4 Social Development During Adjustment in the MENA Region: Contradiction or Opportunity?
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English
Print Publication Date:
11 Apr 1997
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BOOK; government; country; economic reform; The Fund; MENA country; structural-adjustment policies country; resource allocation; a number of country; structural adjustment; Health care spending; Health care; Middle East
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Abstract

Ever since developing countries in the 1980s introduced a set of macroeconomic measures that are collectively referred to as “adjustment,” scholars and politicians have expressed concern about the effect of adjustment on the poor. The concern usually centers on social development, because adjustment policies may adversely affect the availability of affordable health and education services. This concern is understandable. Adjustment policies include a combination of measures designed to reduce government expenditures, to curtail—at least in the short run—private consumption, and—through changes in trade and exchange rate regimes, taxes, and subsidies—to realign consumer prices with (world) market prices. Such measures often result in price increases for food products, drugs and pharmaceuticals, and (imported) school supplies.

Jacques van der Gaag

Ever since developing countries in the 1980s introduced a set of macroeconomic measures that are collectively referred to as “adjustment,” scholars and politicians have expressed concern about the effect of adjustment on the poor. The concern usually centers on social development, because adjustment policies may adversely affect the availability of affordable health and education services. This concern is understandable. Adjustment policies include a combination of measures designed to reduce government expenditures, to curtail—at least in the short run—private consumption, and—through changes in trade and exchange rate regimes, taxes, and subsidies—to realign consumer prices with (world) market prices. Such measures often result in price increases for food products, drugs and pharmaceuticals, and (imported) school supplies.

Of course, some of the events that made it necessary for countries to adjust their economic policies in the first place had similar effects: unsustainable government policies led to ever-higher debt. Debt servicing became so high that other sectors, including health and education, were squeezed out. Rampant inflation eroded private incomes, often putting various necessities, such as drugs and school-books, out of the reach of the poor. The apparent similarities between the initial effects of adjustment measures and the continuous, eroding effect of unsustainable government policies make it extremely hard to identify the effect of the adjustment on social development. Indeed, the early literature on this topic observed that countries that started to adjust suffered from excess poverty and deteriorating social services. Unfortunately, little reference was made to the policies that created large numbers of poor people, led to underinvestment in social infrastructure, and impaired the governments’ ability to improve this situation. The resulting adjustment measures were therefore erroneously identified as the cause of stagnation in social development, rather than the inevitable result of unsustainable policies.

The second wave of this literature was more careful. It tried to compare the situation during adjustment with the counterfactual: what the country would have looked like if it had continued with its preadjustment policies. Some of this literature is reviewed in the next section. This paper, however, will take a different approach.

The developing world has seen unprecedented progress in social development over the past few decades. In 1950, life expectancy was 40 years. Today, it is 62. Four decades ago, 28 out of every 100 children died before the age of 5; by 1990, this number had fallen to 10. In 1965, primary school enrollment ranged from 37.6 percent in low-income countries (excluding China and India) to 94.7 percent in high-income countries. By 1990, 70 percent of children in low-income countries were enrolled in primary school, despite rapid population growth. And while only 5 percent of children under 5 were immunized in 1970, by 1993 this number had increased to 80 percent.

Much of this progress is associated with economic growth and the resulting improvements in living conditions. Rising incomes motivated families to demand more access to and better quality of services. Improvements in the food supply, sanitation, water, and other determinants of living conditions were also accelerated by economic development. But much also derived from increased awareness about the importance of investing in health and education for economic development. Indeed, countries like Chile, China, Costa Rica, and Sri Lanka, to name a few, recognized early on the importance of investing in the health, nutrition, and education levels of their populations. As a result, their social indicators have exceeded for decades those of countries with similar levels of income.

Thus, social progress is a product of both economic development and good, people-oriented social policies. This paper will concentrate on the latter, trying, in particular, to determine to what extent adjustment measures constrain governments from pursuing good social policies—those that, by facilitating access to effective, high-quality services for the entire population, have a positive impact on health and education levels.

After a short review of the literature on social development and adjustment, this paper focuses on social development in the Middle East and North Africa (MENA) region.1 MENA will be shown as a prime example of how economic prosperity (in the 1970s) can accelerate social development. The paper examines the consequences of adjusting—and of not adjusting—on changes in social indicators as well as on public and private efforts in the health and education sectors. It also addresses the question of whether or not countries in the MENA region spend their resources on health and education efficiently. Two additional issues that are relevant for social development in the region will be addressed: new options created by the revolution in information technology and the gender gap.

Literature on Social Development and Adjustment

There is a vast body of literature on social development and adjustment, and this is not the place to review it all.2 Rather, we will highlight the two main approaches adopted to date on this topic, to contrast them with the approach taken in this paper. The first and still best-known publication on the social implications of adjustment policies is Adjustment with a Human Face (Cornia, Jolly, and Stewart, 1987). Based on ten case studies, the report drew the following conclusion:

National adjustment policies have, on the whole, successfully combined adjustment with poverty alleviation and nutritional protection in the Republic of Korea, Botswana and Zimbabwe. In other countries, economic developments have seriously eroded the levels of living of the poor and the nutritional standards of children (p. 4).

The report does address the crucial question of whether adjustment policy, or the adjustment process, is the main cause of human difficulties and social setbacks. The answer:

No, this is not the position of this study. . . . We recognize that the primary cause of the downward economic pressures on the human situation in most of the countries affected is the overall economic situation, globally and nationally, not adjustment policy as such (p. 5; emphasis in original).

Nevertheless, the study as a whole is critical of the early adjustment policies (the study covers 1980–85) and calls for the need to look for alternative approaches that explicitly protect the most vulnerable groups in society.

Spurred by this kind of criticism—and perhaps also by disappointing initial results of stabilization and adjustment efforts—the development community, notably the World Bank and the IMF, continued to critically assess the results of its own efforts to put failing countries back on a path of sustainable development. A comprehensive study entitled Adjustment Lending Revisited was published in 1992 by the World Bank (Corbo, Fischer, and Webb, 1992). This study made a major effort to define the counterfactual—that is, the hypothetical situation without adjustment—and to correct its results accordingly. A few of the conclusions are worth quoting. First, the study found convincing evidence that

… adjustment lending contributed to faster growth of gross domestic product (GDP) and higher ratios of exports saving to GDP in the latter 1980s in countries that used adjustment lending intensively, starting in 1985 or earlier (p. 2; italics added).

It also found that

… living conditions, even in the short run, did not appear to have been systematically related to adjustment lending. Furthermore, most long-run indicators of living conditions continued to improve [in countries that adjusted rapidly] (p. 2).

At the same time, the study found two related results that were seriously troublesome: the ratio of investment to GDP decreased in these countries, and in some countries government education expenditures and school enrollment fell.

Thus, in general, the results of even the most careful studies are mixed, underscoring the difficulties of disentangling cause (adjustment policies or unsustainable economic policies) and effect (social outcomes). And the debate continues. The recently published Oxfam Poverty Report (Watkins, 1995), for example, concludes that,

in the cities and villages of Latin America and Africa, … structural adjustment has become a euphemism for suffering. . . . For people in the South, the argument that there is no alternative to adjustment provokes the almost universal response that there must be. Oxfam believes that they are right—and that there is an alternative (p. 73; emphasis in original).

