MENA-Projektet Poverty in the Middle East and North Africa

MENA-projektet

Poverty in the Middle East and North Africa A Survey of Data and Recent Trends

Author: Willy Egset

Delstudie 12, 2000 UD MENA-projektet

Poverty in the Middle East and North Africa A Survey of Data and Recent Trends

Author: Willy Egset

1 Text: Utrikesdepartementet, Enheten för Mellanöstern och Nordafrika, MENA-projektet Form och layout: Norstedts Tryckeri AB Omslag: UD-Redaktionen, Maria Beckius Artikelnr: UD 00.051 ISBN: 91-7496-207-8 Tryckt av Norstedts Tryckeri AB, 2000

2 Foreword

In the autumn of 1998 a project group was set up at the Ministry of Foreign Affairs for the purpose of analysing the political, economic and social conditions in North Africa and the Middle East (the MENA region). Within the framework of this project a series of special studies, including this one, have been commissioned. Solely the authors are responsible for the contents of each of these studies, which do not necessarily reflect the position of the Ministry of Foreign Affairs on the issue in question. This study contains a review of the poverty situation in the MENA region and cites, in particular, five country cases (Yemen, Morocco, Egypt, Jordan and Tunisia). Author of the study is Willy Egset, a researcher at the FAFO Institute for Applied Social Science in Oslo, Norway.

The editor

3 4 Contents

Abbreviations and acronyms ...... 7

List of figures and tables ...... 8

Executive Summary and Policy Recommendations ...... 9 Policy implications and recommendations ...... 10

1 Poverty in the middle east and North Africa ...... 13 1.1. Levels of poverty: Low levels of absolute poverty when measured by male income, more poverty when measured by other indicators ...... 14 1.2. Internal distribution: Increasing risks for non-earners (women, youth and the elderly) ...... 16

2 Processes of poverty and affluence in the MENA region ...... 21 2.1. Natural resources: Many people, little rain, much oil ... 21 2.2. The process of labour migration ...... 24 2.3. Population growth...... 28 2.4. The labour market ...... 29 2.5. Security: Peace and stability a key factor ...... 32 2.6. Social unrest: Potential for ”multilateral radicalisation” in the wake of reforms ...... 34

3 Country cases ...... 37 3.1. The Republic of Yemen: Serious poverty challenges ... 38 3.2. The Kingdom of Morocco: Substantial progress, but mixed achievements and a difficult future ...... 42 3.3. The Arab Republic of Egypt: Structural adjustment with increased poverty, but improvements on the horizon...... 45

5 3.4. The Hashemite Kingdom of Jordan: Failed growth threatens welfare and equity ...... 49 3.5. The Republic of Tunisia: Successful poverty alleviation during structural adjustment but sustained growth not secured ...... 52

4 Prospects for the future ...... 57 4.1. Structural adjustment and the poor ...... 57 4.2. Entering global competition: From import-substitution to export-led growth ...... 58

5 Conclusion ...... 62

References ...... 64

Appendix 1: Technical Background: Approaches and concepts used in poverty assessment studies ...... 68 Concepts of poverty ...... 68 Common approaches to poverty measures ...... 71 Concepts and technical terms...... 73

Appendix 2: Tables ...... 77

6 Abbreviations and acronyms

App. – Appendix EMA – Euro-Mediterranean Agreements ESCWA – Economic and Social Commission for Western Asia (United Nations) GCC – Gulf Co-operation Council (association of oil producing Gulf states: Saudi-Arabia, Kuwait, Qatar, UAE, Oman, Bahrain) GDP – Gross Domestic Product GNP – Gross National Product HDI – Human Development Index* HPI – Human Poverty Index* ILO – International Labour Organisation IMF – International Monetary Fund LDC – Least Developed Countries MENA –Middle East and North Africa PPP– Purchasing Power Parity* SAP – Structural Adjustment Program TFR – Total Fertility Rate* UAE – United Arab Emirates UNDP – United Nations Development Program WDI – World Development Indicators (A set of 500+ socio-economic indicators for 210 countries in time-series, published annually by the World Bank in print and CD-ROM) WTO – World Trade Organisation

* See Appendix 1, Concepts and technical terms, for definitions.

7 List of figures and tables

Figure 1 Population living below US$1 (PPP) per day by region ...... 18 Figure 2 Human Development Index scores and real GDP per capita by region ...... 18 Figure 3 Human Development Index scores and real GDP per capita by country ...... 19 Figure 4 Maps w/ key indicators ...... 20 Figure 5 Oil resources in the MENA region ...... 23 Figure 6 Water resources and withdrawals by country ...... 23 Figure 7 GCC work migration by countries ...... 26 Figure 8 Population growth, various indicators ...... 28 Figure 9 Employment ...... 30 Figure 10 Defence expenditures in % of GNP. Selected countries ...... 33

Table 1 Selected social indicators in MENA ...... 19 Table 2 Absolute poverty by region ...... 77 Table 3 HDI values by region ...... 78 Table 4 HPI and HDI by country...... 78 Table 5 Social indicators ...... 79 Table 6 MENA oil reserves by country (proven reserves by Jan 1998) ...... 80 Table 7 Gender, social development ...... 81 Table 8 Defence expenditure (in % of GDP) ...... 82 Table 9 Remittances in thousand USD ...... 82 Table 10 Expected years of schooling ...... 83 Table 11 Malnutrition and maternal mortality, by country ...... 84 Table 12 Water, renewable resources and withdrawals ...... 85 Table 13 Economic growth, by country GNP (per capita growth (annual %)) ...... 86 Table 14 Real GDP per capita, by country and region ...... 87 Table 15 MENA growth rates 1988–2007 ...... 88 8 Executive summary

Poverty in the MENA region has four major characteristics, although reservations must be made regarding the availability of statistics and disparate ways of measurement for different countries: • The incidence and severity of poverty as measured by household income and consumption is less than in other developing regions of the world. Currently at 4.1 percent, the percentage of absolute poor has declined slowly over the past decade, according to World Bank figures. Nevertheless, the absolute number of poor has increased due to population growth, reaching 10.7 million by 1993. On broader indicators of development – such as infant mortality rates, life expectancy and literacy rates – MENA holds a middle position among the developing regions. The mismatch in MENA performance according to the two types of indicators raises concern over the effi- cacy of development strategies and relevant public policies in the region. • Important differences exist between and within countries. Yemen, Iraq, Morocco, Egypt, Djibouti and Sudan show high poverty levels. Women are disadvantaged, most particularly in the share of total income, literacy and education levels. There is higher concentration of poverty in rural than in urban areas, but there are indications of a shifting balance, and increasing urban poverty. Unemployment among youth, even educated youth, is high. • The MENA region is characterised by “primitive welfare states”. With varying degrees of success, most governments have tried to reduce income inequalities and poverty, mainly through government subsidies, a large public sector and a focus on education. • Based on predicted per capita economic growth for the next ten- year period, poverty levels in the region will probably increase gradually in the short to medium term (2–4 years), and may stabilise in the longer term (5–10 years). The current opening of economies, 9 globalisation and structural adjustment challenge welfare policies. Reduced public spending combined with low or negative growth may increase poverty which is already aggravated by high population growth. Increased economic growth combined with adequate policies for economic diversification may reduce poverty significantly in the longer term. Some countries (Yemen, Jordan and West Bank/ Gaza Strip) have a high dependency on labour migration, mainly within but partly outside the region, and flows of remittances play a major role as a source of income, lifting many households out of poverty. The role of labour migration and remittances is likely to decrease. • The MENA region is marked by political conflicts and many of the countries face security challenges. Internal opposition may add to the conflict potential. Conflicts increase poverty both directly and indirectly, through the resulting public expenditure allocations to arms and the military forces, through effects on labour migration and flows of remittances, and through reduced foreign investments and trade. • Western (and formerly Soviet block) development and aid policies towards the region have, more than elsewhere, been marked by geopolitical concerns and a strategic objective of maintaining political stability in the region. This has contributed to the creation of strong governments and economic imbalances.

Policy implications and recommendations Overall poverty reduction strategies should not be the priority, except at the multilateral level.

At the overall strategic level, Fafo does not recommend to make general poverty alleviation programs in the MENA region a priority topic for policy, although such development co-operation could be considered with Yemen, Iraq, Morocco, Egypt, Sudan and Djibouti. Possible support to such programs should aim at improving their targeting through shifting from universal subsidies to developing efficient and sustainable social security systems. As initiatives within this area tend to be costly and to imply turf-separations with the US, the EU is more likely to be a proper framework than bilateral co-operation. 10 Donor co-ordination and evaluation should be expected to be difficult

For many countries aid policy towards the Middle East has been inter- twined with general foreign policy aims. While it may be debatable whether this should be so, it is likely to remain in the near future. This will continue to put severe restrictions on policy instruments such as donor co-ordination and evaluation of aid.

Guidelines which stipulate how development co-operation in the region should take distribution effects into account may be an effective means of integrating poverty considerations and development aid. Such guidelines should focus on the social dimensions of the overall macro-economic and institutional changes.

The aim is to ensure that proper consideration is given to poverty within areas which impact on the level of poverty, and that measures which are likely to improve the situation for the poor are given priority. Such guidelines should be compatible with core values in Sweden and for Swedish foreign policy and development co-operation. Fafo recommends to review existing or develop new guidelines within the following three areas: 1. Structural adjustment and economic reform will be a core issue for both development and poverty reduction in the area, particularly as the economies are becoming more open than before. Interna- tional agencies will probably be leading in the co-operation with the countries within this area. Sweden may pursue a policy to ensure that proper emphasis is given to equal access for women to education, labour, health and participation in society, and that potential effects on urban poverty and changes in urban-rural relations are properly addressed. 2. Four topics often addressed by foreign policy towards the region have linkages to poverty alleviation. These links may be made ex- plicit by Sweden in bilateral relations and within EU initiatives: i. Reduction of the conflict levels in general and of military domi- nance in government will contribute significantly to economic growth and potentially to reduction of poverty.

11 ii. Water management policies have effects on the agriculture and on urban-rural relations of importance for poverty, and such social effects should be taken into account in all co-operation on water and related issues. iii. Human resource management will be a core factor for poverty reduction in the coming years: A bias towards higher academic education is to be avoided, and universal primary school enrolment is a priority field. Secondary education must fit new de- mands in growth sectors, and the quality of vocational training programs needs improvement. Any human resource management policy should specifically target women. iv. Family planning and reproductive health are complex issues in the region and of importance to poverty. Family planning programs seem to have positive effects (although priorities will differ in the various countries), and reproductive health should be more sensitive to women’s health, not only mother-child health. 3. Labour markets within the MENA region and in the EU play a major role in alleviating poverty through remittances. Any change of policy which changes the access to these labour markets affects the poor in the region in a direct way.

12 1 Poverty in the Middle East and North Africa1

The range in the level of wealth and other resources among MENA countries2 is wide. Thus, although regional level poverty levels are not high in comparison to the poorest developing regions such as Sub- Saharan Africa and South Asia, poverty can be seen to be a more per- vasive problem in some countries and groups of countries when data is broken down to the national level. In addition, the poverty measure chosen influences the picture of poverty in the region. The widely- used income poverty measure, using a poverty line of USD1/day, de- scribes low levels of poverty in the MENA region. Other measures, which look towards social and economic development indicators for evidence of poverty, describe a more serious problem. Finally, the internal distribution of wealth within households, not directly captured by either of these measures, points to women, youth, the elderly and the unemployed as having a higher risk of experiencing poverty than others in the household.

1 The following persons are thanked for their generous input to this report: research director Jon Pedersen for supervising the project, researcher Laurie Blome Jacobsen for her comprehensive contribution in the revision of the final draft, and managing director Jon Hanssen-Bauer and researchers Dr. Marwan Khawaja and Aage A. Tiltnes for helpful comments and suggestions. 2 The MENA region will in this report refer to Algeria, Bahrain, Egypt, Iran, Iraq, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Saudi Arabia, Syria, Tunisia, United Arab Emirates, and Yemen. These countries will be considered the core MENA countries. The definition excludes Israel and Malta. Three African Arab countries that are atypical of the region in several respects are included in the UNDP regional statistics, but are not extensively discussed, namely Djibouti, Somalia, and Sudan. The West Bank and Gaza are briefly mentioned in the text, but since comparative international statistics are not readily available for this entity, it is mostly omitted. See also App. 1, Concepts and technical terms, for UNDP and World Bank definitions.

13 1.1 Levels of poverty: Low levels of absolute poverty when measured by male income, more poverty measured by other indicators The countries in the MENA region belong to a group of predominantly middle-income developing countries, except for some of the GCC countries and Yemen which belong to the high income and low income cat- egories respectively.3 The incidence of direct income poverty in the region is both less extensive and less severe than in almost all other developing regions of the world, and comparable to the post-communist economies in Eastern Europe and Central Asia (see Figure 1).

When measured by income the MENA region exhibits low levels in the incidence and depth of poverty. Trends show decreasing proportional levels of poverty over the last decade, but increasing total numbers of poor.

The depth of absolute poverty is also well below the average for the developing countries. This is due to the traditionally high levels of redistribution and spending on welfare in most MENA economies. The annual trend in the proportion of poor in the population and the poverty gap is also positive, although the poverty decline has been very slow in the recent decade. Due to population growth, the total number of poor is on the increase, however, from 10.3 million in 1987 to 10.7 million in 1993 (most recent regional update, World Bank 1999a:1). It should be noted, however, that comparisons of MENA poverty with other regions is seriously constrained by scarcity of data4 , and that the effects of low economic growth rates over recent years may have had negative effects which are yet to be fully documented5 . Still, a crude indicator such as GDP per capita supports the conclusion that poverty levels in the Arab region are moderate when compared to the poorest areas of the world, most notably Sub-Saharan Africa and South Asia.6

3 Somalia and Sudan belong to the low income category. (World Bank 1998/99: Data Sources, Table 1). See App. 1 for exact classification. 4 See App. 1, Data sources and their quality. 5 See App.2, Table 13 and Table 15 for economic growth indicators. 6 See App.1, Concepts and technical terms, for a definition of developing regions and App. 2Table 14. 14 The region exhibits more disturbing results when poverty is measured by broader social development indicators.

In terms of the broader social development indicators represented by scores on the Human Development Index (HDI)7 , MENA holds a less favourable position compared to other developing regions. It rates behind Latin America, East Asia, South East Asia and Eastern Europe and the CIS, but above South Asian and Sub-Saharan African levels. Moreover, the revisions of the previous 1995 figures made for the 1999 edition of the Human Development Report show an ominous development for the Arab region (UNDP 1999: Development indicators, TN1). Due to changes in methodology and revisions of data, several large and important Arab states have lost considerably in the international, comparative ranking of human development in the most recent edition of the UNDP report.8 Following long-term growth in Asia, and relative stagnation in the MENA region, the Arab states now rate below the average of the developing world in terms of human development indicators, which is a significant change compared to earlier years.9 While important social indicators show a favourable development, with substantial progress in infant mortality rates, life expectancy and eradication of illiteracy over the past decade, the region continues to lag behind Latin America and East Asia on all these indicators. Malnutri- tion data also show that some of the countries have a significant percentage of children with chronic malnutrition. This gap in human development is particularly wide when considering the vital field of adult illiteracy. Adult illiteracy in the MENA region was measured at 38.2 percent in 1995, compared to 12.8 and 16.9 percent in Latin America and East Asia respectively (World Bank 1999b). Furthermore, the literacy gap has widened since 1985, with illiteracy eradication rates in East Asia almost double those occurring in MENA during the same period.

7 The HDI index includes life expectancy at birth, adult literacy rate, combined enrolment rate, and adjusted per capita income in PPP$. See Appendix 1, Concepts and technical terms. 8 See App.2, Table 4. 9 See App. 1, Concepts and technical terms, for the methodological revisions in the 1999 HDI index. A revised method of discounting income means that the relatively favourable real GDP per capita levels compensate less for poor achievements on social development indicators than earlier, resulting in lower HDI.

