Policy Frameworks to Accelerate Poverty Reduction Efforts Khalid Abu Ismail Economic Development and Integration Division
1. Two competing narratives
Pillars of conventional wisdom on Arab development (at least till 2010) 1. Growth was decent for most countries (4-5% in 2000s) 2. Extreme poverty was low (MPI and HC below 1.9$) and declining from 1990 3. Inequality low to medium (0.33 Gini) and stable from 1990. 4. Fiscal and monetary indicators were stable and outlook positive (IMF/WB regional outlook, 2010) 5. Employment growth was fastest in the world and unemployment declined significantly from 1990-2010. 6. Boom in physical infrastructure in GCC and middle income countries (Egypt, Morocco, Syria). Page 3
Much of the human development progress was also driven by gains in education 12 1990 10 10.1 9.8 9.6 9.5 9.4 8.9 8.6 2015 8 8 7.8 7.3 7.3 7.1 7.1 6.6 7.3 6 4 5.1 5 4.3 4.1 3 2 0 Page 4
But there are a few other stylized facts
Money metric poverty rates in 2010 may have been low but vulnerability was very high (highly sensitive to choice of poverty line) which is why poverty skyrocketed after conflicts 100 90 80 70 60 50 40 30 20 10 0 0.2 0.6 1 1.25 1.6 2 2.4 2.8 3.2 3.6 4 4.4 4.8 5.2 5.6 6 6.4 6.8 7.2 7.6 8 8.4 8.8 9.2 9.6 10 Algeria Djibouti Egypt, Arab Rep. Iraq Jordan Mauritania Morocco Sudan Syrian Arab Republic Tunisia State of Palestine Page 6
Household multidimensional poverty affects 4 in 10 HHs Acute Poverty (%) 60 55 50 45 40 35 30 25 20 15 10 5 0 Cluster 1 Morocco Cluster 2 Sudan Mauritania Yemen Comoros Cluster 3 Jordan Egypt Tunisia Iraq Algeria 0 10 20 30 40Poverty 50 (%) 60 70 80 90 100
Vulnerability to MP is also high and severity high in LDCs 100% 80% 60% 92.4 Acute Poverty 37.0 76.2 20.4 75.2 48.6 Poverty 11.4 27.8 15.8 31.0 23.1 34.7 25.2 25.2% of the population are vulnerable to falling into poverty 40% 20% 0% 03/05/2018 27.0 21.6 29.6 22.6 49.7 11.7 16.2 19.2 20.9 7.6 11.6 17.5 5.6 6.3 0.2 1.8 1.4 5.5 5.3 Cluster 1 Cluster 2 Cluster 3 Regional Cluster1 Cluster2 Cluster3 Regional Average Average Non-Poor Vulnerable to poverty (deprivation score 20-33.32%) Poor excluding the severly poor (Deprivation score 33.3-50%) Severly Poor (deprivation score >50%) 17.5% of the population are in severe poverty
Inequality is higher than Gini suggests 80 60 40 20 0 Total Urban MHH Highest education Top quintile Household size 14 Rural FHH No education Bottom quintile Household size 8+ Headcount poverty (%) Poverty Acute Poverty 03/05/2018
Despite rapid employment creation, unemployment is still high (double world average) especially for females and youth (lowest participation WW) 45% 40% Male Female Total 35% 30% 25% 20% 15% 10% 5% 0% World avg MENA avg UMI LMI Sudan Iraq UAE KSA Qatar Oman Kuwait Bahrain Tunisia Libya Lebanon Jordan Algeria Yemen WBG Syria Morocco Egypt Page 10
And employment mainly occurred in the informal sector Public Informal private Self-employed Formal private Employers Unpaid family workers 100 17.4 9.3 8015.5 7.5 26.1 60 51.2 41.8 9.5 40 68.9 9.6 14.3 20 43.6 23.0 21.3 0 1980 1990 2000 2012 Page 11
Labor Productivity lowest world wide and has become even negative in 2011-2017 In 2011 PPPs Northern, Southern and Western Europe Europe and Central Asia 0.8% 0.7% 1.0% 1.5% South-Eastern Asia and the Pacific 3.1% 2.8% Asia and the Pacific 4.4% 5.0% Arab States Latin America and the Caribbean -0.8% 0.3% 0.4% 0.8% Sub-Saharan Africa 0.7% 2.9% World 2.0% 2.3% Source: ILO estimates and projections -2.0% -1.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 2011-2017 2001-2010 Page 12
As a result, ACs have lowest return to schooling almost half of the average for 120 countries Page 13 Source: Montenegro and Patrinos, 2013
Fiscal policy constraints: Low tax to GDP ratio in most Arab countries is a reflection of rentier political economy Tax revenue(% of GDP) in oil-rich countries Tax revenue(% of GDP) in oil-poor countries 30 30 25 20 20 15 10 10 5 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 0 2005200620072008200920102011201220132014 Comoros Djibouti Bahrain Kuwait Oman Iraq Libya Qatar Egypt Lebanon Morocco Syrian Arab Republic Jordan Mauritania Sudan Tunisia Saudi Arabia Arab oil-rich countries Yemen, Republic of Arab oil-poor countries Source: Sarangi 2016 [Background paper for the forthcoming ESCWA Report on Rethinking Fiscal Policy in Arab Countries ] Page 14
But that has reached its limits: Rising debt and debt servicing payments A major concern 100.0 General government gross debt (%GDP) 90.0 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0-2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 OR-HMICs (Excl. Iraq, Libya) LICs (Excl. Somalia) OP-MICs (Excl Palestine, Syria) Arab region Source: Sarangi 2017 [Background paper for the forthcoming ESCWA Report on Rethinking Fiscal Policy in Arab Countries ] Page 15
