80515 Inclusion and Resilience MENA DEVELOPMENT REPORT Inclusion and Resilience The Way Forward for Social Safety Nets in the Middle East and North Africa Joana Silva Victoria Levin Matteo Morgandi © 2013 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org Some rights reserved 1 2 3 4 16 15 14 13 This work is a product of the staff of The World Bank with external contributions. Note that The World Bank does not necessarily own each component of the content included in the work. The World Bank there- fore does not warrant that the use of the content contained in the work will not infringe on the rights of third parties. The risk of claims resulting from such infringement rests solely with you. 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Under the Creative Commons Attribution license, you are free to copy, distribute, transmit, and adapt this work, including for commercial purposes, under the following conditions: Attribution—Please cite the work as follows: Silva, Joana, Victoria Levin, and Matteo Morgandi. 2013. In- clusion and Resilience: The Way Forward for Safety Nets in the Middle East and North Africa. Washington, DC: World Bank. DOI: 10.1596/978-0-8213-9771-8. License: Creative Commons Attribution CC BY 3.0 Translations—If you create a translation of this work, please add the following disclaimer along with the at- tribution: This translation was not created by The World Bank and should not be considered an official World Bank translation. The World Bank shall not be liable for any content or error in this translation. All queries on rights and licenses should be addressed to the Office of the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2625; e-mail: pubrights@worldbank.org. ISBN (paper): 978-0-8213-9771-8 ISBN (electronic): 978-0-8213-9772-5 DOI: 10.1596/978-0-8213-9771-8 Cover photo of displaced children at play in South Lebanon: Jenny Matthews/Panos Pictures. Cover design by Debra Naylor, Naylor Design, Inc. Library of Congress Cataloging-in-Publication Data Silva, Joana. Inclusion and resilience : the way forward for social safety nets in the Middle East and North Africa / Joana Silva, Victoria Levin, and Matteo Morgandi.    pages cm. — (MENA development report) Includes bibliographical references. ISBN 978-0-8213-9771-8 (alk. paper)—ISBN 978-0-8213-9772-5 (ebk.) 1. Middle East—Social policy—21st century.  2. Africa, North—Social policy—21st century.  3. Middle East—Economic policy—21st century.  4. Africa, North—Economic policy—21st century.  I. Title. HN656.A8S55 2013 306.0956—dc23 2012047958    Contents Preface xi Acknowledgments xv Executive Summary xvii Overview 1 A Framework for SSN Reform 3 Key Challenges That Call for Renewed SSNs 6  The Current State of SSNs in the Middle East and   North Africa 15 The Political Economy of SSN Reforms in the Middle East    and North Africa: What Do Citizens Want? 23 The Way Forward: How to Make Safety Nets in the    Middle East and North Africa More Effective and Innovative 35 Notes 41 References 41 1 The Framework for Social Safety Net Reform in the Middle East and North Africa 43 The Growing Need for Safety Nets 43 Key Objectives and Results of Effective SSNs 48 References 54 2 The Challenge: Poverty, Exclusion, and Vulnerability to Shocks 57 Introduction 57 Poverty and Lack of Access to Services 60 Vulnerability to Poverty 81 Social Exclusion 93 Conclusions 95 v vi Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa  nnex 2A  Demographic Statistics and Poverty Incidence A   in the Middle East and North Africa, Selected Countries, c. 2006–10 98 Notes 99 References 100 3 The Current State of Social Safety Nets in the Middle East and North Africa 105 Introduction 105 Data and Methodology 107 Spending on SSNs 110 Performance of SSNs, Excluding Subsidies 116 Performance of Subsidies as SSNs 134 Conclusions 137 Annex 3A  Additional Figures and Tables 140 Annex 3B  Methodological Annex 145 Notes 147 References 147 4 The Political Economy of SSN Reforms in the Middle East and North Africa: What Do Citizens Want? 149 Introduction 149  Demand for Redistribution among Citizens of the  Middle East and North Africa 153 Citizens’ Regard for Existing SSN Systems 161 Satisfaction with Existing SSN Programs 161 Subsidy Reforms: Acceptance and Options 177 What Works? International Experience of SSN Reforms    That Increased Acceptability 184 Annex 4A  MENA SPEAKS Questionnaire 196 Annex 4B  Methodology of MENA SPEAKS Surveys and    Jordan Gives Experiment 204 Annex 4C  Public Awareness of SSN Programs and Subsidies 208 Annex 4D  Determinants of Redistribution Preferences    among Jordan’s Middle Class 218 Annex 4E  Determinants of Perceiving High Inequality 219  Annex 4F  Effects of Perceptions about Corruption,  Inequality, and Deteriorating Economic Situations on the Evaluation of SSN Effectiveness 220 Notes 221 References 221 Contents vii 5 The Way Forward: How to Make Safety Nets in the Middle East and North Africa More Effective and Innovative 225 Introduction 225 A Path toward Effective and Innovative SSNs 228 The Way Forward 252 Notes 260 References 260 Appendix A:  Description of the Data Used for the   Micro-Analysis 263 Appendix B: Nonsubsidy SSN Programs Included in    Household Survey Assessment 265 Appendix C: SSN Programs in MENA SSN Inventory 269 Boxes ES.1 Listening to the Middle East and North Africa xxv 1.1 Social Safety Nets (SSNs) Defined 45 1.2 Global Experiences through an SSN Quiz 53 2.1 Poverty, Vulnerability, and Social Exclusion Defined 58 2.2 Inequality of Opportunity Analysis for Early Childhood Health 71 2.3 Household Coping Strategies in the Republic of Yemen 89 3.1 Principal Cash Transfer Programs in the Middle East and North Africa, Selected Countries 115 3.2 The National Aid Fund in Jordan 124 3.3 A Private, Informal Safety Net: Zakat in the Republic of Yemen 130 3.4 The Food Subsidy Program in Tunisia 137 4.1 Listening to Citizens: The MENA SPEAKS Surveys and the Jordan Gives ­Experiment 151 4.2 Indonesia: Rice Subsidy Reform during the Asian Crisis 187 4.3 Peru: National Debate and Reforms 187 4.4 Arab Republic of Egypt: Reduction of Subsidy Burden 188 4.5 Argentina: The Limits of Crisis Politics 189 4.6 Uruguay: Avoid Antagonizing Powerful Interest Groups 191 4.7 Bangladesh: Politics of Food Subsidy Reforms 192 4.8 Pakistan: Derationing of Flour Subsidies in the 1980s 194 4.9 Zimbabwe: Reforms during a Crisis 195 5.1 Main Issues Discussed at SSN Consultation Workshops 227 5.2 Emerging SSN Best Practices in the Middle East and North Africa 229 viii Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa 5.3 Examples of Enhanced Targeting in the Middle East and North Africa 237 5.4 Social Accountability and the Role of Civil Society Organizations 242 5.5 Building Unified Registry Systems 244 5.6 Indonesia’s Fuel Subsidy Reform and SSN System 250 Figures O.1  Citizens’ Self-Reported Ability to Buy Sufficient Food in the Middle East and North Africa, Selected Countries, 2009–11 4 O.2  Citizens’ Satisfaction with Government Assistance to the Poor in the Middle East and North Africa, Selected Countries, 2011 5 O.3 Framework for Renewed Social Safety Nets in the Middle East and North Africa 5 O.4  Prevalence of Wasting Relative to GDP per Capita in the Middle East and North Africa, Selected Countries, c. 2009–12 8 O.5 Stunting, by Wealth Quintile, in the Middle East and North Africa, Selected Countries, 2006 9 O.6 The Rural-Urban Divide: Poverty Rates in the Middle East and North Africa, Selected Countries, c. 2005–10 9 O.7 Share of Young Urban Males out of School and out of Work, by Family Wealth, in the Arab Republic of Egypt, Jordan, and Morocco, c. 2009–10 10 O.8 Work Status of Urban Wage-Employed Men, by Wealth Quintile, in the Arab Republic of Egypt, Jordan, and Morocco, 2009–10 11 O.9 Probability of Transition to a Good or Bad Job in 2009, by Consumption Quintile and Employment Condition of Young Egyptian Males, 2008 12 O.10 Share of Population Living on US$2–US$2.50 a Day in the Middle East and North Africa, Selected Countries 12 O.11 Expenditure Composition by Income Quintile in the Arab Republic of Egypt, 2009 13 O.12 Household Coping Mechanisms for Shocks in Iraq and Morocco, 2009–10 14 O.13 SSN Spending with and without Subsidies, Middle East and North Africa, Relative to Other Developing Countries, c. 2008–11 16 Contents ix O.14 Food and Fuel Subsidies as Percentage of GDP in the Middle East and North Africa, Selected Countries, c. 2008–11 17 O.15 Comparison of Subsidy and Nonsubsidy SSN Expenditures for the Poor in the Middle East and North Africa, Selected Countries, c. 2008–11 17 O.16 Nonsubsidy SSN Program Mix by Type, Middle East and North Africa, c. 2008–11 18 O.17 Coverage by Nonsubsidy SSN Programs, Middle East and North Africa, Relative to Other Regions 19 O.18 Nonsubsidy SSN Program Mix by Targeting Type, Middle East and North Africa, Selected Countries, 2008–11 19 O.19 Benefit Incidence of Nonsubsidy SSNs, Middle East and North Africa, Relative to Other Regions 20 O.20 Benefit Generosity of Nonsubsidy SSNs, Middle East and North Africa, Relative to Other Regions 21 O.21 Poverty and Inequality Impact of Nonsubsidy SSNs in the Middle East and North Africa, Selected Economies, Compared with Other Regions 22 O.22 Inefficient but Poverty-Reducing Subsidies in the Middle East and North Africa, Selected Countries, c. 2004–10 24 O.23 Self-Reported Poverty and Perceived High Inequality, by Income Quintile, in the Middle East and North Africa, Selected Countries, 2012 25 O.24 Opinions on Causes of Success among the Jordanian Middle Class, 2012 26 O.25 Opinions about Responsibility for SSNs and Government Effectiveness in SSN Provision in the Middle East and North Africa, Selected Countries, 2012 27 O.26 Awareness of SSNs, by Income Quintile, in the Middle East and North Africa, Selected Countries, 2012 28 O.27 Knowledge of SSN Program Beneficiaries, by Income Quintile, in Tunisia and Jordan, 2012 29 O.28 SSN Design Preferences, in the Middle East and North Africa, Selected Countries, 2012 29 O.29 Support for Conditionality of SSN Programs in the Middle East and North Africa, Selected Countries, 2012 30 O.30 Opposition to Subsidy Reform of Any Product, by Self-Reported Income Group, in the Middle East and North Africa, Selected Countries, 2012 31 x Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa O.31 Preferred Product for Subsidy Removal (Assuming Necessity of Reform) in the Middle East and North Africa, Selected Countries, 2012 32 O.32 Preferred Targeting of Compensation following Subsidy Reform, in the Middle East and North Africa, Selected Countries, 2012 33 O.33 Propensity to Donate Vouchers by SSN Design and Treatment Group in Jordan, 2012 34 1.1 Citizens’ Self-Reported Ability to Buy Sufficient Food in the Middle East and North Africa, Selected Countries, 2009–11 44 1.2 Citizens’ Satisfaction with Government Assistance to the Poor in the Middle East and North Africa, Selected Countries, 2011 46 1.3 Where Social Safety Nets Fit in Larger Development Policy 47 1.4 Framework for Renewed Social Safety Nets in the Middle East and North Africa 48 2.1 Little Change in the Absolute Poor But Rising Numbers of Relative Poor in the Middle East and North Africa, 1981–2005 60 2.2 Poverty Headcount at US$2 per Day in the Middle East and North Africa, Selected Economies 61 2.3 Prevalence of Child Underweight, Wasting, and Stunting in the Middle East and North Africa, c. 2009–10 65 2.4 Incidence of Wasting and Stunting Relative to GDP per Capita (PPP) in the Middle East and North Africa, Selected Countries, c. 2009–12 65 2.5 Stunting, by Wealth Quintile, in the Middle East and North Africa, Selected Countries, 2006 66 2.6  Preprimary School Gross Enrollment in the Middle East and North Africa, Compared with the World and Developing-Country Averages, 2007–10 68 B2.2.1 Decomposition of Dissimilarity Index of Early Childhood Health Outcomes in the Middle East and North Africa, Selected Countries 72 2.7 The Rural-Urban Divide: Poverty Rates in the Middle East and North Africa, Selected Countries, c. 2005–09 74 2.8 Out-of-School Rates by Location and Gender in the Middle East and North Africa, Selected Countries, c. 2006–10 76 Contents xi 2.9 Work Status of Urban Wage-Employed Men (Ages 35–64), by Wealth Quintile, in the Middle East and North Africa, Selected Countries, c. 2009–12 77 2.10 Likelihood of Refusing a Job, by Education Level, in the Middle East and North Africa, 2009 79 2.11 Probability of Transition to a Good or Bad Job in 2009, by Consumption Quintile and Employment Condition of Young Egyptian Males, 2008 80 2.12 Share of Population Living on US$2–2.50 a Day in the Middle East and North Africa, Selected Countries 82 2.13 Expenditure Composition by Wealth Quintile in the Arab Republic of Egypt, Iraq, and Jordan, c. 2007–09 83 2.14 Household Coping Mechanisms for Shocks in Iraq and Morocco, 2009–10 85 2.15 Incidence of Catastrophic Health Expenditures in the Middle East and North Africa, Selected Economies, c. 2003–07 86 B2.2.2 Human Opportunity Index of Early Childhood Health Outcomes 73 3.1 SSN Spending, with and without Subsidies, in the Middle East and North Africa, Compared with Other Developing Countries, c. 2008–11 111 3.2 Spending on SSNs, with and without Subsidies, in the Middle East and North Africa, Selected Countries, Compared with Other Developing Countries 112 3.3 Expenditures on Food and Fuel Subsidies in the Middle East and North Africa, Selected Countries, c. 2008–11 112 3.4 Comparison of Subsidy and Nonsubsidy SSN Expenditures for the Poor in the Middle East and North Africa, Selected Countries, c. 2008–11 113 3.5 Nonsubsidy SSN Program Mix by Type, Middle East and North Africa, c. 2008–11 114 3.6 Nationwide Coverage of Nonsubsidy SSNs, by Program Type, in the Middle East and North Africa, c. 2008–11 117 3.7 Coverage by Nonsubsidy SSN Programs in the Middle East and North Africa, Compared with the World and Other Regional Averages, c. 2002–10 118 3.8 Coverage Rates of the Bottom Quintile by Specific Nonsubsidy SSN Programs 120 3.9 Nonsubsidy SSN Program Mix by Targeting Type, Middle East and North Africa, c. 2008–11 122 xii Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa 3.10 Beneficiary Incidence of Nonsubsidy SSNs in the Middle East and North Africa Compared with the World and Other Regions, c. 2002–10 123 3.11 Benefit Incidence for Bottom Quintile of Selected Nonsubsidy SSN Programs 126 3.12 Benefit Generosity of Nonsubsidy SSNs, Middle East and North Africa, Compared with the World and Other Regions, c. 2005–10 ­ 127 3.13 Benefit Generosity for the Bottom Quintile of Selected Nonsubsidy SSN Programs, Middle East and North Africa, Compared with Europe and Central Asia 129 3.14 Poverty Rate Impact of Nonsubsidy SSNs, Selected Economies in the Middle East and North Africa, Compared with the World and Regional Averages, c. 2005–10 133 3.15 Inequality Impact of Nonsubsidy SSNs, Selected Economies in the Middle East and North Africa, Compared with the World and Regional Averages, c. 2005–10 134 3.16 Benefit Incidence of Subsidies and Ration Cards in the Middle East and North Africa, Selected Countries, c. 2005–10 136 3.17 Poverty Impact of Subsidies in the Middle East and North Africa, Selected Countries, c. 2004–10 138 3A.1 Performance of Nonsubsidy SSNs in the Middle East and North Africa, Selected Economies, Relative to Development Peers 141 3A.2 Coverage Rates of Main Nonsubsidy SSN Programs by Wealth Quintile in the Middle East and North Africa 142 3A.3 Distribution of Benefits from Main Nonsubsidy SSNs by Wealth Quintile, Middle East and North Africa, Selected Economies 144 4.1 Perceived Causes of Poverty among Jordanian Middle Class, by Subjective Income Group, 2012 155 4.2 Who Feels Poor, by Income Quintile, in the Middle East and North Africa, Selected Countries, 2012 157 4.3 Perceived Inequality, by Income Quintile, in the Middle East and North Africa, Selected Countries, 2012 159 4.4 Opinions on Causes of Success among the Jordanian Middle Class, by Subjective Income Level, 2012 160 4.5 Support for Government SSN Provision, by Prospective Living Standard, Middle East and North Africa, Selected Countries, 2012 160 Contents xiii 4.6 Perception of Improving Living Standards, by Wealth Quintile, in the Middle East and North Africa, Selected Countries, 2012 161 4.7 Opinions about Responsibility for SSNs in the Middle East and North Africa, Selected Countries, 2012 162 4.8 Opinions of SSN Effectiveness in the Middle East and North Africa, Selected Countries, 2012 162 4.9 Perceptions of Government Effectiveness in Providing SSNs, by Income Quintile, in the Middle East and North Africa, Selected Countries, 2012 163 4.10 Jordan Gives Experiment Results Regarding Trust in SSN Institutions 164 4.11 Awareness of SSN Programs in the Middle East and North Africa, Selected Countries, 2012 166 4.12 Awareness of SSNs, by Income Quintile, in the Middle East and North Africa, Selected Countries, 2012 167 4.13 Average Number of SSN Programs of Which Respondents Know a Beneficiary, by Income Quintile, in the Middle East and North Africa, Selected Countries, 2012 168 4.14 Knowledge of Specific SSN Program Beneficiaries, by Income Quintile, in the Middle East and North Africa, Selected Countries, 2012 169 4.15 SSN Targeting Preferences in the Middle East and North Africa, Selected Countries, 2012 172 4.16 SSN Design Preferences in the Middle East and North Africa, Selected Countries, 2012 172 4.17 Preferences for Conditionality of SSN Programs in the Middle East and North Africa, Selected Countries, 2012 173 4.18 Types of SSN Conditions Preferred in the Middle East and North Africa, Selected Countries, 2012 174 4.19 Propensity to Donate Vouchers by SSN Design and Treatment Group in Jordan, 2012 176 4.20 Awareness of Specific Subsidies in the Middle East and North Africa, Selected Countries, 2012 178 4.21 Knowledge of Subsidies, by Income Quintile, in the Middle East and North Africa, Selected Countries, 2012 179 4.22 Opposition to Subsidy Reform on Any Product, by Self-Reported Income Group, in the Middle East and North Africa, Selected Countries, 2012 180 4.23 Preferred Product for Subsidy Removal (Assuming Reform Is Inevitable) in the Middle East and North Africa, Selected Countries, 2012 181 xiv Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa 4.24 Preferred Product for Subsidy Removal, by Self-Reported Income Group, in the Middle East and North Africa, Selected Countries, 2012 182 4.25 Preferred Destination of Savings from Subsidy Reform in the Middle East and North Africa, Selected Countries, 2012 184 4.26 Preferred Compensation for Subsidy Reform, by Self-Reported Income Group, in the Middle East and North Africa, Selected Countries, 2012 185 4.27 Preferred Compensation for Subsidy Reform within the Jordanian Middle Class, by Self-Reported Income Group, 2012 186 4C.1 Public Awareness of Nonsubsidy SSNs in the Arab Republic of Egypt, 2012 209 4C.2 Public Awareness of Nonsubsidy SSNs in Jordan, 2012 210 4C.3 Public Awareness of Nonsubsidy SSNs in Lebanon, 2012 211 4C.4 Public Awareness of Nonsubsidy SSNs in Tunisia, 2012 212 4C.5 Public Awareness of SSN Subsidies in the Arab Republic of Egypt, 2012 214 4C.6 Public Awareness of SSN Subsidies in Jordan, 2012 215 4C.7 Public Awareness of SSN Subsidies in Lebanon 216 4C.8 Public Awareness of SSN Subsidies in Tunisia, 2012 217 Tables O.1 Child Poverty Rates in the Middle East and North Africa, Selected Countries, c. 2006–10 7 1.1 Social Policy Measures Implemented during the Arab Spring in the Middle East and North Africa, Selected Countries, 2011 46 2.1 Child Poverty Rates in the Middle East and North Africa, Selected Countries, c. 2006–10 63 2.2 Characteristics of Poorest and Richest Households in the Middle East and North Africa, Selected Countries, c. 2006–09 64 2.3 Education Outcomes of the Poorest and Richest Quintiles in the Middle East and North Africa, Selected Countries, 2006 69 2.4 Access to Health Services in the Arab Republic of Egypt, Jordan, and Morocco, by Wealth Quintile, 2006 70 B2.2.1 Average Coverage Rates for Selected Early Childhood Health Outcomes in the Middle East and North Africa, Selected Countries 71 Contents xv 2.5 Rural-Urban Divide: Access to Services in the Middle East and North Africa, Selected Countries, 2012 75 2.6 Incidence of Idiosyncratic Shocks in Iraq, Morocco, and the Republic of Y­ emen, 2009–10 84 2.7 Out-of-Pocket Health Care Spending and Impoverishment Effects in the Middle East and North Africa, Selected Economies 87 2.8 Household Coping Strategies in Response to Systemic Shocks 89 2A Demographic Statistics and Poverty Incidence in the Middle East and North Africa, Selected Countries, c. 2006–10 98 3.2 Average Distribution of Fuel Subsidy Benefits by Consumption Quintile in 20 Developing Countries 136 3A.1 Share of Nonsubsidy SSN Spending by Economy and Program Type, Middle East and North Africa, c. 2008–11 140 3B.1 Welfare Aggregates in Middle East and North Africa Economies under Study 146 4D.1 Determinants of Redistribution Preferences among Jordan’s Middle Class, 2012 218 4E.1 Determinants of Perceiving High Inequality in the Middle East and North Africa, Selected Countries, 2012 219 4F.1 Effects of Selected Perceptions on Evaluation of SSN Effectiveness in the Middle East and North Africa, Selected Countries, 2012   220 5.1 Progress on Human Development Outcomes and SSN Reform, by Stage, in the Middle East and North Africa, 2011 254 5.2 Challenges for SSN Systems and Possible Ways Forward in the Middle East and North Africa, Selected Countries, 2012 256 B.1 Nonsubsidy SSN Programs in Household Survey Assessment of Selected Countries in the Middle East and North Africa, c. 2002–10 265 C.1 Middle East and North Africa SSN Inventory, c. 2008–11 269    Preface Transitions are defining moments for social welfare systems. Most social safety net (SSN) programs around the world were introduced during such periods (such as independence after the collapse of the former Soviet Union, Nepal’s transition to democracy, decentralization in Indonesia, and regime change in Brazil and Portugal), and they remained in place afterward. Transitions are forward-looking times, when crucial rethink- ing takes place. In fulfilling people’s aspirations of greater social inclusion and better access to economic opportunities, SSN systems come under increased scrutiny when key questions such as these are discussed: • How much redistribution is optimal and on what terms? • What are the basic goals and priorities for safety nets? • What should be the range and scope of welfare systems? • How can existing systems be reformed to achieve these goals? Before the Arab Spring, many governments in the Middle East and North Africa tended to rely on a redistribution system that protected against destitution through universal subsidies of basic consumption items, which guaranteed affordable access to food and fuel for all citizens, irrespective of their needs. This system’s only available response to crises was to scale up these subsidies or to provide more and better-paid public employment for middle and upper classes. While popular, this system was not sustainable. Perhaps even more importantly, it did not empower citi- zens to prepare for better livelihoods. Today, SSNs in the Middle East and North Africa are ripe for reform, for moving forward on a path that goes from existing systems to ones that incentivize investments in education and health among the poor, protect xvii xviii Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa adults and children against destitution, and help poor and near-poor households navigate the effects of shocks. To better capture the spirit of the post–Arab Spring Middle East and North Africa, and to help in meeting the expectations of its citizens, this report was developed in an inclusive and interactive way. Its development comprised a variety of activities, all designed to share information and to capture the region’s knowledge, preferences, and ideas for present and future SSNs. Specifically, the report reached more than 4,000 Middle East and North Africa citizens through the nationally representative MENA SPEAKS surveys (fielded in collaboration with Gallup in the Arab Re- public of Egypt, Jordan, Lebanon, and Tunisia), which inquired about citizens’ attitudes on, knowledge about, and support for reform of SSNs in the Middle East and North Africa. This was an innovative way to collect systematic information on these citizens’ views and ideas on the topic of safety nets. Moreover, the report reached more than 400 Jorda- nian middle-class citizens through a behavioral game (Jordan Gives), which collected information on revealed preferences for redistribution using real trade-offs, in a nationally representative sample of the Jorda- nian middle class. The report also reached more than 250 representatives of government; academia; civil society; nongovernmental organizations; community- based organizations from Algeria, Bahrain, Iraq, Jordan, Kuwait, Leba- non, Morocco, Oman, Saudi Arabia, Tunisia, the United Arab Emirates, and West Bank and Gaza; and multilateral and bilateral donors (including the International Labour Organization and the United Nations Economic and Social Commission for Western Asia). These representatives partici- pated in the regional consultation workshops in Beirut (January 13–14, 2012), Tunis (January 16–17, 2012), and Muscat (April 16–17, 2012). The workshops were organized jointly with the World Bank MENA Social Protection Strategy team, which allowed for leveraging the dialogue be- yond SSNs to encompass active labor market policies and social insurance systems. During the workshops, the report’s team presented a showcase of global best practices on SSNs using posters and a quiz highlighting key results and features that make SSN programs work. The team also moder- ated expert cafes/roundtables where more than 20 experienced SSN prac- titioners from across the region discussed openly their views on the way forward for SSNs in the Middle East and North Africa and shared knowl- edge on their experience with various aspects of SSN reform. Following up on these initiatives, the team reached out to governments and work- shop participants to develop the MENA SSN ­ Inventory (see appendix C), featuring each country’s major SSN programs and their key characteristics Preface xix (including program objectives and design, as well as recent estimates of budgets and number of beneficiaries). This report, as well as the new tools that it developed for policy mak- ers—including the survey instruments, the game, the posters, and the SSN inventory—all aim at enhancing knowledge about the state of exist- ing SSNs and at informing the debate about their largely unexploited potential. By mitigating the costs of the unforeseeable, by placing the least-endowed on a path of self-reliance, and by reducing the social and political cost of transformations, effective social safety nets represent the policy lever that MENA countries can least afford to overlook during this epoch of change.    Acknowledgments This report is the product of the collaborative effort of a core team led by Joana Silva and comprising Victoria Levin and Matteo Morgandi (principal authors), Mohamad Alloush (data management and analysis), Facundo Cuevas, Tarsicio Castañeda, and Carole Abi Nahed Chartouni. In addition, Victoria Levin and Facundo Cuevas supported at different stages the coordination of the project; Facundo Cuevas also helped to raise funds for the realization of the MENA SPEAKS survey and the Jordan Gives experiment. Bénédicte de la Brière, Ruslan Yemtsov, Karla Hoff, and Hana Brixi provided guidance and useful inputs at different stages of this report. Amy Gautam and Mary Anderson edited the report. Background papers were written for this report by Tarsicio Castañeda, Facundo Cuevas, Abhishek Gupta, Mohamad Alloush, Carole Abi Nahed Chartouni, Yohana Dukhan, Paul B. Siegel, and Quentin Wodon. Anne Hilger, Rania Atieh, Yohana Dukhan, Haneen Sayed, Samira Hillis, Sherine Al-Shawarby, Dorothee Chen, Ezequiel Molina, Lillian Frost, Maaouia Ben Nasr, Sebastian Trenner, Hala Ballout, Kristen Himelein, and Yasmeen Tabbaa provided very useful inputs. The report benefited greatly from the feedback received during ex- tended consultations. In particular, we are grateful to representatives of government, academia, civil society, NGOs, and CSOs from Algeria, Bahrain, Iraq, Jordan, Kuwait, Lebanon, Morocco, Oman, Saudi Arabia, Tunisia, the United Arab Emirates, and West Bank and Gaza as well as to the International Labour Organization and the United Nations Economic and Social Commission for Western Asia, who participated in the regional workshops (in Beirut, January 13–14, 2012; Tunis, January 16–17, 2012; and Muscat, April 16–17, 2012) and in national consulta- tions in Jordan (January 10, 2012). We thank the team that developed the World Bank Social Protection Strategy for MENA, and in particular Rebekka Grun (task leader), Surat Nsour, Victoria Levin, Sebastian xxi xxii Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa Trenner, Rania Atieh, and Nicole La Borde for co-organizing these workshops with our team. We are grateful to Gallup, and in particular to Krista Hoff, Cynthia English, and Joe Daly, for guidance and effective implementation of the MENA SPEAKS surveys. We thank the Center for Strategic Studies at the University of Jordan, and particularly Musa Shteiwi, Yasmina Suley- man, and Walid Alkhatib, for guidance and effective implementation of the Jordan Gives behavioral experiment. We thank our peer reviewers Margaret Grosh, Harold Alderman, and Lynne D. Sherburne-Benz for their valuable guidance and Lire Ersado for his helpful comments. We are also grateful to Jehan Arulpragasam, Trina Haque, David Coady, Haneen Sayed, Samira Hills, Ghassan N. Alkhoja, Jeffrey Waite, Nadine Poupart, Alaa Mahmoud Hamed, Surat Nsour, Mira Hong, Rasmus Heltberg, Umar Serajuddin, Hassan Zaman, William Stebbins, May Wazzan, Phillippe Leite, Nidhal Ben Cheikh, Mehdi Barouniand, Patrick Canel, and Paolo Verme for insightful discus- sions and feedback. This work was supported by the Arab World Initia- tive and by the Trust Fund for Environmentally and Socially Sustainable Development (TFESSD)—Social Protection Window. We thank Steen Jorgensen, Caroline Freund, Yasser El-Gammal, and Roberta Gatti for their strategic guidance.    Executive Summary Transitions are defining moments for social welfare systems. Most social safety net (SSN)1 programs around the world were introduced during transition periods (such as independence after the collapse of the former Soviet Union, decentralization in Indonesia, and regime change in Brazil and Portugal), and they remained in place afterward. When SSN systems come under increased scrutiny regarding their ability to fulfill people’s aspirations of greater social inclusion and better access to economic opportunities, key questions are discussed: ­ • How much redistribution is optimal and on what terms? • What are the basic goals and priorities for safety nets? • What should be the range and scope of welfare systems? • How can existing systems be reformed to achieve these goals? The Arab Spring brought the need for social inclusion and a new social contract to the forefront. Countries in the region have been relying on a redistribution system that protected against destitution through universal subsidies, which guaranteed affordable access to food and fuel for all citi- zens, irrespective of their needs. Governments could respond to crises only by scaling subsidies up or by increasing the size and generosity of public employment. While popular, this system proved hard to sustain. Perhaps even more important, it did not empower citizens to prepare for better livelihoods. Continued growth and poverty reduction, as well as a growing middle class in the Middle East and North Africa, go often hand in hand with chronic poverty and high vulnerability. Children and rural residents face a high risk of poverty, translating into disappointing human development outcomes. More than a quarter of children in the bottom income quintile in the Arab Republic of Egypt, Morocco, and the Syrian Arab Republic xxiii xxiv Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa are chronically malnourished. By the ages of 16–18, children in the poor- est quintile in Egypt and Morocco are more likely to have dropped out of school than to have continued studying. Low levels of human capital ac- cumulation carry a higher risk of either unemployment or precarious em- ployment in jobs with limited chances of upward mobility. When well crafted, SSNs can contribute toward breaking the cycle of intergenera- tional poverty by helping families to keep children healthy and in school. SSNs along with increased social services can also help to tackle the prob- lem of spatial pockets of poverty in slums and rural areas by promoting the demand for safety net services and building community assets. In ad- dition to those in chronic poverty, a large share of the region’s population hovers close to the poverty line and exhibits low resilience to shocks. As many as 15–17 percent of Egyptians, Iraqis, Syrians, and Yemenis, and 10 percent of Moroccans, have per capita consumption levels that are no more than US$0.50 per day above the US$2 per day poverty line (in purchasing power parity [PPP] terms). If SSNs that help in navigating the effects of shocks are not in place, vulnerable households face a high prob- ability of an irreversible loss of human capital during shocks. In addition to the poor and vulnerable, some social groups (such as women and peo- ple with disabilities) face particular barriers in gaining access to social services and labor market opportunities. Together with improved service provision, SSNs can help to start addressing these barriers. SSNs in the Middle East and North Africa are ripe for reform. Most of the region’s spending on SSNs finances energy subsidies, crowding out more effective interventions. Middle Eastern and North African coun- tries spend, on average, 6 percent of gross domestic product (GDP) on subsidies. Fuel subsidies alone represent an average of 4.6 percent of GDP. In sharp contrast, other SSNs in the region are underresourced— receiving less than 0.7 percent of GDP, on average, and being fragmented among many small programs with significant overlaps. Most of the poor and vulnerable fall through the cracks: two out of three people in the poorest quintile are not reached by nonsubsidy SSNs. In fact, existing coverage of the bottom quintile in the region is less than half of the world average. Moreover, inadequate targeting results in significant leakages of SSN benefits to the nonpoor, siphoning off resources that could be used to decrease poverty and improve the distribution of welfare. The average nonsubsidy SSN program in the region distributes only 23 percent of its total benefits to the bottom quintile, while the corresponding figure for the average comparator programs in Latin America and the Caribbean and in Eastern Europe and Central Asia is 59 percent. Although subsidies (and in particular, fuel subsidies) are inefficient and frequently ineffective relative to other SSN interventions, because of their sheer size, many people depend on them to stay out of poverty. Moving from the status Executive Summary xxv BOX ES.1 Listening to the Middle East and North Africa The activities conducted in preparation for this report reached more than 4,000 Middle Eastern and North African citizens through the nationally representative MENA SPEAKS (Social Protection Evaluation of Attitudes, Knowledge, and Support) surveys, which were fielded in collaboration with Gallup in Egypt, Jordan, Leba- non, and Tunisia. Moreover, the report surveyed more than 400 Jordanian middle-class citizens through a behavioral game (Jordan Gives) that collected information on revealed preferences for redis- tribution, using real trade-offs, from a nationally representative sample of the Jordanian middle class. Through consultation workshops across the region, the report also involved more than 250 representatives of government; aca- demia; civil society; nongovernmental organizations (NGOs); community-based organizations from Algeria, Bahrain, Iraq, Jor- ­ dan, Kuwait, Lebanon, Morocco, Oman, Saudi Arabia, Tunisia, the United Arab Emirates, and West Bank and Gaza; and multilateral and bilateral donors (including the International Labour Organiza- tion and the United Nations Economic and Social Commission for Western Asia). quo toward more effective, reliable, and equitable social safety nets re- quires careful thinking not only about the technical aspects of reform but also, and perhaps more important, about the sensitive issues concerning the political economy of reform. Political economy considerations have been a major reason why SSN reform has largely stalled or never began in some Middle Eastern and North African countries; new evidence suggests that better information, improved design, and increased transparency of SSNs can help the region move forward. The region’s citizens are expecting their governments to be more effective providers of SSNs that target the poor. New opinion surveys conducted in Egypt, Jordan, Lebanon, and Tunisia as part of this study (see box ES.1) reveal that close to 90 percent of citizens see the government as the main provider of SSNs. However, in Egypt and Leba- non, less than a third found the current SSN policies and programs effec- tive, while in Jordan and Tunisia the poor reported much more dissatis- faction than the rich. The surveys also showed the uneven coverage of SSNs and, to some extent, their regressive nature. In Egypt, 23 percent xxvi Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa of all respondents—particularly the poor—did not know any of the main SSN programs in the country, while in Lebanon and Tunisia, the rich were more likely than the poor to know an SSN beneficiary. In spite of their large fiscal cost, awareness of fuel subsidies is below 50 percent in all four countries. The opposition to subsidy reform varies strongly across countries (higher in Egypt and lower in Lebanon) and in terms of prior- ity, with gasoline in Egypt, tobacco in Lebanon, and diesel in Jordan and Tunisia being the subsidies most accepted for reform. In addition to the opinion surveys, this study conducted a behavioral experiment (Jordan Gives) among a nationally representative sample of the Jordanian middle class, collecting information on preferences for redistribution to the poor using valuable trade-offs. This experiment showed not only that middle- class individuals support redistribution to the poor, but also, more impor- tant, that this support varies according to the design of the assistance and the credibility of targeting. Altogether, these activities suggest that (a) much scope remains to increase support for reform by raising awareness on the existence and true cost of subsidies; and (b) customizing the design of renewed SSNs can help to shift public opinion in favor of SSN reform. For instance, in all countries but Lebanon, those who approved of subsidy reform opted for a cash transfer targeted to the poor rather than more broad-based measures; in general, citizens showed a clear preference for SSNs that focus on the poor (rather than on specific groups) and that deliver cash (rather than in-kind benefits). Recent experience has demonstrated the feasibility of SSN reform in the Middle East and North Africa. There are several examples of success- ful reforms that have attained significant positive results: • West Bank and Gaza created a unified registry across SSN programs that significantly improved targeting accuracy and crisis response ­capacity. • The Republic of Yemen responded quickly during the global economic crisis with a workfare program to bridge a consumption gap of the poor and vulnerable while also creating community assets. Simultane- ously, important reforms were implemented in the main cash transfer program, the Social Welfare Fund, such as improving poverty target- ing with a proxy means-test formula, strengthening capacity for ser- vice delivery, and implementing a new legal and policy framework. • Morocco’s Tayssir program—a pilot cash transfer program conditional on school attendance and targeting areas with high incidences of school dropouts and poverty—has had a significant positive impact in reducing dropouts in rural areas, especially among girls. • Djibouti has adopted an innovative program design to make a workfare program work for children and women. Executive Summary xxvii • Lebanon recently launched a central targeting database (National Pov- erty Targeting Program), laying the foundation for an effective SSN. • Jordan has made important steps toward rebalancing SSNs away from subsidies and developing a targeting and poverty reduction strategy. The remaining key human development challenges in the region and the disappointing performance of existing SSN systems call for more e ­ ffective and innovative SSNs that promote inclusion and resilience. Although there is no single solution, better results can be achieved through action on the following four agenda items: • Improving the impact of SSN programs in the Middle East and North Africa, including their effect on present and future poverty. Currently, most of the region’s nonsubsidy SSN programs have a lim- ited impact on poverty and inequality because of the combination of low coverage (with inefficient targeting) and inadequate or nonexis- tent monitoring and evaluation (M&E) systems. Hence, the way for- ward on this front could entail the following: C Prioritizing interventions that promote investment in human capital. SSN programs should be geared to addressing the observed human development challenges, such as child malnutrition and school dropouts. This can be achieved by (a) scaling up the region’s exist- ing successful conditional cash transfer (CCT) programs (such as the Tayssir program in Morocco) and workfare programs (such as the Republic of Yemen’s Social Welfare Fund); (b) tweaking the design of existing programs to make them work better for children and women (such as Djibouti’s workfare plus nutrition program); or (c) creating new interventions to fill the gaps based on best prac- tices around the world but adjusting their design to empower the poor and vulnerable. Given the reluctance to condition SSN trans- fers, as observed in the MENA SPEAKS surveys, a well-developed information and communication strategy about the benefits of this approach should precede the implementation of CCT programs in the region. C Enhancing targeting toward the poor and vulnerable. Improved target- ing can contain costs, ensure equity, allow SSNs to act as insurance, and increase effectiveness. Most of the programs in the region re- main categorically or geographically targeted, even though these methods are effective only in environments of concentrated pov- erty. At the same time, in the MENA SPEAKS surveys, citizens indicated their strong preference for poverty-based targeting as op- posed to categorical targeting. There is already substantial move- ment in the region (as in Iraq, Jordan, Lebanon, West Bank and xxviii Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa Gaza, and the Republic of Yemen) in the direction of poverty-based targeting. Results in these places have demonstrated the power of such reforms and outlined a clear path forward. C Improving the focus on SSN program results through M&E and social accountability. In the Middle East and North Africa, enhanced M&E for SSNs can help allocate budget resources among programs, monitor day-to-day operations, and track the results of interven- tions. M&E has been particularly effective when the evaluation re- sults and empirical data are used to inform budgetary decisions and reshape programs. This was the case in West Bank and Gaza and the Republic of Yemen. Moreover, introducing well-functioning social accountability systems can improve efficiency and account- ability and combat corruption. C Reaching out to other stakeholders (citizens, NGOs, civil society organiza- tions [CSOs], the private sector, and nonprofits). Citizens’ awareness about existing SSN programs is low and skewed toward the wealthy. On-demand registration requires awareness about the existence of programs, eligibility criteria, and application procedures. Compre- hensive communication campaigns are needed to inform poor and vulnerable citizens of the safety nets that are available to them. Moreover, engaging a broader spectrum of stakeholders (such as NGOs, CSOs, the private sector, and nonprofits) in financing and implementing SSN programs could add leverage from their exist- ing financial and human resources. • Establishing a reliable yet flexible SSN infrastructure that can be used in normal times as well as during crises. An effective SSN system can help citizens navigate the effects of idiosyncratic and systemic shocks. The recent global economic crisis underscored the weak capacity of existing SSN systems in the Middle East and North Africa to serve this function. Promoting households’ resilience to shocks through SSNs requires a strong administrative infrastructure. Having this infrastruc- ture in place ahead of a crisis allows for quicker and more efficient development of remedial and mitigation actions, such as scaling up of benefits for the most vulnerable or expanding coverage, thus enhanc- ing resilience. In particular, setting up an improved SSN infrastructure could entail the following: C Creating unified registries of beneficiaries that can be used to target multiple programs. In normal times, unified registries can reduce costs and facilitate coherence and convergence because all agents work with the same database. In times of crisis, unified registries can be used to quickly disburse additional benefits to the target popula- Executive Summary xxix tion or to promptly expand coverage by adjusting eligibility criteria. In this regard, West Bank and Gaza provides an example of best practice in the region. C Using effective service delivery mechanisms. In normal times, modern benefit delivery systems are important to reduce administrative costs and leakages to nonbeneficiaries, avoid corruption, and make the transfer of payments to beneficiaries quick and flexible. Effec- tive use of modern technologies such as smart cards, mobile pay- ments, and over-the-counter payments in bank branches facilitates rapid response during crises. • Consolidating fragmented SSN programs. In the Middle East and North Africa, direct transfer programs (cash-based or in-kind) are often small and highly fragmented. International experience suggests that having a few comprehensive programs, specifically designed to reach different segments of the poor and vulnerable, can address cur- rent vulnerabilities and social protection gaps by increasing both cov- erage (currently below 20 percent of the poor in most countries) and benefits (currently covering about 5–10 percent of consumption of the poor). A few parts of the region (for example, Morocco and West Bank and Gaza) have started reforming their SSNs in this direction. To achieve progress in this respect, governments can start by identi- fying gaps in SSN systems and creating an inventory of SSN pro- grams with program objectives, eligibility criteria, and benefit types. Morocco recently undertook this type of analysis. Informed by such an analysis, governments can identify programs that can be expanded or consolidated and formulate a strategy for implementation of the reform. • Rebalancing the financing and priorities of safety net systems by focusing on targeted programs rather than on subsidies. Middle East- ern and North African countries spend the lion’s share of SSN expen- diture, in terms of GDP, on energy subsidies and a small share on targeted safety nets. Reducing costly and regressive general fuel and food price subsidies would decrease fiscal imbalances and free up re- sources for other safety net instruments. In particular, this could entail C Increasing spending and improving coverage of nonsubsidy SSNs to protect against destitution. Successful subsidy reforms have demonstrated the importance of gaining citizens’ trust in the government’s capac- ity to deliver fair and reliable compensation. In light of the evidence provided by the MENA SPEAKS surveys and the Jordan Gives exercise, delivering effective and inclusive SSN programs would be an essential step toward comprehensive subsidy reform. xxx Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa C Reforming price subsidies through wholesale or internal reforms. Sequencing of sensitive reforms such as that of universal price sub- ­ sidies is crucial for their success. To gain credibility, governments could start by I mproving targeting (for example, through differentiated –  marketing and packaging, which can lead to self-targeting, as in ­ Tunisia), narrowing subsidy coverage (such as through lifeline tariffs in electricity), and reducing leakages in the distribution chain. – Identifying the most sensitive subsidies and focusing instead on the most regressive ones. According to the MENA SPEAKS surveys, the least-preferred products for subsidy reform were cooking oil in Egypt, bread in Lebanon and Tunisia, and electricity in Jordan. These subsidies could be subject to reform only when the gov- ernments demonstrate their success at reforming less-sensitive subsidies. Given that spending on fuel subsidies is