Washington, D.C., September 23, 2005
MR. THEIS: Good afternoon. Welcome to this briefing from the Middle East and North Africa Region of the World Bank. I'm David Theis with the Bank's External Affairs Department. With us today are Mustapha Nabli, immediately to my left, who is the chief economist for the region, and we have Christiaan Poortman, who is the Vice President for the Middle East and North Africa at the World Bank. Next to him is Joe Saba, the Country Director for Iran, Iraq, Jordan, Lebanon, and Syria, and finally, we have Nigel Roberts down at the end, the Country Director for West Bank and Gaza.
And Mr. Poortman and Mr. Nabli will give us a brief overview on Bank operations in the Region over the past year and the current state of the economy in the region, and then, we will go to a Q&A session.
MR. POORTMAN: Well, thank you very much. I'll try to keep it short in order to allow a little bit more time for questions and answers. Let me just say that the year that is behind us when I was here to talk with you 12 months ago has been, as you can imagine, a very busy year for the Middle East and North Africa Region, and obviously, in response to the many developments that were taking place in the Middle East and North Africa Region.
Mustapha Nabli will talk briefly about the macro situation. Let me just say a few things about the Bank's involvement. We have again over the last 12 months further expanded our operations in the Middle East and North Africa Region. Our lending now stands at upwards of US$1.6 billion in the last 12 months, which as a matter of fact, since 2001, is a tripling of our lending commitments to the Region. So I think an indication of the way in which we're trying to respond to the various needs that come out of the region.
In addition to that and I think of increasing importance is the large amount of what we call economic and sectoral work, which is economic studies, sectoral studies, technical assistance, and any other type of technical assistance that we can provide to our countries. This is taking up an increasing part of our work program, and we now put out some 60 to 70 pieces of economic and sectoral work in the Region over the last 12 months, which complements, I think--we're trying to complement our financial assistance with this, and there's a large demand for this kind of work.
In terms of the focus and the strategy that we have for the Region, this has remained very much as it was last year and reflected in the documents that we unveiled about a year and a half ago [sic] in the Annual Meetings in Dubai, it is a strategy that is very much focused on helping the countries of the region deal with the overriding problem of unemployment, the acceleration of investment that is needed, and the social services that are being provided by the countries in the Region. There was a very special focus, as you know, on private sector development, and here, clearly, our colleagues in IFC play a very important role as well as our colleagues in MIGA. An increasing emphasis on infrastructure development: two-thirds of our portfolio at this moment is in infrastructure, very much as a response to the demands from the Region, and a lot of our work is focused on safety net arrangements, advising and providing technical guidance to our countries and helping them dealing with the transitions that they are making.
And last but not least, the issue of capacity-building: I was making reference to that already when I mentioned the economic and sectoral work that we are doing. We are increasingly being asked to help countries put into place these capacities with a very specific program that I want to highlight of a program of technical cooperation with the countries in the Gulf who are no longer borrowers from the World Bank Group, as you know, but do receive technical guidance and assistance from us on a reimbursable basis but a program that is now close to US$7 million a year basically distributed over the countries of the GCC.
Last but not least, a significant amount of our time and effort was devoted to what we call post-conflict situations. Particularly, our program in Iraq and our program in West Bank and Gaza have seen a lot of activity. We have now committed the nearly US$400 million or just over US$400 million of the Iraq Trust Fund that was made available to the Bank for management. All of that money has been committed, and we have just moved forward with another program of US$500 million worth of IDA resources, which will be made available to Iraq over the next two years.
In addition to that, in West Bank and Gaza, we have been very actively involved in the process. Our general operations that, as you know, have been there for the last 10 years if not longer, but more particularly, we have been very deeply engaged in trying to support and provide some of the economic underpinning associated with the recent disengagement, which has put an additional sort of amount of work in our work program and in our relations with the Palestinian Authority.
We have the two Directors here who deal with these two programs, and I'm sure they will be able to give you more information if you were to need to that after this. Let me turn it over to Mustapha to say something about the macro situation.