However, Demery and Squire (1996), basing their study on comparable household survey data for six African countries, conclude unambiguously that “effective reform programs are associated with reduced overall poverty, inadequate ones with worsening poverty” (p. 40).

To conclude this brief review, we have to draw attention to a further complication: many countries that initiate adjustment do so halfheartedly. For instance, Lipton and van der Gaag (1993) conclude that

the problem is not that adjustment packages were anti-poor. Rather, the problem is that [in many cases] the adjustment policy package was not really structural enough. . . . Where the poor fail to gain from adjustment, it is usually because adjustment fails, not because successful adjustment fails the poor (pp. 23–24).

Mainly because of these methodological difficulties (how to define the counterfactual and how to separate “successfully” adjusting countries from the unsuccessful ones without becoming tautological), the development community has yet to come to a consensus about the effects of adjustment policies on social development. Therefore, this paper will take a new approach. Rather than try to unravel the effects of adjustment on social development, it will focus on the possibilities (or lack thereof) of pursuing good social policies during adjustment. Good social policies are broadly defined as those that adequately address the social needs of the population.

Social Development in the MENA Region

Macroeconomic Background

MENA’s social progress during the 1960s and 1970s was outstanding. As a result of rapid economic growth, infant mortality was reduced by 50 percent, and life expectancy rose by more than 10 years. Primary school enrollment increased from 71 percent in 1965 to 93 percent in the late 1970s. Adult literacy improved to 45 percent from less than 33 percent during the same period.

However, collapsing oil prices and deteriorating productivity during the mid-1980s created an economic crisis. Since 1986, real per capita incomes have fallen by 2 percent a year (World Bank, 1995a). Even exporters of products other than oil suffered, because of labor and capital market linkages: during 1986–90, the economies of Jordan, Morocco, and Tunisia grew by less than 1 percent a year. Deficits (as a percentage of GDP) reached unsustainably high levels: Jordan, 9.2 percent; Egypt, 7.7 percent; and the Islamic Republic of Iran, 9.2 percent. Debt servicing began to crowd out public expenditures for investments and other growth-oriented outlays. In the mid- and late 1980s, inflation was eroding income levels in Egypt, the Islamic Republic of Iran, the Syrian Arab Republic, the Republic of Yemen, and most other countries in the region.

Some countries in the region (Jordan, Morocco, and Tunisia) responded to these events by initiating economic reforms that recognize the new competitive realities of a more open world economy, aim to improve the economy’s productivity, promote non-oil exports, improve the skill level and flexibility of the labor force, and move to a sustainable pattern of more rapid economic growth. Others, such as Egypt, Oman, Saudi Arabia, and the United Arab Emirates, attempted to ride out the rough times, in some cases by relying on their natural resources.

Infant and Child Mortality

Against this macroeconomic background, we will first look at what happened to the social progress that was so prominent in the region during the 1970s. One of the most comprehensive indicators of social progress is the infant mortality rate. It reflects the influence of many forces, from a general improvement of living conditions resuiting from economic growth, to mothers’ education, to policies that provide access to basic health and nutrition services. Table 1 shows the infant mortality rate for MENA countries in five-year intervals. It reveals the dramatic progress that some countries made during the 1970s (for example, Bahrain reduced its infant mortality rate to 22 from 52; Oman dropped to 56 from 145; and Saudi Arabia to 58 from 105). Without exception, progress continued during the 1980s.

Table 1.

MENA Region: Infant Mortality Rate and Performance Index

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Source: World Bank, Economic and Social Database.

See Appendix 1 for explanation.

It is a bit harder to judge whether the pace of progress was influenced by the events of the 1980s, because in a technical sense it is easier to reduce the infant mortality rate from, say, 110 to 80 than from 80 to 50 (see Table 1 and explanation of performance index in Appendix 1). For instance, Algeria saw its infant mortality rate reduced from 112 to 88 (24 points) during 1977–82, and to 67 (21 points) by 1987. The performance indices for these two periods are 24 and 27, respectively, the latter being the greater achievement.

The performance index shows that most countries made even more progress in the 1980s than in the 1970s. No clear pattern with respect to adjustment emerges. Jordan and Morocco continue to experience accelerated progress, but progress in Tunisia seems to be slowing down. Egypt, Oman, and Saudi Arabia all experienced rapid progress in the early 1980s, but the pace has since slowed down.

A similar picture emerges from the data on the mortality of children under age 5. Table 2 shows rapid progress since the 1960s in every country and continued progress since the 1980s, although Lebanon and Saudi Arabia show some setbacks. The pace of progress, however, seems to have slowed.3 The main causes of mortality for infants—neonatal mortality (tetanus, asphyxia, and pneumonia), and postneonatal mortality (infectious diseases and diarrhea)—are quite different from those for children between the ages of 1 and 5—infectious diseases (including measles), injury, accidents, and malnutrition. The temporary setbacks in Lebanon and Saudi Arabia are most likely war related. Overall, the picture is one of steady progress, which, at first sight, is surprising, given the background of a rapidly deteriorating regional economy. But these results are not unusual.

Table 2.

MENA Region: Mortality of Children Under 5

(Deaths per 1,000 live births)

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Source: UNICEF (1995).

Hill and Pebley (1989) provide a careful examination of global trends in infant mortality from the early 1960s through the 1980s.

They conclude that there is

… little basis for postulating a general slowdown in the pace of mortality decline in the early 1980s, contrary to what might have been expected in light of the downturn in economic conditions (pp. 680–81).

With respect to adjustment policies, they maintain that

… the economic difficulties developing countries have experienced and/or the structural-adjustment policies countries have adopted in the early 1980s do not seem to have slowed mortality declines substantially, if at all (p. 676).

Moreover, for most countries in the region there is no indication of a serious deterioration in such important indicators as access to safe water, sanitation, and health care (see Appendix 2). Finally, the MENA region, like every other part of the world, benefited from global efforts to expand immunization (Henderson, 1994): whereas most countries had immunization rates below 50 percent in 1984, now many have immunization rates greater than 80 percent. This is a major accomplishment, especially in light of the economic conditions during this period.

Education

The MENA region has been relatively late to recognize the importance of universal education. As a result, today more than one-third of the population of the region is illiterate. However, during the 1970s and 1980s, primary enrollment rates increased rapidly. Most countries have now achieved almost universal primary enrollment, with the notable exceptions of Morocco, where 80 percent of boys and only 57 percent of girls attend primary school; Saudi Arabia (81 percent and 75 percent, respectively); and Kuwait (60 percent for both boys and girls). Near universal male enrollment has been achieved in the Republic of Yemen, but only 43 percent of girls are enrolled. In none of the countries is there any evidence that primary enrollment was jeopardized during the 1980s.

Progress toward universal secondary education, however, has been much slower. For example, in 10 of the 15 countries for which we have data, more than one-third of the eligible cohort is not enrolled in secondary school (see Appendix 2, Table A6). The performance index for secondary education (Table 3) shows that progress accelerated in the late 1970s, but has slowed down in most countries since 1986. Moreover, in a number of countries (Iraq, Kuwait, Morocco, and Syrian Arab Republic), the situation is getting worse, not better.

Table 3.

MENA Region. Secondary Education Performance Index

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Source: World Bank, Economic and Social Database. Note: See Appendix 1 for explanation.
Table A6.