triple the spending on food subsidies, nonfood subsidy reform is the lower-hanging fruit. In the MENA SPEAKS surveys, citizens indicated that if they had to pick one subsidized product for re- form, this product would be tobacco in Lebanon, gasoline in Egypt, and diesel in Jordan and Tunisia. – Engaging citizens early on in the dialogue on compensation packages and promoting awareness through information cam- paigns. Governments can use the findings from the MENA SPEAKS surveys to initiate a dialogue on preferred compensa- tion packages in their countries. The evidence so far shows that people in the Middle East and North Africa prefer subsidy re- form that targets cash-based compensation to the poor alone (Egypt, Jordan, and Tunisia), perhaps combined with invest- ment of savings in education and health (Lebanon). The Middle Eastern and North African economies find themselves at different stages of progress on human development outcomes and SSN reforms. Notably, the two places that have advanced the most in SSN reform are West Bank and Gaza and the Republic of Yemen, which have, respectively, medium- and low-level human development outcomes (as proxied by the United Nations Development Programme’s human devel- opment index). They were able to implement successful SSN interven- tions (establishing a unified registry in West Bank and Gaza and reform- ing the Social Welfare Fund in the Republic of Yemen) that help to address their specific needs. Bahrain, Djibouti, Jordan, Lebanon, and Morocco have made important steps toward SSN reform, such as a work- Executive Summary xxxi fare plus nutrition program in Djibouti, a pilot CCT in Morocco, reforms in the subsidy system in Bahrain and Jordan, and a targeting database in Lebanon. Other countries are currently considering new programs or reforms of their SSN systems. In each country, the way forward would include short- and medium- run interventions with complementary and mutually reinforcing objec- tives. In the short run, Middle Eastern and North African countries can start demonstrating better results using existing SSN systems by tweaking the design of existing programs, building unified registries, or piloting new programs such as CCTs and “workfare plus.” In the medium run, the focus can shift to reforms that require more preexisting capacity, such as refining the SSN infrastructure and comprehensive subsidy reform. Engaging a broad spectrum of stakeholders in an inclusive and open dia- logue can facilitate the envisioned reforms and promote an empowering role for social safety nets in the region. Note 1. Social safety nets (SSNs) are defined as noncontributory transfers targeted to the poor or vulnerable. They include income support, temporary employment programs (workfare), and services that build human capital and expand access to finance among the poor and vulnerable. Overview Introduction There is currently an unparalleled opportunity for Middle Eastern and North African countries to improve their social safety nets (SSNs)1 to better promote inclusion, livelihood, and resilience. There is a growing international consensus that effective SSN coverage can promote eco- nomic opportunity and help vulnerable populations to overcome poverty. Approximately 80 percent of developing countries currently plan to de- velop or strengthen their SSNs (World Bank 2012a), and those of the Middle East and North Africa are no exception. Historically, transitions and crises have often opened new space for SSN building. Around the world, 70 percent of SSN programs were introduced after a major transi- tion (for example, independence after the collapse of the former Soviet Union; Nepal’s transition to democracy; decentralization in Indonesia; and political changes in Brazil and Portugal). More recently, the global financial crisis spurred dozens of countries to create new SSN programs, expand old ones, and improve overall administrative systems to enhance governance and make programs more efficient (IEG 2011). The Arab Spring has brought the need for social inclusion and a new contract between states and citizens to the forefront. Traditionally, many governments in the region tended to rely on a redistribution system that promoted (a) a minimum standard of living by providing universal subsi- dies of basic consumer goods, and (b) public employment in response to the demand for secure jobs by the middle and upper classes. In times of crisis, governments relied on the same narrow set of policy tools. The subsidy system, which does not require targeting, is popular but has not achieved the desired outcomes of SSNs in an effective and efficient way. During the Arab Spring, demands for increased social inclusion and bet- ter access to economic opportunities implied a turning point for the re- gion as a whole and intense scrutiny of the role of SSNs. 1 2 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa The challenge in the Middle East and North Africa today is to invest in effective SSN systems that are fiscally, politically, and administratively sustainable. To be effective in promoting inclusion, livelihood, and resil- ience, SSNs should be carefully designed and implemented, ensuring that they reach the most vulnerable and help them to build human capital. To achieve fiscal sustainability, some countries around the world have consoli- dated fragmented programs and focused on efficient and lower-cost in- terventions, linking them to asset creation. To achieve political sustain­ ability, some countries have designed programs in accordance with public opinions about poverty and redistribution; established a record of trans- parency, effectiveness, and impact; and considered both the poor’s de- mand for inclusion and the middle class’s demand for fairness. To achieve administrative sustainability, some countries have defined appropriate in- stitutional responsibilities and incentives while developing efficient tar- geting and management systems as well as administrative budgets. Effec- tive planning and design can ensure that sustainability objectives are met by new or reformed SSN programs. Report Objectives The report aims to meet two broad objectives: (a) enhance knowledge about the current state of existing SSNs and assess their effectiveness in responding to new and emerging challenges to the poor and vulnerable in the region by bringing together new evidence, data, and country- specific analysis; and (b) open up and inform a debate on feasible policy options to make SSNs in the Middle East and North Africa more effective and innovative. To those ends, this report seeks to answer the following four questions: • What are the key challenges of the poor and vulnerable in the Middle East and North Africa that call for renewed SSNs? • Are the region’s SSNs achieving their goals of promoting social inclu- sion, livelihood, and resilience to crises? • Which SSN reforms do the region’s citizens want? • What types of policies can be part of the agenda for SSN reform, and how could these policies be developed for maximum effectiveness? Report Structure Chapter 1, A Framework for SSN Reform in the Middle East and North ­Africa, describes and illustrates the reasons for the region’s growing need for SSN reform and establishes the framework for renewed SSNs. It Overview 3 identifies key goals for SSNs (promoting social inclusion, livelihood, and resilience) and illustrates how these goals have been achieved in some parts of the region and elsewhere. Chapter 2, The Challenge: Poverty, Exclusion and Vulnerability to Shocks, analyzes the challenges facing the region’s poor and vulnerable house- holds, which SSNs should focus on as a priority. Two large groups are at higher-than-average poverty risk: children and those who live in rural or lagging areas. The chapter examines factors—such as inequality of oppor- tunities and lack of access to services—that can perpetuate the lower hu- man development outcomes among the poor in these groups. It also de- scribes the challenge of vulnerability (that is, the state of being close to the poverty line and thus at risk of falling into poverty as a consequence of a short-term shock). Finally, it identifies particular social groups that are at a higher risk of exclusion from access to services and employment. Chapter 3, The Current State of SSNs in the Middle East and North Af­ rica, analyzes SSN spending and assesses different aspects of the SSN systems’ performance (including coverage, targeting, generosity, and the impact on poverty and inequality of both subsidy and nonsubsidy SSNs). It benchmarks such performance against that of other regions and coun- tries and identifies the gaps in existing systems. Chapter 4, The Political Economy of SSN Reforms in the Middle East and North Africa: What Do Citizens Want? presents new evidence on citizens’ preferences concerning redistribution and SSN design, using newly col- lected data (MENA SPEAKS surveys and the Jordan Gives behavioral ex- periment). It also discusses how political economy considerations could be taken into account in designing renewed SSNs in the region. Chapter 5, The Way Forward: How to Make Safety Nets in the ­Middle East and North Africa More Effective and Innovative, analyzes and proposes an agenda for reform and the path for moving forward, using global experi- ence and the evidence presented in the preceding chapters. A Framework for SSN Reform Recent economic and social transitions in the Middle East and North Af- rica have refocused attention on the need for greater social inclusion, live- lihood, and resilience. Although sustained growth in many of the region’s countries has pulled people out of poverty and into the middle class, eco- nomic progress has yet to reach many who face persistent poverty and the risk of destitution because of unemployment, disability, or illness. More- over, many more in the Middle East and North Africa are vulnerable to economic shocks, natural disasters, and political or other crises. Without a safety net, poor families who are systematically unable to afford their 4 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa FIGURE O.1 Citizens’ Self-Reported Ability to Buy Sufficient Food in the Middle East and North Africa, Selected Countries, 2009–11 Have there been times in the past 12 months when you did not have enough money to buy food that you or your family needed? 50 40 % who said yes 30 20 10 0 Egypt, Arab Rep. Jordan Tunisia 2009 2010 2011 Source: Gallup Inc. 2011. basic needs are likely to lose hope of escaping poverty; malnourished chil- dren are likely to grow up as poor adults; and, as a consequence of crises, vulnerable families are likely to face difficult choices between survival to- day and avoiding irreversible damage to their future welfare. In fact, economic anxiety is on the rise in the Middle East and North Africa. According to a Gallup World Poll, in 2011, the share of the pop- ulation who admitted having difficulties buying food in the Arab Repub- lic of Egypt, Jordan, and Tunisia was significantly higher than in 2009 (see figure O.1). At the same time, citizens in some of the region’s large countries expressed low levels of satisfaction with ongoing government efforts to help the poor, as shown in figure O.2. By providing assistance to the poor and vulnerable, SSNs can create a springboard to help citi- zens preserve their independence and be in a position to share in the benefits of economic progress. SSNs can be crucial instruments of economic and social transitions in the Middle East and North Africa. Figure O.3 introduces a framework for effective and empowering SSNs in the region. As it illustrates, SSNs can promote three outcomes: • Social inclusion, by enabling investment in human capital (such as sup- porting school attendance or better nutrition for children) Overview 5 FIGURE O.2 Citizens’ Satisfaction with Government Assistance to the Poor in the Middle East and North Africa, Selected Countries, 2011 In your country, are you satis ed or dissatis ed with e orts to deal with the poor? United Arab Emirates Kuwait Saudi Arabia Bahrain Tunisia Jordan Yemen, Rep. Egypt, Arab Rep. Morocco Lebanon 0 20 40 60 80 100 % satis ed Source: Gallup Inc. 2011. FIGURE O.3 Framework for Renewed Social Safety Nets in the Middle East and North Africa Social safety nets to promote Inclusion Livelihood Resilience Increasing human Protecting against Helping households capital and building destitution, navigate the e ects assets of the poor mitigating poverty of shocks Empower people Conditional Workfare Fee waivers Cash Price In-kind cash for access to transfers subsidies transfers transfer services If condition Flexible, Assets must Other costs Costly, Costly to induces need be of might limit creates implement behavior operative value access distortions and operate change systems 6 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa • Livelihood, by protecting against destitution • Resilience to crises, by helping households to navigate the effects of shocks. Experience in many countries, including some in the Middle East and North Africa, shows that several SSN instruments improve investments in human capital through multiple pathways. For example, conditional cash transfers (CCTs) and education fee waivers help to increase school enrollment and attendance. Similarly, CCTs and noncontributory health insurance increase health care use, especially for preventive care (such as mother and child health), while workfare programs can increase the assets of the poor and their communities. Some of these instruments also pro- tect the poor from destitution, and their children from malnutrition and disease, by improving households’ immediate consumption and income without being as expensive and distortionary as price subsidies. In case of shocks, cash transfers reach those in need more effectively than subsidies and in-kind transfers because of their greater flexibility. Key Challenges that Call for Renewed SSNs Understanding the specific challenges faced by the poor and vulnerable is a crucial precondition for effective design of SSN instruments in the Middle East and North Africa. SSN programs encompass a range of flex- ible instruments that can be tailored to the highest-priority needs of the target beneficiaries—advancing the SSNs’ triple goals of promoting in- clusion, livelihood, and resilience. Thus, SSN effectiveness depends on the accurate identification of the principal challenges faced by the poor, such as those that contribute to perpetuating poverty across generations and those that can lead the vulnerable into a quick descent into poverty. To this effect, this section reviews key stylized facts about poverty, vul- nerability, and social exclusion in the Middle East and North Africa and the associated human development challenges faced by the people in need. Two Particularly Vulnerable Groups: Children and Rural Residents Although economic growth in the region lifted many people out of ­ poverty, the decline in poverty rates in the Middle East and North Africa occurred at a slower pace than in other regions, such as Eastern Europe and Central Asia or East Asia and the Pacific. Two large groups of the population face a higher-than-average risk of poverty: children and rural Overview 7 TABLE O.1 Child Poverty Rates in the Middle East and North Africa, Selected Countries, c. 2006–10 percent Child (0–14) Overall Country poverty rate poverty rate Egypt, Arab Rep. 2009 29 22 Iraq 2007 27 23 Jordan 2010 20 14 Morocco 2010 a 25 20 Yemen, Rep. 2006 36 35 Source: Authors’ calculations based on data from latest available household surveys. Note: Poverty rates are based on national poverty lines for all coun- tries except Morocco. a. Poverty line defined as the bottom quintile cutoff. residents. These groups suffer from inequality of opportunities, which is exacerbated by lack of access to services, all leading to lower human de- velopment outcomes. In the absence of SSNs that effectively promote human capital formation among the poor and protect against destitution, these outcomes may be perpetuated. Some countries in the Middle East and North Africa—such as Egypt, Iraq, and the Republic of Yemen—have high levels of child poverty, with at least one in every four children living below the national poverty line (see table O.1). Even in Jordan and Morocco, where child poverty is not as high, children face a significantly higher poverty risk than other age groups. Being born into a poor household puts a child at a significant disadvan- tage compared with his or her peers. The average parent of a poor child in the region has no formal education and has to provide for a family of five or more members. In Egypt and Morocco, 70 percent of the house- holds in the poorest quintile have a head who has never attended school. Poor children often live in dwellings without a sewage connection or basic amenities. In Jordan, a 10-year-old girl in the poorest quintile is 40 percent less likely to drink treated water and 50 percent less likely to have a bed than a girl in the richest quintile. These inequalities are also re- flected in the size and quality of dwellings and access to technology. Progress on some human development outcomes in the Middle East and North Africa is still disappointing—and alarmingly low among the poor, with potentially life-long irreversible impacts. For example, early childhood malnutrition is strikingly high in the region’s low-income countries and in some middle-income ones. The level of economic devel- 8 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa FIGURE O.4 Prevalence of Wasting Relative to GDP per Capita in the Middle East and North Africa, Selected Countries, c. 2009–12 Wasting prevalence among children under ve years, % 25 TMP 20 IND BGDDJI SDN 15 ERI MLI YEM LKA PAK IDN NPL MDV CAFETH NER BFA MMRNGA MAR STP 10 ZAR SLE HTI AFGGHA KHM SYR ALB SEN GNQ LBR GIN GNB BEN CIV COG AGO NAM GMB KENCMR LAO PHL TKM TJK AZE TGOUGA MRTIRQ EGY OMN 5 RWA ZMB PNG GUY ARM THAKAZ MDA MWI MOZ TZALSO SLBUZB BIHSRB MNE ROMGAB SGP KGZ MNG BTN DZAMKD LBY DOM GEO BLZ JOR BRA COL JAM BLR MEX URY BOL NICHNDPRY SWZ ARG TUR SLV PER PAN 0 6 7 8 9 10 11 ln GDP per capita PPP (constant 2005 int. dollar) Sources: Authors’ calculations based on malnutrition data from UNICEF 2009; GDP per capita data from World Bank 2012b. Note: PPP = purchasing power parity. opment contributes but does not completely explain the incidence of malnutrition, as shown in figure O.4: Djibouti, Morocco, and the Repub- ­ lic of Yemen have high malnutrition rates even relative to their develop- ment peers. Within countries, malnutrition rates are higher among chil- dren in poor households (see figure O.5). In terms of education, older children face higher school dropout rates and are more likely to enter the job market as low-skilled youth. The region has important geographic disparities, with those born in lagging areas of even relatively rich countries at high risk of poverty. The rural poverty rates in Iraq and the Republic of Yemen are twice those of urban areas (see figure O.6). Even middle-income countries such as Egypt, Jordan, and Tunisia have spatial pockets (such as slums in urban areas and isolated rural areas) where extreme poverty is prevalent (figure O.6); access to basic services, such as antenatal care and clean water, is lacking (figure O.7); and human development indicators are considerably below the na- tional average. For instance, a child in rural Upper Egypt is 3.4 times less likely than a child in urban Lower Egypt to attend primary school. Inequality of opportunities, combined with lack of access to basic services, severely limits the prospects of people who grow up in poor ­ Overview 9 FIGURE O.5 Stunting, by Wealth Quintile, in the Middle East and North Africa, Selected Countries, 2006 Prevalence of stunting among children under age ve, % 50 45 40 35 30 25 20 15 10 5 0 Djibouti Egypt, Arab Iraq Jordan Morocco Syrian Arab Rep. Republic Poorest 2 3 4 Richest Source: Authors’ calculations based on UNICEF’s latest available Multiple Indicator Cluster Surveys, http:// www.childinfo.org/mics.html. FIGURE O.6 The Rural-Urban Divide: Poverty Rates in the Middle East and North Africa, Selected Countries, c. 2005–10 Jordan Tunisia Egypt, Arab Rep. Iraq Yemen, Rep. 0 10 20 30 40 50 Poverty rate, % Urban Rural Source: Authors’ calculations based on the following household surveys: HIECS, Egypt 2009; IHSES, Iraq 2007; HIES, Jordan 2010; HBS, Republic of Yemen 2006; and World Bank (Poverty Reduction and Economic Management Network) staff estimates using Tunisia HBS 2005. For full identification and descriptions of the surveys, see appendix A. Note: Poverty rates are based on national poverty lines. 10 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa FIGURE O.7 Share of Young Urban Males out of School and out of Work, by Family Wealth, in the Arab Republic of Egypt, Jordan, and Morocco, c. 2009–10 Urban males (ages 15–24) out of school 35 30 25 and out of work, % 20 15 10 5 0 Egypt, Arab Rep. Jordan Morocco Q1 and 2 Q4 and 5 Source: Authors’ calculations based on data from the following household surveys: SYPE, Egypt 2009; LMPS, Jordan 2010; and MHYS, Morocco 2010. For full descriptions, see appendix A. Note: Q = income quintile (1 = lowest, 5 = highest). households, locking them into a low-productivity path. The process by which children and young adults attain desirable education and health outcomes in the Middle East and North Africa depends, to a large extent, on circumstances beyond their control, such as their location at birth, their gender, and their parents’ wealth and education. Wealth is a signifi- cant determinant of access to basic services across the region, such as antenatal care, immunizations, and high-quality child care as well as pre- school education. Among the poor, the inability to cover health costs is significant and especially affects children and pregnant women. Growing up in a poor household and in rural areas also limits the opportunity to accumulate key human capital, including education and health. Most adults in poor Middle Eastern and North African households have either only primary or no formal education. For instance, in 2010, 70 percent of male workers living in households of the bottom consumption quintile in Egypt had primary education or no formal education, compared with only 16 percent of workers living in households at the top income quin- tile. Once in the labor market, individuals with low levels of human capi- tal accumulation are at the highest risk of being unemployed or in poor- quality jobs because low educational achievement makes poor people less employable. Figure O.7 shows that poor young men are more likely to be out of school and out of work than nonpoor young men. Even when they are employed, the poor are more likely to work in informal, low-paying jobs, Overview 11 FIGURE O.8 Work Status of Urban Wage-Employed Men, by Wealth Quintile, in the Arab Republic of Egypt, Jordan, and Morocco, 2009–10 100 90 Urban, wage-employed men (35–64), % 80 70 60 50 40 30 20 10 0 Q 1 and 2 Q 4 and 5 Q 1 and 2 Q 4 and 5 Q 1 and 2 Q 4 and 5 Egypt, Arab Rep. Jordan Morocco Public Private formal Private informal Sources: Authors’ calculations based on data from the following household surveys: SYPE, Egypt 2009; LMPS, Jordan 2010; and MHYS, Morocco 2010. For full descriptions, see appendix A. Note: Q = wealth quintile (1 = lowest, 5 = highest). while those in higher-income households are more likely to be in formal jobs, as shown in figure O.8. Escaping this situation is difficult: figure O.9 shows that workers in the bottom quintile in Egypt are less likely to move from a “bad job” (a job that is neither protected nor well paid) to a good job, and they are more likely than wealthier workers to fall out of good- quality jobs into low-quality ones. High Vulnerability to Poverty, without Effective Coping Strategies Even those who rode the trajectory of economic growth into the middle class remain vulnerable to the risk of falling back into poverty if an eco- nomic contraction takes place. In fact, as many as 15–17 percent of Egyp- tians, Iraqis, Syrians, and Yemenis and 10 percent of Moroccans have con- sumption levels that are no more than US$0.50 per day above the US$2 poverty line, as shown in figure O.10. This large share of the population hovers around the poverty line and therefore has low resilience to shocks. Vulnerable households have little disposable income and spend a high share of total expenditures on essentials. This implies that these house- holds cannot easily scale down their expenditures during shocks, and thus they can easily move into poverty, as figure O.11 illustrates. For instance, between 2005 and 2008, 55 percent of Egyptians experienced at least one episode of poverty or near-poverty (Marotta et al. 2011). 12 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa FIGURE O.9 Probability of Transition to a Good or Bad Job in 2009, by Consumption Quintile and Employment Condition of Young Egyptian Males, 2008 Males (ages 15–34) who were employed in 2008, % 100 90 80 70 60 50 40 30 20 10 0 Q1 and 2 Q4 and 5 Q1 and 2 Q4 and 5 Good job 2008 Bad job 2008 Good job 2009 Bad job 2009 Other status 2009 Source: Authors’ calculations based on HIECS, Egypt 2008 and 2009. For a full description, see appendix A. Note: “Good job” is defined as offering social security or with earnings above two-thirds of the median. “Bad job” is defined as informal and with earnings below two-thirds of the median. “Other status” is defined as being unemployed or out of the labor force. Q = consumption quintile (1 = lowest, 5 = highest). FIGURE O.10 Share of Population Living on US$2–US$2.50 a Day in the Middle East and North Africa, Selected Countries Egypt, Arab Rep. Iraq Yemen, Rep. Djibouti Syrian Arab Republic Algeria Morocco Iran, Islamic Rep. Tunisia Jordan 0 5 10 15 20 Percent Source: Calculations from PovcalNet, http://iresearch.worldbank.org/povcalnet. There is a high probability of an irreversible loss of human capital dur- ing shocks and crises if SSNs that help households navigate the effects of risk are not in place. In the face of a major shock, Middle Eastern and North African households rely on their own income, savings, and assets as well as on informal safety nets (such as private support from family and neighbors) because few have access to formal safety nets. As many as 15 Overview 13 FIGURE O.11 Expenditure Composition by Income Quintile in the Arab Republic of Egypt, 2009 Richest 4 Wealth quintile 3 2 Poorest 0 5,000 10,000 15,000 20,000 25,000 30,000 Annual household consumption in Egyptian pounds Food Rent Utilities Education Health Clothes Telecom Other Source: Data from HIECS, Egypt 2009. For a full survey description, see appendix A. percent of households in Iraq, Morocco, and the capital of the Republic of Yemen reported suffering at least one major shock during the previous 12 months. Formal safety nets do not reach the shock-affected house- holds. As shown in figure O.12, only about 1 percent of all households experiencing a major shock in Iraq and Morocco reported receiving help from formal safety nets (that is, support from the government and non- governmental organizations [NGOs]). In this context, poorer families, with their limited incomes, savings, and assets, are again at greater risk. Similarly, the region’s workforce is vulnerable because of predominantly informal employment, precarious jobs, and the absence of income-sup- port assistance for the unemployed. In addition, weather-related shocks have considerably increased vulnerability among rural agricultural house- holds. For example, in Morocco, 22 percent of all households in 2010 reported having experienced a major weather shock (such as drought, flood, pest infestation, or crop and livestock diseases). Inequitable Access to Social Services and Job Opportunities In addition to the challenges particularly facing poor children, the rural poor, and the vulnerable, pockets of social exclusion impede women, peo- ple with disabilities, and displaced people from gaining access to needed social services and job opportunities. Therefore, SSNs that promote inclu- sion should be designed in ways that are sensitive to the specific needs of these groups and promote their participation in the safety net programs. 14 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa FIGURE O.12 Household Coping Mechanisms for Shocks in Iraq and Morocco, 2009–10 As a coping mechanism to one or more of the aforementioned problems, during last 12 months, has the household: Received help from government or NGO Sold or pawned assets Received help from friends or neighbors Asked for loan Received help from family Used own income or savings 0 10 20 30 40 50 60 Households answering “yes,” % Iraq Morocco Sources: Data from IHSES, Iraq, 2009 and MHYS, Morocco 2010. For full survey descriptions, see appendix A. Note: NGO = nongovernmental organization. Some of the main factors hindering female labor force participation in the Middle East and North Africa are weak support systems (such as pub- lic transportation and child care services), lack of empowerment, educa- tional disadvantages, and wage discrimination as well as gender segrega- tion in various industries (UNDP 2005; World Bank 2004, 2012a). A comparative household survey conducted by the World Bank in Cairo, Egypt; Amman, Jordan; and Sana’a, the Republic of Yemen shows that fewer than 10 percent of women living in households with a member who opposes their work end up participating in the labor market (Chamlou, Muzi, and Ahmed 2008a, 2008b). This is particularly of concern because more than 30 percent of young men oppose female participation in the labor market. Furthermore, in several Middle Eastern and North African countries, tax- and employment-related benefits to families are channeled through men. Countries in the Middle East and North Africa also face challenges, as do other regions, in effectively addressing the difficulties that persons with disabilities consistently face, including high unemployment rates; inaccessible and unaffordable health care; low educational attainment (only 20 percent of women and 40 percent of men with disabilities in the Syrian Arab Republic are literate); inaccessible transportation and infra- structure to reach jobs and services; and stigmatization resulting in social Overview 15 exclusion and marginalization (WHO and World Bank 2010). In 2006, a national survey of people with disabilities in Morocco revealed their high expressed need for improved access to a range of social services (Kingdom of Morocco 2006). In combination with better provision of services, un- conditional cash transfers for people with disabilities can help to start addressing the additional barriers faced by this group in, for instance, accessing health care and rehabilitation, transportation, education, and employment. In some countries of the Middle East and North Africa, externally displaced people can count on a reduced set of social benefits and services than the domestic population. According to the United Nations High Commissioner for Refugees (UNHCR) and the United Nations Relief and Works Agency for Palestine Refugees in the Near East (UNRWA), the region hosts almost half of all the registered externally displaced peo- ple in the world. UNHCR also estimates that the total number of inter- nally displaced persons in the region is around 10 million. The integra- tion of the displaced varies substantially from country to country, and often by particular group. In some countries, displaced people face higher education and health costs than the host country’s population; restricted access to formal sector professions; and constrained mobility due to regu- lations on driver’s licenses (Human Rights Watch 2010). In countries with ongoing conflicts or returning displaced persons, UNHCR and NGOs often step in to provide basic services to the displaced. The Current State of SSNs in the Middle East and North Africa Despite the needs described above, the Middle East and North Africa lags behind other regions in the efficient use of SSN resources. Most coun- tries in the region adopt one of two approaches to SSNs: (a) relying pri- marily on inefficient and pro-rich universal subsidies or ration programs, effectively crowding out more-effective interventions; or (b) offering a multitude of small and fragmented programs that do not have a signifi- cant impact on poverty and inequality because of their low coverage, high leakage, and limited benefit levels. Universal Subsidies at the Expense of More Effective Programs Despite the needs described above, the Middle East and North Africa lags behind other regions in the efficient use of SSN resources. In particular, the region’s countries spend, on average, 5.7 percent of GDP on subsi- dies, as opposed to 1.3 percent of GDP in the average benchmark devel- 16 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa FIGURE O.13 SSN Spending with and without Subsidies, Middle East and North Africa Relative to Other Developing Countries, c. 2008–11 15 12 9 % of GDP 6 3 0 ing sam a 20 1 Dji 2008 Tu 0/11 Jor 011 1 yp uwa 9 Re 0 09 i A 2009 Re 0 08 lop or Afric ntr e of hra 201 roc 201 /0 rab 01 1 20 me a 20 20 08 ia 2 t, A it 2 cou pl 1 ies Ba outi on Mo dan p. Sa Iraq p. de pa & N. 20 i nis rab an in co b Co East n, Leb K ve rat ud d. Ye Mi m Eg Food and fuel subsidies Nonsubsidy SSNs Sources: Authors’ calculations based on Government of Jordan 2011b; World Bank 2009, 2010a, 2010b, 2010c, 2011a, 2011b; World Bank, FAO, and IFAD 2009; IMF Fiscal Affairs Department database. Note: SSN = social safety net. oping country, as figure O.13 shows. With the notable exception of Iraq, the region’s countries spend much more on the more distortionary and pro-rich fuel subsidies (4.5 percent of GDP, on average) than on food subsidies and ration cards (1.1 percent of GDP, on average), as shown in figure O.14. Subsidies capture substantial financial resources that could be spent on more efficient and effective SSN programs, as noted in figure O.15. Sub- sidies aside, administrative data collected as part of this study (Middle East and North Africa SSN Inventory, see appendix A for the description of the methodology) show that nonsubsidy SSNs in the Middle East and North Africa are fragmented among many small programs (see figure O.16); for example, in Morocco, 12 different programs all aim at increas- ing school enrollment. Small Impact of Nonsubsidy SSNs on Poverty and Inequality The Middle East and North Africa region has significant scope to improve the reach of its nonsubsidy safety nets to the poor and vulnerable popula- tion. Everywhere in the region except for West Bank and Gaza, two out Overview 17 FIGURE O.14 Food and Fuel Subsidies as Percentage of GDP in the Middle East and North Africa, Selected Countries, c. 2008–11 14 12 10 8 % of GDP 6 4 2 0 /11 /09 0 08 11 1 1 09 9 10 08 01 01 01 00 20 20 20 20 20 10 08 it 2 ia 2 n2 q2 on uti p. a p. 20 20 wa i Ira da nis rab Re Re an bo in co Jor Ku Tu rab n, Leb iA Dji hra roc me ud t, A Ba Mo Ye Sa yp Eg Fuel subsidies Food subsidies and ration cards Sources: Authors’ calculations based on Government of Jordan 2011b; World Bank 2009, 2010a, 2010b, 2010c, 2011a, 2011b; World Bank, FAO, and IFAD 2009; IMF Fiscal Affairs Department database. FIGURE O.15 Comparison of Subsidy and Nonsubsidy SSN Expenditures for the Poor in the Middle East and North Africa, Selected Countries, c. 2008–11 For every US$ 1 US$23.61 US$96.44 US$158.36 US$193.86 a poor person was spent on was spent on was spent on was spent on got in subsidies in subsidies in subsidies in ration cards in nonsubsidy SSN Jordan Iraq Yemen, Rep. Egypt, Arab Rep. programs Sources: Authors’ calculations based on latest household surveys and Government of Jordan 2011a; World Bank 2009, 2010a, 2010b, 2010c; IMF Fiscal Affairs Department database. Note: SSN = social safety net. of three people in the poorest quintile are not reached by (nonsubsidy) SSNs—less than half of the world average. The only area in the region with SSN coverage above the world average is West Bank and Gaza, where government, donor, and NGO programs cover more than half of 18 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa FIGURE O.16 Nonsubsidy SSN Program Mix by Type, Middle East and North Africa, c. 2008–11 20 18 16 14 No. of SSN programs 12 10 8 6 4 2 0 Bahrain Egypt, Iraq Jordan Kuwait Lebanon Morocco Saudi Syrian Tunisia West Yemen, Arab Rep. Arabia Arab Bank Rep. Republic and Gaza Cash transfers Fee waivers, education, and health bene ts Food and other in-kind transfers Housing Micro-credit and income-generating activities Training Workfare programs Others Source: Authors’ calculations based on Middle East and North Africa SSN Inventory. the poorest quintile, as shown in figure O.17. Overall, coverage of the bottom quintile by SSNs in the Middle East and North Africa is less than half the world average and less than a third of the SSN coverage in Europe and Central Asia or Latin America and the Caribbean (see figure O.17). Different targeting methods are applicable in different contexts. In the Middle East and North Africa, SSN programs overwhelmingly use geo- graphic and categorical targeting methods (see figure O.18), which work well in environments where poverty is concentrated, but not when pov- erty is multifaceted and spatially dispersed. In the latter case, methods that identify households or individuals based on their means or correlates of poverty (proxy means testing [PMT]) are preferable. Given the over- reliance on such targeting methods, leakages in the Middle East and North Africa are very high, with only a quarter of nonsubsidy SSN ben- eficiaries in the average country coming from the poorest quintile, while about 15 percent are from the richest quintile, as shown in figure O.19. A comparison with other regions confirms the underperformance of the Middle East and North African SSNs in terms of beneficiary incidence, since elsewhere the bottom quintile constitutes more than 30 percent of SSN beneficiaries, with Latin America and the Caribbean leading the world at 36 percent. Still, some parts of the Middle East and North Africa region, such as Jordan, West Bank and Gaza, and the Republic of Yemen, have already Overview 19 FIGURE O.17 Coverage by Nonsubsidy SSN Programs, Middle East and North Africa Relative to Other Regions 60 Percentage covered in bottom quintile 50 40 30 20 10 0 me 09 d Jor 005 Mo 2010 rab 010 09 02 ica r. & aci c the Asia an Dji 007 sia ld Ye a 20 k an E. A Wor 20 20 be Afr 2 2 q2 r. & ent. rib &P z n p. n yp rocco p. uti N. Ga st Ba da Ira Re Re Ca bo C st & n, We Ea t, A Eu d. Mi me Eg L. A Sources: Middle East and North Africa: Authors’ calculations based on national household surveys. Other regions: World Bank 2012a. Note: SSN = social safety net. All regional averages are population-weighted. FIGURE O.18 Nonsubsidy SSN Program Mix by Targeting Type, Middle East and North Africa, Selected Countries, 2008–11 100 90 80 Share of SSN programs, % 70 60 50 40 30 20 10 0 p. p. co Ara abia ka a za in q n on lic it si Re Re Ira da wa hra Ga roc ub an st B Tuni Jor Ar rab n, Ku Leb ep Ba Mo nd me i ud t, A bR Ye Sa an yp Eg ian We Syr Categorical Geographical Means tested Self-targeted Proxy means tested Does not specify Source: Authors’ calculations based on Middle East and North Africa SSN Inventory. Note: SSN = social safety net. 20 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa FIGURE O.19 Benefit Incidence of Nonsubsidy SSNs, Middle East and North Africa, Relative to Other Regions 45 Distribution of SSN bene ciaries, % 40 35 30 25 20 15 10 5 0 ica the Asia an 0 09 09 05 10 02 me & Ce c 7 rld 01 00 be Afr Eu Paci 20 20 20 20 20 Wo n2 nt. q2 rib za p. p. co uti N. da & Ca Ira Re Re Ga roc bo st & sia Jor rab n, Mo Dji nd E. A r. Ea me ka t, A r. & d. Ye an Mi yp st B Eg L. A We Poorest quintile Richest quintile Sources: Middle East and North Africa: Authors’ calculations based on national household surveys. Other regions: World Bank 2012a. Note: SSN = social safety net. All regional averages are population-weighted. begun to improve their targeting methods. For example, Jordan’s Na- tional Aid Fund relies on a semiverified means test combined with cate- gorical targeting, while West Bank and Gaza, the Republic of Yemen, and, most recently, Lebanon have introduced PMT-based targeting. In terms of generosity, setting the benefit size for an SSN program is an important but difficult policy decision. On the one hand, a robust safety net should deliver adequate consumption protection for the most vulnerable members of a society, those who cannot provide for them- selves due to age or disability and those who need temporary assistance to rebound from an economic or health shock. On the other hand, overly generous benefits may discourage working-age, able-bodied adults from participating in the labor force and instead encourage them to depend on the assistance provided by the government. As shown in figure O.20, the generosity of SSN programs that reach the bottom quintile in the Middle East and North Africa is low, as these transfers constitute less than a quarter of the bottom quintile’s welfare (as measured by consumption, expenditure, or assets). The greatest impact of SSN transfers on the welfare of the poorest quintile is in West Bank and Gaza, followed by Jordan. However, in countries such as the Republic of Yemen, the consumption levels of beneficiaries in the bottom quintile are barely affected. Overview 21 FIGURE O.20 Benefit Generosity of Nonsubsidy SSNs, Middle East and North Africa Relative to Other Regions 35 Bene ts as % of welfare of bene ciary 30 25 20 15 10 5 0 ica sia an c 20 d 0 7 9 05 rld 01 00 00 za an be aci t. A Afr 20 Wo Jor 09 n2 q2 .2 rib Ga ank &P n p. N. p Ce Ira da Ca Re Re st B st & sia r. & the rab n, E. A We Ea me Eu r. & t, A d. Ye Mi yp me Eg L. A Sources: Middle East and North Africa: Authors’ calculations based on national household surveys. Other regions: World Bank 2012a. Note: SSN = social safety net. All regional averages are population-weighted. Overall, whereas the average SSN system in the world provides trans- fers of almost 20 percent of the bottom quintile’s welfare, in the Middle East and North Africa, this figure stands at only 12 percent, far below the other regions, as shown in figure O.20. This suggests that the benefit generosity of SSNs in the Middle East and North Africa can be increased without triggering work disincentives. The most important indicator of SSN effectiveness is the impact on poverty and inequality. This indicator combines the separate forces of coverage, targeting, and generosity of SSN programs to assess the overall effect of the presence of SSNs on the welfare distribution of the country. With the exception of West Bank and Gaza and Jordan, SSNs in the re- gion have little effect on poverty rates, as estimated through a simulation of poverty in the absence of SSNs (see figure O.21, panel a). SSN pres- ence in Egypt, Iraq, and the Republic of Yemen reduces poverty rates in these countries by at most 3 percent. SSNs in the Middle East and North Africa perform better in terms of poverty impact than SSNs in East Asia, but much worse than the world average or in Europe and Central Asia and Latin America and the Caribbean. Notably, West Bank and Gaza’s SSNs have a higher impact on poverty than the best-performing region (Europe and Central Asia). The regional leader in terms of SSN impact on inequality is West Bank and Gaza, with its SSNs reducing the Gini coefficient by more than 22 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa FIGURE O.21 Poverty and Inequality Impact of Nonsubsidy SSNs in the Middle East and North Africa, Selected Economies, Compared with Other Regions a. Poverty rate impact 20 SSN impact on poverty rate, % 15 20 5 0 ica ia an c 20 d 0 7 9 05 rld As 01 00 00 za an be aci Afr 20 Wo Jor 09 n2 q2 .2 nt. rib Ga ank &P p. N. p Ce Ira da Ca Re Re st B st & sia r. & the rab n, E. A We Ea me Eu r. & t, A d. Ye Mi yp me Eg L. A b. Inequality impact 8 SSN impact on Gini coe cient, % 6 4 2 0 ica ia an c 20 d rab 010 09 05 7 rld As 00 za an be aci Afr 20 20 Wo 09 2 q2 nt. rib Ga ank &P n p. p. N. Ce Ira rda Ca Re Re st B st & sia r. & the o n, J E. A We Ea me Eu r. & t, A d. Ye Mi yp me Eg L. A Sources: Middle East and North Africa: Authors’ calculations based on national household surveys. Other regions: World Bank 2012a. Note: SSN = social safety net. All regional averages are population-weighted. 7 percent (see figure O.21, panel b). On the other hand, in Egypt, Iraq, and the Republic of Yemen, SSNs have an imperceptible effect on welfare distribution, with the Gini coefficient declining by less than 1 percent. Comparisons with other regions demonstrate that in terms of reducing inequality, the region’s performance is in the middle of the regional rank- ings, below Europe and Central Asia as well as Latin America and the Caribbean, but above East Asia. Low coverage, poor targeting, and insufficient generosity of SSNs in the Middle East and North Africa account for these relatively small im- Overview 23 pacts on poverty and inequality. The impact on inequality measures the effect of SSNs on welfare distribution; as such, it is directly tied to target- ing accuracy. Even excluding subsidies and ration cards, the region’s SSNs are not adequately targeted to the poor and vulnerable, which ex- plains the negligible effect on the Gini coefficient. Universal Subsidies Are Inefficient and Pro-Rich—but Many People Depend on Them The most frequently cited reason for reliance on subsidies is protection of the poor by guaranteeing access to food and other essential items at affordable prices. When used as SSNs, universal subsidies (in particular, fuel subsidies) suffer from significant deficiencies in targeting accuracy, as shown in figure O.22, panel a. Indeed, in Egypt, Jordan, and the Republic of Yemen, the richest quintile captures 40–60 percent of all fuel subsidy benefits because the rich consume more energy products than the poor. While the benefits of food subsidies are more equitably distributed, inef- ficiencies due to leakages of subsidies remain staggering: more than 70 percent of spending on food subsidies in Egypt and Iraq could be saved if such leakages were eliminated (World Bank 2010a, 2010b). Still, due to their sheer magnitude as well as the high vulnerability in the Middle East and North Africa, subsidies have a significant impact on poverty, and any reform needs to take this fact into account. Despite their inefficiency, simple removal of subsidies would have significant impover- ishing effects in many Middle Eastern and North African countries. Given their wider coverage and generosity (in terms of subsidization rates of essential goods in the consumption baskets), subsidies have major im- pacts on keeping people out of poverty (see figure O.22, panel b). In Egypt and Iraq, food ration cards reduced poverty rates by more than 30 percent (or about 10 percentage points). Notably, fuel subsidies have lower impacts on poverty than food subsidies. Given the significant poverty-reducing impact of subsidies (especially, food subsidies) and the low impact of nonsubsidy SSNs, reform of subsidies has to be accompa- nied by significant expansion of other SSN instruments that promote livelihood and resilience. The Political Economy of SSN Reforms in the Middle East and North Africa: What Do Citizens Want? A large body of evidence about citizens’ perceptions and aspirations con- cerning SSNs has been collected as part of this report, with the objective of understanding citizens’ key preferences for the SSNs of the future. 