seventies and the eighties, and we know that those booms did allow the Region to make some very significant progress on a number of social fronts, but also, we know subsequently led to Syria's macroeconomic imbalances when the oil prices fell.

And so, we have taken this opportunity in this first report to look in detail at the current oil boom and to discuss what the impact has been on the Region to date and also look at how this has been transmitted to the nonoil economies in terms of oil revenue management.

As Shaha said, the report or at least a summary of it is available to you outside and otherwise on the Net, and I suggest that you read that to get some further details. But Mr. Nabli, our chief economist, will give you a quick summary of what the main findings of the report are.


MR. NABLI: Thank you, Chrik.

This report, it looks like this, and I would like to point out that you have both an Arabic summary of the report as well as a French version of the summary of the report that you will find available and I hope useful.

I would like to summarize the main findings of the report in four points essentially. I'll make four points. The first one, the first message from the report is that when we look at the last few years, we observe that the MENA Region has, in the midst of all this political kind of uncertainty, it has been going through an economic boom essentially. The Region of MENA, as you know, the MENA Region in the World Bank terminology goes from Morocco to Iran, includes Iran and all of the Arab countries, essentially except a few Sub-Saharan African countries, and includes Iran.

The average growth rate for 2003-2004 was 5.6 percent per year, and this is the highest growth rate since the nineties, and actually, it reached a peak in 2003 of 6 percent. In 2003, the growth rate was even 6 percent. It slowed down in 2004, but the average for the two years 2003-2004 is 5.6 percent.

In per capita terms, this growth is the highest since the seventies, so, you know, after the collapse of the eighties and the slow growth of the nineties, one will look at the last few years; it looks like there has been really an economic boom in the growth rate that is extremely relatively high.

This has even translated into somewhat of a decline in unemployment. The unemployment rate, which was, a few years ago, when we looked at the reports that Mr. Poortman mentioned was about 15 percent; the unemployment rate has declined to an average of 13.4 percent, so there have been some gains in terms of employment in the Region. We have seen, and we see, a boom in stock markets throughout most of the countries. The biggest boom, as you know, has been in Egypt, but also, in many of the Gulf stock markets, there has been a boom. We also see a boom in the real estate. In many countries, real estate prices have been booming.

So that's the main message in terms, you know, overall, one can look, you know, despite this political and these security issues and Iraq and so on, so that's the first message that comes out of this from our review of the recent developments.

However, the second message is nonetheless as important. This growth and this boom has not been broad-based and has been driven essentially by the increase in the oil revenues. This is important to remember and to understand and to assess what is the significance of this increase in growth over the last few years and prospects in the near future.

Our estimate is that most of the increase in the growth rate between the nineties and 2003-2004, most of it is due to a huge increase in growth in four major countries, which are Saudi Arabia, Algeria, Iran, and the United Arab Emirates. For the rest of the countries, there has been a slight increase but not really a big increase in the growth rate. Actually, in many countries, the growth rate compared to the nineties has declined, actually.

So this boom, if you like, or this, you know, pickup or this scaling up of the growth rate has not been broad-based. It has not really touched all of the countries of the Region. It has been concentrated in a few countries, and as you see, the four countries that I mentioned are essentially major oil producing countries, and it's not by chance that they are the ones who are really the source of this major increase in growth.

Oil export revenues have increased, you know, quite a bit, significantly, and we go into some detail to measure this increase, and I don't want to say too much about this. But when we compare, despite this increase in the growth rate, when we compare with the rest of the world and the rest of the developing countries, MENA still does not, you know, perform better than, actually, performs less than most of the other regions in per capita terms.

So despite the fact that the increase in the growth rate and the per capita growth is better and is almost the best since the 1970s, it's still lower than many other regions of the world. So this boom, one has to see it in perspective, in global perspective. There has been an increase in the growth rate throughout the developing world, actually, over the last few years, and MENA has been doing well, and it has improved, but it has not improved to the extent that it is really doing better than the rest of the world.