Gross Enrollment Ratio: Secondary School

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Source: World Bank, Economic and Social Database.

1990 data.

1979 data.

1983 data.

1974 data.

1984 data.

1991 data.

In the long run, this lack of progress may have serious consequences for the competitiveness of these countries in the world economy. No matter how much effort is put into privatization, efficiency enhancement, deregulation, export orientation, or any other measure that is part of an adjustment package, long-term economic growth cannot be achieved and sustained without a well-educated and flexible labor force. Therefore, part of a forward-looking growth-oriented policy should be the protection—if not expansion—of investment in postprimary education, through both private and public efforts.

Private Expenditures on Health and Education

There is a general consensus in the development community that the private sector is the engine of economic growth. However, the role of the private sector is generally overlooked when it comes to social development, even though the private sector has been the dominant, if not the only, provider of health and education services throughout the ages. The larger role of the government (too often at the exclusion of the private sector) is a relatively recent phenomenon (van der Gaag, 1995). Indeed, the private sector—comprising nongovernmental organizations, church-based organizations, communities, households, and nonprofit and for-profit providers—still plays a major role in both financing and providing health and education services.

A recent study, conducted as background for the 1993 World Development Report estimates that about 40 percent of health expenditures worldwide comes from private sources (Golladay and others, 1995). Moreover, the variance across countries is large, ranging from, for instance, 4.31 percent in Norway to almost 80 percent in India (see Figure 1).

Figure 1.
Figure 1.

Private Health Expenditures

(In percent of total)

Source: van der Gaag (1995).

Table 4 gives estimates of private health expenditures as a percentage of total expenditures for the MENA countries. Owing to a scarcity of data, these estimates are necessarily rough, but they do indicate that private financing for health care plays a much larger role than generally thought. There is also evidence that the role of the private providers is growing. In Algeria, for example, the number of physicians with private practices grew steadily over the last decade, and they now represent approximately 20 percent of all practicing doctors. More than one-third of all pharmacies are private. In Jordan, the private health sector is very active. About half the population uses the private sector to some degree; up to 15 percent uses private providers exclusively. There are 13,000 private physicians, numerous private clinics, and almost one-fourth of all hospital beds are in privately owned hospitals. In Lebanon, almost all hospital care is private. In some countries and regions (Jordan, Lebanon, the West Bank and Gaza Strip, and the Republic of Yemen), the role of the private sector is rapidly becoming more important.

Table 4.

Private Health Expenditures, 1990

(In percent of total expenditures on health)

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Source: Murray, Govindaraj, and Chellaraj (1994).

Similarly, in the education sector, the role of private schools is large and, in many countries, growing. In Jordan, the private sector accounts for 26 percent of all education expenditures, and the government is pursuing an active policy to expand its role. For example, the first university opened in 1990–91 with 1,324 students. By 1993, enrollment had increased to 11,000. In some countries (Iraq, Morocco, and Tunisia), education is almost all public. In the Islamic Republic of Iran, the Islamic Azad University, which is a privately funded nonprofit institution, is now the largest single institution of higher education in the world, enrolling more than 400,000 students. In Lebanon, 69 percent of primary and 56 percent of secondary enrollment is in private schools. In Kuwait, private primary school enrollment more than doubled during the 1980s (to 36 percent of the total by 1990). Furthermore, in all countries, even those that provide “free” education, parents pay for textbooks, transportation, uniforms, and other education-related expenses.

The importance of the private sector for the financing and delivery of social services is relevant to the debate on the impact of adjustment on social development. Usually, this debate focuses on trends in public expenditures on health and education rather than on private outlays. However, when private financing constitutes a significant part of overall financing, reductions in private resources (as a result of economic crisis or as part of an adjustment package) may jeopardize investments in health and education.

Table 5 shows trends in real per capita consumption in the region. Although the data are incomplete, the picture is clear. With the exception of Israel, Morocco, and Tunisia, real per capita private consumption in every country was lower in 1994 than in 1985. Estimates of income elasticities for health care and education vary widely, but it is not unusual to find income elasticities for education between 0.50 and 1.34 (Lankford, 1985; Jimenez, 1987) and for health care between 0.2 and unity (Gertler and van der Gaag, 1990, p. 61). Clearly, any contraction of private incomes, either during a recession or during an adjustment period, is going to have a negative impact on private health and education expenditures. In this respect one author, who analyzed how recessions may have affected health care expenditures in Latin America, recommends a deliberate countercyclical health care policy (Musgrove, 1984). A similar case could be made for public education expenditures.

Table 5.

MENA Region: Real per Capita Private Consumption Index

(1990 = 100)

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Source: world Bank, Economic and Social Database.

Public Expenditures on Health and Education

The main concern about social development during adjustment, however, is that the need to get the government budget under control may result in a reduction in public outlays for health and education.

We will now investigate how government expenditures in general, and for health and education in particular, have been affected by the economic crisis and subsequent adjustment process (see Table 6). Indeed, we find that, in all countries except Kuwait and the Republic of Yemen, the government’s role in the economy decreased from 1985 to 1990. Moreover, most countries have maintained this trend so far in the 1990s. Thus, this aspect of the adjustment process—either voluntary or forced by economic crisis—is in progress in the MENA region.

Table 6.

MENA Region: Total Central Government Expenditures

(In percent of GDP)

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Source: IMF, Government Finance Statistics (1995). Note: Data for Jordan, Oman, and the United Arab Emirates are for the budgetary government.

1981 data.

1972 data.

1977 data.

Most crucial during the process of reducing the government budget is protection for the social sectors relative to other outlays. The challenge is quite severe: not only are the overall central government budgets shrinking, but in addition—in a large number of countries—interest payments are taking an increasingly large bite out of the available budget (see Appendix 2, Table A1). This is countered somewhat by the fact that military expenditures as a percentage of total government expenditures are generally declining.

Table A1.

Percentage of Central Government Expenditures on Defense, Education, Health, Social Security and Welfare, and Interest Payments

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Source: IMF, Government Finance Statistics (1995). Note: Expenditures represent consolidated central government expenditures, except those for Jordan, Oman, and the United Arab Emirates, which are central budgetary government expenditures.

1981 data.

1972 data.

1977 data.

Most countries appear to have been successful in maintaining the share of health expenditures and even in increasing that of education (Appendix 2, Table A1). However, rapid population growth, a stagnant or declining economy, and declining overall government expenditures have combined to reduce real per capita spending on health, even when the share in the government budget has remained constant (Table 7).

Table 7.

MENA Region: Real per Capita Expenditure on Health by the Central Government

(1980 = 100)

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Source: IMF, Government Finance Statistics (1995). Notes: Expenditure data. Expenditures represent consolidated central government expenditures with the exception of Jordan, Oman, and the United Arab Emirates, which are central budgetary expenditures. They are calculated using the GDP deflator, except Yemen, for which the consumer price index is used.

1981 data.

1972 data.

1977 data.

Bahrain, Jordan, Morocco, and Syria all had lower per capita public health expenditure levels in 1990 than in 1980, while in the wartorn Islamic Republic of Iran, expenditures were cut in half. The drop in per capita expenditures in the United Arab Emirates is the result of an overall decline in total expenditures, magnified by rapid population growth. For Egypt, 1990 expenditure levels were below the peak in 1985, but now appear to be holding stable at 20–25 percent above 1980 levels. Oman shows a substantial increase in expenditures since 1980, while the pattern of the Republic of Yemen’s expenditures clearly shows that the country has recognized the need to attack its social deficit.