24 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa FIGURE O.22 Inefficient but Poverty-Reducing Subsidies in the Middle East and North Africa, Selected Countries, c. 2004–10 a. Bene t incidence of subsidies 70 60 50 Total subsidy bene ts, % 40 30 20 10 0 Poorest quintile Q2 Q3 Q4 Richest quintile Iraq, 2007: food ration cards Yemen, Rep., 2005: fuel subsidies Egypt, Arab Rep., 2009: fuel subsidies Jordan, 2010: food subsidies Jordan, 2010: fuel subsidies Source: Authors’ calculations based on national household surveys. b. Poverty impact of subsidies 40 Impact of subsidies on reducing poverty rate, % 30 20 10 0 Food subsidies Ration cards Fuel subsidies Food, gas, water Petroleum subsidies subsidies Egypt, Arab Rep. Iraq 2007 Egypt, Arab Rep. Jordan 2010 Yemen, Rep. 2009 2004 2005 Sources: Government of Jordan 2011a; Government of Yemen, World Bank, and UNDP 2007; World Bank 2005, 2010a, 2010b. Although many of the technical shortcomings of SSNs have been high- lighted in the past—and although governments have attempted to reform untargeted subsidies at different times—political economy considerations have been a major reason why SSN reforms have largely stalled or never began across the region. As part of this study, new cross-country data were collected using opinion surveys (MENA SPEAKS [Social Protec- Overview 25 FIGURE O.23 Self-Reported Poverty and Perceived High Inequality, by Income Quintile, in the Middle East and North Africa, Selected Countries, 2012 90 Respondents who report being poor, % 80 70 60 “Subjective 50 poor” 40 30 20 10 0 Q1 Q2 Q3 Q4 Q5 Q1 Q2 Q3 Q4 Q5 Q1 Q2 Q3 Q4 Q5 Q1 Q2 Q3 Q4 Q5 Egypt, Arab Rep. Jordan Lebanon Tunisia Source: Authors’ calculations based on MENA SPEAKS survey. Note: Q = income quintile (1 = lowest, 5 = highest). tion Evaluation of Attitudes, Knowledge, and Support]) in partnership with Gallup in Egypt, Jordan, Lebanon, and Tunisia. In addition, this chapter presents the findings from an innovative behavioral experiment (Jordan Gives), which simulated the real trade-offs involved in SSNs by providing participants with fuel vouchers and giving them an option to donate these vouchers in exchange for different designs of SSNs for the poor in their communities. The new data provide evidence on possible entry points for SSNs’ renewal and reform that the poor and middle classes are likely to support. The self-reported poor are an important share of the region’s popula- tion, and they include both a large majority of the poor and also the “subjective poor”—those who are not in the bottom income quintile and yet report themselves to be poor (see figure O.23). The subjective poor can constitute up to one-fifth of the population, as in the case of Tunisia, and stand out for being those more likely to say that “the rich own almost all of the wealth” in the country. In turn, those who believe that income inequality is high tend to demand more redistributive policies. The sub- jective poor is the group that perceives inequality more acutely. This group is also more likely to be dissatisfied with the government’s effec- tiveness in providing SSNs. The demand for redistribution also varies according to personal beliefs about poverty and social mobility. In the questionnaire used after the Jordan Gives experiment, middle-class participants expressed a general belief that hard work usually brings success. This belief was more preva- 26 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa FIGURE O.24 Opinions on Causes of Success among the Jordanian Middle Class, 2012 What is in your opinion the main cause of professional success? Upper middle income Middle income Lower middle income 0 20 40 60 80 Percent Hard work Luck and connections Source: Authors’ calculations based on Jordan Gives 2012 data. lent among those who define themselves as upper- and middle-income, while those who feel their income to be closer to the poor are more likely to say that success is due to luck and connections, as shown in figure O.24. These perceptions are in line with those in Latin America and Western Europe but less stark than in the United States, where individuals over- whelmingly believe that success is the result of individual effort. Government Most Responsible for SSNs but Often Seen as Ineffective When asked about who should bear the primary responsibility for aiding the poor, the vast majority of MENA SPEAKS respondents replied “the government,” as shown in figure O.25, panel a. In Jordan and Tunisia, the poor had markedly the most critical evaluations of government effective- ness regarding SSNs, as shown in figure O.25, panel b. In addition, regression analysis in MENA SPEAKS countries shows that in Egypt and Tunisia, but not in Lebanon, citizens who agreed with the statement that “government corruption is widespread” were much more likely to find the existing SSNs ineffective. Similarly, in the Jordan Gives experiment, those who had more doubts about the accuracy of tar- geting existing SSNs to the poor were less likely to donate their vouchers to the poor. Overview 27 FIGURE O.25 Opinions about Responsibility for SSNs and Government Effectiveness in SSN Provision in the Middle East and Northern Africa, Selected Countries, 2012 a. Responsibility for helping the poor b. Government e ectiveness in providing SSNs Who should be most responsible for the poor in your country? 100 80 Government somewhat or very e ective in 70 providing SSNs, % of respondents 75 60 50 Respondents, % 50 40 30 25 20 10 0 0 Egypt, Jordan Lebanon Tunisia Egypt, Jordan Lebanon Tunisia Arab Rep. Arab Rep. No group should be Charitable org. Religious org. Q1 Q2 Q3 Q4 Q5 Family and friends Government Source: Authors’ calculations based on MENA SPEAKS survey. Note: SSN = social safety net. Q = income quintile (1 = lowest, 5 = highest). Awareness of available SSN programs varies strongly by country and is higher among the wealthy. Egyptians have low awareness about exist- ing nonsubsidy SSN programs, while Tunisian and Lebanese SSN pro- grams have high name recognition. For instance, 23 percent of respon- dents in Egypt had never heard about a single SSN program, even after being prompted with program names; this rate was far lower among the poor than among high-income respondents, as shown in figure O.26. In Lebanon, however, a quarter of the respondents knew about three out of five programs on the list. In Tunisia (and, to a lesser extent, in Lebanon), the rich are much more likely than the poor to personally know someone who participates in an SSN program than are the poor, which could be an imperfect proxy for the level of leakage. In Tunisia, the probability of knowing a benefi- ciary of the National Program of Assistance to Needy Families (Pro­ gramme Nationale d’Aide aux Familles Nécessiteuses ) was twice as high among people in the top and middle-income quintiles than among the poor, as shown in figure O.27, panel a. In contrast, in Jordan, most of the programs are better known among the bottom two quintiles than among the top two quintiles, as shown in figure O.27, panel b. 28 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa FIGURE O.26 Awareness of SSNs, by Income Quintile, in the Middle East and North Africa, Selected Countries, 2012 4.0 3.0 No. of SSN programs known 2.0 1.0 0 Q1 Q2 Q3 Q4 Q5 Egypt, Arab Rep. Jordan Lebanon Tunisia Source: Authors’ calculations based on MENA SPEAKS survey. Note: SSN = social safety net; Q = income quintile (1 = lowest, 5 = highest). Public awareness of food subsidies in the Middle East and North A ­ frica is much higher than awareness of fuel subsidies, and knowledge about subsidies improves with income, especially for fuel. The awareness that fuel was subsidized ranged from 25 percent in Jordan to 47 percent in Tunisia. However, the awareness of the bread subsidy ranged from 47 percent in Lebanon to 87 percent in Egypt. The higher awareness of food subsidies is particularly relevant considering that the fuel subsidies tend to be more regressive and consume more resources than food subsidies across the region’s countries. For example, Egypt spends much more on fuel subsidies (6.9 percent of GDP in 2009) than on food subsidies (1.8 percent of GDP). Raising awareness of the costs incurred due to fuel subsidies could be the starting point for an honest dialogue on SSN reform. Preferences for SSNs Targeting the Poor, with Cash Rather than In-Kind Benefits More than 85 percent of people would prefer to have SSN programs targeted to the poor rather than to different categories of people, such as widows, orphans, and the disabled, as shown in figure O.28, panel a. This preference is stronger among the poor themselves, which is understand- able because categorical targeting is more likely to exhibit leakage to the nonpoor or not to cover them if they do not belong to the targeted Overview 29 FIGURE O.27 Knowledge of SSN Program Beneficiaries, by Income Quintile, in Tunisia and Jordan, 2012 a. Tunisiaa b. Jordanb 35 70 Respondents knowing an SSN bene ciary, % Respondents knowing an SSN bene ciary, % 30 60 25 50 20 40 15 30 10 20 5 10 0 0 Q1 Q2 Q3 Q4 Q5 Q1 Q2 Q3 Q4 Q5 PNAFN National solidarity fund NAF Zakat fund THIMO CNSS health cards MOSD emergency assistance School nutrition program In-kind transfers from MOSW Enhanced productivity program King’s makrame Source: Authors’ calculations based on MENA SPEAKS survey. Note: SSN = social safety net; Q = income quintile (1 = lowest, 5 = highest). a. CNSS = Social Security Fund (Caisse nationale de sécurité sociale); MOSW = Ministry of Social Welfare; PNAFN = National Program of Assistance to Needy Families (Programme national d’aide aux familles nécessiteuses); THIMO = Labor intensive works (Travaux à haute intensité de main d’œuvre). b. MOSD = Ministry of Social Development; NAF = National Aid Fund. FIGURE O.28 SSN Design Preferences, in the Middle East and North Africa, Selected Countries, 2012 a. Preference for poverty targeting vs. categorical targeting b. Preference for cash bene ts vs. in-kind 100 100 Targeting preference, % of respondents Bene t preference, % of respondents 80 80 60 60 40 40 20 20 0 0 Egypt, Arab Rep. Jordan Lebanon Tunisia Egypt, Arab Rep. Jordan Lebanon Tunisia Serving speci c groups of people Serving the poor Goods (food, clothes, etc.) Cash Source: Authors’ calculations based on MENA SPEAKS survey. Note: SSN = social safety net. 30 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa FIGURE O.29 Support for Conditionality of SSN Programs in the Middle East and North Africa, Selected Countries, 2012 80 60 Respondents, % 40 20 0 Egypt, Arab Rep. Jordan Lebanon Tunisia No requirements Some requirements Source: Authors’ calculations based on MENA SPEAKS survey. Note: SSN = social safety net. ­ ategories. Also, more than two-thirds of respondents in each of the four c countries under study preferred cash-based SSNs—ranging from 68 per- cent in Lebanon to 85 percent in Jordan—although the rich were more likely than the poor to prefer in-kind transfers, as shown in figure O.28, panel b. Unlike in Latin America, where conditionality of cash transfers in- creased support for SSNs, respondents in the Middle East and North Africa do not seem ready to impose requirements on safety net recipients. About two-thirds of the survey respondents in Egypt and Lebanon and three-quarters of the respondents in Jordan and Tunisia rejected the idea of conditioning SSN transfers (see figure O.29). For those who agreed with imposing some requirements on SSN beneficiaries, conditions tied to children’s school attendance and active job search efforts were most preferred. Interestingly, in Egypt, the self-identified poor were much more open to the idea than the middle class and the wealthy. If govern- ments were to establish programs with conditionality, an effective com- munication campaign on its rationale would be necessary. Subsidy Reform Acceptance Varies, with Compensation Targeting the Poor Preferred Acceptance of subsidy reform is very country-specific, ranging from a low in Egypt to a high in Lebanon. Figure O.30 illustrates the relative toler- ance of subsidy reform concerning a list of subsidized products. In all Overview 31 FIGURE O.30 Opposition to Subsidy Reform of Any Product, by Self- Reported Income Group, in the Middle East and North Africa, Selected Countries, 2012 70 60 Respondents opposed, % 50 40 30 20 10 0 Poor Lower middle Upper middle and rich Egypt, Arab Rep. Jordan Lebanon Tunisia Source: Authors’ calculations based on MENA SPEAKS survey. countries, the lower-middle-income group is less likely to oppose subsidy reform than the upper-middle-income and wealthy groups. And in three out of four countries (all except Lebanon), the lower-middle-income group is more willing to consider subsidy reform than the self-identified poor. One hypothesis explaining this could be that those of lower-middle income do not depend on subsidies as much as the poor, but they also do not consume a lion’s share of the subsidy benefits, as do those of upper- middle income and the rich. In addition, citizens who were ready to consider the reform of at least one subsidy were more tolerant of reforming fuel subsidies than food subsidies. In Lebanon, an overwhelming majority of citizens appeared to support the removal of the relatively unknown tobacco subsidy (see figure O.31). Gov- ernments can use such information in building a pro-reform coalition. The majority of citizens in the Middle East and North Africa prefer spending the savings from subsidy reform on cash-based transfers tar- geted to the poor, although in Egypt and Tunisia, support for this type of compensation package decreases among those who stand to lose the most. When asked how the savings from subsidy reform could be spent, most people in Egypt, Jordan, and Tunisia preferred targeted transfers only to the poor rather than increased spending on public goods, loosely targeted transfers, or universal compensation (see figure O.32). In Lebanon, the majority of respondents preferred to complement cash transfers to the poor with increased investment in education and health. However, support for cash transfers narrowly targeted to the poor decreases with income. Respondents identifying themselves as lower- ­ middle-income, upper-middle-income, or rich were less likely to prefer 32 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa FIGURE O.31 Preferred Product for Subsidy Removal (Assuming Necessity of Reform) in the Middle East and North Africa, Selected Countries, 2012 Cooking oil Sugar Egypt, Arab Rep. Baladi bread LPG Diesel Gasoline Gasoline Water Electricity Jordan LPG or gas cylinders Diesel Bread or our Tobacco (growers) Lebanon Bread or our Mazoot (diesel) Diesel Cooking oil Tunisia Sugar Semolina Bread or our 0 20 40 60 80 100 Responses, % Food subsidies Fuel and other nonfood subsidies Source: Authors’ calculations based on MENA SPEAKS survey. Note: LPG = liquefied petroleum gas. Each bar displays the percent of respondents in each country who named the product as their first or second preferred for subsidy removal. narrowly targeted cash transfers to the poor, with many opting instead either for more loosely targeted cash transfers or for expansion of health and education spending, so that they could benefit from this reform. It is important to read these results in light of the fact that a broader spectrum of the population defined themselves as poor than those who actually belong to the bottom income quintile. These individuals would likely consider themselves to be among the reform winners and could, in fact, be highly disappointed if they were among the losers. “Jordan Gives” Experiment Tests Support for SSN Designs The Jordan Gives behavioral experiment provides empirical evidence of some of the characteristics that drove preferences for particular methods of redistribution. Overview 33 FIGURE O.32 Preferred Targeting of Compensation following Subsidy Reform, in the Middle East and North Africa, Selected Countries, 2012 80 60 Respondents, % 40 20 0 Egypt, Arab Rep Jordan Lebanon Tunisia Only the poor All except wealthy All Only the poor, plus investment in health and education Source: Authors’ calculations based on MENA SPEAKS survey. Overall, about two-thirds of 420 participants in the Jordan Gives ex- periment decided to donate their fuel vouchers worth 10 Jordanian dinars (JD) of fuel at any gas station in exchange for helping the poor in their communities. In addition, the experiment enabled the evaluation, through a random- ized controlled trial, of the impact of introducing additional information meant to enhance the participants’ confidence that the transfers would reach the intended target (see figure 33). Overall, individuals in the treat- ment group tended to donate visibly more than those in the control group (though this difference is not statistically significant). The treatment, however, significantly increased donation rates among two large groups of participants: young people, and those who had low trust in the accuracy of the existing targeting of national SSN programs. An important consequence of enhancing transparency was that while in the control group the SSN design that achieved the highest rate of fuel voucher donations was unconditional in-kind transfer, in the treatment group the most popular decision was unconditional cash transfers, which may be perceived as more prone to elite capture in spite of being more beneficial for the welfare of the poor. The experiment suggests that there is scope for governments to im- prove individuals’ support for effective SSNs, even from low levels of confidence, through transparency enhancing measures. 34 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa FIGURE O.33 Propensity to Donate Vouchers by SSN Design and Treatment Group in Jordan, 2012 80 Respondents who would donate fuel voucher to help poor, % 75 70 65 60 55 50 Unconditional In-kind (food) Unconditional cash Conditional cash transfer transfer transfer and transfer cash transfer to local school Control Treatment Source: Authors’ calculations based on Jordan Gives 2012 data. Note: SSN = social safety net. Moreover, participants’ characteristics were associated with specific donation patterns: • Everything else equal, individuals who considered themselves as middle class (compared with individuals who reported to be either in ­ lower-income or in upper-income households) were more likely to donate in all options except the conditional cash transfer (where in- come had no impact). • Those who thought that the government-run social assistance was in- effective were less likely to donate their vouchers for options associ- ated with government-provided services (school and training), com- pared to individuals who thought the government was effective in providing social assistance. • Those who believed that poverty is caused by laziness rather than an unjust society or bad luck chose less often to donate to the school, while those who thought that career success comes from hard work (as op- posed to luck and connections) were more likely to donate to the school. • Interestingly, the education level of participants did not seem to play a role in the propensity to donate cash, food, or to the school; however, Overview 35 having higher education proved to be an important predictor of the support for the conditional cash transfer option. • Compared with prime-age participants, young and elderly individuals were more likely to donate their fuel vouchers in exchange for food baskets to poor families in their communities. The Way Forward: How to Make Safety Nets in the Middle East and North Africa More Effective and Innovative SSNs can become a crucial instrument of economic and social transitions in the Middle East and North Africa. As previously described in the framework for SSN reform (figure O.3), the three outcomes that social safety nets can promote are (a) social inclusion, by enabling investment in human capital (such as supporting school attendance or better nutrition for children); (b) livelihood, by protecting against destitution; and (c) re- silience to crises, by helping households navigate the effects of shocks. Achieving these outcomes implies refocusing the goals of the region’s SSNs. The predominant SSN instrument in the Middle East and North Africa—fuel and food subsidies—focuses on guaranteeing, at a high fiscal cost, affordable access to basic goods. This instrument meets only one of the SSN goals: supporting livelihood. Meanwhile, the region currently pays scant attention to promoting inclusion and resilience. Achieving all three outcomes will require reorienting SSNs toward the following goals: • Enhance the focus on the poor and vulnerable • Empower individuals with tools to improve their lives • Ensure ready and rapid temporary support in response to crises • Give citizens a greater voice to promote civic engagement and policy ownership. SSNs in the Middle East and North Africa are ripe for reform. The re- gion relies too heavily on untargeted price subsidies and ration cards, which waste the scarce resources of governments because of high leakage rates and a high propensity for waste, fraud, and corruption. Subsidies aside, SSNs in the Middle East and North Africa are underresourced and fragmented. Most of the poor and vulnerable fall through the cracks of the small, categorically or geographically targeted programs. Moreover, poor targeting methods result in significant leakages of SSN benefits to the nonpoor, siphoning off resources that could be used elsewhere to decrease poverty and improve the distribution of welfare in the region. 36 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa Although subsidies (and in particular, fuel subsidies) are inefficient and frequently ineffective relative to other SSN interventions, many of the poor and vulnerable depend on them to stay out of poverty. Moving from the status quo toward more effective, reliable, and equitable SSNs re- quires careful thinking not only about the technical aspects of reform but also, and perhaps more important, about the sensitive issues revolving around political economy of reform. SSNs in the Middle East and North Africa can perform better in pro- moting inclusion, livelihood, and resilience, and the region’s citizens are expecting them to do so. The MENA SPEAKS survey and Jordan Gives behavioral experiment have demonstrated that people hold the govern- ment responsible as the main provider of SSNs, and many are not satisfied with the effectiveness of current SSN policies and programs. In fact, the types of programs preferred by citizens in several of the region’s countries are in line with best practices in SSN design. Thus, governments have an enabling environment that can be rallied behind SSN reform. Moreover, successful reforms that have attained significant positive results have already been implemented in several parts of the region. For example, West Bank and Gaza created a unified registry across SSN pro- grams that significantly improved targeting accuracy and crisis response capacity. During the last crisis, the Republic of Yemen responded quickly with a workfare program to bridge a consumption gap of the poor and vulnerable, while also creating community assets. Simultaneously, impor- tant reforms were implemented in the main cash transfer program (the Social Welfare Fund), such as (a) improving poverty targeting with a proxy means test formula, (b) strengthening capacity for service delivery, and (c) implementing a new legal and policy framework. In light of the specific challenges faced by the poor and vulnerable in the Middle East and North Africa, and in light of the current state of SSNs, the path toward more effective and innovative SSNs calls for ac- tion on several fronts. While there is no single solution, better results can be achieved through action on the following four agenda items: • Improve the impact of SSN programs, including their effect on present and future poverty • Establish a reliable yet flexible SSN infrastructure that can be used in nor- mal times as well as during crises • Consolidate fragmented SSN programs and integrate these programs within social protection systems • Rebalance the financing and priorities of SSN systems by focusing on targeted programs rather than on subsidies. Overview 37 Engaging citizens and other stakeholders in this reform agenda can im- prove feasibility and facilitate success. Improve the Impact of SSN Programs Currently, most nonsubsidy SSN programs in the Middle East and North Africa have limited impact on poverty and inequality because of low cov- erage combined with inefficient targeting practices and inadequate or nonexistent M&E systems. Hence, the way forward could entail the following: • Prioritizing interventions that promote investment in human capital. This can be achieved by (a) scaling up the region’s existing successful CCTs (such as the Tayssir program in Morocco) and workfare programs (such as the Social Welfare Fund in the Republic of Yemen); (b) tweak- ing the design of existing programs to make them work better for chil- dren, youth, and women (such as Djibouti’s workfare plus nutrition program); or (c) creating new interventions to fill the gaps based on best practices around the world but adjusting their design to empower the poor and vulnerable. • Enhancing targeting toward the poor and vulnerable. Improved targeting can contain costs, ensure equity, allow SSNs to act as insurance, and increase effectiveness. Most of the programs in the region remain categorically or geographically targeted even though these methods ­ are effective only in environments of concentrated poverty. At the same time, citizens in the MENA SPEAKS surveys indicated their strong preference for poverty-based targeting as opposed to categori- cal targeting. There is already substantial movement in the region (in Djibouti, Iraq, Jordan, Lebanon, West Bank and Gaza, and the Republic of Yemen) in the direction of poverty-based targeting. The results have demonstrated the power of such reforms and outlined a clear path forward. • Improving the focus on results in SSN programs through M&E and social accountability. In the Middle East and North Africa, enhanced M&E for SSNs can help allocate budget resources between programs, monitor day-to-day operations, and track results of interventions. M&E has been particularly effective when the results of evaluation and the empirical data produced are used to inform budgetary decisions and reshape programs. This was the case in, for example, West Bank and Gaza and the Republic of Yemen. Moreover, introducing well- functioning social accountability systems can improve efficiency and accountability and combat corruption. 38 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa • Reaching out to other stakeholders (citizens, NGOs, civil society organizations [CSOs], the private sector, and nonprofits). As revealed by the MENA SPEAKS survey, citizens’ awareness about existing SSN programs is low and skewed toward the wealthy. On-demand registration requires awareness about the existence of the program, eligibility criteria, and application procedures. Comprehensive communication campaigns are needed to inform poor and vulnerable citizens of the safety nets that are available to them. Moreover, engaging a broader spectrum of stakeholders (such as NGOs, CSOs, the private sector, and nonprofits) in financing and implementing SSN programs could leverage their existing financial and human resources. Establish a Reliable Yet Flexible SSN Infrastructure An effective SSN system can help citizens navigate the effects of both idiosyncratic shocks during normal times and systemic shocks during times of crisis. The recent global economic crisis underscored the weak capacity of existing SSN systems in the Middle East and North Africa to serve this function. Promoting households’ resilience to shocks through SSNs requires a strong administrative infrastructure. Having this infrastructure in place ahead of a crisis allows for quicker and more efficient development of re- medial and mitigative actions, such as scaling up of benefits for the most vulnerable or expanding coverage, thus enhancing resilience. In particu- lar, setting up an improved SSN infrastructure could entail the following: • Creating unified registries of beneficiaries. Such registries can be used to target multiple programs. In normal times, unified registries can reduce costs and facilitate coherence and convergence because all agents work with the same database. In times of crisis, unified regis- tries can be used to quickly disburse additional benefits to the target population or to promptly expand coverage by adjusting eligibility cri- teria. West Bank and Gaza provides an example of best practice in this regard in the region. • Using effective service delivery mechanisms. In normal times, modern benefit delivery systems are important to reduce administrative costs and leakage to nonbeneficiaries, to avoid corruption, and to make the transfer of payments to beneficiaries quick and flexible. Effective use of modern technologies such as smart cards, mobile payments, and over-the-counter payments in bank branches facilitates rapid response during crises. Overview 39 Consolidate Fragmented SSN Programs In the Middle East and North Africa, direct transfer programs (cash- based or in-kind) are often small and highly fragmented. International experience suggests that having a few comprehensive programs, specifi- cally designed to reach different segments of the poor and vulnerable, can address current vulnerabilities and social protection gaps by increasing both coverage (currently below 20 percent of the poor in most countries) and benefits (currently at about 5–10 percent of consumption of the poor). A few parts of the region (for example, West Bank and Gaza and Morocco) have started reforming their SSNs in this direction. To achieve progress in this respect, governments can start by identify- ing gaps in SSN systems and creating an inventory of SSN programs by program objective, eligibility criteria, and benefit type. For example, ­ Morocco recently undertook this type of analysis. Informed by such anal- ysis, governments can identify programs that can be expanded or consoli- dated, and formulate a strategy for implementation of the reform. More- over, consolidation of SSNs has few prerequisites; thus, Middle Eastern and North African countries can move forward on this agenda item fairly quickly. Rebalance Financing and Priorities of SSN Systems Instead of focusing on targeted programs, Middle Eastern and North African countries spend the lion’s share of SSN spending on energy sub- sidies and only a small share on targeted safety nets. Rebalancing the fi- nancing and priorities of SSN systems away from subsidies and toward more effective and efficient programs could be a major step for SSN re- newal. In particular, this effort could entail the following: • Increasing spending and improving coverage of nonsubsidy SSNs to protect against destitution. Around the world, successful subsidy reforms have demonstrated the importance of gaining citizens’ trust in govern- ment’s capacity to deliver fair and reliable compensation for the reduc- tion or loss of those subsidies. In light of the evidence provided by MENA SPEAKS and Jordan Gives, demonstrating readiness to de- liver effective and inclusive SSN programs would be an essential step on the path toward comprehensive subsidy reform. This could be achieved by creating new programs, scaling up effective programs, and reforming ineffective programs. • Reforming price subsidies through wholesale or internal reforms. Sequencing of sensitive reforms—such as reform of universal price subsidies—is crucial for their success. To gain credibility, government could start by 40 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa C Improving subsidy targeting (for example, through differentiated marketing and packaging, which can lead to self-targeting, as in Tunisia); narrowing subsidy coverage (for example, through lifeline tariffs in electricity); and reducing leakages in the distribution chain. C Identifying the most sensitive subsidies and focusing instead on the most regressive ones. According to the MENA SPEAKS survey, the least- preferred products for subsidy reform were cooking oil in Egypt, bread in Lebanon and Tunisia, and electricity in Jordan. These sub- sidies could be subject to reform only when governments have al- ready demonstrated their success at reforming less-sensitive subsi- dies. Given that fuel subsidy spending is more than three times the spending on food subsidies, it appears that nonfood subsidy reform is the lower-hanging fruit. In MENA SPEAKS, citizens indicated that if they had to pick one subsidized product for reform, this product would be tobacco in Lebanon, gasoline in Egypt, and diesel in Jordan and Tunisia. C Engaging citizens early on in a dialogue about compensation packages and promoting awareness through information campaigns. Governments can use the findings from the MENA SPEAKS surveys to initiate a dialogue on preferred compensation packages in their countries. The evidence so far shows that people in the Middle East and North Africa prefer the government to either (a) target cash-based com- pensation for subsidy reform to the poor alone (Egypt, Jordan, and Tunisia) or (b) combine cash transfers to the poor with investment in savings in education and health (Lebanon). Tailor Country-Specific SSN Reforms The SSN reform path is different for every country in the region, given their varying stages of development and the main challenges of the exist- ing SSN systems. Countries in the Middle East and North Africa find themselves at different stages of progress on human development out- comes and SSN reforms. Notably, the two parts of the region that have advanced the most in SSN reform are West Bank and Gaza and the Republic of Yemen, which have, respectively, medium and low levels of ­ human development outcomes (as proxied by the United Nations Devel- opment Programme’s Human Development Index). These countries were able to implement successful SSN interventions (establishing a uni- fied registry in West Bank and Gaza and reforming the Social Welfare Fund in the Republic of Yemen) that help to address their specific needs. Bahrain, Djibouti, Jordan, Lebanon, and Morocco have made important Overview 41 steps toward SSN reform, such as workfare plus nutrition in Djibouti, a pilot CCT program in Morocco, reforms in the subsidy system in Jordan and Bahrain, and a targeting database in Lebanon. Other countries are currently considering new programs or reforms of their SSN systems. In each country, the way forward would include short- and medium- run interventions with complementary and mutually reinforcing objec- tives. In the short run, Middle Eastern and North African countries can start demonstrating better results using existing SSN systems, tweaking the design of existing programs, building unified registries, or piloting new programs such as CCTs and “workfare plus.” In the medium run, the focus can shift to reforms that require more preexisting capacity, such as refining the SSN infrastructure and comprehensive subsidy reform. Engaging a broad spectrum of stakeholders in an inclusive and open dia- logue can facilitate the envisioned reforms and promote an empowering role for SSNs in the region. Note 1. Social safety nets (SSNs) are defined as noncontributory transfers targeted to the poor or vulnerable. 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Joint report, Washington, DC. CHAPTER 1 The Framework for Social Safety Net Reform in the Middle East and North Africa The Growing Need for Safety Nets Recent economic and social transitions in the Middle East and North Africa have refocused attention on the need for greater social inclusion, livelihood, and resilience. Although sustained growth in many of the re- gion’s countries has pulled people out of poverty and into the middle class, economic progress has yet to reach many families who face persis- tent poverty, unemployment, disability, and illness. And many more families in the Middle East and North Africa are vulnerable to economic shocks, natural disasters, and political or other crises. Without a safety net, poor families who are systematically unable to afford their basic needs are likely to disengage socially; malnourished children are more likely to become poor adults; and near-poor families who lose their liveli- hoods as a consequence of shocks are likely to fall into poverty. In fact, economic anxiety in the region is on the rise. Figure 1.1 depicts the share of people who report being in need for lack of means (Gallup and World Bank 2011). In particular, the following question was posed: “Were there times in the past 12 months when you did not have enough money to buy food that you or your family needed?” The share of the population who responded in the affirmative in the Arab Republic of Egypt, Jordan, and Tunisia in 2011 was significantly higher than in 2009, having increased from 23 to 44 percent in Egypt, from 7 to 16 percent in Jordan, and from 11 to 18 percent in Tunisia. By providing assistance to the poor and vulnerable, social safety nets (SSNs) can improve this situa- tion, serving as a springboard to help citizens become more independent and share in the benefits of economic progress (see box 1.1 for the defini- tion of SSNs). Most Middle Eastern and North African countries responded to the 2008–09 food, fuel, and financial crisis and to the early Arab Spring ­unrest 43 44 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa FIGURE 1.1 Citizens’ Self-Reported Ability to Buy Sufficient Food in the Middle East and North Africa, Selected Countries, 2009–11 Have there been times in the past 12 months when you did not have enough money to buy food that you or your family needed? 50 40 % who said yes 30 20 10 0 Egypt, Arab Rep. Jordan Tunisia 2009 2010 2011 Source: Gallup Inc. 2011. by scaling up generalized price subsidies and increasing public sector wages, at enormous fiscal costs (see table 1.1). These solutions are costly and difficult to remove, and have significantly amplified fiscal pressures (for example, in Egypt and Jordan). Although some governments chose these solutions because subsidies and public sector wages continue to be their preferred instruments for redistribution, others chose them because no effective SSNs were in place that could have been scaled up. In fact, many countries in the region found that existing poverty-targeted SSNs were not flexible enough to expand quickly or that they lacked poverty data and systems to target and deliver other types of benefits. Safety nets are needed at all times, and having them in place before a crisis makes the response more effective. Citizens in some Middle Eastern and North African countries reveal low levels of satisfaction with ongoing government efforts to assist the poor. For example, only about 30 percent of the population of Egypt and Morocco indicates that they are satisfied, as shown in figure 1.2. Yet a few parts of the region have started SSN reforms aimed at achieving better effectiveness and results. West Bank and Gaza and the Republic of Ye- men enhanced targeting of their cash transfer programs. Morocco is implementing a conditional cash transfer (CCT) program requiring that families send their children to school regularly to receive the transfer. Djibouti and the Republic of ­ Yemen are implementing integrated work- fare programs that generate short-term employment opportunities for The Framework for Social Safety Net Reform in the Middle East and North Africa 45 BOX 1.1 Social Safety Nets (SSNs) Defined Social safety nets, sometimes termed “wel- quirements might include primary fare” or SSNs, are noncontributory trans- health care appointments for children or fer programs targeted at the poor or vul- expectant mothers, or job training for nerable and encompassing different able-bodied beneficiaries. program designs and objectives (Weigand • Food or other in-kind transfer programs. and Grosh 2008): These provide SSNs in the form of • Unconditional cash transfer programs goods, including food, school feeding, (UCTs). UCTs provide assistance in the mother and child food supplements, form of cash. Some target the poor take-home food rations, or school ­ (poverty-based targeting), while others ­supplies. target specific regions (geographic tar- • Workfare programs. These provide SSNs geting) or groups of people such as wid- in the form of short-term employment ows, orphans, the sick, and the elderly opportunities in small-scale, labor- (categorical targeting). They are often intensive public works, often at the com- linked to national registries and can be munity level. Beneficiaries must accept used to provide emergency assistance in the work provided by the program in response to a crisis by increasing assis- exchange for the assistance. The wage is tance either through an existing pro- set at a level at which less-poor house- gram or as a stand-alone transfer. holds will not be interested in participa- • Conditional cash transfer programs (CCTs). tion because they can command higher CCTs are transfers of money to poor wages elsewhere (self-targeting). and vulnerable households under certain • Price subsidies (for example, for food or en- conditions, usually related to investment ergy). Some governments subsidize the in human capital. In contrast with prices of certain products by either UCTs, CCT recipients are required to keeping their prices fixed or preventing engage in an activity in exchange for the them from rising too quickly. transfer. For example, beneficiaries’ children can be required to attend school • Fee waivers. These are used to gain access regularly; if they stop, the assistance is to essential services such as health care, no longer provided. Other types of re- schooling, utilities, or transportation. able-bodied members of poor and vulnerable households, providing in- come for families as well as building community assets as part of the safety net. Beyond these examples, a diverse suite of available SSN programs give governments many options for protecting citizens in ­ incentive-compatible and fiscally sustainable ways. 46 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa TABLE 1.1 Social Policy Measures Implemented during the Arab Spring in the Middle East and North Africa, Selected Countries, 2011 Special Bulk Special salary financing in expansion ­increases in food subsidies Special One-off Infrastructure of public public sector or price controls tax cuts transfers investment sector hiring Gulf Cooperation Council (GCC) oil exporters   Bahrain Yes Yes Yes Yes Yes Yes  Kuwait Yes Yes No Yes Yes No  Oman Yes Yes No Yes No Yes  Qatar Yes No No No No No   Saudi Arabia Yes No No Yes Yes Yes   United Arab Emirates No Yes No No No No Developing oil exporters  Algeria Yes Yes No No Yes Yes   Iran, Islamic Rep. No No No Yes No No   Syrian Arab Republic No Yes No Yes No No   Yemen, Rep. Yes Yes Yes Yes No Yes Oil importers   Egypt, Arab Rep. Yes Yes No Yes No Yes  Jordan Yes Yes Yes Yes Yes No  Lebanon No No No Yes No No  Morocco Yes Yes No Yes No Yes  Tunisia Yes Yes Yes Yes Yes Yes Source: World Bank 2011. FIGURE 1.2 Citizens’ Satisfaction with Government Assistance to the Poor in the Middle East and North Africa, Selected Countries, 2011 In your country, are you satis ed or dissatis ed with e orts to deal with the poor? United Arab Emirates Kuwait Saudi Arabia Bahrain Tunisia Jordan Yemen, Rep. Egypt, Arab Rep. Morocco Lebanon 0 20 40 60 80 100 % satis ed Source: Gallup Inc. 2011. The Framework for Social Safety Net Reform in the Middle East and North Africa 47 FIGURE 1.3 Where Social Safety Nets Fit in Larger Development Policy Equity Such as land redistribution, enforcement of contracts and property rights, universal education, safety nets Includes labor policy, contributory social insurance, and social care Social protection services as well as safety nets Safety nets Social risk management Poverty reduction For example, for small farmers, includes irrigation, micro nance, weather insurance, safety nets Foment pro-poor growth while providing services that facilitate the poor’s participation in growth; safety nets are part of providing security Source: Grosh et al. 2008. SSNs are an integral part of the wider social protection system, which also includes social insurance (such as old-age and disability pensions, health insurance, and unemployment insurance) as well as labor market programs (such as skill-building, job search, and matching programs) (World Bank 2012a). Moreover, SSNs fit into the wider array of policies involved in poverty reduction, social risk management, and equity- enhancing programs, as figure 1.3 illustrates. However, in the Middle East and North Africa, formal social insurance systems are mostly na- scent, consisting of mandatory pension and health insurance systems, which have low coverage. These systems tend to cover only about a third of the workforce, and tend to be focused on high-income and public sec- tor workers in metropolitan and urban areas (Gatti et al., forthcoming). Thus, they often miss large shares of the rural population, particularly the poor, the elderly, and informal workers. Besides the coverage gap, demo- graphic transition in the region poses additional challenges to the sol- vency of the social insurance systems and their adequacy for protecting against risks. To date, no country in the region offers genuine unemploy- ment insurance, although the recent social insurance reforms in Jordan and Egypt should be noted. Such limited access to complementary instru- 48 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa ments of the social protection systems implies an even greater need for effective and innovative SSNs. Key Objectives and Results of Effective SSNs SSNs can be crucial instruments of economic and social transitions in the Middle East and North Africa. Figure 1.4 introduces a framework for effective SSNs in the region. In particular, social safety nets can promote the following three outcomes: • Social inclusion, by enabling investment in human capital. SSNs can help households build human capital by stimulating the demand for health and education services and by improving the gender balance in access to these services. For example, CCTs and education fee waivers help to promote school enrollment and attendance. Similarly, CCTs and noncontributory health insurance schemes can encourage health care utilization, especially for preventive care (such as mother and child health), while workfare programs can increase the assets of the poor and their communities. These opportunities can become cata- lysts for empowering citizens to become more productive and self- sufficient participants in the benefits of economic growth. FIGURE 1.4 Framework for Renewed Social Safety Nets in the Middle East and North Africa Social safety nets to promote Inclusion Livelihood Resilience Increasing human Protecting against Helping households capital and building destitution, navigate the e ects assets of the poor mitigating poverty of shocks Empower people Conditional Workfare Fee waivers Cash Price In-kind cash for access to transfers subsidies transfers transfer services If condition Flexible, Assets must Other costs Costly, Costly to induces need be of might limit creates implement behavior operative value access distortions and operate change systems The Framework for Social Safety Net Reform in the Middle East and North Africa 49 • Livelihood, by protecting against destitution. SSN instruments such as cash and in-kind transfers, workfare programs, fee waivers, and subsi- dies can help to protect the poor from deprivation and their children from malnutrition and disease by improving households’ immediate income and consumption. These programs address the problem of chronic poverty, helping to protect poor families from catastrophic losses of human capital. • Resilience to crises, by helping households navigate the effects of shocks. Cash and in-kind transfers as well as subsidies can cushion the effects of shocks on the poor and vulnerable. Although universal subsidies can guarantee affordable access to basic goods even during crises, this in- strument comes at a very high fiscal cost. In contrast, cash transfers are sufficiently flexible to ensure rapid and ready support at a lower cost because of the possibility of targeting benefits to a subset of the total population. To be effective, cash transfers require well-functioning operational systems to be in place ahead of the crisis. Promoting Social Inclusion Beyond the direct effect of income support, SSNs have been proven to stimulate households’ investment in assets and human capital (such as increases in school enrollment and attendance as well as health care utili- zation, and improvements in nutritional outcomes). In many countries around the world, SSNs have boosted the productive capacity of poor and vulnerable youth, thus enhancing their future earnings and contributing to breaking the vicious intergenerational cycle of poverty, as in the fol- lowing examples: • CCTs have significantly decreased school dropouts (for instance, by 57 per- cent in Morocco; see Benhassine et al., forthcoming); enhanced the over- all educational attainment of poor children (for instance, by 10 percent in Mexico; see Skoufias 2005); and increased school enrollment (for instance, by 2.1 and 5.6 percentage points among children 8–13 and 14–17 years old, respectively, in Colombia [see Attanasio, Fitzsimmons, and Gó- mez 2005; Attanasio et al. 2006]). CCTs achieved similar results in Cambodia, Chile, Ecuador, Nicaragua, and Pakistan (Fiszbein et al. 2009). Besides increasing enrollment and attainment, CCTs were found to also have some impacts on learning performance (for exam- ple, on scores on mathematics or vocabulary tests), but the evidence so far has been mixed (in Cambodia, Colombia, Mexico, and Morocco; see World Bank 2009). • Health requirements in CCTs have had a positive effect on the prevalence of health care visits, which increased by 23 and 33 percentage points 50 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa among Colombian children aged, respectively, 0–24 and 24–48 months, with similar results attained in Honduras and Nicaragua (Fiszbein et al. 2009; IEG 2011a). Encouraging effects were also found on early childhood development, including a long-term impact on the development of cognitive and noncognitive skills among young chil- dren (see Macours, Schady, and Vakis 2012) and on nutritional status (as in Colombia, Ecuador, Mexico, and Nicaragua; Fiszbein et al. 2009; IEG 2011a). For example, the Mexican CCT reduced the prev- alence of stunting (by 31 percent), anemia (10 percent), and the likeli- hood of illness among children (40 percent) while also reducing infant mortality (11 percent). • Workfare programs have augmented the assets of the poor. For example, in Ethiopia, beneficiaries were more likely to borrow for productive pur- poses, use improved agricultural technology, and operate nonfarm business activities (see Gilligan, Hoddinott, and Taffesse 2008). They were also more likely to develop community assets and rural infra- structure, which have other positive socioeconomic impacts. These enhanced assets and infrastructure are likely to contribute to future human development outcomes, for example, by facilitating access to schools, clinics, and hospitals. Protecting Livelihood Unequal opportunities and structural factors can lock a child into a low- productivity path for life. By providing income support to poor and vul- nerable families, SSNs protect the poor from destitution and their chil- dren from malnutrition and disease, promoting decent living. SSNs can ensure that every family has sufficient resources to meet its basic food and housing needs. Impact evaluations demonstrate that SSNs have reduced poverty, destitution, and food insecurity among beneficiaries, as in the following examples: • CCTs have led to a reduction in extreme poverty (by 16 percent in Brazil); the poverty rate (by 3 percentage points in Colombia); inequality (by 20–25 percent in Brazil); and decreased child labor (by 10 percentage points in Cambodia).They have also increased the share of resources that families spend on food, leading to a more varied diet (in Ecuador and Nicaragua) (Fiszbein et al. 2009; IEG 2011a; Macours, Schady, and Vakis 2012 for Nicaragua; Schady and Rosero 2008 for Ecuador). • Workfare programs have provided income support to a large number of ­beneficiaries (for instance, more than 1 million workers in Ethiopia). Despite drought and high food prices in the past few years, Ethiopian workfare beneficiaries were more likely to be food-secure than non- The Framework for Social Safety Net Reform in the Middle East and North Africa 51 beneficiaries (Gilligan, Hoddinott, and Taffesse 2008). Argentina’s workfare program reduced moderate poverty (by 2 percentage points) and averted extreme poverty for 10 percent of participating households (Galasso and Ravallion 2003; Galasso, Ravallion, and Salvia 2001). • School feeding programs have avoided hunger and enhanced the cognitive ability of students, thereby increasing retention and attendance in schools. Hunger and consequent poor health can diminish the ability of chil- dren to perform well in school; even short-term hunger, resulting from not having breakfast before school, can decrease the level of con- centration on complex tasks (Bundy et al. 2009). School feeding inter- ventions—such as those implemented in Bangladesh, Burkina Faso, India, Kenya, and Uganda—have been shown to increase school at- tendance by 6–20 percentage points (IEG 2011a). • Price subsidies also have shown positive results in preventing poverty but in a very inefficient way because of high fiscal costs and distortions created (for instance, Government of Yemen, World Bank, and UNDP 2007 for Yemen; World Bank 2010a for Egypt; World Bank 2010b for Iraq). Enhancing Resilience to Crises SSNs enhance resilience by helping households navigate the effects of shocks or systemic crises, thereby preventing them from falling into per- sistent poverty. SSNs can protect the welfare of children and the con- sumption levels of households affected by adverse shocks to income, such as from job or crop loss or sickness. These income shocks can be indi- vidual or systemic, and each type requires different SSN responses. SSNs can serve ex post by helping vulnerable populations to cope with the after- math of a shock or a crisis, and ex ante by providing families with in- creased security (that is, ensuring them against potential loss resulting from risk) so that they can undertake riskier but more productive activi- ties (for example, using higher-yielding seed varieties or migrating in search of employment). SSNs fulfill this function by providing liquidity (such as through cash transfers), offering short-term employment (such as through workfare programs), or providing free or discounted access to essential services like health care (such as through fee waivers). During the 2008–09 food, fuel, and financial price crisis, in economies without adequate SSNs, global progress in reducing child malnutrition (von Braun and Tadesse 2012), hunger (Tiwari and Zaman 2010), and poverty (de Hoyos and Medvedev 2009) was undermined. In coping with higher food prices or loss of income during the crisis, the main strategy of unprotected households was to reduce food quality (dietary diversity), which has been shown to lead to micronutrient deficiency, and then reduce food quantity (Compton, Wiggins, and Keats 2011; World Bank 2012b). 