MR. NABLI: Thank you, Chrik. I will be very brief also.
As you can assume, the economic outlook for the Middle East and North Africa Region in the short-term as well as the medium run continues to be shaped and driven by the oil prices and the oil revenue. As you know, the oil revenue, the Region is highly dependent on oil and oil revenue, and oil prices have been on a positive trend, as you know, in 2005 and actually since the last four or five years. And this has driven centrally the economic outcomes of the region broadly.
We estimate that for 2005, the average growth rate for the region of GDP is going to be high, about 5.3 percent. Now, this is the third year in a row where the growth rate for the region is higher than 5 percent. And this, to put into perspective, to be compared to an average rate of growth in the nineties of about 3.7 percent on average. So the Region has really shifted its growth rate over the last years significantly by about 1.5 percent on average. This is a significant change in movement.
Now, on the other hand, one has to say that this is driven essentially by the oil revenue, the oil production as well as the implication of the increased public expenditures in the oil countries. The average growth rate for the oil producing countries of the GCC is about 6 percent. For the non-GCC oil producing countries, it is about 5.5 percent. So you see, while for the non-oil countries, it's less than that. It's about 4 percent.
So things continue to be driven by the oil revenue, which means that in terms of exports, current account and so on, most of the countries, the oil countries, are knowing extremely positive change in terms of balance of payment, in terms of increased reserves and improved fiscal balances and so on, which have really led to huge amounts of reserves in the region. We estimate that the reserves at the end of 2005 would be on the order of US$300 billion of reserves held by the countries of the Region.
Now, this does not mean that some of the countries are not suffering from this oil revenue. We should not forget that a few countries in the region are oil-importing and therefore are being hurt by the oil revenue. I would like to mention that Morocco is essentially an importer of oil; Tunisia, which is a net importer of oil; Jordan, which is a full importer of oil; as well as Lebanon. These are some of the countries, the main countries which are being hit, you know, strongly negatively by the oil revenue increases of the other countries, by the oil price increases. And they have to address those issues. These are a significant impact. They include fiscal problems, and we have seen in all of those countries, the governments are trying to deal with it by decreasing subsidies, increasing the domestic prices for the energy prices and so on, but they cannot keep with the increases in prices, so they are adjusting by 20, 25 percent, 30 percent, but the oil prices, as you know, have increased by at least 35 percent over last year worldwide. So this is creating a lot of stress in the Region overall.
Now, the issue that the Vice President mentioned about the employment and so on, that leads me to the long run. How is this going to impact the long run outcome or the prospects for the Region? Clearly, this positive outlook, short-term and medium-term, is going to have long-term implications. And the question we ask ourselves is how is going to lead in terms of employment, in terms of poverty reduction, and so on? And that is a very difficult question, because on one hand, the improved fiscal balances, the improved current account balances and balance of payments of the reserves are making it easier for these countries to reform and to pursue more active reform programs. But on the other hand, this also might lead some of the countries to be less proactive in terms of reform, because they can wait not to do reforms.
And so, what we are seeing actually is a divergence in terms of the countries. The countries which are really heavily dependent on oil revenue, the reform programs are ongoing, but they are at a slower pace very often. On the other hand, you have the countries which are really, you know, importing, oil-importing and so on, they are accelerating the reform programs. So there may be a divergence, and two groups of countries are going in different directions. So this is having a positive impact in terms of reform in the importing countries and a negative probably impact in terms of reforms in the oil countries.
So this is going to have long-term implications. Now, a final word, and I know that maybe a question some of you might raise, one of the issues that is impacting the Region this year is the end of the Multi-Fiber Agreement, and some of the countries of the Region which are exporters of clothing and products and so on are being affected by the liberalization of the clothing trade, and I mentioned essentially Morocco and Tunisia, to a large extent, are being negatively impacted by that, and this is leading to some problems in Morocco as well in Tunisia in terms of employment, in terms of reduction of the employment in these sectors, reduction of exports and so on which are significant in these cases.
