The Role of the World Bank in Implementing SDGs in Arab Countries

AFED 2016: Annual Report on SDGs
The Role of the World Bank in Implementing SDGs in Arab Countries

Introduction

The Sustainable Development Goals (SDGs), defines a comprehensive vision of sustainable development that acknowledges the interconnectedness of the economic, social, and environmental dimensions of development and the importance of multisectoral solutions. 

The SDGs are universal, applying to rich and poor countries alike, and include a commitment to collective action on global challenges. Peace, stability, economic progress, and human development in the Arab world have regional and global implications, thus the ability of these countries to make progress towards the SDGs is contingent upon global support. Yet, the challenges to achieving them are mostly country-specific. 

World Bank Group support for the SDGs

The World Bank Group’s (WBG) country-level engagements are at the core of its operational model and will be the primary means through which it will support the SDGs. This is greatly facilitated by its field offices in almost every country in the Arab world. 

The WBG offers integrated solutions to complex, multifaceted challenges. This approach is critical to achieving the SDGs given their interconnected nature. The support of the WBG on the SDGs is based on four main themes of engagement: data and evidence; financing; implementation; and monitoring, evaluation and reporting.

Regarding data and evidence, there is a pressing need for improved data both to monitor progress, diagnose problems, and help design policies and programs that will be needed to find solutions and make progress towards the SDGs. Traditional sources remain important, but new opportunities to collect data must be pursued, especially those made possible by new technology. The WBG is especially active in three areas:

• Ensuring availability of household budget surveys. The WBG has committed to ensuring that by 2020, a household budget survey is taken every three years in the 78 poorest countries.
• Harnessing the data revolution for development solutions. The WBG, together with the Global Partnership for Sustainable Development Data, is supporting innovative approaches for lasting changes in data production, accessibility, and data use for high quality analytics.
• Statistical capacity building for monitoring progress. The WBG is providing technical and financial support to improve production of key statistics that track progress on the SDGs.

Regarding financing, the WBG has identified the following areas of focus:

• Technical assistance and policy advice on how to better mobilize domestic resources;
• Leveraging private sector resources for development; and,
• Addressing the resource needs of global and regional public goods.

Regarding implementation, the WBG’s operating model has aimed to:

• Strengthen country engagement by facilitating the global flow of knowledge to support development solutions in client countries;
• Broaden and strengthen operational instruments; and,
• Leverage an approach which draws on the strengths of the entire WBG, including the private sector arm, the International Finance Corporation (IFC) as well as the political risk insurance arm, the Multilateral Investment Guarantee Agency (MIGA). 

Regarding monitoring, evaluation and reporting, the WBG has recognized the importance of data and policy analysis for monitoring and evaluating progress. During the MDG period, it produced knowledge products such as the World Development indicators and the Global Monitoring Report, and will continue to do so for the SDG period. 

Current global challenges and the Arab world 

The current global economic context is defined by economic headwinds and a continued slowdown in key emerging markets, leaving the global economy somewhat fragile. Many oil exporters remain under pressure in an environment of low oil prices and eroded reserves and fiscal buffers, while at the same time many oil importers are experiencing an easing of pressures on their external balances, inflation, and government budgets.

In addition to a challenging global economic context, many Arab countries are confronting the challenge of increased violence, fragility, and instability. With conflicts in the region, the Arab world has seen a tremendous rise in human suffering due to loss of life, injuries, and forced displacement. In light of these developments and given their diversity, there is an urgent need to implement new strategies to improve the chance for progress on the SDGs. Each country has a unique situation and set of challenges which must be confronted with commensurate and specific policy recommendations and tailored solutions.

Gulf Cooperation Council (GCC) countries, for example, might seek support from the WBG in the form of technical advice, knowledge products, and policy recommendations on how to make progress towards the SDGs and create a vision for a prosperous future. Solutions to challenges such as economic diversification and youth employment can likely draw on other countries’ experiences.

On the other hand, countries confronting issues of fragility and conflict face reversal of development gains and substantial stress on their resources, leading to increased poverty and suffering for many people. These countries can draw on direct WBG programmatic support to address more rudimentary development challenges. Even within this group of countries, there are significant differences among countries, and the solutions which may best support their pursuit of the SDGs. The most urgent focus of WBG support is on countries confronting challenges related to fragility and civil conflict. The interconnectedness between peace and development --and its importance for societies to prosper -- is explicitly recognized by the 2030 agenda, in particular through the incorporation of SDG 16.