52 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa Instead, in economies with adequate SSNs, the effects of the crisis were less severe, and the recovery was faster, as in the following examples: • In Latin America, CCTs in Honduras, Mexico, and Nicaragua pro- tected consumption, helped keep children in school, and prevented children from engaging in child labor when families were faced with individual shocks (IEG 2011b). El Salvador’s Red Solidaria CCT pro- gram contributed to maintaining consumption levels during the 2008–09 food, fuel, and financial crisis. The rate of stunting did not increase among children in poor areas of the country who participated in the program, as it did among children in the same area who did not participate (De Brauw and Murrugarra 2011). Similarly, Brazil, Colombia, and Jamaica were able to scale up programs and benefits quickly during the 2008–09 food, fuel, and financial crisis with good results (World Bank 2011). • In Africa, Ethiopia’s workfare program (Productive Safety Net Pro- gram [PSNP]), originally designed to protect the chronically poor, offered an effective response to the recent crisis. Specifically, the government increased the regular transfer amount for the 4.4 million ­ beneficiaries who were adversely affected by the 2008 crisis and drought. In 2011, the program was quickly scaled up after the severe droughts in the Horn of Africa, thereby preventing destitution (World Bank 2012b). • In the Middle East and North Africa, West Bank and Gaza and the Re- public of Yemen also scaled up their SSN programs. In the Republic of Yemen, a labor-intensive public works program was created, offer- ing support during the crisis and, in parallel, the cash transfer program was strengthened to serve as the main SSN for poverty reduction and crisis response in the future. A similar strategy was used by countries in other regions. For example, during the East Asian financial crisis of the late 1990s, both Indonesia and the Republic of Korea introduced large workfare programs, as did Mexico in the 1995 “peso crisis,” Peru during its recession in 1998–2001, and Argentina in the 2002 financial crisis—all of which having simultaneously developed more permanent transfer programs. In West Bank and Gaza, because the cash transfer program was ready to expand its coverage quickly, assistance was pro- vided using its single targeting system to over 25,000 people to help them cope with the 2008–09 global food and fuel crisis. The wealth of global experience in SSN best practice, presented above, makes a clear case that SSNs can be effective in promoting inclusion, pro- tecting livelihood, and enhancing resilience to crises. Box 1.2 tests the reader’s knowledge of the global best practice in SSN through a short quiz. The Framework for Social Safety Net Reform in the Middle East and North Africa 53 BOX 1.2 Global Experience through an SSN Quiz In the context of this report, global best practices in SSNs were compiled and summarized in a set of posters. In each case, they provide a brief description of the program; indicate its objectives; and highlight the approach, the costs, and the design features that make the pro- gram work. They cover places as diverse as Australia, Brazil, Chile, Colombia, Djibouti, Ethiopia, Georgia, Mexico, Morocco, Turkey, West Bank and Gaza, and the Republic of Yemen. The posters were presented at consultations in Lebanon, Oman, and Tunisia, ac- companied by the quiz below. SSN Quiz Unconditional Cash Transfers Q1) Which economy reached almost 25,000 additional people during the 2011 crisis with its SSN program? Conditional Cash Transfers Q2) Which countries provide social safety net programs that reach 30 percent of the pop- ulation and cost 0.5 percent of GDP? Q3) Which country has an SSN program that brought about a decrease in the poverty rate of 3 percentage points? Q4) Which country provided a transfer to poor families, conditional on regular attendance of primary school by their children, that significantly decreased school dropouts? Workfare In which three countries did beneficiaries build productive assets at the community Q5)  level as part of the SSN? Health Insurance for the Poor Q6) Which country has a program providing health insurance for 50 percent of its poor, at an estimated cost of 0.33 percent of GDP? Answers Q6) Turkey. Q5)  Djibouti, Ethiopia, and the Republic of Yemen, with their productive safety net programs. Q4)  Morocco. Q3)  Colombia, with its CCT (Familias en Acción) program. ing a large share of the population (30 percent), and do so at a low cost (0.5 percent of GDP). Q2)  Mexico’s (Progresa/Oportunidades) and Brazil’s (Bolsa Familia) CCT programs are reach- crisis. Q1)  West Bank and Gaza, with an SSN program that is flexible and can be scaled up in times of 54 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa References Attanasio, O., E. Fitzsimmons, and A. Gómez. 2005. The Impact of a Conditional Education Subsidy on School Enrollment in Colombia. Report summary: Familias 01, Institute for Fiscal Studies, London. Attanasio, O., E. Fitzsimmons, A. Gómez, D. 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Evidence and Lessons Learned from Impact Evaluations on Social Safety Nets. Washington, DC: World Bank. ———. 2011b. Social Safety Nets: An Evaluation of World Bank Support, 2000–10. Washington, DC: World Bank. Macours, K., N. Schady, and R. Vakis. 2012. “Cash Transfers, Behavioral Changes, and Cognitive Development in Early Childhood: Evidence from a Random- ized Experiment.” American Economic Journal: Applied Economics 4 (2): 247–73. Schady, Nobert and Rosero, José, 2008. Are cash transfers made to women spent like other sources of income? Economic Letters, Elsevier, vol. 101(3), pages 246–248, December. Skoufias, E. 2005. PROGRESA and Its Impacts on the Welfare of Rural Households in Mexico. Research report 139, International Food Policy Research Institute, Washington, DC. Tiwari, S., and H. Zaman. 2010. “The Impact of Economic Shocks on Global Undernourishment.” Policy Research Working Paper 5215, World Bank, Washington, DC. von Braun, J., and G. Tadesse. 2012. “Global Food Price Volatility and Spikes: An Overview of Costs, Causes, and Solutions.” Discussion Paper on Develop- ment Policy 161, ZEF Center for Development Research, University of Bonn, Bonn. Weigand, C., and M. Grosh. 2008. “Levels and Patterns of Safety Net Spending in Developing and Transition Countries.” Social Protection Discussion Paper 0817, World Bank, Washington, DC. World Bank 2009. “Building Resilient Communities: Risk Management and Re- sponse to Natural Disasters through Social Fund and Community-Driven Development Operations.” Resource toolkit, World Bank, Washington, D.C. World Bank. 2010a. “Arab Republic of Egypt. Egypt’s Food Subsidies: Benefit Incidence and Leakages.” Document 57446, Social and Economic Develop- ment Group, Middle East and North Africa Region, World Bank, Washing- ton, DC. ———. 2010b. Iraq: First Programmatic Fiscal Sustainability DPL Program Docu- ment. Report 51528–IQ, World Bank, Washington, DC. ———. 2011. Investing for Growth and Jobs. Economic Development and Pros- pects report, Middle East and North Africa Region, World Bank, Washing- ton, DC. ———. 2012a. Resilience, Equity, and Opportunity: World Bank 2012–2022 Social Protection and Labor Strategy. Washington, DC: World Bank. ———. 2012b. Safety Nets Work: During Crisis and Prosperity. Report prepared for the Development Committee Meeting of April 21, 2012, World Bank, Wash- ington, DC. CHAPTER 2 The Challenge: Poverty, Exclusion, and Vulnerability to Shocks Introduction Chapter 1 presented the evidence of the impact that social safety nets (SSNs) can have on a variety of human development and welfare out- comes of the poor and the vulnerable. However, different SSN instru- ments are appropriate to meet different goals. Thus, understanding the human development challenges that the poor and the vulnerable face in the Middle East and North Africa is a precondition to identifying the SSN design options that can best promote inclusion, livelihood, and resilience. This chapter documents the key challenges facing the poor and vul- nerable households, which SSNs should target as a priority. In particular, it first describes the situation of two large groups—children and inhabit- ants of rural or lagging areas—that exhibit high incidence of poverty and lack access to basic services. Then explores additional factors, including vulnerability to poverty and social exclusion, that deplete the human capi- tal and productive potential of the region’s households (see box 2.1 for definitions). By doing so, the chapter makes a case for the renewal of SSNs and highlights the main challenges that SSNs can help to address in the region. The evidence brought to bear on the topics covered in this chapter draws mainly on data from the most recent household surveys, including budget-consumption surveys, demographic and health surveys, and labor force surveys in the region, described in detail in appendix A. The chapter is structured into the following sections and major subsections: • “Poverty and Lack of Access to Service” starts with a snapshot of pov- erty in the Middle East and North Africa, presenting the poverty levels and trends as benchmarked against other regions. 57 58 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa BOX 2.1 Poverty, Vulnerability, and Social Exclusion Defined Poverty, vulnerability, and social exclusion help them navigate the effects of shocks. are three intertwined and complex con- Siegel, Alwang, and Jorgensen (2003) de- cepts that describe different challenges for fine vulnerable households as “those that safety nets and have different implications have moved or are likely to move into for SSN design (such as targeting methods, a state of poverty or destitution as a result flexibility of registries, and activities se- of the cumulative process of risk and lected for workfare programs). ­ r esponse.” In addition, Coudouel and Hentschel (2000) recognize the compli- Poverty: The poor are defined here as those cated nature of vulnerability by stating that falling under a certain threshold level of “vulnerability is a broad concept, encom- welfare (poverty line), as measured by passing not only income vulnerability but household per capita expenditure or con- also such risks as those related to health, sumption. This chapter uses national pov- those resulting from violence, and those re- erty lines, in addition to US$1.25 and US$2 sulting from social exclusion—all of which a day poverty lines (when presenting inter- can have dramatic effects on households.” national comparisons). Wealth quintiles For the purposes of this chapter, a house- used in the analysis are constructed using hold is defined as vulnerable to poverty if it either consumption or expenditure data; is close to and can easily fall below a socially where these are unavailable, a wealth index accepted minimum reference of welfare based on the state of household dwelling (such as a poverty line). We limit our analy- and assets is used instead. Although con- sis to vulnerability to consumption or ex- sumption measures in surveys are, to a cer- penditure changes, which is one of the tain extent, comprehensive, it should be many facets of vulnerability that is most noted that even the best consumption data intimately tied to SSN provision. do not adequately reflect all dimensions of well-being, such as access to public services Social exclusion: Equitable access to social and within-household inequality (Ackland, services is an important condition for Dowrick, and Freyens 2006). To get a bet- equality of opportunities and thus social in- ter understanding of the circumstances clusion. Among the many existing defini- faced by poor households, the analysis in the tions of social exclusion, it can be defined as chapter supplements poverty measures by a process that excludes individuals or looking at other factors, such as malnutri- groups from social, economic, and cultural tion and access to services (see Coudouel, networks or denies them resources associ- Hentschel, and Wodon 2002; Ravallion ated with well-being because of a specific 1996). aspect of their identity (Bhalla and Lapeyre 1999; Burchardt, Le Grand, and Piachaud Vulnerability to poverty: Beyond the chronic 2002; Gore and Figueiredo 1997). Social poor, SSNs also target the vulnerable to exclusion can also be seen from the lens of The Challenge: Poverty, Exclusion, and Vulnerability to Shocks 59 BOX 2.1 Continued Sen’s (2000) capability approach, and in correlated with poverty and vulnerability. that sense is defined as a process leading to In this chapter, an individual is considered a state of functioning deprivation; as such, socially excluded if he or she is unable (par- social exclusion is a process that has visible tially or fully) to participate in society due outcomes, such as deprivation and lack of to factors beyond his or her control. access to decent living, and it is inherently • “Child Poverty and Human Development Outcomes” focuses on chil- dren living in poor households, examining the structural factors that can lock individuals into a low-productivity path for life. These include the prevalence of inequality of opportunities in the accumulation of essential human capital, and service provision that is skewed toward the better off. • “Poverty in Rural or Lagging Areas” puts a spotlight on the second group at high risk of poverty: those living in the rural areas of several middle-income countries that exhibit a stark rural-urban divide and where provision of basic services in rural areas lags far behind national averages. • “The Poor in the Labor Market” discusses how the failed accumula- tion of essential human capital, combined with the limited access to opportunities at a young age, translates into high risk of joblessness, working poverty, and limited mobility, which in turn perpetuate pov- erty across generations. • “Vulnerability to Poverty” assesses the high vulnerability of the Middle East and North Africa’s middle class to both individual shocks (“crises at the micro level”) and systemic crises (“crises at the macro level”), which can precipitate poverty and destitution and increase the likeli- hood of human capital depletion. Particular attention is given to the consequences of climate-related shocks on the poor and vulnerable. • “Social Exclusion” covers the plight of socially excluded groups that often remain unnoticed by governments and discusses the barriers that women, people with disabilities, and displaced people face in the labor market and in obtaining basic services. • The conclusion points toward the subsequent chapters in asking why the region has fallen so short in protecting the poor, promoting human capital formation, and ensuring the vulnerable against the long-term losses brought about by short-duration shocks. 60 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa Poverty and Lack of Access to Services Poverty Levels and Trends Although the incidence of absolute poverty has been declining in the Middle East and North Africa, the total number of poor people remains at its 1990s level. The absolute poverty rate (the percentage of people living below US$2 per day) declined by 26 percent in the region between 1990 and 2005. While a significant achievement, this decline in the abso- lute poverty rate occurred at a slower pace than the reduction experienced in other regions, such as Eastern Europe and Central Asia and East Asia and the Pacific. Furthermore, as shown in figure 2.1, the number of the poor in the Middle East and North Africa has remained stagnant: in 2005, 52.7 million people in the region lived on less than US$2 a day, a number similar to that in 1990 (Chen and Ravallion 2012). Despite some progress against absolute poverty, relative poverty has been rising in the Middle East and North Africa. The average relative poverty lines increased from US$2.84 in purchasing power parity (PPP) terms per person per day in 1981 to US$3.02 PPP per person per day in 2005, reflecting the change in the region’s living standards as a result of economic growth (Chen and Ravallion 2012).1 Using these lines, the headcount index of relative poverty increased from 30 percent in 1990 to 36 percent in 2005, and the number of relative poor increased from 59 to FIGURE 2.1 Little Change in the Absolute Poor but Rising Numbers of Relative Poor in the Middle East and North Africa, 1981–2005 120 100 80 No. of poor, millions 60 40 20 0 1981 1984 1987 1990 1993 1996 1999 2002 2005 Relative poor (weakly relative poverty line) Absolute poor ($2/day) Source: Chen and Ravallion 2012. Note: Absolute poor = individuals living on US$2 or less per capita per day in PPP terms; Relative poor = individuals living on incomes of US$2–3 per capita per day PPP; PPP = purchasing power parity. The Challenge: Poverty, Exclusion, and Vulnerability to Shocks 61 109 million over the same period, as also shown in figure 2.1. The change in relative poverty rates emphasizes that, despite overall progress in living standards, the benefits of economic growth have not homogeneously ac- crued across the population. Regional Heterogeneity in Poverty Reduction Middle Eastern and Northern African countries face varying degrees of challenge in their fight to eradicate absolute poverty. In the region in 2005, 18 percent of the population lived on less than US$2 a day at PPP.2 This poverty rate is higher than in Europe and Central Asia, similar to that of the Latin America and the Caribbean region, and significantly lower than the poverty rates in the Sub-Saharan Africa, South Asia, and East Asia and the Pacific regions. The regional average masks heteroge- neity in absolute poverty between countries. In Djibouti, Iraq, and the Republic of Yemen, the share of the population living with less than US$2 a day was above 40 percent, while in West Bank and Gaza this share constituted less than 2 percent, as shown in figure 2.2. Highest-Priority Challenges: Child Poverty and Rural Poverty Although absolute poverty is not very prevalent in the region, some groups face a higher risk of poverty than others. Annex 2A, at the end of the chap- FIGURE 2.2 Poverty Headcount at US$2 per Day in the Middle East and North Africa, Selected Economies 80 70 60 50 Percent 40 30 20 10 0 me outi p. ian Ara aq b R ep. Jor c Ira M an mi o st B T ep. k a sia za ica L. A d. E & ia r. & & N i c Eu Carib ica Ce ean ia li Isla cc Mi sia S. As As Re ub Ga Syr t, Ir d an uni Afr r me ast Pac Ara b R cR n, oro the . Af r. & b b nt. ep n, Dji nd Ye p E. A y Eg We Source: PovcalNet, http://iresearch.worldbank.org/povcalnet. Note: Headcount data are from the following years: Djibouti 2002; Egypt, Arab Rep. 2008; Iran, Islamic Rep. 2005; Iraq 2006; Jordan 2010; Morocco 2007; Syrian Arab Republic 2004; Tunisia 2005; West Bank and Gaza 2009; and Yemen, Rep. 2005. 62 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa ter, illustrates the incidence of poverty among different demographic groups. Among them, two groups call for priority focus: children living in poor households and people living in rural areas.3 Besides being numer- ous, and at higher risk of poverty, these groups are particularly affected by the high inequality of opportunities in Middle Eastern and North ­ African countries in terms of accumulating essential human capital (such as health and skills), and they tend to have very limited access to social services. To prevent perpetuation of poverty among children in poor households and rural residents, action is needed on both the supply side (through universal and effective provision of social services) and the demand side (through SSNs that motivate beneficiaries to use these services). Child Poverty and Human Development Outcomes This section examines key human development outcomes for children in poor households. In many Middle Eastern and North African countries, children are more likely to be poor than other age groups. Many key outcomes are largely determined during childhood. For instance, mal- nourished children are likely to become poor adults; and children who drop out of school and enter the labor market are likely to end up in low- paying, precarious jobs. Clearly, poverty during childhood can have ir- reversible impacts on human capital accumulation and future productiv- ity. However, when well-crafted, SSNs can help to break the cycle of intergenerational poverty by helping families to keep children healthy and in school. In other regions, safety nets have been redesigned to com- pensate for the disadvantages faced by children in poor households—for example, by linking transfers to sensitization sessions on good nutrition and hygiene practices, use of preventive health care services, or enroll- ment and attendance of primary and secondary schooling. Child Poverty Rates in the Region Children in the Middle East and North Africa are at a particularly high risk of poverty. As in the rest of the world, childhood poverty is high both in low-income countries (for example, 36 percent in the Republic of Yemen) and in some middle-income countries (29 percent in the Arab ­ Republic of Egypt, 27 percent in Iraq, and 20 percent in Jordan), as shown in table 2.1. In Jordan, based on the latest household survey data, more than 20 percent of all children are poor, in contrast to about 12 percent of youth and working-age adults and 7 percent of the elderly. Implications of Childhood Poverty for Human Development Being born into a poor household puts a child at a significant disadvan- tage compared with his or her peers in multiple aspects. The average head of a poor household in the Middle East and North Africa is uneducated, The Challenge: Poverty, Exclusion, and Vulnerability to Shocks 63 TABLE 2.1 Child Poverty Rates in the Middle East and North Africa, Selected Countries, c. 2006–10 percent Child (0–14) Overall Country poverty rate poverty rate Egypt, Arab Rep. 2009 29 22 Iraq 2007 27 23 Jordan 2010 20 14 Morocco 2010 a 25 20 Yemen, Rep. 2006 36 35 Source: Authors’ calculations based on data from latest available household surveys. Note: Poverty rates are based on national poverty lines for all coun- tries except Morocco. a. Poverty line defined as the bottom quintile cutoff. between 45 and 50 years of age, and provides for a family of five or more members, as shown in table 2.2. In fact, 70 percent of the households in Egypt and Morocco in the poorest quintile have a head who has never attended school. The conditions contrast starkly with those of rich house- holds in the same country. In Iraq, for example, poor households, on av- erage, have almost twice as many members as rich households. These inequalities are also reflected in the size and quality of dwellings where children grow up. Children in the poorest quintile are much less likely to live in a household with proper sanitation. For instance, poor households in Egypt, Jordan, and the Syrian Arab Republic are signifi- cantly less likely to be connected to a sewage system; and less than a third of households in the poorest quintile in Djibouti, Syria, and the Republic of Yemen have a functional bathroom in their dwelling. In Jordan, a 10-year-old girl in the poorest quintile is 40 percent less likely to drink treated water and 50 percent less likely to have a bed than a girl in the richest quintile. Similarly, access to technology is highly limited among the poor, with computer ownership hovering around 6 percent in Jordan and 1 percent in Iraq and Syria. One early manifestation of poverty is childhood malnutrition, which is strikingly high in the Middle East and North Africa’s low-income coun- tries and even in some middle-income countries, particularly among the poor. Eight of the region’s countries (Djibouti, Egypt, Iraq, Kuwait, Libya, Morocco, Syria, and the Republic of Yemen) face high rates of child malnutrition, as defined by a rate of stunting (low height for age) or underweight (by at least 20 percent). The stunting rate of children under five years in the Republic of Yemen is as high as 60 percent, as shown in figure 2.3. The rate of wasting (indicating acute malnutrition) among Djibouti’s children is one of the world’s highest (UNICEF 2009). 64 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa TABLE 2.2 Characteristics of Poorest and Richest Households in the Middle East and North Africa, Selected Countries, c. 2006–09 Female HH Has head Head w/o has bath- HH Age of of HH formal fridge Rooms Sewerage room Owns  Country size head (%) education (%) (%) (no.) connected (%) (%) computer (%) Jordan Poorest 5.0 45.2 14 23  87 2.8 17 —  6 Richest 5.0 49.9 13  2 100 4.6 87 — 86 Morocco Poorest 5.3 38.7 1 72  25 2.6 — 71.5  9 Richest 5.5 43.1 2 36  98 4.1 — 100 59 Egypt, Arab Rep. Poorest 4.4 47.2 24 72 — 3.1 23 80.4 — Richest 4.1 49.0 16 14 — 4.0 90 97.3 — Iraq Poorest 11.3 45.2 8 32  78 3.8 64 80.8  1 Richest 6.0 46.7 13 20  94 4.0 80 98.2 21 Yemen, Rep. Poorest 6.4 44.2 8 59   0 2.8 0 12.2 — Richest 7.7 46.4 9 23  97 4.1 49 97.8 — Syrian Arab Republic Poorest 6.1 48.1 9 42  89 3.1 17 31.1  1 Richest 5.2 48.1 6  8 100 3.4 100 100 51 Djibouti Poorest 5.8 47.6 16 62  33 — 2 18.2 — Richest 5.8 48.1 20 49  48 — 9 29.3 — Sources: Authors’ calculations based on data from the following surveys: Jordan DHS 2009; Morocco MHYS 2010; Egypt HIES 2009; Iraq HSES 2007; Republic of Yemen MICS 2006; Syria MICS 2006; and Djibouti MICS 2006. For full survey descriptions, see appendix A at the end of the volume. Note: HH = household; poorest = bottom income quintile; richest = top income quintile; — = not available. The level of economic development contributes to, but does not com- pletely explain, the incidence of malnutrition: Djibouti, Morocco, and the Republic of Yemen have high malnutrition rates even when compared with their development peers, as shown in figure 2.4. As expected, wast- ing (acute malnutrition) rates are lower in countries with higher levels of gross domestic product (GDP) per capita. But some Middle Eastern and North African countries (Djibouti, Egypt, Iraq, Morocco, Syria, and the Republic of Yemen) are notable for having stunting rates high above what would be predicted given their levels of income. This might indicate that dimensions other than income are the cause of malnutrition in these countries—which might be the case in Djibouti, for example, where nu- trition practices such as exclusive breastfeeding are rare.4 Malnutrition has potentially lifelong and irreversible impacts. It can increase the risk of morbidity and mortality, impair cognitive develop- ment, and reduce economic productivity later in life. The most sensitive period for influencing a person’s subsequent human development out- comes comes very early in life: from conception to two years of age. If chronic malnutrition and cognitive stimulation are not adequately ad- dressed in this period, they can lead to stunting, with irreversible losses in cognitive ability, lower learning outcomes, and lower income-earning potential as an adult (Horton et al. 2010). The Challenge: Poverty, Exclusion, and Vulnerability to Shocks 65 FIGURE 2.3 Prevalence of Child Underweight, Wasting, and Stunting in the Middle East and North Africa, c. 2009–10 60 50 % of children under ve 40 30 20 10 0 tes tar ait Ba ia Eg b Re aq an ite L geria co . ud ia in n Em n Mo ya D p. en ti . rab c ep ep t, A bli da rab ano Yem jibou rab Sa Tunis Re hra roc Lib ira r Om uw Qa cR ,R Ara I Jor yp pu iA Al d A eb K mi Isla n, Ira ian Un Syr Underweight Wasting Stunting Sources: Adapted from World Bank 2010c. Stunting and underweight rates were obtained from World Health Organization 2010. Wasting rates were obtained from UNICEF 2009. Rates are based on the 2006 WHO Child Growth Standards. Note: Rates of underweight were not available for Bahrain, the Islamic Republic of Iran, Kuwait, Qatar, and the United Arab Emirates. FIGURE 2.4 Incidence of Wasting and Stunting Relative to GDP per Capita (PPP) in the Middle East and North Africa, Selected Countries, c. 2009–12 a. Wasting b. Stunting Wasting prevalence among children under ve years old, % 25 TMP 25 AFG YEM Stunting among children under ve years old, % BDI TMP NER RWA ETH IND MDG NPL LAOINDGTM 20 ZAR ERI MWI MOZTCD ZMB BEN PNG BGDNGA TZA PAK SWZ BGDDJI 40 LBR SLEMLI GIN UGA MMR LSO KHM TJK CIV SDN SDN CMR 15 ERI MLI YEM LKA BFA KEN IDN GNQ PAK IDN STP SLB PHL DJI BTN NPL MDV HTI VNMCOG HND EGY NAM BWA CAFETH NER GNB GHA AGOECU PER TKM BFA MMRNGA MAR STP TGOGMB MNG IRQ BOL SYR AZE GAB VUT 10 ZAR SLE HTI MRTNIC MARBLZ ZAF ALB AFGGHA KHM SYR ALB SEN GNQ SEN MDV LBY SLV LBR GIN GNB BEN CIV COG AGO NAM 20 KGZUZBGUY LKA ARM PRY DZA TGO GMB KENCMR LAO PHL TKM TJK UGA MRTIRQ EGY AZE OMN THAKAZLBN TUR VENMYS MEX URY 5 RWA ZMB PNG GUY ARM THAKAZ MDA WBG MDA GEO CHN COL BIH ROM MKD MWI MOZ TZALSO SLBUZB BIH BTN DZA SRB MNE ROMGAB MKD LBY SGP JOR DOM TUN SRBBGRARG OMN KGZ MNG GEO BLZ JOR DOM COL JAM BRABLR MEX URY JAMMNE UKR BRA CRI TTO KWT BLR CZE SGP BOL NICHND SLV PER PAN PRY SWZ ARG TUR CHL HRV DEU 0 0 6 7 8 9 10 11 6 7 8 9 10 11 ln GDP per capita PPP (constant 2005 int. dollar) ln GDP per capita PPP (constant 2005 int. dollar) Sources: Authors’ calculations using data on malnutrition from UNICEF 2009 and on GDP from World Bank 2012e. Note: PPP = purchasing power parity. 66 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa FIGURE 2.5 Stunting, by Wealth Quintile, in the Middle East and North Africa, Selected Countries, 2006 Prevalence of stunting among children under age ve, % 50 45 40 35 30 25 20 15 10 5 0 Djibouti Egypt, Arab Iraq Jordan Morocco Syrian Arab Rep. Republic Poorest 2 3 4 Richest Sources: Authors’ calculations based on data from UNICEF’s latest available Multiple Indicator Cluster Sur- veys (MICS)5 and Jordan Demographics and Health Survey (DHS) 2006. In each Middle Eastern and North African country for which data are available, malnutrition is more prevalent among poor households, as re- flected in the stunting findings shown in figure 2.5. In Morocco, stunting affects 29 percent of children in households in the lowest income quintile and is higher than the poverty rate (14 percent), which suggests inade- quate food intake as well as poor nutrition practices (Horton et al. 2010). Similarly in Syria, stunting among children in the poorest quintile is ap- proximately 33 percent, whereas stunting among children in the richest quintile is around 20 percent. Looking at how malnutrition has evolved, the analysis shows that the levels of malnutrition have, for the most part, stagnated over time. In Algeria and Jordan, improvements were maintained, but in other coun- tries the levels of stunting have not changed significantly. In Egypt in particular, stunting rates have been rising, even in the wealthy quintiles. Calculations based on household survey data show that in 2000, 26 per- cent of Egyptian children in the bottom quintile were stunted, with stunt- ing rates dropping with each quintile, down to 11 percent of children in the richest quintile. Between 2000 and 2005, stunting rates in Egypt fell fairly equitably for all except the richest quintile, where they rose slightly. Surprisingly, despite a reduction in poverty between 2005 and 2008, stunting rates rose for all quintiles, and substantially so (by 6–12 percent- The Challenge: Poverty, Exclusion, and Vulnerability to Shocks 67 age points) for all but the poorest quintile, where they rose by less than 1 percentage point. As shown in figure 2.5, this dynamic equalized stunting rates across quintiles in Egypt, but at a very high level. Implications of Childhood Poverty for Human Capital Accumulation Beyond malnutrition, the educational paths of poor and rich children diverge early in life, as early childhood education for young children is rare and often unaffordable for the poor. There is mounting evidence worldwide about the positive impact of early childhood development in- terventions on children’s cognitive and socioemotional development, ­ especially for children up to three years old. Long-term effects include higher schooling and earnings, lower dropout and repetition rates, more stable employment, and fewer arrests (Carneiro and Heckman 2003). Moreover, high-quality, affordable child care programs can also encour- age higher labor force participation by women, which is currently very low in the Middle East and North Africa (World Bank 2012c). All of these opportunities are currently lost because only 22 percent of young children in the Middle East and North Africa attend pre- school, a rate exceeding only Sub-Saharan Africa (18 percent) and sig- nificantly lower than South Asia (47 percent) and Latin America and the Caribbean (69 percent), as figure 2.6 shows. In countries such as Dji- bouti, Iraq, and Syria, enrollment in preprimary education stands at less than 10 percent. Lack of access and high costs are the root of the prob- lem, with children in the poorest wealth quintile in Egypt almost five times less likely to attend preprimary school than those in the richest quintile. With no better options for child care in Morocco, when par- ents go to work, 4 percent of children under 5 are left alone, and 10.6 percent are left in the care of children under 10. These proportions increase with poverty and distance to a capital city, and decrease with higher levels of mother’s education (World Bank 2010e, 2012b). In Tu- nisia in 2009, 88 percent of kindergartens were run privately, and the coverage in Tunis and other urban areas was double that in rural areas (UNICEF 2009). Once they enter school, poor children in the Middle East and North Africa have lower completion rates for primary education, higher dropout rates, and more limited access to higher education than nonpoor children. In Egypt, the primary noncompletion rate is 5.7 percent for children from poor households, while it is 0.5 percent for children from nonpoor households, as shown in table 2.3. Lower primary completion rates in poor households are often attrib- uted to circumstances that lead children (especially girls) to drop out of school, either to work or to care for younger siblings. In fact—and in spite 68 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa FIGURE 2.6 Preprimary School Gross Enrollment in the Middle East and North Africa, Compared with World and Developing-Country Averages, 2007–10 Djibouti Iraq Syrian Arab Republic Saudi Arabia Egypt, Arab Rep. Mid. East & N. Africa Algeria West Bank and Gaza Jordan Oman Iran, Islamic Rep. Developing countries World Qatar Bahrain Morocco Kuwait Lebanon United Arab Emirates 0 20 40 60 80 100 Percent Source: UNICEF Child Info database, http://www.childinfo.org/education_preprimary.php. of the significant progress in recent decades—dropout rates continue to be high and to depend strongly on economic background. Successful edu- cational outcomes in the Middle East and North Africa are largely deter- mined by access to some form of private education, whether tutoring or schooling. Average household spending on education varies widely across the region (1 percent in Egypt, 7 percent in Jordan, and 3.5 percent in Lebanon), and such variance is explained by differences in the availability of publicly funded education and in households’ abilities to afford private educational services. In absolute terms, the richest 10 percent of Jordan’s population spent 14 times more on education in 2008 than the poorest 30 percent (Galal and Taher 2010). Access to higher education in the Middle East and North Africa is limited even for the poor youth who complete secondary schooling. Across the region, access to more prestigious higher-education degrees (such as in medicine, law, and engineering) is biased against the poor. Higher education in Egypt, Morocco, Syria, and Tunisia is publicly pro- vided, but this does not ensure equity of access (Galal and Taher 2010). In Egypt, the poorest quintile of the population constitutes only 4 percent of higher-education students, while in Jordan there are three times as The Challenge: Poverty, Exclusion, and Vulnerability to Shocks 69 TABLE 2.3 Education Outcomes of the Poorest and Richest Quintiles in the Middle East and North Africa, Selected Countries, 2006 No formal Average Primary Dropout rates, education, TIMSS noncompletion ages 16–18 ages 25–45 score, (%) (%) (%) 8th grade Djibouti Poorest — 49.9 50.7 — Richest — 41.5 39.2 — Egypt, Arab Rep. Poorest 5.7 58.8 54.8 380 Richest 0.5 14.4 20.1 417 Iraq Poorest 5.1 69.4 19.7 — Richest 0.5 47.1  8.4 — Jordan Poorest 0.7 30.3 42.9 412 Richest 0.0 10.1 21.3 451 Morocco Poorest 9.1 70.2 68.7 369 Richest 1.6 16.6 16.2 426 Syrian Arab Republic Poorest 1.1 74.1 27.0 — Richest 0.2 37.0  2.3 — Yemen, Rep. Poorest 4.5 79.4 65.1 — Richest 1.1 30.2 14.7 — Source: Authors’ calculations based on data from latest available MICS, DHS, and TIMSS data. Note: DHS = Demographics and Health Survey; MICS = Multiple Indicator Cluster Surveys (UNICEF); TIMSS = Trends in International Mathematics and Science Study; — = not available. many students from the richest quintile as those from the poorest quin- tile. Most higher-education institutions accept students based on general matriculation exams, but low-quality secondary education disadvantages students from poorer areas on these exams, and the prevalence of quotas and exceptions to admission further exacerbates the situation. For exam- ple, in Jordan, 10 percent of university placements are reserved for stu- dents from lower-income brackets, but these too are based on perfor- mance, often favoring students who attend private schools (Galal and Taher 2010). Quotas are used to allocate spaces for the children of Army and Ministry of Education retirees and graduates of schools from rural areas, but these are issued at the expense of the urban poor and students from refugee camps (Reiter 2002). As in the case of education, access to basic health services is also skewed across income groups from early childhood, with lifelong consequences. Family wealth is a significant determinant of access to antenatal care, as seen in table 2.4. Vaccination rates also differ drastically by wealth, with children in the poorest wealth quintiles significantly less likely to have had all of their vaccinations. Lack of access to funds to cover health care costs is significant, and poorer households report this as a problem two to four times more often than those in the richest wealth quintile. In 70 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa TABLE 2.4 Access to Health Services in the Arab Republic of Egypt, Jordan, and Morocco, by Wealth Quintile, 2006 Country Access to services indicator Poorest Q1 Q2 Q3 Q4 Richest Q5 Egypt, Arab Rep. Lack of antenatal coverage (% of pregnant women) 46 36 26 14  8 Problems in accessing health care (distance to health facility) (% of women) 29 22 18 12  7 Problems in accessing health care (getting money for treatment) (% of women) 70 56 47 36 16 Problems in getting all vaccinations (% of children ages 12–23 months) 11 11  7  8  6 Jordan Lack of antenatal coverage (% of pregnant women)  3  1  1  0  0 Problems in accessing health care (distance to health facility) (% of women) 47 43 35 31 23 Problems in accessing health care (getting money for treatment) (% of women) 49 39 33 24 17 Problems in getting vaccinations (all vaccinations) (% of children ages 12– 23 months) 18 13 10 12 11 Morocco Lack on antenatal coverage (% of pregnant women) 60 43 29 13  7 Problems in accessing health care (distance to health facility) (% of women) 51 46 36 26 17 Problems in accessing health care (getting money for treatment) (% of women) 55 53 48 38 24 Problems in getting vaccinations (all vaccinations) (% of children ages 12–23 months) 19 15  9  5  3 Source: Authors’ calculations based on data from latest available MICS surveys (UNICEF n.d.). Note: Q = wealth quintile (1 = lowest, 5 = highest). Morocco, 55 percent of the poor claim that cost constrains their access to health care, while almost 50 percent report that the distance to a health facility is also an impediment. Poor Jordanian households face similar constraints, whereas in Egypt, over 70 percent of poor households re- ported cost as a significant impediment to health care. In Iraq, reported distances to facilities such as public hospitals and health clinics were 15–25 percent longer for poor households than for rich ones. Given lack of access to health care providers, it is no wonder that a survey on child care in rural Morocco revealed a high prevalence of caretaker behaviors harmful to babies’ health, such as declining exclusive breastfeeding, nega- tive psycho-affective behavior, inadequate response in case of diarrhea, limited verbal communication with the baby, excessive swaddling, and incidents of violence (UNICEF 2007). Under conditions of perfect equality of opportunity, circumstances such as a child’s location or gender should have no impact on his or her basic human development outcomes, such that the distribution of out- comes would be the same for any circumstance group (Paes de Barros, The Challenge: Poverty, Exclusion, and Vulnerability to Shocks 71 Vega, and Chanduvi 2008). However, in the Middle East and North Af- rica, the process by which children and young adults attain desirable health outcomes depends, to a large extent, on circumstances that are be- yond their control, such as location at birth, family wealth, and parents’ education. These circumstances play the preponderant role in determin- ing outcomes such as receiving prenatal care and receiving adequate nu- trition (see box 2.2). BOX 2.2 Inequality of Opportunity Analysis for Early Childhood Health Inequality of opportunities here is defined (between 70 and 90 percent of children are as inequality in access to basic services such not stunted in the countries of analysis), as early childhood health care, which influ- whereas other outcomes such as “vaccina- ence children’s lives but are beyond their tions” (between 56 percent in Iraq and 83 control. First, we will depict coverage rates percent in Egypt have all vaccinations) or of early childhood health outcomes; sec- “postnatal checkups” (48 percent in Egypt ond, we will discuss the level and determi- and 15 percent in Morocco) display lower nants of inequality in achieving these out- coverage rates. Table 2.4 previously dis- comes; last, we will present the human played coverage rates of basic health out- opportunity index (HOI), which is a com- comes by wealth quintile in Egypt, Jordan, bination of coverage rates and the degree of and Morocco. In all countries studied, cov- equity of the distribution of each outcome. erage rates are highest for the richest quin- Coverage rates for early childhood tile and lowest for the poorest. health outcomes vary by country and out- Although coverage rates provide useful come, as shown in table B2.2.1. “Not insights into how many health opportuni- stunted” shows favorable coverage rates ties are available, they do not show how TABLE B2.2.1 Average Coverage Rates for Selected Early Childhood Health Outcomes in the Middle East and North Africa, Selected Countries percent Syrian Arab Health outcome Egypt, Arab Rep. Morocco Iraq Republic Yemen, Rep. Postnatal checkup 48.44 15.51 — — — Not stunted 74.04 91.31 71.85 71.67 — All vaccinations 84.00 80.92 56.23 57.14 59.96 Source: Authors’ calculations based on latest available DHS data. Note: — = not available. (box continued on next page) 72 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa BOX 2.2 Continued equitably the available opportunities are bly Egypt) than in others (such as Syria), distributed. The dissimilarity index indi- hinting toward varying country-specific in- cates how equitably outcomes are distrib- equality of opportunities. uted among different circumstance groups To understand how much an individual (see Paes de Barros et al. 2009). The index circumstance contributes to inequality in ranges between 0 and 1, with higher values health outcomes, we conduct a Shapley de- suggesting higher inequality. composition of the index, as shown in fig- Among the outcomes studied, “postna- ure B2.2.1. This analysis shows that espe- tal checkups” display the highest dissimi- cially parents’ education and, to lesser larity index (0.35 in Morocco and 0.13 in extents, location and parents’ wealth deter- Egypt), followed by ­ “vaccinations” (rang- mine whether children will have positive ing from 0.05 in Syria to 0.015 in Egypt) health outcomes. In particular, the analysis and “not stunted” (ranging from 0.03 in looks at the likelihood that an individual Syria to 0.013 in Egypt). In general, the who is 1–5 years old will have completed all dissimilarity index for the outcomes we vaccinations and will not be stunted. In looked at is lower in some countries (nota- Egypt and Morocco, we also look at the FIGURE B2.2.1 Decomposition of Dissimilarity Index of Early Childhood Health Outcomes in the Middle East and North Africa, Selected Countries 100 Contribution of circumstances to inequality 80 in health outcomes, % 60 40 20 0 ted s p ted ns ted s p ted ns ns n n cku cku tio tio tio tio tio un un un un che che ina ina ina ina ina t st t st t st t st c c c c c tal tal