SPectrum 37530 S o c i a l P r o t e c t i o n T h e W o r l d B a n k S u m m e r 2 0 0 6 Opportunity, Security, and Equity In the Middle East and North Africa Social Protection aims at promoting equitable growth through expanding opportunities for good jobs, providing security against risks, and equity enhancing in a globalizing world. Cover Photo: Guillermo Hakim Contents Welcome 3 Robert Holzmann and David J. Steel Overview 5 SocialProtectioninMENA:FrameworkandContext 9 Social Protection: Opportunity, Security, and Equity 9 Social Protection Institutions in the MENA Region 10 The Context: Growth, Poverty, Population, and Human Development Indicators 11 SocialProtectionProgramsandInstruments:AnAssessment 19 MILES: A Multi-Sector Approach to Job Creation 20 Pensions: Making Pay-As-You-Go Systems Work 28 Social Safety Nets 34 Social Funds in MENA: Localizing the Global Experience 41 Addressing Needs in Conflict Situations 47 HIV/AIDS in MENA: Making the Case for Prevention 51 NewDirectionsandEmergingPriorities--Interview 57 WorldBankAssistanceinSocialProtectioninMENA 63 SelectedindicatorsinMENAcountries 67 MillenniumDevelopmentGoalsPerformanceinMENAcountries 68 Leadeditor:MargoHoftijzer.WithguidancefromRobert Holzmann,MichalRutkowski,DavidJ.Steel,DavidA.Robalino, andJohnD.Blomquist.Editor:TimWhitehead. Acknowledgements: TheauthorsofthiseditionofSPectrumwould liketothankthefollowingpersonsfortheir inputsandcomments:SamehEl-Saharty,Nedim Jaganjac,SimaKanaan,IqbalKaur,Zafiris Tzannatos,MargaretGrosh,JanRutkowski,David SethWarren,DavidWilson,LeilaZlaoui,and RaidenDillard. Welcome Welcome to the SPectrum on the Middle East and North Africa (MENA) region. This edition is the third in a series that focuses on the regions where the World Bank is active in social protection. Our goal is to explore the key social protection issues in this region, and to review recent World Bank work. The Middle East and North Africa is an economically diverse region that includes the oil-rich economies in the Gulf, resource abundant, populous countries such as Algeria and Iran, and countries that are resource scarce in relation to population, such as Egypt, Morocco, and Yemen. At the same time, MENA countries share many similarities. The region's economic fortunes over much of the past quarter century have been heavily influenced by two major factors: the legacy of economic policies and structures that emphasized a leading role for the state, and the price of oil. Today, the regions' countries face a variety of socio-economic opportunities and risks. Perhaps the region's main assets are its people. MENA's quickly expanding work force creates an opportunity to boost growth and lift the remaining fifth of the population out of poverty. However, without the necessary conditions in place to generate sufficient jobs for the growing number of working age individuals, the region risks continuing its pattern of economic growth which is erratic and below potential, reducing the chance of further improvements in human development indicators and poverty reduction. In this edition of SPectrum, we provide an overview of the development challenges faced by MENA, and illustrate the ways in which social protection instruments can contribute to the creation of jobs, the management of socio-economic risks, and the provision of minimum levels of subsistence to the most vulnerable. We hope that this edition will prove valuable to our readers in shaping their perceptions of needed social protection interventions that will contribute to developing and implementing the most effective social protection strategies for the region in the short and medium term. Finally, we welcome your feedback, and appreciate suggestions for future editions of SPectrum (so cialprotection@worldbank.org). We refer to our website for further information on social protection and the MENA region (www.worldbank.org/sp). Robert Holzmann David J. Steel Director, Social Protection Acting Manager, Social Protection Human Development Network Middle East and North Africa Region Overview T he countries of the Middle East and North Africa region are home to five percent of the world's population. They are primarily middle income countries, with an overall average income of $3,000 per person per year. The population growth in MENA is among the highest in the world, and MENA's labor force is growing at an even higher pace. Eighty percent of men, and 30% of women participate in the labor force; the total unemployment rate is approximately 13%. Of those who are employed, almost one third works for the public sector. Around 80% of adult men, and 60% of adult women, are literate. Per 1,000 people, 900 have access to electricity, 118 use a mobile phone, 50 have a personal computer, and five have access to the internet. Almost a quarter of MENA's population lives on less than $2 a day, and more than one out of every 10 children under the age of five is malnourished. Aggregate figures about the MENA region mask large disparities between countries. For instance, there are no two neighboring countries in the world where the difference in average per capita income is higher than Yemen and Saudi Arabia; a Lebanese is three times less likely to be unemployed than an inhabitant of West Bank and Gaza; the life expectancy of a Kuwaiti citizen is 34 years longer than that of an inhabitant of Djibouti; a Syrian woman is twice as likely to be able to read and write than a woman in Morocco; and a child is five times more likely to die before the age of one in Algeria than in the United Arab Emirates. Despite these differences, countries in the MENA region have developed social protection mechanisms that share a number of characteristics, and that face similar challenges in the face of changing population structures and increasingly open economies. To varying degrees, MENA's governments have begun to reform their conventional social protection mod- els--traditionally encompassing free education and health, universal subsidies on key consumption items, large public sector employment, and restrictive labor legislation--to better and more efficiently meet the needs of the population. These reforms are mainly triggered by two developments. First, a sustained period of weak economic growth since the mid-1980s created fiscal constraints that spurred the adoption of social protection policies that are more cost effective than subsidies and public employment. Second, a major demographic transition has put pressure on the demand for social services, and has changed the type of assistance that is required; after having succeeded in making substantial improvements in the health and education of their young population, MENA's citizens are now particularly in need of employment. Many governments, both within and outside of the MENA region, implement active labor market policies to foster employment generation. Although, if well-designed, these policies can be useful in redistributing jobs to the more vulnerable population groups, they tend to have only a limited impact on overall job creation. For structural and substantial employment generation to be achieved, a comprehensive and multi-sectoral approach is required, addressing the binding constraints within the broader framework of macro-economic stability, the investment climate, labor regulations, education and skills development, and social safety nets. Within this framework, social protection policies focus on creating more flexible labor legislation to increase job demand and labor mobility, strengthening the skills of vulnerable population groups to enhance their chances in the job market, and providing safety nets to those who are between jobs. In addition to this, social protection mechanisms aim to increase the opportunities of, and provide security to vulnerable groups in society who are either too young or too old to work, or who for other reasons are temporarily or permanently unable to provide for a living. A number of important policy challenges can be distilled from a review of the current social protection systems in MENA: Social protection interventions aimed to generate employment, such as active labor market policies, and vocational education and training, need to be improved to increase their efficiency and effectiveness. Moreover, without a multi-sectoral approach that includes reforms on the demand side of the labor market, no significant This issue of SPectrum is divided into four sections. improvements in job creation can be expected. Section 1 describes the framework for and objectives of Pension systems need to be reformed to provide social protection. It also provides a brief overview of the adequate, affordable, and equitable protection against social protection institutions that exist in the MENA poverty during old age for a larger share of the popula- region and the socio-economic context in which they tion. In particular, problems regarding the financial operate. Section 2 takes a closer look at a number of social sustainability of the existing pension systems need to protection programs and instruments: interventions to be tackled. support employment creation, pension systems, social Social safety nets in most countries continue to be safety nets, social funds, social protection provision in dominated by universal subsidies on consumption (post-) conflict environments, and mechanisms to control items, which are costly and inefficient. While putting the spread of the HIV/AIDS virus and assist those who in place temporary safety nets to soften the shock of are affected by it. Each of the articles of Section 2 illus- subsidy withdrawal, subsidies should be replaced by trates the key developments and challenges in one of these better targeted safety nets, such as public workfare and areas in the MENA region, provides policy guidance, conditional cash transfers. and describes the support that the World Bank offers For Social funds to maintain their position as innova- governments to identify and make the necessary reforms. tors and best-practice deliverers of public services, they Section 3 explores new directions and emerging priorities need to continue to strengthen their performance in in the area of social protection in MENA. Finally, Section the areas of community participation, targeting, mon- 4 describes recent, ongoing, and future activities of the itoring and evaluation, and donor coordination. World Bank to support MENA governments in designing The provision of social protection in conflict and and implementing the most effective and efficient social post-conflict environments poses particular challenges. protection mechanisms for their citizens. Long term involvement, strong cooperation between and commitment of the local population and govern- ments, extensive donor cooperation, and a coherent country strategy linking emergency relief and recon- struction are essential elements of successful social protection interventions. To prevent the devastating social and economic impact nemark of an HIV/AIDS epidemic, it is important to thwart Cart Cur the spread of the virus while the prevalence of the infection is still low. This requires an increase of HIV/ Photo: AIDS awareness, the improvement of monitoring sys- tems, multi-actor partnerships and cross-sectoral approaches for prevention, control, and treatment, and increased support to high-risk groups and those affect- ed by the epidemic. Social Protection Frameworkinand Context MENA: Margo Hoftijzer SocialProtection:Opportunity,Security,andEquity Individuals, households, and communities worldwide face a mechanisms can be expensive and inefficient, often leaving range of risks. Some risks, such as economic recessions, people with reduced human capital after a shock has occurred. natural disasters, or wars, affect entire societies or large Formal, market-based institutions such as banks and insur- groups. Others, such as the illness of a family member, may ance companies can also be essential in reducing vulnerability affect only individual households. Poor people are typically and managing risks. Market-based arrangements do not pro- more vulnerable to risks, being both more exposed to them vide sufficient protection against all the main risks for all and having limited access to effective risk-management people, though. For instance, insurance may not be offered instruments. Moreover, certain groups in a society, such as when there is too much uncertainty about the costs of provid- Hakim children, women, the elderly, and the disabled, can be more ing sufficient cover for a certain risk, or when there is a high mo vulnerable to risks than others (see also the text boxes in this likelihood that many of the insured will claim their insurance chapter on the vulnerability of children and youth, and at the same time (such as in the case of unemployment in times Guiller disability in the MENA region). Whereas poverty reflects of recession). Access to market-based arrangements can be Credit: an unacceptable level of well-being, vulnerability captures particularly limited for the most vulnerable due to high costs, Photo the exposure to uninsured risk of an unacceptable level of the absence of insurances that are geared toward the needs of well-being in the future. A variety of instruments exists to the poor, or simply because of the physical distance to rele- reduce poverty and vulnerability and help people to better vant institutions. In addition, the poor are more likely to deal with risks, improve their opportunities to increase their choose not to insure themselves and instead use their limited welfare, and create a more equitable society. This range of funds for other purposes. interventions, both informal and formal, and especially those geared toward society's most poor and vulnerable, The limitations of self-protection and market-based is called social protection. protection mechanisms create the need for public intervention, such as regulation, government financing, and the direct Informal self-protection mechanisms include provision of services. Public social protection interventions asset accumulation in good times, aim to augment, not replace, family, community, and diversification of income resources, market-based protection mechanisms. Public social and the creation of informal protection programs can compensate for the absence of family and community self-protection or market-based instruments, or provide protection mechanisms. protection in a more efficient and equitable manner. However, self-protection Complementing national economic policies and support- ing strategies for poverty reduction and human develop- ment, they create opportunities and incentives among the poor for increasing their investments in education and health, and for generating higher incomes. If well-designed and comprehensive, public social protection of the population, while the poorest quintile received only policies alleviate poverty and reduce vulnerability through: 17%. A comparable situation is believed to exist with n expanding opportunities for income generation by regard to energy subsidies in some countries of the region, contributing to the creation of good jobs, for instance such as Egypt, Iran, and Yemen. through improving labor market regulations and active and passive labor market policies; Constraints related to the use of public employment as a n providing security by assisting in better managing risks social protection mechanism became evident when the to reduce vulnerability, securing an asset-base, and being rate of recruitment started to outpace the need for new able to engage in higher risk / higher return activities; employees in the public sector. In the 1950s and 1960s, n enhancing equity by providing minimum levels of sub- many new entrants could be absorbed in the public system sistence income and helping to correct market-based due to the expansion of the public provision of social distributive outcomes. services, and the nationalization of private assets. However, as the number of higher educated young labor entrants SocialprotectioninstitutionsintheMENAregion grew, their recruitment into the public service created significant overstaffing. This resulted in economic ineffi- From as early as the 1940s, societies across the MENA region ciencies, substantially higher public employment levels in developed social contracts with a strong preference for redistri- the MENA region than in other parts of the world, and bution and equity in economic and social policy, and an correspondingly high wage bills that limited governments encompassing vision of the role of the state in the provision of in their budgetary flexibility. In addition, the dominance welfare and social services. The archetypical social policy of the public sector as an employer, with its employment model that evolved in the region after the Second World War guarantees, high wages, and extensive social security comprised three main components: schemes, created a strong segmentation between the public n an education and health component, in which free edu- and private sector labor markets. cation and primary health care services were promised to all citizens; In response to the drawbacks of the existing social n subsidies on key consumption items such as food, water protection schemes, several governments started to and energy; and consider and implement reforms. In some countries, such n an employment component, in which an extensive pub- as Tunisia and Algeria, subsidy schemes were modified, lic sector and restrictive labor legislation provided job scaled down, or removed. The Moroccan government security to many citizens. attempted to reduce public sector employment. Spending on active labor market policies in the MENA region This model was initially implemented successfully, but from approximately doubled in the 1990s. Several countries the mid-1980s the combination of an economic downturn also started to consider new coping mechanisms, such as with a major demographic transition--putting pressure on targeted cash transfers and public works. In a few cases, the demand for social services--revealed weaknesses in the these were implemented through social funds, system. Redistributive commitments contributed to alarm- which came to play an increasingly important role in the ing increases in public debt in many MENA countries as execution of social protection programs, in some instances governments struggled to meet public sector wage bills accompanied by a growing focus on the participation of ranging from 6% to almost 20% of GDP. This led some local communities and beneficiaries in project design governments to reconsider their policies, particularly with or implementation. regard to universal subsidies and public employment. Most countries in the MENA region currently have The main shortcomings that prompted governments extensive social protection systems, relying on a selection to review their universal subsidy programs were their sub- of instruments aimed to increase opportunity, security, stantial budgetary burden, and the difficulty to target and equity. Subsidies still play a prominent part in them to the most needy. Since universal subsidies are by the provision of social protection to the population (as is definition accessible to everyone in the population, illustrated for the cases of Egypt and Yemen in figure 1). and the non-poor often consume larger quantities of the Other main components are active labor market subsidized goods than the poor, the better-off share of the programs (including job search assistance, vocational edu- population usually captures a significantly larger portion cation and training, wage subsidies, and microfinance of the subsidies, making these schemes expensive and programs), social safety nets (such as cash transfers inefficient in reaching the poor. In Tunisia, for instance, and public works programs), and social insurance (mainly of the 7% of total government outlays that were spent on pensions). In several countries, governments also respond- food subsidies in 1990, 20% benefited the richest quintile ed to the increasing labor market pressures by initiating 0 Figure1.SelectedSocialProtection labor market reforms. Table 1 provides an overview of OutlaysinEgyptandYemen public spending on various social protection programs in selected MENA countries. (%GDP,late1990s,early2000s) Thecontext:growth,poverty,population,andhuman developmentindicators Egypt 0.3 0.7 1.3 The current context for social protection programs 0.2 and interventions in the MENA region is defined, on the Food one hand, by the main socioeconomic risks that the region Energy faces, and on the other hand by the available resources to Cash PublicWorks manage them. The main risks relate to economic growth, VET poverty, unemployment and, despite remarkable progress in the past decades, performance in terms of education and health indicators. Several of these risks could be 6 amplified as MENA economies further integrate with the world economy. Open economies offer higher Yemen opportunities in terms of higher economic growth, 0.2 employment, and incomes, but also higher risks by 1 Energy increasing exposure to external shocks and volatility and turnover in labor markets. Cash PublicWorks The region's main assets to manage these risks are its growing labor force, and its increasingly healthy, well- educated, and long-lived population. The remainder of this section describes both the assets and the risks of the 6.4 MENA region in further detail. The following section explores how social protection mechanism can contribute to addressing these risks and to making the best use of Note: Pension and unemployment benefits are excluded from the calculations as they are (partly) covered by employer/employee contributions MENA's assets. Table1.PublicSpendingonVariousSocialProtectionProgramsinSelectedMENACountries (%GDP,late1990s,early2000s) Selected Subsidies Cash Transfers Public Works VET* Pensions** Unemployment Insurance** Food Energy Algeria 0.0 NA NA 0.4 NA 3.2 0.3 Egypt 1.3 6 0.2 0.3 0.7 3.1 0.1 Iran 2.7 10 1.2 NA NA 1.2 1.0 Jordan 0.0 NA 0.9 NA 1.6 5.7 - Lebanon 0.1 NA 0.9 NA 0.6 2.5 - Morocco 1.6 NA 0.1 0.2 NA 2.4 - Tunisia 1.7 NA 0.5 0.1 0.9 4.3 - Yemen 0.0 6.4 1.0 0.2 NA 0.8 - * Net government expenditures. ** Gross expenditures, which are (partly) covered by employer and employee contributions. Asset 1: Changing population structures The region's ability to continue its strong performance in As a consequence of structural declines in mortality and education and health despite the economic downturn has fertility rates, MENA is currently undergoing a demographic been partly the result of investments that were made in the transition which will determine the size and structure of its previous period. Improvements in child mortality that population well into the 21st century. Although similar occurred between 1980 and 2000, for example, seem to be demographic trends occurred in other regions that went strongly linked to improvements in female educational through a phase of modernization and industrialization, the attainment prior to that period. But there is also evidence population bulge resulting from this transition in MENA that the continuing strong gains in human development is particularly large, and so are its effects on labor supply indicators reflect an increased efficiency in the delivery of and dependency ratios.1 health and education services, for instance by better targeting of spending to deliver these services to the underserved. Due to the exceptionally high number of children and youth, the transition initially resulted in very high depen- Risk 1: Economic growth dency ratios. At its peak in 1970, there were 95 economically When a population is growing, a certain level of economic dependent persons for each 100 individuals of working age, growth is necessary just to maintain the average per capita and the number remained as high as 91 until 1980. Since income of a society; higher levels of growth are needed for then, the younger age cohorts have started to gradually enter the average income to increase. For several decades from the the labor market, leading to rapidly declining dependency 1960s, countries in the MENA region experienced a period ratios. Until 2020, the growth of the economically active of high economic growth, as large public investments in population will exceed that of the dependent population by health, education, infrastructure, and several industries much greater magnitudes than in any other region, until helped to improve human and physical capital and provided dependency ratios will be as low as 50 dependants per 100 a boost to industrialization. Rising oil prices and remittance working age individuals after 2025.2 income from migrant workers also played a role, to varying degrees in the different countries. As a result, MENA's The growth of the working age population, especially in the economic growth performance in the 1960s was the highest existing context of increased educational attainment, female in the world, averaging 7.1 percent a year. Output growth labor participation, and longevity, provides a large pool of continued to be strong during the 1970s, but this resulted productive workers, and the low dependency ratios increase mainly from the availability of resources accrued during the the scope for higher savings and investments. As the experi- oil boom. Productivity declined in this period, and together ence of East Asia has shown, these circumstances offer unique with falling oil prices, a more competitive international opportunities to accelerate economic growth and raise the environment, and the strains and demands of the social living standards of the population across the region. contract, this helped set the stage for the more serious difficulties that emerged in the next decades. In the Asset 2: Human development indicators mid-1980s and 1990s, growth rates declined. As public Not only will the MENA region experience an extraordi- revenues shrank and governments' redistributive commit- nary large labor force, this labor force will also be more ments remained high, public debts increased substantially. healthy and educated than ever before. This development Labor productivity and real wages stagnated or further allows for higher labor productivity, and longer working declined, and unemployment rose. lives as health and life expectancy further increase. Remarkable improvements in health and education indica- Most countries in the region responded by engaging in tors in MENA started in the 1960s, when the region easily gradual economic stabilization programs, cutting down kept pace with the human development performance public debt and inflation, and implementing structural of middle-income countries in other regions such as East reforms in the areas of privatization, trade liberalization and Asia and Latin America. This strong positive trend contin- deregulation. However, partly as a result of the cautious and ued even after MENA's economic downturn in the mid- incomplete nature of these reforms, economic performance 1980s, in some instances even at a faster pace than in the remained weak during the remainder of the last century, and previous decades of high economic growth. Between 1980 substantial improvements in labor productivity or employment and 2000, the average number of years of schooling of growth failed to occur. Although over the past few years the those over 15 years of age more