Beyond the core comparative advantage of supporting the SDGs at the country level, the WBG engages on critical challenges related to global public goods, notably issues related to climate change, as well as crisis prevention, preparedness, and response. These crosscutting challenges are especially salient in the Arab world, and addressing them is a prerequisite for achieving the SDGs. Progress on these challenges requires working with multiple stakeholders in different countries, connecting and aligning efforts to global initiatives, and applying multiple instruments. 

While Arab countries are going through a transition, the conflicts in the region have had devastating consequences. The WBG, in collaboration with the UN, EU, and other bilateral and multilateral organizations, is mobilizing an international coalition to address these challenges. To do so, the WBG is going beyond its traditional, country-based approach and emphasizing its function as a global institution with convening power. 

While it has become apparent that Official Development Assistance (ODA) alone is insufficient to finance countries’ SDG needs, ODA remains critical, particularly for the most vulnerable countries. It is also evident that some small middle-income countries facing crises are also in need of targeted support. 

WBG Support for Arab Countries

World Bank¹ lending for the MENA region increased from US$ 2.8 billion in FY14, to US$ 3.5 billion in FY15 and will account for US$ 5.2 billion in FY 2016. The increase in FY16 lending reflects a higher level of development policy financing in Iraq and Egypt, and an emergency operation for Iraq to support the reconstruction of conflict-affected infrastructure and to restore public services in areas brought under government control. 

The WBG has also established a new financing initiative, in partnership with the Islamic Development Bank and the United Nations, to mobilize the international community in support of Lebanon and Jordan, which are the countries in the Arab world most affected by the Syrian refugee crisis, conflict, and economic instability. The financing initiative is comprised of two distinct, yet complimentary, facilities:

• a Concessional Financing Facility, which aims to provide additional development assistance on concessional terms to Jordan and Lebanon; and,
• a Guarantee Facility, which aims to provide the large volumes of financing needed for post-conflict reconstruction and economic recovery across the region.

The proposed Concessional Financing Facility aims to combine grants from supporting countries with loans from Multilateral Development Banks (MDBs), bringing down the interest rate on the loans to highly concessional levels. It provides Arab middle-income countries most affected by large numbers of refugees with access to urgently needed concessional development aid. This facility establishes a sustainable long-term and predictable financing platform, and addresses the problems associated with gaps in multi-year and medium-term financing for development and emergency humanitarian interventions. This facility represents a coordinated response by the international community to provide concessional financing through various MDBs and UN agencies already operating in the region.

The proposed Guarantee Facility will provide guarantees which can be used through three tools:

a) Guarantees on MDB loans or guarantee options, opening up space in the balance sheet of MDBs to lend additional amounts to countries in the region;

b) Guarantees to support the issuance of a special type of World Bank bond, providing additional financing to Arab countries by leveraging the capital markets [this would be above what could be achieved through tool a) ]; and,

c) Guarantees to support the issuance of a special type of Sukuk, administered by the Islamic Development Bank.

In addition to new financing mechanisms specifically supporting Arab countries, the World Bank Group has established a new strategy for the region, divided into four pillars. The first two address the underlying causes of violence and conflict and focus on:

• Improving governance and inclusion; and,
• Regional cooperation.

The latter two tackle the urgent consequences by addressing:

• Resilience to shocks of refugees and IDPs; and,
• Recovery and reconstruction.
• WBG support for improving governance and inclusion is focused on three areas:
• Quality Jobs. In light of the “elite-capture” obstacle to private-sector job creation in the past, designing “capture-proof” policies in the business sector would be a priority. Next would be policies that build skills through a market orientation. Finally, in some countries, labor regulations need to be improved to promote formal-sector job creation.
• Quality services. In the social sectors, governments could build on local success stories, including cases of non-state providers and local governments providing quality services. Mechanisms that strengthen students’ and patients’ ability to hold teachers and doctors accountable, such as vouchers, could be piloted. Regarding infrastructural services, replacing subsidies with targeted cash transfers could improve efficiency, equity, and strengthen citizens’ voice; and fostering infrastructure investment by the private sector can enforce greater accountability. The primary role of the government sector would be to create the policy and regulatory environment to ensure accountability and efficient use of resources.
• Citizen engagement. Some countries revised their constitutions in the direction of greater citizen engagement and inclusion. The WBG can help improve transparency and accountability by:
  • i. Enabling cross-cutting reforms and legislation, setting up independent accountability institutions, and greater internet access;
  • ii. Improving sectoral institutions, such as the accountability in social service delivery; and,
  • iii. Incorporating citizen feedback and beneficiary engagement in all WBG projects.