vac vac vac vac vac No No No No a a stn stn All All All All All Po Po Egypt, Arab Rep. Iraq Morocco Syrian Arab Yemen, Republic Rep. Wealth Location (urban/rural) Parents' education Other Source: Authors’ calculations based on latest available DHS data. Note: “Other” refers to the number of children in the household and gender. The Challenge: Poverty, Exclusion, and Vulnerability to Shocks 73 BOX 2.2 Continued completion of postnatal checkups. The then adjusts it according to how equitably variables measuring circumstances in the the outcome is distributed among circum- analysis were location (urban/rural), educa- stance groups. The HOI ranges from 0 to tion of household head, and household 1, with higher values suggesting a more eq- wealth. “Other” factors in the analysis in- uitable outcome. clude considerations such as the number of In the Middle Eastern and North Afri- children in a household and gender. can countries studied, the HOI is highest Combining coverage rates and the dis- (hence, the distribution is most equitable) similarity index, we calculate the human for “not stunted” and “all vaccinations” in opportunity index (HOI) of early child- Egypt and Morocco. The HOI is low and hood health outcomes, as shown in figure very similar for “all vaccinations” in Iraq, B2.2.2. The HOI is a widely used measure Syria, and the Republic of Yemen (0.54– of inequality of opportunities, which uses 0.57), hinting at low coverage rates in those the coverage rate of a certain outcome and countries. FIGURE B2.2.2 Human Opportunity Index of Early Childhood Health Outcomes 1.0 0.5 HOI 0 Egypt, Arab Iraq Morocco Syrian Arab Yemen, Rep. Rep. Republic Postnatal checkup Not stunted All vaccinations Source: Authors’ calculations based on latest available DHS data. Note: HOI = human opportunity index (0 = lowest, 1 = highest). Poverty in Rural and Lagging Urban Areas Middle-income countries have spatial pockets in rural areas and urban slums where extreme poverty is still prevalent. Although urbanization in the Middle East and North Africa increased in the past decade, a signifi- cant share of the population still resides in rural areas. In 2010, 38 percent 74 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa of the region’s total population were rural residents. There is substantial heterogeneity in urbanization between countries: although in Egypt and the Republic of Yemen, most of the population is rural, a third of Tuni- sia’s population lives outside the cities, and in Djibouti and Lebanon rural population is slightly above 10 percent. The Rural-Urban Divide Most of the poor in the Middle East and North Africa live in urban areas because of high urbanization rates, but poverty incidence is significantly higher in the rural areas of Djibouti, Egypt, and Tunisia than it is in the urban areas of these countries. In Egypt, almost 31 percent of rural inhab- itants are asset-poor, compared with 14 percent in urban settings (as shown in figure 2.7). In Iraq and the Republic of Yemen, around 40 per- cent of the rural population fall below the poverty line, compared with 16 and 21 percent, respectively, in urban areas. In all Middle Eastern and North African countries with available data, the risk of being poor is twice or even three times as high for rural resi- dents as it is for urban dwellers. For example, while Upper Egypt has 40 percent of the country’s total population, it accounts for 60 percent of its poverty and 80 percent of severe poverty; its average rural per capita con- sumption lags behind urban levels in Jordan and Morocco by 24 and 46 percent, respectively (World Bank 2010d). FIGURE 2.7 The Rural-Urban Divide: Poverty Rates in the Middle East and North Africa, Selected Countries, c. 2005–09 Jordan Tunisia Egypt, Arab Rep. Iraq Yemen, Rep. 0 10 20 30 40 50 Poverty rate, % Urban Rural Sources: Authors’ calculations based on HIES Egypt 2009; IHSES Iraq 2007; HBS Republic of Yemen 2006; World Bank (Poverty Reduction and Economic Management Network) staff estimates using HBS Tunisia 2005 and HBS Morocco 2006. For full descriptions of these surveys, see appendix A. The Challenge: Poverty, Exclusion, and Vulnerability to Shocks 75 TABLE 2.5 Rural-Urban Divide: Access to Services in the Middle East and North Africa, Selected Countries, 2012 Antenatal coverage Births attended by skilled Improved drinking Primary school (% of pregnant women) personnel (%) sources (%) attendance (%) Country Urban Rural Urban Rural Urban Rural Urban Rural Algeria 94 85 — —  85 79  98 95 Djibouti 94 47 — —  99 54  67 49 Egypt, Arab Rep. 85 67 87 59 100 99  91 87 Jordan 99 98 — —  98 92 100 98 Morocco 85 48 85 40  98 61  96 83 Syrian Arab Republic 92 83 — —  93 86  89 85 Yemen, Rep. 68 39 46 10  72 47  83 64 Source: Authors’ calculations based on UNICEF Child Info database, http://www.childinfo.org. Note: — = not available. Demographic factors, such as higher dependency ratios as well as migration and education, explain a portion of the rural-urban divide ­ (World Bank 2010d). However, disparities in access to services also play a role, exacerbating the disadvantages of rural inhabitants. Coverage by antenatal care and the share of births attended by a skilled health worker are all significantly lower in the rural areas of Egypt, Morocco, and the Republic of Yemen than in the urban areas, as shown in table 2.5. Rural residents in Djibouti, Morocco, and the Republic of Yemen are also much less likely to have access to improved drinking water sources and to send their children to preprimary or primary education. The accumulated lack of basic services is staggering: in rural Morocco, as many as 52 percent of women lack antenatal coverage; 39 percent of the population do not have access to improved drinking water sources; 17 percent of children of pri- mary school age do not attend school; and the likelihood that a girl is married by the age of 18 is 79 percent. A child in Rural Upper Egypt is 3.4 times less likely than a child in Urban Lower Egypt to attend prepri- mary school. In countries like Algeria, Jordan, Lebanon, and Syria, the urban-rural divide is less accentuated, but there are lagging areas that suffer from rela- tive deprivation. For example, in the wilaya of Djelfa, Algeria, more than half of Djelfa’s population older than six years of age are reported as not attending school compared with an almost universal primary education completion rate in the rest of Algeria. The average per capita household expenditure in Jordan’s northeastern governorate Al-Mafraq is 51 per- cent of that of Amman. In Lebanon, poverty is significantly higher in pockets such as the rural Akkar and Dinniyeh regions and in concentrated slums around the cities (World Bank 2010d). In Syria, the mean per cap- 76 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa FIGURE 2.8 Out-of-School Rates by Location and Gender in the Middle East and North Africa, Selected Countries, c. 2006–10 90 Children (ages 15–17) who are out of school, % 80 70 60 50 40 30 20 10 0 Egypt, Arab Iraq Jordan Morocco Syrian Arab Yemen, Rep. Rep. Republic Rural female Urban female Rural male Urban male Sources: Authors’ calculations based on data from latest MICS (UNICEF n.d.), DHS Egypt 2008, and MHYS Mo- rocco 2010. ita household expenditure in Aleppo is almost half of that of Damascus (the capital). Rural Disadvantage Exacerbated for Females Living in a rural area instantly puts one at a disadvantage when it comes to achieving favorable education outcomes, and this disadvantage is exac- erbated for females. Figure 2.8 shows that in all Middle Eastern and North African countries except Jordan, rural females aged 15–17 have the highest probability of being out of school. In Morocco, this difference is especially stark: 80 percent of rural girls are out of school compared with only 23 percent of urban girls. More- over, based on data from the Morocco Youth Survey 2010, poverty starts contributing to the lower educational outcomes of rural females at an early age, with rural poor children and especially rural poor females hav- ing the highest out-of-school rate at ages 7–10. Indeed, 17 percent of rural females in the poorest quintiles are out of school in Morocco com- pared with 5 percent of urban poor females and virtually none of rural females in the top two quintiles. The Poor in the Labor Market The previous sections illustrated how the inequality of opportunities, combined with lack of access to basic services, severely limits the pros- The Challenge: Poverty, Exclusion, and Vulnerability to Shocks 77 FIGURE 2.9 Work Status of Urban Wage-Employed Men (Aged 35–64) by Wealth Quintile in the Middle East and North Africa, Selected Countries, c. 2009–12 100 90 Urban, wage-employed men (35–64), % 80 70 60 50 40 30 20 10 0 Q 1 and 2 Q 4 and 5 Q 1 and 2 Q 4 and 5 Q 1 and 2 Q 4 and 5 Egypt, Arab Rep. Jordan Morocco Public Private formal Private informal Sources: Authors’ calculations based on data from MHYS Morocco 2010; Jordan ERF LMS 2012; and Egypt SYPE 2009. Note: Q = wealth quintile (1 = lowest, 5 = highest). pects of people growing up in poor households, particularly in rural areas, to accumulate essential human capital, including formal education, health, and skills. As an illustration, table 2.1 showed that, in most countries, most heads of poor households received no formal education. Once in the labor market, individuals with low levels of human capital have limited chances to end up in jobs that will allow them and their fami- lies to escape poverty. Because the poor are mostly low-skilled, they are more likely to find themselves in precarious employment and to lack the urban, means to move into better jobs. Figure 2.9 shows the work status of ­ wage-employed, prime-age males (35–64 years old) in Egypt, Jordan, and Morocco according to their household wealth. Adult males in poor fami- lies tend to be employed more in the informal sector, and in Egypt and Morocco they tend to have less access to public sector employment. Whereas the public sector offers social protection and the formal private sector offers high wages, the sectors where the poor tend to work are neither protected nor high-paying. Doubly Disadvantaged in the Middle East and North Africa Such labor market disadvantage is exacerbated in the context of Middle Eastern and North African countries, where job creation has been mod- est, and poor unskilled individuals compete with the better-skilled for scarce employment opportunities. In recent years, economic growth in 78 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa the region has led to the creation of mostly low-quality, low-paid jobs (World Bank 2012c). Among those who do find a job, informality (de- fined as not having access to social security) is rampant, and especially so for young people, women, and the low-skilled. In fact, informality in the Middle East and North Africa (67 percent of the workforce) is higher than in other middle-income regions, such as Latin America (61 percent) and Europe and Central Asia (40 percent). In addition, it is well known that the Middle East and North Africa has the world’s highest unemployment rate, and how these jobs are allocated plays to the disadvantage of the poor. One-third of individuals inter- viewed by Gallup in non-Gulf Cooperation Council countries thought that the main obstacle to youth employment was the lack of acceptable jobs for new labor market entrants. Another fifth of respondents thought that the main challenge was that jobs are given only to the connected people (Gallup and World Bank 2009). Because the poor tend to have smaller networks in addition to lower human capital, they are at a double disadvantage in their chances to land a good job. It is no surprise, then, that in some countries poor households are more likely to have no single member employed. As many as 23 percent of people in Morocco live in households with no employed member; in Jordan, 17 percent do so, and in Egypt, the figure is 10 percent. House- holds with no one employed are not necessarily poor, as they can receive other sources of income such as rent, pensions, or remittances. However, in Jordan and Morocco, households in the lower-income quintiles are indeed those most likely to have no member employed, with 25 and 36 percent of households, respectively, without a single member working. This is not so in Egypt, where only 7 percent of poor households are in this situation. Such patterns are likely to differ across countries according to migration opportunities and the propensity to cohabit in the absence of a male household head. Starting Out Poor Often Leads to a Low-Productivity Path Among young people, poverty strongly increases the chance to be out of school and out of work. Being neither in school nor at work captures the difficulty of labor market insertion as well as the lost potential of young people to become more productive adults later on. Available data from Egypt, Jordan, and Morocco demonstrate that the likelihood of poor young men to be in this state can be twice as high as that of young men in higher-income families. For instance, in rural Morocco, more than 40 percent of young men in the bottom two quintiles were out of school and out of work in 2010, compared with only 20 percent of those in the top two quintiles. As young, poor individuals in the Middle East and North Africa struggle to accumulate the two key assets to succeed in the labor The Challenge: Poverty, Exclusion, and Vulnerability to Shocks 79 FIGURE 2.10 Likelihood of Refusing a Job, by Education Level, in the Middle East and North Africa, 2009 70 60 Individuals refusing a job o er, % 50 40 30 20 10 0 Eg b Em ti ra s en . Alg . Ba ia st B T in k a ia ud a Mo ia co q b R ait lic n Leb ar on ya Yem b Rep ep t, A te Sa Gaz Ira da ra ou er an unis rab ra t ub roc Lib an Ara Kuw Qa yp ira ,R Jor h d A Djib ep iA nd ian ite We Syr Un Elementary education Secondary education Tertiary education Source: Gallup Inc. 2009. market—experience and postbasic education—joblessness at a young age is likely to affect earning potential later on. Unemployment among the poor is less likely to be the result of choice, and more likely due to lack of work opportunities. Middle Eastern and North African countries experience the world’s highest unemployment rates. However, the reasons for unemployment are heterogeneous. Among some groups, unemployment may be a strategic choice to maxi- mize the chances of ending up in the desired job by increasing the search period. Among others, unemployment may simply be the result of the inability to find any job. The available evidence suggests that individuals who are poor and unemployed are more likely to be in this condition because they cannot find a job, not because they are waiting to find a bet- ter job (World Bank 2012c). For instance, the Gallup data in figure 2.10 show that the likelihood of refusing a job is far lower among the low- skilled (largely poor) than among the higher-skilled, signaling that unem- ployment for this group of individuals is less of a choice than for those who are better off. Few Options and Incentives for Women in the Labor Force Another factor explaining the high rate of joblessness in poor households relates to the labor force participation rate of unskilled women. Female labor force participation is historically low in the Middle East and North 80 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa Africa region except among highly educated women. Because women in poor households receive either no education or only a primary education, they are less likely to participate in the labor force, but the determinants of low female labor force participation are more complex than educa- tional level. Women have few incentives to work in light of the low wages, low employability, and the low returns from education they can expect on the market.6 They are also challenged by limited decision-making power and job opportunities (Lundberg and Wuermli 2012; World Bank 2012a). Persistently Low Job Mobility for the Poor Overall, poorer individuals show higher persistence in low-quality jobs, and a higher likelihood of falling out of good-quality jobs. The preceding figures have shown that poor individuals’ jobs are more likely to be infor- mal and low paying. Moreover, unlike in other regions, in the Middle East and North Africa, informality in the labor market is not a temporary phenomenon (Gatti et al. 2011). Panel data from Egypt collected between 2008 and 2009 show us that the persistence of various labor market outcomes varies significantly ac- cording to individuals’ household consumption level. Figure 2.11 shows the job transition rates of out-of-school males aged 15–34.7 Among the youth with a low-paying informal job in the bottom two household quin- FIGURE 2.11 Probability of Transition to a Good or Bad Job in 2009, by Consumption Quintile and Employment Condition of Young Egyptian Males in 2008 Males (ages 15–34) who were employed in 2008, % 100 90 80 70 60 50 40 30 20 10 0 Q1 and 2 Q4 and 5 Q1 and 2 Q4 and 5 Good job 2008 Bad job 2008 Good job 2009 Bad job 2009 Other status 2009 Source: Authors’ calculations based on HIECS Egypt 2009. Note: “Good job” is defined as offering social security or earnings above two-thirds of the median. “Bad job” is defined as informal and with earnings below two-thirds of the median. “Other status” is defined as being unemployed or out of the labor force. Q = consumption quintile (1 = lowest, 5 = highest). The Challenge: Poverty, Exclusion, and Vulnerability to Shocks 81 tiles in 2008, 73 percent were in the same status a year later, compared with only 65 percent among the same cohort from the top two household wealth quintiles. Even in a relatively short time span, these rates indicate that wealthier workers are not only less likely to be in low-quality jobs but also better able to move out of them. Conversely, 76 percent of youth from low-income households who held a high-earning or protected job in 2008 remained in the same status a year later, compared with 84 per- cent among those from higher-income households. Vulnerability to Poverty Low Resilience to Shocks in the Middle East and North Africa Poverty headcount ratios can inaccurately reflect the size of the popula- tion that SSN programs need to reach. Families and individuals who have insufficient resources to exit poverty are certainly a priority target group, but focusing exclusively on this group alone may be too restrictive. People who earn 1 percent more than the poverty threshold are not that different from those who earn 1 percent less; in other words, the population just above the poverty line is essentially equally at risk of falling under the poverty line in the event of a relatively minor individual shock or a slight worsening of economic conditions. Unfortunately, the vulnerability of these individuals near the poverty line often goes unrecognized. In the Middle East and North Africa, vulnerable households make up a large share of the population. Although economic growth in the region has lifted many out of poverty, many of those people remain at risk of falling back into poverty if an economic contraction takes place, even if it is temporary. This vulnerability to poverty is illustrated in three different but complementary ways. First, defining the middle class as living be- tween US$2 a day (poor by developing-country standards) and US$13 a day (poor by developed-country standards) (as in Ravallion 2010), the Middle East and North Africa stands out as having a large share of its population in the middle class by developing-country standards, many of whom remain fairly close to poverty. In fact, only 5 percent of the re- gion’s population live above US$13 a day. Second, a large share of the region’s population is vulnerable to even smaller income loss. As many as 15–17 percent of Egyptians, Iraqis, Syrians, and Yemenis and 10 percent of Moroccans have consumption levels that are no more than US$0.50 per day above the US$2 poverty line, as shown in figure 2.12. Third, even using national poverty lines, household survey data in Egypt, Iraq, Syria, and the Republic of Yemen confirm that a high share of those countries’ populations hovers just above the poverty line. 82 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa FIGURE 2.12 Share of Population Living on US$2–2.50 a Day in the Middle East and North Africa, Selected Countries Egypt, Arab Rep. Iraq Yemen, Rep. Djibouti Syrian Arab Republic Algeria Morocco Iran, Islamic Rep. Tunisia Jordan 0 5 10 15 20 Percent Source: Calculations from PovcalNet, http://iresearch.worldbank.org/povcalnet. Overall, the data on vulnerability imply that many households fre- quently shift into and out of poverty. For example, between 2005 and 2008, the welfare of poor households in Egypt increased by 10 percent, but 55 percent of Egyptians experienced at least one poor (or near-poor) episode (Marotta et al. 2011). Almost one-fifth (17 percent) of the popu- lation experienced a deep fall in welfare, defined as moving more than two deciles down the welfare distribution; another fifth (21 percent) experi- enced a slight fall in welfare, moving down one decile; and 16 percent of the population preserved their rank as nonpoor. The poor have low levels of disposable income and spend a high share of total expenditures on essentials that cannot be scaled down easily in the presence of shocks, as these examples show and figure 2.13 illustrates: • In Jordan, the rising cost of food and basic goods caused an increase in the general poverty line (in Jordanian dinars) from JD 392 to JD 553 between 2002 and 2008. This was not met by a commensurate rise in wages, straining vulnerable households, who allocated 43.5 percent of household expenditures to food in 2008 (ESC 2010a). Asset ownership in 2008 represented only 0.9 percent of average household income, indicating limited scope for asset sales and resilience should Jordan experience another price shock. People in the three poorest quintiles allocated 82 percent of the household budget to basic expen- in Jordan ­ ditures (45 percent of which was spent on food and 19 percent on rent). • In Egypt, people in the three poorest quintiles allocated 88 percent of household consumption to basic goods (including 48 percent on The Challenge: Poverty, Exclusion, and Vulnerability to Shocks 83 FIGURE 2.13 Expenditure Composition by Wealth Quintile in the Arab Republic of Egypt, Iraq, and Jordan, c. 2007–09 a. Egypt, Arab Rep. b. Iraq c. Jordan Richest Richest Richest 4 4 4 Wealth quintile Wealth quintile Wealth quintile 3 3 3 2 2 2 Poorest Poorest Poorest 0 10,000 20,000 30,000 0 1,000 2,000 0 20,000 Egyptian pounds Iraqi dinars Jordanian dinars Food Rent Utilities Education Health Clothes Telecom Other Sources: Authors’ calculations based on data from HIES Egypt 2009; ESC 2010a (Jordan); IHSES Iraq 2007. food and 19 percent on rent). In these quintiles, salaries accounted for 62 percent of household incomes while transfers provided another 33 percent. Meanwhile, consumption took up 86 percent of total in- come, leaving little room for spending on assets and other resilience capabilities.8 • Similarly, the three poorest quintiles in Iraq allocated 89 percent of consumption to basic expenditures (including 50 percent to food and 18 percent to rent). As these examples suggest, households around the poverty line have very limited room for scaling down expenditures in times of economic hard- ship, seriously straining their capacity for resilience. The absence of income support assistance for the unemployed, cou- pled with high informality, is an additional cause of high income vulner- ability among most of the workforce in the Middle East and North Africa. Informality is mostly associated with low-quality jobs, with informal workers earning 10–50 percent lower salaries than formal workers with similar skills (Gatti et al. 2011). Informal employment is also associated with higher vulnerability to social risks because informal workers do not have access to the same social protection tools (including health insur- ance, pensions, and job stability) that protect the relatively small formal workforce. In Egypt and Tunisia, more than half of workers do not have 84 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa a contract; in Egypt, the share without social security coverage increased by 10 percentage points between 1998 and 2006; and in Morocco, 80 percent of the population is not covered by a pension. No system of in- come support for the unemployed has been developed, and workfare pro- grams in the region remain limited in scope and scale. Crises at the Micro Level: Idiosyncratic Shocks from Health, Job, or Asset Loss Households are exposed to multiple work- or business-, health-, and ­violence-related risks. When households are hit by these shocks, the re- sult can be a significant loss of assets or income. Although household surveys usually do not capture household shocks and coping strategies, surveys conducted in Iraq, Morocco, and the Republic of Yemen are im- portant exceptions and provide revealing information. Although some shocks are linked to the economy (for example, jobs and earnings losses are the most commonly reported major shock in Morocco), others relate to violence and conflict. (Loss of an asset or livestock due to violence and theft was the most commonly reported shock in Iraq during the war pe- riod, while death and serious illness of a household member were the most frequent shocks reported in the Republic of Yemen’s capital, Sana’a, in 2009–10.) Table 2.6 shows the incidence of these shocks, by type, as reported by survey respondents. As many as 15 percent of households in Iraq, Morocco, and Sana’a reported suffering at least one major shock during the previous 12 months. In the Republic of Yemen, the four worst shocks mentioned by house- holds were death of a household member, serious injury or illness of a household member, loss of assets due to violence and theft, and job loss. The losses can be significant; for example, 58 percent of households in TABLE 2.6 Incidence of Idiosyncratic Shocks in Iraq, Morocco, and the Republic of Yemen, 2009–10 Yemen, Rep.   Percentage of respondents reporting occurrence Iraq Morocco (Sana’a) Lower wages or returns of family business 5 6 0 Unexpected job loss or bankruptcy of family business 7 5 2 Death of household member 2 4 5 Serious injury or illness of household member 3 0 4 Loss of asset or livestock due to violence and theft 13 1 2 Another major problem 2 1 3 At least one of the shocks mentioned above 15 15 15 Sources: Authors’ calculations based on data from Republic of Yemen’s Social Networks and Solidarity Mechanisms Survey 2010; IHSES Iraq 2009; and MHYS Morocco 2010. The Challenge: Poverty, Exclusion, and Vulnerability to Shocks 85 Iraq who suffered a major shock reported that they reduced the quantity and quality of their food as a consequence. Coping with Shocks to Individual Households In the face of a major shock and in the absence of effective SSNs, house- holds often rely on their own income, savings, and assets and on informal safety nets. In Morocco and Iraq, only about 1 percent of all households suffering major shocks reported receiving help from formal safety nets (that is, support from the government and nongovernmental organiza- tions), as shown in figure 2.14. The most common coping strategies were using own income and savings and receiving help from informal safety nets (such as private support from family and neighbors). In this context, poorer families, with their limited incomes, savings, and assets, are again at greater risk. Catastrophic and Impoverishing Effects of Health Care Costs Although social health insurance schemes and free health services are extensive in most of the Middle East and North Africa, many households still face large—indeed, catastrophic—health care costs. Catastrophic (health cost) effects are commonly defined as occurring when a household’s health care expenditures exceed 10 percent of its total expenditures or 40 FIGURE 2.14 Household Coping Mechanisms for Shocks in Iraq and Morocco, 2009–10 As a coping mechanism to one or more of the aforementioned problems, during last 12 months, has the household: Received help from government or NGO Sold or pawned assets Received help from friends or neighbors Asked for loan Received help from family Used own income or savings 0 10 20 30 40 50 60 Households answering “yes,” % Iraq Morocco Sources: Authors’ calculations using Iraq IHSES 2009 and Morocco MHYS 2010. Note: NGO = nongovernmental organization. 86 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa FIGURE 2.15 Incidence of Catastrophic Health Expenditures in the Middle East and North Africa, Selected Economies, c. 2003–07 14 12 Households incurring catastrophic health care expenditures, % 10 8 6 4 2 0 ) p. /06 . 03 a a (20 nisia 05 Rep 04 on (20 Liby az 07 Re ) /04 (20 eban ) 05 d G /05 ) (20 Arab (20 en, ) Tu 05 (20 k an m L Ye t, an ) yp st B Eg Sources: World Bank 2010c; data from national household surveys. We Note: “Catastrophic” health care expenditures are defined as expenditures exceeding 10 percent of a household’s total expenditures or 40 percent of expenditures net of food spending. percent of expenditures net of food spending. Related to but distinct from catastrophic effects, impoverishment effects occur when a household becomes poor following the need to pay for the health care services that it receives. The Middle East and North Africa regional report on health (World Bank 2010c) found high levels of catastrophic health costs in several countries in the region. For example, in Lebanon in 2004/05, about 13 percent of households faced severe financial strain following the ill health of a household member (see figure 2.15). The study also found significant impoverishment effects related to health (see table 2.7), with an alarming increase in household poverty headcount ratios post-illness in a number of countries. The main driver of these health-related costs was the high out-of-pocket expenditures incurred by households, despite health fee waivers and services often paid for by the state. The Toll on Households of Conflict and Violence Wherever the likelihood of conflict and violence is high—as it is across the Middle East and North Africa—there are long-term human capital consequences for households. Injury and death of working members of households often precipitate the use of short-term coping strategies that The Challenge: Poverty, Exclusion, and Vulnerability to Shocks 87 TABLE 2.7 Out-of-Pocket Health Care Spending and Impoverishment Effects in the Middle East and North Africa, Selected Economies Prepayment poverty Postpayment poverty headcount headcount Absolute difference Relative difference Economy (% households) (% households) (% difference) (% difference) Egypt, Arab Rep. (2007) 31.8 36.1  4.3 13.5 Iran, Islamic Rep. (2006) 13.6 15.4  1.8 13.2 Lebanon (2004/05) 27.5 31.6  4.1 14.9 Libya (2003/04)  1.7  1.8  0.1  5.6 Tunisia (2005)  3.7  4.4  0.7 17.8 West Bank and Gaza (2005) 13.7 25.1 11.4 82.9 Yemen, Rep. (2005/06) 20.3 21.9  1.6  7.9 Sources: World Bank 2010a; authors’ calculations using data from national household surveys. Note: An “impoverishment effect” is defined as when a household becomes poor following the need to pay for the health care services that it receives. can damage long-term human capital accumulation. Such strategies in- clude withdrawal of children from school, inadequate use of health care, and consumption of inadequate diets. In Iraq, conflict-related morbidity and mortality have been associated with increased asset sales by house- holds, higher school dropout rates, and worse health outcomes for chil- dren (Silva and Thirumurthy 2010). In West Bank and Gaza, conflict threatens people’s livelihoods and access to food, health, and education: approximately 40 percent of Gaza households live in extreme poverty, and 80 percent are dependent on food assistance (ILO 2008); in 2005, 32 percent of all fatalities were children, and as many as 1,709 were wounded (see UN-OCHA 2007); primary school enrollment decreased dramati- cally from around 95 percent in 2002 to 80 percent in 2005 (UNDP 2009). A recent United Nations Development Programme survey in West Bank and Gaza highlighted the significance of conflicts as a risk: when asked to specify the most important source of threat for themselves, respondents ranked “foreign occupation” as the most serious threat, ­ followed by deteriorating economic conditions, deteriorating political conditions, and a lack of personal security (UNDP 2009).9 Crises at the Macro Level: Systemic Shocks The macro-level shocks the Middle East and North Africa has suffered since 2008 have included rising commodity prices, reductions in remit- tances, and more recently, significant political upheaval. The region faced more of a price shock than a labor market shock following the global financial crisis, such that individuals’ real income was reduced. A quanti- ­ tative analysis shows that earnings fell for all workers between the ages of 88 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa 25 and 58 in Egypt in 2008–09 (Cichello and Marotta 2011), but the ef- fect was more pronounced for women, after controlling for initial levels of earning. Growth in remittances slowed to an 8.5 percent increase be- tween 2007 and 2008 (in dollar terms) compared with 16 percent annual growth in the previous five years. The slowdown might not have affected poverty directly, as remittances typically go to better-off families, but it did affect the social balance in labor-sending countries in the region (World Bank 2010b). The political upheavals that began in 2011 have also had an economic impact, with disruption to daily commerce and the uncertainty surrounding the ultimate outcomes. In most cases, Middle Eastern and North African economies were able to rebound when the focus of the Arab Spring shifted from mass demonstrations to elections. Such macro shocks (food price shocks, global financial crises, the Euro crisis, and so on) are expected to continue. The increasing volatility of commodity prices, as well as close links between the financial sector and the real economy, will likely increase the frequency of price shocks in the Middle East and North Africa relative to the 1980s and 1990s. The in- creased integration of the region’s economies with international financial markets as a result of liberalization and structural reforms has brought many benefits (such as greater foreign direct investment). However, mar- ket irregularities elsewhere in the world now translate into greater eco- nomic growth shocks locally. Food price shocks in particular have a high impact in the region because as much as 50 percent of consumed food is imported. Coping Strategies Show Resilience or Vulnerability The impacts of high and volatile food prices on poverty, food security, and social cohesion are severe in many countries (World Bank 2012d).10 The most common household responses to the 2007–08 crisis were to reduce the quality and quantity of meals consumed. In addition, house- holds reduced nonfood consumption, sought more working hours, or diversified their income sources. Migration, and sometimes reverse mi- gration, was another common response. Asset sales and loans from family and kin also provided important cushions for households. These trends can be organized into signs of vulnerability and resilience, as shown in table 2.8. Many of the coping strategies listed in the right column can lead to lasting welfare losses. In addition, box 2.3 describes coping strategies in the Republic of Yemen not necessarily captured in quantitative surveys but important nonetheless. Mitigating Effects of Social Resilience—and Safety Nets Crises can also frustrate expectations for upward mobility. Shocks can have social and psychological impacts during the critical formative years of a young person’s life, with the severity depending on the person’s age The Challenge: Poverty, Exclusion, and Vulnerability to Shocks 89 TABLE 2.8 Household Coping Strategies in Response to Systemic Shocks Evidence of resilience Evidence of vulnerability Living off savings Cutting back basic consumption; fewer and less-nutritious meals Migrating internally for opportunities Cutting back essential nonfood consumption Adapting business strategies Forgoing health care Cutting back nonessential spending Selling assets needed for livelihood Extending working hours Accumulating unserviceable debt Working more jobs Dropping out of school; sending children to work; switching from private to public school Striving to keep children in school Engaging in high-risk income generating activities Returning to education or training Depleting community support networks Engaging in communal meals Engaging in theft, crime, drug selling Joining mutual support groups; seeking support from Resorting to divorce and abandonment, alcohol and drug use, high stress levels, family and friends domestic violence Establishing savings or credit groups Exhibiting lower resilience to other shocks Source: World Bank 2012d. BOX 2.3 Household Coping Strategies in the Republic of Yemen Quantitative data do not often capture child labor, particularly begging or vending household coping strategies. Focus groups at street traffic lights. with rural communities in Omran gover- Overall, the dominant message was that norate and in Noukem in Sana’a were con- urban parents tried to keep their children in ducted in 2010 to study the impact of the school and cut costs elsewhere. In rural ar- food price crisis on vulnerable households. eas, however, respondents thought that The most common response in both rural more children had been removed from and urban areas was that people reported school to work (for example, to sell qat). In eating differently, cutting out meat and the capital city of Sana’a, an increasing chicken and relying more on vegetable number of women sought home-based stews. People ate smaller meals, making work or outside jobs. Depending on their meals stretch, and skipped breakfast (espe- level of education and skills, women found cially affecting children who had to wait for janitorial, hospital, or domestic service jobs, lunch to be fed). Rural women said they or they joined the police and armed forces. gave children bread dipped in tea or ma- This was noted as a source of tension, as teed (a yogurt and tahini mix), whereas two some men did not like competing with years ago they could afford juice, meat, and women for jobs, and some male household fish. Some respondents reported chewing members disapproved of women working. qat more often because it suppressed their The strain on households also resulted in appetite. Spending on other items and noneconomic impacts, including reported community events, such as weddings, also higher levels of stress, more household dis- declined. There were reports of increased putes, and increased domestic violence. Source: Hossain et al. 2010. 90 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa when the shock occurs and the extent to which mitigation measures are available to the child and parents and community (that is, social resil- ience) (Lundberg and Wuermli 2012). Social resilience is important for adolescents, especially because it affects their ability to develop their identities, autonomy, and future career orientation. Sources of social re- silience during crises include services provided by community centers, churches, and mosques; family and community ties; and common narra- tives or ways of seeing the world that help promote resilience. Adoles- cents can also self-regulate their behavior to respond to a shock—for ex- ample, adapting to changing job markets by actively seeking out mentors and employment services (Lundberg and Wuermli 2012). When indi- viduals, households, and communities respond to crises by self-regulating expectations and seeking psychosocial support, social resilience is the result. However, vulnerable groups in the Middle East and North Africa rarely benefited from social protection programs during the food, fuel, and financial crises that started in 2008, according to a global qualitative study of the impact of food, fuel, and financial crises on households (World Bank 2012d). Reported problems with formal safety nets include poor targeting, low generosity, and downscaling during the crisis as con- straints on public spending increased. Free and subsidized education, on the other hand, was important in keeping children in school, and subsi- dized health services were appreciated by recipients. A World Food Programme survey in 2008 found that one-third of respondents in the ­ Republic of Yemen received some form of cash or food assistance (WFP 2008). Focus groups there had considerable awareness of the Social ­ Welfare Fund (the government’s main cash transfer program) and its designated target groups. According to the findings, people who did not ­ receive official assistance felt that those that did were particularly needy. Other official sources of assistance appear to have declined or have been withdrawn, including noncash benefits for soldiers. Households in Sana’a resorted to multiple sources of assistance, most commonly borrowing from family and neighbors. Food distributed during Ramadan and Eid by mosques and local councils was another source of assistance cited (Hos- sain et al. 2010). Climate-Related Shocks According to preliminary analysis, climate change impacts are likely to be particularly significant in most parts of the Middle East and North Africa (World Bank 2009, 2010e)—generating more frequent challenges and demands for governments’ rapid response. Higher temperatures and re- duced precipitation, which lead to increased occurrences of droughts, are The Challenge: Poverty, Exclusion, and Vulnerability to Shocks 91 already materializing in the Maghreb. Among the predicted effects are the following: • An estimated 80–100 million more people will be exposed to water stress by 2025, which is likely to result in increased pressure on ground- water resources and an attendant rise in potential conflict, diarrheal diseases, and malnutrition. • Agriculture yields, especially in rainfed areas, are expected to fluctuate more widely, ultimately falling to a significantly lower long-term average. • In urban areas in North Africa, a temperature increase of 1–3 degrees Celsius could expose 6–25 million people to coastal flooding. Com- munities in low-lying coastal areas of Egypt, Kuwait, Libya, Qatar, Tunisia, and the United Arab Emirates are at particular risk. Flooding will affect communities in both urban (port cities) and rural areas. All households across a subregion may be at risk, but particular pockets that are already poor (for example, fishing communities) may have fewer resources to cope and rebuild livelihoods. Widespread Effects, with Agricultural Households Most Vulnerable For rural agricultural households, the principal vulnerability is from weather-related shocks—shocks that are increasing as a result of climate change. In Morocco, a climate shock and agriculture module was fielded as part of the 2010 Household and Youth Survey (MHYS). Results indi- cate that 22 percent of all households in Morocco reported having expe- rienced a major weather shock, such as drought, flood, pest infestation, or crop and livestock diseases, in the previous five years. The only type of shock reported more frequently than weather was an unexpected increase in prices of food or other essential commodities consumed (72 percent of all households experienced this shock). Weather shocks were more com- mon than job-, business-, health-, and violence-related shocks. More- over, 77 percent of households who suffered this type of shock reported that they had not yet recovered from its negative consequences. Moreover, the consequences of these types of shocks are severe among agricultural households. In Morocco, 28 percent of households had at least one member engaged in agriculture or agriculture-related activities, of which 30 percent reported having had a serious or very serious finan- cial loss due to climate-related factors. The five most commonly reported climate-related shocks were • Reduction of agricultural yield due to inadequate rainfall (periodic and recurrent water scarcity due to droughts) (reported by 62 percent of households); 92 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa • Reduction of job opportunities in the agricultural sector (44 percent of households); • Reduction of agricultural yields because of too much water (too much rain or flooding) (38 percent of households); • Reduction of agricultural yields because of changing and unpredict- able climate and temperatures (too hot, too cold, too rainy, too dry) (35 percent of households); and • Reduction in livestock due to less grazing land because of droughts and floods (32 percent of households). For these households, climate change brings frequent and significant shocks that can have large impacts. These impacts create new needs to which SSNs have to adapt (Heltberg, Siegel, and Jorgensen 2009, 2010). SSNs Crucial to Climate Change Adaptation The Middle East and North Africa is one of the most vulnerable regions in the world to climate change, and traditional SSNs can be adapted to provide a broader response. Those countries with increasing urbanization in low-lying coastal areas and river deltas are at higher risk of weather- related events (Verner and Biroscak 2010). The recent Intergovernmen- tal Panel on Climate Change report (IPCC 2012) forecasts increasing climate and weather variability as well as more frequent and severe natu- ral hazards. These phenomena will have an intricate and negative effect on health as well as on food and water security. Thus, poverty and vulner- ability might increase. These forecasts imply an increasing challenge for SSNs. Countries in Sub-Saharan Africa are pioneers in this respect, having adopted an ap- proach that integrates SSNs with climate change adaptation and disaster risk management schemes (Davies, Oswald, and Mitchell 2009). These programs aim to increase resilience of vulnerable households and com- munities by strengthening and protecting livelihoods and by building as- sets that are useful for communities: for example, public works projects geared at improving water resource management and cash transfers con- ditional on participation in resilience-building activities. Such projects help build human capital while promoting sustainable development and helping to mitigate climate-related risk. It is important for these pro- grams to be flexible, responsive, and easily scalable to efficiently respond to changing conditions (Heltberg, Siegel, and Jorgensen 2010). There are new easily accessible technologies such as geographic information sys- tems, spatial data infrastructures, and information and communications technologies that could be used innovatively to achieve better results (Sie- gel, Gatsinzi, and Kettlewell 2011). Countries such as Ethiopia, Kenya, The Challenge: Poverty, Exclusion, and Vulnerability to Shocks 93 and Rwanda have recently started such initiatives and have been fairly successful at adopting climate-related approaches to SSNs (GEF 2007; Siegel, Gatsinzi, and Kettlewell 2011; World Bank 2010e). Social Exclusion Even apart from the effects of poverty and economic or weather-related shocks, social exclusion explains why some groups of people remain poorer than others, are less economically or politically involved, or ben- efit less from services. Social exclusion in the Middle East and North Africa is multifaceted and takes on many forms. Some of the excluded groups in the region are women, people with disabilities, and displaced people. Often the conditions of social exclusion are interconnected, and they most clearly play out in the labor market and the ability of socially excluded groups to access employment or health insurance benefits. Gender-Based Exclusion Although ability is evenly distributed between the genders, opportunities to exit poverty in the Middle East and North Africa are not. In particular, in the region during the past decade, while the average level of education has increased significantly among women, the opportunities available to them in terms of labor market participation, the percentage of seats held in parliament by women, and the ratio of women to men in nonagricul- tural wage employment have remained low (World Bank 2012c).11 Cultural barriers, weak support systems (such as public transportation and child care services), and wage discrimination are some of the main factors hindering female labor force participation in the region (UNDP 2005; World Bank 2004). A comparative household survey conducted by the World Bank in Amman, Cairo, and Sana’a shows that social norms and conservative attitudes play a significant role in preventing women from entering the labor force: less than 10 percent of women living in households with a member who opposes their work actually do partici- pate in the labor market. This is particularly of concern because more than 30 percent of young men (aged 15–44) oppose female participation in labor markets (Chamlou, Muzi, and Ahmed 2008a, 2008b). Furthermore, tax- and employment-related benefits to families are channeled through men. A woman can receive such benefits only if she is officially the head of the household (that is, if she is widowed or proves that her husband is old or incapacitated). In Jordan, women’s social