than doubled, to 5.5 years, output and employment performance for the MENA region and mortality rates of children under 5 years of age as a whole improved, this upturn has been chiefly driven decreased by about two thirds, from 138 to 47 per thou- by external events, rather than by structural improvements sand births. During the same period, life expectancy within the region. Furthermore, the upsurge was driven by increased by ten years, to 68.3 only four countries, while a majority of countries in the region actually experienced a downturn compared to the employment for both new entrants and those who are 1990s.4 To reinvigorate economic growth, the MENA region currently unemployed. This would entail a doubling of the would benefit from the removal of structural barriers to level of employment at the start of the 21st century. private sector growth, in combination with a reduction in the However, projections indicate that unemployment will rise dominance of the public sector. These would require reforms significantly across the region if countries do not improve in a wide range of areas, from improving the business their job-creation record of the 1990s, and continue to rely environment within the countries of the MENA region, on public sector employment and migration as the main to economic diversification and a deeper integration with sources of employment creation. international product and capital markets. Risk 2: Poverty Figure2.UnemploymentratesinMENAcountries The availability of resources and the strong policy focus on (%oflaborforce,2004) human development from the 1960s allowed for a steady decline in poverty rates in the MENA region. In Tunisia for instance, the population share living in poverty decreased 30 from more than 50% in 1965 to only 16% in 1985. For the MENA region as a whole, the 1987 poverty rate was less 25 than 25%, which was among the lowest of all developing 20 regions at the time.5 The era of steady poverty declines came to a halt when economic growth stagnated in the 15 mid-1980s. Poverty rates have been fluctuating between 20 10 and 25% ever since, and are now similar to the poverty incidence experienced in the Europe and Central Asia, and 5 the Latin America and the Caribbean regions. Although the 0 share of poor in MENA's population is still low compared E n n a o UA ypt a G Iran Iraq to some other developing regions in the world, the continuing Kuwait Eg Oman meeY Qatar Syri WB Lebano Bahrein Jordan unisiaT Morocc Algeri absence of progress in the elimination of poverty is worrisome. Furthermore, even though the share of the SaudiArabia population living in poverty has remained fairly constant, due to population growth their number has risen from 41 million in 1987 to 52 million in 2001, an increase of more Notes: (1) UAE: United Arab Emirates; WBG: West Bank and Gaza; (2) Data for Gulf Countries are for nationals only. (3) Most recent data than a quarter in a time period of less than 15 years. Further for Djibouti (not depicted): 43.5% (1990) progress on poverty reduction is largely dependant on increased, pro-poor economic growth. Risk 3: Unemployment If the growing share of healthy, well-educated working-age Some population groups--particularly young new entrants individuals is considered to be the main asset of MENA to the labor market with middle and upper levels of education, countries, the possibility that this growing population and women--are disproportionately affected by unemploy- group is not able to find jobs can be regarded as their main ment. Unemployment rates for youth and young adults are risk. Unemployment in the MENA region is already among more than twice the rate of overall unemployment in many the highest in the world, affecting almost all countries countries, and female unemployment is nearly 50% higher in the region, and with particularly high rates in Algeria, than male unemployment in the region as a whole. There is West Bank and Gaza, and Iraq (figure 2). An estimated also an education dimension to the unemployment pattern, 17 million workers, or 12% of the total work force, were with unemployment rates highest for groups in the middle unemployed in 2001.6 Unofficial estimates of unemployment and upper end of the education distribution. In addition to can be much higher. the disadvantage that first-time jobseekers have on the labor market, the concentration of unemployment among the The growth of the MENA labor force in the next decades is higher educated new entrants is related to the fact that difficult to predict, and estimates of the number of job the public sector can no longer absorb large shares of these opportunities that need to be generated in the next decades population groups. Unfortunately, the decline in public vary. A 2003 estimate indicates that up to 100 million new sector employment opportunities is as yet not being offset jobs need to be created between 2000 and 2020 to provide by sufficient increases in labor demand by the private sector. The low private sector demand for higher educated workers who had expected to be employed by the government is a consequence of slow private sector growth (in some to move into the informal sector rather than into formal countries), but also of the limited interest of private sector employment in the private sector.7,8 employers in acquiring the skills and knowledge of those who have essentially been educated to spend their working It is neither likely nor desirable that the public sector remain life in the public sector. a leading source of employment creation in the MENA region; and migration, the other traditional engine of job To some extent, unemployment of the higher-educated creation, is unlikely to substantially alleviate labor market young, and women, appears to be voluntary. Presumably, pressures. The solution to reducing unemployment after having failed to acquire the expected employment in and underemployment is two-pronged, and requires a the public sector, many of the unemployed in this segment multi-sectoral approach. First, from the viewpoint of the choose not to work, and are supported by their families as (potential) employer, the private sector needs to be provided they wait for employment that meets their expectations. with an environment that promotes job creation, through This phenomenon of `queuing' for public sector jobs seems macro-economic stability, a favorable investment climate, and to be particularly strong among the labor-importing flexible labor market regulations that provide incentives to countries where high youth unemployment co-exists with a hire workers. Second, from the workers' viewpoint, individuals large inflow of foreign workers. Job opportunities in both should be encouraged to participate in the labor market, and the public and the private sector are likely to remain scarce, be provided with the incentives and opportunities to acquire however, as long as these jobseekers do not lower their the education and skills that are demanded by the private expectations or attain additional skills. sector, while adequate social protection mechanisms should be in place to cushion transitions between jobs. For individuals without (substantial) formal education, the situation is generally very different. Having neither Risk 4: Further improvements in human the expectation of public sector employment, nor the option development indicators to be voluntarily unemployed (as lack of education is closely A recent World Bank study comparing the development of related to poverty), they are likely to accept whatever MENA's human development performance with those in a employment is available or to create their own jobs. comparative set of countries found that, by the year 2000, For this reason, unemployment in this segment of the the MENA region had eliminated the gap that existed in labor market is relatively low, although the incidence the 1960s in key health indicators, and had significantly of underemployment is higher. reduced the gap in education indicators.9 Nevertheless, MENA's current performance in health and education MENA's poor labor market outcomes are not limited to compares less favorably with the average performance unemployment. Poverty and vulnerability are associated of middle-income countries worldwide, to which most with unstable or inadequate employment (underemploy- countries in the MENA region belong. For instance, the ment), rather than with an absolute lack of work. Casual average child and infant mortality rates in middle-income workers, self-employed and individuals who work for countries are only two thirds of the rates experienced in family-run enterprises can be just as likely (or even more MENA, and the literacy rate in the MENA region as a likely) to be in the bottom of the income distribution as whole, particularly for women, is still substantially lower those who are unemployed or out of the labor force than the middle-income-country average (figure 3). altogether. Although the levels of informal sector employ- Furthermore, regional indicators do not capture existing ment are moderate compared with other developing regions, large differences between MENA countries. The literacy they are high considering the large share of public sector rate among women in Yemen and Morocco, for example, is employment in MENA. Moreover, as a result of the lack 29% and 38%, respectively. This is only one third to half of job opportunities in the formal sector, the size of the of the female literacy rates in Jordan (85%) or West Bank informal sector is rising. In Egypt, the share of new entrants and Gaza (87%).10 The infant and under-five mortality whose first jobs were in the informal sector increased from rates in the region's low-income countries--Djibouti and less than 20% in the 1970s to 60% in the 1990s, and there Yemen--are more than twice as high as the MENA average. are indications that informality is not just a transient state for new entrants on their way to a formal job. Increases in This implies that despite past performances the region as a informality between 1990 and 1998 have been largest whole, and several countries in particular, need to continue for women and for individuals with intermediate schooling. to focus on improving a number of important human This seems to suggest that, at least in Egypt, the slowdown development indicators. This need is exacerbated by the in public sector hiring has led more of those persons appearance of relatively new risks, such as the spread of the 80 60 55 37 40 Figure3.HumanDevelopmentIndicatorsforMENAandMiddleIncomeCountries 61 87 80 94 20 nder5mortality(2002,2004) 0 Femaleliteracy Maleliteracy MIC Literacy rates Mortality rates MENA MIC 100 60 80 50 60 40 30 40 61 87 80 94 20 20 44 30 55 37 10 0 0 Femaleliteracy Maleliteracy Infantmortality Under5mortality MENA MIC 60 50 Source: World Development Indicators; UNESCO. MENA literacy rates: 2002. All other data: 2004 40 30 20 HIV/AIDS infection and related diseases such as tuberculosis. 44 30 55 37 10 Although HIV/AIDS prevalence in the general population 0 remains low in the region, Djibouti is already facing an HIV/ Infantmortality Under5mortality AIDS epidemic and, unless strong and decisive preventive measures are taken, the rest of the MENA region will likely face a rapid spread of HIV/AIDS into the general population in the near future. Endnotes 1 The dependency ratio is defined as the ratio of the economically dependant part of the population to the working age population. 2 World Bank. 2004. 3 Iqbal. 2006. 4 Of the economic recovery in the 2003-2004 period, 97% originated from Saudi Arabia, Iran, Algeria, and the United Arab Emirates. Source: World Bank. 2005. "2005 Economic Developments and Prospects--Oil Booms and Revenue Management." Washington, DC 5 These data assume a poverty line of US$2 per day. When using a US$1 per day poverty line, the regional poverty ratio was well below 5%. 6 Kabbani, Kothari . 2005. "Youth employment in the MENA region: a situational assessment." SP Discussion Paper 0534, World Bank, Washington, DC 7 World Bank. 2004. 8 Kabbani, Kothari . 2005. "Youth employment in the MENA region: a situational assessment." SP Discussion Paper 0534, World Bank, Washington, DC 9 Iqbal. 2006. The comparator group consists of a set of countries with similar levels of per capita income in 1980 as MENA, mainly in Latin America and East Asia. MENA here refers to the ten countries for which data were available since 1960. 10 Male literacy rates in these countries are higher by 40 percentage points in Yemen, 25 in Morocco, 11 in West Bank and Gaza, and 10 in Jordan. Sources Iqbal. 2006. "Sustaining Gains in Poverty Reduction and Human Development in the Middle East and North Africa." World Bank, Washington, DC Laborsta. ILO Robalino et al. 2005. "Pensions in the Middle East and North Africa--Time for Change." World Bank, Washington, DC World Bank. 2001. "Social Protection Sector Strategy: from Safety Net to Springboard." Human Development Network. Washington, DC World Bank. 2002. "Reducing Vulnerability and Increasing Opportunity: Social Protection in the Middle East and North Africa." Middle East and North Africa Human Development Department. Washington, DC. World Bank. 2004. "Unlocking the Employment Potential in the Middle East and North Africa: Toward a New Social Contract." MENA Development Report. Washington, DC. The Vulnerability of Children and Youth Childrenandyouthunderthe Certain categories of children and youth, such as school ageof24makeuptwothirds drop-outs, working children, orphans, disabled, and street children, are more exposed to risks than others. The region's furtherprogressinkeyhumandevelopmentindicatorstowards the attainment of poverty-reduction and the Millennium DevelopmentGoalsdependslargelyonreachingthemostdisad- laicoSnemeY:tiderCotohP ofthetotalMENApopulation, andtheirnumberswillcontinue togrowrapidlyoverthenext20 years.Childrenandyoutharenot onlythelargest,butalsothemost vantagedchildrenandtheirfamilies--thosewhohavenotbeen tnempoleveD rofdnuF vulnerablepopulationgroupinMENA. reachedbytraditionalpublicservices.Untilnow,however,they Povertyratesamongchildrenaregenerally havebeenrelativelyneglectedbymainstreampublicresponses higherthanthoseamongadultsinallcountriesin toimprovingthesituationofchildrenandyouthingeneral,and theregion,andcanbeashighas40%insomecountries.Inthe civil society and informal networks have picked up much of regionasawhole,anestimated34millionchildrenlivebelow theburdenoftheirsupport,eitherthroughfamilynetworksor thepovertyline. through various charitable organizations, many of which have religiousconnections.Thesetargetedprogramstendtobesmall Childrenandyouthareparticularlyvulnerabletoriskexposure, andpiecemeal,however,andareseldomincorporatedintothe asitmaycriticallyimpacttheirhealthandnutritionalstatus,their majorprotectivestructuresofeithergovernmentorcivilsociety. schoolenrollment,andtheirpreparednessforhighereducation Reachingthesechildrenonalargerscalewillrequireinnovative, andentryintothelabormarket.Theirsheernumbershighlight multi-sectoralpoliciesandprogramsthatarelow-cost,effective, the cumulative benefits that can be gained if governments andbuildonthestrengthsoffamiliesandcommunities. succeedinimprovingthesocio-economicstatusofchildrenand youth,whichcanbelargelyachievedthroughgeneraleducation Several countries in the MENA region have intensified their andhealthprograms. effortstoreachthoseatthebottomofthepovertyscaleand thosewithspecialneeds,withanunderlyingapproachofmain- Althoughthestatusofchildrenandyouthhasimprovedoverthe streamingtheneedsofdisadvantagedchildrenandyouthacross lastdecade,15to20%ofschool-agedchildreninMENAstilldo sectors, starting with education. Activities are concentrating notgotoschoolandenterthelabormarketbelowminimumage. inthethreeareasof(1)analyticalandpolicyworktoincrease Childrenandyouthlivinginruralareas,inplaceswithoutaccess the understanding of age-specific risks (Morocco, West Bank tohealthcare,orinareasofconflict,areespeciallyproneto and Gaza, and Yemen); (2) projects to mainstream activities illnessandprematuredeath,andsocio-culturalfactorssuchas toimprovethesituationofvulnerablechildrenandyouthinto earlymarriageofgirlsandearlypregnancy,contributetohigh generaleducationworkprograms(Egypt,Jordan,andYemen); infant-mortalityratesandlowbirth-weightsofinfants.Children and(3)raisingawarenessandbuildingcapacityofpolicymakers andyouthalsofacerisksintermsofjuveniledelinquencyand byaddressingthespecificneedsofvulnerablechildrenandyouth exposuretopoliticalandregionalconflicts. throughregionalconferencesandworkshops. Disability in the MENA Region Disability cuts across key development themes such as poverty of social and economic life, including access to health services, reduction, economic growth, and reaching the Millennium education, employment, and participation in civil society. This Development Goals by 2015. Disability and poverty are inextri- would be beneficial not just for the disabled person and his or her cably linked and form a vicious cycle, in which barriers to health household, but also contribute to social and economic develop- and rehabilitation services, education, employment, and other ment in general. Despite some progress over the last decade, and aspects of economic and social life can trap individuals and increasing interest in inclusive development within governments their families in a life-long cycle of poverty. and civil society, public policies in most MENA countries do not yet promote this inclusive environment for persons with disabilities. There is no single definition of disability or single method of Policies and programs on disability tend to be random and drawing boundaries between disabled and non-disabled people marginal, leading to prevention or mitigation programs that are in social policy. Nevertheless, rough estimates of the prevalence underdeveloped or not implemented. It also leads to the exclusion of disability in a selection of MENA countries puts the share of of many disabled from education systems, health services, social disabled in the population at between 3.5% and 10% of the security arrangements, and the labor market. Governments in the total population, totaling between 9 and 27 million people.1 region could undertake many concrete and immediate steps for The causes of disability in the MENA region are manifold and mainstreaming disability in their policies. They could engage in include high rates of birth-related disabilities, communicable regional and national dialogues, and build a shared vision and and chronic diseases, weak access to and availability of health partnerships among local, national and international stakeholders. services, poor nutrition, accidents and violence. The region has Each country would then need to develop and implement its among the highest rates of traffic accidents in the world. Poverty, own strategy based on its own particular circumstances, policy political instability and conflicts are also taking a toll on the physi- environment, and preferences of the various stakeholders. cal and mental health of the population. The overall patterns of disabilities and the type of interventions required to address them The World Bank is in the early stages of assisting MENA are likely to change over the next decades, as in most countries governments in managing the risks associated with disability and ongoing epidemiological and demographic transitions lead to providing security and opportunities to the disabled. In Egypt, an increase in non-communicable diseases as well as injuries the experience gained through the Social Protection Initiatives and work-related diseases. This provides MENA with the twofold Project--financed by the World Bank--demonstrated that a challenge of addressing the persistent and continuing risks of community-based, inclusive education model is a feasible entry disabilities prevalent in lower-income settings, and the need point for the inclusion of disabled children in the education to respond to the changing causes of disability that are driven system. In West Bank and Gaza and Yemen, NGOs have delivered by these transitions. or improved services to disabled. In Iraq, a comprehensive national policy for the disabled has been developed, and a new To lift the barriers that persons with disabilities face, policies and model of community-based care is being implemented to benefit programs should be in place to integrate them into all aspects over 100,000 of those in need of prostheses. (1) Metts. 2000. "Disability Issues, Trends And Recommendations For The World Bank." Social Protection Discussion Paper No. 7, Washington, DC. Selected MENA countries include Algeria, Djibouti, Egypt, Iran, Iraq, Jordan, Lebanon, Morocco, Syria, Tunisia, West Bank and Gaza, and Yemen. Social Programs andan Instruments: Assessment T his section describes the public social protection mechanisms that are currently in place in the region, explores options to improve their efficiency in dealing with the main socioeconomic risks that individuals and households face, and illustrates the type of assistance that the World Bank can provide to help. In the area of employment, MENA countries make extensive use of active labor market programs. However, a more comprehensive, multi-sectoral approach to job well with that in middle income countries worldwide. creation is required, taking into account both the supply However, as a large share of expenditures does not reach and the demand side of the labor market. Within this the poor, various governments are exploring options to framework, social protection measures aim to increase improve targeting mechanisms. In several countries, the earning capacity and reduce the risk of unemploy- social funds were established to implement social ment of vulnerable groups, and provide income protection programs, notably public works and community protection for workers who are in between jobs. At least development programs. Increasingly, social funds are as important as managing risks related to unemployment improving their participatory approaches and their are systems that deal with the risk of the loss of labor targeting and monitoring and evaluation systems, and income due to old age. Few countries in the region have are becoming more integrated in national poverty entered the phase of preparing and implementing reform programs. Finally, this chapter reviews ongoing strategies to address problems related to, among others, activities of both governments and the World Bank financial sustainability and equity of their pension concerning social protection interventions aimed at systems. In the area of social assistance, the level of managing two particularly destructive risks: conflicts public spending in MENA as a whole corresponds fairly and the HIV/AIDS epidemic. elopmentv De for Fund Social emenY Credit: Photo MILES: A Multi-Sector Approach to Job Creation David A. Robalino, Margo Hoftijzer, Paul D. Dyer and Guillermo Hakim G iven the unprecedented labor force pressures facing the production being the most important ones, and not by struc- MENA region, governments have launched a variety of tural improvements of the macroeconomic framework. The labor policy initiatives to increase job opportunities and lion's share of the recent economic recovery in the region strengthen job creation. These interventions have, by and originates from a limited number of oil-exporting countries. large, focused on active labor market strategies, including Furthermore, as economic growth rates moderate from these public works projects, and vocational education and training high levels, they will nonetheless remain insufficient for cre- programs. Some countries in the region have also made an ating enough jobs to keep pace with the burgeoning labor effort to make labor market regulations more flexible in order force and to absorb the currently unemployed. to encourage the private sector to hire more workers. However, there are questions about the effectiveness of current labor For the MENA region's employment-creating growth market interventions in MENA. Creating truly effective labor potential to be strengthened, three fundamental and policies requires a multi-sectoral approach that simultane- interrelated structural transitions are required: (1) a change ously addresses incentives to job creation on the supply side from closed to more open economies, to create more and binding constraints on the demand side of the labor competitive industries, benefit from international best market. The World Bank is developing the so-called MILES practices, and gain access to new technology; (2) a move framework, which provides a comprehensive analytical from public sector dominated to private sector led economies, framework that captures the five key, interlinked sectors providing the basis for improved efficiency and expansion of whicharecrucialtolabormarketoutcomes:theMacroeconomic employment; and (3) a shift from oil dominated to more framework, the Investment climate, Labor market regula- diversified economies, to reduce the region's dependence tions, Education and skills development, and Social protec- on volatile sources of growth, maintain fiscal stability, and tion. The main elements of importance to job creation of each preserve important social expenditures. of these sectors are described in the remainder of this article. The focus is on the areas which are most directly related to Compared with previous oil booms, the region's oil social protection: labor market policies and institutions, voca- producers are increasingly demonstrating impressive fiscal tional education and training, and social insurance. restraint. They are building up liquidity and are pursuing common strategies for diversification of the oil wealth into Asoundmacroeconomicframework foreign assets. They have also worked to develop trade ties and to encourage greater foreign participation in their A sound and stable macro economic framework is an economies. With diminishing positive links to the oil essential prerequisite for job creation, as it provides economies and increasing negative impacts from higher entrepreneurs with an enabling environment to expand oil prices, MENA's resource poor economies have main- their business and to create new jobs. tained a solid pace of reform. They have made, on average, stronger progress in trade reform over the last five years At first sight, MENA's overall macroeconomic performance than all other regions of the world. Nonetheless, much over the past years has been impressive. Economic growth has stronger progress can take place, particularly with regard been high and accompanied by a decrease in unemployment. to trade liberalization. For example, the resource poor However, the improved economic performance has mainly economies as a group continue to maintain some of the been driven by external events, the rise in oil prices and oil highest tariffs in the world. 