15 Even more than in other regions, MENA aggregate data mask tre- mendous differences between countries. While the highest ranking MENA countries on the UNDP Human Development Index achieve scores on the level of Latin America and industrialised countries, countries such as Egypt, Morocco, Iraq, and Yemen stand out as the weakest achievers in human development among the core MENA countries, with more than a third of Egypt and Morocco’s populations, and nearly half of the Yemeni population classified as poor on the Human Pov- erty Index (HPI).10 As far as Iraq is concerned, the full effects of international trade and military sanctions may yet be undocumented in available statistics. Yemen (together with Djibouti, Sudan, and Soma- lia), are significantly worse off than other MENA states, and count among the world’s poorest countries by any measure of economic and social deprivation.11

1.2. Internal distribution: Increasing risks for non- earners (women, youth and the elderly) The ideal assumption of internally equal household distribution made in most poverty studies can contribute to mask real inequalities, notably with regard to the distribution of wealth in households along lines of gender and age. Individual socio-economic data is scarce, making such assessments difficult. However, the lack of female participation in the labour force and poor levels of female literacy, high youth unemployment, and a future elderly population which will not have household economic support at today’s levels (due to demographic factors) point to present and future household characteristics which contribute to increasing risks of poverty for certain groups. Males are predominantly the chief wage-earners in the MENA region. Female participation in formal economic life is lower in MENA countries than in all other developing regions. Female labour force participation in the MENA region measured by the female proportion of the total labour force was 26 percent in 1997 – only two percent

10 See App. 1 for an explanation of the HPI index, and App.2, Table 4. HPI figure is not available for Iraq. 11 See App. 2, Table 4 and Table 14

16 above the 1980 level. However, female participation has increased more rapidly in the 1990s (WDI 1997). This fundamental socio-economic feature does much to explain the region’s low achievements on social indicators in general, and particularly women’s achievements. MENA women particularly lag behind men in adult literacy (46 percent for women and 71 percent for men in the Arab states) and in shares of earned income (women earn only one-fifth of total income). Similarly, there is a considerable gap between male and female combined school enrolment rates (54 versus 64 percent in the Arab states) (UNDP 1999: Table 1). Improvements are indeed taking place – many countries in the region started out at extremely low levels at independence – but progress has not been rapid when compared to other developing regions. Female education is important in improving maternal and child health, and increasing female enrolment is expected to have a positive impact on these outcomes. The previously measured excess mortality of female infants compared to male infants has also been declining significantly over recent years (Tabutin 1991). Public awareness of the importance of this issue and further improvements in socio-economic capabilities of women are both key to regional development. Rising unemployment forcing more people out of the (formal) labour force particularly affects new entrants, most notably the youth and educated women. While the quality of labour force statistics is generally not optimal, available figures suggest that between 50 and nearly 80 percent of the unemployed are below 25 years old (ESCWA 1996:67). Youth unemployment usually does not reflect perfectly the actual shortage of jobs, but represents a significant degree of exclusion, usually with no or very little public compensation. At the exit of the labour market one finds the ageing MENA population who will quickly become more numerous, as the huge number of today’s youth grow old. Increasing life expectancy means that today’s youth will live longer after income-earning age than their par- ents, and decreased fertility means that they will have significantly fewer income-earners to provide for them. Many will not be able to rely on public allowances. With the diminishing role of traditional ex- tended families, this process is creating a group of particularly vulnerable poor (ESCWA 1996:56) which has yet to become a large group identifiable in household statistics.

17 Figure 1 Population living below US$1 (PPP) per day by region

1987 1990 1993

Sub-Saharan Africa

South Asia

MIddle east and North Africa

Latin America and the Caribbean

Eastern Europe and Central Asia

East Asia/Pacific excl. China

East Asia and the Pacific

0 10 20 30 40 50 Percent of population

Source: World Bank 1999a

Figure 2 Human Development Index scores and real GDP per capita by region

HDI scores Real GDP per capita 1,000 25000

0,900 22500 HDI Real GDP per capita 0,800 20000

0,700 17500

0,600 15000

0,500 12500

0,400 10000

0,300 7500

0,200 5000

0,100 2500

0,000 0 LDC S Africa South Asia Arab States All dev. countries S E Asia World East Asia E Europe & CIS Latin America countries Industrial

Source: UNDP (1999) Human Development Indicators, Table 1. Regional score equals median value of country-scores in the region.

18 Table 1: Selected social indicators in MENA12

Infant Mortality Rate Life Expectancy at Birth Adult Illiteracy Rate (per 1,000 births) (Years) (% of people 15 and above)

1990 1992 1997 Change 1990 1992 1997 Change 1985 1990 1995 Change 1990–97 1990–97 1985–95

61 60 48 –21.3% 64.5 65.1 67.4 4.3% 50.5 45.5 38.2 –24.4

Sources: World Bank 1999a / WDI 1999 and own calculations.

Figure 3 Human Development Index scores and real GDP per capita by country

HDI scores Real GDP per capita 1,000 30000

0,900 27000 HDI Real GDP per capita 0,800 24000

0,700 21000

0,600 18000

0,500 15000

0,400 12000

0,300 9000

0,200 6000

0,100 3000 0,000

Djibouti Yemen Sudan Morocco Iraq Egypt Syria Algeria Tunisia Iran Jordan Oman S Arabia Lebanon Libya UAE Bahrain Kuwait Qatar 0

Source: UNDP 1999: Human Development Indicators, Table 1

19 Figure 4 Maps w/ key indicators Percentage poor (less than 2USD per day) Percent poor Nodata/ not in region 015% 1520% 2025% 2560%

Human Development Index Country Rank HDI rank Nodata/ not in region 4059 6079 8099 100170

Percentage chronic malnurished (stunted) Percentage malnurished Nodata/ not in region 012% 1218% 1825% 2539%

12 See App.2, Table 5 for other developing regions.

20 2 Processes of poverty and affluence in the MENA region

The country data presented above demonstrate large differences in poverty levels among the countries, differences not linearly correlated with the general economic situation of the countries. The incidence of poverty in a given country is the product of a practically unlimited number of endowments and political choices. Yet, as a region, the Mid- dle East is characterised by specific processes with far-reaching ramifi- cations for the prevention, generation, and preservation of poverty in the region and in the individual countries. This section will outline some of the most important resources and processes which directly or indirectly have a bearing on poverty and development levels in the MENA region. We will first discuss certain resources which are key to the region and its development, and then turn to socio-economic and political processes occurring in the region in the context of such resources (or lack thereof).

2.1. Natural resources: Many people, little rain, much oil13 Two natural resources, oil and water, have had immense significance for the entire region’s socio-economic development.

The MENA region currently holds nearly two thirds of the world’s proven oil reserves, a proportion that is likely to increase in the future. These oil resources are extremely inequitably distributed, with the six

13 Richards & Waterbury 1996:45

21 sparsely populated GCC-countries controlling two thirds of total regional reserves.14 Except oil and gas, the natural resource endowment is scarce in the MENA region, with some exceptions. The lack of water, and the effect of this on agriculture, is especially critical. Out of 17 countries for which data exist15 , eleven have a supply of internal renewable fresh- water resources below the national “water stress” level of 1000 m3 per person per year (the so called Falkenmark Level). Six are below the absolute minimum level of 125 m3 established by Israeli researchers (Richards and Waterbury 1996:162). Comparably, the averages are 5,975 m3 for the developing countries, and 10,804 m3 for the industrial world. Similarly, ten of the countries had an annual fresh water withdrawal rate exceeding 100 percent of internally generated resources for the 1987–1995 period, whereas the average rate for the developing world was 6.3 percent for that period (UNDP 1998:181). With 21 percent of the population in the Arab states lacking access to safe water and an additional 10 percent lacking access to basic sani- tation, the region compares favourably with the developing world averages (29 and 58 percent respectively) (UNDP 1998:68). Neverthe- less, available per capita quantities are bound to decline given more or less fixed internal water resources and population growth rates. The demand for water is also likely to increase due to per capita income improvements. The implications of diminishing water supply are more serious for the dominant consumer, agriculture, which currently uses about 85 percent of the region’s water. At the same time, agricultural producers are less able to pay for their water use (compared to individuals and industry) (Richards & Waterbury 1996:162). A political drive for food self-sufficiency has comprised an major

14 It should be noted that even the economies of the greatest oil exporters are not without troubles. Saudi-Arabia, for example, has had a balance of payment deficit every year since 1983 (Richards & Waterbury 1996:61). Recent ESCWA figures show high estimates of poverty in the GCC region, when including non-national immigrant workers. The model applied is not described in detail and figures cannot be directly compared to those given for other countries in this report. It included non-income indicators such as education, and low achievements in female educational attainments contributed to define as poor 15% of the population in Bahrain, 11% in Kuwait, 17% in Oman, 11% in Qatar, 3% in UAE, and as many as 21% in Saudi Arabia (ESCWA 1996:21). 15 Data not available for Bahrain, Djibouti, Qatar, and Somalia (UNDP 1998:180)

22 Figure 5: Oil resources in the MENA region

Shares of World Oil Proven Reserves** Estimated years of remaining Reserves** production at 1997 levels by Jan 1998 Middle East and North 500 300 800 Africa GCC 700 450 Kuwait 250 400 600 350 200 500 Rest of 300 400 the 250 150 Iraq World 300 200 UAE 100 150 S.Arabia Iraq Iran 200 Iran Libiya World 100 50 total 100 50 Libiya Algeria Algeria Others* 0 0 0

Sources: The Middle East and North Africa 1999:175; Richards & Waterbury 1996:54 * “Others” includes Yemen, Egypt, Syria, and Tunisia ** Reserves in 1,000 million barrels Remaining production years for UAE only indicated as “above 100” in MENA 1999. It should be noted that years of remaining production are based on the most conservative estimates of proven resources, and do not correspond to actual years of production. See App. 2, Table 6, for underlying figures.

Figure 6 Water resources and withdrawals by country

3000

Annual fresh water withdrawals Renewable fresh water 2500 as % of water resources available per person 1987-95 (cubic meters/year) 2000 Water Stress Level 1500

1000

500

0 Kuwait Egypt UAE Libya Jordan S Arabia Yemen Tunisia Oman Syria Algeria Morocco Sudan Lebanon Iraq Iran Turkey

Sources: UNDP 1998:180; Richards & Waterbury 1996:146 aspect of the import-substituting development strategy pursued by nearly all MENA countries until recently. This policy has translated into low or zero irrigation water prices, agrochemical subsidies to farm-

23 ers and producer price supports. Combined with limited land- and water-use planning, the result of such policies has been intense pres- sure on the quantity and quality of surface and groundwater resources (Larsen 1998:292). Broader economic policies have discouraged agricultural productivity, and sufficiency levels have steadily declined for all key commodities (including cereals) and are currently well below 50 percent, except for meat (Richards & Waterbury 1996:149). The self sufficiency-strategy has been costly and heavily dependent on direct and indirect public subsidies. Economic reforms recently being implemented across most of the region, subsidies are, however, being reduced to varying extents. Cuts in public subsidies have mixed effects for the poor and different consequences for rural and urban poor. On the production side, irrigated agriculture employs a minor share of the labour force and irrigation schemes favour larger and wealthier farmers (Larsen 1998:292; El-Ghonemy 1998:69). On the consumption side, cuts in direct food subsidies affect the urban poor disproportionately, since food comprises a larger share of consumption in poor households. On the other hand, studies show that the more well-off are usually more able to profit from at least certain types of food subsidies because of chronically deficient targeting (van Eeghen 1998:242). Increased agricultural prices are likely to benefit the very large part of MENA poor who live in rural areas and live off agricultural output, although large producers will benefit more.

2.2. The process of labour migration Labour migration and remittances redistribute oil wealth throughout the region more effectively than direct aid from oil exporters.

Regional mechanisms contribute to redistribute some of the tremen- dous oil wealth in the Middle East from the main exporters to the poorer countries in several ways. First, considerable direct financial support has been given by the main oil exporters to poorer Arab states and Turkey (estimated at US$50 billion between 1973 and 1990). How- ever, aid levels have decreased in the 1990s. Average transfers from the oil exporting countries dropped from 5.9 percent of GNP in 1973/4 24 to 0.8 percent in 1991, and have not regained since (El-Ghonemy 1998:62-3). The effect of direct aid on regional development is considered dubious at best, for two main reasons. Firstly, a dominant, but undisclosed, proportion of the aid has been channelled directly into defence budgets (e.g. arms purchases from countries outside the region). Secondly, non-defence support has been poorly managed (El- Ghonemy 1998:63; Richards & Waterbury 1996:368). A second mechanism is that of labour migration and its associated transfer of remittances, which is likely to have had a stronger, more direct and equitable effect than aid. The main receiving countries, the GCC states, attracted high numbers of migrants from the poorer countries through large investments in infrastructure and development.16 Although the major labour exporters have shifted with political and economic circumstances and the type of demand (skilled/unskilled), the poorer countries of Egypt, Yemen and Jordan have been consistently the main labour exporters since the early 1970s. In 1975, Egypt exported nearly 400,000 workers (230,000 of them to Libya), the two Yemens combined sent some 360,000 workers abroad (mostly to Saudi Arabia), while Jordan sent 265,000 (175,000 to Saudi Arabia). In 1985, Egypt and Jordan had 747,000 and 267,000 workers respectively in the GCC countries alone (Richards & Waterbury 1996:272-5).

Labour migration growth has decreased since the 1980s and its composition shifted to more skilled labour and Asian labour.

The increase in labour migration growth (but not total numbers of, with the exception of Iraq) declined in the 1980s with falling oil-prices, and demand shifted from unskilled to more skilled labour. A much more serious shift occurred in 1990 with the Iraqi invasion of Kuwait. Some 750,000 Yemenis, 300,000 Jordanians, 150,000 Palestinians, and all Sudanese were either expelled or fled from Saudi Arabia and the Gulf. Egyptian nationals subsequently replaced many of the former Arab migrants in the Gulf states (Richards & Waterbury 1996:370-1; Zlotnik 1998:450).

16 Other exporters such as Libya and Iraq have also attracted large numbers of workers, especially after the additional oil price rise in 1979. In 1980 the two countries had 400,000 and 750,000 immigrant workers respectively, according to one estimate (Richards & Waterbury 1996:370).

25 Figure 7 GCC work migration by countries17

Number of immigrant workers in GCC countries 1975-1990 (in thousands)

Bahrain Kuwait Oman QatarQutar Saudi Arabia UAE 3000

2500

2000

1500

1000

500

0 1975 1980 1990

Sources: World Development Indicators 1997; Middle East and North Africa 1997:410. Note that figures may vary, and are subject to errors.

Gulf migration trend data for the post-Gulf war period are scarce and partly conflicting. Post-war reconstruction in Kuwait and normali- sation in other GCC countries quickly restored labour demand at least to previous levels. Egypt was especially able to profit. Jordan experienced a sharp increase in remittances as a proportion of GNP in the 1990s despite continued strains in relations with the Gulf: remittances increased from 12 percent in 1991 to 19 percent in 1994, and to 21 percent in 1996 (Central Bank of Jordan 1998:5, in Pedersen 1998: 360). In Egypt and Yemen, remittances amounted to about 10 percent of GNP in 1993, and have probably remained relatively stable. (World Bank 1995, in Richards & Waterbury 1996:378). The Gulf crisis reinforced the existing trend towards an increasing Asian proportion of the GCC immigrant workforce. Asians had long been working in the Gulf, already comprising a majority in the smaller GCC countries in 1975. By 1985, only Saudi Arabia still had a 60 percent Arab majority of migrant workers, a majority which was probably lost in the early 1990s, when the total Arab share of the foreign GCC work force was estimated at 30–35 percent (UN 1998b:386).

17 See Table 9, Appendix 2 for official figures on remittances. Note that cited figures are official and thus reflect transfers and savings via banks and other financial institutions only.

26 While Asians are generally paid less than Arabs,18 they are also considered more skilled in some areas, and less of a political concern (UN 1998b:387; Richards & Waterbury 1996:370).

Labour migration has both costs and benefits to the sending countries.