So that's the second message. So the growth has been essentially due to the oil revenue, and we go to some extent to explain how the oil revenue increase has led to an increase in government expenditures and an increase in investment, and then, this has led to multiplier effects and then, therefore, higher growth in these countries and so on.

The third message that I would like to, you know, spend a few minutes on is really that we looked specifically in this report to how the oil revenue this timer around, this boom in oil revenue has been managed. And we did quite a bit of comparison comparing to the seventies and the eighties' experiences, and a number of lessons, you know, appear, you know, when we looked at this.

First of all, the nature of the boom itself of the oil revenue is quite different this time around from the previous ones in two respects: first, when we look at it in per capita terms, you know, the increase over the last two or three years of the oil revenue in per capita terms compared to what we saw in the seventies and then in the eighties, it's much smaller in relative terms.

As you might realize that the oil price, despite the fact that it's at $50 or $55 today in real terms is still less than what it was in 1980 or 1981. The real price of oil today, despite the increase, is still lower than when we deflate it by the cost of, you know, the manufacturing prices index worldwide. In dollar terms, the real price is still lower.

And the other thing is that population today in Saudi Arabia and Algeria and Iran is much higher than it was in the seventies and the eighties, so when you measure in per capita terms, the increase in the oil revenue is much smaller than what we saw in 1980-1981 or in 1973-1974.

The second thing that we have to realize is that the nature of the shock and the way the shock took place is different this time around. What we see this time around is that since 2000, the prices and the revenues have been more or less on an upward trend, you know, except for a decline in 2002 somewhat, but overall, the prices have been, since the low of 1998-1999, it has been on an upward trend, and the revenues have been growing steadily in 2003, 2004, 2005.

Now, this is very different from what we saw in 1973-1974 and 1980-1981, where there was a huge spike and then a collapse afterwards, one year after, two years after. Which means that the nature of the shock itself is very different. Actually, from the perspectives of the countries, it's much better, which means the other thing that also we have seen that countries are more prudent this time around in terms of the use of this oil revenue.

We have looked at how much of this oil revenue has been spent during the recent year or two, and we see that there has been clearly an increase in expenditures through using this oil revenue, but many of the countries have used this revenue to retire debt or to save it, and many countries have built significant savings and reserves through stabilization funds to phase, to not spend all of this increase in the revenue immediately.

This is in contrast to what we saw in the previous two shocks, where most of this revenue was spent, actually, and then, when the price collapsed after one or two years, the countries find themselves, you know, starting to incur debt, and then, they got into the debt dynamics and so on.

So we have seen a more prudent and more conservative, you know, management of this oil revenue this time around, even though, in some countries, we see that there has been also a ratcheting up of the expenditures over the last few years. So even though they did not start increasing their expenditures the first year or two, and then, after three or four years, they started spending; you know, seen that in some countries and so on.

Now, the fourth point that--and the fourth area where we have is to look at what does this mean in terms of the long-term? And for that, the message that since this increase in growth is due essentially to the short-term increase in expenditures due to the oil revenue, has there been a change in the fundamentals, in the structural basis of the economies to grow in the long-term? Because we are worried that the increase in the oil revenue might slow down the progress in terms of the structural reforms needed, which are critical for the long-term growth.

And that's why we reviewed the progress in terms of structural reforms. And actually, what we see is that the progress in structural reforms has not really gone very strongly. And even though it's not so clear, the link is not straightforward, it may be possible that this increase in oil revenue might have been, you know, the cause or a reason why structural reforms have not moved really as strongly as one would have expected given the challenges.

So when we looked at the structural reform, we looked at many areas of structural reform. We look at the trade openness, we look at the business environment, and we look at governance, three areas of structural reforms. And while we find some progress in terms of trade openness, the trade policies have moved quite significantly in most of the countries of the Region in the last few years, and we have seen a decline in tariffs, decline in nontariff barriers, driven to a large extent by the bilateral and multilateral regional agreements, whether it is the Euromed agreements with Europe or whether it is some bilateral free trade agreements with the U.S. as well as, you know, agreements within the Region itself, you know, the Pan-Arab Free Trade Area as well as some others. So there has been quite a bit of change and improvement in terms of the openness of the trade policies.

