World Bank highlights MENA social woes

Data from a new report by the World Bank has revealed that while poverty incidence rates did not improve in the Middle East and North Africa (MENA) region, during the period 1985-2000, there were strong gains in human development.

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By  Massoud A. Derhally Published  April 23, 2006

Data from a new report by the World Bank has revealed that while poverty incidence rates did not improve in the Middle East and North Africa (MENA) region, during the period 1985-2000, there were strong gains in human development. According to the report, ‘Sustaining Gains in Poverty Reduction and Human Development in MENA,’ literacy spread to 69% of the region’s population, average schooling (for those above 15) increased to 5.2 years, child mortality rates declined to 46 per thousand births, and life expectancy climbed to 68 years. “The region improved its social indicators faster than middle-income comparators over this period,” the report says. However, the report does comment on “the fact that little poverty reduction occurred during the 1990s despite remarkable gains in human development reflects a failure to translate rising human capital into higher productivity. The slow growth experienced by the region over this period was a consequence in part of deficiencies in macroeconomic and structural policies. “Among the structural policies that prevented higher rates of return to education and higher rates of employment were those related to trade,” it continues. “Insufficient openness to trade and investment constrained the returns to human development investments in the region.” The report provides an overview of trends in poverty and human development indicators during the last two decades. Since the mid-1980s, there has been little progress in poverty reduction in the MENA region, although human development indicators have continued to improve. It also shows that the substantial progress in reducing poverty in earlier decades came to a halt in the latter half of the 1980s. Average poverty rates for the Middle East and North Africa (MENA) region, measured at the US$2 per capita per day international poverty line, fell to 25% by 1987, the lowest in the world at that time. They stagnated thereafter, fluctuating between 20-25%. “This is the social cost of slow growth,” said Mustapha Nabli, Chief Economist at the World Bank for the MENA region. “An additional 11 million people were added to the ranks of the poor between 1987 and 2001, because the region’s population continued to grow but its economies didn’t.” Progress in human development indicators - despite economic stagnation and a decline in levels of social spending - suggests gains in the efficiency of service delivery during the 1990s. This can be attributed to better targeting of spending to underserved groups and positive cross-sectoral impacts of earlier investments in female education and the provision of safe water supply. For example, statistical analysis shows a strong link between child mortality improvements during 1980−2000, and the level of female education achieved by 1980. The report also notes that the region’s social ‘safety nets’ need considerable improvement. Parts of the safety net that are effective are often not efficient, and parts that are relatively efficient are not effective. For example, food and energy subsidies reach a large number of people and are effective in the sense that they also reach the poor. However, both food and energy subsidies are inefficient in that they involve a lot of resource leakage to the non-poor. The report argues for a three-pronged plan to meet future challenges: accelerate growth while paying special attention to the need to increase labor absorption in the private sector; further improve human capital by focusing on education quality at all levels and expanding the access of the poor to health services; and strengthen social safety nets through an emphasis on efficiency and insurance objectives. A growth strategy built around a bigger role in the regional economy for markets, the private sector and international trade and investment, can deliver the needed growth, says the report. Such an approach, combined with better governance and higher female labor force participation, can raise the average output per capita by 3% per year, or thrice the actual rate experienced since 1985. “The region cannot afford to miss this opportunity - 22 million more people would be lifted out of poverty by 2015 with a high growth scenario, than without.” claimed Nabli.

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