The example of the share of remittances in the GNP of Jordan, as cited above, demonstrates the macroeconomic significance of labour migration in providing foreign currency to many of the non-GCC countries. Yet, out-migration also represents costs to sending countries by creating labour supply shortages in some sectors, inflated wages for these groups, and skilled labour migrants may represent a loss of public investments made in their training. Shortages of key personnel can be a result, for example shortages of medical specialists has been reported in Jordan (Egset & Hammad 1999:28).

Labour migration provides a relatively equitable economic benefit to the sending country.

On the personal level, economic benefits are unequivocal, and available data suggest equitable effects in receiving countries, although remittances probably accrue in relatively larger amounts to the non- and near-poor than to the absolute poor (World Bank 1994:26). In Jordan, 15 percent of all households received remittances from relatives abroad in 1995, 27 percent of households with illiterate heads received remittances, and as much as 55 percent of households without labour resources19 (Arneberg 1998: App. 6.2). The majority of labour migrants have traditionally been young, adult males from rural areas20 . Thus, their migration helps reduce poverty where it is most acute through return of remittances, reduced local unemployment, and pos- sibly also by driving up wages for those who stay (Richards & Waterbury

18 In Saudi Arabia, for example, Arab workers were paid on average three times the wages of Asian workers in 1989 (UN 1998:386). 19 Defined as having at least one household member in the labour force. Some of these may have chosen not to work, of course, for the very reason that they live off remittances. 20 They are probably not the very most poor, however, since leaving the country takes a minimum of resources (Richards & Waterbury 1996:386)

27 1996:371). Hence, changes in migration opportunities in the MENA region will quickly translate into gains or losses for substantial parts of the needy population.

2.3. Population growth High population growth has been accommodated by increased public expenditure by MENA governments in education and health services.

Second only to Sub-Saharan Africa, MENA has the fastest growing population of the world, at 2.7 percent per year in the 1980–97 pe-

Figure 8 Population growth, various indicators

Regions 1975 - 2015 MENA population 1970 - 2025 % growth per year Millions 4 700

3,5 600

3 500 [Sub-Saharan Africa] 2,5 400 2 [Middle East & N.Africa] 300 1,5 [South Asia] 200 [Latin Amer.& Caribb.] 1 [East Asia & Pacific] 100 0,5 [Europe & Central Asia] 0 0 1970 1980 1990 1997 2015 2025 1975 1980 1985 1990 1995 1997- 2015

TFR (births per woman) Urban population as percentage of total Selected countries 1970 - 1995 Selected countries 1970 - 2015 12 100 90 10 80 8 70 60 6 50 40 4 30 2 20 10 0 0 Turkey Egypt UAE Iran Syria Libya Yemen Turkey Tunisia Bahrain Egypt UAE Iran Syria Libya Oman Yemen

1970 1980 1995 1970 1995 2015

Source: WDI 1999

28 riod. Although total fertility rates (TFR) in MENA have declined from 6.1 in 1980 to 4.0 in 1996, it is still the second highest in the world and at double of the replacement levels. The World Bank estimates that population growth will continue in the 1997–2015 period at a rate of 1.9 percent. Based on these projections, the region’s total population of 280 millions in 1997 will reach 394 millions by 2015, and as much as 600 millions by 2025. Most of the growth comes in cities, adding to urban stress caused by the influx of people from the countryside to urban areas across the region. Population growth has both benefits and drawbacks, and their balance depends on the rate of economic growth, the available resources and the policies applied. So far, it appears that the region has been able to meet the “demographic costs” of high population growth. Crude indicators show that for the region • expenditure on education has increased (5.0% of GNP in 1980, 5.6 in 1995); • expected years of schooling has increased for both sexes from 1980 to 1992 (except for Iraq and Jordan); • gains have been made with regard to overall literacy rates • most countries have improved their supply of health services (WDI 1997).

Studies demonstrate that government policies can have a significant independent effect in reducing fertility rates, even in the predominantly islamic MENA region. In general, the MENA countries which have elected an active involvement in the matter have chosen “soft” policies, such as subsidies of birth control technology and public information campaigns. Turkey and Tunisia have promoted birth control since the mid 1960s, and among the Islamic-majority countries they have the lowest TFR in the region today. Many of the high fertility Gulfstates, on the other hand, provide economic incentives for large families (Richards & Waterbury 1996:86, WDI 1997).

2.4. The labour market High labour market growth has not prevented increased unemployment in cities, among youth, women and the highly educated. 29 The increase in the region’s labour force correlates with population growth. It is currently growing at an annual rate of 3.2 percent (1990– 1997), and at a projected annual rate of 3.3 in the 1995–2010 period (World Bank 1998/99:195, WDI 1997). In addition to the huge numbers of youth entering the labour market, labour force growth is spurred by increasing female participation rates and reduced opportunities for emigration (to the Gulf and Europe). The entire region has experienced long-term recession after the fall in oil prices in 1982. Simulta- neously, the decline in the relatively large agricultural employment increased from the late 1970s onwards. Consequently, from a situation of mostly full employment (and in many cases “over-full employment”, Pissarides 1993:18) guaran- teed by government employment and very large public sectors, unemployment began to rise gradually from the early 1980s. Four gen- eralisations can be made about the nature of actual unemployment in the MENA region (Richards & Waterbury 1996:134): Unem- ployment is higher (1) in the cities than in the countryside, (2) among the youth, (3) among the educated (generally), and (4) among women seeking employment (with the exception of the GCC states). Higher urban than rural unemployment partly follows from the process of urban migration. Rural job-seekers seek employment in the cities and agricultural work is not preferred among “new entrants”. Fur- thermore, there is greater wage flexibility in agriculture, which means

Figure 9 Employment

Unemployment Females in labour force % of total labour force 35 40 30 35 25 30 20 25 20 15 15 10 10 5 5 0 Algeria Bahrain Egypt Iran Jordan Lebanon Libya Morocco Syria Tunisia Turkey Yemen 0 Algeria Egypt Iran Jordan Kuwait Morocco S Arabia Syria Tunisia Yemen

1970 1995 2015

Sources: WDI 1999, CIA World Factbook

30 that deteriorating economic conditions result in lower wages rather than dismissals (Pissarides 1993:5-7). Youth unemployment21 is partly attributable to the fact that new entrants need time to find employment – a tendency strengthened in MENA countries by strong preferences for public sector employment, and willingness to wait for such opportunities. Non-wage benefits (job- security, pension schemes, bribes, networks, status) and ample opportunities for multiple job holdings22 probably explain the continued attraction of government jobs, despite an absolute and relative decline in public wages (Pissarides 1993:8). Given the large share of youth in the labour force, this type of transitional unemployment may com- prise a substantial part of the total, the extent of which is yet to be established. The relatively high unemployment among the educated23 indicates that there are allocation problems in the labour market. An estimated 75 percent of Egypt’s unemployed held an intermediate school di- ploma or a university degree in the 1986–1990 period. Similar patterns are found throughout the region. Factors contributing to higher youth unemployment are more strongly at work for the educated youth: less preference for agricultural work, stronger preference for public employment and more willingness to wait for it, as well as unwillingness to take low-skill, low-wage jobs. In addition, there is an overpro- duction of university degrees and under- and misdirected production of vocational skills demanded by the private sector (Richard & Waterbury 1996:112–133). Despite these factors, returns on education are generally high in the MENA region, owing to the still larger than average public sectors.

21 In Morocco, for example, studies have shown that youth unemployment rates are about twice that of the adults, which is about the same proportions as that of industrialised countries. In Egypt, the relative share of youth unemployment is significantly higher (Pissarides 1993:14). 22 By the same token, some of those formally registered as waiting to get a job in the public sector may be employed already in the private, informal sector (Pissarides 1993:8). 23 Education also increases the labour force participation. That is, the educated are both more unemployed and more employed than non-educated. In Jordan, highly educated woman are ten times more likely to be in the labour force than those with basic or no education, whereas men’s participation increases by 50 percent on the same measure (Arneberg 1998:234).

31 Finally, the female unemployed are often young and educated and thus also affected by the factors just mentioned. In addition, their employment is considered less “committed” in the sense that they are not the main bread-winners of their families, and therefore can afford staying out of what they and their families consider inappropriate or not preferred jobs (Richards & Waterbury 1996:138). How much of MENA unemployment which is due to allocation problems, compared to an actual shortage of jobs at wages demanded, is difficult to establish. However, the combination of the factors described suggests that the level of “real” unemployment should not be underestimated.24 It has been suggested that unemployment is not one of the primary causes of poverty in the MENA region (Pissarides 1993:20). This conclusion is not supported by recent country studies. In Jordan, for example, wage employment was found to be the single most important determinant of economic welfare for Jorda- nian households (Arneberg 1998:197), and 80 percent of the households report income from employment as the main income source. More than half (54 percent) of the poorest 10 percent of the households had no employed members (Arneberg 1998:207). Increasing unemployment, therefore, should be considered a growing cause of poverty and an indicator of economic and social exclusion in the MENA region.

2.5. Security: Peace and stability a key factor High, but decreasing, military expenditure in the region has both short- and long-term implications for economic growth.

High military expenditure and the role of the military in Middle East states are the products of numerous and lengthy conflicts, a historically strong military role in post-colonial nation-building and subse-

24 In Jordan, frictional unemployment, defined as waiting for a new job to start, has been measured at 12 percent of the total. Most of these were waiting for a job in the public sector. An additional 5 percent of the unemployed were classified as being in “voluntary unemployment” because of unwillingness to take certain types of available jobs (Arneberg 1998:242).

32 Figure 10 Defence expenditures in % of GNP. Selected countries

% of GNP 25

0 Algeria Egypt Iran Israel Jordan Kuwait Libya Syria Turkey Yemen

1985 1995

Source WDI 1999 (See Appendix 2 for other countries) No available data for Yemen (1985) quent political leaderships in most of the countries, as well as strategic geopolitical considerations of the region.25 The Middle East is the top military spender among all world regions, with military spending levels surpassed only by Eastern Europe during the Cold War period (Knight et al. 1996:13). As a group, MENA countries have reduced defence spending over the past decade from 13.4 percent of GNP in 1985 to 9.5 percent on average in 1995 (WDI 1999). The GCC countries are large spenders, but with the exception of Kuwait and Bahrain, have reduced their defence budgets in the 1990s. Yemen, the poorest country of the region, is one of the top spenders,

25 The Israeli-Arab conflict – which has brought four large-scale wars (1948, 1956, 1967, 1973), numerous violent skirmishes, and lasting occupation of various Arab land – may be the most fundamental conflict, but several others have contributed generously to tensions and human and material losses in the region. Among these is one of the longest and bloodiest conventional interstate wars of the twentieth century, the Iran – Iraq War (1981–1988), causing some 367,000 fatalities and 700,000 casual- ties (Krieger (ed.) 1993:467). Other major conflicts include the Algerian-Moroccan conflict (since 1976) over Western Sahara and the Iraqi invasion of Kuwait in 1990 and the ensuing international intervention. In addition there has been a range of mi- nor clashes and shows of force between Egypt and Libya, Jordan and Syria, Syria and Iraq, a Turkish intervention on Cyprus, and later several in Iraq, and others. Internal conflicts have been no less frequent nor bloody: full-scale civil wars in Lebanon (1958, 1976–1989), Sudan (1959–1971, 1983–), North Yemen (1962–1968, 1994), in Oman in the early 1970s, and near-civil war conflicts in Turkey and Algeria in the 1990s (Richards & Waterbury 1996:329). A number of other minor conflicts could be mentioned.

33 allocating 15 percent of GNP to defence in 1995, nearly one third of the central government expenditures that year. While conventional thinking has it that less arms mean more butter, this effect is hard to verify (Richards & Waterbury 1996:336). Some studies suggest that military spending is positively correlated with economic growth (Benoit 1978, in Knight et al 1996:18). Knight et al (1996) point to a two-phased effect: In the short run, reduced military spending (like other public spending) can have a contractionary effect on the national economy through reduced aggregate demand and hence growth. In the longer run, military spending cuts will increase resources available for alternative domestic uses and reduce distortion in resource allocation. They estimate that in regions with the highest military spending, cuts can be expected to increase capacity output in the very long run by nearly 50 percent, relative to the levels that would have pre- vailed if spending rations had remained fixed (Knight et al 1996:41). More direct effects on economic growth can be expected through a more business-friendly climate created by stable political conditions. A recent World Bank study (1999b:191) holds that it is difficult to imag- ine dynamic growth in the region without solid progress in the peace process, and without an end to the daily occurrence of civil strife in the Arab world. Similarly, a diminished role of the military could promote political pluralism. But even though the military’s role is retracting in several MENA countries, it remains a powerful player in most.

2.6. Social unrest: Potential for “multilateral radicalisation” in the wake of reforms Social unrest in a number of MENA countries has occurred or is occurring as a reaction to (1) rural and periphery underdevelopment, and (2) increasing economic insecurity accompanying structural adjustment, particularly felt by urban residents. In some countries, islamist movements have served as a “common ground” for protest arising from both urban and rural frustrations, but no political force has successfully shouldered the role of a broad-based alternative to the economic reform policies pursued by most of the region’s governments. In the near future, provision of legal channels for interest articulation to the populations affected by reforms could facilitate the restructuring process overall and reduce the risk of violent reversals.

34 Social imbalances have resulted from failures in past development strategies in the MENA region, notably rural and periphery underdevelopment. Others accompany the transition to a more competitive, outward-oriented economic strategy, notably falling real wages, rising unemployment and increased costs of living, affecting urban areas relatively stronger than rural. Each of these processes have proved their potential to create social unrest in the past and present, and may be expected to do so also in the future. The scale and depth of unrest will depend on the specific ways by which reforms are implemented, opportunities for non-violent articulation and government responses26 . Urban social unrest has typically been seen in response to percepti- ble retractions in public policies, rather than long-term neglect. There are numerous examples of urban “bread-riots” in, often successful, opposition to government attempts to cut food subsidies (Sadiki 1997:136).27 Since the current restructuring of MENA economies is expected to entail significantly increasing urban living costs, more of these riots may be seen, especially as the shift occurs parallel to rising youth unemployment.

26 Examples of the rural-based unrest include one of the most serious internal conflict in the region in the 1990s, namely the islamist violence in upper-rural Egypt26. The conflict escalated from 1991 onwards, framed in an islamist political language, and killed up to several hundred people every year at its peak around 1995. The conflict has been interpreted as a “regional revenge” (Fandy 1994) against the nearly total cultural, political and economic hegemony exercised by Egypt’s northern urban centres over upper Egypt. According to Fandy (1994:611), the islamist groups draw most of its supporters from poor, remote and isolated villages of upper Egypt, areas that were never “penetrated” by official authorities, neither colonial nor national, and which have remained underdeveloped and sparsely integrated into the nation’s economic and political life. Similarly, while islamist violence was largely conducted by the urban, well-educated young in the 1970s and 80s, in the 1990s this has changed: The average age of those arrested on charges of islamist violence in the 1970s was 27 – it has dropped to 21 in the 1990s, with a quarter of those reported below 20. And while as many as 80 percent in the same group had an education on college or university level in the 1970s, the percentage has dropped to 20 percent today, most of whom have less prestigious majors. The geographical background of perpetrators and the actual scenes of violence have shifted from larger towns and cities in the 1970s to rural, usually Southern villages, or slum townships of Cairo, today (Ibrahim 1995:74– 75). 27 Including widespread unrest in Egypt in 1977, in Morocco and Tunisia in 1984, Sudan in 1985, Algeria in 1988, Jordan in 1989, and Lebanon at several instances (Sadiki 1997:136)

35 The multifaceted phenomenon of islamist mobilisation can be considered a direct response to socio-economic deprivation in only certain respects. The relationship between economic hardship and political islam is a characteristic of certain radical islamist fringe groups, not major mainstream movements. Nonetheless, islamist movements (in Egypt, Algeria, Tunisia, Turkey, Yemen and Iran in particular) have been more successful at national level organisation and mass mobilisation than other political forces and parties in the region (Abukhalil 1997:156). Otherwise, disparate sources of unrest could find common ground for protest, uniting urban objections to the loss of socio-economic goods (subsidies, employment) with long-standing rural frustrations from neglected development. Nationally and socially broad- based opposition movements may prompt, in turn, the most heavy- handed response from regimes. The Algerian debacle might be an example of this mechanism of “multilateral radicalisation” (Burgat and Dowell 1997:306). Political leaders frequently cite the fear of popular unrest as the rationale for the slow pace of economic reforms28 , and the strength of islamist parties is likely to have been an important reason for slow- down and reversals of political reforms. But such attempts to forestall opposition may prove counter-productive. Firstly, forestalling opposition leaves what are in fact essentially conservative islamist economic policies untested, even on the local level. Secondly, upon a failure on the part of the political system “to provide unrestricted legal channels for participation in public work, violence would find a nurturing environment in the resulting frustration” (Arab Strategic Report 1997:117). Thus, the design of political institutions should not be neglected in public sector reform in the MENA region.