Let me stop at this.
MR. THEIS: All right. We are going to turn to questions now, and if you could wait for the microphone and then identify yourself by name and affiliation. Thanks very much.
MR. THEIS: You've answered all the questions already, gentlemen.
QUESTION: Hi, my name is Lawrence Knollman. I report for Dow Jones News Wires. I just have a question. You mentioned reserves and the buildup in reserves. There has been some talk by some central banks in the Middle East about diversifying away from the dollar. Now, obviously, they probably would comment on this directly rather than yourselves, but I wondered if that is a trend that you have been seeing or hearing about and whether you expect that to continue.
MR. NABLI: Well, I don't have really the information whether this is happening or not. I'm not sure whether this is happening, so I'm not able really to provide a comment on this.
MR. THEIS: Yes.
QUESTION: How did countries in the Region deal with this extra revenue from oil reserves and exports?
MR. THEIS: And affiliation, please?
QUESTION: Muhammed Esutu with the Egyptian television Nine News Channel.
MR. NABLI: Well, I think I would like to start maybe to referring you to a document that we released last spring discussing this exact issue. We released a report in April 2005 called Economic Developments and Prospects in the Middle East and North Africa Region. And we have looked at this issue, how the countries are managing this oil boom, if you like. And a number of observations can be made around this. First of all, this oil boom is different from the previous one in a number of respects: different from the seventies oil boom or the eighties.
The main difference, besides the size of it, is that the way it's happening has been progressive. The increase in the oil price has been steady for the last four or five years, whereas if you look in '73, '74, '80-'81, there has been a sharp increase and then collapse of the oil price. This time around, the oil revenue increase has been much more steady and continuous. It has continued for the last four years essentially. So that is the first thing.
In terms of how the countries are managing, we have observed a number of things. First of all, overall, we see that the countries have not--unlike the previous booms, have not stepped up their expenditures in response to the increase in the revenue dramatically at the beginning, at least. It took them time to start increasing their expenditures, to use the oil revenue. So we are seeing now that the expenditures are increasing. It is true in many countries. But still, they are not increasing at the same rate as the oil revenue is increasing, which means that the fiscal balances have improved dramatically. In many of these countries, you have a fiscal surplus of 15 percent, 20 percent of GDP, huge surpluses as well on the balance of payments.
So to summarize, some of this increase is being used to increase expenditures; some of this is being used to fund subsidies actually, part of these expenditures, because many of these countries are not adjusting the energy prices, so part of this revenue is being spent as subsidies on--some of this revenue is being used to retire debt. Some of these countries have reduced significantly their debt. I can mention Algeria, for instance, has reduced its debt. Saudi Arabia has reduced its debt dramatically over the last few years. So they have used it to retire debt.
And the third is to build these reserves. So they're using this to beef up their reserves and they're investing it in the international markets essentially.
QUESTION: Did you notice structural reforms using this revenue?
MR. NABLI: That's a comment I made because this revenue gives--it's an opportunity actually for reforms because for many of these countries doing the reforms that need to be done, in many areas, it requires financial resources, if you're going to do reforms of the pension systems, If you are going to do reforms of financial systems, if you are going to do reforms of the public administration system; if you are going to do reforms of the trade and production system like agriculture, production prices and so on.
These cost money and so this is an opportunity for many of these countries to do these reforms and fund some of these reforms of this oil revenue. So this is a big opportunity, but on the other hand, there is a temptation if your macro balances are good to take it easy actually. So counties are behaving differently. Some countries are, you know, taking advantage of this and reforming more. Some countries are taking it more easy and reforming less than they would have otherwise and so on. So the picture is very mixed in general on this matter.
QUESTION: I'm from [?] Magazine, Beirut. You raised the issue last year that the high oil prices might affect or slow down the reforms, and you had a meeting with the finance ministers and the central banks of the Arab world. How do you evaluate their reaction to the advise of the Bank from the last meeting? What has changed from the last year, especially in terms of creating jobs and reforms? Thank you.