On the other hand, when we look at the business environment, we do not see much progress. There have been some, you know, good cases where there has been some progress in terms of employment and the business environment. We do not see that there has been an improvement or, in other words, even if there is an improvement, it has been slower than what has been happening in the rest of the world. So actually, the countries of the Region are falling behind in terms of the business environment and the private investment.

The same thing can be said for the governance, and we looked at the indicators of governance, whether it's quality of public administration or whether it's the public sector accountability mechanisms, and especially on public accountability, we find that the Region has fallen behind, actually, compared to that. There has not been much progress in terms of the governance.

And this is extremely important, because this is critical for the progress of the reforms, in general, the structural reforms. And when we look at this slow progress on structural reforms in general, this is not very good for the long-term prospects. So when the impact of this oil revenue increase, you know, starts to go away, we do not see the fundamentals improving strongly enough for the growth rates to be permanently and strongly increasing to face the challenges that Mr. Poortman talked about in terms of employment and so on.

So the conclusion of that is that broadly speaking, we see that there has been strong gains in growth and performance in the last few years. We expect this growth to continue to be relatively strong even though it is going to slow down in 2005-2006. Our estimate is that it is going to slow down to less than 5 percent over the next two years, but this remains strong and higher than what we saw in the nineties.

The long-term prospects are not really--we don't see the underpinning of long-term prospects improving in any significant way, which means that the reform agenda remains on the table, and the countries of the Region, while doing, you know, making some progress in some areas, the overall push for structural reforms is still not taking hold, you know, deeply.

Clearly, a caveat here: I tried to paint a broad picture, so different countries have different stories to tell, you know, and there may be some changes here and there more recently that are not well captured by my broad, you know, picture of the Region. What's happening in Egypt today is different from what's happening in Algeria, and what's happening in Morocco is different from what's happening in Syria.

So, you know, my broad picture is maybe too simplistic in a way and does not really reflect the specifics of each country. But we go, in the report, you'll find, you know, some attention paid to the specific country experiences here and there, and you should look at that if you are interested. I'll stop here.

I don't know; Jennifer, would you like to add something?

MS. KELLER: No, I think, actually, let's just open it up for questions.

QUESTION: I wonder if you could give a review of the economic situation in Iraq.

MR. NABLI: Should we--

MS. RIZA: Maybe we could take a few questions, and please introduce yourself as well, and then, we will ask that--we also have some of our country directors here as well so that they can all listen to all of the questions.

There and then here.

QUESTION: I'm Ed McHugh with Interpress Service. Mr. Nabli, why does the World Bank insist on structural reforms when structural reforms have proven to be a failure in Latin America and, as we've heard from other countries, from Asian countries, Asian countries are moving away from the Fund and the Bank. Why do you insist on pushing structural reforms on Middle Eastern countries?

QUESTION: Robert McMann, Radio Free Europe. I was interested in your comment about--you mentioned the increase in revenues having a negative impact on structural reforms so far. And I was wondering if you could give some examples, concrete examples, of places. One possible example that comes to mind maybe is Iran, where they have had a huge increase in revenues; however, there's the nonoil sector, perhaps, not getting the attention it should get. It also has major human rights problems and other areas that could perhaps get more attention, social areas, with the increase in revenues.

MS. RIZA: We'll take one more over here. Is there a question there?

QUESTION: Actually, when you remove oil from the equation, how do you see the picture? Without oil increases, how do you see the picture?

MR. NABLI: Actually, in the report, you'll find on Iraq, there is a very short summary of recent economic developments, so you might find it when you look at this.

Very quickly, on Iraq, what we see is that clearly, after the collapse of 2003 of output and so on given the war and things like that, there was the beginning of a pickup in 2004. But our estimates, even though the data on Iraq is not very--you know, the quality is still not very strong, we see that the recovery has somewhat stalled by the second half of 2004.