28 For example, President Mubarak in the Middle East Times, 02.06.96: “I don’t want to be a second Russia in the World.”

36 3 Country cases

Five country cases are outlined below with the purpose of present- ing a more detailed picture of poverty and the relationship between poverty and other factors in a number of states for which data exists. These cases illustrate similarities and differences in levels of poverty, its distribution in the population, its associated factors and government responses. Of the five cases, three are found among the countries with the highest incidences of poverty in the region (Morocco, Yemen and Egypt). Yet its distribution across the population varies and each of the three countries has had different state economic ideologies and policy responses, which have impacted the nature and severity of poverty. Despite the wide variety in these factors among the cases, some general conclusions regarding the states’ experience with poverty can be presented. Firstly, the level of economic equality and economic situation for rural as compared to urban residents is better in those states which have carried out relatively successful land reform. This includes the “socialist” case of Egypt. We see that there is a much wider urban/rural gap and higher levels of inequality generally in Morocco, which has not had a formal land reform and has historically espoused strong support for liberal economic policies rather than socialism. Secondly, as can be expected, a unifying feature of poverty in the cases is that poverty is concentrated in rural areas, although urban poverty may be increasing. Finally, in all the cases we see regional inequality within countries as a prominent characteristic of poverty (either accompanying or surpassing urban/rural differences) which has, to a greater or lesser degree, been complemented by poor government allocation of resources in key social services such as health and education.

37 3.1. The Republic of Yemen: Serious poverty challenges The Republic of Yemen is the poorest of the MENA countries29 . In 1988 the YAR had a population of about 8.5 million, and a per capita income of 640 USD, while the PDRY30 had a population of 2.4 million and a per capita income of 430 USD. The two states merged in May 1990 with the hope that unification would promote economic development in regions with very poor economic bases. Civil conflict between the North and South broke out after unification and continued through 1994 – bringing huge costs on already strained budgets (MENA 1997:1071). In combination with other factors this resulted in slow economic growth, high inflation and a growing budget deficit (World Bank 1996:12.). The Yemeni economy is primarily dependent on remittances and aid from its Gulf oil-producing neighbours, modest oil reserves (about 23% of GDP) and a small, underdeveloped agricultural sector. The Gulf War brought the expulsion of 750,000 expatriate Yemenis (about one-fourth of its total labour force), mainly from Saudi Arabia, causing a fundamental social and economic shock to the new state. Im- proved relations with Saudi Arabia made it possible for Yemenis to begin seeking work in the country again in 1995. A degree of aid from the Gulf countries has also resumed, though far from previous levels. Yemen’s oil production has picked up in the 1990s, supplying the predominantly agricultural economy with foreign earnings. International agencies, including UNDP, the World Bank and the IMF, have set up assistance programs.

Poverty levels are the highest in the region, with little improvement in the last decade.

Although household surveys have not been conducted since 1992, a

29 Along with Arab countries not considered to belong to the core MENA region in this report: Djibouti, Somalia, Sudan. 30 South Yemen, a radical one-party state since the British withdrawal in 1967, had attempted a socialist transformation of its economy, and broad-based educational and health reforms. A scarce natural resource base, factional infighting, lost activity at the Aden port, and a Soviet orientation in foreign and economic relations, did not contribute to economic success (Krieger (ed.) 1993:997).

38 1995 income analysis found no significant changes in poverty levels – which remain high. Nineteen percent of the rural and 18.6 of the urban population are defined as poor, while 9 percent of the total popu- lation31 are absolute poor (World Bank 1996:2). Yemen scores much worse than other MENA countries on the UNDP Human Poverty In- dex (HPI) with 49.2 percent HPI poor, and ranks number 78 of all the 92 ranked developing countries. Real per capita GNP was measured at $810 in 1999 – slightly below the average for the LDC countries (see Table 4).

High poverty depth and inequality, poverty highest in certain rural regions, poor households characterised by large household size and illiterate heads.

Poverty depth is high and Yemen has higher levels of inequality than other countries in the region, as the poorest 20 percent of the population consume 6 percent of total private expenditures, while the rich- est 20 consume 46 percent. Poverty in Yemen is closely linked both to rural-urban status and to agricultural production. Yemen is a rural country in which 80 percent of the population live in rural areas, and 58 percent of the total labour force is employed in agriculture (World Bank 1996:1,27). Poverty is particularly concentrated in Yemeni governorates with the highest concentration of small farm activities (World Bank 1996:25). Poor households have illiterate heads more often than others, and more children. Particular groups of poor include Somali refugees of Yemeni descent (100,000), foreign refugees especially from Somalia (10,000), Southern Yemeni peasants dispos- sessed by reversed land-reform (100,000) and members of the low- status ethnic group of Akhdamis in Northern Yemen.

Yemen shows the poorest performance regionally on social indicators.

The high incidence of income poverty is associated with the poorest achievements on all key social indicators of all MENA countries: life

31 The Yemeni poverty line is based on minimum expenditure on food and non-food items (World Bank 1996: Annex 1)

39 expectancy at birth (56.7 years), adult literacy rate (38 percent), and infant mortality rate (78 per 1,000 live births). Similarly, its total fertility rate (TFR) at 7.5 is the highest in the region (World Bank 1996:i; UNDP 1998:130,157). Considering Yemen’s scores on socio-economic indicators, two factors have, in particular, contributed to poor results. Firstly, government expenditures on public welfare and development have been very low, and secondly, expenditures made have not successfully targeted the most needy population – the rural poor – but have instead tended to serve urban residents (World Bank, 1996, 2, 25). Public investment in development activities was less than half of that of other low-income countries at 2 percent of GDP in 1995 (World Bank, 1996, 25).

Low government expenditure and regional biases characterise health care provision.

Poor achievements on health indicators are related to the state’s rural nature, the government’s lack of investment and unequal investment in health among the country’s different governorates. Yemen’s health system was built nearly from scratch beginning in 1970, with relatively better standard in the PDYR. Government expenditure on health is very low at 1.7 percent of GDP (half of the minimum $12 per capita recommended for low-income countries). Poor rural governorates receive significantly less per capita than better-off urban districts (World Bank 1996:32). As a cogent indicator of overall health performance, infant mortality rates are highest in the northern regions, in the rural sector and amongst infants born to mothers who are illiterate or who have not received basic maternal health services.

High illiteracy rates among both the poor and non-poor, low primary school enrolment, especially for females, and inadequate growth of government expenditures on education.

In terms of outcomes and public expenditures, Yemen shows a slightly but not much better performance in education. Expenditures for primary and secondary education were 15 percent of the total and 5 percent of GDP in 1994 (World Bank, 1996, iv.). However, expenditure levels have not kept up with student increase: While overall student enrolment increased by 28 percent during 1990–1994, expendi- 40 tures on education decreased by 27 percent – an indication of deteriorating quality (World Bank 1996:37). On the other hand, primary school enrolment increased from 30 to 76 percent between 1973 and 1990. Yet, enrolment is low compared to other low-income countries and acutely deficient for females. For every 100 boys enrolled in primary school, there were only 41 girls, as compared to 100 versus 86 on average for developing countries (World Bank 1996:36). Illiteracy among the poor is higher but in relative terms not as high as one would have expected: 66 percent of the poor are illiterate (59 percent of the non-poor). For women, illiteracy is above 80 percent for poor and non-poor. For poor and non-poor men the score is 44 and 34 percent respectively. Unemployment levels are not markedly different for the poor as compared to non-poor, but some differences in employment patterns exist, and public sector employees make up a growing poverty group. Total labour force participation is low at 53 percent. Poor men begin working earlier in their life, and quit later than the non-poor. The overall female participation rate is 18 percent. Poor women enter the labour market earlier than the non-poor, their participation is below the non-poor during child-rearing years, and it subsequently rises above non-poor levels. Overall unemployment rates are slightly higher among the poor, but among young adults the relationship is reverse.32 In 1992, 13 percent of all public sector employees (26 percent of the labour force) fell below the poverty line, compared to 18 percent in the private sector. Prospects for improvements in the poverty situation in Yemen are not promising in the short and medium term. The rural concentration of poverty makes public intervention less feasible due to weak infrastructure and low state capacity. Improvements in agricultural productivity would benefit the majority of the poor most effectively, and agricultural output has grown by 4.8 percent from 1990 to 1997. Acutely scarce water resources impede further improvements. In the same period, GDP has grown by 3.7, which is barely above population growth and not sufficient to increase expenditures per capita. Oil in-

32 The unemployment rate estimated in the World Bank assessment is only 7 percent, which is far below that estimated by other sources.

41 come (23 % of GDP in 1994–95) is contributing crucially to overall growth, but its domestic developmental effects are largely indirect and critically depend on long-term resource allocation made by the government.

3.2. The Kingdom of Morocco: Substantial progress, but mixed achievements and a difficult future Morocco has been leading the now broader movement of economic reform in the MENA region for a decade. Beginning in 1983, Morocco has undergone a period of structural adjustment reforms, highlighted by a parliamentary vote of support for extensive privatisation in late 1989. However, Morocco’s performance on reducing poverty has been mixed. Compared to other lower middle-income countries, Morocco has a higher incidence of rural poverty. With a real GNP per capita at US$ 3310 (PPP) in 1998, Morocco is significantly below the regional average, and at the average of the developing world at large. With 40.2 percent HPI poor, it is only above Sudan and Yemen in the region on that specific measure. Based on a 1990–91 survey, 13.1 percent of the population are below the national poverty line – 50% fewer than measured in 1984–85. This improvement has been achieved by sustained per capita growth in the years between, much of which has been in labour-intensive manufacturing. Less than 2 percent of the population are absolute poor as measured by the international $1 (PPP) per capita per day, while the $2 (PPP) per capita per day line defines 19.6 percent as poor (UNDP 1998:191, WDI 1999, Appendix 2).

Performance on social developments indicators below the regional average.

Equally mixed are Morocco’s achievements on social development indicators, on many of which Morocco falls below regional averages. Despite poor performance in some areas (high illiteracy and infant mortality rates), Morocco’s performance on all the social indicators has improved greatly over the past twenty years. Life expectancy at birth is 64 for men and 68 for women, compared to an regional average of 66 and 68 respectively. The infant mortality rate is 64 per 1,000 live births (1996), as compared to 48 in the region (1997). Male and

42 female adult illiteracy are 43 and 69 respectively (1995), compared to 28 and 50 regionally. As elsewhere, low female literacy and education levels are closely related to low standards in maternal and child health (World Bank 1994: x). Population growth is less than regional average, projected at 1.5 percent in the 1995–2015 period, caused by a fertility rate at 3.4 children per woman, down from 5.4 in 1980 (UNDP 1998:193,177; WDI 1997). Inequality persists as the poorest 20 percent of the population receive 6.6 of the total income, the wealthiest 20 percent have 46.3 of the total income (World Bank, 1994).

A wide gap exists in poverty levels and access to health and education services along rural/urban lines and among regions.

As we have seen, different measures give widely different estimates of the scale of poverty in Morocco. However, the distribution of poverty between urban and rural areas, and among the various regions of the country, show that the marked disparities in evidence in the 1980s still existed in 1990–91 (World Bank 1994: 6). The World Bank’s 1994 poverty assessment and later income analyses describe the poverty situation as being concentrated in rural areas, where a substantial group of the poor are small farmers (World Bank 1994: passim). While in urban areas most of the poor are wage-earners or self-employed, under-employment is more characteristic in rural areas and is seasonal. Seventy- two percent (about 2.5 million people) of all poor are rural dwellers. Eighteen percent of rural populations are poor compared to 7.6 percent of urban residents. Consumption is higher in urban than in rural areas. The poor have, on average, large households (both dependants and non-dependants), and male-headed households are slightly poorer than female-headed households. Finally, regional variations are significant (less than five percent poverty in urban, coastal areas, more than 25 percent in the Centre-North, East, and Centre-South). The level of health, education and infrastructure, and government expenditure in these services, is likewise skewed along urban/rural and regional lines. Although Morocco has invested much in expanding the number of rural schools, there are still some 53 percent of the rural population without a school in their area (World Bank, 1994, 78). Further, in the crucial area of female education, female primary enrolment is significantly lower among rural poor compared to rural non-

43 poor, while there is no such difference in urban areas. Government expenditures favour investment in secondary at the expense of primary education. Improvements on health indicators and in the provision of services has been complicated by the state’s allocation of resources with a bias towards health centres offering preventative care (and heavy investment in hospital care) and the urban-biased allocation of these out-patient health centres (World Bank, 1994, 77). Furthermore, the poorest regions in the country received the least amount of public investment in health. In urban areas, the poor have significantly less access to health services and other municipal services, while in rural areas most of these services are not available to anyone but the most wealthy.

High real growth in agriculture during the 1980s stalled during the 1990s

Agriculture is a vital determinant of poverty in Morocco, both because it provides direct and indirect livelihood to the vast majority of the rural poor, and because its pay-off levels affect rural to urban migration which is a main factor behind rising urban unemployment and hence poverty33 (World bank 1994:v). High growth in agriculture during the 1980s (8 percent annually) was reportedly due to structural and policy reforms undertaken from the the mid-1980s. How- ever, these trends have not continued into the 1990s. In this crucial sector34 , average annual growth of output was negative for the entire 1990–97 period (WDI 1999: Tables 4.1 and 2.4). It is likely that this has contributed to stall decline in poverty levels. The problems in agriculture are long-term and worsening: the country is likely to experience “chronic water stress” by the year 2020, while earth erosion and degrading water are already significant problems (World Bank 1996:xi).

Economic growth has failed to keep up with population increase.

33 Its negative growth rates in the 1990s were primarily caused by several seasons of serious drought, illustrating the vulnerability of agricultural “self-sufficiency” in the MENA region. 34 In the 1990–97 period, agriculture employed 35 percent of the male labour force and 63 percent of the female (WDI 1999: Table 2.4).

44 Despite successful macroeconomic management in the 1990s, Mo- rocco has failed to sustain economic growth above population growth. GNP per capita growth has, in fact, been negative for several years, including 1996–97 (–4.4 percent). During the 1990s GDP has grown at an average annual rate of only 1.9 percent, which is below population growth, and considerably below “pre-reform” growth rates (4.2 percent, 1980–89). Even if Morocco regained the 1980s growth rates of 3 to 4 percent – a target not met by industry, manufacturing, or services in the 1990s – unemployment would continue to rise, even with stable rates of labour force participation (World Bank 1996:6). Much depends on the country’s ability to adapt its manufacturing industry (e.g. textile) to the more competitive external environment established by the Uruguay Round and the Free Trade Accord with the EU, the short term effects of which may well be negative (World Bank 1996:10).