MR. NABLI: Well, in terms of creating jobs, what we see is that some of these expenditures are helping create jobs actually, so I think as we measured last spring, the unemployment rate in Arab subregion went down from 15 percent to about 13.5 percent or 13.4 percent. So there has been some gain in terms of employment. But this is personally my interpretation, but it's really temporary. It's not really dealing with the long-term issues because these expenditures, increased expenditures, you have programs to provide employment, short-term employment, or you employ more people in the government and things like that.
This can happen. But this is not going to solve the problem in the long run. And probably when we meet in next time, we'll show that the unemployment must have fallen further this year compared to last year.
So this certainly in the short-term there are benefits in terms of the decline of unemployment, but the question remains whether long-term this is sustainable, because this oil revenues are there, but are they sustainable? The oil prices, you know, I don't know in two or three years are they going to remain at the same level, and then when they fall again, what's going to happen to this employment and so on.
But by the end of the day, the reforms are really the critical thing to create the long-term jobs. And here as I said, the picture is mixed in terms, so you see some countries pursuing actively, some countries less actively, reforms. So I cannot provide a general answer to that. It's very country specific.
QUESTION: Just one more. Are you going to meet with the ministers this year also? Do you have a meeting with the Arab ministers and the central banks to discuss the same issues you discussed the last year?
MR. NABLI: We have bilateral meetings, yes, to discuss those issues, yes.
QUESTION: But the last year, you had a meeting with the Arab ministers with Mr. Wolfenson?
MR. NABLI: Yes, there will be a meeting with--maybe Chrik.
MR. POORTMAN: No, that's a regular feature. I mean there is a meeting between the president of the Bank and the Arab Governors as we call them which are primarily the people who are ministers of finance.
QUESTION: Hi. It's Mark Wallace with Emerging Markets. I'm wondering how the political shifts in places like Jordan and Lebanon are affecting your work in the region and also maybe Mr. Roberts could talk a little bit about new potential in Gaza given recent events there?
MR. POORTMAN: It's a rather general question. I mean I think there are obviously programs that are focused very much on basic economic issues. And we have intense and broad-ranging relationships with all the counties in the region and that is sustained, and this includes Jordan and Lebanon, and we're trying, if you have specific questions about these countries then I can address them.
West Bank and Gaza, is there any particular that you have in mind in your question? I mean is it related to the broader economic environment or what is your interest? What is your question?
QUESTION: Yes. It's related to the broader economic environment and whether you see opportunities for your work there?
MR. POORTMAN: Well, there's definitely a lot of work going on there, but Nigel, you want to say something that?
MR. ROBERTS: Sure, yeah. Well, after the Israel successful disengagement from Gaza, there is at the moment a fairly intensive engagement between the Israelis and the Palestinians on a number of issues of bilateral interest and it's worth noting that this kind of engagement has not been part of the political landscape for the last five years.
So you see at the moment discussions underway on the management of the Egyptian border, on the interconnection between Gaza and the West Bank, on the management of the internal borders between Israel and the Palestinian territories, all of which are intended to restore movement which is an essential part of bringing about recovery.
As you also know, there is a heightened interest by the international community and also by intentional investors on the basis that the disengagement can unlock the door to a renewed peace process and, first of all, a resumption of the roadmap process or something akin to it, and a movement towards final status talks and a solution to conflict.
And it's on that basis that you see these expressions of both additional commitments by donors and also an interest in committing further in the next three years or so. It's also on this basis that you see a potential renewal of private investment and investors in coming into the Gaza and the West Bank economies.
Now, the work that we have done, as Mr. Poortman mentioned earlier, has been focused very much in the last year in trying to help put in place the preconditions for economic recovery so that that pillar of an emergent peace process is something that can, in fact, be implemented.