The security situation, you know, has not helped the economy recover, and the growth that was expected to continue, the strong growth to continue in 2004. Clearly, the oil revenue and the increase in the oil revenue, for instance, for Iraq has been significant. And despite the fact that the oil output and the exports in terms of quantity is below what was expected and what was--but the increase in price has compensated for that, which means that the revenue has been higher than what was expected in general, and this has helped, you know, maintain the economy and fund, you know, the economic reconstruction somewhat and so on.

But the reconstruction generally is not going very strongly, and the growth has slowed down in the second half of 2004. That's broadly speaking; maybe my colleague, Joe Saba, who is Director for Iraq, might add something on this.

Would you like to add something, Joe?

MR. SABA: I think that is a very good summary also about what is happening in terms of the social sector and mortality, health, and education. And so far, the indication is that there have been improvements. The children are back in school. There's a lot of work to do, but things have picked up.

On the other hand, when you look at child nutrition and mortality rates and other health indicators, we don't see a great improvement over time. But when we look at that, and we think it has to do with the fact that water and sanitation remain serious problems. All of these things, of course, can be helped by the overall recovery in the economy.

When we say recovery, we also mean the private sector. The private sector requires a degree of certainty. An improvement in the security situation will provide the certainty necessary for the private sector response that we would hope for. So we continue to work on some issues like the safety net, nutrition, access to basic services like health and education.

QUESTION: Are you rolling back the subsidies in Iraq for the food rations? The Finance Minister said that they always ration their subsidy system. Are you part of that, the World Bank?

MR. SABA: Yes, we have a project. [Off-microphone.]

MR. NABLI: I think to be very precise on this last point, clearly, the World Bank does analytical work and policy work with the Iraqi authorities on these issues, including the food subsidies and things like that. But we are not in any, you know, involved in the practical reforms themselves, you know. We are just trying to help them gain experiences, see what other countries have done, what they can learn from other experiences and so on, and what are the costs, what are the things that should be looking at in terms of possible impact if they do lift the subsidies on food; what will be the impact on the poor? How can they mitigate that impact? So that's the kind of work that we do. But as you know, there has not been any, you know, action on that front yet by the Iraqis, and we don't know when and how they will do that.

On the last question, and I'll come back to the structural reforms, on what is the picture without oil if there has not been the oil revenue. Clearly, from what I said, the growth rate of 5.6 percent that was 2003-2004, if there was not the oil boom, it would have been much, much, much smaller. How much? You know, probably my own guess is it should have been, like, 4 percent or less, so there has been at least 1.5 percent or 2 percent of growth in the Region that is due to the oil revenue.

We have seen much more, you know, the current accounts would not have been as strong. The reserves clearly would have been much smaller in many countries of the Region, and clearly, the fiscal accounts would have been in a less good situation. Unemployment would have not been--would not have slowed. The major drops in unemployment took place in Iran and Algeria, actually, and this, thanks to a large extent, to the increase in public expenditure. In Algeria, you know that until three years ago, they had a public expenditure increase and a special program of public expenditures which was aimed at, you know, employing people, which was temporary kind of employment, and this has helped reduce.

I think if the oil boom did not happen, I do not think this would have been possible. The same thing on Iran. So I think the picture overall, I mean, you can read what I said in terms of the situation being hurt by the oil revenue can be in reverse, actually, and you can get an idea of the picture how it would have looked like if there were no oil boom.

QUESTION: You mention structural reforms. Why does the Bank continue to insist on the idea of structural reforms when it has been rejected in other parts of the world?

MR. NABLI: Well, as I said, the regions of the world vary. I mean, in East Asia, the growth has been strong and continues to be strong. In Latin America, it has been improving for the last few years compared to the decline, and I'll come back to the structural reforms on this. In Eastern Europe and Central Asia, there is better performance.

MS. KELLER: Are you asking the nonoil exporters in the--

MR. NABLI: In the Region, yes, the nonoil exporters, the growth rate and the progress in terms has been slightly better but not that much better. Probably--what was the average for the nonoil exporters?

MS. KELLER: I think it ticked up from, you know, over the 1990s from, say, 4.1 to something like 4.3.

MR. NABLI: 4.3, yes.

