3 November 2008
The World Bank Group is adhering to its pledge for greater engagement in the Middle East and North Africa. However, data on the development impacts on the poor are lacking, while other data suggest that many Bank projects in the region are at risk.
According to a recent World Bank press release, the World Bank Group (WBG) continued its increasing commitment in the region during fiscal year 2008 through its various lending arms. The World Bank committed over $1.7 billion for 42 loans and grants to the public sector. Nearly half of this new lending went to Egypt, including a $500 million loan in the form of budget support as an incentive to deregulate its financial sector. The Bank’s new commitments also included a budget support grant to Yemen worth $51 million, which generated controversy over policy conditions that mandated a reduction of the civil service, land reform, and lower corporate taxes.
Meanwhile, the International Finance Corporation (IFC) increased its private investments in the region, which in the case of the IFC includes Pakistan, from $1.2 billion in 2007 to reach $1.4 billion in 2008 in 50 new projects. The financial sector is the largest in IFC’s portfolio in the region, and new commitments included operations for the housing and small and medium enterprises sectors. The IFC also increased its expenditure in advisory services in the region to reach $22 million, up from $5.7 million three years ago. Unfortunately, information about these operations is scant, though they typically focus on privatization; tax reform, as in the case of Yemen, where it lowered corporate taxes at the same time the Bank recommended doubling the VAT; and facilitating investor-friendly reforms.
For its part, the Multilateral Investment Guarantee Agency (MIGA) increased its exposure in the region to reach US$ 430.7 million in 2008, almost entirely for a single project: a container terminal in Djibouti.
The WBG claims that its support to the region has reaped fruit in terms of the region’s economic growth, with real GDP rising at an average of 6.1 percent over the past 5 years, and in terms of poverty reduction. The WBG also suggests that the IFC has created 63,360 new jobs in the region.
While it is true that “there is a clear growth spurt that has lasted for several years,” as stated by Ms. Ritva Reinikka, Director of the Bank’s Social and Economic Department at a press briefing during the recent annual meetings, she acknowledged that “it is still below the growth of other developing regions.” On the other hand, a great part of this growth is due to high oil prices as well as workers’ remittances, which the Bank website states are the largest in the world relative to GDP.
As for the reduction of poverty in the region, there is no accurate data to confirm that the poverty rate is actually decreasing. The latest statistic available on the World Bank’s website is from 2005 and shows 19.5 percent living below $2 a day. In fact, according to a recent op-ed on poverty written by Farrukh Iqbal, lead economist and Mustapha Kamel Nabli, chief economist for the MENA Region at the Bank, only “seven countries in the region do collect systematic data on the distribution of incomes or expenditures among their citizens and allow the World Bank access to aggregated versions of the results.” Even in these countries, the accuracy of the figures is questionable. The authors conclude that “in poverty reduction…the Middle East and North Africa performed worse than most” developing regions.
With MENA suffering one of the highest unemployment rates in the world, job creation is listed as a top priority for the Bank. If the IFC has in fact created 63,360 new jobs – and the methodology for ascertaining this number is based mostly on self-reporting - it needs to also report on the number of jobs that were lost as a result of the privatization processes that it supports through its advisory services, as well as livelihoods that are lost to project-induced displacement.
These questions surrounding the effectiveness of the World Bank Group in the region are especially valid as internal Bank documents reveal that that 40 percent of current World Bank projects in the region are “at risk” of not meeting their development objectives.
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