Conclusion: the narrative matters (1) Development model was working- look at health, education, GNI, Gini, 1.25$ so liberal economic model delivered on growth and poverty reduction. It just needed some fine tuning and returns on education and growth can be improved by better doing business indicators, less state intervention (smaller public sectors, subsidies and social transfers) and better education quality. (IMF-WB-Government reports) (2) Arab development model was fundamentally broken- because of the underlying political economy model and its outcomes and there are serious fiscal policy constraints. What is needed are deeper economic governance reforms to create fiscal space for a stronger poverty-growth-employment nexus with structural transformation as a core policy objective. Page 16
So question for SWAP Meeting: Are we content with the business as usual story? (narrative based on 1.29$) Extreme poverty now very low (10% based on 1.9$ update in 2017) and declined by more than half from 1990 mainly due to reductions in China and India. If not, is there a case for an alternative narrative to spring out of this process? If so, what are the entry points? How can it be done? Page 17
2. What is going on at the regional level?
3 Challenges Undermining National Poverty Reduction Efforts Policy challenge: Although, poverty is increasingly high on the agenda, the required macro-fiscal policy frameworks to address its roots and the required integrated cross-sectoral institutional response are lacking (MoF-MoP-MoSA need to work together). Data Challenge: Monitoring and analyzing poverty is highly constrained by data availability and suitability as well as gaps in the suitability of traditional poverty measurement methodologies to capture poverty in conflict affected countries (Syria, Yemen, Somalia, Iraq, Libya). Institutional Capacity Challenge: Limited availability of research and technical capacity at national level needed to develop policy-oriented evidence and tools and to assess the impact of policies on poverty. Page 19
But there are Opportunities to Accelerate Poverty Reduction Efforts Renewed momentum at regional, and national level around the 2030 Agenda. Increased national ownership and regional cooperation (growing number of countries undertaking socio-economic reforms to reduce poverty, growing number of regional initiatives and coordination by the LAS Ministerial Council for Social Affairs). Page 20
Regional Architecture to Accelerate Poverty Reduction Global SDG Advocacy and Implementation Mechanisms (including HLPF) SWAP 3 rd Decade Poverty Reduction SDG1 Reporting Mechanism? National Planning National Development Plans and PRSs Social Policies social protection schemes Macro-fiscal policies Monitoring and analyzing poverty UN Government Development Assistance Frameworks Regional Inter-Governmental Partnerships and Resolutions (LAS Ministerial Council for Social Affairs and Arab League Summit) Arab Forum for Sustainable Development Regional Poverty Reduction Framework and Strategy Regional Poverty Research Centre Regional Capacity Building Workshops Regional Poverty Network We try to ensure complementarity and synergies between these frameworks and to accelerate National Poverty Reduction Efforts
Examples: Global: DESA-ESCWA-ECLAC workshop on Revisiting Socio-economic policies to address poverty in all its dimensions in Middle Income Countries and formulation of a DA project to accelerate national poverty reduction efforts Support global SDG implementation and reporting frameworks Coordinate efforts and ensure coherence within the SWAP for the 3 rd Decade on the Poverty Reduction Taking part in the MPPN (OPHI) Regional: Contribute to the development of an Arab PRS (led by LAS) Arab Forum for Sustainable Development Generate evidence on the trends in inequality in MP indicators and define remedial policies (ADO 2019 Revisiting Inequality ) Generate evidence on MP at regional level assessing progress achieved (Arab Multidimensional Poverty Report 2020-21 and an EGM) Global Expert Workshop to revisit Regional Frameworks to Accelerate MP Reduction Advance research on the analysis on dynamics of MP, MP in MICs, impact assessment of different policy remedials Equip with analytical and policy tools and support the establishment of an Arab Poverty Centre Page 22
Ongoing and Future Work National: Support National Poverty Reduction Efforts (covering planning (PRS, NDP), reform of social and macro-fiscal policies, monitoring and impact assessment, policy and program tools, capacity building). Five requests received and cooperation frameworks are underway with Sudan, Mauritania, Yemen, Iraq, Egypt, and Jordan. Planned activities are a scoping mission with Sudan, Yemen, Iraq, and Mauritania in October 2018. Page 23
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