secu- rity and pensions cannot be passed on to their husbands and children after their deaths. A woman cannot apply for a family allowance unless she can 94 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa prove that her husband is deceased or disabled or that she is the primary family breadwinner. A lower mandatory retirement age for women, while designed to protect them, also leads women to accumulate less in social benefits than their male counterparts (ESC 2010b). Gender-based regu- lations—including, in some countries, restrictions on the type and hours of work as well as requirements for the husband’s permission to work and travel—pose additional challenges. Disability-Based Exclusion As in other regions, countries in the Middle East and North Africa have not effectively addressed the difficulties that persons with disabilities con- sistently face. Although a precise estimate is elusive, the incidence of dis- ability in the Middle East and North Africa is between 1 and 12 percent of the population (Peters 2009). The disadvantages that disabled people encounter are clearer: high unemployment rates, inaccessible and unaffordable health care, low edu- cational attainment, inaccessible transportation and infrastructure, and stigmatization resulting in social exclusion and marginalization (WHO and World Bank 2011). For example, in Syria, only 20 percent of women with disabilities are literate, compared with 66 percent of the total female population and 40 percent of men with disabilities (UNICEF 2002). In addition, the physical infrastructure to aid mobility is lacking for people with disabilities. Very few public schools accommodate disabled students, and very few countries have publicly funded programs to help the dis- abled integrate into society or build their skills (UN-ESCWA 2007). Moreover, people with disabilities in the Middle East and North Africa have poor access to health and social provisioning as well as inadequate rehabilitation services (UN-ESCWA 2007). To confront these challenges, people with disabilities require a range of services, from relatively minor and inexpensive interventions to com- plex and costly ones. In 2006, a national study in Morocco estimated the expressed need for improved access to a range of services. People with disabilities in the study expressed a strong need for better health care and rehabilitation services (55.3 percent), medications (21.3 percent), techni- cal devices (17.5 percent), and financial help for basic needs (52.5 percent) (Kingdom of Morocco 2006). In combination with better provision of services, unconditional cash transfers for people with disabilities can help to address the additional barriers faced by this group in accessing health care and rehabilitation, transport, education, and working, among other things. Many countries provide income support through such transfers to these households, including poor households with a disabled member and The Challenge: Poverty, Exclusion, and Vulnerability to Shocks 95 directly to individuals with disabilities (for example, Bangladesh, Brazil, India, and South Africa [WHO and World Bank 2011]). Exclusion of Displaced People The Middle East and North Africa hosts almost half of all the registered externally displaced people in the world, according to the United Nations High Commissioner for Refugees (UNHCR) and the United Nations Relief and Works Agency for Palestine Refugees in the Near East. Among them are 7.5 million Palestinians and Iraqis displaced in Jordan and Syria (UNDP 2009). The UNHCR also estimates that the total number of internally displaced persons in the region is around 10 million. However, Middle Eastern and North African countries grant few citi- zenship rights to externally displaced people, thus excluding the long- term displaced from labor markets, political participation, public educa- tion, health care, and other social benefits in their host countries. The integration of the displaced varies substantially from country to country, and often by particular group. In Jordan, for example, Palestinians who have not been granted Jordanian citizenship (or who hold temporary two- year passports) are denied access to free basic public education, have to pay higher non-national university fees, and face more expensive health care services. Furthermore, access to formal sector professions is denied because working in organized occupations such as medicine, law, and engineering requires Jordanian citizenship to belong to the relevant pro- fessional association. Mobility is also constrained because foreigners’ driver’s licenses are more expensive and shorter in duration (Human Rights Watch 2010). In countries with ongoing conflicts or returning displaced people, the UNHCR and NGOs often take on the role of providing basic services to these groups. For example, international NGO programs within Syria and Jordan have provided cash and in-kind support to displaced Iraqi families, with a focus on vulnerable children and women, including voca- tional training for girls, community centers, and remedial education. Conclusions This chapter has used the most recent data in the Middle East and North Africa to identify structural factors and emerging risks faced by the poor and vulnerable—the targeted population for SSN programs. The data show that the opportunities associated with continued economic growth, poverty reduction, and a growing middle class in the region are damp- 96 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa ened by the effects of poverty, exclusion, high vulnerability to shocks, and rising economic volatility, as summarized here. Poverty Children are at particular risk for poverty, which is correlated with poor human development outcomes, such as malnutrition. Being born into poverty puts a child at a significant disadvantage relative to his or her peers. Poor children are at a higher risk for malnutrition, a risk aggra- vated by lack of health-related services. Due to this inequality of oppor- tunities, the paths of poor and rich children diverge early in life, which manifests itself among poor children in lower preprimary enrollment, higher dropout rates, and lower completion rates. Precarious employment and joblessness go hand in hand with poverty because the poor and low-skilled tend to have fewer labor market oppor- tunities and more unstable employment conditions, which perpetuates their poverty status. The scarcity of jobs and how they are allocated par- ticularly affects poor individuals. The available evidence suggests that individuals who are poor and unemployed are more likely to be in this condition because they cannot find a job, not because they are waiting to find a better job. Indeed, poor individuals are more likely to work in in- formal and low-paying jobs. They are also more likely to stay in low- quality jobs and less likely to keep good-quality jobs. The region also has important geographic disparities, with those born in lagging areas of even relatively rich countries lacking opportunities. There are spatial pockets of poverty in middle-income countries where extreme poverty is prevalent, access to basic services is lacking, and hu- man development indicators are considerably below the country’s aver- age. The disadvantageous circumstances of these areas are likely to un- dermine the potential of those born there, independent of their level of effort. Vulnerability to Shocks The extent of vulnerability to shocks is high, with a large share of the population in the Middle East and North Africa living just above the poverty line. In the absence of reliable and effective SSNs, regular idio- syncratic shocks (such as employment and health shocks) as well as in- creasingly frequent systemic, macro-level crises can plunge many into persistent poverty that can have irreversible effects on human capital be- cause of ineffective coping strategies. New risks associated with climate change also pose new challenges. The Challenge: Poverty, Exclusion, and Vulnerability to Shocks 97 Social Exclusion The social exclusion of some groups in the region—particularly women, people with disabilities, and displaced people—explains why these groups remain poorer than others, are less economically or politically involved, or benefit less from services. Cultural barriers, weak support systems, and wage discrimination are some of the main factors hindering female labor force participation in the Middle East and North Africa. Exclusion of migrants occurs through a lack of legal and political rights; a lack of secu- rity; and limited access to services, housing, and employment in the re- ceiving country. Countries in the region face challenges in effectively addressing the difficulties that persons with disabilities consistently face, including high unemployment rates, inaccessible and unaffordable health care, low educational attainment, inaccessible transportation and infra- structure, and stigmatization resulting in social exclusion and marginal- ization. To promote more equitable access to services, SSN design should address these groups’ particular needs and ensure their active participa- tion in interventions. Finally, Why? The high prevalence of lost opportunities for poor and vulnerable house- holds indicates that SSNs in the Middle East and North Africa are falling short of protecting the poor from deprivation, promoting human capital formation among the poor, and ensuring them against long-term losses brought about by short-duration shocks. But why is this so? The next chapter examines in detail the performance of SSN programs in the re- gion, benchmarking them against SSN performance in other regions and countries. 98 ANNEX 2A Demographic Statistics and Poverty Incidence in the Middle East and North Africa, Selected Countries, c. 2006–10 Egypt, Arab Rep. 2009 Iraq 2007 Yemen, Rep. 2006 Jordan 2010 Morocco 2010 Syrian Arab Rep. 2006 Poverty Poverty Poverty Poverty Q1 Q1 % incidence % incidence % incidence % incidence % incidence % incidence population (%) population (%) population (%) population (%) population (%) population (%) Urban 48 12 68 16 26 21 83 14 53  6 56 37 Rural 53 30 33 39 74 40 17 17 47 33 44  4 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa Elderly (>65)  5 14 3 17 3 30 5 7 5 13 7 24 Infants (0–1)  2 30 3 37 3 27 2 16 2 31 2 19 Children under 5 11 29 15 28 15 30 11 17 9 26 10 20 Children (0–14) 33 29 40 27 46 36 34 20 28 25 33 20 Youth (15–29) 28 20 30 28 30 36 30 11 31 16 30  8 Members of female-headed  households 12 20 9 20 5 29 9 11 — — 8 20 Members of male-headed households 88 22 91 23 95 35 91 15 — — 92 18 People with disabilities  1 38 3 24 11 35 2.4 28 — — — — Members of households whose head is  illiterate 31 31 20 32 39 43 8 26 — — — — Total 100 22 100 23 100 36 100 14 100 20 100 20 DHS 2008 MICS 2006 MICS 2006 DHS 2007 DHS 2004 MICS 2006 ANC by trained medical staff 74 54 84 99 97 33 99 97 68 40 84 59 Birth delivery by trained medical staff 79 55 93 99 98 17 99 98 63 30 93 78 Birth delivery in a health facility 72 45 — 100 99 — 100 99 61 28 — — Sources: Authors’ calculations based on Egypt HIES 2009, Egypt DHS 2008; Iraq HSES 2007, Iraq MICS 2006; Jordan LMPS 2010, Jordan DHS 2007; Morocco MHYS 2010, Morocco DHS 2004; Republic of Yemen HBS 2006, Republic of Yemen MICS 2006; Syria HIES 2006, Syria MICS 2006. Note: ANC = antenatal care; DHS = Demographic and Health Survey; MICS = Multiple Indicator Cluster Survey (UNICEF); Q = wealth quintile (1 = lowest, 5 = highest); — = not available. The Challenge: Poverty, Exclusion, and Vulnerability to Shocks 99 Notes   1. Weakly relative poverty lines assume that a rise in the overall living standards in a country increases the minimum consumption level needed to not be deemed “poor.” This concept differs from the strongly relative poverty lines in that, with the former, poverty rates fall in the presence of distribution- neutral growth. The estimates of weakly relative poverty presented in the report are anchored to private consumption from the national accounts (Chen and Ravallion 2012).   2. The PovcalNet website also included aggregate poverty numbers for the Middle East and North Africa region for 2008 (15 percent at US$2/day at 2005 PPP). However, those numbers are based on data that cover less than 50 percent of the population, creating uncertainty about the estimated pov- erty rate at the regional level for 2008.   3. Other groups that are at high risk of poverty, such as the disabled, are dis- cussed later in the chapter. A third group with high risk of poverty relates to households headed by illiterate individuals, whose profile, however, tends to overlap with the rural households and households with child poverty.   4. In countries where malnutrition extends into the middle and higher quintiles, international experience suggests that the problem is not just lack of income but also lack of knowledge or practice. In these situations, SSNs can be a helpful delivery mechanism, but a transfer per se might not be the main tool; that is, in cases where a targeted (conditional or unconditional) cash transfer or a workfare program is going to be implemented, an associated component can create incentives to change behaviors. This is now being done in Dji- bouti and has attracted a high degree of buy-in from the government and donors.   5. The Multiple Indicator Cluster Surveys (MICS) is an initiative conducted by the United Nations Children’s Fund (UNICEF) to assist countries in collect- ing and analyzing data to fill data gaps for monitoring the situation of chil- dren and women. For information, see http://www.childinfo.org/mics.html.   6. Although unemployment is a serious problem in the region for both sexes, especially among first-time job seekers, it is more acute among women. The average female worker in Jordan is likely to have 12.3 years of education, compared with 9.3 years for a male counterpart holding the same job (ILO 2010).   7. Using youth as an illustration also ensures that the household income quintile is less likely to be driven by their labor market status than if the whole adult population had been taken into account. Because the time span is only one year, even relatively small differences are significant—although the crisis year of 2008–09 may have increased the dynamism of the labor market and may not be a representative year.   8. Data from Egypt Household Income, Expenditure, and Consumption Sur- vey (2009).   9. For more details on the effects of conflicts on poverty, see UNDP (2009). 10. Countries included in the research were Bangladesh, Cambodia, the Central African Republic, Kazakhstan, Kenya, Mongolia, Senegal, and Thailand. 11. 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CHAPTER 3 The Current State of Social Safety Nets in the Middle East and North Africa Introduction To perform an assessment of the multiple challenges concerning social safety nets (SSNs) in the Middle East and North Africa today, this chap- ter will use household survey data and administrative data from a variety of sources to answer two main questions: 1. How much does the region spend on SSNs, both overall and disag- gregated by program type? 2. How well do the region’s SSNs perform in terms of coverage, target- ing, generosity, and impact on poverty and inequality? The average Middle Eastern and North African country spends about 6 percent of gross domestic product (GDP) (or more than 85 percent of total SSN resources) on nontargeted food and energy subsidies. Most of the region’s countries provide food subsidies, fuel price subsidies, or both. In addition, some countries, such as Iraq and the Arab Republic of Egypt, also provide food for the poor through ration cards. Although subsidy programs are usually popular and are based on good intentions to guarantee access to basic goods for everyone, such programs are expensive for governments to maintain. Thus, they capture substan- tial financial resources that could be spent on more efficient and effective SSN programs. In addition, subsidy budgets fluctuate with the world market price of the subsidized goods, which undermines a government’s ability to predict expenditures. Besides imposing a sizable and unpredict- able fiscal burden, subsidies suffer from high levels of leakage to the non- poor and may even be regressive if the rich consume more of the subsi- dized goods than the poor do, as is the case with most types of fuel. Subsidies can also distort consumption patterns when people overuse subsidized products, and they can have adverse effects on producers’ 105 106 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa ­ ncentives. Finally, subsidies are vulnerable to fraud because intermediar- i ies have an incentive to sell subsidized goods at market prices. Price subsidies aside, SSNs in the Middle East and North Africa are very small (with all but one country covering less than 30 percent of the bottom wealth quintile) and highly fragmented. Countries in the region adopt one of two approaches to SSNs: (a) relying primarily on subsidies or ration programs, as Iraq and the Republic of Yemen do; or (b) offering a multitude of small and fragmented programs that serve similar objec- tives but are implemented by different agencies, as in Jordan and M ­ orocco (where 12 programs all aim at increasing school enrollment). Aside from the Public Distribution System food ration card, Iraq’s only other pro- gram is the Social Safety Net (also known as the Social Protection Net- work), which covers 0.3 percent of the population and only 0.09 percent of the bottom quintile. In Jordan, both the National Aid Fund (NAF) and the Ministry of Social Development provide emergency assistance, but there is a lack of coordination between the two agencies. Low coverage and high fragmentation make SSNs unreliable, limiting their ability to protect people from destitution or to prevent short-term shocks from having adverse long-term consequences. Moreover, the Middle East and North Africa region lags behind other regions in the efficient use of SSN resources, with the average program in the region distributing only 23 percent of its benefits to the bottom quin- tile, versus an average of 59 percent in the comparator sample of programs in Latin America and the Caribbean and in Eastern Europe and Central Asia. The disparity stems from (a) overreliance on subsidies and (b) low coverage, fragmentation, and ineffective targeting of nonsubsidy SSNs. As mentioned above, subsidies and ration cards tend to be universal, so their use is not explicitly restricted to the poor. However, other SSN programs in the region, specifically cash transfer programs, suffer from poor targeting. Many countries target cash transfers categorically—to single mothers, widows, orphans, the unemployed, the elderly, and the disabled—irrespective of poverty level. Even though geographic target- ing can be highly effective in principle, in the Middle East and North Africa it has been applied without the required updated poverty maps. In Egypt, Tunisia, and the Republic of Yemen, all cash transfer programs target specific categories of the population in certain geographic regions. For example, Tunisia’s National Program of Assistance to Needy Fami- lies (Programme National d’Aide aux Familles Nécessiteuses; PNAFN) cash transfer program targets the country’s Center-West and North-West regions based on outdated poverty estimates. Eligibility for other pro- grams in the region is based on the discretion of the relevant agencies. Such targeting approaches lead to considerable leakage of program re- The Current State of Social Safety Nets in the Middle East and North Africa 107 sources to the nonpoor and to undercoverage of the poor who do not fit the predefined categories or do not live in targeted regions. Although categorical or geographic targeting can be effective in the presence of concentrated poverty, such targeting makes it difficult for governments to scale up SSNs in times of crisis. Only a handful of pro- grams in the region have begun implementing individual assessment tar- geting, such as the income (or means) test used in Jordan’s NAF. West Bank and Gaza was the first country in the region to target its Cash Transfer Program using proxy means testing (PMT), which relies on ob- servable household characteristics rather than hard-to-verify income to assess welfare. Lebanon’s new National Poverty Targeting Program and the Republic of Yemen’s Social Welfare Fund (SWF) now also use PMT to assess eligibility. To formulate policies that can address the challenges outlined above, it is vital to assess the current performance of key SSN programs in the Middle East and North Africa. This chapter analyzes the expenditure levels, coverage rates, targeting performance, and poverty and inequality impact of existing SSN programs in selected countries. The selection of countries was driven by the availability of the necessary data, as described in the next section. The remaining sections present the results of this assessment. Data and Methodology The most important prerequisite (and the most frequently cited con- straint) for the analysis of SSN performance is high-quality data. This study uses two sources of data to assess the effectiveness of current SSNs: household survey data and a new compilation of administrative data on existing SSN programs in the Middle East and North Africa. Household Survey Data The first type of data, existing household surveys, are used mainly to as- sess coverage, targeting, generosity, and overall impact on poverty and inequality. Availability of and access to microdata are essential to assess the performance and incidence of the different fiscal efforts invested in subsidies and SSNs. Microdata allow for precise identification of the ­ beneficiaries of different SSN programs, as well as for estimation of the impact that SSN programs have on poverty and inequality. For an SSN performance assessment, household surveys had to in- clude questions about respondents’ participation in SSN programs and 108 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa TABLE 3.1 Household Surveys Used in the Middle East and North Africa SSN Study Economy Survey Year Djibouti Djibouti Household Survey (Enquete Djiboutienne Auprès des Ménages; 2002 EDAM-IS2) Egypt, Arab Rep. Household Income, Expenditure, and Consumption Survey (HIECS) 2009 Iraq Iraq Household Socio-Economic Survey (IHSES) 2007 Jordan Household Income and Expenditure Survey (HIES) 2010 Morocco Morocco Household and Youth Survey (MHYS) 2010 West Bank and Gaza Expenditure and Consumption Survey (ECS) 2009 Yemen, Rep. Household Budget Survey (HBS) 2005/06 the SSN transfer income received by their households. Such surveys were available for seven of the region’s economies: Djibouti, Egypt, Iraq, Jordan, Morocco, West Bank and Gaza, and the Republic of Yemen. ­ Table 3.1 lists the household surveys that served as the core data sources for this report.1 Administrative Data: MENA SSN Inventory Using household survey data to analyze the performance of SSN pro- grams has limitations because household surveys cannot capture the full range of transfers provided through public spending. In addition, de- pending on the year of the latest available household survey, an analysis based entirely on this source might give a dated perspective on SSNs. Therefore, a new inventory of SSNs in the Middle East and North Africa was compiled to complement the household survey analysis with admin- istrative data on SSN spending and scope. This study spearheaded the creation of the Middle East and North Africa (MENA) SSN Inventory through a major data collection effort involving a variety of counterparts and instruments. A standard question- naire template was formulated to obtain detailed information on SSN programs, such as their objectives, targeted population, implementing agencies, eligibility criteria, and type of instrument used. Moreover, the questionnaire collected the number of beneficiaries and budgetary costs for the latest available years. The template was completed by triangulat- ing a variety of sources, starting with desk reviews of relevant documents (such as Poverty Assessments, Public Expenditure Reviews, and Social Safety Net Assessments) and adding information from the websites of ministries of social affairs and national statistical offices. Following data collection, representatives of relevant entities were interviewed, using The Current State of Social Safety Nets in the Middle East and North Africa 109 ­ ntry points in existing policy dialogue in Egypt, Jordan, and Tunisia, as e well as by canvassing participants of the 2012 SSN consultation work- shops held in Lebanon, Oman, and Tunisia. Data collection for the in- ventory required extensive consultations with key informants who had intimate knowledge of the SSN programs. The collected MENA SSN Inventory contains a wealth of administrative data on existing SSNs in the Middle East and North Africa, and it is used extensively throughout this chapter (for a list of programs in the inventory, see appendix C. Methodology Because the performance of SSNs depends in part on the resources at their disposal, the study first turns to the assessment of SSN expenditure levels in the Middle East and North Africa. Overall SSN expenditure, measured as a percentage of GDP, is benchmarked against other country comparators and then disaggregated by program type, such as universal price subsidies and targeted cash transfer programs, to reveal the relative extent of resource use efficiency. This comparative analysis relies mostly on administrative data. This study analyzes SSN programs through four performance indicators: • Coverage rate, defined as the portion of the population in a given quin- tile that receives the transfer • Targeting accuracy, measured by the incidence of beneficiaries (proportion of program beneficiaries belonging to each quintile) and incidence of benefits (proportion of total transfers received by beneficiaries in each quintile) • Generosity, measured as the average magnitude of the transfer as a share of the welfare of a given quintile of beneficiaries • Poverty and inequality impact, measured as the difference between the actual poverty (inequality) indicator and a simulated poverty (inequal- ity) indicator in the absence of the SSN program. As much as possible, the methodology for the SSN performance assess- ment was standardized across countries to improve comparability.2 For instance, the study uses the bottom quintile of welfare (as measured by consumption, expenditure, or asset-based wealth index) in the assessment of coverage, targeting, and generosity instead of relying on national pov- erty lines. For more information about methodology in this study, see annex 3B. 110 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa Spending on SSNs The comparison of SSN expenditures between those of the Middle East and North Africa and those of the countries of other regions depends, in large part, on the definition of SSNs—in particular, whether SSNs in- clude food and fuel subsidies. To benchmark the spending in 11 of the region’s economies, a sample of other developing countries was con- structed from an International Monetary Fund data set of spending on subsidies and transfer programs. The resulting average expenditure on SSNs (including food and fuel subsidies) for 35 comparator developing countries is 2.1 percent of GDP, or less than a third of the average 6.4 percent of GDP spent by Middle East and North African countries (in- cluding subsidies and ration cards).3 Subsidy spending in the region is much higher in both absolute and relative terms than it is elsewhere. The average Middle Eastern and North African country spends 5.7 percent of GDP on food and fuel sub- sidies, as opposed to 1.3 percent of GDP in the average benchmark coun- try. Moreover, subsidy spending as a share of total SSN spending is much higher in the Middle East and North Africa (at 84 percent) than in the comparator country sample (55 percent). Excluding the subsidy category from SSNs reduces the region’s spending drastically, making it almost 10 percent lower than the average spending of benchmark developing coun- tries. Indeed, without subsidies, the region’s countries spend, on average, 0.74 percent of GDP on SSNs, while benchmark countries spend, on average, 0.8 percent of GDP, as shown in figure 3.1. Within the Middle East and North Africa, there is substantial hetero- geneity in overall SSN spending, with expenditures ranging from 0.6 per- cent of GDP in Lebanon to more than 14 percent of GDP in the Repub- lic of Yemen. The wide disparity in spending is driven almost entirely by differences in expenditures on subsidies, as nonsubsidy spending has a very narrow range: from 0.04 percent of GDP in Kuwait to 1.9 percent of GDP in Iraq. On the other hand, subsidy spending ranges widely, from 0.4 percent of GDP in Lebanon to 13.7 percent of GDP in the Republic of Yemen. One would expect that, as a country develops, it would spend more on protecting its poor and vulnerable populations. Figure 3.2 looks at SSN spending with and without subsidies in the Middle East and North Africa relative to the constructed sample of comparator countries, controlling for the countries’ level of GDP per capita. The conclusions are striking: if one includes subsidies in SSN expenditures, most Middle Eastern and North African countries (Egypt, Iraq, Jordan, Morocco, Tunisia, and the Republic of Yemen) spend much more on SSNs than predicted by their The Current State of Social Safety Nets in the Middle East and North Africa 111 FIGURE 3.1 SSN Spending, with and without Subsidies, in the Middle East and North Africa Compared with Other Developing Countries, c. 2008–11 15 12 9 % of GDP 6 3 0 ing sam a 20 1 Dji 2008 Tu 0/11 Jor 011 1 yp uwa 9 Re 0 09 i A 009 Re 0 08 lop or Afric ntr e of hra 201 roc 201 /0 rab 01 1 20 me a 20 20 08 ia 2 t, A it 2 2 cou pl 1 ies Ba outi on Mo dan p. Sa raq p. de pa & N. 20 i nis rab an I in co b Co East n, Leb K ve rat ud d. Ye Mi m Eg Food and fuel subsidies Nonsubsidy SSNs Sources: Authors’ calculations based on data from World Bank 2010c, 2011a, 2011b, 2012b; Government of Jordan 2011b; World Bank, FAO, and IFAD 2009; IMF Fiscal Affairs Department database; IMF staff reports; various publications. Note: SSN = social safety net. level of development. However, if subsidies are taken out, most under- spend on SSNs compared with their development peers. The spending of all but two of the region’s countries (Iraq and Jordan) is at or below the trend line. In Egypt, Lebanon, and Tunisia, the level of SSN spending net of subsidies is far below that of their respective development peers. Subsidies: Fuel over Food On average, Middle Eastern and North African countries spend much more on fuel subsidies (4.5 percent of GDP) than on food subsidies (1.1 percent of GDP). The predominance of fuel subsidies is evident in figure 3.3: fuel subsidies make up, on average, almost three-fourths (73 percent) of total subsidy spending in the region. Still, there is much heterogeneity in terms of reliance on fuel versus food subsidy spending. The Republic of Yemen represents one end of the spectrum, with 13.6 percent of GDP spent on fuel subsidies and only 0.1 percent of GDP spent on food subsidies. Two countries (Iraq and Lebanon) spend more on food subsidies than on fuel subsidies, with Iraq, whose Public 112 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa FIGURE 3.2 Spending on SSNs, with and without Subsidies, in the Middle East and North Africa, Selected Countries, Compared with Other Developing Countries a. With subsidies b. Without subsidies 15 5 Spending on SSNs without subsidies (% of GDP) YEM Spending on SSNs with subsidies (% of GDP) BLZ 4 ECU MEX 10 PHL IRQ 3 EGY IDN IND MRT MAR TKM 2 IRQ 5 IND JOR BLZ TUN MEX JOR UKR PER BGD PAK PHL BGD UKR 1 SEN DJI NGA PER DJI HNDLKA MAR ECU MRT SEN IDN CHN HND LKA COGGTM CHN VCT CRI ARGGAB COMYEMNIC CPV TUN CRI ARG TGO COM NICCPV SLV SUR AZE LBNMUS TGO PAKCOG GTM SUR SLV JAMAZE LBN VCT 0 BEN MNG JAM 0 NGA MNG BEN EGY TKM MUS GAB 0 5,000 10,000 15,000 0 5,000 10,000 15,000 GDP per capita, PPP (constant 2005 US$) GDP per capita, PPP (constant 2005 US$) Sources: Authors’ calculations based on data for Middle East and North Africa from the IMF Fiscal Affairs Department database and World Bank publications. Data for comparator countries from the IMF Fiscal Affairs Department database. GDP data from World Development Indicators (World Bank various years). Note: Bahrain, Kuwait, and Saudi Arabia were excluded from this graph, given their high level of GDP per capita and the absence of their develop- ment peers in the data set. PPP = purchasing power parity; SSN = social safety net. FIGURE 3.3 Expenditures on Food and Fuel Subsidies in the Middle East and North Africa, Selected Countries, c. 2008–11 14 12 10 8 % of GDP 6 4 2 0 /11 /09 10 08 11 1 1 09 9 0 08 01 01 00 01 20 20 20 20 20 10 08 ia 2 n2 q2 a2 ait on uti p. p. 20 20 i Ira da nis rab Re Re w an bo in co Jor Ku Tu rab n, Leb iA Dji hra roc me ud t, A Ba Mo Ye Sa yp Eg Fuel subsidies Food subsidies and ration cards Sources: Authors’ calculations based on data from World Bank 2010c, 2011a, 2011b, 2012b; Government of Jordan 2011b; World Bank, FAO, and IFAD 2009; IMF Fiscal Affairs Department database; IMF staff reports; various publications. The Current State of Social Safety Nets in the Middle East and North Africa 113 FIGURE 3.4 Comparison of Subsidy and Nonsubsidy SSN Expenditures for the Poor in the Middle East and North Africa, Selected Countries, c. 2008–11 For every US$ 1 US$23.61 US$96.44 US$158.36 US$193.86 a poor person was spent on was spent on was spent on was spent on got in subsidies in subsidies in subsidies in ration cards in nonsubsidy SSN Jordan Iraq Yemen, Rep. Egypt, Arab Rep. programs Sources: Authors’ calculations based on latest household surveys, subsidy expenditure data, and World Bank 2009, 2010a, 2011b; Government of Jordan 2011b; IMF Fiscal Affairs Department database. Note: SSN = social safety net. Distribution System ration cards reach virtually all Iraqis, spending the most on food subsidies (5.5 percent of GDP). Although the intention to provide affordable fuel to citizens is laud- able, this objective is achieved at a high social cost. The substantial finan- cial resources expended on fuel subsidies could be spent on more efficient and effective SSN programs or on other priority sectors, such as health and education. Currently, for every US$1 a poor person receives in non- subsidy SSN programs in Jordan, Iraq, the Republic of Yemen, and Egypt, around US$24, US$96, US$158, and US$194, respectively, are spent on subsidies or ration cards (see figure 3.4).4 For example, our anal- ysis of household survey data reveals that poor Egyptians received about LE 430 million (Egyptian pounds) in 2009; at the same time, the com- bined expenditures on untargeted fuel and food subsidies and ration cards were close to LE 83.4 billion. Indeed, as demonstrated by Fattouh and El-Katiri (2012), the 2008 spending on fuel subsidies in Egypt was equal to all health and education expenditures combined, while in the Syrian Arab Republic and the Republic of Yemen, fuel subsidies absorbed more than 1.5 times the combined health and education expenditures. Nonsubsidy SSNs: Small, Fragmented Programs Subsidies aside, SSNs in the Middle East and North Africa are frag- mented among many small programs. Figure 3.5 presents the data on SSNs from the MENA SSN Inventory of administrative data (by pro- gram type). 114 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa FIGURE 3.5 Nonsubsidy SSN Program Mix by Type, Middle East and North Africa, c. 2008–11 20 18 16 14 No. of SSN programs 12 10 8 6 4 2 0 Bahrain Egypt, Iraq Jordan Kuwait Lebanon Morocco Saudi Syrian Tunisia West Yemen, Arab Rep. Arabia Arab Bank Rep. Republic and Gaza Cash transfers Fee waivers, education, and health bene ts Food and other in-kind transfers Housing Micro-credit and income-generating activities Training Workfare programs Others Source: Authors’ calculations based on MENA SSN Inventory. For specific programs covered, see appendix C. The programs available in each country vary greatly in number. Some countries, such as Iraq and Syria, have only a few SSN programs. Others, such as Bahrain, Jordan, Kuwait, and Morocco, have more than 10 SSN programs. Program fragmentation is especially evident in Jordan and Morocco, where many programs attempt to achieve the same objective (as previously noted concerning Morocco’s multitude of education pro- grams). This snapshot reveals that Bahrain, Egypt, Kuwait, Jordan, Leba- non, and Morocco have more than five programs in one category, which implies intense competition for limited fiscal resources and a high prob- ability of overlap. In terms of spending, most Middle Eastern and North African coun- tries concentrate on cash transfer programs (see table 3A.1). However, in Lebanon, the bulk of spending goes toward fee waivers for education and hospitals. In the Republic of Yemen, half of the nonsubsidy SSN expen- diture is on workfare, while in Morocco, noncash programs such as com- munity infrastructure projects take precedence. Finally, in Jordan, train- ing and micro-credit programs consume a substantial share of the SSN budget. The next section assesses the performance of some of these pro- grams, focusing especially on principal cash transfer programs, described in box 3.1. Because subsidies constitute such a significant share of spend- ing on SSNs in the Middle East and North Africa, a later section evaluates the performance of subsidies as SSNs. The Current State of Social Safety Nets in the Middle East and North Africa 115 BOX 3.1 Principal Cash Transfer Programs in the Middle East and North Africa, Selected Countries Most of the principal cash transfer pro- the NAF Directorate within the Ministry grams in the region target specific popula- of Social Development. Households re- tions assumed more likely to be poor, such ceive around US$56–254 per month de- as orphans, widows, individuals with dis- pending on household size and the number abilities, and families of prisoners. This of handicapped people in the household. box describes the main features of these Besides regular cash assistance, the NAF programs. also provides free health insurance cover- age and emergency assistance. Egypt: Monthly Social Pension (formerly Sadat Pension) Morocco: Tayssir Program The program was legislated in 1980 and is Initially a pilot study implemented by the implemented by the Ministry of Insurance Ministry of Higher Education and Scien- and Social Affairs. Its objective is to help tific Research in 2008, this program was a families without able-bodied males. Benefi- conditional cash transfer targeting 6- to ciary households are paid about LE 145– 12-year-old students living in poor com- 205 per month depending on household munities. Its objective was to promote pri- size. mary school enrollment and to reduce Iraq: Social Safety Net (SSN) dropouts of poor primary school students. Founded in 2006, the SSN (also known as Each student received US$8–13 per month, the Social Protection Network, or SPN) is with higher amounts conditional on atten- implemented by the Social Welfare De- dance and higher grades. An impact evalu- partment. The program targets orphans, ation revealed that dropout rates were re- children of divorced women, the handi- duced, especially in higher grades (with capped, the unemployed, and families of stronger impacts on dropouts for girls), and prisoners. Households receive US$110– provided some evidence of improvement in 170 per month depending on household math achievement for boys. size. Tunisia: National Program of Assistance Jordan: The National Aid Fund (NAF) to Needy Families (Programme National The NAF was established in 1986 as an ad- d’Aide aux Familles Nécessiteuses; PNAFN) ministratively and financially independent Founded in 1986, the PNAFN is imple- organization to protect and support needy mented by the Ministry of Social Affairs. individuals and families by extending re- The program covers about 7.2 percent of curring or emergency financial aid as well the population and mainly targets the el- as vocational training and free health insur- derly poor, poor widows, and handicapped ance. The cash transfer is implemented by individuals of the poor regions in the (box continued on next page) 116 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa BOX 3.1  Continued Center-West and North-West. The aver- board is chaired by the Minister of Social age monthly transfer is about US$45 per Affairs and Labor. The fund provides both month. A child allowance supplement of temporary and permanent SSNs. Since US$6 per school-age child is also provided, 2007, the SWF has used PMT to assess eli- up to a limit of three children. gibility for its permanent cash transfer pro- gram. The SWF covers more than 1 mil- Republic of Yemen: Social Welfare Fund lion households, with transfers of up to (SWF) US$4.66 per month for individuals and up The SWF was established in 1996 as an in- to US$9.32 per month for families. dependent government institution whose Performance of SSNs Excluding Subsidies This section assesses the performance of the Middle East and North ­ Africa’s principal SSN programs other than subsidies and ration cards. In particular, these programs are evaluated on • Coverage rates: the extent to which they reach the neediest beneficiaries; • Targeting accuracy: the extent to which program resources are distrib- uted efficiently; and • Benefit generosity: the extent to which these transfers provide adequate income support. All of these features combine into the most important indicators of pov- erty and inequality impact—observable effects on reducing poverty and decreasing inequality. Coverage Rates The MENA SSN Inventory collected information on the number of beneficiaries in SSN programs. Figure 3.6 aggregates these data and pre­ ­ sents them as shares of the selected countries’ total populations. It is im- portant to note that the Inventory does not capture the overlap between different programs (the same person in the Republic of Yemen could re- ceive assistance from the Social Welfare Fund and the Social Fund for Development, for example, and be counted twice in the figure). The estimates presented in the figure should thus be treated as the upper ­ bounds on nationwide coverage of SSNs. The inventory shows that the The Current State of Social Safety Nets in the Middle East and North Africa 117 FIGURE 3.6 Nationwide Coverage of Nonsubsidy SSNs, by Program Type, in the Middle East and North Africa, c. 2008–11 100 SNN bene ciaries, % of population 80 60 40 20 0 Bahrain Egypt, Iraq Jordan Kuwait Lebanon Morocco Saudi Syrian Tunisia West Yemen, Arab Rep. Arabia Arab Bank Rep. Republic and Gaza Cash transfers Fee waivers, education, and health bene ts Food and other in-kind transfers Housing Micro-credit and income-generating activities Training Workfare programs Others Does not specify Source: MENA SSN Inventory. For a complete list of programs, see appendix C. Note: SSN = social safety net. Each program’s coverage is added independently of others; this calculation assumes no overlap between SSN programs and thus represents the upper-bound estimate of SSN coverage. region’s countries vary widely in their SSN coverage—demonstrating that in some countries (such as Egypt, Iraq, Kuwait, and Syria), nation- wide coverage is quite low, while coverage is the Republic of Yemen is extensive. Coverage by cash transfers is highest in Bahrain and the Republic of Y ­ emen, and in Lebanon, hospital fee waivers reach a large share of the population. There are large gaps in SSNs’ coverage of the poor and vulnerable throughout the Middle East and North Africa. Figure 3.7 depicts the coverage rates of SSN programs for the poorest quintile in selected coun- tries. Overall, two out of three people (more than 70 percent) in the poor- est quintile receive no income support transfers. The only exception is West Bank and Gaza, where government, donor, and NGO programs cover more than half of the poorest quintile. How do the observed coverage rates of the region’s SSNs compare with those of other regions? To answer this question, the 2011 Atlas of Social Protection: Indicators of Resilience and Equity (ASPIRE) (World Bank 2012a) is used to compare the population-weighted regional and world averages of SSN coverage for the bottom quintile. The right side of figure 3.7 reveals that the Middle East and North Africa leaves a much larger 118 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa FIGURE 3.7 Coverage by Nonsubsidy SSN Programs in the Middle East and North Africa Compared with World and Other Regional Averages, c. 2002–10 Percentage covered in bottom quintile 60 50 40 30 20 10 0 me 09 d Jor 005 Mo 2010 rab 010 09 02 ica L. A ur. & aci c the Asia an Dji 007 rld Ye a 20 k an 20 20 be Afr Wo 2 t, A co 2 q2 r. & ent. rib &P z n p. n p. uti N. Ga st Ba da Ira Re Re Ca oc bo C st & sia r n, We E. A Ea E d. yp Mi me Eg Sources: Middle East and North Africa: Authors’ calculations based on data from national household sur- veys; data for other regions from World Bank 2012a. Note: SSN = social safety net. Regional averages are population-weighted. share of its bottom quintile uncovered by SSN programs than all other regions. Whereas only 16 percent of people in the bottom quintile in the Middle East and North Africa receive any SSN transfers, the correspond- ing share is higher than 50 percent in Europe and Central Asia as well as Latin America and the Caribbean. In the Middle East and North Africa, coverage of the bottom quintile by SSNs is less than half the world aver- age and less than a third of the average in Europe and Central Asia and Latin America and the Caribbean. Six out of seven Middle Eastern and North African countries also un- derperform their development peers in terms of undercoverage of the bottom quintile. We use country-specific data from ASPIRE to analyze the relationship between undercoverage rates and economic develop- ment, as measured by GDP per capita. The results of this analysis can be found in figure 3A.1, panel a. The downward-sloping trend line shows a negative correlation between economic development and coverage of the bottom quintile by SSNs: as countries attain greater fiscal space, they can cover more of the poor and vulnerable, thus reducing undercoverage rates. However, throughout the Middle East and North Africa except in West Bank and Gaza, undercoverage rates are above the level predicted by the trend line, implying that, at least in principle, there can be suffi- The Current State of Social Safety Nets in the Middle East and North Africa 119 cient fiscal space to reduce undercoverage. Of course, in the Middle East and North Africa, the reality is that food and fuel subsidies are taking up most of this fiscal space (their performance is discussed in the next section). Virtually all SSN programs in the Middle East and North Africa fail to cover even 20 percent of the bottom quintile, while some programs cover a substantial proportion (up to 11–12 percent) of the top quintile. In Egypt, for example, the Monthly Social Pension (or Sadat Pension) pro- gram covers only 8 percent of the poorest quintile. In Jordan, the NAF reaches only 16.5 percent of the poorest quintile. And Djibouti’s programs and Iraq’s SSN are almost nonexistent in terms of coverage, reaching less than 2 percent of the poorest quintile. Indeed, the highest coverage of the poorest quintile (exceeding 50 percent) is again in West Bank and Gaza, where assistance is provided primarily by the United Nations (UN). Although low coverage of the poor is a key signal that SSN programs need expansion, substantial coverage of the rich indicates a high degree of inefficiency. In practice, high coverage rates for the poor are difficult to attain without some leakage. Nevertheless, at the very least, coverage rates should decrease progressively from the poorest to the richest quin- tiles. Specifically, coverage rates should have a negative slope across wealth quintiles. We test this hypothesis as shown in figure 3A.2: the Monthly Social Pension (or Sadat Pension) and Zakat in Egypt; the NAF and Zakat in Jordan; the SWF and the Social Security Fund in the Re- public of Yemen; Reintegration for the Demobilized in Djibouti; and assistance from all entities in West Bank and Gaza do portray a some- what negative gradient. Conversely, Iraq’s SSN program actually has a positive slope, as does the disability assistance in Djibouti for all but the richest quintile. Meanwhile, in Morocco, coverage rates for programs that promote school enrollment and literacy fluctuate across wealth quintiles. To benchmark the region’s program coverage rates, a household sur- vey analysis similar to that performed for Europe and Central Asia and Latin America and the Caribbean is used. Benchmarking the Middle East and North Africa’s program coverage rates of the bottom quintile reveals that they are 50 percent lower, on average, than in Europe and Central Asia or in Latin America and the Caribbean. It is important to note that coverage depends on program type because family allowances—such as that of Uruguay’s Asignación Familiar or Russia’s child allowance—achieve very high coverage because of their universal nature. Still, it is illustrative to observe that, in the Middle East and North Africa, only the UN as- sistance in West Bank and Gaza covers as much of the bottom quintile as other signature programs in Europe and Central Asia or Latin America and the Caribbean, with the region’s other programs trailing far behind, as shown in figure 3.8. 