3.3. The Arab Republic of Egypt: Structural adjustment with increased poverty, but improvements on the horizon. Since the late 1980s, pressing economic problems persuaded Egyptian authorities to “adopt the new orthodoxy” (Springborg 1989:4) promoted by international financial agencies. From 1991 until 1998, Egypt was party to three successive IMF Structural Adjustment Programs (SAPs). In this period, rampant inflation and budget deficits35 have been brought under control (4.6%, and 0.9 % of GNP respectively in 1997/98), and foreign currency reserves have multiplied (EIU 1998:8–9). Stabilisation has yet to translate into substantial real growth and increased living standards. There are scarce signs that poverty has been reduced in the 1990s. In the 1990–97 period, GDP growth averaged 4 percent per year, which is less than corresponding figures for the previous decade (WDI 1999:Table 4.1). In terms of (nominal) GNP per capita, Egypt’s $1,180 in 1997 is modest even in the lower middle-

35 Egypt’s position in the Gulf War contributed significantly to Western (largely Ameri- can) creditors cutting Egypt’s $50 billion foreign debt (1990) to $26 billion by 1994 (Cassandra 1995:11).

45 income group (World Bank 1998:191). Based on data from a 1990/91 survey, World Bank estimates indicate that 20 percent of Egypt’s population with the highest income have 41.1 percent of total income, while the 20 percent with the lowest income have 12.5 percent, which is more equitable than Morocco and Yemen. A national survey conducted in 1997/98 indicates that inequality has increased in the 1990s (Datt et al 1998:45), but differences in methodology could be equally important. Lack of comparable data make pre- and post-reform comparisons difficult. Gradual price increases on several items following cuts in subsidies have affected the purchasing power of the entire population, while the more recent cuts in food subsidies would have hurt the poor disproportionately, as these were the main beneficiaries of the extensive pre-reform system (World Bank 1991:57). The incidence of absolute poverty in Egypt was estimated in 1991 at 7.6 percent on the $1 per day line, with a poverty gap of 1.1 percent. With a $2 per day line, the percentage increases drastically, to 51.9 percent of the population, with a gap of 15.3 percent (WDI 1999:Table 2.7). On the UNDP HPI index, Egypt is ranked above Yemen, Sudan, and Morocco only, with 33 percent HPI poor. Rural- urban differences in poverty levels are less apparent in Egypt than in Morocco, partially because there is a concentration of the population in the Nile Valley and Delta (such that most of the rural population lives near urban areas).

The poor in Egypt are concentrated in rural Upper Egypt, have larger households and dependency ratios, and are more often female-headed households.

A more recent study established a national poverty line based on minimum consumption expenditures. It estimated the percentage of poor at 26.5 percent (Datt et al 1998). In this study, the poor in Egypt are described as follows (Datt et al 1998: passim): 26.5 percent or 15.7 million persons are poor according to a regionally defined minimum food and non-food consumption. 8.6 percent, or 5.1 million persons, are “ultra poor”. The national poverty gap index is 6. Both poverty lines demonstrate that the incidence and depth of poverty is somewhat more serious in rural areas, as 23.1 percent of the urban, and 29.1 percent of the rural population, are poor. The most affected area is upper rural Egypt, but – somewhat surprisingly – when including 46 urban areas, Upper Egypt does not have more poverty than Lower Egypt. Poor households are larger than non-poor, with an average number of 8 members in “ultra poor households”, and an average of 5.4 among the non-poor. Poor households have a higher dependency ratio36 than the non-poor, and the ultra poor have the highest. The difference is almost entirely explained by differences in the number of children. On average, the poor have one extra child to support for every four adult members of working age, relative to the non-poor. Female-headed households are more often (and marginally more severely) poor than male-headed households – 33.5 of urban and 36.3 of rural female-headed households are poor, compared to 21.8 and 28.1 of the male-headed households respectively. However, female- headed households have a slightly higher average per capita consumption, a fact that indicates the existence of large differences within the category.

Performance on social indicators below the regional averages

A closer look at key social indicators show that Egypt’s life expectancy at birth stands at 64.8 years, its infant mortality rate at 57 per 1000 live births, and its adult literacy rates at 51.1 percent – all of which are below regional averages (UNDP 1998:129, 156).

Government expenditures in health and education have not kept up with large population growth and show regional biases, the poor are markedly less educated than the non-poor.

Considering health and educational services, the rapid demographic growth in Egypt has contributed to a growing share of government expenditures towards salaries to the detriment of quantitative and qualitative needs (World Bank, 1990–91). Regional inequalities in the allocation of services persist in both education and health service provision. Furthermore, the share of expenditure on education for primary education was measured as 20 percent compared to 50 percent for university education (World Bank, 1990–91, 220). In the study

36 The ratio of the members in age groups 0–15 years and above 60 to the number of members of working age 15–60 years.

47 mentioned above it was found that the poor are less schooled in every sense. (Datt et al 1998: passim): Only 48 percent of the poor can read, compared to 66.5 on the average.37 Among poor women and poor rural residents only 34 and 39 percent respectively are literate. Aver- age years of schooling is 4.4 years for the poor, versus 7.0 years for the non-poor. Sixty-six percent of the poor, 76 percent of the ultra poor, and 74 percent of poor women have not completed primary school, compared to 44 percent of the non-poor. All poor report financial reasons (rather than access) as the most important for not attending school.

Unemployment is higher for the poor and women, and the employed poor most commonly work in construction, agriculture and the trade and services sectors. Remittances are not a key income source for the poor.

Labour force participation is low among all groups with glaring gender differences: 57.7 percent of males and 20.9 percent of women in urban areas, and 60 versus 14.5 percent in rural areas. (Datt et al 1998). Unemployment is higher for the poor in all sectors and across gender. Gender differences are particularly large: Unemployment for urban males and females are 8 percent and 27 percent, versus 6 percent and 36 percent in rural areas. (Datt et al 1998). The poor more often work as causal wage labourers, but for poor urban females, salaried work is more important than casual. On the whole, construction, agriculture, and trade and services have the highest concentrations of poor. In rural areas, poverty is considerable lower among landholders, and decreases with the size of the holding. Transfers (including remittances) are not a key income source to most households, and on average represent 2.2 percent of the mean per capita expenditure. The proportion of poor and non-poor households receiving transfers is nearly the same, but the poor receive a larger absolute per capita amount. Because of larger families, however, transfers represent a smaller proportion of their expenditures. Growth in the second part of the 1990s was affected by the huge

37 The national illiteracy estimates given by Datt et al differ from international statistics.

48 drop in tourist revenues that followed from major terrorist incidents in Luxor and Cairo, but is now gradually resuming. Egypt concluded its adjustment programs under the IMF in 1998, but remains committed to further privatisation and trade liberalisation. In 1999, Egypt signed a Free Trade Agreement with the EU, which is hoped to boost export-oriented industry. Similarly, the hitherto sluggish privatisation program has gained pace this year, a fact which has contributed to a situation where international agencies and investors are now starting to look at Egypt as a promising emerging economy in the area.

3.4. The Hashemite Kingdom of Jordan: Failed growth threatens welfare and equity The Kingdom of Jordan, with some 4.7 million people, is scarce on natural resources and domestic industry, but large inflows of Arab aid and workers’ remittances contributed to high growth rates during the late 1970s and early 1980s. Reductions in inflows in the second part of the 1980s led to severe economic problems at the end of the decade, and structural reforms were negotiated with international agencies. Reforms were delayed because of the outright economic crisis caused by the Gulf War, which disrupted aid and remittances from the Gulf and important trade links with Iraq, and flooded the country with Iraqi refugees, as well as Jordanian and Palestinian expatriates. The economy improved temporarily after the crisis, not least due to rapid increases in remittances38 , but has slowed to negative on a per capita basis since 1996.

Moderate and low economic growth rates in the 1990s accompanied by high population growth rates.

Jordan’s overall GDP growth was satisfactory in the mid 1990s, but largely offset by high rates of population growth (4.2 % annually be-

38 Repatriation of capital in 1992, when migration resumed, contributing from a low of 12 percent of GNP in 1991 to 19 percent in 1994, and to 21 percent in 1996 (Central Bank of Jordan 1998:5, in Pedersen 1998: 360).

49 tween 1980–1995) (WDI 1997 and 1999). In the second part of the 1990s, growth has failed, and yielded negative GDP per capita growth in 1996 (–1.64%) and 1997 (–1.85%), and most probably also in 1998. Currently, talks are being held with the IMF with the objective of alleviating the effects of economic problems, stimulating growth and stepping up reforms (MEED 30.04.99). More than most other countries in the region, Jordan’s economy has been hurt by political conflicts in its neighbouring countries, most notably Israel–Palestine and Iraq, conflicts which have also affected tourism negatively.

Jordan is still the least poor in the region, has above average performance on social indicators and has the highest equality among states ranked in the region.

A 1991 survey estimated the percentage of poor in Jordan at 15 percent based on a national poverty line. The World Bank $1 per day line yields a percentage of absolute poor of 2.5, with a low poverty gap at 0.5 percent. The $2 per day line raises the percentage of poor to 23.5, with a gap at 6.3 percent (WDI 1999). In the UNDP HPI ranking, Jordan, together with Bahrain, are the least poor of all ranked MENA countries, with only 9.8 percent HPI poor. This suggests a socially equitable distribution which is supported by favourable scores on social indicators: life expectancy at birth (69 for men, 72 for women), infant mortality rate (30 per 1,000 live births), adult illiteracy rate (7% for men, 21% for women), all of which are well above regional averages (World Bank 1998: 202). Jordanian fertility rates continue to be above the regional average (TFR 4.0), however, with a TFR of 4.3 in 1995, (Randall 1998:63). Recent studies, as well as the recent negative growth in per capita growth, suggest that levels of income poverty have probably been increasing in the late 1990s, although differences in methodology pre- clude strict comparisons. Income mobility is low, and the poor more often report declining income and low expectations for the future. Income data support their low spirits, showing that the lower income brackets tend to receive less or stable income, while the upper brackets are increasing their income (Arneberg 1998:215). Fourteen percent of all households consider themselves poor according to a range of subjective questions, corresponding almost exactly to the 15 percent poor found by the World Bank in 1992. 50 Households in poverty are characterised by a female and/or uneducated household head and high dependency ratios. There is little urban/rural distinction in poverty.

Twenty-three percent of female-headed households and 13 percent of male- headed households consider themselves poor. These differences are supported by income data. Heads that are divorced double the poverty risk of their households. Widowed heads, on the other hand, lower the risk of poverty compared to the average. Most probably, this is a strong indication of the importance of mechanisms of family-based support (and non-support) in Jordanian society. High household dependency ratios increase the risk of poverty. The single most important determinant of poverty in Jordan is education. The risk of being poor is eight times higher for households with an uneducated head, compared to households whose heads have more than secondary education. Labour market attachment is crucial to poverty risk, and there are similar levels of poverty in households without labour resources irrespective of the sex of head. In households with labour resources, female-headed households are worse-off regardless of other characteristics, indicating either discrimination of females in the labour market or lower earnings for younger members of the households. Contrary to the patterns found in all the other cases, rural areas are not generally poorer than urban areas in Jordan. However, living in the capital Amman nearly halves the poverty risk. Living in the north- eastern governorates of Zarqa and Mafraq increases the risk of being poor. As in the other cases, construction is an industry with a dispro- portionate share of poor. Low occupation status – day labourers, unskilled workers and the like – increases the poverty risk. Particular groups of poor include Palestinian refugees living in camps, who run a double risk of being poor relative to non-refugees, irrespective of other attributes.

51 3.5. The Republic of Tunisia – Successful poverty alleviation during structural adjustment, but sustained growth not secured. Finally, we turn to Tunisia, a country whose structural adjustment process has been combined with a commitment to poverty alleviation policies that have been commended by international financial agencies. Having followed the same general import-substituting model of development since independence as most other Arab countries, Tunisia too ran into severe balance of payment and budget deficit problems in the early 1980s, when external and internal conditions became less favourable to that development strategy. Initial reforms aimed at stream-lining the economy while preserving the prominent role of the state, and more thorough reforms were also restrained by popular resistance. In the summer of 1986, however, the country was virtually out of foreign currency to cover imports and had to turn to the IMF for an agreement which would allow for new loans. From then on, Tunisia has worked closely with the World Bank and the IMF in the implementation of reforms. The key restructuring components have been the same as those of the other reforming countries in the region, including currency devaluation, budgetary con- traction, privatisation, promotion of export and reduced protection against imports. But Tunisia has been exceptional in its emphasis on poverty alleviation during reforms, having pursued policies and achieved results that, according to the World Bank (1995:i), “could well serve as a model for other countries seeking similarly dramatic results”. In the following, we shall review some of these policies and their results. With a nominal GNP per capita at US$ 2,112 (1997), Tunisia still belongs to the category of lower-middle income countries. A few years ago, Tunisia was a very poor country – more than 40 percent of its population were classified as poor in the late 1960s (World Bank 1995:i). While different measures yield widely different counts of poverty today, the incidence of poverty has undoubtedly dropped significantly in the past ten to fifteen years. A recent assessment study (World Bank 1995:i) estimated the number of poor at 7 percent of the population in 1995, down from 11.8 poor in 1985. Only 3.9 percent fall below the US$1 per day line, although as many as 22.7 percent fail to meet the US$2 line, indicating that a substantial number of those “lifted

52 above” the poverty line in recent years remain vulnerable to economic fluctuations (WDI 1999: Table 2.7). According to the cited World Bank study39 , two major processes contributed to poverty reduction in the reform period since 1986. Firstly, as expected, continued (though not high on a per capita basis) economic growth40 has been the backbone of poverty alleviation. Sec- ondly, and more unusual, Tunisia improved its income distribution at least during the first phase of structural adjustment. Although the change is not dramatic, it represents an improvement on the Gini index from 43.4 percent in 1985 to 40.1 percent in 1990, which is exceptional when considering the large cuts in public spending that were executed in that period (World Bank 1995:iii). The reasons for Tunisia’s ability to shield the poor, and indeed improve their situation during restructuring, can be found both in the ways by which macro-economic stabilisation was implemented and in the Tunisian government’s ability to devise adept pro-poor public policies during reform and after, as well as in its patterns of post-reform economic growth. The stabilisation phase is critical for the poor and near-poor, as stabilisation is a response to deteriorating debt and balance of payment indicators and therefore invariably requires cuts in government expenditures, which in Tunisia were reduced from 37.4 percent of GDP in 1986 to 30.1 percent in 1993 (World Bank 1995:2). But social sector41 spending was protected, and its share of government expenditures increased from 47.5% in 1985 to 52.5% in 1990. In fact, social sector spending increased in real terms during the initial phase of restructuring (1986–90), a fact which greatly smoothed that process, although the social sector has not been unaffected by public aus- terity since then. As public social funds became more scarce, Tunisia introduced targeting schemes in order to protect the most needy. There are two types

39 The 1995 World Bank poverty assessment study is based on a 1990 household budget study and projections of later developments. 40 Since 1986, when growth was negative, annual GNP growth has varied between 0.2 (1988) and 10.8 (1997) (WDI 1999). 41 Social expenditures include: education, health care, basic infrastructure, social security, consumer subsidies, direct cash transfers, regional development programs (World Bank 1995:4).

53 of targeted social assistance programs. One is a system established in 1986 of direct transfers of food or money to those qualifying as needy, including the elderly, the handicapped, school children, and poor families. The program reached more than 100,000 people in 1994, some three quarters of those eligible. Yet, the program suffers from complex administration and imperfect outreach, contributing to prevent some of the most needy from benefiting from its services (World Bank 1995:41). The other social assistance system is one of targeted consumer subsidies. Subsidies introduced in the 1970s were subjected to thorough reforms in 1990, shifting from universal to targeted subsidies in order to reduce the considerable “leakage” to the non-poor that resulted from universal subsidies.42 An innovative self-targeting mechanism was chosen for foodstuff, offering “inferior quality” products (including cheap wrapping) at subsidised prices. Anyone can still choose the more limited range of subsidised goods, but they tend to be bought by the poor, and targeting of subsidies has improved significantly, now benefiting the poor disproportionately (World Bank 1995:43). The pattern of economic growth in the post-reform period also ben- efited the poorer segments of the population, with the strongest growth and employment generation found in relatively labour intensive, low- skill and low-pay sectors such as textiles, clothing, leather, and tourism. The informal sector had the higher growth rates, while the formal sector has been unable to absorb the growing labour force and has seen steadily rising unemployment in the reform period, particularly in urban areas (World Bank 1995:6). Furthermore, sectors producing tradable goods have improved their wages relative to non-tradable producers, such as the large civil service. In agriculture, however, price shifts have only effected marginal income increases among the poor households – but these are also less negatively affected than larger landowners by cuts in subsidies of inputs, such as fertiliser and irrigation water. Reduced rural poverty has been achieved mainly through growth in non-agricultural activities, assisted to some extent by government credit programs (World Bank 1995:21).