Not only will these actions support peace and social stability, but they will support countries’ ability to implement the SDGs while growing inclusively and sustainably.

Despite a common language, history, culture, and threats, the Arab world remains the least integrated region in the world. Potential gains from regional integration are significant, including the capture of trade benefits and building trust, which will likely lower the level of conflict. The WBG will initially focus on three areas:

• Energy. Studies indicate that investment costs to meet the growing electricity demand in the region would be reduced by 35 percent with a fully integrated electricity grid. The region would also benefit from increased trade in solar power and participation in the growing international gas market. Subsidized energy tariffs, which have been the main detriment to the financial viability of the gas and electricity sectors in the region, are another priority of the WBG strategy in the region.
• Water. Arab countries are the most water scarce in the world, with some of the lowest water productivity rates, largely because water tariffs are among the lowest in the world. Arab governments are providing the highest level of subsidies globally, with disproportionate capture by the wealthiest. The WBG will attempt to advise countries on how to:
  • Introduce tariffs and technology for water and energy efficiency;
  • Introduce integrated communities through rapid delivery programs with strong citizen engagement;
  • Introduce integrated urban water management and agricultural water productivity systems that simultaneously address sustainability of water services and water resources; and
  • Expand international water management agreements.
• Education. Quality is the main regional concern and there is wide variation by socioeconomic status, geography, and gender. Regional cooperation offers an opportunity for reform. This would build on the Education for Competitiveness regional initiative currently undertaken in partnership with the Islamic Development Bank.

These regional approaches directly address Arab countries’ collective capacity to make progress on many of the SDGs, both directly and indirectly. While directly addressing SDG 4 (education), SDG 6 (water), and SDG 7 (energy), successful policies can contribute to progress on SDG 1 (poverty), SDG 5 (gender), SDG 8 (jobs and economic growth), SDG 10 (inequality), and SDG 16 (peace and justice), among others. The WBG strategy determines that there are certain sectors which may be better addressed collectively to set the region on a faster development track.

The welfare of migrants, IDPs, and host communities is a global public good. As such, it will take a global effort to address the problem. The goal of the resilience pillar will be to address this global public good. To do so, the WBG will follow three principles:

• Support national or local governments so they can, in turn, promote the welfare of host communities, refugees, and IDPs;
• Orient development assistance towards helping migrants and IDPs build assets, in terms of human, physical, and institutional capital, and with a special emphasis on preventing the erosion of human capital (health and education) among displaced populations; and,
• Rely on the international community, and donor community in particular, for financing.

The WBG approach to reconstruction and recovery in the Arab world aims to regain citizens’ trust in the state and therefore must begin before the conflicts are over. This will require working with non-traditional partners and requires substantial financial support, which the WBG is seeking to address with the aforementioned financing plan.

The WBG strategy in support of the Arab world is a new approach which attempts to tackle the underlying causes of fragility and conflict, while simultaneously supporting resilience, reconstruction, and recovery efforts. A fundamental component of implementing this strategy is doing so in partnership with other regional and global institutions like the UN, and the Islamic Development Bank. 

Although the WBG relies on its country engagement model, the regional approach -- particularly when done in partnership -- has the potential to be transformative. These efforts work toward creating inclusive societies and are critical to countries’ ability to implement the SDGs. They can be a testament to the ability of countries suffering from fragility and conflict to overcome their structural and sometimes existential threats in favor of a holistic and multi-sectoral path toward sustainable development, embodied in the SDGs. Without peace, there is no development. And while specifically articulated in SDG 16, peace is a fundamental prerequisite for countries who wish to meet the 17 SDGs.

Mahmoud Mohieldin, Senior Vice President for the 2030 Development Agenda, United Nations Relations, and Partnerships , World Bank

[1] IBRD/IDA