120 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa FIGURE 3.8 Coverage Rates of the Bottom Quintile by Specific Nonsubsidy SSN Programs Iraq SSN Djibouti Demobilization Djibouti Disability Croatia-Support Allow Morocco Literacy Serbia MOP Jordan Zakat Fund Uzbekistan SA for LI Hungary Aid Progs. Egypt, Arab Rep. Zakat Yemen, Rep. SSF Bulgaria GMI Estonia MT Bene ts Egypt, Arab Rep. Sadat Pension Morocco Educationa Lithuania Social Ben. Yemen, Rep. SWF West Bank and Gaza MOSA West Bank and Gaza Non-MOSA Ukraine XP program Azerbaijan TSA Jordan NAF El Salvador LRSA Poland SW bene ts Armenia FB Romania GMI Georgia TSA Kyrgyz Rep. UMB Panama Oportunidades Peru Programa Juntos Turkey CCT Kosovo SA Mexico Oportunidades Dominican Republic LRSA Albania NE West Bank and Gaza UN Macedonia SFA Brazil Bolsa Familia Russian Federation CA Turkey Green Card Ecuador Bono de DH Uruguay Asignación Familiar 0 20 40 60 80 % covered in bottom quintile Sources: Middle East and North Africa: Authors’ calculations based on data from national household surveys; data for other regions from the World Bank’s Europe and Central Asia Household Survey Database; the Or- ganisation for Economic C ­ o-operation and Development Social Expenditure Database (www.oecd.org/els/ social/expenditure); and the World Bank’s Latin America and the Caribbean SSN inventory (forthcoming). Note: CA = Child Allowance; CCT = conditional cash transfers; DH = human development (desarollo humano); GMI = Guaranteed Minimum Income; LRSA = Last Resort Social Assistance; MOP = Maternal Sup- port to Families (Materijalno obezbeđenje porodice); MOSA = Ministry of Social Affairs; MT = Means Tested; NAF = National Aid Fund; NE = Economic Assistance (Ndihma Ekonomike); SA = Social Assistance; SA for LI = Social Assistance for Low Income; SFA = Social Financial Assistance; SSF = Social Security Fund; SSN = social safety net; SWF = Social Welfare Fund; TSA = Targeted Social Assistance; UMB = United Monthly Benefit; UN = United Nations; XP = Extremely Poor. a. Excludes the “One Million Satchels” (Un Million de Cartables) school supplies program. The Current State of Social Safety Nets in the Middle East and North Africa 121 The evidence presented above is unambiguous: the coverage of non- subsidy SSNs in the Middle East and North Africa is very low, with the vast majority of the poor being left to fend for themselves in times of need. A dependable SSN is vital not only for protecting those who cannot work (such as the elderly and the disabled) from destitution, but also for preventing temporary income shocks from becoming permanent poverty traps because of inefficient coping strategies (for example, taking children out of school or selling productive assets). The coverage rate is one indi- cator that signals the effectiveness of SSNs in reaching those in need; clearly, the region’s countries have significant scope to improve the reach of their safety nets to the poor and vulnerable population. Targeting Accuracy Different targeting methods are applicable in different contexts. In the Middle East and North Africa, SSN programs overwhelmingly use cate- gorical and geographical targeting methods, which work well in environ- ments where poverty is concentrated but not where poverty is multifac- eted and spatially dispersed. In the latter case, methods that identify households or individuals based on their means or correlates of poverty (through PMT) are preferable. The MENA SSN Inventory has collected valuable information on tar- geting methods used by different SSN programs. Using these data, figure 3.9 vividly illustrates the predominance of categorical targeting in the region. Indeed, many countries (Bahrain, Egypt, Iraq, Kuwait, Saudi Ara- bia, and Syria) rely exclusively on categorical targeting. The second favor- ite targeting method is geographic, with Morocco and the Republic of Yemen relying heavily on SSN programs that target different regions. The use of individual assessment criteria (such as means tests or PMT) is much less common. A couple of programs in Jordan and Tunisia use in- come thresholds as eligibility cutoffs. PMT for targeting SSNs is an emerging trend, with programs in Lebanon, Morocco, West Bank and Gaza, and the Republic of Yemen starting to use it fairly recently. A few programs in Jordan and Morocco are self-targeted. Although in theory SSN programs are intended for the poor and vul- nerable, in the Middle East and North Africa, the wealthy tend to consti- tute a significant share of SSN beneficiaries. On average, only a quarter of nonsubsidy SSN beneficiaries in the region come from the poorest quintile, while about 15 percent come from the richest quintile, as shown on the left side of figure 3.10. In Egypt, Jordan, and West Bank and Gaza, only 1 in 10 SSN beneficiaries may come from the top quintile; this indi- cates some degree of targeting accuracy, but still fewer than half of all SSN beneficiaries in these countries are from the poorest quintile. 122 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa FIGURE 3.9 Nonsubsidy SSN Program Mix by Targeting Type, Middle East and North Africa, c. 2008–11 100 90 80 Share of SSN programs, % 70 60 50 40 30 20 10 0 p. p. co Ara abia ka a za in q n on lic it isi Re Re Ira da wa hra Ga roc ub an un Jor Ar rab n, Ku Leb ep Ba Mo nd T me di t, A bR u Ye Sa an yp st B Eg ian We Syr Categorical Geographical Means tested Self-targeted Proxy means tested Does not specify Source: Authors’ calculations based on MENA SSN Inventory. For a list of programs in the inventory, see appendix C. Note: SSN = social safety net. Since 2009, targeting performance in West Bank and Gaza has im- proved further, given the creation of the unified Cash Transfer Program (CTP) in 2010, which uses a PMT targeting mechanism and a unified payment scheme. Indeed, a recent targeting assessment of the CTP con- firmed that more than 80 percent of beneficiaries of this program are in the bottom 20 percent of the population. Thus, CTP is poised to become one of the most advanced cash assistance programs in the Middle East and North Africa and may serve as a model of best practices elsewhere in the region. In contrast, in Djibouti and Morocco, the richest quintile represents the same share of SSN beneficiaries as the poorest quintile, implying little targeting, if any. In the most extreme case of Iraq, the distribution of beneficiaries is skewed toward the rich, with the top quintile making up almost 30 percent of all SSN beneficiaries. A comparison with other re- gions, using ASPIRE, confirms the underperformance of the Middle East and North Africa’s SSNs in terms of beneficiary incidence: in all the other three regions in the comparison, the bottom quintile constitutes 30 per- cent or more of SSN beneficiaries, with Latin America and the Caribbean leading the world at 36 percent. There is a strong positive correlation between targeting accuracy and economic development (as shown in figure 3A.1, panel b), but there is The Current State of Social Safety Nets in the Middle East and North Africa 123 FIGURE 3.10 Beneficiary Incidence of Nonsubsidy SSNs in the Middle East and North Africa Compared with World and Other Regions, c. 2002–10 45 40 Distribution of SSN bene ciaries, % 35 30 25 20 15 10 5 0 ica the Asia an 0 09 09 05 10 02 L. A ur. & ci c 7 rld 01 00 be Afr 20 20 20 20 20 Wo n2 a nt. q2 rib &P za p. p. co uti N. da Ce Ca Ira Re Re Ga roc bo st & sia Jor rab n, Mo Dji nd E. A Ea me ka t, A r. & E d. Ye an Mi yp me st B Eg We Poorest quintile Richest quintile Sources: Middle East and North Africa: Authors’ calculations based on data from national household sur- veys; data for other regions and world from World Bank 2012a. Note: SSN = social safety net. All regional averages are population-weighted. great dispersion in the performance of Middle Eastern and North African economies relative to development peers. Egypt, Jordan, West Bank and Gaza, and the Republic of Yemen are above the trend line, which means that the targeting accuracy of their SSNs is higher than would be pre- dicted by their levels of GDP per capita. On the other end of the spec- trum, Djibouti, Iraq, and Morocco all find themselves below the trend line, so their SSNs’ targeting is worse than that of their development peers. In a well-targeted, progressive SSN program, the bottom quintile re- ceives the most transfers, with the share of transfers declining as wealth increases. As shown in figure 3A.2, the only program in the Middle East and North Africa that appears to fit this description is Jordan’s NAF, which has a steep negative gradient, with the richest two quintiles cumu- latively receiving less than 20 percent of all NAF transfers (see box 3.2 for a description of NAF’s targeting methods). In contrast, in Iraq, a mere 2 percent of all SSN benefits go to the poorest quintile, while the richest quintile captures 43 percent of program resources, making this program highly regressive. In terms of benefit incidence, therefore, Jordan’s NAF 124 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa BOX 3.2 The National Aid Fund in Jordan The National Aid Fund (NAF) administers the largest cash safety net program in Jordan. It was established in 1986 as a response to increasing poverty and inequality in the country. A semiautono- mous institution, the NAF is governed by a board of directors chaired by the Minister of Social Development. NAF assistance is administered through district offices throughout Jordan. In terms of program resources, public spending on the NAF in 2009 repre- sented only 0.5 percent of GDP and 2 percent of government spending. NAF assistance is targeted at poor and disadvantaged people be- longing to various categories perceived as incapable of engaging in income-generating activities. Such categories include women with young children, orphans, the elderly, persons with disabilities, fam- ilies headed by divorced or abandoned women, and households where the main breadwinner is in prison. Although the first eligibil- ity criterion for NAF assistance is belonging to one or more of the above categories, the second criterion is a means test: families’ in- come must fall short of a preset per capita threshold. This income test falls between a semiverified test for formal incomes and an un- verified test for other sources of income. In terms of benefits, the NAF provides regular and emergency cash transfers, with minimum benefits in 2009 of JD 40 (Jordanian dinars) per month (71 percent of the adult equivalent poverty line) and a maximum of JD 180 per family per month for a family of five or more persons. In addition to cash support, beneficiary families are automatically eligible for free government health insurance and vocational training programs. Sources: Adapted from Government of Jordan 2011b and World Bank 2007. is the regional leader in targeting accuracy, and Iraq’s SSN program is the most regressive program in the region. The Monthly Social Pension (or Sadat Pension) in Egypt and the SWF in the Republic of Yemen each have a progressive benefit incidence, but not significantly so. However, these two countries differ in their tar- geting of the poor, given the difference in their respective poverty lines. Given the Republic of Yemen’s high poverty rate (about 35 percent), the share of the SWF going to the poor is 48 percent, whereas Egypt’s pov- erty rate of 22 percent implies that only 26 percent of Monthly Social Pension (or Sadat Pension) benefits reach the poor. Finally, in West Bank The Current State of Social Safety Nets in the Middle East and North Africa 125 and Gaza, assistance received from the UN in 2009 was relatively better targeted than the rest of the programs there. Both Ministry of Social Af- fairs (MOSA) and non-MOSA programs reach the poor but cannot avoid leakage to the better-off. As mentioned above, however, West Bank and Gaza has made tremendous progress in targeting performance since 2009. Benchmarking the incidence of benefits in specific SSN programs demonstrates highly inefficient resource use in the Middle East and North Africa. Figure 3.11 shows the benefit incidence for the bottom quintile of SSN programs in the region against comparator programs in Europe and Central Asia and Latin America and the Caribbean. The av- erage program in the Middle East and North Africa distributes 23 percent of its benefits to the bottom quintile, whereas the average comparator program distributes more than twice that percentage—59 percent—to the bottom quintile. It is important to note that benefit incidence is necessarily lower for large programs, such as Oportunidades in Mexico (which covers around 30 percent of the total population), than it is for small programs, which can target resources more precisely. All of the Middle Eastern and North African economies lag behind their comparators in terms of targeting performance. Indeed, four programs in the region—the SSN in Iraq, the Zakat Fund in Jordan, the MOSA assistance in West Bank and Gaza, and the cash assistance from the Social Security Fund in the Republic of Ye- men—transfer less than 20 percent of their program resources to the bot- tom quintile, which makes all of these programs regressive (figure 3A.3). SSNs in the Middle East and North Africa suffer from significant leak- ages of resources to the nonpoor and even the wealthy, which means the region has significant scope to improve the allocative efficiency of its SSN programs. Because of its reliance on outdated categorical and geographic targeting methods, the region lags behind others that have switched to individual assessments of either incomes (through means tests) or expen- ditures (through PMT), in some cases complemented by community- based targeting. Within the Middle East and North Africa, Jordan, West Bank and Gaza, and the Republic of Yemen have begun to improve their targeting methods. For example, Jordan’s NAF relies on a semiverified means test together with categorical targeting, while West Bank and Gaza, the Republic of Yemen, and, most recently, Lebanon, have intro- duced PMT-based targeting for their signature SSN programs. Benefit Generosity The basic question in designing an SSN program is the transfer size, which should be commensurate with the desired impact on intended out- comes, such as poverty reduction (Grosh et al. 2008). As shown in figure 126 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa FIGURE 3.11 Benefit Incidence for Bottom Quintile of Selected Nonsubsidy SSN Programs Iraq SSN West Bank and Gaza MOSA Yemen, Rep. SSF Jordan Zakat Egypt, Arab Rep. Zakat Egypt, Arab Rep. Sadat Pension West Bank and Gaza Non-MOSA Yemen, Rep. SWF Russian Federation CA West Bank and Gaza UN Argentina HHH Uzbekistan SA LI Mexico Oportunidades Jordan NAF Hungary Aid Progs. Albania NE Kyrgyz Rep. UMB Kosovo SA Jamaica CCT Poland SW Bene ts Serbia MOP Macedonia SFA Chile Solidario Armenia FB Turkey Green Card Lithuania Social Bene t Georgia TSA Azerbaijan TSA U.S. TANF Croatia Support Allow Estonia MT Bene ts Turkey CCT Brazil Bolsa Familia Ukraine XP Program U.S. Food Stamps Bulgaria GMI Romania GMI 0 20 40 60 80 100 Bene ts to the bottom quintile, % Middle East and North Africa programs  Comparator programs Sources: Middle East and North Africa: Authors’ calculations based on data from household surveys. Europe and Central Asia data from the World Bank Social Protection database and the Organisation for Economic Co-operation and Development Social Expenditure Database (www.oecd.org/els/social/expenditure). Latin America and the Caribbean data from LAC SSN inventory (forthcoming). Note: CA = Child Allowance; CCT = conditional cash transfers; FB = Family Benefit; GMI = Guaranteed Mini- mum Income; HHH = Heads of Households; MOP = Material Support to Families (Materijalno obezbeđenje porodice); MOSA = Ministry of Social Affairs; MT = Means Tested; NAF = National Aid Fund; NE = Economic Assistance (Ndihma Ekonomike); SA = Social Assistance; SA LI = Social Assistance for Low Income; SFA = Social Financial Assistance; SSF = Social Security Fund; SSN = social safety net; SW = Social Welfare; SWF = Social Welfare Fund; TANF: Temporary Assistance for Needy Families; TSA = Targeted Social Assistance; UMB = Unified Monthly Benefit; UN = United Nations; XP = Extremely Poor. The Current State of Social Safety Nets in the Middle East and North Africa 127 FIGURE 3.12 Benefit Generosity of Nonsubsidy SSNs, Middle East and North Africa, Compared with World and Other Regions, c. 2005–10 35 Bene ts as % of welfare of bene ciary 30 25 20 15 10 5 0 ica sia an c 20 d 0 07 09 05 rld 01 za an be aci t. A Afr 20 20 20 Wo Jor 09 n2 rib Ga ank &P n raq p. p. N. Ce da Ca Re Re st B st & sia I r. & the rab n, E. A We Ea me Eu r. & t, A d. Ye Mi yp me Eg L. A Sources: Middle East and North Africa: Authors’ calculations based on data from national household sur- regions from World Bank 2012a. veys; data for world and other ­ Note: All regional averages are population-weighted. 3.12, the generosity of SSN programs that reach the bottom quintile in the Middle East and North Africa is low, constituting less than 15 percent of the bottom quintile’s welfare. The greatest impact of SSN transfers on the welfare of the poorest quintile is in West Bank and Gaza, followed by Jordan. Elsewhere, such as in the Republic of Yemen, the consumption levels of beneficiaries in the bottom quintile are barely affected. At the same time, one would expect SSNs to represent a negligible share of consumption for the richest quintile. In the Middle East and North Africa, this is not the case. Indeed, in Egypt, SSNs are more gener- ous for the richest quintile than for the poorest one. Iraq and West Bank and Gaza also provide substantial income support to the richest quintile, comprising 10 and 18 percent, respectively, of that quintile’s welfare. Using ASPIRE to benchmark the region’s SSN generosity for the bot- tom quintile against that of other regions reveals that SSN transfers in the Middle East and North Africa are much more modest than elsewhere. Whereas the average SSN system in the world provides transfers of al- most 20 percent of the bottom quintile’s welfare, in the Middle East and North Africa, this figure stands at only 12 percent, far below the other regions. Plotting benefit generosity for the bottom quintile against GDP per capita demonstrates that richer economies provide more generous bene- 128 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa fits to their poor and vulnerable populations (see figure 3A.1, panel c). West Bank and Gaza appears above the trend line, most likely because cash assistance is provided by international donors, such as the UN and international NGOs. On the other hand, Egypt and the Republic of Ye- men (and, to a lesser extent, Iraq) are below the trend line, implying that compared with their development peers, SSN transfers in these countries are much more modest. Figure 3.13 compares the generosity of some SSN programs in the Middle East and North Africa with similar programs in Europe and Cen- tral Asia. Most Middle Eastern and North African programs lag behind the comparator programs in providing sufficient income support for the poorest quintile. West Bank and Gaza and Jordan’s NAF are regional leaders in terms of benefit generosity. Setting the benefit size for an SSN program is an important but diffi- cult policy decision. On the one hand, a robust safety net should deliver adequate consumption protection for the most vulnerable members of a society: those who cannot provide for themselves due to age or disability and those who need temporary assistance to rebound from an economic or health shock. On the other hand, overly generous benefits may dis- courage working-age, able-bodied adults from participating in the labor force and instead encourage them to depend on the SSNs provided by the government. Based on the international comparisons presented above, the benefit generosity of SSNs in the Middle East and North Africa can be increased without triggering work disincentives. The Role of Zakat as Informal Safety Net In the Middle East and North Africa, a significant complement in all countries to the formal or public SSN system is the privately provided Zakat, which is often perceived as the largest transfer system to the poor and vulnerable. Zakat consists of informal social transfer from better-off to poorer households. One of the Five Pillars of Islam, it is a system in- grained in Islamic society whereby it is a duty to give part of one’s income and assets to help the poor and needy. The amount is computed using a formula that differs by type of asset, which may include gold, land, live- stock, minerals, and cash savings. Interpretation of this formula varies from country to country. Typically, Zakat targets categories of beneficiaries that the Qur’an de- fines as being especially in need. In some countries, the collection and distribution is institutionalized by the government in the form of an oblig- atory tax, but in others, such as the Republic of Yemen, it remains largely a private affair—being not an obligatory tax but a transfer whose amount is calculated by the giving household and that is mostly either distributed The Current State of Social Safety Nets in the Middle East and North Africa 129 FIGURE 3.13 Benefit Generosity for the Bottom Quintile of Selected Nonsubsidy SSN Programs, Middle East and North Africa Compared with Europe and Central Asia Romania GMI Jordan Zakat Yemen, Rep. SWF Latvia GMI + dwelling Egypt, Arab Rep. Sadat Pension Kyrgyz Rep. UMB Iraq SSN Poland SA bene ts Egypt, Arab Rep. Zakat Russian Federation CA Kazakhstan TSA Albania NE Ukraine XP program West Bank and Gaza MOSA West Bank and Gaza UN Bulgaria GMI West Bank and Gaza Non-MOSA Macedonia, FYR, SFA Jordan NAF Hungary Regular SA Bosnia and Herzegovina CSW Lithuania Social Bene t Armenia FB Prog Serbia MOP Croatia S. Allowance Montenegro FMS/MOP Estonia MT Bene ts Kosovo SA Georgia TSA 0 10 20 30 40 50 60 Bene ts as % of welfare of bottom quintile Middle East and North Africa countries Comparator countries Sources: Middle East and North Africa data from authors’ calculations based on household surveys; other data from World Bank’s ECA (Europe and Central Asia) Household Survey Database. Note: CA = Child Allowance; CSW = Centres for Social Work; FB = Family Benefit; FMS = Family Material Support; GMI = Guaranteed Minimum Income; MOP = Material Support to Families (Materijalno obezbeđenje porodice); MOSA = Ministry of Social Affairs; NAF = National Aid Fund; NE = Economic Assis- tance (Ndihma Ekonomike); SA = Social Assistance; SFA = Social Financial Assistance; SSN = social safety net; SWF = Social Welfare Fund; TSA = Targeted Social Assistance; UMB = United Monthly Benefit; UN = United Nations; XP = Extremely Poor. directly to the chosen beneficiary or delivered for distribution to the mosque or sherif (neighborhood leader). (Delivery to the government or an NGO is less frequent.) Zakat is normally given in the form of cash, once or twice a year (during Ramadan and Eid). According to the United Na- tions Development Programme’s Arab Human Development Report 130 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa (UNDP 2002), the system of Zakat may be enabling large segments of the Arab and Muslim populations to escape visible poverty and need. Quantitative data on this issue are scarce, but new data on the Republic of Yemen reveals that Zakat • Is an important SSN; • Does not serve all the functions of an SSN (such as promotion of re- silience and of human capital formation) and overlaps with (thus does not fully crowd out) other private and public SSNs; and • Poses interesting political economy issues (see box 3.3 and Silva, Alloush, and Wodon 2012). BOX 3.3 A Private, Informal Safety Net: Zakat in the Republic of Yemen Data cial ability to give was the most important As part of the SSN review, the World Bank determinant of both the likelihood of giv- piloted the Yemen Survey on Social Net- ing and the amount given. Other important works and Solidarity Mechanisms. The determinants of giving were social net- survey included traditional modules on so- works, trust in personal connections, and cioeconomic characteristics in addition to religiosity. On average, the reported new modules that specifically targeted the amounts were below 2.5 percent of annual giving and receiving of Zakat as well as at- income. titudes toward Zakat. It also included mod- Receiving Zakat: Is Zakat an important ules on social networks, the incidence of source of financial support for the poor? shocks, risk coping mechanisms, and Among receivers in the poorest income de- household decision making. A sample of cile, it represents about 25 percent of their 795 households (5,500 individuals) was sur- pre-Zakat income. Does it provide good veyed. The sample was representative of coverage of the poor? It reaches over 35 the capital city of Sana’a. The data have percent in the poorest quintile—higher been used to study the determinants of giv- coverage than that of formal SSN programs ing and receiving Zakat and its effects on in Sana’a. Is it well targeted? Yes, the data poverty (Silva, Alloush, and Wodon 2012). show that more than 70 percent of Zakat recipients were in the lowest wealth Facts on Zakat quintiles. Giving Zakat: Do most households give? What do receivers use Zakat assistance for? How much do households give? Thirty Zakat is used mostly for necessities, and percent of all households in Sana’a indi- the most common reason for receiving Za- ­ akat, and the finan- cated they have given Z kat is financial difficulty. However, having The Current State of Social Safety Nets in the Middle East and North Africa 131 BOX 3.3  Continued suffered a shock is not significantly associ- loush, and Wodon (2012) show that social ated with a higher likelihood of receiving networks of the household head are signifi- Zakat. Nor do income losses significantly cant determinants of the likelihood of re- increase the probability of receiving Zakat, ceiving Zakat. but decreases in wealth do, suggesting that Is Zakat perceived positively as an SSN? Zakat is more likely to focus on the chroni- Zakat is a well-respected institution that is cally poor than the transitory poor. perceived positively. People trust Zakat Who falls through the cracks? Zakat and think it is an important part of society. reaches more poor households in Sana’a It sets a high standard for formal SSN tar- than other safety nets, and those who re- geting and distribution. However, its role is ceive it are poor. However, the receivers to ameliorate poverty, not to promote the are usually related to or live near the givers: formation of human capital, which calls for 82 percent of givers said that the person to the use of other forms of SSN to comple- whom they gave Zakat was related to them ment it. In Sana’a, people’s attitudes about or their households, and 60 percent of giv- making SSNs conditional on behaviors ers say the person to whom they gave Zakat conducive to human capital formation were last year had already received Zakat from positive. them for more than three years. Silva, Al- In the context of this report, an interesting survey was conducted: the Yemen Survey on Social Networks and Solidarity Mechanisms. This household-level survey added modules on giving and receiving Zakat, attitudes toward Zakat as a form of SSN, and complementarities between receiving Zakat and other forms of SSN, to other modules on socioeco- nomic characteristics and income. Its main findings were threefold: • First, Zakat is an important SSN because it is an important source of financial support for the poor, and most households that receive it are poor and vulnerable. • Second, for full coverage of the poor and of all the functions of an SSN, Zakat needs to be complemented by other forms of SSN because (a) part of the chronically poor are not benefiting from Zakat, which reaches about one-third of the poor (based on the survey in Sana’a)—a coverage nevertheless better than other existing SSNs in Sana’a—and although those who get it are poor, because it entails an existing link between receiver and giver, poor households that are not well con- nected to social networks are systematically excluded; and (b) Zakat does not serve all the functions of an SSN because it does not promote spending on human capital formation or health. Public programs 132 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa ­ocused on that function could leverage the effect of Zakat protection. f As a lump-sum donation given once or twice a year, Zakat is also not a very effective instrument for risk prevention because it neither facili- tates consumption smoothing nor appears to help households. • Third, Zakat overlaps with (thus does not fully crowd out) other pri- vate and public SSNs. Impact on Poverty and Inequality The most important indicator of SSN effectiveness is the impact on pov- erty and inequality. This indicator combines the separate forces of cover- age, targeting, and generosity of SSN programs and assesses the overall effect of the presence of SSNs on the welfare distribution of the country. This analysis is performed through a static simulation of welfare net of SSN transfers, without attempting to simulate any behavioral adjust- ments to the absence of SSNs. Still, for the purposes of this regional study, this analysis allows for comparison of the effectiveness of existing SSNs in reducing poverty and inequality in different areas of the Middle East and North Africa. With the exception of West Bank and Gaza and Jordan, SSNs in the region have little effect on poverty rates, as shown in figure 3.14. SSN presence in Egypt, Iraq, and the Republic of Yemen reduces poverty rates in these countries by at most 4 percent. Benchmarking the region’s per- formance to other regions and the world average is revealing: SSNs in the Middle East and North Africa perform better in terms of poverty impact than SSNs in East Asia but much worse than the world average or in Europe and Central Asia or Latin America and the Caribbean. Notably, however, SSNs in West Bank and Gaza have a higher impact on poverty than those in the best-performing region (Europe and Central Asia). A similar picture emerges for the nonsubsidy SSN impact on the pov- erty gap. The poverty gap measures the average shortfall from the pov- erty line (with the nonpoor having zero shortfall) as a percentage of the poverty line. Thus, the poverty gap reflects both the depth and the inci- dence of poverty. As with the poverty rate, SSNs in Jordan and West Bank and Gaza appear to have a noticeable effect on the poverty gap (reducing it by 23 and 42 percent, respectively). The rest of the region performs significantly worse compared with the 22 percent average world reduction in the poverty gap due to SSNs. Egypt’s and Iraq’s SSNs re- duce the gap by about 7 percent, and those of the Republic of Yemen, by 4 percent. Overall on this measure, the Middle East and North Africa is on par with East Asia but performs worse than Europe and Central Asia or Latin America and the Caribbean. The Current State of Social Safety Nets in the Middle East and North Africa 133 FIGURE 3.14 Poverty Rate Impact of Nonsubsidy SSNs, Selected Economies in the Middle East and North Africa Compared with World and Regional Averages, c. 2005–10 20 15 SSN impact on poverty rate, % 20 5 0 ica sia an c 20 d 0 07 09 05 rld 01 za an be aci t. A Afr 20 20 20 Wo Jor 09 n2 rib Ga ank &P n raq p. p. N. Ce da Ca Re Re st B st & sia I r. & the rab n, E. A We Ea me Eu r. & t, A d. Ye Mi yp me Eg L. A Source: Middle East and North Africa: Authors’ calculations based on data from national household surveys; data for world and other regions from World Bank 2012a. Note: SSN = social safety net. Regarding the impact on inequality, the regional leader is again West Bank and Gaza, with its SSNs reducing the Gini coefficient by more than 7 percent, as shown in figure 3.15. Most other SSNs in the region have little impact in this regard. In Egypt, Iraq, and the Republic of Yemen, SSNs have an imperceptible effect on welfare distribution, with the Gini coefficient declining by less than 1 percent. Comparisons with other re- gions demonstrate that in terms of reducing inequality, the region’s per- formance is in the middle of the rankings, below Europe and Central Asia and Latin America and the Caribbean but above East Asia. In figure 3A.1, panels d and e benchmark Middle Eastern and North African economies against those of other regions that are at the same level of economic development. As economies develop, the impact of their SSN systems on poverty and inequality tends to improve, as demon- strated by the positive trend lines. SSNs in Egypt, Iraq, Jordan, and the Republic of Yemen reduce poverty and inequality by less than would be predicted given their level of GDP per capita. Within the region, only West Bank and Gaza outperforms its development peers in terms of both poverty and inequality reduction due to SSNs. In fact, it is one of the top 10 performers in the world in terms of reducing inequality. 134 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa FIGURE 3.15 Inequality Impact of Nonsubsidy SSNs, Selected Economies in the Middle East and North Africa Compared with World and Regional Averages, c. 2005–10 SSN impact on Gini coe cient, % 8 6 4 2 0 ica ia an c 20 d rab 010 09 05 7 rld As 00 za an be aci Afr 20 20 Wo Jor 09 2 q2 nt. rib Ga ank &P an p. p. N. Ce Ira Ca Re Re st B d st & sia r. & the n, E. A We Ea me Eu r. & t, A d. Ye Mi yp me Eg L. A Source: Middle East and North Africa: Authors’ calculations based on data from national household surveys; data for world and other regions from World Bank 2012a. Note: SSN = social safety net. As seen above, the coverage and generosity of nonsubsidy SSNs in the Middle East and North Africa leave much scope for improvement, and the expenditures absorbed by these programs are very small, especially in comparison with spending on subsidies. So, the negligible effects of the region’s SSNs on poverty rates and poverty gaps do not come as a big surprise. The impact on inequality measures the effect of SSNs on wel- fare distribution; as such, it is directly tied to targeting accuracy. Even excluding subsidies and ration cards, the region’s SSNs are not adequately targeted to the poor and vulnerable, which explains the negligible effect on the Gini coefficient. Notably, if subsidies were included, this barely positive effect on inequality might even turn negative in some countries, given the regressive nature of most subsidies. The next section assesses the extent to which subsidies achieve their intended safety net objectives. Performance of Subsidies as SSNs Subsidies and ration cards are introduced by governments to achieve a variety of objectives, among them, The Current State of Social Safety Nets in the Middle East and North Africa 135 • To expand access to the subsidized goods (for example, to reduce ­energy poverty); • To spur the development of certain sectors (industry for fuel subsidies and agriculture for food subsidies); • To offset temporary commodity price fluctuations; • To avoid inflationary pressures; and, of course, • To maintain popular support (Fattouh and El-Katiri 2012). Yet the most frequently cited objective for reliance on subsidies is to pro- tect the poor by guaranteeing access to food and other essential items at affordable prices (Grosh et al. 2008). Previously the chapter showed that Middle Eastern and North African countries rely extensively on subsidies to provide safety nets for their poor and vulnerable populations. How effective are these subsidy-based SSNs? This section takes a brief look at the coverage, targeting, and poverty impact of subsidies and ration cards in the region. Although subsidy programs are intended to benefit all poor and vul- nerable people, such coverage depends on whether these groups consume the subsidized goods. Household survey evidence suggests that fuel sub- sidies in Egypt, Morocco, and the Republic of Yemen, as well as food subsidies and ration cards in Iraq and Morocco, cover almost everyone in the country. However, Egypt’s food ration cards, which require registra- tion, miss about 20 percent of the bottom quintile. In terms of their benefit incidence, subsidies are at best neutral; up to 60 percent of fuel subsidies in the Middle East and North Africa are cap- tured by the richest quintile. A review of fuel subsidies in 20 developing countries revealed that the top consumption quintile captures six times more in subsidy benefits than the bottom quintile, as shown in table 3.2 (Del Granado, Coady, and Gillingham 2010). Even subsidies for kero- sene, a fuel used predominantly by the poor, while less regressive, cannot compare in targeting efficiency with a targeted cash transfer program. It comes as no surprise, then, that price subsidies and ration cards have the highest leakage rates of all types of SSN programs in the Middle East and North Africa. Figure 3.16 depicts the percentage of expenditures incurred by each quintile on food or fuel subsidies in selected countries. The benefits of food subsidies in Jordan and ration cards in Iraq are equally distributed across quintiles because the poor spend a large portion of their income on food. In contrast, the richest 20 percent of the population capture 40–60 percent of all fuel subsidy benefits because the rich consume more energy products. Thus, the benefit incidence curves of fuel subsidies in Egypt, 136 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa TABLE 3.2 Average Distribution of Food Subsidy Benefits by Consumption Quintile in 20 Developing Countries percentage Consumption quintile All Poorest 2 3 4 Richest housholds Total impact  7.1 11.4 16.2 22.5 42.8 100.0 Total direct impact  7.1 10.7 14.0 19.9 47.6 100.0 Gasoline  3.0  5.7  9.7 19.4 61.3 100.0 Kerosene 19.0 19.7 20.6 20.1 20.6 100.0 LPG  3.8  7.6 12.6 20.8 53.8 100.0 Indirect impact  7.3 11.7 16.3 22.6 42.0 100.0 Source: Del Granado, Coady, and Gillingham 2010. Note: LPG = liquefied petroleum gas. FIGURE 3.16 Benefit Incidence of Subsidies and Ration Cards in the Middle East and North Africa, Selected Countries, c. 2005–10 70 60 50 Total subsidy bene ts, % 40 30 20 10 0 Poorest quintile Q2 Q3 Q4 Richest quintile Iraq, 2007: food ration cards Yemen, Rep., 2005: fuel subsidies Egypt, Arab Rep., 2009: fuel subsidies Jordan, 2010: food subsidies Jordan, 2010: fuel subsidies Source: Authors’ calculations based on data from national household surveys. Note: Subsidy incidence calculated using consumption incidence and aggregating across subsidized fuel or food products; thus, it assumes the same subsidization rates across these products. Q = quintile (1 = lowest, 5 = highest). Jordan, and the Republic of Yemen have a very steep positive gradient across wealth quintiles. When used as SSNs, subsidies and ration cards suffer from significant deficiencies in targeting accuracy because there is a high propensity for fraud and corruption. The inefficiencies due to leakages of subsidies are The Current State of Social Safety Nets in the Middle East and North Africa 137 BOX 3.4 The Food Subsidy Program in Tunisia The Food Subsidy Program has been an did stand up in the refrigerator had a lower important part of Tunisia’s safety net since subsidy, while the lowest subsidy was on the 1970s, providing universal access to fresh bottled milk. For cooking oil, the food subsidies on selected consumer prod- government maintained the subsidy on oil ucts (cooking oil, sugar, milk, meat, and labeled only as “cooking oil” and dispensed cereals). By the mid-1980s, subsidies ac- from bulk drums but sold oil labeled as “ol- counted for 10 percent of government ex- ive oil” and dispensed in appealing bottles penditures and 4 percent of GDP, repre- at market prices. As a result, many wealth- senting a substantial budgetary burden. At ier consumers switched to the unsubsidized the same time, studies showed that the products, which they found more attractive wealthiest income group captured twice as and convenient. Similar reforms were im- much of the subsidy per capita as the poor- plemented for bread, thus eliminating the est income group. In the early 1990s, Tuni- subsidy on refined baguette-type bread sia launched a series of reforms, including while preserving it for lower-quality bread. reducing or eliminating subsidies for some Although such tinkering with packaging commodities and cutting production and and marketing can appear minor, the re- distribution costs of subsidized goods. forms led to a significant decrease in gov- One major achievement of the reforms ernment expenditure on food subsidies was improvement in the targeting of subsi- (from 4 percent of GDP in 1984 to 1.5 per- dies, achieved by reliance on self-targeting cent in 1998). Perhaps even more impor- through innovative use of packaging and tant, the share of subsidy transfers captured marketing. For instance, the government by the poorest quintile increased from 8 to introduced different subsidy levels for nu- 21 percent. Nevertheless, the subsidy re- tritionally equivalent forms of milk in dif- forms might have had an adverse effect on ferent packages. The highest subsidy was nutrition: an early analysis of consumption on reconstituted powdered milk packaged revealed a drop in calorie and protein in- in small plastic bags that would not stand take in the poorest quintile. up in the refrigerator. The packages that Sources: Alderman 2002; Grosh et al. 2008; Tuck and Lindert 1996. staggering: for instance, the government of Egypt could save 73 percent of the cost of food subsidies if it eliminated leakages and decreased cover- age (World Bank 2010a). This is especially true for the subsidized baladi bread, where the cost of transferring LE 1 to a needy household is almost LE 3 because almost two-thirds of the benefits go to the non-needy (Ahmed et al. 2001; Grosh et al. 2008; World Bank 2005). Similarly, in Iraq, for every US$1 received by the poor in the form of food rations, the 138 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa government spent US$6 because of inefficiencies and vulnerability to waste, theft, and corruption (World Bank 2010b). One way to increase the efficiency of subsidies as an SSN instrument is through self-targeting, achieved by focusing on inferior goods (goods consumed primarily by the poor, such as kerosene) or by packaging and marketing subsidized goods in a way that promotes self-targeting. Tuni- sia’s reform of its Food Subsidy Program in the 1990s is one of the most successful examples of the latter (see box 3.4). As shown above, although subsidies suffer from extremely high leak- ages and do not provide a reliable safety net, simple removal of subsidies would have significant impoverishing effects in many Middle Eastern and North African countries. Figure 3.17 shows the poverty impacts of the region’s subsidies based on existing studies. It is evident that given their wider coverage and generosity (in terms of subsidization rates of essential consumer goods), subsidies have major impacts on keeping people out of poverty. In Egypt and Iraq, the presence of food subsidies and ration cards reduced poverty rates by about 30 percent. Notably, fuel subsidies have less impact on poverty than food subsidies; still, fuel subsidies in Egypt decreased poverty incidence in 2004 by more than 18 percent. In Jordan, removal of the water subsidy would have a higher effect on pov- erty than removal of food or gas subsidies. Finally, in the Republic of Yemen, the direct impact of petroleum subsidies on poverty was only 5.7 FIGURE 3.17 Poverty Impact of Subsidies in the Middle East and North Africa, Selected Countries, c. 2004–10 40 Impact of subsidies on reducing poverty rate, % 30 20 10 0 Food subsidies Ration cards Fuel subsidies Food, gas, water Petroleum subsidies subsidies Egypt, Arab Rep. Iraq 2007 Egypt, Arab Rep. Jordan 2010 Yemen, Rep. 2009 2004 2005 Sources: Government of Jordan 2011a; Government of Yemen, World Bank, and UNDP 2007; World Bank 2005, 2010a, 2010b. The Current State of Social Safety Nets in the Middle East and North Africa 139 percent—still very high relative to the 2 percent impact from the pres- ence of nonsubsidy SSNs. These results imply that subsidy reform should be accompanied by expansion of nonsubsidy SSNs that promote liveli- hood and resilience. Conclusions This chapter has demonstrated that SSNs in the Middle East and North Africa are ripe for reform. The region relies too heavily on untargeted price subsidies and ration cards, which waste the scarce resources of gov- ernments because of high leakage rates and a high propensity for waste, fraud, and corruption. Subsidies aside, SSNs in the region are underre- sourced and fragmented. Most of the poor and vulnerable fall through the cracks of the small and categorically or geographically targeted programs. Moreover, poor targeting methods result in significant leakages of SSN benefits to the nonpoor, siphoning off resources that could be used else- where to decrease poverty and improve the distribution of welfare in the Middle East and North Africa. Although subsidies are inefficient and frequently ineffective relative to other SSN interventions, large numbers of the poor and vulnerable popu- lations depend on them to stay out of poverty. So if the region’s countries are to move from the status quo toward more effective, reliable, and eq- uitable social safety nets, how should they proceed? The most difficult questions always revolve around the political economy of reform, and chapter 4 will move from the “what” to the “how.” 140 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa Annex 3A Additional Figures and Tables TABLE 3A.1 Share of Nonsubsidy SSN Spending by Economy and Program Type, Middle East and North Africa, c. 2008–11 percent Fee waivers, Food and Micro-credit education, other and income- Cash and health in-kind generating Workfare transfers benefits transfers Housing activities Training programs Others Bahrain 100.0 n.a. n.a. n.a. n.a. n.a. n.a. n.a. Egypt, Arab Rep.  91.9  8.1 n.a. n.a. n.a. n.a. n.a. n.a. Iraq 100.0 n.a. n.a. n.a. n.a. n.a. n.a. n.a. Jordan  44.5  0.5  8.7 1.1 29.6 15.6 n.a. n.a. Kuwait 100.0 n.a. n.a. n.a. n.a. n.a. n.a. n.a. Lebanon n.a. 82.9 n.a. n.a. n.a.  0.1 n.a. 17.1 Morocco   2.5  4.9 20.8 3.7 n.a. n.a. 16.6 51.6 Saudi Arabia 100.0 n.a. n.a. n.a. n.a. n.a. n.a. n.a. Syrian Arab Republic 100.0 n.a. n.a. n.a. n.a. n.a. n.a. n.a. Tunisia  69.0 27.9 n.a. n.a. n.a.  0.2 n.a.  2.8 West Bank and Gaza  64.0 n.a. 34.3 n.a.  1.7 n.a. n.a. n.a. Yemen, Rep.  55.5  3.7 n.a. n.a. n.a. n.a. 40.8 n.a. Source: Authors’ calculations based on MENA SSN Inventory. For a list of programs in the inventory, see appendix C. Note: n.a. = not applicable. The Current State of Social Safety Nets in the Middle East and North Africa 141 FIGURE 3A.1 Performance of Nonsubsidy SSNs in the Middle East and North Africa, Selected Economies, Relative to Development Peers a. Undercoverage b. Bene ciary incidence 100 DJI GHA KHM RWA PAK BTN 50 ARG % in bottom quintile not covered by SSNs Bottom quintile as % of SSN bene ciaries IRQ BOL VEN BIH BRA MAREGY MKD MYS MYS 80 AFG BGD GEO JOR 40 VNM BTN JOR TMP ARG URYPOL KGZ KEN YEM ARM KEN MEX VNM DOMMUS BGD LKA BIH 60 IND AZEKAZ 30 KGZ WBG IDN ARM RUS PRY AFG GEOEGY DOM PERCRIPAN TUR BGR BRA RUS IND KAZ ROM MWI WBG GTM LKA TUR BGR BLR MEX YEM PRY THA GTM SLV ECU AZE CHL 40 20 NIC MNG UKR LVA CRI POL LVA MWI MKD BLR NIC TMP MUS DJI MAR VEN 20 SLV ROM 10 IRQ BOL IDN THA PER URY MNG PAK GHA 0 0 RWA KHM 6 7 8 9 10 6 7 8 9 10 Log GDP per capita, PPP (constant 2005 US$) Log GDP per capita, PPP (constant 2005 US$) SSN bene ts as % of welfare for bene ciaries in bottom quintile c. Bene t generosity d. Poverty impact 60 BLR 40 ROM % reduction in poverty rate with SSNs CRI BLR 30 MNG MUS 40 BOL AZE POL ROM AZE NIC ARM MUS MEX 20 WBG POL GEOARM BGD JOR ECUMKD BRA LVA VNM WBG NIC UKR KAZCHL 20 PAKIRQ ARG ECU MEX AFG MNG UKR PERKAZ BIH PAN CHL LVA MYS 10 TMP GHA BGD BOL BRA KGZ EGY SLV DOM URY VNM LKA MKD URY GTM LKA THA DOM JOR THA CRI RWA KEN YEM KGZ MYS MWI TMP BTN BGR MWIAFG GHA KEN PAKIRQ GTM YEM EGY PER BGR BIH PANARG 0 KHM TUR 0 RWA BTN SLV TUR 6 7 8 9 10 6 7 8 9 10 Log GDP per capita, PPP (constant 2005 US$) Log GDP per capita, PPP (constant 2005 US$) e. Inequality impact 20 BLR ROM % reduction in Gini with SSNs 15 10 GEO POL AZE WBGMNG ARM MUS LVA 5 UKR KAZ TMP BGD ECU MEX CHL KGZVNM NIC BOL JOR MKD BRAURY CRI LKA THA DOM PER BIH ARG MYS PAN 0 MWIAFG KEN YEM PAKIRQ GTM EGY BTN SLV BGR TUR 6 7 8 9 10 Log GDP per capita, PPP (constant 2005 US$) Sources: Middle East and North Africa data from national household surveys; other data from World Bank 2012a. Note: PPP = purchasing power parity; SSN = social safety net. Trend lines are not weighted by population. 