Middle East and North Africa Fast Facts, Countries eligible for World Bank borrowing

Despite the economic and social reforms embraced by several countries in the region, it continues to suffer from many of the same problems that have hindered growth since the 1980s. The private sector—key to job creation— remains underdeveloped and has yet to emerge as an engine for growth in the region. Inadequate financial systems and governance structures continue to stall expansion of the private sector, thus limiting the participation of private businesses in the economy. And the impact of the region’s legacy of conflicts has stretched throughout the region, effectively diverting resources and hampering the potential to attract foreign investors.

Today the biggest economic and social challenge facing the majority of countries in the region is unemployment, which ranges from less than 5 percent in economies of the Gulf Cooperation Council to approximately 30 percent in countries such as Algeria and Yemen. In West Bank and Gaza unemployment is more than 50 percent. At the regional level the unemployment rate averages 15 percent, and jobless rates among youth are twice the regional average in some countries. As the labor force grows, the region will need to create about 4 million jobs a year to accommodate new entrants into the labor market.

WORLD BANK ASSISTANCE

The World Bank’s overriding goals in the Middle East and North Africa region continue to revolve around building a favorable investment climate and restoring sufficient confidence in the region to create jobs and empower poor people with knowledge and skills that enable them to build sustainable livelihoods. To achieve these goals the Bank’s regional strategy addresses five common challenges faced by countries in the Middle East and North Africa: public sector efficiency and governance, private sector development and employment creation, education for living in a global economy, water management in a water-stressed region, and gender equality. In fiscal 2003 lending totaled $1.1 billion in 9 countries for 19 projects that supported reform and investments in the public and private sectors, education, water supply and natural resource management, agriculture, and infrastructure.

In response to the region’s growing interest in sustained engagement in policy reforms, the Bank continued to share knowledge and advice through programmatic economic and sector work, offering a series of analytical, advisory, and learning activities. In Morocco, for example, the Bank helped the government develop a public expenditure review that links expenditures to results achieved in the country, starting with health. The Bank is also delivering advice on pension reform in Egypt, Iran, Jordan, Lebanon, and West Bank and Gaza. At the regional level the Bank sponsored the Mediterranean Development Forum in Amman and the Knowledge for Development Conference in Marseilles. These forums proved effective in engaging civil society groups, initiating dialogue, and focusing governments’ attention on such issues as gender, HIV/AIDS, and governance. In addition, the Regional Water Initiative continued to promote dialogue among governments to improve the management of water—a critical issue in a water-distressed region such as the Middle East and North Africa.

Knowledge sharing has been at the core of the Bank’s development assistance to Gulf countries for many years now. The Reimbursable Technical Assistance Program extends technical and policy advice on a reimbursable basis to countries whose high levels of income make them ineligible for lending. The technical cooperation program with Saudi Arabia, which spans more than two decades and is the largest to date, emphasizes private sector investment, infrastructure reform, water strategy, and long-term economic planning. In Kuwait the program supported the government’s reform efforts in private sector participation and investment, infrastructure, fiscal policies, and human development. This year the Bank signed the first multiyear technical assistance program with Kuwait for the 2004–05 period, which includes the assignment of a long-term adviser to the Ministry of Finance.

The ongoing conflict in the West Bank and Gaza and the continued deterioration of socioeconomic conditions led the Bank to expand its support for emergency social and municipal services to Palestinians. Two emergency services support projects provide critical support for the health and education sectors. The Bank plays an important role in coordinating bilateral and multilateral aid to the Palestinian Authority. At the request of the donor community, the Bank produced its second emergency assessment of the economic crisis and disbursed $55 million in trust funds to much-needed social services, despite difficult circumstances there.

After a seven-year hiatus and at the request of the Government of Iran, the Bank formulated an Interim Assistance Strategy that focuses on policy dialogue and support for reforms through nonlending as well as lending activities in targeted sectors such as water, sewerage, low-income housing, and the environment. In fiscal 2003 two projects were approved—one was aimed at reducing the impact of water and air pollution in major cities, and the other at relieving social and economic hardships caused by two devastating earthquakes last year.

In line with the United Nations Security Council Resolution, the Bank is undertaking a range of activities in support of Iraq’s reconstruction and long-term development. Work is under way to prepare a needs assessment in coordination with a number of bilateral and multilateral organizations, such as the United Nations, the Islamic Development Bank, and the European Union, among others. A team of World Bank and international experts has been assessing the most pressing needs for the reconstruction of Iraq, mainly in the areas of health, education, power, agriculture, water, and economic management.