0 Investmentclimate,institutionsandinfrastructure means by which governments affect labor market outcomes (e.g., the level and distribution of wages and the level Firms will expand and create formal sector jobs when and composition of employment). They also help workers the costs of doing business (including from regulation, manage risks such as those related to economic shocks or corruption, and poor infrastructure) are low and predictable. occupational hazards. However, overly restrictive regulatory environments place strains on firms struggling to compete International experience overwhelmingly suggests that the in the global economy. International evidence suggests that most important engine for rapid and sustainable economic rigid employment regulations are harmful, especially in growth is a dynamic and competitive private sector, free from countries undergoing economic restructuring. Firms face excessive regulation. Private sector development and job constraints to allocate resources efficiently, which increases creation are of particular importance for MENA, as the private production costs and reduces their competitiveness. Rigid sector still accounts for less than 50% of GDP in the region, regulations can also discourage the entry of new firms, and the public sector remains a major source of employment resulting in lower levels of investment and job creation. with limited potential for expansion. In addition to a stable macroeconomic environment, private sector growth requires In MENA, there has been a tendency to avoid job destruc- the basic protection of property rights, an adequate legal and tion rather than to promote job creation. In particular, regulatory framework, and a broader governance environment governments have provided workers with lifetime job that does not deter investment with unnecessarily cumbersome security and generous job-related benefits through restrictive procedures and costs. hiring and dismissal procedures and mandated severance packages (see below). Rigid regulations can protect After having been among the weakest reformers worldwide for "insiders" (older, established workers), but at the expense of seveal years, MENA's pace of reforms to improve the business "outsiders" (young labor market entrants) who are then climate has recently picked up, particularly among the resource often pushed into the informal sector, where they are not poor economies with regard to business environment reform. covered by any social protection mechanisms. In MENA's resource rich countries, the large oil related budget surpluses appear to have delayed the imperative for reform. Under current regulatory conditions in most MENA countries, When looking at the current status of the business climate, many contracts are long-tem and open-ended. This limits both resource rich and resource poor economies are ranked the ability of firms to adjust their workforce for economic around the 50th percentile worldwide, similar to the Europe reasons and typically requires the payment of expensive and Central Asia and the South Asia regions, and well below severance packages that are often open to lengthy and East Asia and the high income OECD countries. uncertain legal reviews. Among the main remaining regulatory hurdles in many MENA Several countries have made efforts to decrease the restric- countries are high minimum capital requirements to start a tiveness of labor regulations by reducing hiring and firing business (exacerbated by a generally underdeveloped and pub- restrictions, at least for new entrants. This is generally done licly led banking and financing sector), and burdensome and by allowing short-term and more flexible contracts for new time-consuming contract enforcement mechanisms. Although hires which reduce the perceived risk by the employers. For many governments have started to address long-needed financial instance, Morocco and Tunisia have passed legislation that sector reforms, private sector access to bank finance remains expands the possibilities for part-time work and fixed-term limited, particularly in the non-Gulf countries. contracts. Egypt's 2003 Labor Code allows for defined-term contracts to be renewed an unlimited number of times Labormarketregulations without being made permanent contracts. The problem with this approach, however, is that it promotes the proliferation When employment regulations are flexible, and non- of jobs where workers do not receive social security coverage wage costs of labor are low, firms have more incentives and therefore are ill prepared to manage income shocks. to hire new formal sector workers. However, in a more flex- ible labor market workers may be more likely to In general, moves towards more flexible labor regulations spend periods of time in-between jobs, so adequate have been limited in the region. Even in countries where income protection mechanisms are necessary. there has been added flexibility in regard to hiring, the procedures for dismissing workers remain convoluted and Labor market regulations--including legal protection for expensive, particularly in regard to possible legal actions workers, mandated severance packages, minimum wages following dismissal. This asymmetry in hiring and firing and occupational health and safety measures--are important regulations means that firms still face uncertainties in regard to future non-wage labor costs associated with countries in the region to review the relevance and cost dismissing workers. Such uncertainty keeps firms from effectiveness of existing training programs. Most countries hiring new workers and from restructuring in ways that have adopted a gradual, piecemeal approach to strengthening would make them more productive engines of job creation. their VET programs, but few have embarked on substantial reforms. Jordan, Lebanon, Morocco and Tunisia have Educationandskills successfully introduced changes to curricula, and VET programs in these countries are implemented in cooperation Good education and appropriate skills strengthen with the private sector to transform the labor skills needed individuals' productivity and employability, thereby improving by firms into training content for VET programs. Some their opportunities for finding and retaining (better) jobs. countries have also taken steps to improve the qualification and certification frameworks used to assess students. For People acquire education and skills both prior to and after instance, Egypt is piloting a qualification framework that entering the labor market. Within the formal education will establish skill standards for VET graduates. Jordan has system, MENA's governments have succeeded in providing bolstered national standards by implementing common basic education to the great majority of the eligible popula- national curricula and exit examinations for VET schools, tion. They now face a number of remaining challenges, and private vocational centers have become subject to review from ensuring that schools and universities effectively by the Ministry of Education. Tunisia is experimenting with convey socially and economically useful skills and a new management model for training centers in which competencies to those who attend, to extending meaningful school autonomy and private sector participation are educational opportunities to children and youth who have promoted. While it is still too early to assess the outcomes been left out of initial efforts to provide basic education. in Tunisia, the reforms in Egypt and Jordan are likely to have increased the employability of VET graduates. Vocational Education and Training Programs Vocational education and training (VET) can improve To further improve the effectiveness of vocational training an individual's productivity and employability by enhancing programs, MENA countries need to address four key areas: his or her skills set and adjusting it to employers' greater focus on VET for workers rather than for those who demands. To the extent that VET programs are used to have not yet entered the labor market; increased public-private improve job opportunities for vulnerable groups in society, cooperation; revised funding mechanisms; and improved they can be considered part of a social protection system. quality and expansion of learning opportunities. The focal At their best, VET programs are vehicles for the generation point of VET programs should be on the retraining and the and transmission of knowledge within a lifelong-learning productivity improvement of workers. For the young who perspective, providing workers with training that is relevant have not yet entered the labor market, the formal education to the needs of a labor market in the global economy, system--rather than VET--should provide a solid basis of emphasizing adaptability and applicable skills. At their knowledge and competencies. With respect to public-private worst, VET serves as a last resort for young workers who cooperation, countries should secure more balanced partnerships, have not been adequately prepared for a role in the labor strengthening the private role in advising public VET market by the traditional education system. programs on curricula and in the provision of training. The private provision of training can, in a properly regulated Existing VET programs in the MENA region are generally environment, provide more efficient and targeted training. characterized by outdated curricula, and tend to absorb consid- The current strong role of governments in VET may be erable funds without producing effective results. They are crowding the private sector out of the training market. In primarily directed at serving the needs of young dropouts from terms of funding mechanisms, there is currently a marked the school system, and the bulk of their activities are oriented segregation between private and public VET programs. toward pre-employment training in narrowly defined skills. Private VET programs are largely financed through fees and Employers often complain that graduates from these programs tuition. Public programs, on the other hand, are funded by do not possess entry-level qualifications and are not employ- direct budget allocations, modest fees and, in some coun- able. Thus, regional VET programs largely fail to provide tries, the collection of a training levy from firms. However, targeted workers with the skills they need to be successful in mechanisms to fund, for example, private training through the current labor environment, let alone the adaptability to a government-mandated training levy could result in compete in a more dynamic, knowledge-based labor market. better outcomes by promoting more effective public/private partnerships in training. In the area of the quality and One challenge of increasing global competition and the scope of learning opportunities, to avoid VET becoming development of a knowledge-based economy is prompting a dead-end with low social acceptance, countries could adopt competency-based approaches for curricula lier in the education system to reduce drop-outs and other development and continue to develop testing and certifica- schooling problems. Job search assistance, on the other tion standards for students that are appropriate to desired hand, can have positive impacts on both employment educational outcomes. and earnings capacity to the extent that there are relevant information failures in the labor market, and can be Socialprotection implemented at relatively low cost. A well designed social protection system can contribute to In all, ALMPs impact on overall job creation and wage both job creation and enhanced worker protection. It can growth is rather limited. They are therefore not a substitute increase the acceptance of more flexible labor regulations by for massive employment generation, but should rather be increasing labor mobility and by providing protection and viewed as a complementary mechanism to help vulnerable opportunities to vulnerable groups. If not well designed, the groups benefit from private sector growth. In fact, the social protection system can reduce the level of employment effectiveness of ALMPs is usually higher when they are while offering only limited protection. implemented in a period of economic growth. This article focuses on the role of active labor market programs Most MENA countries have long turned to ALMP-type and social insurance. Social safety nets, described in a separate activities to assist vulnerable workers, including public article, can also contribute to job creation by providing income works programs and wage subsidies to encourage firms to protection and incentives to invest in human capital. keep workers and create additional jobs. More recently, some countries have turned to micro-credit programs to Active Labor Market Programs encourage self-employment and small enterprises. While Active labor market programs (ALMPs) are designed to these programs have benefited workers struggling in the reduce the risk of unemployment and increase the earning current labor environment, their impact seems negligible capacity of vulnerable groups. They can target young, compared to the amounts that governments spend on them. poor, or displaced workers, or the long-term unemployed. Moreover, considering the relatively high amount that At their narrowest definition, ALMPs consist of public MENA governments spend on ALMPs, the number of works projects and government-run workshops targeting participants in this type of programs has been low by workers with special needs.1 Under a broader definition, international comparison. ALMPs include incentives such as wage subsidies to the private sector to hire new workers or grants to firms to Most spending on ALMPs in MENA focuses on programs relocate to regions with high unemployment. They for young, urban workers. Given the demographic trends in may also include credits for small enterprises, as well as the region over the past decade, this focus is understandable. vocational counseling and placement services, and retraining. However, jobs provided under these programs are ALMPs can also help workers manage cyclical downturns. short-term in nature and do little to reduce long-term In that regard, they are an attractive policy option in that challenges to young workers competing in the job market. they provide results without the political liabilities of Furthermore, MENA's focus on youth has meant that labor market deregulation. These programs, however, can spending is relatively low on programs that aid at-risk be expensive and require careful design, comprehensive adults. This is particularly true for women. Female partici- monitoring, and effective targeting to ensure that they pation in regional ALMPs is low, while female labor force reach those truly in need of their services. participation and female unemployment rates are rising. Furthermore, evidence suggests that poorly educated International evidence suggests that the overall impact of workers, who account for most of the unemployed, are ALMPs on job creation and wage improvements is at best underserved by these programs. limited.2 Wage subsidies, for instance, can be useful for providing some re-entry opportunities to older workers and To improve the performance and cost-efficiency of ALMPs the long-term unemployed, but do not have broader positive in MENA, regional governments could consider lessons impacts as they recycle the supply side and can be abused by learned from international experience. A common recipe for the demand side. Public works projects create short-term successful ALMP intervention includes: careful targeting of jobs, but they do little to develop skills or sustainable those needing and receiving assistance; a comprehensive employment. Although training of the unemployed package of ALMP services with, importantly, feedback into generates some benefits, particularly if it is on-the-job with vocational education programs; and an orientation to active employer involvement, training for youth is very often existing labor demand through links to firms and inputs unsuccessful, and it makes much more sense to invest ear- from the private sector. Most importantly, MENA countries need to improve their monitoring systems, in order to use The two most common income protection programs in the past experiences to improve their programs, particularly in case of job loss are severance pay and unemployment bene- terms of targeting and design. Impact evaluations are key in fits (in the form of unemployment insurance, assistance or this regard, as they allow administrators to identify the savings accounts). In MENA, the two programs that exist effects and cost effectiveness of various programs. Program are severance pay and unemployment insurance.5 effectiveness will become even more important as an increasing number of workers are affected by MENA open- All MENA countries have provisions for severance pay in ing up to the global economy. the case of arbitrary dismissal. Most also allow for end-of- service payments. Very few, however, allow dismissals for Social Insurance economic and technical reasons. As in the case of pensions, The role of the social insurance system is to help individu- (see following article) severance programs in the MENA als to smooth consumption over their lifetime. Standard region share some common problems. First, severance pay- components of the social insurance system include: unem- ments are among the most generous in the world, even more ployment insurance, end-of-service indemnity programs, generous than in Latin America and East Asia (Figure 1). individual unemployment savings accounts, health insur- Second, their generosity and the fact that the programs are ance, and old-age, disability and survivorship pensions. unfunded leave workers exposed to risk (that is, non-pay- These programs are important because, by pooling risks, ment at the time of separation partly because it is often they provide a mechanism to mitigate the income effects those employers who should pay severance benefits that are of various shocks and thus give more flexibility to workers also the ones facing most financial difficulties). Third, in to move across jobs. The need for these programs is par- some counries, all employment contracts--even in small ticularly important as MENA countries introduce struc- establishments--are subject to severance awards and this tural reforms to diversify their economies, improve can limit enforcement. Finally, redress in the case of non- competitiveness, and penetrate foreign markets. As these payment often requires lengthy legal procedures that can reforms are bound to generate "winners and losers" in the leave workers without income protection for an extended labor market, this makes the need for well-designed period of time. As a result, the current systems reduce incen- income support programs for those whose employment is tives both to dismiss and to hire workers, amounting to terminated all the more important. This will both reduce protection for insiders at the expense of outsiders. opposition to reforms and help workers to better manage the risks associated with employment termination. In Only three countries in the region have put unemployment many developing countries, the task of cushioning adjust- insurance (UI) schemes in place: Algeria, Egypt and Iran. ment costs for workers is hampered by a narrow tax base. In Algeria, the introduction of unemployment insurance Even with limited resources however, improving the insur- was accompanied by a phase out of the severance pay sys- ance component of income support schemes and pooling tem. In Iran and Egypt, the two systems coexist. risks across individuals can go a long way in smoothing the adjustment costs for workers. As in the case of pension and severance benefits, formulas and eligibility conditions for UI tend to be ad-hoc in the sense that Social insurance systems, however, can preclude job creation the contribution rate does not reflect the risk and cost of when policies are badly designed and distort incentives. To unemployment. There are also issues with the financing start with, these programs are generally financed through a mechanisms and the management of the funds that compro- pay-roll contribution. When benefits are not closely linked to mise the financial sustainability of the schemes while creating contributions, at least part of this contribution can be perceived uncertainty among employers regarding the future evolution as a tax that can reduce the level of employment. In the case of of contribution rates. In Iran, the unemployment fund is pension systems that are financed on a pay-as-you-go basis, already running a deficit which is being covered by the sur- even when benefits are related to contributions in a transparent plus of the pension fund. At the other end, Algeria's unem- manner, solvency requires the existence of an implicit tax.3 In ployment insurance scheme is over-funded and has addition to reducing the level of employment, a social insur- accumulated sizable reserves that are in turn used to finance ance system that is too generous and requires a high contribu- various training and job placement programs. Though this tion rate to be financed can also create incentives to move to practice is not necessarily without merit, it is not subject to the informal sector as individuals with limited capacity and proper evaluation, raising concerns about the desirability of small firms might not be able to afford the contribution rates. the system. Furthermore, in all cases incentives for re-employ- Furthermore, the social insurance system can reduce labor par- ment are weak. This is true even in the case of Algeria where ticipation rates, for instance when a pension system provides the benefit replacement rate decreases during the first year, incentives for early retirement.4 but then remains constant at 50% for the next two years. Figure1:SeverancepayinMENAishigherthaninotherregions MENA LatinAmerica EastAsiaand SouthAsia EasternEurope Sub-SaharanAfrica OCDE Morocco Yemen Oman Lebanon Jordan Iran Bahrain Quatar Djibouti Tunisia WBG Egypt Algeria 0 .1 .2 .3 .4 .5 .6 .7 .8 .9 1 Costindex(1=max) Source: Robalino, Mataoanu. "Severance Pay Programs in the Middle East and North Africa" (forthcoming) There is no universal protection system against income loss In the case of unemployment insurance, a first constraint that can be recommended for all countries. The design needs concerns the size of the informal sector and the nature of to adapt to local economic and social conditions and take into unemployment. In countries with large informal sectors, account political constraints. When determining the optimal rigid labor markets, and a high unemployment rate among balance of programs that protect against loss of labor income, first-time job seekers, unemployment insurance may not be policy-makers would benefit from informed analyses that an immediately appealing policy option. There are also alert them to the possible trade offs of various programs. For questions regarding the institutional capacity to properly example, the costs of severance pay may be two to three times design and manage this type of scheme that requires higher than the cost of providing unemployment insurance, advanced administrative systems for monitoring employ- implying that a shift from severance pay to unemployment ment and wage history of workers. In most of today's insurance could provide the same overall level of worker pro- OECD countries, unemployment insurance was the tection at significantly lower costs. last of three measures to be introduced (in addition to severance and pensions). MENA may therefore want to As the policy dialog in the area of income protection pro- focus for the time being on pensions while adjusting its grams for workers intensifies, countries could consider an severance schemes, bearing in mind both the equity and integrated assessment of income protection programs for efficiency objectives as the region becomes more affected workers. A first set of questions that need to be addressed by globalization. regarding each program include: (i) how well they protect individuals' incomes; (ii) how efficient these programs are; WorldBankAssistance (iii) how they respond to various shocks; and (iv) how robust they are in the face of political pressures. Policy decisions The World Bank actively assists regional governments as also need to be based on an assessment of initial conditions: they move toward creating more efficient policies to (i) the structure of labor markets (e.g., the size of the infor- strengthen employment generation. Since the launch of the mal sector); (ii) the types of informal protection mecha- MENA Regional Employment Report, Unlocking the nisms that are available; (iii) the nature of unemployment; Employment Potential in the Middle East and North Africa in and (iv) institutional constraints. 2004, the World Bank has held a number of conferences on the development of comprehensive job creation strategies, In this context, the current severance schemes seem to be both at the regional level and in various client countries. To "over-designed" for the economic conditions facing the MENA disseminatethefindingsoftheMENARegionalEmployment economies and one could argue that, rather than having a sys- Report and three related reports on gender, governance and tem that is not enforced, it is better to have a more moderate trade, World Bank staff held several roundtables on the scheme that is enforced. This would provide more certainty to reports' main themes, including the Yemen Roundtable in workers and more flexibility to employers, and thus contribute Sana'a and the Maghreb Roundtable in Tunis. More recently, more to social protection and faster economic growth. the World Bank held a major conference on regional employ- ment issues in Cairo (see the text box on the Regional Endnotes Conference on Job Creation and Skill Development below). 1 Due to their limited impact on employability and long term earning capacity of par- ticipants, public works and workfare programs are regularly classified as social safety nets, rather than as ALMPs. For individual countries, the World Bank provides tailored 2 See Abrahart, Kaur, Tzannatos. 2002. "Government Employment and Active Labor analytical activities, including reports, policy notes, and Market Policies in the Middle East and North Africa in a Comparative International Context." Chapter 2 in Handoussa, Tzannatos (eds.). 2002. "Employment Creation and technical assistance. In Tunisia, the World Bank established Social Protection in the Middle East and North Africa." American University of Cairo a long-term analytical partnership to work on employment Press, Cairo; Tzannatos. Dar . 2001. " Programmes actifs pour le marché du travail : with the government (see the text box on Programmatic Un aperçu général des évidences Résultant des évaluations." Social Protection Discussion Paper Series No. 0105, World Bank, Washington, DC; and Betcherman, Olivas, Dar. Economic Sector Work in Tunisia). 2004. "Impacts of Active Labor Market Programs: New Evidence from Evaluations with Particular Attention to Developing and Transition Countries." Social Protection Other countries where the World Bank provided assistance Discussion Paper Series No. 0402, World Bank, Washington, DC on labor market related social protection issues include Iran, 3 Robalino. 2006. "Pension Systems and the Labor Market: Why reforms can help both." 4 The labor force participation rate is defined as the share of the working age population Iraq, Morocco, and Yemen. The Bank has also provided who are either employed or looking for employment. By reducing the pool of potential lending in support of VET programs to among others workers, a lower participation rate implies lower output to distribute among the population. Jordan, Morocco, Tunisia, and Egypt. 