The education sector has fared better. With few exceptions, all countries registered significantly higher per capita expenditures in 1990 than in 1980, a major accomplishment in light of the economic conditions during this period (see Table 8). Again, the Islamic Republic of Iran is the exception, while education expenditures in the Syrian Arab Republic have been reduced to dangerously low levels.4

Table 8.

MENA Region: Real per Capita Expenditure on Education by the Central Government

(1980 = 100)

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Source: IMF, Government Finance Statistics (1995). Notes: Expenditure data represent consolidated central government expenditures, with the exceptions of Jordan, Oman, and the United Arab Emirates. Expenditures are calculated using the GDP deflator, except Yemen, for which the consumer price index is used.

1981 data.

1972 data.

1977 data.

The results on education are more favorable than usually found in the literature. Tilak (1992, p. 8) concludes from a review of the literature that “economic difficulties experienced during the painful adjustment and recession periods adversely influence education development.” Lockheed and Verspoor (1991) find that, in the early 1980s, 12 out of 13 intensely adjusting countries reduced the share of education in total government expenditures. Kakwani, Makonnen, and van der Gaag (1990) find that education indicators declined in almost all intensely adjusting countries.

For health care, in contrast, the decline in per capita expenditures is in line with what has been found by previous studies. A recent report concludes that adjusting countries showed a more rapid initial decline in public expenditures on health than did nonadjusting countries, but their expenditures also recovered faster and to higher levels (Yazbeck, Tan, and Tanzi, 1995). Overall, the evidence suggests that whether or not public expenditure levels for health and education are being protected during periods of economic austerity is a matter of policy. For the MENA region, the data indicate that efforts have been made to maintain public spending levels, but not always enough to maintain real expenditures per capita. Where per capita expenditures have gone down significantly, as for health care in Jordan and Morocco, the need to improve the efficiency of such outlays becomes very strong.

As in the rest of the developing world, public resource allocation in the social sectors of the MENA region shows excess expenditures on tertiary care and schooling (compared with basic services) and on salaries rather than on other inputs (such as drugs or learning materials). For example, Egypt spends three times more resources on hospital care than on primary care, and half of its education budget goes to universities. Ninety-three percent of Egypt’s education budget goes for salaries. In Iraq, this number exceeds 96 percent. Morocco spends 71 percent of its public health budget on hospitals. Jordan spends 60 percent on hospitals and less than ½ of 1 percent on public health measures.

The fact that in most countries public health expenditures (and probably private expenditures as well) are skewed to higher levels of care helps explain an apparent paradox: per capita health expenditures have gone down, but basic health indicators, such as the mortality rates of infants and children under 5, continue to improve.5 Clearly, large outlays for hospitals and specialized care do little to reduce the social deficit as measured by these indicators. A shift of public expenditures from higher-level toward basic care (notably for children and mothers) and to rural areas can greatly improve the health conditions of the population even in times of economic austerity.

Similar efficiency gains can be expected in the education sector. Reduced public outlays for tertiary schooling, coupled with the expansion and increased relevance of secondary education, especially for women, are necessary to improve the skills of the labor force to the levels needed in today’s competitive labor markets (Shafik, 1994).

Summary

The overall picture of social development is positive. The progress of the 1970s, spurred by rapid economic growth, continued during the 1980s despite the economic crisis and, in some countries, despite adjustment policies. There is no room for complacency, however. While from a historical perspective social indicators in the region look good, some countries are doing worse than expected, especially in postprimary education, given their relatively high income levels. In other countries, notably the poorer ones, such as the Republic of Yemen, the social indicators still point to a large social deficit. We will turn our attention to these problems, and possible solutions, in the next section.

Agenda for the Future

The Social Deficit

Rapid progress during the 1970s and 1980s notwithstanding, the region is still grappling with a social deficit that warrants urgent public attention. On the health side, Algeria, the Islamic Republic of Iran, Oman, and Saudi Arabia have a level of infant mortality that is well in excess of what could be expected on the basis of the countries’ income level (Figure 2). Part of this phenomenon is readily explainable. High levels of female illiteracy (55 percent in Algeria, 57 percent in the Islamic Republic of Iran, and 52 percent in Saudi Arabia) and high fertility rates (as high as seven or eight births per woman in some countries), combined with a lack of access to safe water and sanitation (only 55 percent of the population in rural Algeria has access to safe water; only 55 percent in rural Saudi Arabia has access to sanitation), create an environment that endangers the lives of young children.

Figure 2.
Figure 2.

Infant Mortality

(Per 1,000 live births)

Per capita GNP based on 1992 purchasing power parity estimates

The Islamic Republic of Iran and Oman spend a relatively high percentage of the public budget on health (about 6–7 percent), suggesting serious inefficiency in the allocation of resources in the health sector. In primary education, Morocco and Saudi Arabia are doing much worse than expected (Figure 3). And for secondary education, almost all MENA countries underperform, with the notable exceptions of Egypt and Jordan (Figure 4). This poor record, combined with adult illiteracy rates that in many countries exceed 30–40 percent, is likely to be a severe constraint on future economic growth. Without ignoring the need, in some countries, to expand primary education and, in all countries, to increase its quality, a concerted effort to increase access to, and the relevancy of, postprimary education should be high on the list of priorities for social development. Without a skilled, flexible labor force, no country will be able to survive the competition in a wide open global economy (World Bank, 1995a).

Figure 3.
Figure 3.

Gross Primary Enrollment Rate

(In percent)

Figure 4.
Figure 4.

Gross Secondary Enrollment Rate

(In percent)

Per capita GNP based on 1990 purchasing power parity estimates

Information Technology and Competitiveness

Lack of a skilled labor force is a major constraint on economic development, especially in a competitive, open world economy. Revolutionary advances in biotechnology, agriculture, manufacturing, and, most of all, information technology are having a profound impact on the economic and social developments that shape the societies of the future. The countries that are most agile in adopting these new technologies for their own development needs are the most likely to enter the next century on a path to prosperity. In contrast, countries with a narrow human resource base, or with economies that are too rigid to take advantage of the new opportunities, are likely to fall behind (National Research Council, 1995).

The technology revolution, although relevant for the developing world as a whole, is particularly relevant for the MENA region. The region does face the need to rapidly increase the education and skills of its labor force, but—at the same time—it has the resources and the human capital base to do so if it takes advantage of the new learning options created by advances in information technology.

The same revolution that calls for a structural change in the way we approach education (from “complete” education prior to labor force participation to “lifelong learning”) will provide the tools to accomplish this. While the relative price of conventional education is rising, every 18 months the digital revolution has been cutting in half the cost of storing, manipulating, and transforming information. There is no end in sight to this development. On-line educational “communities’ can now provide on-demand and customized education to everyone who needs it. Indeed, the marketplace for education will become global. Students in every region, city, and village of the world will soon have access to the world’s best information and education resources, in Paris, New York, Moscow, Tokyo, Sao Paulo, or any other city they want to “study,”

The challenge is to take advantage of these new opportunities within an overall education and training policy. The challenge for the MENA region is to increase its levels of conventional education (especially secondary) while simultaneously expanding the infrastructure necessary to allow the promises of the information technology revolution to become reality.