What we have been saying over this period is that these preconditions can be classified under three headings:
First of all, as an end to violence. This is violence of a bilateral nature. Second is a rolling back of the restrictions on Palestinian movement, both of goods and people that have been imposed over the last five years by Israel and which have acted to compress the economy and bring about the economic crisis that we have all witnessed.
And third is a far more vigorous effort by the Palestinian authority to reform its own systems and to gain control of the interior space of Gaza and West Bank.
Our view is that if those three things are seriously addressed, then you will see an upsurge in both donor commitments and also in private investment. Absent the emergence of those preconditions, however, it's very unlikely that you will see the kind of response that is so important if this economy is to recover.
A back of the envelope calculation suggests that the difference between putting in a certain sum of money under today's conditions as opposed to the same sum of money under much improved policy conditions is a difference of at least two. In other words, your GDP rate that you would envisage under improved policy conditions would be at least double what you would expect to gain from investments under today's conditions.
So obviously that is why we've applied a lot of our own thinking in Africa for this process of trying to get a grip on these conditions.
QUESTION: Hi. I'm Laura McInnis from Reuters. I have a question about Iraq. I wanted to know if you could assess both your plans for engagement with the country and the country's needs and also when and whether the World Bank intends to open, have people on the ground working there and sort of starting with that?
MR. POORTMAN: Well, I ask Joe Saba who is the director responsible for the program in Iraq to answer specifically. I mean your question seems to say that we have no operations in Iraq as we speak. I mean we have been engaged in Iraq ever since for the last two years plus. And we've had a very extensive program. As I said in the introduction, initially by applying and using the resources that were put at the disposal of the World Bank through the International Trust Fund, which was about $400 million plus, and as I've indicated, we've just gone to our board with a program that will be financed by about, well, exactly $500 million of IDA resources which are World Bank resources, so to say.
So we have a very extensive program, not just of financing projects, but also a very extensive program of technical assistance, economic and sector work, as I mentioned at the beginning. I'll ask Joe to say a few more words about it. In terms of our presence, we have a significant number of Iraqi staff working on the ground. What you're referring to I think is the presence of international staff and I think the president of the institution has indicated that this is subject to periodic review and he and the institution haven't made a decision about this.
MR. SABA: In terms of what we have been doing, roughly two and a half years after the first needs assessment, the analysis now really is to take a look at what the resource envelopes are and also the best, the most efficient and effective way in which Iraq can use those resources. So in our analytic and advisory services, we have been and we will continue to intensify our engagement with the Iraqi government in issues concerning public expenditure management and issues such as systems building, institution building, and specifically putting in place systems for procurement, systems for financial management, systems for contract management to ensue that public funds are used properly, systems for planning which involve a comprehensive budget framework that include not only Iraq's own resources but the resources that the various donors have brought to bear.
In the case of our project work, we in the Trust Fund have concentrated in areas such as basic needs, water, sanitation, education and in health. The money we have brought to bear though has also been focused in the areas that we think this institution has comparative advantage which again is institution building and systems building.
So we're using those projects as well as the projects we will be doing with the IDA money which will be concentrated in four sectors of roads, education, power and again water and sanitation, basically building on the work we did in the Trust Fund and again putting in place the type of system so that we hope in a relatively short term,Iraq will be in a better position to do it themselves.
These systems while they take time to put in place have been useful, not only obviously to the Iraqis, they've been useful in attracting other donor assistance, and we're pleased to report that other donors have been requesting the Iraqis to use these systems in deploying their own assistance, and finally I think again from the World Bank's point of view, we think that the legacy that we might offer in terms of our time spent in the last few years in Iraq is not only the bricks that we manage to lay but again the institutions that we build. So that is the focus of our work and what we will continue to intensify both in projects as well as our policy engagement.
MR. THEIS: Yes?
QUESTION: Maariv, Tel Aviv.
Coming back to the Gaza and Israel, are we ready, the World Bank, to commence the border points between Israel and the Gaza Strip. And the second question is what role is Mr. James Wolfensohn going to play now in the area--what will his main task be?