42 In 1985 the subsidy program conferred twice as much worth of benefits to the non- poor compared to the poor. It contributed significantly to the purchasing power of the poor, however, and improved targeting rather than elimination of the program was crucial to the welfare of the poor (World Bank 1995:42).

54 Finally, Tunisia’s traditional emphasis on the social aspects of development, including promotion of female education, has been cited as important in the country’s ability to benefit from reforms (World Bank 1995:ii). It scores above the regional average on key social indicators such as life expectancy at birth (68.4 for men, 70.7 for women), infant mortality rate (27 per 1,000 live births), adult illiteracy rate (44.2% for women, 21.9% for men). While a relatively high achiever in the region, substantial challenges remain in developing Tunisia’s human resources, not least with regard to female literacy and schooling (UNDP 1999: Human Development Indicators, Table 2). Despite considerable progress, poverty and near-poverty remains a salient problem in Tunisia, and Tunisian poverty has many of the characteristics found in other MENA countries (World Bank 1995:iii and passim):

Poverty is concentrated in rural areas, but the rural-urban balance is changing

About two-thirds of Tunisia’s poor lived in rural areas in 1995. Rural areas have 13.1 percent poor, urban areas only 3.5 percent. But rural poverty has declined faster than urban poverty, and wage and employment shifts amongst economic sectors and rising urban youth unemployment following structural adjustment are strengthening this tendency.

Larger families correlated with poverty

In both rural and urban areas, poor households are above average in size, with more children and higher dependency ratio overall than non- poor households.

Poor heads of households are not usually unemployed

In rural areas, most poor heads of households are wage earners, and many own land and livestock. Incomes from small farms are vulnerable to fluctuations in rainfall, but the typical occupational category of poor rural as well as urban heads of household is construction. In urban areas, more than 60 percent of the poor are wage-earners, and the rest are mainly self-employed. So far, rising unemployment has mainly

55 affected youth who are not heads of households. Unemployment – if constant or increasing still – is thus likely to have an adverse effect on poverty at a later stage.

Strong association between poverty and lack of human capital

Two-thirds of the poor in both rural and urban areas belong to households whose main breadwinners have no formal education. School enrolment rates continue to be lower for the poor in urban and rural areas than for non-poor, and lower for both groups in rural areas. As in the other cases, continued progress in poverty alleviation in Tunisia requires sustained economic growth and skilful public policies. Until today, growth indicators have been unstable, shifting from very low or negative in some years (–0.93% GNP per capita growth in 1993), to very high in other years (9.16% GNP per capita growth in 1997). More stable growth requires, among other things, a diversified economy less vulnerable to price fluctuations in one or a few commodities. As we shall see in the following section, several changes in the internal and external economic environment offer opportunities as well as serious challenges for the MENA region in that respect.

56 4 Prospects for the future

4.1. Structural adjustment and the poor The distributive effects of structural adjustment programs are complex and controversial. A number of common components may affect the situation of the poor, including (1) reduced public spending, (2) devaluation, (3) raised interest rates, (4) cuts in consumer subsidies, including introduction of market-based agricultural prices, and (5) downsizing of the public sector (Richards & Waterbury 1996:214). The impact of these and similar policies on the poor are not well- researched in the Middle East. They are likely to affect the urban poor more than the rural, who are likely to benefit from rises in agricultural prices. One study finds that in Egypt there is evidence that the 1987 and 1991 adjustment programmes seriously hurt the existing poor and created a group of ‘new’ poor especially in urban areas. For those, devaluation and rising inflation clearly raised the overall cost of living (El-Ghonemy 1998:182, 201). The World Bank’s own estimates of poverty levels suggest a decline in incidence as well as depth of poverty in the early 1990s. Short-term negative impacts, acknowledged by the World Bank, are supposed to be outweighed by growth in the longer term. In response to criticism, the World bank added “safety nets” in its three-pronged strategy for poverty alleviation43 in 1990–91 and began linking lending to the country’s efforts to reduce poverty and allocate funds to social sectors, the so-called social funds (MFA 1998:7,19). The experiences with these social funds in the MENA context have been mixed, and as far as direct transfers to the poor (which is not the only use of such funds) are concerned, experience from Egypt and Jordan indicate that the public transfers have been insubstantial and with a limited outreach,

43 The two first being “broad-based growth” and “human development” (MFA 1998:19).

57 and thus less important than private, family-based transfers (van Eeghen 1998:242). In recent years, reforms have gained some pace in the Middle East, and it is likely that they increase poverty in the short term. The important question is whether reforms can actually produce growth in the longer term.

4.2. Entering global competition: From import- substitution to export-led growth It is widely agreed today that further reduction of income poverty and further progress on social development can only be achieved by sustained economic growth, although opinions differ as to the most ap- propriate strategies for growth and the effects on distribution in the short and longer term. While poverty alleviation under certain conditions can be achieved at zero growth through redistribution, such transfers from the wealthier, and politically more powerful, to the poorer, are unlikely and have few adherents today. In practise, countries with slow or negative growth (e.g. transitional post-communist countries) have experienced the most serious deterioration of internal distribution (UNDP 1999:6). Redistribution accompanied by growth, will increase the pay-off for all and thus increase political feasibility. Due to the relatively low depth of poverty in MENA, growth is expected to have an above-average impact on reducing the number of poor in the region (von Eeghen and Soman 1997:4). By implication, the low or negative growth in recent years has most probably increased poverty. Since the mid-1980s nearly all MENA countries have opted for greater outward orientation of their economies, in effect their development strategies have gradually changed from import-substituting, state-led industrialisation towards export-led growth and privatisation. Global trade and investment flows are expanding rapidly in spite of the major setback represented by the recent crisis in Asia. But global competition is intense, and an export boom similar to East Asia’s of the 1970s should not be expected for the MENA countries (Diwan et al 1998:48). Linking the region to the global economy can be discussed in relation to two major processes in their external environment: the finalisation of the Uruguay Round and the establishment of the World Trade Organisation (WTO), and the integration with the

58 EU via individual association agreements supposed to prepare the ground for a Euro-Mediterranean Free Trade Agreement (EMA) by the year 2010. None of these tracks offer a panacea to MENA economic growth. Several countries were not GATT members by the end of the round, and thus are not members of the new WTO, 44 a position that, in itself, detracts from their attractiveness among international investors (Hoekman 1998:97). The regional effects of the Uruguay Round are expected to be relatively small, with provisions allowing existing (high) import tariffs to mostly remain in place (Hoekman 1998:114). Over the short and medium term, effects are predicted to be negative due to the phasing out of the Multi Fibre Agreement, (which will increase competition and lower prices in exported textiles), and cuts in agricultural subsides in industrialised countries (which will increase the costs of food imports) (Diwan et al 1998:58). According to this analysis, “skilled labour ends up as the main loser in the Mid- dle East and North Africa because unskilled wages are pushed up by the rise in agricultural terms of trade” (Diwan et al 1998:59, 65). Predictions are very uncertain on the longer term, although the Arab economies are likely to benefit from increased global trade (see Ta- ble 4.2.1). To what extent depends on the individual country’s ability to gain market shares. Similarly, the Euro-Mediterranean agreements are not likely to have substantial, immediate effects45 on growth. Here too, direct benefits are scant since Mediterranean countries already enjoyed duty-free access to the EU for industrial (non-agricultural) goods under Coopera- tion Agreements signed in the 1970s. Because contracting countries will have to give up most import tariffs on EU products, the most tangible direct impact of the EMA is negative. With some 48 percent of total imports from the EU, this represents a considerable loss which is not expected to be off-set by benefits in the short and medium term

44 When the WTO entered into force in January 1995, Algeria, Iraq, Jordan, Lebanon, Libya, Saudi Arabia, Syria, and Yemen were non-members. Algeria, Jordan, and Saudi Arabia have been involved in accession talks (Hoekman 1998:97). 45 Euro-Mediterranean bilateral association agreements were signed by Tunisia in 1995, and later by Morocco, Jordan, the Palestinian Authority, and Egypt. Negotiations are ongoing with Algeria and Syria. In addition to trade and investment, they cover the respect for human rights, political dialogue, and social, cultural and environmental issues (World Bank 1999b:192)

59 (Hoekman & Djankov 1996:3). Supposedly, benefits would outweigh costs in the longer term, through processes such as (1) credibility and dynamic gains (EMA as an anchoring mechanism for domestic reforms, especially where WTO mechanisms are too weak, such as in investments and services, reducing the risk of internal reversals and increasing investor confidence), (2) harmonisation (of regulatory regimes and administrative frameworks), (3) facilitation of general liberalisation (EMA as an engine for further liberalisation and bearer of initial adjustment costs), and (4) transfers (financial and technical assistance to facilitate reforms and cushion effects) (Hoekman & Djankov 1996:5–6). The extent to which these potential benefits accrue depends on a range of country policies. Having examined the “model” Tunisian agreement, however, Hoekman & Djankov (1996: 25) find that most of these mechanisms are unlikely to yield substantial benefits, primarily because the EMA “does not go significantly beyond the existing multilateral (WTO) disciplines”, especially in the fields of foreign direct investments (FDI) and services (in contrast to the agreements signed by Eastern- and Central European countries), and because they allow for long periods of adjustments. Both fields, moreover, are at the core of globalisation. Relative losses in foreign direct investments and services (such as information technologies, financial and business support, and other infrastructure services) are damaging to MENA’s potential advantages in global competition, both directly in terms of lost investments, and indirectly, because high standard services are crucial to support development of domestic competitive sectors. Thus, the greatest significance of the EMAs is probably the credibility and commitment that they bestow on sustained and continued reform, not the independent impact of either of the agreements.46 This finding draws at- tention to the fact that increased growth in the MENA economies will have to be based on fundamental internal reforms, rather than improved external relations. Indeed, as the analysis of the WTO and EMA processes have shown, openness without improved domestic competi- tiveness and investment environment openness may have larger costs than benefits even in the long term. So far, reform in MENA has been slow and, in fields such as privatisation of public enterprises, insub-

46 This applies to “transfers” too, since MENA already received significant financial assistance from the EU, and because this aid is likely to decline in the coming years, i.a. because of urgent needs in the Balkan (Hoekman & Djankov 1996:6)

60 stantial. Reducing the weight of, and stream-lining the public sector remains a priority area.47 There are indications that MENA’s commitment to trade and financial regimes such as the WTO and EMA does raise the credibility of reforms and contributes to growth. Growth in the more diversified economies reached 4.8 percent in 1998, and as much as 9 percent in Morocco (largely spurred by agriculture as drought came to an end), in spite of the sharp regional effect of decline in oil-prices which caused growth in the region as a whole to drop from 3.1 percent in 1997 to 1.5 percent in 1998. Similarly, improved credit ratings by international rating agencies for diversified economies such as Egypt, Iran, Jordan, Morocco, and Tunisia, contributed to substantial increases in net FDI. Still, net FDI inflows amounted to less than 1 percent of the region’s GDP in 1998, compared to 4 percent in East Asia and 3 percent in Latin America (World Bank 1999c:162-3). Estimates by the World Bank suggest continued annual rates of growth barely above zero towards the year 2000, a level which is insufficient to keep up with population growth and will yield negative per capita growth in the first part of the period. Depending on trends in oil prices and long- term effects of the Asian crisis, annual growth is expected to average 3.4 percent for the coming decade, barely above population growth, yielding only a marginal improvement in per capita income and consumption in the decade as a whole. The more diversified economies are expected to see results from reforms, but only slightly above the average, at an annual 4.4 percent for the period, and 5 percent for the latter part of it. While these rates are above those of the previous decade (1988–97), they are the lowest estimated for any developing region, including Sub-Saharan Africa.48 Consequently, poverty levels are likely to increase in the short term (2–4 years) by rates comparable to those of per capita consumption (by which poverty is usually measured), and decline only marginally later on, but more so in countries such as Egypt and Morocco (with relatively high rates of poverty) and Tunisia.

47 The MENA region today spends 9.8 percent of GDP on public wages, nearly twice as much as the average 5 percent in the OECD countries, Asia, and Latin America (World Bank 1999b:191). 48 Projected real GDP growth for the developing regions 1998–2007 are East Asia and Pacific (5.8%), South Asia (5.4%), Latin America and the Caribbean (3.7 %), Sub- Saharan Africa (3.8%) (World Bank 1999b:194).

61 5 Conclusion

This study has shown that the incidence and severity of poverty as measured by income and consumption data are less serious in the MENA region than in other developing regions of the world. Although the availability and quality of data reduce the robustness of that conclusion, it is supported by crude national economic figures. The flow of money into and within the MENA region has been considerable, owing in large part to the region’s enormous oil reserves. While this endowment has created extreme differences among neighbouring countries, oil rent has in fact been redistributed to a notable extent. Indi- rectly, oil has contributed to increase the region’s geo-political importance and associated strategic rent. In the 1960s and 1970s, most states in the region shouldered the responsibility of increasing their population’s supply of health, education, employment, and other welfare services, often starting from extremely low levels of provision in those fields. Whether conducted in the name of Arab socialism or not, the development strategies pursued by most MENA countries placed a strong role on the state and the public bureaucracy in promoting an efficient use of limited resources in what has become known as import-substituting industrialisation (ISI). Undoubtedly, the high level of public spending entailed in this strategy has had beneficial effects on the level of welfare among vulnerable groups. However, the achievements of the MENA states on broader indicators of social development have been moderate, and progress on some indicators slower than that found in other regions. Most notably, the region lags behind in literacy levels, and most particularly so with regard to female literacy. More generally, promoting female human resources and economic capabilities must be given priority if the region is to catch up with global development and economic competition. A more structural side-effect following from the ISI development strat- 62 egy has proved to be the relative neglect of rural development, rural areas today showing the highest incidence of poverty and problems in social development. With diminishing oil-prices in the 1980s the flow of money dried out, the ISI strategy seemed to have lost its potential of growth, and a decade of very slow growth commenced for most MENA countries. In view of severe balance of payment and budget deficit problems in the late 1980s, MENA countries have turned to international agencies for advice and credits necessary for reforming their economies. In that process, the ISI strategy has gradually been abandoned in favour of economic development emphasising export-led growth. The region is currently struggling to come to terms with this economic orientation, and substantial, sustained growth is yet to be seen, most countries lacking a strong and diversified export industry. The effects of economic restructuring on poverty are uncertain and mixed, and depend- ant on the specific policies and growth patterns in the individual country. Cuts in public spending are expected to hurt the poor, although the Tunisian case has shown that the poor can be protected. Simulta- neously, the shift in terms of trade between urban and rural sectors following from rising prices on agricultural products can benefit the majority of MENA poor who reside in rural areas, although that depends on a number of specific contextual variables. On the whole, improvements in poverty and overall social development in the MENA region can only be achieved by sustained economic growth and adept public policies, especially in the promotion of human resources and in the use of limited economic resources to protect the poor. Furthermore, seeking solutions to internal and external conflicts would help attracting badly needed investments, including foreign and Arab capital. Unfortunately, inferring from sluggish growth prognoses and steady population growth, poverty levels in the region are expected to increase gradually on the short to medium term (2–4 years), and stabilise on the longer term (5–10 years). Within the same period, in a more competitive domestic and global economic environment, offering opportunities as well as risks, increased diversification is expected among sectors and countries.