Clearly, this is not a task for governments alone. However, governments do have an important role to play in facilitating these developments, for example, in implementing policies to stimulate private sector involvement in education and training and taking steps to increase the expansion of and access to the airwaves as well as to other communication infrastructure to bring the relevant information where it is needed. The public and the business community need to be informed about the learning opportunities that are increasingly becoming available (for example, through pilot projects). Where applicable, standards and accreditation need to be enforced to guarantee minimum levels of quality. Finally, reform in conventional education may be necessary to increase its relevancy in light of the technology revolution.

None of these measures calls for larger public outlays for education. Indeed, given relatively high public expenditures on education, much can probably be accomplished with existing resources. The need to adjust may provide the opportunity to seriously reevaluate traditional resource allocation patterns, with an eye to the new opportunities created by modern information technology.

The Gender Gap

The gender gap in the MENA region is among the largest in the developing world. An astounding 60 percent of the adult female population is illiterate. The health status of women is well below what could be expected on the basis of the income levels of the region. Indeed, an estimated 1 million more women would be alive in the Middle East if their life expectancy were closer to the averages of countries with similar income levels.

Compounding these problems are very high fertility rates in some of the countries (as high as seven to eight births per woman in countries like Iraq, the Libyan Arab Jamahiriya, Oman, Saudi Arabia, the Syrian Arab Republic, and the Republic of Yemen). In Oman, women marry at the age of 15 on average, and in the Republic of Yemen, marriage often occurs at even younger ages.

Underinvestment in the health and education of half the population is a major impediment to economic development. The economic returns on the education of girls are at least as high as those on boys’ education. Moreover, girls’ education has benefits that go beyond increased productivity in the labor market. Increased age of marriage, reduced fertility, improved nutritional and hygienic practices (benefiting the health of the next generation), increased emphasis on and attention to their children’s education, and increased participation in public and political life are all benefits related to higher educational levels of women. No country that aims at future prosperity can afford to forgo these benefits.

Some countries (the Islamic Republic of Iran, Tunisia, and Turkey) have made remarkable progress since the 1960s, achieving almost universal primary enrollment for girls. Algeria, Egypt, and Iraq have also made considerable progress on primary education. But the situation in Kuwait and Morocco appears to be getting worse. Primary enrollment rates for girls were only 60 percent and 57 percent, respectively, in 1992.

In the MENA region, only 72 girls enroll in secondary school for every 100 boys. Although this ratio is fairly high compared with other developing countries, absolute enrollment rates for secondary education are well below what they should be. For example, in 1992 the gross enrollment rate for girls in secondary education in the Islamic Republic of Iran was 57, in Kuwait 51, in Morocco 28, in Tunisia 46, and in the Republic of Yemen 31. Once girls are enrolled in secondary school, they often outperform boys and show higher retention and completion rates. Furthermore, throughout the region, female labor force participation rates are increasing. What is needed is a greater public commitment to women’s education in order to tap this resource for future economic growth. Given the region’s relatively high levels of public resources devoted to education, the problem is clearly not one of additional outlays. Rather, good social policies would imply a shift of available resources to areas where the investment has the highest payoff: female education.

A recent study conducted for UNICEF (Rihani and Prather, 1994) outlines the measures necessary to improve both the demand for and the supply of female education (Table 9). Many of the proposed strategies do not imply major increases in educational resources.

Table 9.

Strategies to Improve Girls’ Participation in Education

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Source: Rihani and Prather (1994, p. 37).

Conclusions

This paper investigated social development in the Middle East and North Africa during the 1980s, a period characterized generally by stagnating or negative economic growth and one during which Jordan, Morocco, and Tunisia initiated far-reaching adjustment programs. Although the region achieved social progress during this period in terms of postprimary education, a number of countries fell behind other parts of the world with similar income levels and continue to underperform in this area. In general, the region’s social indicators are lower than can be expected on the basis of GDP levels and resources devoted to the social sectors, pointing to serious inefficiencies in resource allocation.

We explored the possible link between adjustment (or economic crisis) and social development (or lack thereof), but found no clear connection. These results are in line with much of the recent literature on this topic. For instance, Maasland and van der Gaag, in Corbo, Fischer, and Webb (1992), reviewing global social progress during the early 1980s, conclude that

… regardless of their adjustment status, developing countries made progress in terms of social indicators during the 1980s. [Furthermore], while there was no evidence that Bank-supported adjustment lending policies per se had an adverse effect … [we] … did not find evidence that adjustment policies accelerate progress where it is most needed. [Finally], the record shows that [social] progress can be achieved and maintained under austere economic conditions. Given the inefficiencies in the social sectors, there is scope for improvements in social conditions without large budgetary consequences (pp. 60–61).

Thus, the lesson is clear: a lack of social progress is not an inevitable by-product of austere economic conditions, nor should one look to the adjustment process itself to accelerate social progress. The adjustment process will provide the macroeconomic stability and prosperity that facilitate the implementation of sound social policies. In the MENA region, the focus of social policies should be on (1) attacking the social deficit in the poorest countries by increasing access to basic health and education services, and (2) addressing the education gap through concerted efforts to expand access to postprimary education. The latter is not a task for the state alone. Increased recognition of the role of the private sector, coupled with regulatory and financial measures that will facilitate private sector expansion, is a sine qua non for addressing the needs of the labor markets in a timely fashion.

Finally, no country can expect to prosper by underinvesting in half its human resources. Where the gender gap is large, concerted efforts are needed to accelerate investment in the health and schooling of young girls and women.

Adjusting to the new realities of a wide open competitive world economy is necessary for countries to prosper. There is no evidence that, in the MENA region, social development is being jeopardized by this adjustment process. On the contrary, the need to adjust creates new opportunities to revisit established resource allocation patterns. These patterns need to be adjusted for the region to continue to increase its human capital by making adequate and high-quality social services available to all its people.

Appendix 1

Performance Index

The performance index used in the body of the paper is as follows:

P t , 0 = ln ⁡ ( S o p − S 0 ) − ln ⁡ ( S o p − S t )

where Pt, o is the performance from period 0 to period t, S0 is the social indicator value at period 0, St is the social indicator value at period t, Sop is the optimal value of the indicator, and ln denotes the natural logarithm.

For the infant mortality rate, Sop = 0; thus,

P t , 0 = ln ⁡ ( S t / S 0 ) .

This means that the performance index is approximately equal to the percentage improvement in S for a small change in S. For gross secondary enrollment, we choose Sop to be equal to 100. It is possible that gross secondary enrollment is greater than 100, but this was not the case for any country in the MENA region.

For the derivation of the performance index and its properties, see Kakwani (1993).

Appendix 2

Background Tables

Table A2.

Index of per Capita GDP at Market Prices

(1990 = 100)

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Source World Bank, Economic and Social Database. Note: Base year for Kuwait, Libya, and the United Arab Emirates is 1989.
Table A3.

Growth of Real GDP per Capita

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Sources: World Bank estimates.
Table A4.

Overall Surplus/Deficit

(In percent of GDP)

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Source: IMF, Government Finance Statistics (1995).
Table A5.