5 For a review of these programs, see Robalino, Mataoanu. "Severance Pay Programs in the Middle East and North Africa" (forthcoming). World Bank. Washington, DC. Regional Conference on Job Creation and Skill Development InDecember2005,theWorldBankheldaregionalconfer- demand,whereaslabormarketprogramsandinterventions enceonjobcreationandskilldevelopmentinCairo,Egypt. canfacilitatelaborreallocationandprovideasafetynetfor Theconferencewasattendedbyrepresentativesofthemajority themostvulnerable.Theimportanceofthebroadrangeof ofMENAgovernments,WorldBankstaffworkingintheregion, areasinvolvedindevelopingacomprehensivejobcreation andawiderangeofinternationalexperts,regionalprivate and growth strategy was reflected in the presence at the sectorrepresentatives,andregionalresearchers.Theprimary conference of government representatives of a variety of mission of the conference was to highlight the necessary ministries, such as Labor and Social Welfare, Education, policies and reforms needed to facilitate job creation in Planning,Investment,Industry,andFinance. theregion,toprovideparticipantswithconcreteexamples of successful efforts to create jobs and develop labor Theenvironmentofknowledgesharingallowedtheattendees skillsinnon-MENAcountries,andtoprovideaplatformfor tosharebestpracticesandlessonslearnedfromthecontext participantstovoicetheirconcernsandplansregardingtheir oftheircommonchallenges.ItalsohelpedWorldBankstaff individualeffortstocombatunemployment. tobettergraspthecomplexitiesandchallengesfacingclient countriesinregardtoemployment,andsohelpbettertailor The conference's key outcome was that the most pressing futureWorldBankassistancetocountryneeds. issueintheMENAregion,thelackofjobcreation,cannot besolvedbylabormarketpoliciesalone.Thereisaneedfor acomprehensivejobcreationandgrowthstrategy,withan importantroleforincreasedprivatesectordevelopmentand thealignmentofeducationandtrainingsystemswithlabor Tunisia The World Bank's Programmatic Economic Sector Work on Employment Strategy Tunisia is among the most diversified countries in the MENA region and maintains a well-established economic reform effort. But the situation in Tunisia is still far from ideal. Unemployment is nearly 13.5%, and unemployment amongitsyoungpeopleisnearly27%.Tomoreeffectively addressthecontinuingemploymentchallenge,theTunisian governmenthasjoinedtheWorldBankinamultiyeareffort toimprovethegovernment'slabormarketpoliciesandthe Another aspect of the programmatic work in Tunisia is to qualityofitsrelatedreforms.ThisProgrammaticEconomic betterunderstandhowthebusinessclimateimpactsemploy- SectorWork(PESW)includesaseriesoftargetedstudiesand ment,especiallyinregardtosmallandmediumsizedenter- trainingforTunisianofficialsthatwillallowthemtoincrease prises(SMEs).Insupportofthis,theTunisiangovernment theeffectivenessoftheiroveralljobcreationstrategy. haspreparedarevisedcompetitivenesssurvey,theresults of which are currently being reviewed with the support of ThePESWprogramstartedin2004,followingthesuccessful theWorldBank.ThiswillbesupplementedbyaWorldBank deliveryofaWorldBankreportontheTunisianEmployment studyoftheinvestmentclimateandthecharacteristicsand Strategy. In response to this report, the government constraintsofSMEsinTunisia.Thestudywillprovideamore committed itself to a collaborative effort in which a joint comprehensive view of the role SMEs play in the Tunisian teamwoulddevelopmacroeconomictoolstobetterevaluate labor market, and how government can assist SMEs in theimpactofvariouspoliciesonemployment,improvethe playingamoredynamicroleasanengineofjobcreation. technicalcapacitiesofthegovernmentandtheWorldBankto assessthebusinessclimateanditsimpactonemployment, Manycountriesintheregionarehinderedbythequalityand andstrengthenthedatacollectionandanalysiscapabilities scope of available labor market data. Such information is of those working on Tunisian employment research. These vitaltoanyeffective,well-targetedapproachtoemployment activities will help the Government of Tunisia to establish policy.Withthisinmind,theBankprograminTunisiaispro- sound economic policies which promote competitive prod- vidingimportanttechnicaltrainingandadviceondatacollec- uct markets and private sector led growth, particularly in tionatthehouseholdandenterpriselevelsinTunisia.This theservicessector. includesadiagnosisoftheexistinglabormarketinformation system,andtechnicalsupportonhowtoimprovesurveys One area of focus has been improving the quality and andprojectionsmethods. efficiencyofTunisia'sactivelabormarketprogramsand training programs. Work is ongoing to build a stronger OneofthemostimportantoutcomesofthePESWhasbeen monitoring and evaluation system, and to review these Tunisia'sdevelopmentofstrongerinter-ministerialcoopera- programs in the context of international experience. tion.Suchcooperationisnecessaryforpositiveemployment Relatedstudieswilladdressmicro-enterpriseprograms outcomesbecauseofthevariedpolicyimplicationsandthe and pre-employment training programs, and include a needfortimely,cooperativeimplementation.TheTunisian longitudinalstudyonuniversitygraduates.Thesestudies government is developing an integrated employment will allow the Tunisians to refine their employment and strategy across a number of ministries, and has already trainingprogramsinordertostrengthentheireffective- established a small technical steering committee to nessandmakethemmorecostefficient. facilitatethecoordinationofemployment-relatedactivities. Pensions:Systems Pay-as-you-go MakingWork David A. Robalino I t is common to hear that the crisis of defined benefit have remained essentially untouched--except for discre- pension systems financed on a pay-as-you-go basis tionary adjustments to contribution rates and/or eligibility (DB-PAYG) is due to the aging of the population. Under conditions. The systems differ in terms of design and DB-PAYG schemes, the contributions of active members are institutional structure (see Table 1) but all are vulnerable to used to pay the pensions of those who are retired, and as the the problems discussed above. number of retirees increases relative to the number of contributors, so the story goes, the finances of the system Most pensions systems in MENA offer retirees a share of worsen, and because adjustments to contributions and their pre-retirement income that is too large. Gross replacement retirement ages are politically difficult the crisis emerges. rates1 for the average full career worker2 are often above DB-PAYG systems are victims of other evils as well. The 70%, among the highest in the world (see Figure 2). At the way benefit formulas and eligibility conditions are usually same time, very few countries impose a ceiling on the wage set reduces incentives to work, contribute, and save on the on which contributions are paid and pensions are calculated. side. This problem is aggravated because the benefit formulas Without such a ceiling, even high-income workers receive and eligibility conditions tend to be subject to political high replacement rates. A first obvious problem with high discretion that makes the system risky and unpredictable. replacement rates is that they are costly to finance. For Also, and contrary to common belief, DB-PAYG tend to instance, the contribution rate necessary to finance an 80% redistribute income from low- to high-income workers. replacement rate at age 60 would be in most cases above 25% of wages. Economies cannot afford this level of Some countries in the Middle East and North Africa are taxation as it can reduce labor demand, expand the informal showing that, with appropriate reforms, pay-as-you-go sector, and affect competitiveness. In addition, high ceilings systems do not have to follow this path. Most reforms under and high replacement rates induce an inefficient diversifica- consideration maintain a pay-as-you-go pillar at the core of tion of savings for retirement, because individuals do not the new pension system, but focus on adopting benefit have incentives to save outside of the public system. Yet, formulas, eligibility conditions, and rules that: (i) make the there is little rationale for having the public system as the system financially self-sustainable over the very long-term, only source of income for retirement. even in the presence of an aging population; (ii) reduce political discretion; (iii) respond to the needs of different With one or two exceptions all pension systems are making population groups, including the poor and individuals with promises that they will not be able to keep--even if the limited savings capacity; (iv) provide incentives to work and population stops aging. This is simply because the to make pension contributions; (v) allow for transparent and benefits are too high relative to the contributions. Indeed, a progressive redistribution; and (vi) provide incentives to pay-as-you-go pension system operates in a way similar to a diversify sources of income for retirement. This article bank account: individuals "deposit" contributions and when discusses the motivations for reform and how the new they retire they "withdraw" pensions. It is therefore possible pay-as-you-go systems would work. It summarizes the main to compute the implicit interest rate on these lessons from the policy dialogue that took place in the contributions. It turns out that a pay-as-you-go system has a majority of countries during the past four years. maximum interest rate that it can afford to pay to its members. A good proxy for this maximum interest rate is Whytheneedforreform? the long term real growth rate of the economy, say 3% to 4% per year. In MENA countries, unfortunately, pension All countries in MENA adopted DB-PAYG pension systems systems implicitly pay real rates of return on contributions early in the second half of the last century. Since then, these above 5% or 6% per year; in some cases even above 10% per Table1:PensionSystemsinMENAcountries Country Number Integrated Contractual Military Join: Workers in Self-Employed And Coverage Of Regimes--Civil Workers in State Owned Others Join: (%) Funds1 Servants and Public Sector Enterprises Join: Private Sector Join: Algeria 2 Yes General General3 General Ownfund 40 Bahrain 2 No PublicSector PublicSector3 PublicSector NotCovered 30 Djibouti 3 No PrivateSector OwnFund PrivateSector NotCovered 28 Egypt 3 No PrivateSector OwnFund PrivateSector PrivateSector3(3 schemes) 92 Iran 3 No PublicSector OwnFund PrivateSector PrivateSector3 43 Iraq 2 No PublicSector PublicSector3 PublicSector NotCovered 18 Jordan2 2 Yes General General General NotCovered 36 Lebanon 2 No PublicSector PublicSector3 PublicSector NotCovered 25 Libya 1 Yes General General3 General General3 87 Morocco 3 No OwnFund PublicSector3 ContractualW NotCovered 20 Tunisia 2 No PublicSector PublicSector3 Pub.orPrivate PrivateSector3(3 schemes) 49 West Bank & Gaza 2 No Notcovered Notcovered4 Notcovered NotCovered 17 Yemen 4 No PublicSector OwnFund5 PublicSector PrivateSector 13 (1) Refers to institutions managing pension schemes. It excludes occupational funds in public and private companies but includes the pension funds for the military and security forces; (2) Schemes for civil servants and the military are closed to new entrants; 3) Indicates that within the fund plan members have a special scheme; 4) New law has just been promulgated; 5) There are two separate funds--one for the military and another for the security forces. Source: Robalino et al. 2005. "Pensions in the Middle East and North Africa--Time for Change." World Bank, Washington, DC year! (Left panel Figure 3.) Moreover, interest rates tend to generations, either through higher taxes, lower benefits, be higher for individuals whose wages are growing fast and/or lower expenditures on non-pension items (such as, (usually skilled workers) than for individuals with flat for example, on education and health). This seems unfair, wages (usually unskilled), which results in the problem of particularly given that only a modest part of the adverse redistribution. current population is benefiting from the pension system--usually workers in the formal private sector and To continue with the bank account metaphor, the pension civil servants. On average, pension systems in MENA systems are "borrowing" contributions at an interest rate cover only 30% of the labor force and pay pensions to less that is too high and that they cannot afford to pay. than 10% of the elderly population. Coverage rates Accumulated debts are already very large--larger than the reflect to a large extent the productive structure of the public debt and, in some instances, larger than the size of economy as well as prevailing institutional arrangements. the economy (see right panel in Figure 3). Consequently, countries with large public sectors (such as Algeria and Libya) tend to have higher coverage rates. The pension funds, from time to time, try to address the Also, countries that have set up special programs to reach financial problem by adjusting the parameters of the system vulnerable groups (such as Egypt and Tunisia) have by, for example, increasing the contribution rate. Which higher coverage rates. At the other extreme, countries parameter is adjusted and by how much usually depends on with a high share of the labor force employed in the the discretion of policy-makers and is the result of political agricultural sector (Morocco) and/or the informal sector negotiations. It is difficult or impossible to predict what type (Djibouti, Yemen) have lower coverage rates. This is of adjustments will take place in the future, and this exposes because administratively it is more difficult to reach plan members to high levels of uncertainty and risk. these individuals, but also because saving capacity tends to be lower among these groups. Ultimately, pension Without reforms, the large debts that the pension systems should strive to increase their coverage to systems are accumulating will have to be paid by future encompass as many individuals as possible. However, as Figure2:Themandatesofthesysteminterms increased coverage under a flawed pension system ofincomereplacementareoftenambitious might only exacerbate the pension crisis, this expansion andnotaffordable should be accompanied--or preceded--by appropriate pension-system reforms. Uruguay Whatwouldthenewpay-as-you-gosystemslooklike? Iran Iraq Yemen The first step in the design of new pension systems is to CostaRica agree on how much income will be replaced upon Egypt retirement. This implies making explicit choices regarding Spain Libya the role of the government and the role of the individual in Algeria securing savings for old-age. If standards of living after Bahrain Italy retirement can be maintained with say 80% of pre-retire- Argentina ment income, how much should come from the public Morocco system? Should it be the same for all levels of income or Poland Jordan should the targets for high-income workers be lower? How Sweden much should the government guarantee to those with limited Tunisia Peru savings capacity? The answers to these questions necessarily France reflect social preferences. In all cases, however, choices need Bulgaria to be affordable. Affordable means that individuals and Chile Germany Average firms are able to support the tax burden that is associated Russia with financing the targeted benefits. It is also important to Mexico UnitedStates allow middle- and high-income individuals to diversify their Djibouti sources of income for retirement by capping the salary that 0 20 40 60 80 100 120 is subject to social security contributions and developing the PercentofAverageEarnings necessary regulatory and supervisory framework for the development of voluntary long-term savings instruments. Colombia Once these choices have been made, countries maintaining Iran an earnings-related pension system with pay-as-you-go DominicanRepublic Latvia financing have two main avenues. One is to keep current Algeria defined benefit formulas but introduce special rules that Uruguay guarantee financial sustainability, address problems Bulgaria Slovakia in terms of incentives and equity, and reduce political Algeria discretion. Key measures are: UnitedStates Poland n to include all salaries in the calculation of the pension, Poland indexed to the growth rate of the average covered wage; Luxemburg n to mathematically link the retirement age to the level of Hungary Norway the targeted replacement rate, the contribution rate, life Morocco expectancy, and the mechanism used to adopt pensions Korea Spain (see below); Egypt n to adjust this retirement age periodically--say every five Turkey years--to take into account changes in life expectancy; ElSalvador Average UK n to introduce fair penalties for individuals retiring before Sweden this age and fair compensation for individuals retiring Russia after this age; and Switzerland n to adopt an automatic mechanism to index pensions-- 0 1 2 3 4 5 6 7 8 9 10 say by the growth rate of the consumer price index. CeilingonCoveredWage (MultipleofAverageEarnings) Jordan and Morocco are countries in the region following this path. Source: Robalino et al. 2005. "Pensions in the Middle East and North Africa-- Time for Change." World Bank, Washington, DC 0 Figure3.Systemsthatpayhighimplicitratesofreturnoncontributionsandhave largepensiondebts LebanonMilitary LebanonCivilServants WestBank Brazil MoroccoMilitary Poland BahrainMilitary Romania LibyaCivilServants Jordan WBG(Military) Hungary TunisiaPrivateSector Turkey IranCivilServants LibyaPrivateSector/SOEs WestBankGaza TunisiaPublicSector Morocco(CMR) MoroccoPrivateSector Djibouti(CMR) AlgeriaSelf-employed Philipines IranPrivatesector Argentina YemenPublicSector LebanonMilitary YemenPrivateSector JordanIntegrated Djibouti(OPS) AlgeriaIntegrated Mexico MoroccoCivilServants Chile BahrainCivilServants IranCSRO MoroccoContractualWorkers Ecuador TunisiaSelf-employed IranSSO DjiboutiPrivateSector EgyptIntegrated Morocco(CNSS) BahrainPrivateSector Longterm Korea sustainablelevel Gaza LebanonCivil DjiboutiCivilServants Morocco(RCAR) 0 2 4 6 8 10 12 14 0 50 100 150 200 250 RealImplicitRateofReturnfor AccruedtoDateLiabilities(%GDP) RepresentativePlanMember(%peryear) Source: Robalino et al. 2005. "Pensions in the Middle East and North Africa--Time for Change." World Bank, Washington, DC Another avenue has been recently followed by countries as well as the method of indexation. The older the individual such as Sweden, Poland, and Latvia, and is now being when he retires, the higher the pension that is paid for a considered in Egypt (see the text box in this article). It given account balance. involves the introduction of the so-called Notional Accounts (NA) system.3 The NA system remains financed on a The critical issue in the NA system is how to define the pay-as-you-go basis but uses a different benefit formula. notional interest rate that is credited to the accounts. This benefit formula is mathematically equivalent to the Different countries have followed different approaches. defined-benefit formula discussed above, yet it is simpler In general, a good proxy is the growth rate of the covered and more transparent. The system operates as follows. average wage. To guarantee the financial sustainability of Individuals contribute and their contributions are registered the system, however, this notional interest rate needs to be in personalized accounts. These accounts are called "notional" adjusted as a function of the liabilities of the system (i.e., the because they do not actually contain savings--the system is pension promises) and expected contributions, net of the pay-as-you-go--they are simply records in a computer. The pension payments accruing from them.4 The end result is a system credits notional interest to these accounts. Upon system that is financially self-sustainable, where benefits are retirement, the balance in the account is used to compute linked to contributions in a transparent way--improving the value of the pension that the individual will receive for the incentives to contribute and reducing distortions in the rest of his/her life. This calculation takes into account labor supply and savings decisions--and that is not subject how long, on average, the individual can be expected to live, to political discretion, at least when well designed. The system also provides flexibility to devise special arrange- The World Bank provides substantial support in the area of ments for individuals with limited savings capacity. Indeed, pension reforms to a large number of countries in the MENA because benefits reflect contributions, it is possible to have region. Currently, the greater part of World Bank assistance multiple contribution rates. Thus, casual workers or the involves helping governments to analyze the extent of the self-employed can be allowed to contribute at lower rates. The problems, and identify and design possible policies to address pension system can then offer a minimum pension guarantee them. Governments have been--and are being--assisted financed either through additional contributions from plan through knowledge sharing, training, analytical services and members or from general revenues. The system could also use policy advice in among others Algeria, Djibouti, Iran, Iraq, general revenues to match the contributions of low-income Jordan, Lebanon, Libya, Morocco, and Yemen. The scope of this individuals to guarantee an adequate pension upon cooperation is expected to increase as more countries become retirement. Hence, NA systems combined with non- aware of the need to reform their pension systems. The focus of contributory pensions or matching public contributions could World Bank support is likely to gradually shift from analysis and help solve the problem of coverage. policy advice to implementation support as governments move toward the actual execution of reform plans, such as currently is Whataboutfully-fundedschemes? the case in Egypt and West Bank and Gaza. Whether countries should increase the level of funding of the pension system depends on expected costs and benefits. The benefits of higher levels of funding are related to potentially higher rates of return on contributions5 (and therefore higher pensions for the same contribution rate), as well as positive effects on the financial sector and, through this channel, on economic growth. These benefits, however, do not come automatically. Higher rates of return require appropriate governance structures, accountability, and investment policies. Whether higher levels of long-term savings contribute to financial sector development also depends on existing institutions and market structure. In financial sectors where a core of sound banks and insurance companies does not exist, where the government is a dominant player, where the appro- priate regulatory framework is not in place, and where erratic public debt management has not contributed to the emergence of a yield curve, the benefits of higher funding can be overshadowed by the costs. The latter are not only related to the transition costs--since new contributions can no longer be used to pay the pensions of current beneficiaries--but also Endnotes 1 `Gross Replacement rate' is the ratio between the gross (before tax) pension to the risk of capital loss and/or net rates of return on that an individual receives upon retirement and his/her last gross salary. investments below wage growth. 2 For comparison purposes, replacement rates across countries are computed for an individual who is assumed to earn economy-wide average earnings and Whatliesahead? contribute continuously from age 20 until the statutory retirement age or the maximum replacement rate is reached. 3 See Holzmann and Palmer (eds.). 2002. "Pension Reform. Issues and While it is clear that most countries in the MENA region face Prospects for Non-Financial Defined Contribution (NDC) Schemes." problems with their current pension systems, many govern- World Bank, Washington, DC 4 See Robalino, Bodor. 