MS. KELLER: And some of that was due to oil as well, because you have to feed in the Suez Canal receipts upturn and so--

MR. NABLI: And some of it due to, in the last few years, better weather conditions in Morocco or in some, so weather has been better, and agriculture has done better. So a significant part of this gain is due to exogenous, what I call exogenous shocks.

Now, structural reforms; why would we continue to insist on structural reforms while structural reforms have failed everywhere else? Well, I might not agree with that statement, I don't think that structural reforms have failed. I think structural reforms have not produced everywhere the expected results. But I do not think one can say that there are countries which have produced significant progress in growth and better performance without structural reforms. So we have to be careful on how we read these things.

What are the structural reforms that are needed in a given country at a given time that would produce results is a question that is really very specific to the country in question and the time and place. So finding what are the right combinations of structural reforms that are needed for a given country in a time and place is extremely important, and it's not easy always to define it. And sometimes, countries' structural reforms that have been done did not, you know, in Africa, we have seen that in many cases; we have seen in some countries in MENA also.

But to say that structural reforms are not needed and are not useful, I think that would really be very dangerous. I think every country, even developed countries; let's not forget even developed countries go through structural reforms. You know the agenda of structural reforms in Europe today. You know, it's huge. And countries that have done structural reforms have succeeded to improve their conditions in others; you know, Germany and things, you know the situation in Germany when you compare Germany to the U.K., or when you compare Germany to the Netherlands, you know, you see which countries have done the structural reforms and have been successful in improving their performance and others which have not.

QUESTION: But there are some countries which have had protectionism before they actually adopt all these liberalizing and opening up so--

MR. NABLI: Countries have been doing that for 60 years, protection, so that's right. Even if I accept that argument that you need some period of protection early on and then when you mature and then and so on, this is maybe, I mean, this can't be argued. But the fact is that MENA countries are the countries--I mean, you look at the numbers here. When we looked at the ranking in terms of the rates of protection, you know, we have some of the countries of the Region which have the highest rates of protection in the world today.

I mean, we look at Morocco, we look at Tunisia, and we look at even Egypt before the major reform of trade in the last fall. Egypt has moved significantly over the last nine months in terms of the trade policy. But before that, it was the highest rates of protection, you know, in the world and so on. And these countries, you know, maybe it was useful to have it, you know, in the sixties and the seventies, but now, I think it has outlived its usefulness.

So that's on the structural reform. On the issue of do we have any cases where the oil revenue increase can be linked to slower structural reform, to my mind, clearly, you mentioned the case of Iran, and the other case that comes to my mind clearly is Algeria, I think, where the increase in oil revenue has essentially been associated, I wouldn't say caused, or I don't know; I can't make that, but what we see is that Algeria has not moved on structural reform over the last few years, and the increase in oil revenue can be associated with the slowness of the--we can see another example, Yemen. We have Yemen. Yemen is another case which is a poor country which is in need of major reforms on governance, on whatever, business environment and judicial systems and things like that. And actually, with the increase of the last few years, you know, progress on structural reforms has slowed down.

And with the prospect of decline in oil revenue in Yemen because of the decline of production, because the reserves of Yemen are being exhausted, and the best estimates say that in the next 10, 12 years, you know, there will be no oil revenue, no oil production in Yemen, and structural reforms are extremely critical, and we have not seen it happen.

MS. RIZA: We're running out of time, so we're going to take two or three more questions very quickly. Please be very quick and introduce yourselves. There's one over there. We'll take one over there and over here.

QUESTION: I wonder whether you also noted in your reports the benefit in transparency levels in performance of, you know, a variety of governments in the Region and in terms of corruption, performance, and transparency issues. How did that improve during that period? And the second question is since you've mentioned, you know, the oil prices and, you know, other political considerations in the Region, in the World Bank estimates in the coming two years, do you think the private sector or major investments would bear of going to the Middle East and investing there in light of the situation there?

QUESTION: I'm Laura McGinnis from Reuters. I was wondering if you could speak in more detail about the employment situation in the Region, you know, whether employment, you said employment growth has increased but, you know, in the report, it says it's still weak, so I wondered if you could--

QUESTION: Could you comment on the gold which was apparently stolen from the Central Bank, whether it has been recovered? And secondly, how has the currency transfer gone in terms of the bank notes that replaced the bank notes from Saddam Hussein's days? In other words, have there been any problems with the currency transfer?