Gross Enrollment Ratio: Primary School

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Source: World Bank, Economic and Social Database.

1991 data.

1979 data.

1983 data.

1984 data.

1990 data.

Table A7.

Total Fertility Rate

(Births per woman)

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Source: World Bank (1995b).
Table A8.

Immunization: Poliomyelitis

(Infants under 1 year; percent)

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Source: World Health Organization, Health-for-All Global Indicators database.
Table A9.

Immunization: Measles

(Under 12 months; percent of age group)

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Source: World Bank, Economic and Social Database.

1982 data.

Table A10.

Immunization: DPT

(Under 12 months; percent of age group)

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Source: World Bank, Economic and Social Database.

1982 data.

1987 data.

Table A11.

Access to Safe Water

(In percent of population)

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Source: World Bank, Economic and Social Database.
Table A12.

Access to Sanitation Facilities

(In percent of population)

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Source: World Health Organization, Health-for-All Global Indicators database.
Table A13.

Access to Local Health Care

(In percent of population)

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Sources: World Health Organization, Health-for-All Global Indicators database; and, for Jordan, World Bank, Economic and Social Database.
Table A14.

Life Expectancy at Birth

(In years)

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Source: World Bank (1995b)

Comment

Abdoulatif Benachenhou

In his presentation, the author provides us with many interesting findings as well as a number of useful comments. There is no direct relationship between levels of per capita income and the performance of health and education in the MENA countries. The policies that are addressed to these sectors, as well as the efficiency with which resources are allocated and used, are what determine performance. Thus, under certain conditions, a decrease in GDP and/or fewer resources allocated to these sectors will not affect either access to or quality of education and health. To improve performance, quick adjustments in the allocation and use of resources are needed.

The author reports that the adjustment policies implemented in this group of countries have had diverse effects on education and health. He concludes by saying:

Overall, the evidence suggests that whether or not public expenditure levels for health and education are being protected … is a matter of policy. For the MENA region, the data indicate that efforts have been made to maintain public spending levels, but not always enough to maintain real expenditures per capita (p. 155).

The author quotes a similar finding from other recent literature: “The record shows that [social] progress can be achieved and maintained under austere economic conditions. Given the inefficiencies in the social sectors, there is scope for improvements in social conditions without large budgetary consequences,”1 This means that adjustments in the social sectors are needed to counterbalance the impact of adjustment in other sectors, which, in turn, affects the social sectors.

In most countries, both human and material resources are inefficiently allocated and used, leaving room for improvement in developing these sectors, provided that the appropriate policies are implemented. Even countries that have achieved results from their adjustment policies, such as Jordan, Morocco, and Tunisia, must continue to pay greater attention to improving their social sectors because there is no evidence that adjustment policies per se accelerate progress where it is most needed.

The author reminds us that the social sectors under review are still underdeveloped by international standards. Postprimary education is particularly underdeveloped, which may impede the growth prospects of the MENA region. A recent World Bank document states that severe financing pressures will arise from a greater demand for education and social services from a young population. However, it is essential to maintain educational quality and access because enhanced skills are the key to higher incomes in the future.

To achieve sustainable development in education and health, a favorable economic environment is needed—if both public and private additional resources are to be generated—for a continuing and diversified growth of education and health services. Hence, adjustment policies, inasmuch as they strengthen the foundation for growth, are most welcome.

In the prevailing conditions in the countries in this region, on both the demand and supply sides, there are good arguments in favor of private provisioning and financing of education at the postprimary levels. Public finance should be directed principally toward ensuring universal literacy, numeracy, and social and cultural values through greater participation in primary, lower secondary, and eventually upper secondary education.

Although the region has made rapid progress at all levels of the educational system, it is still gender biased, which deprives the countries of huge human resources and negatively affects their economic and social prospects. Viewed from the perspective of human resource management, the status of women may also be threatened, in the short run, by ill-conceived reform policies.

Points for Debate

The author wants to address “the question of whether or not countries in the MENA region spend their resources on health and education efficiently” (p. 139). To this crucial question, relating to the adjustment policies in the social sector, many answers are possible. One may argue that the allocation of resources to the various levels of education or the different health subsystems is unbalanced. This aspect is well documented in the paper, which shows the large share of outlays in education and health for tertiary education and prestigious hospitals. Another aspect of the misallocation of resources at all educational levels as well as in all health subsystems is weak productivity. This is not documented in the paper. Resource allocation is unique to each country.

Some experts quoted in the paper are in favor of reallocating resources from tertiary education and prestigious hospitals to basic education and health care. On this issue, given the social forces at play, is it possible to implement such a reallocation between different levels and subsystems? This points out the crucial role of social forces in the reform process, which is often underestimated.

For decades, the sensitive issue of resource reallocation has been raised, without having a clear impact on the decision-making process. This is important to consider when it comes time to answer the question the author poses in his paper. Moreover, we are still asking ourselves how we can increase the overall productivity of the system while maintaining the quality of the services. Over the last three decades, many vested interests have influenced development in the social sectors. The author points out, rightly, that “the role of the private sector is generally overlooked when it comes to social development” (p. 147).

If one distinguishes between private provisioning of social services and private financing mainly by the end users, it may happen that developing the private sector as a provider of social services is likely to fail, in keeping with the increasing demand, and so continue to require financial support from the public sector. It will thus not significantly relieve the pressure on the state’s budget. For example, private demand for health care may be supported by social security schemes, as it is in many Arab countries. It may also happen that these schemes begin to experience financial pressures because of the economic crisis and request additional public funds to balance their budgets. The demand for education may also be strengthened by public subsidies or loans. But again, this imposes a certain burden on the public finances.

The author refers to the many success stories of private sector development in the MENA region. Yet, one has to identify the obstacles that face this development. Aside from the cases where the legal and regulatory framework is still unfavorable, one may separate the obstacles facing the private sector in general from those specific to the education and health sectors.

  • On the one hand, stabilization policies make imported equipment more expensive and increase the volume of private contributions needed to fund it. The rise in the cost of credit, and even its increasing scarcity, goes hand in hand with the tightening of monetary policy. These factors may deter private entrepreneurs from investing. These policies also generally lead to a decline in domestic demand. On the other hand, devaluation has made competition with imported goods and services less unfavorable.

  • Some other specific obstacles impede the development of the private sector in education and health. Because of the association of these two sectors with the concept of public service, the bureaucracies want to retain a certain degree of control over private activities. They are not short of arguments when it comes to guaranteeing end users a certain quality of service. Here, a sensitive question arises relating to the cultural dimensions of the development of education and health in many of these countries. It often takes a long time for the market to become really competitive and for users to be able to evaluate what is being marketed. The quality of education and health services has to be guaranteed.

Experience also shows that private entrepreneurs are more efficient in setting up and operating small and medium-sized institutions than large hospitals or universities. The initial capital costs and the organizational requirements of these units are often beyond the reach of private entrepreneurs unless they enter into joint ventures with foreign partners or are heavily subsidized by the state. In this context, it would be interesting to understand how countries of the region have built comparative advantages in health or education services, particularly Egypt, Israel, and Jordan.

The author stresses that the marginal cost of extending educational and health coverage is bound to increase at the upper limits. In that situation, adjustment policies and the economic recession are likely to have a negative impact on vulnerable groups, particularly girls and women residing in remote areas.