2006 (forthcoming). "On the Financial ments still need to determine how to solve them. Although Sustainability of pay-as-you-go systems and the role of government indexed funded pension schemes may generate higher rates of return bonds." World Bank. Washington, DC. on pension contributions, well-designed pay-as-you-go 5 This assumes that funds are invested in a well diversified portfolio of financial assets and that this portfolio generates a rate of return that is higher systems can also achieve all the objectives of a pension system. than the sustainable rate of return of the pay-as-you-go system--which as The Notional Account system could be a promising model of discussed above is close to the growth rate of wages. Photo a financially sustainable, transparent, and non-distortionary Credit: pay-as-you-go system, particularly in environments where the Sources Cur conditions for more funded schemes are not sufficiently met Holzmann, Hinz. 2005. "Old Age Income Support in the 21st Century: an International Perspective on Pension Systems And Reform." World Bank, tCar but where the administrative capacity is relatively high. Washington, DC. nemark Notional Accounts in Egypt EgyptisadoptingaNotionalAccount(NA)systemcomple- Thenewsystemalsoconsidersmechanismstocoverindividuals mented by a fully-funded defined-contribution system. The withlimitedsavingscapacityandthelongtermpoor--thelatter newpensionsystemtargetsa65%grossreplacementrateat throughtheintroductionofabasicpensionforindividualsofage age60.Itimposesaceilingof2.5timestheeconomy-wide 65andolderthatisfinancedoutofgeneralrevenues. average earnings and offers a minimum pension guarantee equivalentto15%ofeconomy-wideaverageearnings(close What are the welfare and fiscal implications? totheindividualpovertyline). Figure 4 shows that the new system considerably reduces pensionbenefitsforindividualswhoretireearly(beforeage55), The current pension schemes are closed to new entrants who butcanevenincreasereplacementratesforindividualswhodelay jointhenewNAsystem.Planmembersintheclosedschemes, retirement(atage65orlater).Thus,thenewsystemprovides however,arefreetoswitchtothenewsystemiftheydesire.Those incentives to work. The reform also dramatically improves the individualswhodonotswitchtothenewsystemwillfacegradual financialpositionofthepublicsystemandthereforethewelfareof adjustmentsinbenefitsinordertocontaintheaccumulationof futuregenerations.Budgettransferstothepensionsystemcould unfundedliabilities. behalvedovertheshortterm.Overthelong-term,savingscould beintheorderof8%ofGDP. Tofinancetheimplicitpensiondebtoftheclosedsystems,the governmentwillusethesurplusfromthenewNAsystem,butina transparentway.Basically,thegovernmentwillissuegovernment bonds appropriately indexed in exchange for the contributions thatitborrows.Thesebondswillhavelongmaturitiesandcould eventuallybetraded. Figure4:ThenewpensionsysteminEgyptprovidesadequatebenefits andissustainable 20 8% Retirementage65 7% Transferstoonly 10 coverdeficitofcurrent 6% systemwithoutreform 0 PEOPLEWIN P 5% PEOPLELOOSE Budgetsupportto closedsystems -10 %GD 4% withoutsurplus fromNAsystem 3% -20 Budgetsupporttoclosed 2% systemsnetofsurplus fromNAsystem -30 Retirementage55 1% -40 0% 20 25 30 35 40 45 50 Changeinindividualreplacementrate(pp) 2007 2017 2027 2037 2047 2057 2067 Ageoftheplanmembertoday Source: World Bank. 2006. "Egypt: Improving the Welfare of Future Generations through Pension Reform." Volume I. Washington D.C. Social Safety Nets John Blomquist Social Safety Nets are non-contributory transfer programs targeted to the poor or those vulnerable to poverty and shocks. Some people refer to such programs as social assistance or social welfare programs. Countries in the Middle East and North Africa provide a range of public social safety net programs. They include subsidies on important commodities and both cash and in-kind transfers such as cash assistance for the poor, food and nutrition programs for mothers and young children provided through schools or as part of other services, and housing and support services for the poor and orphans.1 Recently, the need for greater economic growth in the face of a more competitive, globalizing world has stimulated vigorous debate within MENA on how and whether to renegotiate the social contract between citizens and the state. Three issues dominate the policy discussion with respect to social safety nets: (i) defining the appropriate role of the public sector in providing safety nets; (ii) enhancing the longer-term value of safety net programs in building physical and human capital and reducing poverty; and (iii) exploring the potential for social assistance to permit the reform of commodity subsidies. Photo: Guillermo Hakim SafetyNetsandthePublicSector Is there a role for social safety nets, and should govern- Most countries in the region followed a state-dominated ments be involved? These questions have elicited significant path of development following independence, leading to controversy among policymakers and the general publics of large public-sector employment, generous public pensions many countries. It is argued that safety nets, appropriately and low-priced health and education services along with designed, contribute to both the equity and efficiency with pervasive controls on certain commodity prices and other which economies operate.2 Above all, and most commonly goods. Under such conditions, the need for cash social assis- understood, safety nets can have an immediate impact on tance in particular was considered small. Stagnant growth poverty and inequality. That is, they contribute to a more through the 1980s and 1990s forced many countries to con- equal distribution of resources among the population. sider economic reforms that give the private sector a more Further, safety nets can contribute to the efficiency of an prominent role and reduced the involvement of the state.3 economy in at least three important ways. First, they can These reforms, from streamlining public-sector employ- facilitate macroeconomic and structural changes, allowing ment to reducing price subsidies, imply that some families sustainable and faster growth to occur. Latin American gov- will be more vulnerable to joblessness and poverty, at least ernments have used safety nets to ease the effects of struc- in the short term until the structural changes result in tural changes following the debt crises, including public sustainable growth. How best to provide assistance to the workfare and social fund instruments. One of the lessons of needy becomes increasingly relevant. the East Asian crisis has been the need to build effective safety nets during good times that can be expanded during In recent years, spending on social protection in MENA has crisis periods. Second, safety nets can also be used as an been fairly comparable with other middle-income countries instrument of reform to replace inefficient redistributive ele- (left panel of figure 1). MENA countries spend on average ments of other programs, such as price subsidies. And, third, less than 5% of GDP for social insurance and social assistance they can serve as springboards, contributing to the forma- combined, slightly above the levels in other developing tion of human or physical capital that allows recipients to regions but well below the levels observed in much of Europe, improve their prospects and contribute to overall growth. including the European Union member states. The averages Figure1.RegionalSpendingPatternsonSocialProtection(late1990s) 14 13.6 6 5.6 5.7 5.7 12 5 4.8 10.3 4.3 4.3 10 4.1 4 8 %ofGDP 6 3 4.7 %ofGDP 4 2.4 2.9 2 2 1.4 1.5 1 0 0 Yemen Iran Morocco Tunisia Egypt Algeria Jordan Africa SouthAsia EastAsia MiddleEast ECEurope nEurope Social Insurance Social Assistance Total LatinAmerica stereW Note: Figures use IMF definitions. Public expenditure on social security and welfare includes compensation for loss of income to the sick and temporarily disabled; payments to the elderly, the permanently disabled, and the unemployed; family, maternity, and child allowances; and the cost of welfare services, such as care of the aged, the disabled, and children. It excludes expenditures on some safety nets, such as subsidies and public works program costs. Source: Besley, Burgess. 2003. "Benchmarking Provision of Social Safety Nets." Social Protection Discussion Paper No. 0315. World Bank. Washington, DC. World Development Indicators, various years. mask considerably variation across countries, reflecting (US $20.5 million in 2004). Foreign remittances are an however, a different balance between spending on social important source of assistance in all countries. For example, assistance and spending on social insurance and other social remittances from abroad comprised more than 63% of total programs (right panel of figure 1).4 Regardless of the country, transfers received by the poorest decile of the population in spending on social assistance accounts for a small portion of Yemen in 1998.6 resources, with cash transfers ranging from about 0.1% of GDP to 1.2%. Commodity price subsidies by far dominate By contrast, the coverage among the poor and the adequacy public assistance in terms of expenditure as shown in table 1 of benefits of public safety nets tend to be insufficient to in the first section of this issue. have much effect on poverty across most social assistance programs in the region. Most programs, including cash Non-government and informal transfers among households transfers, do not target the poor per se, but provide benefits constitute a vital safety net in MENA, dwarfing public based on membership in a category of families or individuals sector assistance in nearly every country for which there is presumed to be vulnerable. Others do not have verifiable evidence. Religious and charitable contributions make up a measures of incomes and assets for targeting purposes. In significant portion of non-government assistance (see the Egypt for example, cash assistance is provided categorically text box in this article on Islamic Social Welfare in the to groups such as orphans, widows, unmarried women without Palestinian Territories). Zakat is an Islamic obligation to means of support, divorcees and their children, the disabled, provide for those in need, with the exact amount depending and prisoners' families. The assistance is intended to be on a family's wealth. Some countries enforce Zakat, even means-tested, requiring application at a local welfare office, treating it as a tax managed by the government, responsible supported with documentation including family birth for allocation to the poor, while other countries rely on private, certificates and salary records from employers or pension informal collection and administration. Waqfs are charitable statements as well as a national identification card. Eligibility foundations set up by wealthy individuals to provide particular determination is hampered by the fact that many poor goods or services, such as schools for the poor. individuals do not possess identification cards, and incomes often cannot be verified. There is a broad range of non-government assistance. In Iran, religious foundations, or Bonyads provide most of the social As a consequence, many beneficiaries are not considered poor assistance to the poor. There are nearly 30 foundations and according to national poverty lines. Less than 12% of the charities with a combined annual budget amounting to poor are reached by the main public social assistance half the general government budget and 30% of national programs in Egypt, providing an average benefit of slightly revenue.5 There are more than 800 officially registered chari- more than 8% of the poverty line for a family with two adults ties in Syria that disburse an amount equal to nearly 90% of and three children in Upper Rural Egypt. Social assistance is the total budget of the Ministry of Social Affairs and Labor estimated to have raised about half a percent of the population above the poverty line in 2004. Morocco's Entraide Nationale they can be targeted to specific areas of high poverty with reaches under 2% of the poor. The Social Welfare Fund in high unemployment. They vary in size, but typically cover Yemen provided transfers to 15 different target groups in the only one or two of percent of the workforce, providing three late 1990s. Only 20% of the poor were covered, with the cash or six months of continuous employment. benefit to a family of average size amounting to about 10% of the poverty line. Workfare programs are a well-established safety net component in many MENA countries, and have been adopted in Asia, It is not immediately evident whether the public sector Africa, and Latin America. The largest programs are found in should increase its provision of assistance, or whether India and Bangladesh. Morocco and Tunisia have long-estab- reliance should be placed mainly on the private and nongov- lished programs, while Algeria and Egypt have tended to use ernmental sectors. Current targeting of public benefits is them in response to economic adjustment measures. Many of not effective, and there is evidence that public sector the programs are operated within larger social fund frame- resources may reduce the level of private resources going to works that have multiple objectives, often focused more on the poor.7 Yet, if the targeting and efficiency of public generating infrastructure than providing transfers to the poor. safety nets can be improved, there are several reasons for increasing the role of the public sector. First, providing tar- International evidence indicates that in order to be considered geted assistance in an objective and unbiased manner may good investments, both the public works infrastructure created be preferred to providing it on a potentially subjective basis, and the extent of pro-poor labor content must be carefully determined perhaps by religious affiliation, geographic designed. Important design features have been found to location or proximity, or the likelihood of having a family include: (i) requiring high labor content of projects; (ii) setting member who can provide adequate remittances. Second, the wage rate for participants low enough to ensure self-tar- crowding out some non-government assistance may be geting and not to compete with private sector opportunities; useful if those resources can be spent more productively on (iii) ensuring that projects produce high-quality assets other investments. And the government may be in the best demanded by local communities; and (iv) having in place position to effect efficient redistribution of resources from administrative capacity at the local level where projects are richer to poorer segments of society. The targeting outcomes run. Some efforts are underway to redesign programs with associated with nongovernmental assistance are virtually these principles strongly in mind, notably including the unknown. Finally, the political economy of making hard newest phase of Egypt's Social Fund for Development. reform decisions suggests that governments will need to be involved in providing assistance to those for whom reforms Conditional cash transfer programs (CCTs) are a relatively new may have a negative short term impact. While the appropriate instrument that seeks to foster human capital development and role of the public sector in providing assistance will vary by help break the cycle of poverty. Cash assistance is provided to country and circumstance, the extent to which the public poor families conditional on behavior, often including keeping sector is involved has important ramifications for the design children in school and maintaining health regimes. The cash of social assistance in MENA. helps reduce poverty in its own right and compensates families for the opportunity cost of changing behavior; the changed DevelopingPhysicalandHumanCapital behavior is expected to contribute to long-term human capital development for the young. They operate by stimulating demand Policy makers want social safety nets to contribute more to for existing health and education programs. In several cases, reducing poverty over the long term. They are also anxious CCTs have also been a means to consolidate disparate cash not to create a dependency on state handouts or to discourage transfer programs into more efficient, effective targeted interven- looking for work. Public workfare and conditional cash transfers tions to support human capital formation. Mexico replaced the are two program options that deserve consideration for wider tortilla subsidy with a CCT and Brazil consolidated four cash application in this context. transfer programs into the Bolsa Familia program, creating the largest CCT in the developing world. CCTs have seen increasing Public workfare provides temporary low wage jobs to application in Latin America and are becoming popular else- able-bodied poor individuals. Income is transferred in a where, including Turkey and West Bank and Gaza. self-targeted manner while ideally achieving useful projects such as road construction and maintenance, irrigation The preliminary evidence on the longer-term benefits of infrastructure, reforestation, and soil conservation. These CCTs has been impressive. Gains in children's education, schemes do not create permanent employment, but can health and family consumption have been recorded in Latin provide temporary income to smooth consumption over a American programs that have been rigorously evaluated such short period. The programs can be scaled-up quickly, and as the interventions in Mexico and Nicaragua. CCTs are not a panacea for poverty, however, and they are not applicable in n Egypt: Assessment of benefit incidence and targeting all cases. It is important that there be access to education and options in the context of subsidy reform; health facilities, and that limited use among the poor results n Iraq: Provide international experience with social assis- from a lack of demand rather than supply. However, the positive tance design and targeting methods; evaluation results suggest possible applications within MENA. n Syria: Assist in design of a social protection strategy, including studying role of informal assistance mechanisms SocialAssistanceandReformofSubsidies and targeting approaches for public cash social assistance in conjunction with reduction in subsidies; and In most of the region, subsidies remain a burden on n Jordan: Develop a proxy-means test for targeting public economies (see also the textbox on commodity subsidies in assistance. this article). Cash transfers are being examined as a possible way to reduce harmful subsidies while preventing the poor As a second stage, the Bank has provided grant and loan funds from suffering from higher prices. In principle, a to support implementation of reforms or further capacity well-designed cash transfer could compensate the poor for development. Two current examples of ongoing activities are: the loss in purchasing power from higher commodity n West Bank Gaza: Changing the main social assistance prices. A universal transfer given to everyone would directly program to a conditional cash transfer program condi- compensate all individuals equally in absolute terms. tioned on education attendance and medical checkups for Whether the replacement of subsidies by a transfer would children; generate significant resources depends on the level of the n Iraq: Strengthening policy, management and administra- cash benefits and on whether or not they are phased out tive capacity at the Ministry of Labor and Social Affairs to over time. It is also necessary to consider the mechanism administer a new national safety nets program. by which cash would be transferred. It can be very difficult to operate a universal program if the administrative and payment infrastructure are not in place to monitor and deliver huge numbers of cash transfers. Despite these difficulties, the option of universal cash transfers to compensate for subsidy withdrawal can be worthwhile considering. For example, a recent study conducted for the case of Egypt reveals that, if only half of the savings from a 50% reduction in energy subsidies are used to compensate via an untargeted cash transfer program, most of the negative impact of the subsidy withdrawal on the Endnotes poor can be eliminated. 1 For many countries in the region, including Algeria, Tunisia, Egypt and Iran, expenditures on housing and shelter assistance typically exceed those for other Indonesia, with a rich history of safety nets, is trying a in-kind and cash transfers for the poor. See World Bank. 2002. "Reducing universal cash transfer to compensate for fuel price increases. Vulnerability and Increasing Opportunity: Social Protection in the Middle East and North Africa." Orientations in Development Series. Middle East and North Africa The program was introduced together with price increases Region. Washington, DC. in the fall of 2005. It covers about 30% of the population, 2 See Ravallion. 2003. "Targeted Transfers in Poor Countries: Revisiting the Trade- some 15.5 million near-poor families, making it the largest Offs and Policy Options." Social Protection Discussion Paper No. 0314. World Bank. Washington, D.C cash transfer program in the world in terms of coverage. 3 Iqbal. 2006. "Sustaining Gains in Poverty Reduction and Human Development in Targeting cash only to the poor would expose the non-poor the Middle East and North Africa." World Bank, Washington, DC to higher prices without compensating them but would be a 4 International evidence shows little correlation between countries' wealth reflected in GDP per capita and the level of spending on social assistance (Besley, Burgess. progressive transfer and would save resources for other 2003. "Benchmarking Provision of Social Safety Nets." Social Protection Discussion public investment. In the longer term, developing targeted Paper No. 0315. World Bank. Washington, DC) transfers, perhaps as CCTs, would help compensate the 5 Iran Daily, September 2004. 6 Van de Walle. 2002. "Poverty and Transfers in Yemen." Middle East and North poor and may encourage human capital development. Africa Working Paper No. 30. World Bank, Washington, DC 7 Crowding out private transfers to the poor when public resources are increased WorldBankInvolvement is documented in some countries. See Conning, Kevane. 2001. "Community Based Targeting Mechanisms for Social Safety Nets." Social Protection Discussion Paper No. 0102. World Bank. Washington, DC; Schoeni. 2000. "Does Unemployment The World Bank is engaged with governments on social assis- Insurance Displace Family Assistance?" Rand Papers 00-05. Labor and Population tance issues through a sequentially staged approach. In the Program; Cox, Jimenez. 1992. "Social Security and Private Transfers in Developing Countries: the Case of Peru." World Bank Economic Review Vol 6(1): pgs. 155- first stage, the Bank primarily provides technical assistance 69. World Bank, Washington DC. Recent research disputes this claim with regard and sector work to assist in the analysis of issues and potential to conditional cash transfers, however. See Teruel, Davis. 2000. "Final Report: An implications of alternative policy choices. Examples include: Evaluation of the Impact of Progresa Cash Payments on Private Inter-Household Transfers. International Food Policy Research Institute." Migration MigrationisastructuralfeatureofMENA'ssocio-economiclandscape.Anestimated5%ofthepopulationofAlgeria, Morocco,andTunisiaaretemporarilyorpermanentlyresidingabroad.InLebanon,thisshareisashighas10%.More thanhalfofMENA'semigrantsresideinEurope,whileaboutonethirdfoundtemporaryemploymentwithintheregion, intheGulfCountries.ImmigrantsalsomakeupanimportantshareofworkerswithinsomeMENAcountries:foreign workersfromwithinandoutsideoftheregionmakeup60%to90%ofthetotalworkforceintheGulfStates. Migrationcanhavedeepeconomic,social,human,andpoliticalconsequences,notonlyforthemigrantsandtheir households,butalsofortheircountriesoforiginandtheirhostcountries.Incountriesoforigin,migrationcanrelieve unemploymentpressuresandprovideaneconomiclifelineformillionsofmenandwomen.Inthenon-Gulfcountries withintheregion,remittancessenthomebyMENA'smigrantsbyfarexceedtheamountsofOfficialDevelopment Assistancereceived.InJordan,thelevelofremittancesreceivedisashighas22%ofGDP.Inreceivingcountries, migrantworkersmaytakeonjobsthatarenotattractivetonationalworkersortakeupspecializedpositionsforwhich nonationalsupplyexists. Butnotallimplicationsofmigrationarebeneficial.Thedepartureofhighlyskilledworkersmayleadtoalossofproduc- tivityinboththeprivateandthepublicsectorinthecountryoforigin.Thedepartureofasmanyas25%ofuniversity graduatesfromtheArabworldtoWesterncountriesin1995and1996seemstosignalthatthisisindeedthecasein MENA.Inreceivingcountries,aninfluxofforeignworkersmaydefernecessarylabormarketandsocialpolicyreforms, andthedownwardpressureonlaborincomeofnationalworkerswithcomplementaryskillstothoseofmigrantsmay increasetheriskofpoliticaltensionsconcerningmigration.Migrantsthemselvesmaybesubjecttounfairordiscriminatory treatmentcomparedtonationalworkers. Despitethenotionthatmigrationhasimportantsocio-economicconsequences,itsextentanditsimplicationsfor theMENAregionarenotwellstudied.Theimplicationsandpossibilitiesofmigrationarenotconsistentlyintegrated intodevelopmentandpoverty-reductionstrategies,andthereisverylittlecooperationbetweensendingandreceiving countriestoensureawell-managedmigrationprocessthatseekstogeneratethehighestmutualbenefitsforcountries oforigin,receivingcountries,migrants,andmigrants'households. IncooperationwiththeEuropeanCommission,theWorldBank hasstartedtofilltheinformationgapwithregardtothemain migrationmovementsfromMENAtoEUMemberStates.Overa periodofthreeyears,acomprehensiveprogramofstudieswill becarriedoutontheextent,nature,causesandconsequences ofmigrationflows.Theprogramwillstudythepoverty,social andlaborimpactofmigration,andwillidentifygoodpractices intheareaoflabormigrationmanagementandsocialprotection arrangements for migrant workers and returnees. The main objectiveoftheworkistoidentifyandsupporttheimplementa- tion of projects, policies, regional arrangements, and institu- tionalreformsthatwillmaximizethebenefitsofinternational migrationflowsandreducetheircostsforallstakeholders. Sources: (1) Esim, Smith (eds.). 2004. "Gender and Migration in Arab States: The Case of Domestic Workers." ILO, Beirut, Lebanon; (2) International Financial Statistics, IMF, Washington, DC; (3) World Development Indicators; (4) Friedman. 2005. "The World is Flat (A Brief History of the 21st Century)." Commodity Subsidies in MENA Price and ration subsidies remain common in the region, but are costly, distort economic incentives and usually function inefficiently as safety nets. Large-scalesubsidiesareverycostlyintermsofresourcesthat andothercommodities,inwhichalowpriceischarged could be used for potentially more productive investments in fortheuseofaninitialquantityorblockoftheutility, health, education, infrastructure, or social protection. In Iran, whilesubsequentblocksarechargedatprogressively subsidiestopped16%ofGDPin2001.ThePublicDistribution higherrates;and System(PDS)foodrationsubsidyalonecostsmorethan15% n Reducingorremovingthesubsidyandreplacingitwith ofGDPinIraq.SubsidiesonfoodandenergyinEgyptarecur- anotherprogram.Auniversalcashtransferprogramhas rentlynearly10%ofGDPannually.Inaddition,theartificialprice been adopted in Indonesia to compensate for fuel distortsincentivestobothconsumersandproducersresultingin priceincreases,coveringnearly30%ofthepopulation. underproductionandoverconsumptionofsubsidizedgoods.And Transition to conditional cash transfers is now under finally,subsidiestendtobeaninefficientmechanismtohelpthe consideration. poor.Inthecaseofuniversalpricesubsidies,thebenefitsofthe lowerpricesaredistributedamongthepopulationinproportion Theseoptionsarenotmutuallyexclusive,andcouldbeusedin to the consumption of the subsidized good. For many staple combinationwithoneanother. goods,thewell-offcapturealargershareofthevalueofthe subsidythanpoorergroupsbecausetheyconsumemore.Ration Reformisdifficult.Therearemanyexamplesinwhichsubsidies subsidiesareofteninefficientsafetynetsaswell.InIraq,the have been removed too quickly without alternative safety net PDSsubsidycostsabout$6.30totransfer$1worthoffoodto mechanismsinplace.RiotinginYemenin2005forcedarecon- apoorIraqicitizen,whileitcosts$5.40totransfer$1worthof siderationofannouncedfuelpriceincreases.Streetprotestsin foodtothepoorusingEgypt'sfoodsubsidies. 1996inJordanfolloweda200%increaseinthepriceofbread andotheritems;asimilarattempttoincreasefuelpricesin1989 Optionsforreforminclude: ledtoriotingandhelpedbringdownthegovernment.Despite n Improvingthetargetingofexistingsubsidies. political pressures, Jordan, Egypt and Syria are among the n Changingthemixofthesubsidizedration,removing countriesactivelyconsideringwaystofreepriceswhileeffectively itemsconsumedmoreheavilybytherichandreplac- assistingthepoorwithalternativesafetynets. ing them with or keeping items consumed more exclusively by the poor (e.g., coarse flour, broken Lessons from international experience underscore the rice).SuchanapproachwasfollowedinTunisiain importanceof: theearly1990s; n Understandingtheeffectsofsubsidyreformsonthepoor Office beforechangingpolicy; ieldF n Improving household targeting through identifica- tion of the poor. Alternatives include direct n Building political support for change through public Iraq means testing for eligibility, using a proxy- educationcampaigns; Children meansapproachthatislessdatainten- n Reducingsubsidiesgraduallyunlesspoliticalwillexistsfor theev sive,usingsomeformofcategorical one-timechange;and Sa targeting, or excluding certain n Havingalternativesafetynetinterventionsinplacebefore groups from eligibility that are reducingsubsidies.Despitetheirinefficiencyasasafetynet Credit: knowntobebetteroff(suchas instrument,removalofsubsidieswillharmthepoorifthere Photo higher income civil servants). arenocompensatingmechanisms. Lifeline or block tariffs are Sources: Alderman. 2002 "Subsidies as a Social Safety Net: Effectiveness and Challenges." Social commonapproachesforelectricity Protection Discussion Paper No. 0224. World Bank, Washington, DC; Arulpragasam, Alatas, Aran. 2006. "Indonesia: Fuel Subsidy Reallocation - Note on the Poverty and Social Impact Analysis." Indonesian Poverty team INDOPOV. World Bank. 2005. Washington, DC; World Bank. "Iraq: Social Protection in Transition - Labor Policy, Safety Nets and Pensions." Human Development Group. Middle East and North Africa Region. Washington, DC; World Bank. 2005. "Egypt: Toward a More Effective Social Policy: Subsidies and Social Safety Nets." Report No. 33550-EG. Social and Economic Development Group. Middle East and North Africa Region. Washington, DC. Islamic Social Welfare in the Palestinian Territories Itwasin1967thattheIslamicMuslimBrotherhoodstarted the intifadah. The same study estimated that one Islamic to found Islamic charity organizations in the Palestinian organizationaccountedforatotalof33%ofcashassistance occupiedterritories.Theactivityoftheseorganizationswasini- in the territories, and the various Zakat committees to an tiallylimitedtothemanagementofreligiousschools,nurseries additional21%oftotalcashassistance.Morerecentstudies, andkindergartens,whichwereusuallyattachedtomosques. however,haveshownthattheleveloffoodandcashassistance Very quickly, however, these organizations expanded their accountedforbyIslamiccharitableorganizationshasdropped, programstoincluderegularsupporttoneedyfamilies,including withthePalestinianAuthorityandUnitedNationsReliefand women-headedhouseholds,thedisabled,theunemployedand WorksAgency(UNRWA)actingasthemainsourceofthisform orphans.Bythelate1990s,Islamicorganizationsrepresented ofdirectassistance. 