63 References

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65 Pissarides, Christopher A. (1993): Labor Markets in the Middle East and North Africa. World Bank Working Paper 12739. New York: The World Bank Richards , Alan and John Waterbury (1996): A Political Economy of the Middle East. Boulder: Westview Press Sadiki, Larbi (1997): “Towards Arab Liberal Governance: From the Democracy of the Bread to the Democracy of the Vote”, in Third World Quarterly vol 18 No 1 Shukri, Shirian J A (1996) Arab Women: Unequal Partners in Develop- ment. Aldershot: Avebury Springborg, Robert (1989): Mubarak’s Egypt – Fragmentation of the Political Order. Boulder & London: Westview Press Tabutin, D 1994: “La surmortalité féminine en Afrique du Nord de 1965 a nos jours: Aspects descriptifs”. Population 1994(4): 833-854 UN (1998b): Population, Distribution and Migration. New York: United Nations UNDP (1997): Human Development Report 1997. New York: UNDP UNDP (1998a): Human Development Report 1998. New York: UNDP UNDP (1998b): Globalisation, Uneven Development and Poverty: Re- cent Trends and Policy Implications. By David Woodward, WP 4. From UNDP web UNDP (1999): Human Development Report 1999. New York: UNDP van Eeghen,William (1998): “Poverty in the Middle East and North Africa”. In Nemat Shafik (ed.): Prospects for Middle Eastern and North African Economies, London: MacMillan Press von Eeghen, W and K Soman (1997): Poverty in the Middle East and North Africa. The WorldBank GroupWWW: [www.worldbank.org/ wbi/mdf/,dfl/menapoor.html] World Bank (1990): World Development Report 1990 – Poverty. New York: Oxford University Press World Bank (1991): Egypt – Alleviating Poverty during Structural Ad- justment. Washington D.C.: The World Bank World Bank (1994): Kingdom of Morocco – Poverty, Adjustment, & Growth. Vol 1. World Bank: Washington D.C. World Bank (1995): Republic of Tunisia – Poverty Alleviation: Preserving Progress while Preparing for the Future. Volume I – Main Report World Bank (1996): Republic of Yemen – Poverty Assessment. Washing- ton D.C.: The World Bank

66 World Bank (1998/99): World Development Report 1998/99. New York: Oxford University Press World Bank 1999a: Poverty Update – Trends in Poverty. From WWW: [www.worldbank.org/html/extdr/extme/2214] World Bank (1999b): Global Economic Prospects and the Developing Countries. Washington D.C.: The World Bank World Bank (1999c): Global Development Finance 1999. Washington D.C.: The World Bank

67 Appendix 1: Technical Background: Approaches and Concepts used in Poverty Assessment Studies

In this Appendix, we will present various concepts of poverty and how these are translated into poverty measures. We will also briefly give our assessment of the data sources we use, as well as give an over- view over technical terms and definitions in the report.

Concepts of Poverty Three aspects of the concept of poverty are under current international debate, and the choice of approach yield widely different im- pressions of poverty: a) The range of aspects of human life to be included in a concept of poverty; b) The unit of analysis, individuals or households; and c) Whether the scale of poverty measurement should be absolute or relative.

In practice, the choice of approach for this report is mainly governed by the availability of data.

Definitions of poverty No universally accepted definition of poverty exists in international research, but a set of quite well-established positions can be deline- ated – ranging from traditional money-metric definitions on the one end, towards approaches taking a larger number of living condition aspects into consideration, on the other. This report will rely predominantly on two main approaches:

68 • An income approach typical of the World Bank, which considers poverty as a failure to reach a minimum level of income – the poverty line. A main advantage offered by the approach is that it allows for simple cross-country comparison. • The human poverty / capability approach, advocated by the UNDP, which considers poverty “not only the lack for the necessities of material well-being, but the denial of opportunities for living a tolerable life” (UNDP 1997).

The UNDP has developed a Human Development Index (HDI) and a Human Poverty Index (HPI) for the purpose of cross-country comparison. The HDI contains three variables, life expectancy, educational attainment, and real GDP per capita. The HPI is based on the HDI, but geared towards the poor parts of the population. HPI is thus composed of the percent of people with a life expectancy below 40, the percentage of illiterate adults, and a composite economic indicator consisting of the percentage of people with access to health services and safe water, and the percentage of malnourished children under five (UNDP 1997:18).

Unit of Analysis: Individuals or households? While poverty is experienced by the individual and international poverty statistics are commonly based on “head counts”, adequate individual data on economic (and other) resources are rare, particularly for non-earning dependants. Furthermore, income is often pooled and consumption is shared within households (Alcock 1993:87). There- fore, the household is today established as the unit of data collection and analysis in major international poverty and living condition studies.49 It is further assumed that internal redistribution mechanisms produce equal living conditions inside the individual household, count- ing all members as poor if the unit is poor, and vice versa. Neverthe- less, methods have been developed for adjusting measures to varying household composition and size (Alcock op.cit.:91–100, Fløtten

49 It should be noted that this norm has been criticised for reducing the measurable incidence of poverty: “It is well known that the extent of poverty based on larger units is less than that based on smaller units since, for example, many poor individuals share households with better-off relatives” (Piachaud 1988:342, in Alcock 1993:89).

69 1999:22). In this report, the number of poor in a country constitutes the sum of people living in poor households, however defined.

Poverty and Inequality A final critical component in definitions of poverty to be mentioned here, is the use of absolute versus relative measures50 : “Whereas poverty is concerned with the absolute standards of living of a part of society – the poor – inequality refers to relative living standards across the whole society” (World Bank 1990:26). The standards used by the World Bank for comparison – the 1 USD per day per person – is de- rived from what was thought to be needed in India to purchase a minimum basket of goods defined as necessary for a minimum standard of living. A number of local adaptations of this exist, in Jordan, for in- stance at least three poverty lines are used, based on different ideas on what basket of goods is necessary. The absolutist position was challenged in the 1960s with the theory of relative deprivation, focusing on the position of the individual compared to the general standards of living of her fellow citizens. This usually results in a much higher number of poor. Results generated this way are clearly affected by inequality levels, and the exact level of the relative poverty line is established in a rather arbitrary manner. In practise, absolute standards are almost exclusively used in developing countries, while relative measures are the most common in Western countries51 and in the former Eastern Block (Khawaja 1998.:6). Meas- urements for income inequality and severity of poverty add information to statistics on poverty incidence.

Data sources and their quality In this report, we make extensive use of World Bank figures for the broader picture. The World Bank employs two absolute poverty lines for cross-country comparison:

50 It should be noticed that other definitions have been proposed, such as “subjective” and “consensual” poverty lines (Fløtten op.cit.:25-7). 51 The EU, for example, has used a measure that draws the poverty line at 50 percent of median income per unit of consumption (Ringen op.cit.:101).

70 • a lower line which defines the incidence of “absolute poverty” as the percentage of the population with an income/expenditure of less than US$1per day (1985 PPP52 ), and • an upper line of US$2 which defines the percentage of “poverty” more broadly. The lower line is the most common for comparisons in time and space.

We will supplement World Bank data with other sources of data, such as the UNDP and individual country studies, as well as qualitative material regarding the processes generating poverty and wealth in the Middle East. While we believe that together, these data give an adequate though broad picture of the poverty situation, we do not necessarily endorse these methods of measurement as compared to the others mentioned above. It reflects, rather, the current availability of data. As noted by ESCWA, there is a dearth of household data on poverty in the Middle East region (ESCWA 1993:55, 57). Less than half of the population (47 percent) has been covered by at least one survey, a fact which puts serious constraints on substantial comparisons, as well as on our actual knowledge of the actual poverty situation (World Bank 1999a). The World Bank’s regional estimates are based on those countries in each region for which at least one survey has been conducted. We assume that the sample of countries covered by surveys is repre- sentative of the region.

Common approaches to poverty measures • Income / consumption approach “Household incomes and expenditures per capita are adequate yardsticks for the standard of living as long as they include own production” (World Bank 1990:26). This World Bank approach to poverty is probably the most common. Poverty is seen as a failure to reach a minimum level of income or consumption – the poverty line. A main advantage offered by

52 Purchasing Power Parity on 1985 levels.

71 the approach is relatively straightforward cross-country comparison, although this is not free of methodological hazards .

• Basic human needs approach This approach is essentially an elaboration of the previous, specifying in more detail the various aspects other than income considered necessary for “basic human needs”, such as food, clothing, shelter, water (or related achievements such as nutrition, life expectancy, mortality rates) . Adequate levels of each of the different goods/services (or achievements) are defined, rather than using one poverty line.

• Human poverty / capability approach A far more comprehensive conception of poverty has been put forward, among others, by the UNDP, and scholars such as Amartya Sen. Poverty is conceptualised in terms of a process of social deprivation involving “not only the lack for the necessities of material well-being, but the denial of opportunities for living a tolerable life” (UNDP 1997), and proposing that poverty is a lack of capability to function in a number of physical and social ways. The UNDP has developed a Human Development Index (HDI) and a Human Poverty Index (HPI) for the purpose of cross-country comparison. The HDI contains three variables, life expectancy, educational attainment, and real GDP per capita. The HPI is based on the HDI, but geared towards the poor parts of the population HPI is thus composed of the percent of people with a life expectancy below 40, the percentage of illiterate adults, and a composite economic indicator consisting of the percentage of people with access to health services and safe water, and the percentage of malnourished children under five (UNDP 1997:18).

• Social exclusion approach This approach is elaborated primarily by the British sociolo- gist Peter Townsend, and advocated, among others, by the ILO. It draws on the notion of “relative deprivation”, the idea that the incidence and depth of poverty is defined by comparing

72 the income of the lowest income brackets not with some absolute poverty line, but with the prevailing average income levels in the individual society. Adherents think of poverty as a lack of resources required to take part in activities and en- joy living standards which are customary or widely accepted in society.

• Participatory approach The participatory approach questions the procedures by which poverty is usually defined, rather than the definitions as such, although it clearly leans towards a social deprivation model. It suggests that an understanding of poverty in society should be inferred from a process of dialogue with, and participation of local people, emphasising their own understanding of poverty and exclusion as appearing in their societies.

Concepts and technical terms In the following a definition of important concepts and technical terms used in the report can be found. Two major sources, the UNDP and the World Bank, use different categorisations of the region. We will follow the World Bank definition unless otherwise is stated, but Arab states not included in that definition (Djibouti, Somalia, Sudan) are included in UNDP statistics presented (although statistics are frequently not available for Somalia). The atypical countries of Israel and Malta will be excluded from the analysis. • Developing regions: The UNDP categorisation of four developing regions (1998:227) are Arab States (Algeria, Bahrain, Djibouti, Egypt, Iraq, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Saudi Ara- bia, Somalia, Sudan, Syria, Tunisia, United Arab Emirates, and Yemen), East Asia (China, Hong Kong, Korea DPR, Korea PRR, Mongo- lia) South East Asia and the Pacific (Brunei-Darussalam, Cambodia, Fiji, Indonesia, Lao People’s Dem Rep., Malaysia, Myanmar, Papua

73 New Guinea, Philippines, Samoa (Western), Singapore, Solomon Islands, Thailand, Vanuatu, Vietnam) South Asia (Afghanistan, Bangladesh, Bhutan, India, Islamic Rep. of Iran, Maldives, Nepal, Pakistan, Sri Lanka) Latin America (Antigua and Barbuda, Argentina, Bahamas, Bar- bados, Belize, Bolivia, Brazil, Chile, Colombia, Costa Rica, Cuba, Dominica, Dominican Rep., Ecuador, El Salvador, Grenada, Gua- temala, Guyana, Haiti, Honduras, Jamaica, Mexico, Nicaragua, Panama, Paraguay, Per, Saint Kitts and Nevis, Saint Lucia, Saint Vincents, Suriname, Trinidad and Tobago, Uruguay, Venezuela) • Gini Coefficient – the most common indicator of comparative income inequality, the Gini coefficient bases inequality on the cumulative distribution of expenditures across the population. Specifi- cally, it measures the area between the 45 degree line and the Lorenz curve, which shows the cumulative percentage of individuals (x axis) against the cumulative percentage of income (y axis). With perfect equality the Lorenz curve would be equal to the 45 degree line. A Gini coefficient of 0 is perfect equality, a Gini coefficient of 1 is perfect inequality. • Head Count Index – the proportion of the population that falls behind a specified poverty line. It is commonly measured according to the level of household expenditures or income. • Human Development Index (HDI) – the HDI is based on three indicators; longevity, as measured by life expectancy at birth; educational attainment, as measured by a combination of adult literacy (two-thirds weight) and the combined gross primary, secondary and tertiary enrolment ratio (one-third weight); and standard of living, as measured by real GDP per capita (PPP$). To construct the index, fixed minimum and maximum values have been established for each of these indicators: – life expectancy at birth: 25 years and 85 years – adult literacy rate: 0% and 100% – combined gross enrolment ratio: 0% and 100% – real GDP per capita (PPP$): 100$ and 40,000$

The HDI is an average of these four indexes. A discount formula is used in the estimation of the income component, and changes in this

74 formula (a more gradual and constant discount of income replacing the previous threshold discount method) are the main reason for some countries’ (including many of the Arab states) poorer rankings in 1999 compared to previous years. In addition, underlying data have been revised, particularly income data (PPP$) from the World Bank (UNDP 1999:159). For details concerning computation of the final index, consult the source as cited.

• Human Poverty Index (HPI) – the human poverty index for developing countries (HPI-1) concentrates on deprivations in three es- sential dimensions of human life already reflected in the HDI – longevity, knowledge and a decent standards of living, but is more geared towards the situation is developing countries. In construct- ing the HPI-1, the deprivation in longevity is represented by the percentage of people not expected to survive to age 40 (P1), and the deprivation in knowledge by the percentage of adults who are illiterate (P2). The deprivation in living standards is represented by a composite (P3) of three variables – the percentage of people without access to safe water (P31), the percentage of people without access to health services (P32) and the percentage of moderately and severely underweight children under five (P33). P3 is a simple average of P31–33 (UNDP 1999:163). For details concerning computation of the final index, consult the source as cited. • Labour force, total, comprises people who meet the ILO definition of the economically active population: all people who supply labour for the production of goods and services during a specified period. It includes both the employed and the unemployed. While national practices vary in the treatment of such groups as the armed forces and seasonal or part-time workers, in general the labour force includes the armed forces, the unemployed, and first-time job-seekers, but excludes homemakers and other unpaid caregivers and workers in the informal sector. Females as a percentage of the labour force shows the extent to which women are active in the labour force. • Middle East and North Africa, MENA region according to the World Bank Includes Algeria, Bahrain, Egypt, Iran, Iraq, Israel, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Saudi Arabia, Syr- ian Arab Republic, Tunisia, United Arab Emirates, West Bank and Gaza, Yemen.