The author is strongly in favor of introducing information technologies in the education and training systems, maintaining that “much can probably be accomplished with existing resources” (p. 160). This point deserves elaboration in light of the insufficient procurement of conventional training materials in many countries. In any case, introducing such technologies requires extensive programs to upgrade the skills of teachers and support staff and to increase their motivation to learn. Is that possible for the entire system without additional resources? Here again, country-specific studies are needed. The risk exists that two sectors will develop, one that is well equipped and well financed and one that is marginalized.

Further Considerations

A number of other issues require some attention for a further analysis of the impact of adjustment policies and economic recession on education and health. First, the education and health sectors are still labor-intensive industries, which raises several issues.

  • In many countries, inflation has been significant as a result of stabilization and liberalization policies. Real wages have decreased. Many teachers, health practitioners, and other workers in the education and health fields have reacted by seeking additional sources of income. As a result, their productivity is probably negative even if the quantity of services they offer remains the same. Under these conditions, the quality of education and health services may decline rapidly.

  • In this context, efforts made to increase the productivity of the system, including through lengthening the workday, are difficult to sustain and may encounter some resistance.

  • The quality of public services in education and health may also have suffered because of difficulties in recruiting new and well-trained professionals. In some countries, highly qualified specialists remain unemployed even while the need for their qualifications is growing. One solution may be for private institutions to provide such services, employing these specialists and thereby avoiding wasting resources.

Second, adjustment policies and recession may also affect the demand for education and health services. The situation of the labor market as well as the increasing costs of access and success may have reduced the benefit-to-cost ratio for education. Even in the middle class, where real incomes are declining, education is no longer viewed as the main way to improve one’s social status. How does one handle this decrease in the private profitability of education if employment opportunities remain rare, while so many job seekers are lining up for the available jobs?

Third, the impact of adjustment policies on education and health systems and their reform has many aspects, and, in his paper, the author reviewed the restrictions imposed on public expenditure levels. The indirect impact is more difficult to identify and assess. Some issues are set forth below.

  • Are households able to maintain or increase their health and education expenditures in the context of overall price liberalization policies and increasing poverty?

  • Increases in food prices have had an effect on nutrition levels, particularly for young children, whose learning abilities may be impaired later on.

  • The decreasing real wages may affect teachers’ productivity and motivation. In some countries, the following slogan has sprung from such a situation: “I teach them according to the amount of money they pay.”

  • With high unemployment levels, are we not wasting qualifications acquired earlier in the education and training systems?

The relationship between economic growth prospects and the reform and development of the social sectors is complex. One may argue that economic austerity is indispensable to impose the necessary reforms on decision makers. But this does not necessarily result in the conception and implementation of sound social policies. Furthermore, and beyond certain limits, the social sectors may lose their coherence and attractiveness for private investors and qualified personnel.

The author does not refer explicitly to the privatization of public infrastructures in the educational and health systems. Under certain conditions, this step may well provide the state with additional resources and improve the efficiency of the global system. In this regard, the feasibility of privatizing vocational training infrastructures and health specialities could be explored.

When looking to diversify financing in the education and health sectors in the Arab countries, one should not underestimate the welfare state tradition, which has prevailed over the last three decades. When communities are approached to participate in the financing of such projects, they experience cultural shock. In the longer run, this may change.

The Case of Algeria

The Algerian case illustrates adequately the arguments made by the author and provides us with further information.

The education and health systems developed rapidly thanks to the soundness of public finances up to 1986. The annual growth rate of enrollments was 7 percent for 1970–85 in primary education (ages 6–15), 16.4 percent for the same period in secondary education, and 18 percent in tertiary education. This growth resulted in an increase in enrollment rates at all levels and in greater participation of girls and women in the system, as well as in a decrease in illiteracy.

The same improvement occurred in the health system, especially after free access to delivery was introduced in 1974. By the end of the 1980s, about 5.4 percent of GDP was spent on health. The social demand for health and education skyrocketed after being restricted during historical rough times. This overall situation was bound to create many problems. Among these, the most important were the following:

  • Capital costs in both sectors increased quickly owing to a strong and diversified demand facing a rigid local supply and overly expensive imported equipment and technical assistance.

  • Operating costs increased sharply owing to the mismanagement of human resources illustrated by a decrease in the pupil-teacher ratio and an increase in the ratio of support staff to teaching staff. In the health sector, the bulk of outlays (70 percent) was on salaries, and most of that share was spent on practitioners in acute inpatient care, especially in expensive teaching hospitals.

    It was recently documented that only 43 percent of hospital beds were used, while, in 1993, 21 percent of equipment facilities were out of order because of maintenance problems and a lack of resources allocated for repairs.

  • In this context, unit costs increased significantly as dropouts and repeaters became numerous. A recent study of the vocational training system shows the failure, and inefficient use, of physical capacity, plant, and equipment. The number of trainees at any one time averaged only 54 percent of potential capacity; the teacher-trainee ratio averaged 1:11 compared with the recommended 1:25 ratio.

  • The policy of assisting university students with tuition, food, housing, and transport consumes a large share of resources, while direct unit costs are cut by 53 percent.

  • The link between education and the demand for educated people was masked by a powerful labor demand up to 1984. Since that date, the upheaval of the labor market has revealed the gaps between the two sides.

  • During the whole period, it became obvious that the educational system as a whole had been torn between its function of transmitting knowledge on the one hand and the ideological influence of the political forces imposed on it on the other. This latter consideration induces caution when it comes to the crucial question of the intervention of new actors in the education field.

  • As for the health system, many observers have noted that health indicators, especially life expectancy and infant mortality, in Algeria are low compared with countries with a similar per capita GDP. The system has a strong bias in favor of quite sophisticated care in a clinical environment that is not yet suited to the epidemiological situation of the country.

Against this background, the Algerian authorities began to examine the organization and functioning of both the education and health systems within the context of reviewing public expenditure. This will be carried out in close cooperation with the World Bank. The following items are on the agenda:

  • A reform of the process of resource allocation that aims at a better use of both human and material resources. Planning and programming mechanisms will be improved.

  • A reduction in outlays on transfers, especially in tertiary education.

  • A request for greater financial participation from users of the health system.

  • There is an increasing awareness that a well-functioning health system that covers the basic health needs of the population is in itself a good safety net and even a substitute for a safety net mechanism. For low-income groups, it is more important to have access to good health services than to have a higher income that could easily be eroded by inflation.

Many obstacles to reform remain, among which is the authorities’ reluctance to act quickly in the context of an unstable economic and political situation. Recently, the government appointed in January 1996 put educational reform at the top of its agenda.

Concluding Remarks

The author is certainly right when he views adjustment policies as an opportunity to increase public sector efficiency and promote private sector development. But this opportunity may well not be used. The success or failure of adjustment in the social sector may depend on the social forces at play in each country.

The continuation of the economic recession may jeopardize the efforts that are being made. Growth achievements have been very low in the Arab countries in the last 15 years, undermining employment opportunities; if this situation continues, public spending possibilities will diminish while private sector contributions will also decline.

If adjustment policies succeed in restoring rapid growth, then the social sectors may adjust to the new conditions. If growth is not restored, these sectors may be trapped in a historical declining trend, unable to attract the private sector and with less involvement by the state.