10%to40%ofsocialinstitutionsinGazaandtheWestBank. InGazaalone,theyaccountedfor65%ofeducationalinstitu- As a rule, assistance from Islamic charity organizations tionsbelowthesecondarylevel.1FundingforIslamiccharity is provided to families as opposed to individuals and is organizationsandserviceproviderscamefromlocalandfor- allocatedonthebasisofsocio-economicratherthanreligiousor eignsources,largelyintheformofdonationsfromcharitable politicalcriteria.Islamiccharityorganizationsenjoythetrust societiesintheGulf,EuropeandNorthAfrica. of the communities they serve; they have strong links with grassroots organizations; they are recognized for their Zakat2 committees are amongst the most established of professionalismandareknownfortheireffectivetargetingof Islamic welfare institutions and they exist throughout the assistancetowardsthepoorest.Arecentsurveyundertakenby Arab and Muslim world. In the West Bank and Gaza, these theWorldBankontheroleofPalestiniannon-governmental committeesoperateunderthesupervisionoftheMinistryof organizations(NGOs)asserviceprovidersshowedthatIslamic ReligiousAffairs.Theyaretypicallygovernedbyaboardoflocal NGOswereparticularlysuccessfulindiversifyingtheirsources communityandreligiousleaders,providingcashandin-kind ofincome,andinrelyingondonationsandvolunteerwork. assistancetolowincomehouseholds,orphans,thechronically illandthedisabled.SomeZakatcommitteesareregistered ascharitiesbutmostareregulatedbylawderivingfromthe JordanianandEgyptianlegislation. TheroleofIslamicorganizationsrosesignificantlyfollowingthe outbreakoftheintifadahin2000.Accordingtoastudybythe UnitedNations,by2002,thebeneficiariesofZakat commit- teesincreasedto6,550families,upfrom450familiesbefore 1 Roy. 2000. "The Transformation of Islamic NGOs in Palestine." Middle East Report, 214 2 Zakat (Alm) is one of the five pillars of Islamic and it is a form of charity paid by Muslims. It provides a mechanism for redistributing wealth and is calculated as a percentage of personal income/assets. While according to the rules of Islam, the Zakat is obligatory; its payment is essentially voluntary. Source: International Crisis Group. 2003. "Islamic Social Welfare, Activism in the Occupied Palestinian Territories; A Legitimate Target?" Middle East Report No. 12, Amman/Brussels. 0 Photo Credit: Yemen Social Fund for Development Social Funds in MENA: Localizing the Global Experience Yasser El-Gammal Several countries in the MENA region rely on social funds to provide a variety of public services to disadvantaged communities. Social funds continue to lead the way in innovative approaches to efficiently providing well-targeted and effective services. SocialFundsinMENA Social funds are intermediary organizations that finance stakeholders in project identification, implementation and multi-sectoral programs. These include small-scale public monitoring, and designing a blueprint for a community led investments targeted at meeting the needs of poor and risk management approach. Recently, social funds have vulnerable communities, and that contribute to social capital become involved with implementing decentralization and development at the local level. After the first social fund approaches, being tried by many governments around the was established in 1987 in Bolivia, their numbers increased world. International evidence suggests that social funds can dramatically first in Latin America and then in other be more cost efficient in delivering services than other national developing regions worldwide, particularly in Africa. programs and that social fund-supported facilities perform as Gradually, the focus of social funds worldwide has shifted well as or better than similar facilities without social fund from providing short-term safety nets to soften the impact of involvement, particularly if there is significant input and structural adjustment policies on the poor, to longer term control by beneficiary communities.1 efforts aimed at empowerment, capacity building, and sustainability goals. They have played an important role in The first social fund in the MENA region was founded in catalyzing community participation, engaging various Egypt in 1992, followed by Algeria (1994), Yemen (1997) and Morocco (2002). Initially, the social funds in Egypt and Yemen addressed the possible negative social impacts of economic reform and stabilization programs, and included programs designed to deal with specific economic shocks that led to pressures on the social protection system, such as the inflow of Egyptian and Yemeni returnees from the Gulf region after the 1991 Gulf War. Later these social funds, along with those in Morocco and Algeria, started to focus more on the long-term strengthening of the poor's social and economic capital. Social funds in the MENA region were designed taking into account global experiences and lessons learned initially from Latin America and other regions. Later on, countries within the MENA region learned from each other. The Funds' designs were adapted to the specific economic and social environment of the region, including the expanding need for employment and income generation due to the rapid increase of the labor force, the ongoing transition from public sector to private sector led growth, and a relatively Table1:FeaturesandMainActivitiesofSocialFundsinMENA Country (start) Country features Social fund characteristics Main social fund activities EGYPT n Weakcivil n Strongpartnershipswithregional n SMEdevelopment (1992) societybase andlocalgovernments,andpublic andprivatefinancialinstitutions n Publicworks n Highunemployment n CommunityDevelopment n Trainingandretraining ALGERIA n Post-conflict n Socialcentersinservice-deprived n PublicWorks (1994) environment areasforviolenceaffectedpopulations n CommunityDevelopment n Highunemployment n InstitutionalDevelopment YEMEN n Lowlocal n Strongpartnershipwithlocalcommunities n Communitydevelopment (1997) government capacity n Focusonruralareas,education,andwater n Microenterprisedevelopment n Capacitybuilding, n WeakNGObase andinstitutionalsupport n Ruralpoverty MOROCCO n Ruralpoverty n StrongpartnershipswithNGOs n Communitydevelopmentand (2002) socialinfrastructure n Relativelystrong n Helpedestablishlinkagesbetweencivil NGObase societyandgovernment n Supporttoeconomic infrastructureand incomegeneration n Institutionaldevelopment forintermediaries n Studiesandcapacitybuilding weak base of civil society organizations. They have all been concentrated mostly in rural areas, programs focus on leaders in improving services and employment opportunities delivering better services in rural areas in response to for women. Regional and country specific events, such as shocks, and on contributing to longer-term objectives of the 1991 Gulf War and the civil war in Yemen in 1994, upgrading human capital. Education activities have been further affected the scope and focus of the region's social consistently at the top of Yemen SFD supported activities, funds. Despite a number of shared characteristics in design reflecting the country's low literacy rates and the fact that and environment of operations, MENA's social funds have female literacy rates fall way behind those of males2. The developed differently in response to their countries' SFD has introduced more cost effective designs to school specific needs and vulnerable population groups, and their buildings, which were adopted by the Ministry of particular comparative advantages (table 1). Education. It also helped the Ministry of Education to establish a community participation unit with the objective Yemen:innovator of involving the local population in the education process, and helped establish hundreds of parent-teacher associa- Given the low capacity of local governments and the weak tions. Water comes second in terms of supported activities, base of NGOs, the Social Fund for Development (SFD) in as Yemen has among the world's lowest per capita water Yemen relies heavily on partnering directly with local consumption and availability rates. The SFD built on old communities and on helping to formalize informal structures techniques by revitalizing old Yemeni water-harvesting at the village level. Although the Yemen SFD was estab- schemes in rural areas, participated in developing a new lished less than ten years ago, it has already emerged as a water law in the country, and provided technical support best practice institution for two reasons: it has successfully to the newly established Ministry of Water and scaled up its provision of infrastructure and service Environment. Over its 10­ year life, the SFD has financed delivery, and it has been a tremendous catalyst for over US$315 million worth of sub-projects. In 2005, SFD innovation by using new approaches, partnering with programs accounted for over 40% of government spending communities to ensure sustainability, and shaping on social protection, or about 0.5% of GDP. They have government policies with these innovations. With poverty been subjected to rigorous evaluation and are cost-effective and efficient, particularly in the case of subprojects that developed linkages between local NGOs and community were either directly implemented or contracted by benefi- groups on one hand, and local government and elected ciary communities. The Yemen SFD was showcased as best officials at the village and higher levels on the other. The practice globally at the 2004 Beijing poverty conference. SDA has innovated in the area of income generating activities to support small local economic infrastructure in rural Egypt:SMEdeveloper areas. The fund provides loans to local cooperatives that use them for productive assets in the local communities. This Egypt's SFD is characterized by a strong Small and money is then paid back to local NGOs to be recycled in Medium Enterprise (SME) development program and, some social development activities. This relatively new due to Egypt's still relatively weak civil society base, a organization at present represents about 4% of government strong reliance on partnerships with regional and local spending on social protection, or 0.5% of GDP. governments. In 1992, with over one million workers returning to Egypt after the 1991 Gulf War, the first Algeria:reachingout phase of the SFD focused on employment generation and labor mobility of public-sector workers. For a time it was One of the more distinctive offerings of the Algerian Social the largest social fund in the world and it remains among Development Agency (SDA), established in 1994 in the the largest today. Given increasing pressure on the aftermath of a decade of economic decline and the outbreak economy to generate jobs, SME development became of terror campaigns in 1991, was a program to develop social increasingly important, absorbing over 55% of available service centers in some of the most deprived slums. The funding by the late 1990s. Presently, this component con- social fund created these social centers to provide a caring tinues to absorb over 50% of funds. Micro finance was face of government in communities that had no social introduced during the SFD's second phase, to services of any kind, including some of the first psychotherapy provide support to the lower end of those who are programs in Algeria. Although the program still faces economically active amongst the poor. The social fund serious problems, the social centers now offer a variety of also supports public works, community development and services, including social intermediary activities, such as labor mobility activities to: a) respond to impacts of awareness programs, and direct services, such as immuniza- immediate policies like privatization; b) help build tion and cultural programs. The Algerian SDA finances human and economic capital; and c) contribute to substantial small scale public works and employment enhancing the social infrastructure with investments in programs. An evaluation in 2000 concluded that it was education and health. In addition to using local govern- playing a consequential role in delivering improved social ments as intermediaries to implement public works protection programs. Government contributions to the SDA activities, the SFD cooperates with a combination of pub- amounted to almost 5% of total social transfers in 2005. lic and private financial institutions to implement its SME development component, while NGOs play an Lebanon:communitydevelopment increasingly active role in the implementation of community development activities. Overall it has been effective in Some governments in the MENA region, notably in meeting its program objectives, and continues to attract Lebanon and West Bank and Gaza, carry out programs a lot of donor support. It accounts for about 13% which share similarities with social fund activities, of government spending on social protection, about particularly in the area of community development. In 0.2% of GDP. Lebanon, the Council for Development and Reconstruction (CDR) started to implement a Community Development Morocco:NGOpartnerships Project in 2002. The CDR is an autonomous institution through which World Bank and other donor funds are As in Yemen, the Social Development Agency (SDA) in channeled for safety net programs. The project promotes a Morocco has a rural focus, given the nature of poverty in participatory, community-driven approach to improve the the country and the large discrepancy between rural and living status and economic conditions of disadvantaged urban areas in their access to social services. Building on the communities. Results to date have been mixed. rich cultural heritage of Morocco, the social fund supports Achievements include the start-up of some sub-projects in rural economic development in areas like rural tourism, the areas of skills development activities for youth, women's cooperatives, and income generating activities. The agriculture, health and education. However, implementation SDA has taken advantage of a relatively strong NGO base in has been hampered by unresolved questions, among others Morocco and has channeled the majority of its resources on how to best use NGOs in this context. The World Bank through national, regional and local organizations. It has and CDR have been exploring ways to speed up implementation. The experience so far suggests that donors and the Monitoring and Evaluation: The global Aid Effectiveness government need to continue to consider what is the Agenda and the importance of solid Monitoring and most appropriate way to implement community driven Evaluation arrangements emphasize the need for efficiency development programs in the Lebanese context. and effectiveness in program implementation. Social funds in MENA are paying more attention to setting up TheRoadAhead monitoring and evaluation systems that will help them to enhance their programs. This is another area in which Social funds have a built-in contradiction. They tend to they can show leadership to help more of an evaluation operate outside the direct scope of responsibility of line culture to take hold in the public sector in MENA along ministries, yet they provide services that, in theory, could be the lines of what has already happened in Latin America carried out by them. The justification for social funds' for example. In Yemen, a best-practice impact evaluation relative independence is the assumption that they are better was concluded in 2003 and a new one is under able than line ministries to allocate public goods and services preparation. The Egypt SFD has recently conducted its efficiently, transparently, and in a way that fits local first impact evaluation. preferences. However, this institutional set-up may weaken line ministries in the performance of their tasks, and More Innovations: The MENA social funds should continue undermine sectoral coordination. So the continuation of to experiment with different implementation approaches social funds is only justified if they deliver benefits to final on various levels. These could include policy level innova- beneficiaries that outweigh the possible adverse affects that tions that are coordinated with line ministries, providing they may have on the functioning of line ministries. This an integrated multi-sector approaches to delivering services, calculation depends both on the comparative advantage or innovations that aim to enhance the efficiency of that social funds have in delivering public goods compared delivering services, for instance by relying more exten- to line ministries, and on the extent to which the good sively on decentralized and participatory processes. practices and innovative approaches of social funds can be used to strengthen the performance of line ministries, rath- Better Donor Coordination: Donor preferences for financing er than undermine them. social funds have not always resulted in good coordination, despite earnest efforts. Under Phase III of the Yemen SDF, MENA's social funds must strengthen their performance donors agreed to streamlined procedures for reporting and in a number of areas if they are to continue to serve as procurement. Joint missions have been successfully carried out innovators and demonstrators of new ways to deliver by a number of donors. Donors have conducted two indepen- services and of methods of decentralized participatory dent and in-depth reviews of the Egypt Social Fund in the last decision-making, management and accountability that six years, which pointed to a variety of improvements that may be adopted for broader application by other public needed to be made in donor coordination. The issue is for sector organizations: donors to model consistent behavior over the long term, otherwise the benefiting agency can be pulled in several different More Integration in Poverty Programs: MENA's social directions at once. More joint work from the donors' side and a funds need to become increasingly integrated in govern- more results-oriented approach will be required to facilitate the ments' overall poverty programs, and their roles and respon- communication between social funds and donors. sibilities within that larger framework should become clearer. In Egypt, the SFD is now charged with implementing the WorldBankSupport country's micro-finance strategy. In Yemen, the SFD is well- incorporated into the government's five-year development The World Bank has been instrumental in introducing plan, as one of the government's main instruments for pov- the concept of social funds to MENA, and in mobilizing erty reduction. In Morocco, the SDA is a main pillar sup- donor support for this new instrument in the region. porting the country's new social inclusion approach. The World Bank disseminated the lessons learned from social-fund experiences in Latin America, and later on led Better Targeting: All MENA's social funds are working a process of intra-regional knowledge sharing through to enhance their targeting mechanisms to ensure that the which MENA's more recent social funds benefited bulk of their resources reach the poor and the most vulner- from the lessons learned by those that were founded at able. The Egypt, Yemen and Morocco social funds are an earlier stage. either directly supporting the development of poverty targeting toolkits or are/have been major contributors to In addition to facilitating knowledge sharing and provid- the development of poverty maps. ing technical assistance, the World Bank also provided financial support to all four social funds in the MENA Endnotes region, totaling US$530 million to date. Today, the 1 Rawlings, Sherburne-Benz, Van Domelen. 2003. "Evaluating World Bank's support is concentrated mainly on providing Social Funds--A Cross-Country Analysis of Community Investments." World Bank, Washington, DC. technical and financial assistance to the SFDs in Egypt 2 Yemen's female literacy rate was 26.9% in 2002, compared to and Yemen. 69.5% for males. YEMENSOCIALFUNDFORDEVELOPMENT-SUPPORTEDAL-GUAIRIWATERPROJECT Water springs from dunes Al-Guairivillage,locatedinRudoumdistrict(Shabwagover- Bythebeginningof2004,Al-Guairivillagehadbegunreap- norate),liesamidstdunesandshadowsofpalmtrees.The ingthefruitsofthissuccessfulsubproject,andlateronthe village'ssolesourceofwaterusedtobethenaturalsprings nearbyvillagesbenefitedfrompipedwateraccess. running beneath the dense sandbanks. Dwellers suffered muchinthepasttocollectenoughwaterfortheirhousehold Someofthemembersofthelocalcommunitymettotellthe useandanimalwatering. SFDoftheeffectoftheprojectontheirlives.Allofthem expressed favorable opinions towards the project and its Notwithstanding this, the local community had identified benefits.Theysaidthattheynowhavetrouble-freeaccess schoolingasitstoppriority.Therefore,theYemenSocial to sufficient amounts of safe water. They added, "In the Fund for Development (SFD) supported the area with past,wewerecompelledtocrossthesanddunestoreach the reconstruction of a co-education school, grades one thespringstofetchwater.Butnowadays,thankstotheSFD- through eight. After this became a reality, the people in supportedproject,watercurrentlyflowsintothetapsinside the community--along with the SFD--started thinking of ourhouses..." anappropriatewaytoaccesswatereasily.Asimpleidea sprangfromcommunitydiscussionsunderthepalmtrees, andthefirststepsforitsrealizationimmediatelytookoff. Making use of the flowing springs, the SFD financed the construction ofsmallwatertanksatlevelslowerthanthe runningwater's.Waterstartedtocollectintothesereservoirs, which,inturn,pouredtheaccumulatedwaterintoalarger tank(sitedatastilllowerlevelthanthesmallbasins).From Source: Yemen Social Fund for Development, Newsletter--Edition No. 31, thistank,waterflowsthroughpipelinestothevillage. July-September 2005 Photo Credit: Alan Gignoux Addressing Needs in Conflict Situations John Blomquist S ustainable social and economic recovery from serious conflicts requires a long term commit- ment from all stakeholders. This is never easy, considering the overwhelming challenges that societies face when they emerge from conflict, including poverty, ongoing ethnic, political or religious rivalry, and weak governmental structures and infrastructure. Within a comprehensive framework involving cooperation and coordination from donors, country authorities, and civil populations, social protection interventions can make a valuable contribution to post conflict reconstruction efforts. Along with other international aid agencies, the World Bank is attempting to incorporate the lessons learned from previous experience into ongoing social protection activities in conflict-affected environments. Thedevastatingeffectsofconflict The MENA region contains a large number of conflict-affected countries and regions, from Iraq, West Bank and Gaza, and Lebanon currently, to Djibouti, Yemen and Algeria in the recent past. Worldwide, more than 50 countries have experienced significant periods of conflict since 1980, often resulting in complete breakdowns of the state. Most have been intrastate conflicts. The transition to peace is often characterized by insecurity, uncertainty, and repeated cycles of violence before lasting stability prevails. Recent research suggests that nearly half of post-conflict countries will experience further violence within the first five years following the initial peace settlement. Conflicts produce a range of economic and social problems that are not easily addressed by traditional health, education and social protection services alone. The ongoing struggle in Iraq, combined with the effects of two decades of conflict and economic decline, have led to increases in poverty, unemployment rates in excess of 25%, and large numbers of disadvantaged and vulnerable groups, including jobless former military personnel and members of private militias, disabled war victims and internally displaced persons. It has been estimated that there are between 20,000 and 135,000 disabled war victims, and up to 550,000 internally displaced persons in Iraq. West Bank and Gaza continues to experience the oppressive effects of political unrest, a tight system of internal and external closures and an economic depression at an unprec- edented level. In just over five years, the poverty rate has reached almost 50% of the population and unemployment is estimated at 28%. According to a recent World Bank report, if existing condition persist, amidst a serious fiscal and budget crisis, poverty and unemployment rates are likely to rise to 67% and 40%, respectively, by the end of 2006. Postconflict:(re)creatingtheframeworkforafunctioningsociety Post-conflict reconstruction aid is a unique form of development assistance, generally combining the objectives of providing short-term humanitarian relief and reconstructing the physical and institutional infrastructure to support the long term economic development of an affected society. Particularly in the immediate post-conflict phase, ment with more than 30 conflict-affected countries and reconstruction activities can be a key to preventing a recur- areas worldwide, including several in the MENA region. In rence of conflict. the aftermath of conflicts in Bosnia and Herzegovina, Rwanda, and East Timor among other examples, the inter- Selected social protection interventions can be a valuable national community, including the World Bank, has gained part of an integrated package of activities to (re)create the significant experience in post-conflict reconstruction. The enabling conditions for a functioning peacetime society. World Bank strives to consolidate the lessons learned from Among other possibilities, counseling and other social ser- these experiences, and to define an appropriate role in vices can benefit former combatants and their families; emerging situations to ensure that comparative advantages social funds and public works can help build infrastructure are put to best use within the international community to and provide reintegrating employment; microcredit and best help affected societies. The often simple, but important small business opportunities can help foster growth; tar- lessons include: geted conditional cash transfers may encourage school n Reintegration takes time. Following internal conflict or attendance and health maintenance to enhance children's civil war, it is unrealistic to expect opposing sides to rein- human capital; and revitalizing unemployment assistance tegrate simultaneously. Reintegration into individual and pensions can contribute to stability and prevent the communities must precede assimilation into wider groups. expansion of poverty among the vulnerable. It is important to treat each side equitably. n Policy reform is critical. Post-conflict approaches need The commitment of the World Bank to assist countries to be part