MR. POORTMAN: I can start with the Wolfensohn question. Mr. Wolfensohn, as you know, has left the World Bank, and he has been appointed as the Special Representative of the Quartet dealing with issues of disengagement in Gaza, and he uses that mandate, I think, to make a very important contribution to this process. You are from Israel, so maybe you have been able to follow that much more closely than many others here in the room. But I think he has made a major contribution in terms of helping institutions like the World Bank and others to put in place this macroeconomic underpinning to hopefully lay the basis for accelerated and rapid economic development in Gaza and subsequently in the West Bank. But that's a mandate that is still running, as you know, so that's what he's doing, and clearly, we are very closely collaborating with him and giving him all the support we can in making his mission as successful as possible.
Nigel, do you want to comment?
MR. ROBERTS: Yes. Let me try to answer the question about financing and improvement in border management.
Yes, we have been very actively engaged with both the parties for the last year in seeing what can be done to create a modern, safe, and efficient system of border management, which at the moment is proving a tremendous constraint to Palestinian development.
The current levels of restrictions along the Gazan border arose as a result of the intifada and the violence, but our view is that it is certainly possible to achieve a better balance between adequate security for Israel and commercial viability for the Palestinians, using systems that are well-tried and tested throughout the world, though admittedly not on sensitive borders.
And we are considering potential financial support to a reformed border system, but provided that certain, if you like, understandings are reached between the parties that will ensure a much higher degree of efficiency than you see at the moment.
These concentrate on two specific areas. One is an agreed bilateral and transparent management system in which both parties participate in operating the borders and in which the performance of the border service agencies on both sides is much more open to public scrutiny than is the case at the moment.
The second is the introduction and appropriate use of new, updated scanning technologies where what we are seeking in these discussions is clarity on exactly what the new generation of scanning equipment will be used for so that again, it is possible to envisage a progression from today's highly restricted system to one that works better without in any sense compromising Israeli security.
I would just add as an afterthought by way of illustrating the problem--if you look at Gaza today, Gaza has to develop; Gaza has to grow to sustain any hope of a transition toward a resolution of the conflict. The economy in Gaza today is not one that supports popular aspirations. You have, particularly in the southern parts of the Gaza Strip, a whole generation of young people who have grown up in the last six to ten years and have never known work. This is clearly not useful ground for forging any kind of reconciliation program.
Now, the development of Gaza is very much constrained by their operation of the borders today. On an average daily basis, somewhere between 35 and 50 loaded trucks of exports only transit from Gaza to the outside world, to Israel or to third countries. Our estimates are that even in today's depressed economic conditions, you would need to see at least 100 trucks a day.
In 1999, before the intifada, the daily passage of export trucks was roughly 300 trucks a day, which is just about ten times what is currently transiting. I mention that to illustrate the nature of the problem. But I am relatively confident that the two parties are going to agree to a system of rectifying.
MR. THEIS: Another question?
QUESTION: Regarding oil prices and impact on the Region, I wonder if you had any assessment on if the improved fiscal position of governments has resulted in any change in poverty so far, and if there is a relationship between having more revenue than not, feeling such a rush to implement the reforms, what can the World Bank do to change that or to improve that?
MR. NABLI: On the impact of the increase in oil revenue on poverty, I think it is pretty difficult because the measurement of poverty really takes time. We don't have measures of poverty every year or every six months, so it takes time to get information on poverty.
So maybe over time, this information will become available. But one would suspect--but one would suspect, everything else being constant--that the increase in the growth rate that I have talked about, going from 3.7 to 5.3 or 5.5 percent, is going to have a positive impact on poverty, and poverty will be reduced. So one would expect that poverty is probably going to be reduced, is being reduced at this stage, but how much, it is difficult to say at this stage.
MR. THEIS: Yes?
QUESTION: Robert McNair, Radio Free Europe.
I'd like to try again with the same question. It seems like the governance issue or the structural reform issue is at the heart of international concerns about this Region. The Bank has very clearly said that this Region is lagging the world in terms of governance issues such as public accountability, that it is among the weakest in improvements in business climate.