MR. NABLI: I'll leave the gold to--may I ask Jennifer to talk about the employment question and maybe the transparency and how we have the transparency in--

MS. KELLER: In terms of the employment situation, we looked at what has happened to unemployment over the last four years that we could measure. From the start, you should know that a lot of this information is not readily available in certain countries, but we certainly saw a slight tick up in employment creation, and the unemployment rate from the countries that we could measure had declined from 14.9 percent to 13.4 percent.

This seems modest. However, I think you need to bear in mind that this Region, the labor force is growing at a rate of 3.4 percent per year. And so, even a moderate decline in unemployment, I think, we see as something significant, because the demands on this Region in terms of employment creation are so large that any decline, I think, is worth noting.

And where has it taken place? I think it's a mixture. There have been declines in unemployment in Morocco, and there have been, as Mr. Nabli suggested, significant declines in some of the oil producing countries such as Algeria and Iran. And I think probably the largest decline took place in Algeria, which was approaching 30 percent and is now around 24 percent; still high, but quite a large reduction in the last four years.

I think it's important to note also that when, you know, we've been talking about what these economies would look like without the oil, I mean, even with the oil, if you look at the growth rate that they've sustained over the last two years, in the area of 5.6 percent a year, this, you know, this a large upturn in growth, and yet, it is still not enough.

From our estimates, what this Region needs to have on a sustainable basis over the next 20 years to address this employment challenge is somewhere on the area of 6 or 7 percent a year. So you can imagine, I mean, the growth rates, right, the demands are just enormous on this Region.

In terms of transparency, I think it's good to look at the report. You can see we looked at two different areas of governance, and one of them was more on the area of public sector accountability, and the other focused on the area of public administration.

In terms of Egypt, I don't want to go into the particulars of the specific country, but I think you'll find it in there, and it really did capture a broad range of indicators, including corruption and transparency. So I think there, if you take a look at the report, you'll have a clearer sense of how countries moved in these directions.

MR. NABLI: On the Iraq questions, I don't think that we have anything to say about the gold and things. We have no specific information, or we are not involved in that; we don't have anything to say.

On the bank notes on the currency, from what we know, it has gone quite smoothly. And the substitution of the new currency to the old currency has gone, and it has been accepted by the population, and it has gone quite well. That's my reading of the experience. That's already some time ago. That's more than a year ago or so. When you don't hear news means good news on that point.


MS. RIZA: Joe, would you like to add? Could you please give that to Joe? He might want to add. Joe, wait because they can't take--

MR. SABA: Just two quick facts to verify the statement. I was just taking a look. The influx of oil allowed the Central Bank to build its foreign exchange reserves to about four months of imports. The money supply grew by about 117 percent in 2004, and we have a very strong indication of the remonetization of the economy. In addition, the exchange rate and the auctions have continued relatively quite stable, from 14.60 to 14.80 per dollar during this whole period.

So these three indicators over time indicate that the money has been well accepted; the economy has monetized; the currency exchange has gone quite well. It's actually quite a success story.

MS. RIZA: We're going to take two more questions. That is it; over here, the two front ones over here.

QUESTION: Thank you. Tariq Rashid from Middle Eastern News Agency. Just asking about the impact of debts on the proceeding of reform in the Middle East and whether the external assistance and loans played a role in this reform, in this progress which has been achieved this year.

MS. RIZA: Over here.

QUESTION: My name is Peter Thompson from World Press Center. I have actually two questions, I'm afraid: number one is is it fair to summarize what's been said here that there's been external demand for oil that has caused what growth there has been, and the use of the revenues has not been particularly stunning or productive, and that there doesn't appear to be a constituency for the positions that the Bank is advocating. That's question one.

And question two is is there any discussion of the kind that's going on in Africa, for example, around the Extractive Industries Initiative and the whole--is there any constituency for that discussion in the Region?