BUILDING THE CLIMATE FOR INVESTMENT

Creating a business-friendly environment remains an important priority for the Bank in the Middle East and North Africa, where geopolitics pose an added challenge to attracting investors. Investment climate assessments conducted in Algeria and Morocco revealed the obstacles faced by investors. Among the key constraints identified are administrative bottlenecks, limited access to credit and industrial land, and human resource constraints, all of which ultimately undermine the competitiveness of the countries’ private sector. The Bank has initiated similar assessments for Iran, Oman, and Syria. This year the World Bank Group also organized a consultation tour, stopping in Jordan, Lebanon, and Syria to engage local businesses in active dialogue about boosting trade and investment. In North Africa the SMExchange Program is promoting partnerships between private businesses on both sides of the Mediterranean Sea. A joint Bank–IFC initiative is complementing these efforts through programs that deliver improved business services, such as introducing new credit instruments, streamlining registration and licensing procedures, and helping business associations improve the quality of services they provide to their members.

Public sector efficiency is critical in paving the way for a healthy investment climate. In Tunisia, where urbanization is placing increased pressure on municipalities to maintain basic services and infrastructure, the Bank is helping local authorities better deliver and manage public services through training, computerization of tax management, and reforms in working procedures. A policy-based loan is supporting Jordan through its second year of wide-ranging reforms to make the public sector more service-friendly and to improve budgetary and financial management and judicial reforms.

EMPOWERING POOR PEOPLE

With about 23 percent of the 300 million people in the Middle East and North Africa living on less than $2 a day, empowering poor people constitutes an important strategy for fighting poverty. Through a combination of analytical, advisory, and lending services, the Bank aims to provide poor people with the necessary skills, resources, and infrastructure to improve the quality of their lives. A rural employment project in Algeria created jobs by engaging poor people in labor-intensive work, such as reforestation and flood control structures, and by financing fruit tree plantations and vineyards with farmers’ participation. The results led policymakers to adopt similar approaches in their rural development programs.

In Morocco a rural water supply and sanitation project increased the safe, potable water supply to 300,000 rural dwellers and lowered by about a quarter the incidence of diarrhea in children. Children who traveled long distances to fetch water had more time to dedicate to schooling: primary school attendance for girls and boys rose by 70 percent and 40 percent, respectively.

Although the civil society movement is still nascent in the region, the Bank is giving voice to poor people by engaging grassroots organizations in the preparation of the PRSP in the Republic of Yemen. Following extensive consultations with civil society groups, Yemen’s first PRSP proposes a long-term framework for fighting poverty based on high economic growth, human resources development, upgraded infrastructure, improved access to social services, and enhanced social safety nets. (See box 5.7.)

GLOBAL PRIORITIES

The Middle East and North Africa region focused activities on the following global priorities during this fiscal year.

Maternal and Child Health

With children and youth constituting more than half of the population in the Middle East and North Africa region, they are among the most vulnerable segments of society during times of economic stress and political conflict. In coordination with the United Nations Children’s Fund (UNICEF) and other partners, the Bank is conducting situation analyses and supporting community-based projects to deliver services for children. In Jordan the Bank is supporting a mentoring program to help at-risk children integrate into their communities. In Egypt the Bank is working with local organizations to protect and provide solutions for child workers, such as including them in the formal education system or developing informal alternative education for them. In November 2002 a conference on “Children and the Cities” gathered some 80 mayors from around the Arab world to address the rapid growth of cities and the plight of children who live in crowded quarters.

Supporting Trade and Integration

With relatively low levels of exports and foreign direct investments, the prospects for stimulating growth through greater openness and engagement with the world economy present much potential for the region. In preparation for the 2003 Joint World Bank – International Monetary Fund Annual Meetings in Dubai and as part of its economic and sector work, the Bank completed a study on trade and investment climates in the region, offering policy advice on achieving faster growth, creating more jobs, improving productivity, and reducing poverty through trade and integration.

Also Available:

Table 5.6: World Bank Lending to Borrowers by Theme and Sector
Figure 5.11: IBRD and IDA Lending by Theme
Figure 5.12: IBRD and IDA Lending by Sector