To what extent is the Bank having a dialogue with these countries to try to stress these concerns, which should be stressed worldwide, on these issues? You raised it back in April with a pretty big report. Could you say to what extent there is a dialogue on these issues, on these reforms?
MR. NABLI: Yes, absolutely. The countries of the Region are in two groups. First is the group where the Bank has operations, where the clients borrow, and there is continuous dialogue. And there is a group which is different, and the Vice President mentioned, which are the GCC countries where the dialogue is different because they are not clients, really; they ask for technical assistance.
So I will focus on the first group, because that's the one where we have daily engagement, if you like. And in every one of those countries we have continuous dialogue on the reforms. You go from Morocco to Egypt to Jordan and Iraq--Mr. Saba mentioned Iraq today--and Lebanon, Syria, even Syria, which is borrowing--West Bank Gaza. We have policy dialogue on all those issues, and as I mentioned, the picture is mixed. There are countries which are moving forward very actively, in a determined way, and there is momentum for reforms, and others where there is less.
But we continue. That's our work, that's our job, to continue to be engaged and to follow, whether it is on the governance issue, on transparency. We do a lot of work on governance issues in the public sector in most of the countries. We do work on budget issues, on transparency of budgets, on the management of the budgets, on the public administration. We have projects, we have technical assistance, we have policy dialogue. Even on terms of corruption, there is increasingly dialogue and discussion with many countries. They are asking for help in terms of how to deal with corruption issues. So this is ongoing, but it varies from case to case.
MR. THEIS: Last question, up at the top.
QUESTION: I wonder if Mr. Nabli and Mr. Saba could comment specifically on Iran and how the increased oil prices are developing and what programs the World Bank has with Iran. I'd like to hear a bit more, and also, with the changes of government recently, how you see things.
MR. NABLI: Just two comments on Iran. In terms of the increase of oil revenue and its impact on the reforms, our view is that Iran is one of the countries which did benefit in a huge increase in oil revenues. It is one that is in that group which has benefitted, and it has led to a significant increases in public expenditures also, which is probably having a positive impact on unemployment being reduced and reduction in poverty.
On the other hand, as of now, for the last couple of years, at least, we have seen that the reform momentum has slowed, and we don't know. There is a new government that is coming in; we'll see how this new government is going to proceed in terms of this reform program.
There are huge challenges in terms of reforms that need to be done in every dimension. You know as everybody else that the energy subsidy is a huge issue in Iran. Energy subsidy consumes a big chunk of the oil revenue. But there are other issues, going from trade policy to financial sector development to water management to--you name it. There are lots of issues that need to be addressed in Iran, and I think, I hope, that the new government will move forward and be more dynamic and more proactive in terms of what is needed for the long run, because if there is a country which really shows this dilemma about the need to create jobs on one hand and the need for reforms and the increase in the oil revenue which might lead some to think that we don't need to make the reforms, it is Iran.
MR. THEIS: All right. Thanks very much.
QUESTION: Sorry--are there any programs on Iran?
MR. POORTMAN: Yes. Joe was just going to say a word about the program.
MR. THEIS: Sorry. Okay.
MR. SABA: Briefly, our website does give a rather full picture of the programs we have. We have a portfolio of about $1.3 billion. A good amount of it is in water and sanitation and in earthquake reconstruction and environment. In each of these programs, we are again working closely with t hem to institute new systems for procurement, for financial management, for implementation, and to seek new ways for resource management. And, as Mustapha said, we have a very active program and dialogue with them concerning means to achieve greater growth and get more efficient and effective use of the resources they have. For a long time, they had concentrated on programs of distribution and equity, and it is very clear given the demographic pressure that there is now a need to turn much more sharply toward programs for growth.
The new government has just taken its chair, and we are looking forward to meeting with their representatives here during the weekend, and we'll be exploring with them their programs and policies, and we hope to be able to continue along the same path.
MR. THEIS: Thanks, everyone.