MR. POORTMAN: Well, there's a question of debt. On the issue of extractive industries, I know and I'm familiar with the debate on extractive industries in Africa. I think the short answer to your question is no, there isn't. At the same time, I think the points that we've been making about transparency and governance, governance and transparency and accountability, are very important elements in this kind of a debate, and there is clearly in the extractive industries in the Middle East a certain amount of nontransparency.

We in the World Bank aren't involved in the kind of debate that there is on the African continent, but nevertheless, I think through many of the pieces of work that we're doing in these countries very much also at the request of the authorities themselves, I mean, after all, they are the ones to determine what happens, so I just want to say that in terms of their commitment to it that we are increasingly asked to comment and to provide guidance into how the financial management and accounting can be improved, made more transparent.

There is also a demand, I think, in these countries on the part of civil society to have a greater understanding of what's going on, and this is not something that obviously they themselves made this clear, but I think just to sort of generally say that there is a greater interest in having a greater opening up of this. And to the extent that we can, we assist governments in making this and putting the emphasis, as I said, on issues of financial management and transparency. So there is some work being done in this area.

MR. NABLI: On your first question on the use of revenue, maybe it's an oversimplification the way you--yes, I wouldn't put it exactly the way you put it. Actually, what we're trying to say is that the management of the oil revenue has been quite more prudent this time around as compared to the past. Now, whether it's stunning, or whether it is the best possible or not, that can be debated. But there has been certainly more awareness this time around of the need to be more careful in that, even though we are seeing, you know, some slippages here and there, and in some countries, it has not.

So that's how I--and on your question about the constituency for reform, clearly, the oil revenue weakens the constituency, and we argue that the oil revenue has been a soft budget constraint, which is not very helpful in terms of, you know, pushing ahead for reform and letting constituencies for reform operate.

On the debt, I'm not sure I get the questions, but I do not see really personally from the work, you know, that we do that there is very strong relationship between debt and lending in the reforms. There is some at the level of the World Bank. Clearly, we do a number of operations which support reforms. We have lending operations on Morocco to support public administration reform. We have a lending operation in Jordan to support public sector reform. We have a lending operation in Tunisia to support private sector development.

So we have a number of operations which are based on policy reforms. We do also in the lending in specific sectors do also promote and support reforms, whether it's in agriculture; whether it's in education; or whether it's in health or so on; this happens. But from that, I wouldn't say that the lending is really overall for the Region has been driving reform or has been critical for the reform. I think whatever reform has been happening has been really, you know, driven, you know, from inside.

QUESTION: What has the impact been of the reforms on the debt situation?

MR. NABLI: Actually, what we see over the last 10 years or so, the debt situation has been quite either improved or not worsened in most countries in the Region, which in a way, if you say that, you know, a debt situation which is serious might help reform, you know, maybe a crisis situation helps reform, this has not been happening in the Region, because the countries of MENA have been managing their debt quite well, actually, recently.

QUESTION: But what has been the impact of lending on the reforms?

MR. NABLI: I mean, the way we look at it is that really, the reforms are really home-grown. They have to come from the countries, and if the lending can help and can facilitate, can support reform, that's what we are for. But we don't see the lending as a driver for reform. That's not the way to look at it. And that's not--I mean, experience in the Bank and coming back with reform, pushing reforms through the lending from above is not very effective.

That's the experience that comes out after 20 years of structural adjustment reform, I mean. You should not push. But if the reforms are coming from inside, if there is demand, and then the country asks for support for this reform, that works. You know, if Morocco, you know, they want to do reform of the public administration and then say okay, they want to do a reform of the housing sector, or they want to do a reform of the financial sector, and then, they come to the Bank, we would like you to help us, you know, design it and help it, and then, we'll go to finance some of these reform, that works, and this happens in many cases.

MS. RIZA: Well, I'm afraid we've run out of time, so we just want to thank you all for being over here, and I just want to remind you again that you can pick up the press release and the executive summary on your way out. We also will have the transcript posted later on today of this press conference, and you can find it at Thank you very much again for attending this conference.

[Whereupon, at 10:53 a.m., the press briefing was concluded.]

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