75 • Poverty Gap Index – the additional money the average poor person would have to spend the reach the poverty line, expressed as a percentage of the poverty line. The poverty gap measures the depth of poverty. • Purchasing Power Parity (PPP) – may also be called the “law of one price”. It is an economic theory that states that at any given time goods should sell at the same price if the price is expressed in a common currency. Thus, if in two countries the prices when converted to a common currency are different, it reflects under- and overvaluation of the currencies. The theory is used to convert monetary amounts or prices to a common metric. • Real GDP per capita (PPP$) – the GDP per capita of a country converted into US dollars on the basis of the purchasing power parity exchange rate. • Total Fertility Rate (TFR) – the average number of children that would be born alive to a woman during her lifetime is she were to bear children at each age in accord with prevailing age-specific fertility rates (UNDP 1999:256) • World Bank Classification of MENA Economies by GNP per capita (1998)53 : Low-Income (Up to US$785) (Yemen [Somalia, Sudan]) Lower Middle-income (US$785–$3,125) (Algeria, Egypt, Iran, Iraq, Jordan, Morocco, Syria, Tunisia, West Bank and Gaza, [Djibouti]) Upper Middle-income (US$3,126–$9,655) (Bahrain, Lebanon, Libya, Oman, Malta, Saudi Arabia) High Income, Non-OECD countries (US$9,655 or more) (Ku- wait, Qatar, United Arab Emirates)

53 Arab states not defined as MENA countries by the World Bank in brackets.

76 Appendix 2: Tables

Table 2: Absolute poverty by region54

Population Living Below US$1 (PPP) Per Day by Region Regions Number of poor Headcount Index55 Poverty Gap56 (millions) (percent) (percent)

1987 1990 1993 1987 1990 1993 1987 1990 1993

East Asia and the pacific (excluding China) 464 468.2 445.8 28.2 28.5 26.0 8.3 8.0 7.8 (109.2) (89.3) (73.5) (23.2) (17.6) (13.7) (3.8) (3.1) (3.1) Eastern Europe and Central Asia 2.2 n.a. 14.5 0.6 n.a. 3.5 0.2 n.a. 1.1 Latin America and the Caribbean 91.2 101.0 109.6 22.0 22.0 23.5 8.2 9.0 9.1 Middle East and North Africa 10.3 10.4 10.7 4.7 4.3 4.1 0.9 0.7 0.6 South Asia 479.9 480.4 514.7 45.4 43.0 43.1 14.1 12.3 12.6 Sub-Saharan Africa 179.6 201.2 218.6 38.5 39.3 39.1 14.4 14.5 15.3 Total 1,227.1 n.a. 1,313.9 30.1 n.a. 29.4 9.5 n.a. 9.2

Source: World Bank 1999a:2

54 Note that the UNDP and the World Bank use slightly different regional definitions (see World Bank 1990:xi and UNDP 1998:137-8). See Appendix 1 for a definition of regions. 55 See Appendix 1: Technical terms 56 See Appendix 1: Technical terms

77 Table 3: HDI values by region

Regions HDI values

LDC 0.430 Sub-Saharan Africa 0.463 South Asia 0.544 Arab states 0.626 Developing countries 0.637 S E Asia and the Pacific 0.695 World 0.706 East Asia 0.712 E Europe and the CIS 0.754 Latin America 0.756 Industrialised countries 0.919

Source: UNDP 1999: Development Indicators, Table 1

Table 4: HPI and HDI by country

HPI HPI HDI HDI Changes in ranking Value % Rank57 Value Rank due to revisions of data and methods for the 1999 UNDP Development Report

Kuwait n.a. n.a. 0.833 35 19 Bahrain 9.8 10 0.832 37 6 Qatar n.a. n.a. 0.841 41 16 UAE 17.7 27 0.812 43 5 Libya 16.4 22 0.756 65 –1 Lebanon 11.3 14 0.749 69 –3 Saudi Arabia n.a. n.a. 0.740 78 –8 Oman 23.7 39 0.725 89 –18 Jordan 9.8 9 0.715 94 –8 Iran 20.4 34 0.715 95 –18 Tunisia 23.1 38 0.695 102 –20 Algeria 28.8 52 0.665 109 –28 Syria 20.1 32 0.663 111 –31 Egypt 33 57 0.616 120 –9 Iraq .. .. 0.586 125 1 Morocco 39.2 67 0.582 126 –2 Sudan 36.8 61 0.475 142 14 Yemen 49.2 78 0.449 148 2 Djibouti 40.8 69 0.412 157 4

57 Out of 92 developing countries ranked.

78 95

–

43.10

23.32

28.09

24.36

12.91

–

Adult Illiteracy Rate

(% of people 15 and above)

97 1985

–

0,7% n.a n.a n.a n.a.

–

orld Development Indicators). Most calculations

Life Expectancy at Birth

ty) / World Bank 1999c (W ty) / World

97 1990

–

9.5% 67.3 67.5 68.1 68.4 1,6% 29.7 20.9 16.9

–

10.0% 50.7 51.1 51.9 52.4 3,2% 56.6 n.a. 43.4

10.7% 69.3 68.8 67.7 68.8

23.8% 68.1 68.6 69.3 69.7 2,3% 17.8 15.1 12.8

21.3% 64.5 65.1 66.5 67.4 4,3% 50.5 45.5 38.2

11.5% 59.2 60.5 61.7 62.5 5,3% 58.1 54.1 50.6

–

1990

(per 1,000 births)

Infant Mortality Rate

1990 1992 1996 1997 Change 1990 1992 1995 1997 Change 1985 1990 1995 Change

Table 5: Social indicators Table

Selected Social Indicators, Regions

Regions

East Asia and the pacific 42 44 39 38

Africa 100 97 91 90 Eastern Europe and Central Asia 28 28 24 25 Latin America and the Caribbean 42 38 33 33

Sources: World Bank 1999b (Regional Data on Pover World Sources: made by author.

Middle East and North Africa 61 60 50 48

South Asia 87 85 n.a. 77

Sub-Saharan

79 Table 6: MENA oil reserves by country

Proven Oil Reserves by January 1998, in 1,000 million barrels)

MENA 724.6 Saudi-Arabia 261.5 Kuwait 96.5 Iran 93 Iraq 112.5 UAE - All 98 Abu Dhabi 92.5 Dubai 4 Sharaj 1.5 Qatar 3.7 Oman 5.2 Bahrain 0.2 Syria 2.5 Algeria 9.2 Libya 29.5 Egypt 3.8 Tunisia 0.3 Yemen 4

Source: The Middle East and North Africa 1999

80 Table 7: Gender, social development

Adult literacy rates Combined enrolment ratio Share of earned income HDI rank Female Male Female Male Female Male

Algeria 82 49.1 73.9 62 66.7 19.1 80.9 Bahrain 43 79.4 89.1 85.9 78.1 15 85 Djibouti 162 ...... Egypt 112 38.8 63.6 63.4 68.9 25 75 Iran 78 59.3 77.7 62.6 67 18.9 81.1 Iraq 127 45 70.7 45.4 55.1 13.9 63.8 Jordan 87 79.4 93.4 66 66 19.1 80.9 Kuwait 54 74.9 82.2 57.9 52.2 25.3 74.7 Lebanon 66 90.3 94.7 75.1 66.1 22.7 77.3 Libya 64 63 87.9 89 85.5 16.3 83.7 Morocco 125 31 56.6 40.6 50.7 27.8 72.2 Oman 71 46 71 58.1 60.1 10.6 89.4 Qatar 57 79.9 79.2 72.8 65.2 10 90 Saudi Arabia 70 50.3 71.5 54.4 55.1 10 90 Sudan 157 34.6 57.7 27.5 31.8 39.2 60.8 Syria 81 55.8 85.7 57.8 61.2 19.8 80.2 Tunisia 76 54.6 78.6 66.4 67.6 24.7 75.3 Turkey 69 72.4 91.7 53.7 59.9 35.5 64.5 UAE 48 79.8 78.9 72.1 66.1 10.2 89.8 Yemen 151 39 39 26.9 67.7 21.3 78.7 All Developing countries 61.7 78.8 53 58.9 32.4 67.6

81 Table 8: Defence expenditure (in % of GDP)

1985 1995

Algeria 2.5 3.2 Bahrain 4.1 5.4 Egypt 12.8 5.7 Iran 7.7 2.6 Iraq 41.2 Israel 20.3 9.6 Jordan 15.5 7.7 Kuwait 5.7 11.6 Lebanon .. 3.7 Libya 12 6 Morocco 6 4.3 Oman 24.4 16.7 Qatar .. .. S Arabia 22.7 13.5 Syria 21.8 7.2 Tunisia 3.6 2 Turkey 4.6 4 UAE 6.7 4.8 Yemen .. 15.7

Table 9: Remittances in thousand USD

1980 1985 1989 1992 1995

Bahrain –96 –228 –199 –218 –237 Kuwait –692 –1044 –1283 –829 –1347 Oman –362 –903 –791 –1181 –1740 Qatar ...... Saudi Arabia –4094 –5199 –8542 –13397 –16616 United Arab Emirates ...... Egypt 2791 3212 3293 6104 3279 Jordan 667 846 565 781 Morocco 209 249 1356 2179 1890 Turkey 2153 1762 3135 3000 3327 Yemen 1392 .. 414 125

82 Table 10: Expected years of schooling

Female Male

Country 1980 1992 1980 1992

Algeria 6 6 9.2 11 Bahrain ...... Egypt .. .. 10.8 Iran .. .. 9.9 Iraq 9 7 11.7 9.4 Israel Jordan 12 12 11.7 11.4 Kuwait 11 .. 11.4 .. Lebanon ...... Libya ...... Morocco 5 6 7.7 8 Oman 2 7 5 8.4 Qatar 11 12 10.3 10.5 Saudi Arabia 5 6.7 8.6 Syria 8 10.8 10.2 Tunisia 7 10 9.7 10.9 UAE 7 7.7 10.7 West Bank/Gaza .. .. Yemen .. ..

83 Table 11 Malnutrition and maternal mortality, by country

Z-scores Maternal Country Weight Height Weight mortality for age for age for height ratio

Algeria 13 18 9 160 Bahrain 9 10 5 60 Djibouti 23 22 11 570 Egypt 12 25 6 170 Iran 16 19 7 120 Iraq 23 32 11 310 Jordan 9 16 2 150 Kuwait 6 12 3 29 Lebanon 300 Libya 5 15 3 220 Morocco 9 23 2 610 Oman 23 23 13 190 Qautar Saudia Arabia 130 Sudan 34 33 13 660 Syria 13 21 9 180 Tunisia 9 23 4 170 UAE 14 17 15 26 Yemen 39 39 13 1400

84 Table 12: Water, renewable resources and withdrawals

Renewable fresh Annual fresh water water available withdrawals as % of per person water resources 1987–95

Kuwait 11 2690 Egypt 43 1967.9 UAE 64 1405.3 Libya 100 766.7 Jordan 114 144.7 S Arabia 119 709.1 Yemen 243 n.a. Tunisia 371 87.3 Oman 393 124.2 Syria 456 205.9 Algeria 460 32.4 Morocco 1017 36.2 Sudan 1227 50.9 Lebanon 1315 30.8 Iraq 1615 121.6 Iran 1755 54.6 Turkey 3074 16.1 Bahrain n.a. n.a. Djibouti n.a. n.a. Qatar n.a. n.a. Somalia n.a. n.a. Developing countries 5975 Industrial countries 10804

Sources: UNDP 1998:180; Richards & Waterbury op.cit.:146

85 Table 13: Economic growth, by country GNP (per capita growth (annual %))

1990 1991 1992 1993 1994 1995 1996 1997

Algeria –3.68 –5.08 –0.32 –3.5 –3.91 0.25 1.74 –0.53 Bahrain –6.65 –1.17 11.69 5.58 –4.71 4.31 –1.78 .. Egypt 14.09 –14.81 10.81 1.83 3.76 4.1 4.02 4.55 Iran 9.24 9.85 3.68 1.68 –2.73 1.14 3.31 1.51 Iraq ...... Israel 3.81 1.94 1.9 3.21 4.31 3.61 1.65 –0.61 Jordan –4.24 –8.07 13.49 2.66 4.93 3.92 –1.64 –1.85 Kuwait –24.26 –27.7 96.37 19.88 2.44 0.59 .. .. Lebanon ...... Libya ...... Morocco 3.2 4.66 –6.32 –2.96 10.51 –9.42 11.05 –3.9 Oman 6.81 0.37 –3.03 0.32 0.6 0.35 .. .. Qatar –10.9 –5.36 4.81 –8.68 –8.82 –8.83 .. .. S Arabia 2.3 3.3 –0.21 –4.48 –6.5 –2.27 –0.71 –1.43 Syria 5.18 4.2 5.59 3.77 4.48 3.12 0.36 0.89 Tunisia 7.01 1.01 4.85 –0.99 1.83 1.72 0.17 9.16 UAE 9.71 –8.16 –2.79 –4.17 –3.03 –1.47 .. .. West Bank and Gaza ...... Yemen .. –12.09 1.11 0.35 –3.61 1.91 –1.76 –0.53

Source: WDI 1999

86 Table 14: Real GDP per capita, by country and region

Yemen 810 Djibouti 1266 Sudan 1560 Egypt 3050 Iraq 3197 Syria 3250 Morocco 3310 Jordan 3450 Algeria 4460 Tunisia 5300 Iran 5817 Lebanon 5940 Libya 6697 Oman 9960 Saudi Arabia 10120 Bahrain 16527 UAE 19115 Qatar 20987 Kuwait 25314

Regions LDC 992 Sub-Saharan Africa 1534 South-Asia 1803 All developing countries 3240 East Asia 3601 South-East-Asia and the Pacific 3697 Arab states 4094 Eastern Europe and the CIS 4243 World 6332 Latin America and the Caribbean 6868 Industrialised countries 23741

Source UNDP 1999: Development Indicators, Table 1

87 Table 15 MENA growth rates 1988–2007

Growth rates/rations 88–97 1996 1997 1998 Baseline (per year) forecast* 1999 2000 98–2007

Real GDP growth 2.6 5.3 3.1 1.5 0.7 2.5 3.4 Consumption per capita –0.5 3.0 –0.7 –1.1 –2.7 –0.4 0.6 GDP per capita –0.1 2.9 0.5 –1.0 –1.8 0.0 0.9 Population 16–65 years 3.1 2.9 3.0 3.0 3.0 2.9 2.8 Median inflation** 8.2 7.1 4.1 3.7 3.7 4.3 6.0 Budget balance –4.7 –0.2 –1.7 –2.5 –2.9 –1.5 –3.0 Export volume*** 5.5 3.6 5.1 –2.2 2.1 3.8 3.8 Current account/ GDP –2.5 2.5 2.1 –5.0 –5.8 –2.0 0.0 GDP of oil-dominant ec’s 3.2 4.6 2.6 –0.3 –0.8 1.6 2.7 GDP of diversified ec’s 4.1 6.5 3.4 4.8 3.3 4.0 4.4

* Forecast for the 1998–2007 by November 1998. All others updated March 1999. ** GDP Deflator *** Goods and nonfactor services Sources: World Bank 1999b: Appendix1, Regional Economic Prospects:191, World Bank 1999c: 164

88 In 1998 a project group was set up at the Ministry for Foreign Affairs (decision UD98/1416/MENA) for the purpose of analysing the political, economic and social conditions in the MENA region, i.e. North Africa and the Middle East from Morocco in the west to Iran in the east. The main aspects to be reviewed were the importance of the region to Sweden and Europe in terms of security, the prospects for de- mocratization, economic trends and trade patterns, as well as the role of development cooperation. The task, the purpose of which was to provide supporting data for Sweden´s policies in this region, was completed in the autumn of 1999 with the publication of a main study, as well as a series of special studies focusing on specific matters relevant to the overall review. This study is issue no. 12 in the series of special studies. Earlier issues in the same series, all in Swedish, are:

Delstudie 1 Ingmar Karlsson: Tankar om islam och Europa Delstudie 2 Patrik Johansson: Konfliktmönster i MENA-regionen 1980–1997 Delstudie 3 Helena Lindholm Schulz, Michael Schulz och Thord Jansson: Demokratins möjligheter i Mellanöstern Delstudie 4 Khaled Salih och Jakob Dencker: Demokratins möjligheter – Fallstudier, Jordanien och de palestinska områdena Delstudie 5 Anita Theorell: Om kultursamarbete – Från ”Att se den andre” till ”Att se varandra” Delstudie 6 Gunnar Arbman, Göran Danielsson, Jan Prawitz och Lars Wigg: Massförstörelsevapen och säkerhetspolitik Delstudie 7 Eva Marling och Sholeh Irani: De feministiska paradoxerna i Iran. Rädsla förvandlad till mod. Två perspektiv på de iranska kvinnornas situation Delstudie 8 Bertil Egerö, Lise Munck och Mikael Hammarskjöld: Mycket olja, många barn. Befolkningsutveckling i MENA-regionen Delstudie 9 Carl-Johan Belfrage: Ekonomiska utmaningar Delstudie 10 Göran Gunner: Mellanösterns religiösa minoriteter. En studie med tyngdpunkt på kristna minoriteter Delstudie 11 Ylva Brune: Stereotyper i förvandling. Svensk nyhets- journalistik om invandrare och flyktingar

Ministry for Foreign Affairs S-103 39 Stockholm Further information and copies of the main study or the special studies may be obtained from the MENA departement at the Ministry of Foreign Affairs, telephone: +46-8-4051000 Tel: +46-08–40510 00, Fax: +46-8–7231176 Ministry for Foreign Affairs website: www.ud.se Article no: UD 00.086, ISBN: 91-7496-208-6 Printed at Norstedts tryckeri AB 2000