of a coherent country strategy in which atten- emerging from conflict is confirmed through its involve- tion is given to policy reform in addition to physical SocialprotectioninconflictaffectedareasinMENA Algeria: Social Safety Djibouti: Ex-Combatants Palestinian NGO Project Net Support Project Reintegration Project (Phases I and II, 1998-2005) (1996-2001) (1999­2003) This project was initially This project assisted in the The project sought to facilitate the launched to help finance and sustain establishment of the Algerian social and economic reintegration of the provision by NGOs of essential Social Fund in 1994 and provided: some 3,000 ex-combatants into services to poor and marginalized (i) small scale public works projects civilian life through targeted, Palestinians. Moving into its second with local work requirements; multi-sectoral assistance on a pilot phase, the Project was developed to (ii) the first community develop- basis. The project components include an integrated effort at ment program; and (iii) social included: (i) social mobilization capacity building and institutional service centers in "bidonvilles" to through the creation of veteran's development to enhance the quality, provide services including immuni- associations; (ii) economic reintegra- impact and sustainability of NGO zation, health and education tion primarily through training and services while, at the same time, awareness programs, home medical small business development; and supporting the overall professional visits for the disabled and (iii) assistance to the disabled. and strategic development of the psychological and physical A Learning and Innovation Credit Palestinian NGO sector. Through a rehabilitation services. supported part of an integrated proposed third phase, the Bank will program to demobilize and reinte- support the establishment of an grate veterans into Djiboutian society NGO Development Center. and its economy. This was comple- (See text box on the Palestinian mented by demobilization/separation NGO Project.) payments, largely funded by France and the European Commission. reconstruction and institutional development. view of how World Bank activities will engage and take Reintegration and moving from a post-conflict situation over from emergency operations should be present, and requires more than demobilization. cooperation should be established with relief and other n The local populations determine success. The commit- international agencies such as the Office of the United ment of the populations at the local levels, including cen- Nations High Commissioner for Refugees (UNHCR) tral and local government and civil society, ultimately and the International Committee of the Red Cross determines the effectiveness and sustainability of the (ICRC) in the early phases of humanitarian assistance. reconstruction effort. Increasingly, international actors n Donor coordination will help maximize the impact of are reaching out to local organizations in partnership for available funds. Effective coordination requires both their reconstruction efforts. cooperation and leadership. Early agreement should be n Presence and partnerships improve performance. reached at a high level on the respective roles of the main Where conditions permit, field presence and the ability to players in the sectors being addressed. There are strong directly work with counterparts to monitor activities and indications that the overall response of the international maintain coordination with other donors allows a flexible community would be enhanced by cohesive funding and timely response to changes and improved perfor- strategies such as multi-donor trust funds. mance of project activities. The World Bank mission in West Bank and Gaza is a case in point. n Establish linkages between relief and reconstruction. The World Bank can assist in making the transition from humanitarian relief to longer term development. A clear West Bank and Gaza: West Bank and Gaza: Iraq: Emergency Social Emergency Services Social Safety Net Protection Project Support Projects Reform Project (2006­2007) (2002-2004) (2004-2008) The objective is to strengthen The objective of these projects This project seeks to mitigate the the capacity of the Ministry of Labor was to mitigate the deterioration of impact of the social and economic and Social Affairs to more effectively basic social services brought on by crisis on the most vulnerable. It aims develop, manage and deliver social the conflict and the effects of to reform the existing social safety safety net and pension programs. The limited economic activity and public net program to achieve better safety-net component will focus on revenue. They provided support for targeting of conditional cash trans- providing core information and basic health, education and social fers, conditioned on the health and technology systems and computers to assistance services and selected nutrition of children under the age of process applications for the expanded operating budget items for other six and the education of youth up to safety net program. It will set up a ministries to continue services. the age of 18. A second component basic monitoring and evaluation Bank funding was complemented will strengthen institutional capaci- system and it will provide technical by other donor grants from the ties, through technical assistance for assistance and training in safety-net European Commission, the policy planning, training provision implementation management, United Kingdom's Department for and equipment, provision of comput- monitoring and evaluation, and International Development (DFID), er hardware and software, and medi- examining targeting and eligibility and the governments of Finland, cal equipment and supplies. The last options to improve future program Italy, Denmark, Switzerland component provides for administra- performance. The pension component and Sweden. tive, consulting, and monitoring and will prepare baseline information and evaluation aspects of the project. information technology support for future policy analysis, including surveys of pension beneficiaries, current contributors and employers. The Palestinian NGO Project THEPALESTINIANNGOPROJECTISTHEFIRSTANDONLYPROJECTINTHEMENAREGIONWHEREWORLDBANK FUNDS, COMBINED WITH FUNDING FROM VARIOUS OTHER DONORS, ARE DIRECTLY CHANNELED TO NGOS. TheProjectisimplementedbyaconsortiumofNGOsincluding,asleadagency,theWelfareAssociation(aprivate nonprofitfoundationestablishedtosupportPalestiniansocietyinsustainabledevelopment),theBritishCouncil, andtheCharitiesAidFoundation.Theprojectservesasagrant-makingfacility,providinggrantstoNGOsto financeessentialservicesinthesectorsofhealth,educationandagriculture,payingparticularattentiontoyouth, communitydevelopmentandpeoplewithspecialneeds.Sinceitsinception,andoveraperiodofalmosteight years,theprojecthascontributedtobuildingclassrooms,clinics,youthandcommunitycenters,providing trainingandtoolstochildrenwithdisabilities,creatingjobsforunemployedwomen,rehabilitatinglandand providingincome-generatingactivities. Theprojectfinancesgrantsthroughtwotypesofprograms:i)Thedevelopmentgrantsprogramsupportsservice deliverybywellestablishedNGOsbasedontheirsuccessfultrackrecord.ii)Partnershipgrantsprovidefunding onaprogrammaticbasis,throughpartnershipsbetweenlargeNGOsandsmallerNGOsandcommunity-based organizations.Thepartnershipgrantsprogramisparticularlyaimedatreachingouttosmallerorganizations, whichtypicallydonothaveaccesstofunding,andpromotingthetransferofknowledgeandexpertisewithinthe sector,therebybridgingthegapbetweenNGOsatdifferentcapacitylevels.SincetheoutbreakofthePalestinian intifadahinlate2000,theProjecthasalsoservedasamechanismforcreatingjobsandprovidingemergency servicestoNGOs.ThiscomponentwasfullyfinancedbydonorswithabudgetthatreachedoverUS$10million. Theproject'sregularprogramsattractedmorethanUS$35millionsince1998. Inadditiontoprovidinggrants,theProjecthasbuiltthecapacityofNGOsinessentialproject-management skills.TheprojectfinancedtheestablishmentofaninteractiveNGOportal,implementedcapacity-building programsforPalestinianumbrellaorganizations,financedthedevelopmentofstandardNGOfinancialand accountingguidelines,andestablishedaunifiedhealthinsuranceprogramforNGOstaff.Theprojectisbased ontheprincipleoffosteringpartnershipsbetweenNGOsatdifferentcapacitylevels,therebycontributingto transferknowledgeandexpertisewithintheNGOsector. Acomprehensiveimpactassessmentoftheprojectisunderwaywhichwillcomplementtheactivitymonitor- ingthathasbeenconductedthroughouttheproject.AfollowupprojectwillfocusonestablishinganNGO DevelopmentCenterthatwillcontinuetomobilizeandchannelfinancialsupporttoNGOswhileproviding capacitybuildinganddevelopingstandardsforNGOservicedelivery. Sources: (1) World Bank. 2004. "Semi-Annual Monitoring Report on Conflict-Affected Countries: October 2003-March 2004"; (2) World Bank. 1998. "Post Conflict Reconstruction: The Role of the World Bank." Washington, DC; (3) Palestinian NGO Project. "Activities Report 2004: Working Towards a Better Future for Palestine." (4) Anderlini and El-Bushra. 2004. "Post Conflict Reconstruction." In International Alert/Women Waging Peace. 2004. "Inclusive Security, Sustainable Peace: A Toolkit for Advocacy and Action" London, Washington, DC. 0 HIV/AIDS in MENA: Making the Case for Prevention Francisca Ayodeji Akala The economic impact of HIV/AIDS is primarily linked to and reduced savings--the expected costs of HIV/AIDS will its effect on morbidity and mortality which makes it par- be much higher. Even under conservative assumptions, ticularly devastating for the population of a country. Since the total economic loss incurred between 2000 and 2025 the disease typically affects the working-age population and is estimated to be in the order of 35% in terms of today's those of the child-bearing and child-rearing age, the disease GDP. The MENA region therefore has a rare opportunity leads to a loss of workers (skilled and unskilled) as well as to respond early and effectively to prevent a the breadwinners and caretakers of the family. With the widespread HIV/AIDS epidemic and the consequent reduction in revenue from the reduced labor force and the negative economic impacts. increase in AIDS-related expenditures, fewer resources are available for investments and this reduces the long-term While the HIV prevalence rates are low in the region, economic growth of a country. While the economic effects the risk for transmission of the infection is not. The risk fac- of HIV/AIDS may take time to manifest (especially when tors that exist in the region for HIV transmission include: the epidemic is in the early stages), they are inevitable; n behavioral factors (such as injecting drug use, commercial therefore, efforts to control the spread of the infection sex work, men who have sex with men and those who should be a priority. have multiple sexual partners and unprotected sex); n a rising youth population which has a higher propensity HIV/AIDSSituationinMENA to engage in risky behavior; n an increasing incidence of sexually transmitted infections The current HIV/AIDS prevalence in the MENA region is and low condom use; and low and the infection is largely confined to the high risk n the existence of a number of structural factors such as groups. UNAIDS data1 indicates that the regional HIV poverty, unemployment, gender inequalities, migration, prevalence rate is 0.2% and about 440,000 people were living conflict situations and refugees and internally displaced with HIV/AIDS in the region at the end of 2005 (although persons. estimates range from 250,000 to 720,000 people). For a number of countries of the region, the percentage increase in GovernmentActiontoAddressHIV/AIDS the number of people living with HIV from year to year is significant (figure 1) and it is evident that the epidemic is Many challenges to addressing the epidemic currently exist growing and action must be taken to limit the economic and in the region and they include: social consequences. Experiences from other regions demon- n the weak and ineffective HIV/AIDS surveillance systems strate the need to prevent the spread of the virus in the early for tracking the epidemic; stages of the epidemic because the costs of prevention, control n the general lack of HIV/AIDS awareness; and treatment increase exponentially as the epidemic spreads, n the high levels of stigma and fear associated with the con- and because the cost of treating the disease is significantly dition; higher than the cost of its prevention. n the perception of the epidemic as primarily a health issue rather than an integrated developmental issue requiring Even with the current low prevalence rates in MENA multi-actor partnership and coordinated cross-sectoral countries, the financial cost of treating AIDS cases can be actions; substantial. The average annual cost of HIV/AIDS preven- n the limited interventions for high-risk groups primarily tion, treatment and care in the MENA region could reach affected by the epidemic (see figure 3); 1.5% of GDP by 20152 (Figure 2). When taking into n the lack of social support systems for the families affected account the broader spectrum of economic losses that are by the epidemic; and associated with HIV/AIDS--such as declining productivity n the limited local capacity for HIV/AIDS programming. Figure1.IncreaseintheNumbersofAdults Figure2.ProjectedHIV/AIDS-RelatedHealth andChildrenLivingwithHIVinselectedMENA Expendituresin2015(%GDP) Countries(%,2001­2003) 80 5.0 4.0 60 e 3.0 40 %ofGDP 2.0 1.0 %increas 20 0.0 0 emen JordanLebanonMoroccoTunisi Yemen a a n n Iran Iran Egypt Algeri AlgeriaDjibouti Bahrai DjiboutiEgypt Oma Lebanon Tunisia Source: Based on UNAIDS estimates of HIV prevalence rates for 2001 Source: Jenkins, Robalino. 2003. "HIV/AIDS in the Middle East and North Africa: The and 2003. Costs of Inaction". World Bank, Washington, DC. The lack of accurate information on the nature and dynamics WorldBankSupporttoGovernments of the HIV epidemic in the region is a key impediment for developing effective measures of prevention and control. Recognizing the developmental significance of HIV/ Despite these challenges, many MENA countries are already AIDS in the MENA region, the World Bank carried out implementing programs to address the epidemic and a a situational and economic analysis of the epidemic in number of countries have prepared national HIV/AIDS 20033 and more recently in 2005 developed a regional strategic plans. (For additional information on prevalence strategy4 which highlights the following areas of support and governments' actions by country, see table 1). Most of to strengthen national and regional HIV/AIDS policies the national plans being implemented are still in the early and programs: phases and it is difficult to assess their impact on the n Engage political leaders, policy makers, and key stake- epidemic. However, a review of the plans indicates that they holders to raise awareness and attention given to HIV/ are too generic and/or more appropriate for countries with AIDS programs within national and regional policies and much higher HIV prevalence. Prevention services are also strategies; more geared to the general population than targeted at n Upgrade the surveillance systems and strengthen research the high-risk groups (which are mainly the infected and and evaluation of epidemiological, economic, and behav- therefore a source for further transmission). ioral aspects of HIV/AIDS in order to enhance the effec- tiveness of HIV/AIDS policies and programs; To date, the Governments of Algeria, Djibouti, Iran, n Develop national HIV/AIDS strategies and programs, Jordan, Morocco and Yemen have either received grants or based on specific epidemiological, social, and economic been approved to receive HIV/AIDS grants from the conditions and context of each country; and Global Fund to Fight AIDS, TB and Malaria. The n Enhance national capacities and promote knowledge Government of Iran has also been implementing programs sharing on the comprehensive management of HIV/AIDS to address the growing epidemic related to injecting drug programs. use such as needle exchange programs, and these programs have been cited as best-case examples worldwide. Despite In addition to this analytical work, the World Bank has these commendable initiatives by governments, much provided technical assistance to the Governments of more still needs to be done in a more effective and coordi- Morocco and Lebanon in the development of national nated manner to address the epidemic. HIV/AIDS strategic plans. It is financing HIV/AIDS proj- Figure3.IndividualsatRiskwithAccesstoInterventionsinUNAIDS-MENARegion*(%) AwarenessofHIV/AIDS 20% STDtreatment 16% VoluntaryCounceling&Testing 6% BehavioralinterventionsforCSWs 5% Harmreduction 1% 0% 10% 20% *The UNAIDS includes Sudan and Turkey but excludes Djibouti in its definition of the MENA region. The percentage figures should therefore be interpreted with caution, but the general trends remain valid. Source: "Access to HIV Prevention: Closing the Gap." Report by the Global HIV Prevention Working Group convened by the Bill and Melinda Gates Foundation and the Henry J. Kaiser Family Foundation, May 2003 ects and activities in Djibouti (see text box in this article for more information on this project) and Lebanon. Also, the World Bank organized an inter-regional consultation on HIV/AIDS and injecting drug use in April 2006 attended by participants from Iran, Afghanistan, Tajikistan, Pakistan, Uzbekistan, and the Kyrgyz Republic. Keeping in mind the early stage of the epidemic, the low prevalence and the socio-cultural context in the region, the World Bank proposes the following framework of strategic interventions: n raising political and social awareness of the risks associated with HIV/AIDS among the key policy makers to create the enabling environment for effective actions; n introducing research and effective surveillance systems to monitor the dynamics of the epidemic particularly among high-risk and vulnerable groups; and n implementing prevention and treatment programs that are accessible to high-risk and vulnerable groups. Endnotes 1 UNAIDS. 2006. "2006 Report on the Global AIDS Epidemic: A UNAIDS 10th Anniversary Special Edition." 2 Jenkins, Robalino. 2003. "HIV/AIDS in the Middle East and North Africa: The Costs of Inaction." World Bank, Washington, DC. 3 Jenkins, Robalino. 2003. "HIV/AIDS in the Middle East and North Africa: The Cost of Inaction." World Bank, Washington, DC. 4 World Bank. 2005. "Preventing HIV/AIDS in the Middle East and North Africa: A Window of Opportunity to Act." Orientations in Development Series, No. 34348. Washington, DC. Table1.HIV/AIDSDataforMENACountries Adults (15-49) living with HIV/AIDS Prevalence by end of 2003 HIV/AIDS rate (%) by (and range related deaths Country end of 2003 of estimates) by end of 2003 Government actions/programs ALGERIA 0.1 9,000 <500 nNSP(2003-06) (3,000-18,000) nGFATMGrant(US$9million) BAHRAIN 0.2 600 <200 nNoInformation (200-1,100) DJIBOUTI 2.9 8,400 7,500 nMulti-sectoralNationalHIV/AIDSStrategicFramework (2,100-21,000) (2,200-21,000) 2003-07 nIDAGrantforHIV/AIDS,TB&Malaria(US$12million) nGFATMGrant(US$7.2million) nIDFGrantwithotherHornofAfricaCountriesforHIV/ AIDSM&E nAFDGrantforHIV/AIDS(US$5million) nOther multilateral donors supporting health sector includingHIV/AIDS EGYPT <0.1 12,000 700 nHIV/AIDSsituationassessment,noNSPyet (5,000-30,000) (200-1,600) nUSAID/FHIsupportedactivities nRoleofcivilsocietyhasincreasedsince2004 IRAN 0.1 14,000 200 nNSP(2002-06) (6,800-22,000) nGFATMGrant(US$9.7million) IRAQ 0.1 <500 <200 nNoInformation JORDAN <0.1 <500 <200 nGFATMGrant(US$2.5million) nUSAID/FHIsupportedactivities LEBANON 0.1 2,800 <200 nNSP (700­4,000) nIDF Grant (US$350,000) to strengthen HIV/AIDS M&Eandsurveillancesystems LIBYA 0.3 10,000 NotAvailable nNoInformation (3,300-20,000) MOROCCO 0.1 15,000 NotAvailable nNSP(2002-04,newonebeingdeveloped) (5,000-30,000) nGFATMGrant(US$4.7million) OMAN 0.1 1,300 (500- <200 nNoInformation 2,900) TUNISIA <0.1 1000 <200 nMid-TermPlan2002-2005 (400-2300) nProcessforNSP2006-09commenced nNationalresponseessentiallyfundedbyGovernment YEMEN 0.1 12,000 NotAvailable nNSF(2002-05) (4000-24,000) nGFATMGrant(US$5.5million) Source of prevalence data: UNAIDS 2004. NSP: National Strategic Plan for HIV/AIDS. GFATM: Global Fund to Fight AIDS, TB and Malaria. AFD: Agence Francaise de Développement. Djibouti AIDS Project Despite its relatively high nominal per capita income of US$780 (compared to an average of US$510 for Sub- Saharan Africa and US$320 for Yemen), Djibouti has one ofthepoorestsetsofsocialindicatorsintheworldandits healthindicatorsarebelowregionalaverages. In2001,theHIV/AIDSprevalencerateisestimatedat2.9% for the whole population. However, it is higher than 5% amongpersonsaged20-35,indicatingthatHIVinfectsthe economicallyproductiveandsexuallyactivepersons. (3) Multisector Responsestoreinforce To meet these challenges, the Government of Djibouti healtheducation,coun- requested the assistance of the World Bank through the seling,andprevention Photo Credit: ©UNAIDS/ MulticountryHIV/AIDSProgramfortheAfricaRegion(MAP) activitiesinelevenministries G. Pirozzi and was able to meet the eligibility criteria including the tobettertargetpriority development of a strategic approach to HIV/AIDS, the vulnerablegroups. establishment of a high-level HIV/AIDS coordinating body, andthechannelingoffundstoNGOsandtheprivatesector. (4) Community Response to strengthen community- In 2003, the Djibouti HIV/AIDS, Malaria and Tuberculosis basedinitiatives,associations,andNGOssothattheycan ControlProjectbecameeffective.Itsdevelopmentobjective implementessentialactivitiesforthereductionofthevulner- istocontributetothechangeinbehavioroftheDjiboutian abilitytoHIV/AIDS,malariaandtuberculosisandmitigate populationinordertocontainorreducethespreadofthe theimpactoftheepidemic. HIV/AIDSepidemic,tomitigateitsimpactoninfectedand affectedpersons,andtocontributetothecontrolofmalaria The project achieved several key results including the andtuberculosis. provision of integrated social, psychological, nutritional and clinical care for about 400 persons living with HIV/ Inthelasttwoyears,theprojectsuccessfullyimplemented AIDS, including treatment with anti-retroviral drugs, and itsplannedactivitiesinallitsfourcomponents: socialsupporttotheirfamilies.Thedistributionnetworkof condoms reached 300 sales points, and a total of 1 (1) Capacity Building and Policy Development in million condoms have been distributed. Moreover, most support of the national coordinating structure including of the planned activities in the multisectoral component the Interministerial Committee (IC) chaired by the Prime wererealizedandabout75community-basedprojectswere Minister and including eleven ministries, the Technical successfullyimplementedinallthedistrictsofthecountry. IntersectoralCommittee(TIC),andtheExecutiveSecretariat (ES) as well as the strengthening of public, private, and Thesuccessfulimplementationofthisprojectmaybeattributed non-governmentalinstitutions. toanumberofkeyfactors,particularly,thepoliticalcommit- mentatthehighestlevel,theintroductionofanintegrated (2) Public Health Sector Response to HIV/AIDS, Sexually package of care, the involvement of all relevant govern- Transmitted Infections (STIs), Malaria and Tuberculosis ment sectors, the capacity strengthening of the commu- including:thepreventionandmanagementofthesediseases nity-basedassociationsthroughumbrellaNGOs,therigorous throughvoluntarycounselingandtesting;diagnosisandcase criteriausedinselectingthecommunity-basedprojects,and managementofSTIs;distributionofcondoms;strengthening the establishment of a rigorous monitoring and evaluation TB screening and treatment; strengthening the detection, system. prevention,andresponsetomalaria;andstrengtheningof thehealthsystem. New Directions and Emerging Priorities Margo Hoftijzer Interview with Michal Rutkowski, Director of the World Bank's Human Development Sector for the Middle East and North Africa Region Mr. Rutkowski, what do you consider to be the main pri- are not able to participate in existing pension systems. orities for the MENA region in terms of providing social Except in Egypt, coverage does not exceed 50%. Moreover, protection to its citizens, and how do you think that the pension systems impede job mobility, as they are fragment- various countries are dealing with these challenges? ed and generally not portable. Countries should increase coverage, consolidate the various systems, make them more MENA governments do provide social protection, but they transparent and conducive to the functioning of the labor provide it in the wrong way. There is a lot of waste in the sys- market, and achieve the appropriate balance between the tems. A large part of social protection funding reaches parts adequacy of pension benefits and the financial sustainability of the population that do not need it. On the other hand, of the systems. parts of the population that do need it do not receive any- thing, or at least not enough. This imbalance needs to be You mentioned the need to design well targeted safety restored. Most important are the subsidies on food and ener- nets. What should they look like? gy, especially on fuel. They are highly regressive, meaning that the better-off in the population receive more of them There are two aspects to this. First, temporary safety than the poor do. Governments should embark on a path of nets to soften the shock of price increases after subsidies abolishing these subsidies, while at the same time building are withdrawn. The optimal design may differ between coun- safety nets to soften the effects of the price shock of the with- tries, but what could be appropriate is a monthly cash allow- drawal of subsidies in the short run, and creating well tar- ance, which would be the same for all members of the geted social assistance systems to replace the subsidies. population regardless of their income. If the amount is uni- form across income groups, the allowance would help the Second is the functioning of labor markets. They do not poor more than the better-off, since the allowance would function well, primarily because of the dominance of the mean a higher relative addition to a poor person's income public sector, and the absence of a business environment that than to the income of the rich. This type of allowance is also is conducive to private sector development and job creation. simple to administer and can be easily phased out, for This is unlike in Europe, for instance, where many problems instance by simply not adjusting it to inflation. This system of the labor market are significantly related to the way labor was used in many countries, from Indonesia and Iran to markets are regulated and to the manner in which active Eastern European countries, and worked rather well. The labor market policies are organized, although also in these subsidy level in Eastern European countries, for instance, was areas there is scope for improvement in the MENA region. similar or perhaps somewhat lower than in the MENA region, and they managed to abolish them very quickly. They Third are the largest cash-benefit systems that the MENA proved that it is possible to get rid of subsidies, and they used countries have, pensions. Very large parts of the population the uniform monthly cash allowance to achieve this. Second, given the vulnerability levels in the MENA coun- experience, but