Comment

Ali Tawfik Sadik

I would like to make a few comments on Mr. van der Gaag’s paper, in the spirit of Lewis Preston, who affirmed that “knowledge and ideas are critical to development,” and that “the challenge of development, in the broadest sense, is to improve the quality of people’s lives. . . . Certainly a better quality of life calls for higher incomes, but it also involves higher standards of education, health, and nutrition, a cleaner environment, and equal opportunity.”1

Such concepts and thoughts embellish Mr. van der Gaag’s paper, and his definition of social progress as the product of economic development and good, people-oriented social policies is appropriate and acceptable. His choice to focus his discussion on “good social policies” is consistent with the title of his paper. However, social policies in general, and “good” ones in particular, are not explicitly discussed in the paper within a framework that can be used for policy analysis and decision making. The bulk of the paper—and the third section in particular, which covers social development in the MENA region—consists of a simple statistical analysis of the up-and-down variety. With this type of analysis, one must be careful about using indices to track the evolution of variables related to a particular country. This approach is even more misleading when applied to comparisons among countries. Moreover, the author makes no attempt to analyze or discuss the effect of reform policies on product, labor, or money markets and, through them, on the different segments of society.

The economic and social variables for MENA countries presented in 8 of the text tables and the 14 annex tables have no comparator group or standard measurement, which makes it difficult to assess the achievements. Comparisons among countries of the MENA region are not accurate, because these countries are classified by international and regional institutions into different income groups, and their economic structures vary significantly.

Real per capita consumption in the MENA region was lower on average in 1990 than it was in 1985 (Table 5), and the share of central government expenditures in GDP also declined over the same period (Table 6). In light of these trends, Mr. van der Gaag concludes that “… the adjustment process—either voluntary or forced by economic crisis—is in progress in the MENA region” (p. 151). Indeed, it is in progress, but we need to know the costs and incidence of the process and the possibility of choosing policies that minimize these costs while at the same time achieving the desired objectives of protecting the poor and other vulnerable segments of society. Let me assure you that this is not a call to halt adjustment, but rather an invitation to discuss the implications of statements such as the following:

“There is, moreover, a widespread perception that the costs of adjustment have been unusually severe for the poor, even in countries where adjustment programs have restored reasonable growth rates.”2

“The poor must be protected from the potential social costs of economic reform programs.”3

The relevance of the preceding statements stems from the fact that there are several million poor (“poor” is defined as average spending of less than US$1 a day at 1985 purchasing power parity) in the MENA region; their numbers increased from 10.3 million in 1985 to 10.99 million in 1990 and to 11.03 million in 1994. According to this definition, there were 589,000 poor people in Jordan in 1994.4 However, a different definition would produce different numbers. For example, a study by the International Committee for Population Development, carried out in the fourth quarter of 1995, stated that 45 percent of the Jordanian population lives below the poverty line. The study estimated the average monthly income of a poor household at JD 150 (approximately $210). The major reason for the increase in poverty in Jordan is the high unemployment rate.5 In fact, the MENA region posts the highest unemployment rates of any region in the world.

Another study, called “Strengthening Efforts to Reduce Poverty,” prepared for the Development Committee by the staffs of the IMF and the World Bank in 1989, states that 950 million people live in absolute poverty, of whom 85 million live in the MENA region. Assuming a population of about 240 million in the MENA region in 1989, we find more than 35 percent of the population living in absolute poverty. This is of course an average for the entire region, which does not account for differences from one country to another. Decision makers at the national level must become thoroughly informed of the details of their country’s situation and take appropriate measures to address the issue before it gets worse.

Assessing the impact of adjustment on social progress in general and on poverty in the MENA region in particular, for purposes of policy analysis and decision making, requires a comprehensive investigation of the adjustment process and its effects on the various segments of society. Such a task would require the development of a detailed typology of the poor in each country. On the basis of this typology, policy measures could be linked to the sources and uses of income of the poor. For such an investigation to be possible, a framework that delineates the relevant variables and their linkages is required. One such framework is available in the form of the Assessment Matrix of Impact on Poverty of Adjustment Programs (see Figure 1).

Figure 1.
Figure 1.

Assessment Matrix of Impact on Poverty of Adjustment Programs

Source: IMF, The Implications of Fund-Supported Adjustment Programs for Poverty: Experience in Selected Countries, IMF Occasional Paper No. 58 (Washington, 1988), p. 13.

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Note: I am grateful for comments and suggestions received from World Bank staff at an internal seminar, and from participants at the 1996 conference of the Arab Monetary Fund and the Arab Fund for Economic and Social Development. In particular, the paper benefited from comments by Willem van Eeghen, John Page, Lyn Squire, and the two discussants, Abdoulatif Benachenhou and Ali Tawfik Sadik. Tania Barham provided excellent research assistance. All mistakes and data interpretations are my own.

1

The region encompasses Algeria, Bahrain, Djibouti, Egypt, the Islamic Republic of Iran, Iraq, Israel, Kuwait, Lebanon, Libya, Mauritania, Morocco, Oman, Qatar, Saudi Arabia, Somalia, Sudan, the Syrian Arab Republic, Tunisia, the United Arab Emirates, the West Bank and Gaza Strip, and the Republic of Yemen.

2

See for example Vivian (1995), Cornia and Helleiner (1994), Mosley and Weeks (1993), Summers and Pritchett (1993), Bourguignon, de Melo, and Morrisson (1991), and Reimers and Tiburco (1993).

3

Because of data limitations, the performance index could not be calculated.

4

The total expenditure level in the United Arab Emirates remained about the same, but the population grew by about 40 percent between 1980 and 1985, which explains the drop in per capita expenditures.

5

See Grosh (1990) for a similar “paradox” in Latin America.

1

Vittorio Corbo, Stanley Fischer, and Steven Webb, eds., Adjustment Lending Reinsited: Policies to Restore Growth (Washington: World Bank, 1992), pp. 60–61.

1

World Bank, Conference on Development Economics, Proceedings of the World Bank Annual Conference on Development Economics 1993 (Washington, 1994), p. 7.

2

Development Committee, “Protecting the Poor During Periods of Adjustment” (Washington: World Bank, 1987), quoted in T.N. Srinavasan, Structural Adjustment and the Poor, EDI Working Paper (Washington: Economic Development Institute, World Bank, 1988).

3

Barber Conable, President, World Bank, World Bank News, Vol. 7, No. 7, 1988, quoted in ibid.

4

World Bank, Claiming the Future: Choosing Prosperity in the Middle East and North Africa (Washington, 1995), Table 1.3, p. 29.

5

These data appeared in a short article on Jordan in the magazine Al-Khalij, dated December 20, 1995.

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Cover The Social Effects of Economic Adjustment on Arab Countries
The Social Effects of Economic Adjustment on Arab Countries
ISBN:
9781557756053
Publication Date:
11 Apr 1997
Publisher:
International Monetary Fund
DOI:
https://doi.org/10.5089/9781557756053.071
Pages:
271
Figure 1.

Private Health Expenditures

(In percent of total)
Figure 2.

Infant Mortality

(Per 1,000 live births)
Figure 3.

Gross Primary Enrollment Rate

(In percent)
Figure 4.

Gross Secondary Enrollment Rate

(In percent)
Figure 1.

Assessment Matrix of Impact on Poverty of Adjustment Programs