their subsidies were phased down quickly. I tries, the savings from the elimination of subsidies should be am told that in MENA the need to reduce subsidies was used to expand social assistance systems. The key issue here already actively debated in the 1970s. I am often reminded is targeting. Targeting can never be perfect, particularly in about the 100.000 people demonstrating in the streets of environments with high administrative limitations, but the Cairo against subsidy withdrawal in 1977. It is now almost choice of the targeting method is critical in the design of an 2007, and the share of subsidies as a share of GDP has actu- effective and efficient safety net. Both governments and the ally increased since that time. This is an example of a com- World Bank need to test more methods to get a better feel plete lack of action for many, many years, and there is no of which targeting systems work well in certain environments. question that they are lagging behind European and Central One mechanism that seems promising is proxy means Asian countries in this regard. When it comes to pensions, testing, whereby administratively less cumbersome informa- MENA is also behind, but somewhat justifiably as demo- tion than actual income or wealth is used to determine graphic developments were postponing the problems for this eligibility for social assistance. It is widely used in countries region. MENA is just entering what could be called the in Latin America and in poorer European countries, such as European malaise in terms of demographic transition and Armenia. In the MENA region its use is currently being growing dependency ratios, which make it impossible to tested in West Bank and Gaza. It may not be the right sustain the current pension systems. This motivation is just method for each country, but it is promising where administra- kicking in and some countries are tackling the issue. So tion is weak, and no actual means testing can be carried out. even if they are not as advanced in their reforms as in Europe and Central Asia, the delay can be justified by How would you compare the social protection demographic developments, and I am noticing a growing systems in the MENA region to those in other commitment of governments to engage in reforms. parts of the world? MENA countries will experience unprecedented inflows Most MENA countries are middle income countries. of young entrants to the labor market, while the region is Spending on social protection worldwide increases with the already facing very high unemployment levels. How can income level of a country. When looking at social protection social protection systems help to ensure that those currently spending as a share of income, the MENA region fits the unemployed and the new entrants find employment? curve well, hence no substantial change in spending level seems needed. The MENA region needs to deal simultane- This is a complex challenge, and primarily related to job ously with challenges that are typical for Latin America, and creation. The public sector is not only an employer of last with challenges that the Europe and Central Asia region has resort, but also often a dominant employer compared to the been facing. Just as in Latin America, MENA must deal private sector, particularly for the higher educated. It is very with pre-reform pension systems with low coverage and sig- difficult to lay off civil servants, and there is little turnover nificant fragmentation. At the same time, MENA has simi- between the public and the private sector. There is a need to lar issues to Europe and Central Asia in the area of subsidies reduce job protection in the public sector, to accelerate pri- on food, energy and others. In addition, the poorest MENA vate sector development, and to improve labor mobility countries such as Yemen and Djibouti have several problems between the public and private sectors, as well as within similar to those in Africa, having such limited resources and these sectors. This would open up labor markets both for institutional capacity that any properly functioning cash those who are currently employed, and to new entrants who assistance program is in question. This requires the govern- can then really compete for jobs. ments and the World Bank to put more focus on involving communities in delivering assistance to the most vulnerable, The role of social protection is mainly in the area of labor for instance via social funds, because they cannot be identi- market policies. For instance in the design of policies that are fied from the top. This is a challenge for many African conducive to job creation, such as increasing the flexibility of countries, just as for the poorest MENA countries. the labor market by easing hiring and firing conditions. Also, social protection concerns the mechanisms which facilitate Would you say that MENA is behind in pension reforms the movement between jobs, especially considering that compared to Latin America, and behind Europe and increased labor mobility can mean that people more often Central Asia when it comes to subsidy reform? experience periods of unemployment in between jobs. The more prosperous countries in the region might choose to deal Absolutely. Very much so. It is extraordinary to see how with this by creating an unemployment benefit system, which difficult it is for MENA governments to implement subsidy in my view should rather be designed as a social assistance reforms. I don't want to overstate the Eastern European system than as an insurance scheme. But it could also entail the improved provision of job search assistance, or more topics worldwide. I particularly see four areas in which we public involvement in the financing of training. It is impor- can provide useful support. tant to note, though, that these types of activities need to be preceded by the liberalization of the labor market, and this The first one is the nexus between subsidies and cash liberalization needs to accompany changes in the business assistance programs, in particular the redirection of funding environment to enhance private sector development. There is for subsidy schemes toward better targeted assistance a clear sequence from private sector development, through programs, which could for instance be implemented by labor market liberalization, to strengthening active and existing institutions such as social funds. The World Bank passive labor market policies. Without private sector develop- already provides a lot of assistance in this area to various ment, there is no chance of improving job creation in the MENA countries, based on our experiences with similar MENA countries. programs in Latin America and Eastern Europe. A different topic of concern is that some parts of the MENA The second area is pension reform. We already provide region suffer or are recuperating from conflict. What is the substantial support to a number of countries in the region best way to provide social protection to these areas? on this topic. I expect that our engagement will increase, as the current systems in most countries are not sustainable Conflict and post-conflict areas pose a major challenge for social and will need to be reformed sooner or later. Pension reform protection interventions. Social protection activities should reach is extremely complex, and I believe governments can greatly both the population that is affected by the conflict, and popula- benefit from the world expertise and experience that we can tion groups such as the military and militia, who so to speak share with them regarding this issue. depended on the conflict for their income. Affected areas must be assisted through relatively quickly disbursed aid, and those Labor market interventions are a third area where I think we who were actively engaged in the conflict must be moved quick- can provide useful assistance, both by advising on necessary ly to civilian jobs. Two types of intervention can achieve these reforms to liberalize labor markets and, related to that, goals particularly well. First, workfare programs are the quickest by helping to restructure the current social protection mech- way to maintain or increase the income of affected people. By anisms to better assist those who are adversely affected by offering relatively low wages, these programs have a built-in self- this liberalization. targeting system which is inexpensive and efficient. Workfare programs have the additional benefit that they help rebuild infra- The last area where I see our continued involvement is in structure, which is a very important aspect in a post-conflict providing social protection in post-conflict areas. I would be environment. Second, moving members of armies and militia to very happy if there would be no need for our involvement in civilian jobs requires intensive assistance for those who were de- this particular area, but it seems that some of our activities skilled, in terms of job assistance and retraining. Given the will remain related to conflict and post-conflict type inter- importance of providing this type of activity as quickly as possi- ventions, as currently in Iraq and West Bank and Gaza, and ble, and its transitory nature, I would be inclined to use some- upcoming in Lebanon. I wish the necessity of this type of what less stringent criteria in terms of effectiveness and impact intervention would disappear quickly, but unfortunately evaluations than we would apply to programs in different cir- this does not seem likely. cumstances. We should also not forget that this type of interven- tion is very much about signaling, about giving people a What are the main instruments that the World Bank will use? perspective and an appetite for being engaged in activities that are not war or conflict related. These programs were provided in It is a truism that the World Bank's comparative advantage post-conflict Bosnia and Herzegovina, where the World Bank is the simultaneous transfer of money and knowledge, and was intensively involved alongside other donors, and they are this is the case for our social protection activities as well. No relevant for post-conflict areas in MENA too. institution can better provide this combination of knowl- edge and money, and the main vehicle through which to What kind of support can MENA countries expect from the deliver these are our projects. I expect that we will have an World Bank regarding their social protection policies in the increasing number of projects in the future. We used to have near future? quite a few projects with social funds, but along with the needed reforms that I described before, I also see a growing The World Bank should be guided by the reform programs need to improve social protection systems with respect to of the various countries' governments. We should provide the management and administration of the implementing assistance in those areas where we have a comparative institutions. The World Bank has a lot of expertise to offer advantage, based on our experiences in working on various in this area which it can provide, in combination with fund- ing, through sector investment loans. This type of loan has the advantage that there is strong ownership by the sectoral departments with whom we primarily deal, such as the min- istries of labor or social policy, which I feel is particularly important when working on institutional reforms. I must admit that it is much harder to achieve this benefit of own- ership by sector ministries if we bundle a number of inter- ventions into one larger, omnibus type of project, as we are currently encouraged to do. As for development policy lending, I see little scope Finally, let me mention our Reimbursable Technical for that in the near future, although this may change over Assistance (RTA), which allows us to provide technical time when some of the countries in the MENA and policy advice on a reimbursable basis to the region can rely to a lesser extent on income from their Gulf countries, whose high levels of income make them hydrocarbon resources. ineligible for lending. I believe there are important externalities to RTA, because the reforms that spring from Another main instrument to provide assistance is our our work in these countries can serve as example to the analytical products, both country specific and regional. other, lower income, MENA countries. The pension work As for regional work, we notice a huge positive impact of that we are starting in Saudi Arabia may be a good our regional pension study. It has made governments example. I am also very pleased that we recently signed our more aware of the problems they face, and of our intel- first RTA agreement in MENA with a borrowing country, lectual leadership on this issue. For these reasons, region- Egypt. The Egypt RTA consists of a two year, US$600,000, al studies are extremely important. After the pensions assistance program in the field of pension reform. This is study, and the employment study of several years ago, we really a precedent, as it is the first time that a borrowing, might need to start looking from a broad regional per- middle-income country purchases technical assistance spective at the nexus of subsidies and social assistance. from us in recognition, unfortunately, of our resource We already started working on regional studies on youth constraints but also, more importantly, of our expertise and on migration, and our activities in this area are and knowledge in the area. I see more room for RTA pro- likely to increase. We are taking an integrated approach grams with borrowing countries in the future, particularly concerning youth, looking from both the labor market with those countries where knowledge, not donor funding, angle and the viewpoint of pre-labor market education is the binding constraint. Egypt is one of these countries, and vocational education and training. Migration is also but this could also apply for Jordan and West Bank Gaza. a growing agenda, not only concerning migration between the MENA region and Europe, but also between MENA and Asia, and within the MENA region towards the Gulf countries. At the country level, I see an increasing role for programmatic economic and sector work, establishing long-term outcome-related partnerships with govern- ments. This reduces the risk that the World Bank and governments cooperate in studying a certain topic, which is subsequently more or less ignored as time moves on and agendas change. Instead, we should move to these lasting relationships, such as the Programmatic Economic Sector Work we are carrying out with the governments of Tunisia and Jordan on employment and pensions, respec- tively. In the area of employment promotion, which is a particular challenge for the region, we do need a compre- hensive approach, such as the one we have in Tunisia. It is essential to see employment outcomes as a function of the MILES framework, and work accordingly across sectoral boundaries. 0 Photo Credit: Curt Carnemark World Bank Assistance in Social Protection in MENA Margo Hoftijzer G uided by national and regional priorities and strategies, the World Bank continues to assist governments in the MENA region in improving their social protection mechanisms. World Bank support is provided through both lending operations and the provision of analytical and advisory services and technical assistance. For the latter, an increased focus on forming long-term and outcome-focused partnerships with governments through programmatic economic and sector work is anticipated. Several social protection topics are expected to receive increasing attention in the MENA region in the near future. One area is the much needed shift from universal subsidies on consumption items to targeted social safety nets. Second, the number of lending operations to implement pension reforms will likely rise, as govern- ments gradually become ready to move from the analysis of reforms to their implementation. At the same time, analytical services regarding pension systems are expected to start or continue in those countries that have not yet reached the implementation phase. Third, continuing labor force growth will spur reforms to increase employability and job creation. Fourth, due to the life-long impact that adverse risks have on children and youth, more attention is expected to be direct- ed to addressing these risks. Finally, and unfortunately, several countries in the region are expected to continue to have to provide social protection in a conflict or post-conflict environment. Recentandexpectedlendingoperations Between 1999 and 2006, the World Bank approved 17 lending operations in social protection in the MENA region, totaling US$343 million.1 These projects also generated a significant amount of co-financing from other multilateral and bilateral agencies and donors, amounting to roughly double the amount of World Bank lending. Both in terms of the number of projects and the amount of lending, social funds and community development projects, particularly in Egypt and Yemen, dominated the lending portfolio in this period. Other projects were carried out mainly in the areas of post-conflict interventions, vocational educa- tion and training and skills development, and overall social protection initiatives. Hakim mo Guiller Luis Credit: Photo Figure1.WorldBankLendingforSocialProtectioninMENA(US$million, 1999-2007) 350 7projects 300 n 250 8projects 200 US$millio 8projects 150 100 50 0 1999­2001 2002­2004 2005­2007 Table1.WorldBankSocialProtectionLendingProjects(1999-2008) Amount Country Subject (US$ million) Start year* DJIBOUTI Ex-CombatantsReintegration 2.7 1999 SocialDevelopmentandPublicWorks 14.8 1999 FloodEmergencyRehabilitation 6.5 2004 EGYPT SocialFundforDevelopmentIII 50 1999 SocialProtectionInitiative 5 1999 CommunityandLocalDevelopmentProject** 50 2007 IRAN LocalDevelopmentFundProject** 75 2007 VocationalTraining** 150 2007 IRAQ EmergencySocialProtection 8 2006 JORDAN SocialProtectionEnhancement** 10 2007 EmployerDrivenSkillsDevelopment** 5 2008 LEBANON CommunityDevelopmentProject 20 2001 MOROCCO SocialDevelopmentAgency 5 2002 WESTBANKANDGAZA CommunityDevelopmentII 8 1999 PalestinianNGOII 8 2001 EmergencyServicesSupportProject 20 2002 IntegratedCommunityDevelopment 10 2002 EmergencyServicesSupportII 25 2003 SocialSafetyNetReform 10 2004 EmergencyServicesSupportIIsupplemental 15 2004 PensionReform** 7 2007 YEMEN SocialFundforDevelopmentII 75 2000 SocialFundforDevelopmentIII 60 2004 SecondVocationalTrainingProject** 15 2007 * The start year is the fiscal year in which the project was approved by the World Bank Board of Governors. **Expected Table2.WorldBankSocialProtectionAnalyticalandAdvisoryServices(2005-2008) Social Protection Skills Children Strategy Pensions Labor Development and Youth Other Bahrain 2007 2006 2008 Djibouti 2005 Egypt 2005 2007 2006 2007 2008 Iran 2002-2007 2002-2007 Iraq 2007 Jordan 2007 2002-2007 2007 Kuwait 2005 2007 2007 Lebanon 2007 2005 Morocco 2007 2004-2006 2007 2007 Qatar 2006 2008 Saudi Arabia 2006 Syria 2007 2007 Tunisia 2004- 2004-2007,2005 2007, 2005 2005 West Bank and Gaza 2005 Yemen 2005 2005 2006 2007 2006 (disability) Regional 2006 2005 2006 2006 2006 2005 2005 2006 2007 (disability) 2007 2006 2007 (socialinsurance) Notes: (1) Year indicates fiscal year of delivery to client. (2) Analytical services covering more than one area are mentioned under each topic. For example, the 2007 Morocco ESW on Skill Development, Social Protection, and Employment is indicated under social protection strategy, labor, and skills development. n Economic Sector Work n Technical Assistance n Reimbursable Technical Assistance n Conference Photo Credit: Curt Carnemark The largest number of projects was implemented in West discussions, assist in the development and implementation Bank and Gaza, while Yemen received the highest amount of of country strategies and reform programs, build institu- lending, through two social fund projects. Seven new projects tional capacity, and share knowledge. This work is growing are expected to be approved in 2007 and 2008 for Egypt, in importance compared to lending, as middle-income Iran, Jordan, West Bank and Gaza, and Yemen. These proj- countries in particular demand more policy advice in the ects--totaling US$312 million--concern a variety of topics sectors covered by social protection. Table 2 depicts the including community and local development, VET and skills analytical and advisory services to the MENA region for the development, and pension reforms (Figure 1, Table 1). period 2005-2008 and includes Economic and Sector Work (ESW), Technical Assistance (TA), Reimbursable Technical RecentandExpectedEconomicSectorWorkand Assistance (RTA) to high-income countries that are TechnicalAssistance ineligible for lending, and conferences. The ongoing analytical support reflects the region's perceived reform In addition to lending operations, the World Bank's social priorities, notably in the field of pensions, employability protection activities in the MENA region include a wide and labor market reform, children and youth, and govern- range of analytical and advisory services to client countries. ments' overall social protection strategies, including the These are intended to provide information for policy re-evaluation of universal subsidies. Endnotes 1 These figures include vocational education and training projects, which in some instances can also be considered as education interventions, rather than social protection activities. Annex 1: Selected indicators in MENA countries PUBLIC GDP PER LIFE SECTOR POPULATION GDP CAPITA ExPECTANCY UNEMPLOYMENT RATES EMPLOYMENT ) 0402(NOILLIM REP%(ETARHTWORG )4002-1002,RAEY -LIB$SUTNERRUC 0402,NOIL ,%,RAEYREPHTWORG 4002-1002 0402,$SUTNERRUC REP %,HTWORG 0402-1002,RAEY )SRAEY(HTRIBTA 3002 0402,%,LATOT ,%,ELAMEF TNECERTSOM ,%,ELAM TSOM TNECER ,%,HTUOY TNECETSOM LATOTFO % ,TNEMYOLPME TNECERTSOM MIDDLEEASTAND NORTHAFRICA 328.0 2.0 998.9 4.9 3,044 2.9 69.0 13.1 20.8 11.2 .. 31.2 GCC 34.0 3.3 470.4 5.0 13,844 1.6 74.0 7.9 15.0 6.4 .. 80.8 NON-GCC 227.2 2.0 365.7 4.2 1,610 2.2 68.1 14.6 22.6 12.3 31.7 27.3 MAGHREB 78.6 1.6 192.0 4.9 2,441 3..3 70.4 20.3 23.7 19.5 39.7 20.0 MASHREQ 148.6 2.3 173.7 3.5 1,169 1.3 66.8 10.6 21.7 7.4 25.3 34.2 LABORIMPORTING, RESOURCERICH 39.7 3.1 499.5 5.1 12,597 1.9 73.8 7.9 15.0 6.4 .. 80.8 LABORABUNDANT, RESOURCEPOOR 164.9 1.9 283.3 5.6 2,070 3.8 67.4 14.0 19.5 12.9 29.4 28.7 LABORABUNDANT, RESOURCEPOOR 123.6 1.8 190.5 3.8 1,542 2.0 69.5 12.7 23.5 9.8 25.3 28.4 ALGERIA 32.4 1.6 84.6 5.4 2,615 3.7 70.9 23.7 25.4 23.4 47.8 29.0 BAHRAIN 0.7 2.0 11.0 5.9 15,178 3.9 73.4 12.4 31.9 7.8 .. 79.7 DJIBOUTI 0.7 1.7 0.7 3.0 927 1.3 43.0 .. .. .. .. .. EGYPT 68.7 1.8 75.1 3.6 1,093 1.7 69.1 9.5 26.4 5.6 27.1 38.5 IRAN 66.9 1.2 162.7 6.8 2,431 5.5 69.4 10.3 17.8 9.0 24.0 31.3 IRAQ 28.1 2.8 25.5 -7.5 910 -10.0 63.1 27.0 15.0 29.0 50.0 .. JORDAN 5.4 2.6 11.2 5.4 2,058 2.7 72.1 12.5 16.5 11.8 25.8 35.8 KUWAIT 2.5 2.6 51.9 5.4 21,102 2.7 77.0 2.8 3.8 2.2 .. 73.8 LEBANON 4.6 1.3 21.8 4.7 4,780 3.4 70.9 8.2 11.0 7.4 20.9 .. LIBYA 5.7 2.0 29.1 5.6 5,132 3.5 72.7 .. .. .. .. .. MOROCCO 30.6 1.6 50.1 4.0 1,637 2.3 68.6 18.4 24.3 16.6 33.2 9.9 OMAN 2.7 2.4 24.3 2.3 9,133 -0.1 74.2 10.0 .. .. .. 77.6 QATAR 0.6 2.1 28.5 6.6 44,650 4.4 75.0 11.6 28.1 7.6 .. .. SAUDIARABIA 23.2 2.9 250.6 4.1 10,793 1.3 73.3 9.6 15.8 6.8 .. 81.8 SYRIA 17.8 2.3 23.1 3.1 1,301 0.7 70.5 11.7 24.1 8.3 26.3 .. TUNISIA 10.0 1.1 28.2 4.3 2,851 3.1 73.2 13.9 15.9 15.1 27.1 21.8 UNITEDARABEMIRATES 4.3 6.9 104.2 7.3 24,324 0.2 75.4 2.3 2.6 2.2 .. .. WESTBANKANDGAZA 3.5 4.2 3.5 -4.9 985 -8.8 73.0 26.6 .. .. 34.2 .. YEMEN 19.8 3.0 12.8 3.3 649 0.2 57.7 11.6 8.2 12.5 18.7 15.9 EASTASIAAND PACIFIC 1,870.2 0.9 2,367.5 7.9 1,266 7.0 69.6 9.2 10.9 8.6 12.3 33.8 EUROPEAND CENTRALASIA 472.1 -0.1 1,768.1 5.9 3,745 6.0 68.5 9.7 9.8 9.0 24.6 .. LATINAMERICAAND CARIBBEAN 541.3 1.4 2,018.7 2.3 3,729 0.9 70.9 10.0 11.8 8.0 17.8 12.6 SOUTHASIA 1,447.7 1.6 878.8 6.1 607 4.4 63.5 9.3 11.1 8.3 12.1 .. SUB-SAHARAN AFRICA 719.0 2.2 544.0 4.0 757 1.8 45.6 29.1 .. .. .. .. LOWANDMIDDLE INCOME 5,344.3 1.3 8,183.0 5.2 1,531 3.9 64.7 10.3 .. .. .. .. HIGHINCOME 1,000.8 0.6 32,715.8 2.4 32,689 1.7 78.3 6.8 7.0 6.8 13.7 13.5 WORLD 6,345.1 1.2 vv 2.9 6,444 1.7 66.9 9.6 .. .. .. 27.0 Sources: World Development Indicators (2005), Live Database (December 2005), ILO Laborsta Database (December 2005). Notes: Per capita GDP for Bahrain, Kuwait, and Oman are from 2003. Non-MENA aggregates for unemployment and public sector employment are staff estimates. Regional and sub-regional aggregates do not include Iraq. Unemployment numbers in italics indicate countries for which data do not exist for the stated period. Unemployment figures for GCC are nationals only. Unemployment figure Saudi Arabia is staff update. Unemployment figures by age and sex may not be comparable to most recent unemployment figures due to data availability. Youth unemploy- ment refers to ages 15-24, except for Tunisia (ages 15-29). Annex 2: Millennium Development Goals Performance in MENA countries (2003) GOAL 1 GOAL 2 GOAL 3 GOAL 4 GOAL 5 GOAL 6 ERADICATE ACHIEVE PROMOTE GENDER REDUCE CHILD MATERNAL COMBAT HIV/AIDS, ExTREME POVERTY UNIVERSAL EqUALITY AND MORTALITY MORTALITY MALARIA AND AND HUNGER PRIMARY EDUCATION EMPOWER WOMEN RATION IN 2000 TUBERCULOSIS nithgiewrednufoecnelaverP )egafosraey5rednu(nerdlihc wolebnoitalupopfoerahS ygreneyrateidfolevelmuminim )%(noitpmusnoc oitartnemlorneyramirpteN latot,etarnoitelpmocyramirP )puorgegatnavelerfo%( yramirpnisyobotslrigfooitaR )%(noitacudeyradnocesdna otselamefetaretilgnuoyfooitaR )42-51sega%(selam 000,1rep(etarytilatromtnafnI )shtribevil etarytilatrom5rednU )000,1rep( etamitseledoM )shtribevil000,001rep( ecnelaverpevitpecartnoC )94-51nemowfoetar( sisolucrebutfoecnedicnI )elpoep000,001rep( ALGERIA 10(2002) 5.0 94.9 96.0 98.6 91.1 35.0 41.0 140.0 57.0 52.8 DJIBOUTI - 35.0 71.2 91.2 97.0 138.0 730.0 733.4 EGYPT,ARABREP. 8.6 3.0 91.0 33.0 39.0 84.0 60.0 28.1 IRAN,ISLAMICREP. - 4.0 95.6 33.0 39.0 76.0 60.0 28.2 IRAQ 16(2000) 79.9 50.1 102.0 125.0 250.0 44(2000) 157.1 JORDAN 4.4 7.0 100.3 23.0 28.0 41.0 56.0 4.9 LEBANON - 3.0 90.6 68.0 101.9 96.1 27.0 31.0 150.0 63(2000) 12.3 LIBYA - 2.5 103.2 94.2 13.0 16.0 97.0 20.8 MOROCCO 10(2004) 7.0 89.6 75.0 87.8 79.2 36.0 39.0 220.0 63(2004) 112.3 OMAN - 71.9 73.0 97.3 97.7 10.0 12.0 87.0 32(2000) 10.8 SAUDIARABIA - 3.0 54.4 61.0 93.5 96.1 22.0 26.0 23.0 40.3 SYRIANARAB REPUBLIC 4.0 97.9 88.0 93.5 84.2 16.0 18.0 160.0 42.4 TUNISIA 4(2000) 2.5 101.0 82.5 19.0 24.0 120.0 66(2000) 22.1 YEMEN,REP. 46 36.0 71.8 66.0 60.8 60.3 82.0 113.0 570.0 23.0 92.5 Data are for 2003, unless another year is depicted. Source: World Development Indicators 2004 SPectrum is published by the Social Protection Unit of the World Bank. SPectrum is not a formal World Bank publication and is intended to raise awareness, enliven debate and present the latest thinking around social protection issues, including child labor, disability, labor markets, pensions, social funds and social safety nets. The views presented in the articles are entirely those of the author(s) and should not be attributed in any manner to the World Bank, to its affiliated organizations or to members of its Board of Executive Directors or the countries they represent. Articles appearing in SPectrum may be reproduced or reprinted provided the author(s) and SPectrum are cited and a courtesy copy is provided to SPectrum. 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