142 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa FIGURE 3A.2 Coverage Rates of Main Nonsubsidy SSN Programs by Wealth Quintile in the Middle East and North Africa a. Djibouti 2002 b. Egypt, Arab Rep. 2009 1.5 10 8 1 Coverage rate, % Coverage rate, % 6 4 0.5 2 0 0 Poorest Q2 Q3 Q4 Richest Poorest Q2 Q3 Q4 Richest quintile quintile quintile quintile Disability Demobilization Sadat Pension (monthly social pension) Zakat c. Iraq 2007 d. Jordan 2010 0.6 20 15 0.4 Coverage rate, % Coverage rate, % 10 0.2 5 0 0 Poorest Q2 Q3 Q4 Richest Poorest Q2 Q3 Q4 Richest quintile quintile quintile quintile Social safety nets NAF Zakat e. Morocco 2010 f. West Bank and Gaza 2009 15 50 40 10 Coverage rate, % Coverage rate, % 30 20 5 10 0 0 Poorest Q2 Q3 Q4 Richest Poorest Q2 Q3 Q4 Richest quintile quintile quintile quintile Education programsa MOSA Non-MOSA UNRWA g. Yemen, Rep., 2005 15 10 Coverage rate, % 5 10 Coverage r Coverage r 0.2 5 The Current State of Social Safety Nets in the Middle East and North Africa 143 0 0 Poorest Q2 Q3 Q4 Richest Poorest Q2 Q3 Q4 Richest quintile quintile quintile quintile FIGURE 3A.2  Continued Social safety nets NAF Zakat e. Morocco 2010 f. West Bank and Gaza 2009 15 50 40 10 Coverage rate, % Coverage rate, % 30 20 5 10 0 0 Poorest Q2 Q3 Q4 Richest Poorest Q2 Q3 Q4 Richest quintile quintile quintile quintile Education programsa MOSA Non-MOSA UNRWA g. Yemen, Rep., 2005 15 10 Coverage rate, % 5 0 Poorest Q2 Q3 Q4 Richest quintile quintile Social welfare fund Social security fund Source: Authors’ calculations based on data from national household surveys. Note: MOSA = Ministry of Social Affairs; NAF = National Aid Fund; SSN = social safety net; UNRWA = United Nations Relief and Works Agency for Palestine Refugees in the Near East. a. Excludes the “One Million Satchels” (Un Million de Cartables) school supplies program. 144 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa FIGURE 3A.3 Distribution of Benefits from Main Nonsubsidy SSNs by Wealth Quintile, Middle East and North Africa, Selected Economies a. Egypt, Arab Rep., 2009 b. Iraq 2007 50 50 40 40 Bene t distribution, % Bene t distribution, % 30 30 20 20 10 10 0 0 Poorest Q2 Q3 Q4 Richest Poorest Q2 Q3 Q4 Richest quintile quintile quintile quintile Sadat Pension (monthly social pension) Zakat Social safety net c. Jordan 2010 d. West Bank and Gaza 2009 50 50 40 40 Bene t distribution, % Bene t distribution, % 30 30 20 20 10 10 0 0 Poorest Q2 Q3 Q4 Richest Poorest Q2 Q3 Q4 Richest quintile quintile quintile quintile NAF Zakat MOSA Non-MOSA UNRWA e. Yemen, Rep., 2005 50 40 Bene t distribution, % 30 20 10 0 Poorest Q2 Q3 Q4 Richest quintile quintile Social welfare fund Social security fund Source: Authors’ calculations based on data from national household surveys. Note: MOSA = Ministry of Social Affairs; NAF = National Aid Fund; SSN = social safety net; UNRWA = United Nations Relief and Works Agency for Palestine Refugees in the Near East. The Current State of Social Safety Nets in the Middle East and North Africa 145 Annex 3B Methodological Annex Program coverage—the portion of the population in a specific group that re- ceives the transfer. Specifically, the program coverage rate of a quintile is calculated in this study as the number of individuals in the quintile who live in a household where at least one member receives the transfer, di- vided by the total number of individuals in the quintile. For countries where questionnaires include explicit questions on program participa- tion,5 a binary variable is set equal to one if the person lives in a household where at least one member receives the program, and equal to zero oth- erwise. When program participation questions are not included in the questionnaires,6 coverage is calculated by creating a binary variable equal to one if the person lives in a household receiving positive transfers from the program, and equal to zero otherwise. In the latter case, results should be interpreted with caution because respondents might report no or null transfers while still participating in an SSN program. The report also presents indicators of undercoverage, which is the percentage of poor indi- viduals who do not receive the SSN program transfer. Targeting accuracy—the incidence of beneficiaries and benefits as well as indi- cators of leakage, defined as follows: • Beneficiary incidence is the proportion of beneficiaries in each group. Specifically, beneficiary incidence is calculated here as the number of individuals in the quintile who live in a household where at least one member receives the transfer divided by the total number of direct and indirect beneficiaries. • Benefit incidence is the transfer amount received by a specific group as a percentage of total transfers received by the population. For the pur- poses of this study, a program’s benefit incidence for a quintile is equal to the sum of all transfers received by all individuals in that quintile divided by the sum of all transfers received by all individuals in the population. • Leakage of beneficiaries is the percentage of individuals who receive transfers and are not poor. • Leakage of benefits is the percentage of benefits that is received by indi- viduals who are not poor. Generosity—the mean value of the share transfer amount received by all ben- eficiaries in a group as a share of the total welfare aggregate of the beneficiaries in that group.7 146 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa TABLE 3B.1 Welfare Aggregates in Middle Eastern and North African Economies under Study Country Welfare indicator Djibouti Adult equivalent expenditure Egypt, Arab Rep. Actual consumption per capita Iraq Expenditure per capita Jordan Expenditure per capita Morocco Asset-based wealth index West Bank and Gaza Adult equivalent expenditure Yemen, Rep. Actual consumption per capita Sources: Data from the following household surveys (as detailed in appendix B): Djibouti EDAM-IS2 2002; Egypt HIECS 2009; Iraq IHSES 2007; Jordan HIES 2010; Morocco MHYS 2010; Syria HIES 2004; West Bank and Gaza ECS 2009; Republic of Yemen HBS 2006. For this study, generosity is calculated as the average of the ratio of transfer amounts received by all beneficiaries in a quintile over the total welfare aggregate of the beneficiaries in that quintile. Poverty (or inequality) impact—the difference between the actual poverty (or inequality) indicator and a simulated poverty (or inequality) indicator in the absence of the SSN program. For this study, the poverty rate is used (defined as the share of the population below the poverty line) as the poverty indicator, and the Gini coefficient is used as the indicator of inequality. One important assump- tion made in the simulation of poverty and inequality impact is that, in the absence of the program, household welfare diminishes by the full value of the program transfer. This assumes no behavioral adjustments in response to the absence of the program. The analysis of coverage, targeting, generosity, and poverty or in- equality impact of SSN programs uses an expenditure or consumption- based welfare aggregate to divide the population into wealth quintiles and identify poverty status. When consumption or expenditure data are not available, an asset index is calculated to construct wealth quintiles (for example, in Morocco). In this latter case, almost all assets and utility ser- vices are used, including country-specific items. The reason for using many indicator variables rather than a few selected items is the improve- ment in the distribution, with fewer households concentrated on certain index scores. Generally, any item that can potentially be correlated with economic status is included. Finally, following the recommendations of Filmer and Pritchett (2001), Principal Components Analysis (PCA) ag- gregates several binary asset ownership variables into a single dimension. A PCA index is calculated so that households can be ranked from the The Current State of Social Safety Nets in the Middle East and North Africa 147 lowest to the highest socioeconomic level. Table 3B.1 presents the wel- fare aggregates used for the different countries under study. As much as possible, the methodology for the SSN performance as- sessment was standardized across countries to improve comparability.8 Notes 1. The transfer income and SSN participation modules for Lebanon and Tunisia were not available for this study. 2. For the sake of such comparability, posttransfer welfare is used to divide each country’s population into quintiles. Although pretransfer welfare is generally preferable, some household surveys only have indicator variables for transfer receipt and not the transfer amounts (for example, in Djibouti and Morocco). 3. These are simple (not population-weighted) averages. Total expenditure on subsidies 4. The results were computed as follows: . The Amount of nonsubsidy SSN benefits going to the poor numerator uses administrative data on subsidies, while the denominator uses data from household surveys. 5. Countries include Djibouti, Iraq, and Morocco. 6. Economies include Egypt, Jordan, Syria, West Bank and Gaza, and the Re- public of Yemen. 7. See table 3B.1 for more information on welfare aggregates. 8. For the sake of such comparability, posttransfer welfare is used to divide each country’s population into quintiles. Although pretransfer welfare is generally preferable, some household surveys only have indicator variables for transfer receipt and not the transfer amounts (for example, in Djibouti and Morocco). References Ahmed, A. U., H. Bouis, T. Gutner, and H. Lofgren. 2001. The Egyptian Food Subsidy System: Structure, Performance, and Options for Reform. Research report 119, International Food Policy Research Institute, Washington, DC. Alderman, H. 2002. “Subsidies as a Social Safety Net: Effectiveness and Chal- lenges.” Social Safety Net Primer Series, Discussion Paper 0224, World Bank, Washington, DC. Del Granado, J. A., D. Coady, and R. Gillingham. 2010. “The Unequal Benefits of Fuel Subsidies: A Review of Evidence for Developing Countries.” Working Paper 10/202, International Monetary Fund, Washington, DC. Fattouh, B., and L. El-Katiri. 2012. Energy Subsidies in the Arab World. Arab Human Development Report Research Paper Series, United Nations Devel- ­ opment Programme, New York. Filmer, D., and L. Pritchett. 2001. “Estimating Wealth Effects without Expendi- ture Data—or Tears: An Application to Educational Enrollments in States of India.” Demography 38 (1): 115–33. Government of Yemen, World Bank, and UNDP (United Nations Development Programme). 2007. Yemen Poverty Assessment. Washington, DC: World Bank. 148 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa Government of Jordan. 2011a. An Analysis of Consumption Subsidies. Unpublished report, Amman. ———. 2011b. Social Protection Review. Unpublished report, Amman. Grosh, M., C. Del Ninno, E. Tesliuc, and A. Ouerghi. 2008. For Protection & Promotion: The Design and Implementation of Effective Safety Nets. Washington, DC: World Bank. OECD (Organisation for Economic Co-operation and Development). n.d. Social Expenditure Database (SOCX). http://www.oecd.org/els/social/expenditure. Silva, J., M. Alloush, and Q. Wodon. 2012. “Middle East and North Africa: Zakat as a Social Safety Net in Yemen.” Unpublished manuscript, World Bank, Washington, DC. Tuck, L., and K. Lindert. 1996. “From Universal Food Subsidies to a Self- Targeted Program: A Case Study in Tunisian Reform.” Discussion Paper 351, World Bank, Washington, DC. UNDP (United Nations Development Programme). 2002. Arab Human Develop- ment Report 2002: Creating Opportunities for Future Generations. New York: UNDP. World Bank. 2005. Egypt: Toward a More Effective Social Policy: Subsidies and Social Safety Net. Report 33550-EG, World Bank, Washington, DC. ———. 2007. Hashemite Kingdom of Jordan: A Note on Strategy for Modernization of the Social Safety Nets. World Bank, Washington, DC. ———. 2009. Iraq: Poverty Assessment 2009 Report. World Bank, Washington, DC. ———. 2010a. Egypt’s Food Subsidies: Benefit Incidence and Leakages. Report 57446, World Bank, Washington, DC. ———. 2010b. Iraq: First Programmatic Fiscal Sustainability DPL Program Docu- ment. Report 51528–IQ, World Bank, Washington, DC. ———. 2010c. Yemen: Private Sector Growth and Social Protection Development Policy. Grant Program Document, Report 55649–YE, World Bank, Washing- ton, DC. ———. 2011a. Poverty in Egypt 2008–09: Withstanding the Global Economic Crisis. Report 60249–EG, World Bank, Washington, DC. ———. 2011b. Royaume du Maroc: Note Strategique sur le Ciblage et la Protection Sociale. Ciblage et protection sociale: Note d’orientation stratégique. Report AAA65-MA, World Bank, Washington, DC. ———. 2012a. Atlas of Social Protection: Indicators of Resilience and Equity (ASPIRE). Washington, DC: World Bank. http://www.worldbank.org/spatlas. ———. 2012b. Republic of Iraq: Public Expenditure Review (towards More Efficient Spending for Better Service Delivery in Iraq). Report 68682-IQ, World Bank, Washington, DC. ———. Various years. World Development Indicators. Washington, DC: World Bank. ——— . Forthcoming. LAC SSN inventory.Unpublished report, World Bank, Washington, DC. World Bank, FAO (Food and Agriculture Organization of the United Nations), and IFAD (International Fund for Agricultural Development). 2009. Improv- ing Food Security in Arab Countries. Joint report, Washington, DC. CHAPTER 4 The Political Economy of SSN Reforms in the Middle East and North Africa: What Do Citizens Want? Introduction Like other policy areas that involve redistributing resources, social safety nets (SSNs) are a politically sensitive topic. Although a number of the technical shortcomings of the existing safety nets in the Middle East and North Africa have been documented in the past, political economy con- siderations have probably been a major reason why the SSN reforms have largely stalled across the region. Disentangling the political economy of safety nets is complex. The approach of this chapter is to collect cross-country evidence regarding citizens’ perceptions and aspirations about SSNs, with the objective of informing decision makers on possible entry points for SSNs’ renewal and reform that the poor and middle classes are likely to support and that can draw from positive international experience. For example, in cash transfer programs in Latin America, the main reason for making the pro- viders of the program and its beneficiaries jointly responsible for building human capital was to maximize the program’s impact on intergenera- tional poverty. However, this feature also proved critical in changing the political acceptability of SSN programs in Latin America (Grosh et al. 2008). In this sense, the report does not undertake a full political econ- omy analysis of reform but rather highlights its feasibility from the per- spective of the general public and helps decision makers by reducing the risks associated with reforming under complete uncertainty. This chapter focuses on the following six questions, in light of what the existing literature has found to be relevant on the political economy of SSNs—specifically SSNs in the Middle East and North Africa: • What are the perceived causes of poverty and economic success? • What are the main correlates of the appetite for redistribution? 149 150 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa • What do people think the role of the state is, and how satisfied are they about the state’s role with regard to the provision of SSNs to the poor? • What design features do people think SSNs should include? • What is the acceptability of price subsidy reform and the politically viable options for their reform? • What are the characteristics of effective SSNs that have gained broad acceptance among populations around the world? The evidence presented in this chapter is based on newly collected data from the MENA SPEAKS surveys in the Arab Republic of Egypt, Jordan, Lebanon, and Tunisia and from the Jordan Gives behavioral experiment. These data address important knowledge gaps on the subject. The MENA SPEAKS surveys are four nationally representative opin- ion surveys on knowledge and attitudes about safety nets and social pref- erences, fielded by Gallup in Egypt, Jordan, Lebanon, and Tunisia. These cross-country comparable surveys interviewed citizens on the Social Protection Evaluation of Attitudes, Knowledge, and Support (SPEAKS). ­ The second set of data derives from a behavioral experiment conducted among a nationally representative sample of the lower, middle, and upper-middle classes in Jordan. The Jordan Gives experiment collected fact-based information on individuals’ preferences for various forms of SSNs by observing their decisions on whether and how to allocate various forms of SSNs to poor individuals. Little to no data had existed for MENA countries regarding these issues.1 No cross-country data previously ex- isted regarding public awareness and preferences toward SSNs and sub- sidy reform, and little knowledge existed regarding the appetite for redis- tribution and perceptions about inequality, as part of the World Values Survey (WVS n.d.). Box 4.1 summarizes the methodology adopted to collect these data, and annex 4B presents the methodology in greater detail. The data on awareness of existing SSN programs and subsidies reflect the overall state of fragmentation, low coverage, and regressiveness of the current system. Among the key findings, are the following: • Awareness of SSN programs is generally low among their intended beneficiaries, particularly in Egypt, while it is somewhat higher among the rich. • The rich also tend to be more likely than the poor to know a program beneficiary. • Regarding subsidies, the poor are mostly aware of food subsidies but know far less about energy subsidies, though awareness of the latter The Political Economy of SSN Reforms in the Middle East and North Africa: What Do Citizens Want? 151 BOX 4.1 Listening to Citizens: The MENA SPEAKS Surveys and the Jordan Gives ­Experiment Two data collection projects were con­ natives. The value added of the game ducted as part of this regional study. The through a simple survey is that participants findings presented in this report represent tend to think more deeply about trade-offs an unprecedented attempt to shed light on when the consequences of their choices the specificities of the political economy of translate into concrete monetary costs and SSNs in the region through nationally rep- benefits. Thus, the information elicited resentative data. These data are also unique through their decisions should be a more in their application of behavioral econom- reliable measure of their true preferences ics to study the preferences for SSNs in the for redistribution. Middle East and North Africa. The game was carried out in Jordan with 42 groups of 10 citizens each by the Center MENA SPEAKS: MENA Social Protection for Strategic Studies at the University of Evaluation of Attitudes, Knowledge, Jordan. The sampling units were drawn and Support (SPEAKS) from a sample of the Jordanian middle class MENA SPEAKS surveys are four nation- (explained further below). In each ran- ally representative surveys conducted as domly selected primary sampling unit part of the Spring 2012 wave of Gallup’s (PSU), two groups (treatment and control) World Poll in Egypt, Jordan, Lebanon, and played simultaneously in separate rooms, Tunisia. The surveys collected data from with participants randomly assigned to one 1,000 randomly selected households in of the groups. At the beginning of the each country about their subjective income; game, each participant received fuel vouch- perceptions on existing inequality; the role ers issued by Jordan Petroleum Refinery: a of the state as the main provider of SSNs; JD 5 (Jordanian dinars) voucher as a show- knowledge of existing SSN programs; pref- up fee and a JD 10 voucher to play the erences on SSN design features; knowledge game. The magnitude of the voucher for of existing subsidies; and preferences re- the game (JD 10) is essentially equivalent to garding subsidy removal and different the minimum daily wage. Participants were compensation packages. For an example of offered four independent proposals, and a MENA SPEAKS questionnaire (Egypt), for each proposal they had to decide see annex 4A. whether to accept it (implying willingness Jordan Gives: Jordan Behavioral to give up the JD 10 voucher to have the Experiment on Redistribution proposal implemented) or to reject it (im- Preferences plying a preference to keep the JD 10 Jordan Gives is a behavioral game that col- voucher instead of implementing the lected information on people’s preferences proposal. and support for several redistribution alter- (box continued on next page) 152 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa BOX 4.1 Continued The proposals, which portrayed as ticular proposal features (cash versus in- closely as possible different SSN designs, kind, conditional versus unconditional, pri- were the following: vate goods only versus private and public). The difference in the game played in the • [Cash transfer] You give up your JD 10 treatment groups as opposed to the control voucher. Our team gives JD 20 cash per groups consisted of additional information family to five poor families in this com- provided only to the treatment groups. munity. Do you accept or reject the This information appealed to the Arab val- proposal? ues of solidarity and listed the potential • [In-kind transfer] You give up your JD “shopping cart” a poor family could buy 10 voucher. Our team gives a food bas- with JD 20. Moreover, treatment groups ket worth JD 20 per family to five poor were offered the option to accompany the families in this community. facilitator after the game to witness the implementation of the proposal if the se- • [Conditional cash transfer] You give up lected decision was “accept.” This activity your JD 10 voucher. Our team gives JD was complemented by evidence collected 20 cash per family to five poor families through a questionnaire. The sample was in this community conditional on their nationally representative of the middle completion of a free training program class to represent the median voter, who on work-related skills. was expected to have lower self-interest in • [Cash transfer and money to the local increasing redistribution and to be more school] You give up your JD 10 voucher. likely to actively oppose SSN reform. Our team gives JD 20 cash per family to Because of the national scale of the ex- two poor families in this community, periment and to ensure homogeneity of and JD 60 cash will go to the local implementation across groups, a video in school. the local language was used in all groups. This video provided detailed instructions The difference in acceptance rates between to the participants and projected each of the presented alternatives can be attributed the proposals on the screen. to the differences in preferences for par- tends to increase among wealthier people (who absorb most of the subsidy benefits, as shown in chapter 3). • Contrary to the oft-cited perception that SSNs in the Middle East and North Africa are seen as the responsibility of religious or charitable organizations, the region’s citizens unambiguously see their govern- ments as most responsible for assisting the poor. Yet in two out of the four countries studied through the MENA SPEAKS surveys, the vast The Political Economy of SSN Reforms in the Middle East and North Africa: What Do Citizens Want? 153 majority reported being dissatisfied with the effectiveness of the exist- ing SSNs. • The subjective poor (those who are not in the bottom quintile of in- come but who perceive themselves to be in the bottom of the four in- come groups) are a constituency that feels particularly unsatisfied with existing SSNs while showing great demand for more redistribution. • People who perceive inequality to be high, those who expect a drop in living standards, and those who believe that poverty is socially (as op- posed to individually) caused are more likely to demand redistributive policies. • Looking toward the future, citizens (particularly the poor) would rather­see SSNs with cash-based benefits, are in favor of poverty-based targeting, and are generally averse to imposing conditionalities— though preferences on the latter are heterogeneous across classes and countries. • Opposition to subsidy reform varies strongly by country—and it is higher in Egypt and Jordan. Generally there is lower resistance to re- forming energy subsidies than food subsidies. • In case of reform, most citizens would rather see the country’s savings converted into cash-based transfers targeted to the poor, coupled in some cases, with higher spending on the social sector. The next section discusses the evidence on the determinants of the demand for redistribution in the Middle East and North Africa, including beliefs on poverty and individual success. Subsequent sections discuss how citizens regard the existing SSNs and lay out the most-accepted op- tions for subsidy reform. The final section presents international experi- ences of program design features that are likely to enhance acceptability of reform among citizens. Demand for Redistribution among Citizens of the Middle East and North Africa Attitudes toward redistribution vary largely across countries, and in the Middle East and North Africa, comparable data on citizens’ preferences for redistribution, such as those collected by the World Values Survey (WVS), are limited to a few countries (Egypt, the Islamic Republic of Iran, Jordan, and Morocco). As a result, this issue—a crucial determinant of the demand for SSNs—is poorly studied in the region. The MENA 154 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa SPEAKS survey and the Jordan Gives game provide new insights on these issues. Attitudes toward redistribution are shaped by multiple factors, and this section will focus on three major individual determinants: (a) beliefs on causes of poverty and success, (b) self-perceptions of one’s status in the welfare distribution, and (c) perceptions of prospects for upward mobility. • Beliefs on causes of poverty and success. On an individual level, people who think that poverty is caused by lack of willpower or laziness and that success is a result of effort and hard work believe in a “just world,” where everyone gets what they deserve. Such a belief implies a lower preference for redistributive policies (Alesina and Angeletos 2005; Ale- sina and Giuliano 2009; Bénabou and Tirole 2006). • Self-perceived status in the welfare distribution. Preferences for redistribu- tion, and consequently for SSN reform, depend, in part, on whether people perceive themselves to be potential net beneficiaries or bene- factors of SSN programs. This, in turn, is determined by self-perceived rank in the welfare distribution, which is only partly reflected in objec- tive measurements such as income or consumption (Cruces, Truglia, and Tetaz 2011; Ravallion and Lokshin 2000). • Perceptions on prospects for upward mobility. When thinking about long- lasting redistributive policies, people take into account not just their current status and position in the welfare distribution but also their expected future position (Bénabou and Ok 2001; Ravallion and Lok- shin 2000). Thus, people who are hopeful about future upward mobil- ity are less likely to support redistributive SSN programs than people who do not hold such optimistic views about their future prospects. Beliefs on the Causes of Poverty and Success Among the Jordanian middle class, injustice in society is more frequently deemed to be the main cause of poverty, as opposed to laziness. This perception is halfway between those held in regions like Latin America and the Caribbean and continental Europe, where SSNs are more devel- oped, and the United States and China, where most citizens believe that poverty is a result of laziness and lack of willpower, as shown in table 4.1. Although this belief prevails at the mean, the perceptions differ be- tween lower-middle- and upper-middle-class individuals. Data from Jor- dan reveal that middle-class individuals who report being closer to being poor are more likely than upper-middle-class individuals to believe that poverty is a result of injustice in society or of bad luck, as figure 4.1 il- The Political Economy of SSN Reforms in the Middle East and North Africa: What Do Citizens Want? 155 TABLE 4.1 Perceptions of Poverty in Jordan, Latin America and the Caribbean, Europe, and the United States, c. 2006–12 % who believe “the poor are poor because…” “… society is unjust” or “… they are unlucky” “… they are lazy” China 41.6 58.4 Europea 78.3 21.7 India 57.9 42.1 Jordan (middle class only) 61.7 38.3 Latin America and the Caribbean 73.5 26.5 United States 38.4 61.6 Sources: Authors’ calculations based on World Values Survey (WVS) 2006; Jordan Gives 2012. a. Continental Europe. FIGURE 4.1 Perceived Causes of Poverty among Jordanian Middle Class, by Subjective Income Group, 2012 Why are poor people poor in Jordan? 70 60 50 Respondents, % 40 30 20 10 0 Lower-middle class Middle Upper-middle class Injustice in society or bad luck Laziness or lack of willpower Other Source: Authors’ calculations based on Jordan Gives 2012. lustrates. In fact, the share of individuals who believe that laziness is at the core of poverty increases with income and is as high as 37 percent among the upper-middle class in Jordan. The Jordan Gives experiment indicates that perceptions about the poor are associated with the level of support for redistribution. Regres- sion analysis on data from the Jordanian middle class (shown in annex 4D) indicates that those who believe that the poor are in this economic condi- 156 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa tion out of laziness (as opposed to injustice or bad luck) support signifi- cantly less redistributive intervention by the government. These findings are consistent with the evidence from high-income countries. Alesina and Giuliano (2009) have shown that people tend to prefer more redistribu- tion to the poor if they believe that poverty is caused by factors beyond an individual’s control. In an empirical study based on a U.S. survey, Fong (2001) concluded that people who believe that earnings depend on indi- vidual effort such as hard work and willpower do not support redistribu- tion programs for the poor; usually these are people with high-mean and low-variance income. The same study also concluded that people who believe that poverty is caused by exogenous factors, such as bad luck or lack of opportunity, have higher support for redistribution. The regression analysis on the Jordanian data also shows that there does not seem to be a significant correlation between private social safety nets and lower demand for redistribution: those who reported being able to rely on family and friends in times of need actually supported signifi- cantly more redistributive policies by the government than those who felt unable to rely on informal safety nets. Subjective Poverty and the Demand for Redistribution In Egypt and Tunisia, a third of people define themselves as poor—a much higher rate than the actual poverty rate. In the MENA SPEAKS survey, individuals were asked to place their household’s income in one of four categories and were shown four coin stacks of different heights to help visualize the income categories—from poorest (one coin) to richest (many coins). More than 30 percent of all Egyptians and Tunisians char- acterized themselves as being within the poorest income category in their country (the “self-reported poor”). In Jordan and Lebanon, this share hovered at 20 percent. Lebanon stands out as the only Middle Eastern and North African country out of the four where the self-reported poor were actually fewer than what the actual poverty rate indicated. In addition, a sizable share of those in the middle class—and up to 20 percent of the upper middle class in both Egypt and Tunisia—reported themselves as being poor (the “subjective poor”) in spite of not belonging to the bottom income quintile, as table 4.2 shows. In particular, in Egypt, a third of people in the second and third quintiles felt poor; in Lebanon and Jordan, a quarter of the second quintile felt poor; and in Tunisia, al- most half of the people in the second quintile felt poor, as figure 4.2 shows. The previously mentioned regression analysis also indicated that among the Jordanian middle class, those who defined themselves as non- poor were significantly less likely to support redistribution policies than The Political Economy of SSN Reforms in the Middle East and North Africa: What Do Citizens Want? 157 TABLE 4.2 Do People Feel Poorer than They Are? Self-Reported Poverty and Subjective Poverty in the Middle East and North Africa, Selected Countries, 2012 percent Country Poverty rate “Self-reported poor” “Subjective poor” Egypt, Arab Rep. 23.00 34.79 22.44 Jordan 14.40 21.23  8.88 Lebanon 28.50 20.98 10.54 Tunisia 11.00 33.62 19.66 Sources: Authors’ calculations based on latest available household surveys, national estimates, and MENA SPEAKS survey 2012. Note: “Self-reported poor” = individuals who say they feel poor from all wealth quintiles; “subjective poor” = individuals who say they feel poor excluding the bottom wealth quintile. FIGURE 4.2 Who Feels Poor, by Income Quintile, in the Middle East and North Africa, Selected Countries, 2012 90 Respondents who report being poor, % 80 70 60 “Subjective 50 poor” 40 30 20 10 0 Q1 Q2 Q3 Q4 Q5 Q1 Q2 Q3 Q4 Q5 Q1 Q2 Q3 Q4 Q5 Q1 Q2 Q3 Q4 Q5 Egypt, Arab Rep. Jordan Lebanon Tunisia Source: Authors’ calculations based on MENA SPEAKS Survey 2012. Note: Income quintiles calculated based on Gallup income variable. Q = income quintile (1 = lowest, 5 = highest). those who defined themselves as poor. In fact, part of the literature sug- gests that the subjective perception of poverty, and not just income pov- erty, may strongly affect the demand for redistribution. Although some authors believe that the inclination for redistribution programs reduces monotonically with income levels (Gelbach and Pritchett 2002; Meltzer and Richard 1981; Pritchett 2005; T. Romer 1975), other studies indi- cated that an individual’s perception about own income relative to others is a better determinant of support for redistribution programs (Alesina and La Ferrara 2005). Based on a randomized experiment in Argentina, 158 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa Cruces, Truglia, and Tetaz (2011) found that individuals who overesti- mated their relative position in the income table (thinking themselves richer than they were), once they found out their actual standing, de- manded more redistribution. Another study based on a U.S. survey sug- gested that awareness about greater poverty may increase demand for redistribution programs through altruism (Fong 2001). Perceptions of Inequality and Social Mobility The MENA SPEAKS surveys also reveal that between one-third and one-half of the citizens in the four countries, particularly those of lower income, perceive inequality to be extremely high. People were asked what portion of their country’s total wealth they believed was held by the rich. The options were (a) almost all, (b) more than half, (c) half, or (d) less than half of the total wealth held by individuals. The share of individuals that selected “almost all” was 56 percent in Egypt, 38 percent in Lebanon, 36 percent in Tunisia, and 29 percent in Jordan. Although these answers show that inequality is perceived as extreme by only a subset of the popu- lation, it is noteworthy that the poor are more likely to believe that the rich own almost all of the wealth in each country. The data also show that the “subjective poor” systematically perceive higher inequality than the average population does. In particular, the poorer one is, the more likely one is to feel that the rich own almost all the wealth. But the “subjective poor” stand out as having a stronger per- ception of inequality than any other income group (including the poorest quintile), as shown in figure 4.3. Higher inequality does not systematically breed greater demand for redistribution. The demand depends on whether individuals believe that their society is upwardly mobile. Regression analysis from the MENA SPEAKS survey suggests that in Egypt, Jordan, and Tunisia, the percep- tion of high inequality is lower among those whose living standard has been improving (see annex 4E). In fact, the literature suggests that indi- viduals will be less inclined to support SSN programs if they are hopeful about upward mobility in the future. A study by Alesina and Giuliano (2009) suggested that if people are less optimistic about their future in- come, they will be more inclined to equalize everybody’s income. Hirschman and Rothschild (1973) proposed an influential theory called the “tunnel effect,” whereby the support for redistribution may not be high among the poor to the extent that people expect to become rich in the future. Ravallion and Lokshin (2000) found that, in the Russian Fed- eration, not only was support for redistribution the lowest among those who had been on an increasing consumption path, even among the poor, The Political Economy of SSN Reforms in the Middle East and North Africa: What Do Citizens Want? 159 FIGURE 4.3 Perceived Inequality, by Income Quintile, in the Middle East and North Africa, Selected Countries, 2012 80 70 Respondents who think the rich own 60 almost all wealth, % 50 40 30 20 10 0 Egypt, Arab Rep. Jordan Lebanon Tunisia Q1 Q2 Q3 Q4 Q5 Subjective poor Source: Authors’ calculations based on MENA SPEAKS Survey 2012. Note: This graph depicts the percentage of MENA SPEAKS respondents who think the rich own almost all the wealth, as opposed to the percentage who think the rich hold more than half, about half, or less than half of the total wealth held by individuals. “Subjective poor” = individuals who perceive themselves as poor but whose income is not in the bottom quintile. Q = income quintile (1 = lowest, 5 = highest). but also that rich individuals on a downward path expressed a greater demand for redistribution. And data from Jordan Gives indicate that perceptions about upward mobility are skewed according to social classes. In Jordan, the upper- middle class is much more likely than those in the lower-middle class to believe that hard work is the cause of professional success, as opposed to luck and connections (see figure 4.4). As shown in chapter 3, the employ- ment outcomes of the poor are lower than those of the rich, and these data suggest that the poor tend to be much more disgruntled about op- portunities and more aware of the role of privilege in determining such outcomes. Those who think their living standard is improving are less likely to think that (a) the rich own almost all of the total wealth in the country, and (b) the government has primary responsibility for helping the poor (see figure 4.5, panel a). In Egypt, Jordan, and Tunisia, they are also more likely to think the government is very or somewhat effective in providing SSNs to the poor (see figure 4.5, panel b). However, this group tends to be composed of nonpoor individuals (see figure 4.6). 160 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa FIGURE 4.4 Opinions on Causes of Success among the Jordanian Middle Class, by Subjective Income Level, 2012 What is in your opinion the main cause of professional success? Upper middle income Middle income Lower middle income 0 20 40 60 80 Percent Hard work Luck and connections Source: Authors’ calculations based on Jordan Gives 2012. Note: Results based on data. FIGURE 4.5 Support for Government SSN Provision, by Prospective Living Standard, Middle East and North Africa, Selected Countries, 2012 a. Responsibility of government b. E ectiveness of government 120 80 70 to help the poor is with the government % who think the primary responsibility % who think the government is very or somewhat e ective in providing SSNs 100 60 80 50 60 40 30 40 20 20 10 0 0 Egypt, Jordan Lebanon Tunisia Egypt, Jordan Lebanon Tunisia Arab Rep. Arab Rep. Living standard Living standard Living standard Living standard not improving improving not improving improving Source: Authors’ calculations based on MENA SPEAKS Survey 2012. Note: SSN = social safety net. The Political Economy of SSN Reforms in the Middle East and North Africa: What Do Citizens Want? 161 FIGURE 4.6 Perception of Improving Living Standards, by Wealth Quintile, in the Middle East and North Africa, Selected Countries, 2012 60 % who feel their living standards are improving 50 40 30 20 10 0 Q1 Q2 Q3 Q4 Q5 Q1 Q2 Q3 Q4 Q5 Q1 Q2 Q3 Q4 Q5 Q1 Q2 Q3 Q4 Q5 Egypt, Arab Rep. Jordan Lebanon Tunisia Source: Authors’ calculations based on MENA SPEAKS Survey 2012. Note: Q = wealth quintile (1 = lowest, 5 = highest). Citizens’ Regard for Existing SSN Systems Satisfaction with Existing SSN Programs Almost all citizens interviewed in the four countries saw government as the main actor responsible for addressing poverty. An equally large ma- jority agreed with the statement that their government should provide SSNs to the poor, as figure 4.7 shows. Thus, on a general level, citizens’ demand for SSNs—and the expectation that governments should inter- vene in providing them safety—appears to be high. However, large percentages of the population, particularly in Egypt and Lebanon, do not find their governments to be effective in providing SSNs. Figure 4.8 shows that less than 30 percent of all Egyptians and Lebanese think that their governments provide SSNs effectively. Jorda- nians and Tunisians appear to be more satisfied, even though satisfaction in these countries is significantly higher among the upper classes than among the poor and vulnerable. Satisfaction with government effective- ness in providing SSNs is generally higher and more income-related in Jordan and Tunisia than in Egypt and Lebanon, where the low levels of satisfaction are fairly similar across income groups. The positive assess- ment of Jordan’s SSNs by most citizens tends to be in line with findings in chapter 3 that SSNs perform relatively well in Jordan compared with the rest of the region. 162 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa FIGURE 4.7 Opinions about Responsibility for SSNs in the Middle East and North Africa, Selected Countries, 2012 a. Who should be most responsible for the poor in your country? b. Should the government provide social assistance to the poor? 100 100 75 75 Yes responses, % Respondents, % 50 50 25 25 0 0 Egypt, Jordan Lebanon Tunisia Egypt, Jordan Lebanon Tunisia Arab Rep. Arab Rep. No group should be Charitable org. Religious org. Family and friends Government Source: Authors’ calculations based on MENA SPEAKS Survey 2012. Note: SSN = social safety net. FIGURE 4.8 Opinions of SSN Effectiveness in the Middle East and North Africa, Selected Countries, 2012 How e ective is social assistance in your country? 100 90 80 70 60 Responses, % 50 40 30 20 10 0 Egypt, Arab Rep. Jordan Lebanon Tunisia Not e ective at all Not very e ective Somewhat e ective Very e ective Source: Authors’ calculations based on MENA SPEAKS Survey 2012. Note: SSN = social safety net. The Political Economy of SSN Reforms in the Middle East and North Africa: What Do Citizens Want? 163 Both the economic poor and the subjective poor—those who felt likely to need safety nets in the future—were much more critical of the existing system than other people. Dissatisfaction was highest among the subjec- tive poor in Egypt, Jordan, and Lebanon, possibly because they felt more in need but were less eligible for assistance (see figure 4.9). Another evi- dence of the link between vulnerability and perceptions of the effective- ness of SSNs comes from the regression (see annex 4F). In Egypt, Jordan, and Lebanon, individuals who perceived the economy to be deteriorating tended to see SSNs as less effective. Similarly, in Egypt and Jordan, those who found inequality to be higher were more dissatisfied with the effec- tiveness of SSNs. Across all countries, citizens’ perceptions of government corruption also strongly predict their assessment of SSN effectiveness, according to regression analysis on the MENA SPEAKS survey (annex 4F), control- ling for actual income levels and other demographic characteristics. A media study on SSNs in Brazil has shown that corruption cases can im- mediately taint the popularity of programs (Lindert and Vicensini 2010). However, the Jordan Gives experiment provides evidence that en- hancing transparency of delivery can increase support for redistribution among citizens who have low trust in the existing system. The experiment allowed, through random selection of participants into control and treat- FIGURE 4.9 Perceptions of Government Effectiveness in Providing SSNs, by Income Quintile, in the Middle East and North Africa, Selected Countries, 2012 80 somewhat e ective in providing assistance, % 70 Responses that government is very or 60 50 40 30 20 10 0 Egypt, Arab Rep. Jordan Lebanon Tunisia Q1 Q2 Q3 Q4 Q5 Subjective poor Source: Authors’ calculations based on MENA SPEAKS Survey 2012. Note: SSN = social safety net; “Subjective poor” = individuals who say they feel poor but whose income is not in the bottom quintile; Q = income quintile (1 = lowest, 5 = highest). 164 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa ment groups, evaluation of the impact of several design features meant to enhance participants’ confidence that their donations would reach only poor people. Responses to the survey questions conducted as part of Jor- dan Gives indicate that nearly 50% of the middle class have little confi- dence in the way beneficiaries are selected for social assistance programs in their country (figure 4.10a). Qualitative evidence from focus group discussions supports this finding and highlights that many participants believe connections and favoritism play an important role in the assign- ment of benefits. Because targeting in Jordan tends to be more accurate than in most other countries in the region (as discussed in chapter 3), it is likely that confidence in the targeting of SSNs in the other countries is even lower. The Jordan Gives experiment showed that those with low trust in the accuracy of the existing targeting of Jordanian SSNs also displayed an overall lower tendency to donate their fuel vouchers, which was particu- larly evident in the three cash-based SSN designs. However, this ten- dency was countered in treatment groups by the transparency-enhancing feature, which allowed participants to verify in person the delivery of the benefit at the end of the experiment (figure 4.10b). The evidence from this experiment suggests that there is scope for governments to improve individuals’ support for SSNs, even from low levels of confidence, through transparency enhancement measures. In Brazil, for instance, the list of beneficiaries of the cash transfer program Bolsa Familia is published online. Some programs in Sub-Saharan Africa FIGURE 4.10 Jordan Gives Experiment Results Regarding Trust in SSN Institutions a. Trust that SSNs reach the poor b. Mean probability of donating voucher, by trust level 50 80 75 Mean probability of donation, % 40 70 Responses, % 30 65 20 60 10 55 0 50 Completely Somewhat Not very Not con dent Control Treatment Control Treatment con dent con dent con dent at all Con dent Not con dent Source: Authors’ calculations based on Jordan Gives 2012. Note: Results based on data. SSN = social safety net. The Political Economy of SSN Reforms in the Middle East and North Africa: What Do Citizens Want? 165 adopt community-level vetting of social assistance program beneficiary lists (for instance, the cash transfer program in Rwanda). Another way to improve oversight is to publish financial flows for social assistance pro- grams up to the local level. When designing these measures, it is impor- tant to be mindful of the social and power structures in place and the degree of accountability of civil society groups at the local level, as well as social norms about confidentiality and the eventual stigma attached to receiving social assistance. SSN Programs’ Recognition and Outreach Awareness of SSN Programs Some countries are much better than others at raising awareness of the SSN programs available in their countries. The MENA SPEAKS survey included two questions evaluating respondents’ awareness of SSNs.2 Fig- ure 4.11 shows that awareness (defined as either mentioning the program or acknowledging its existence when prompted) differed dramatically by country. In Lebanon, a quarter of the respondents knew about three out of five programs on the list of major programs in the country; in Jordan, respondents knew about three to four out of six programs. Tunisians had the highest awareness of SSN programs, with about 30 percent of respon- dents having heard about five out of six programs. Egyptians had the lowest awareness, with 23 percent of respondents having never heard about a single SSN program, even after being prompted with program names; 30 percent acknowledged only one such program (see annex 4C). By definition, SSN programs deliver income support or goods and services to the poor and vulnerable. However, it appears that in the Mid- dle East and North Africa, knowledge about the existence of these pro- grams is skewed toward wealthier groups. Figure 4.12 shows that aware- ness in all four countries rises with income. In Egypt, the richest quintile knew about twice as many SSN programs as the poorest quintile. This implies that awareness-raising campaigns are not reaching their target audiences, undermining the government’s efforts to improve coverage and reduce poverty. Knowledge of SSN Program Beneficiaries The MENA SPEAKS survey may provide indirect information about the targeting of programs, even if the results should be treated with caution. Data regarding personal knowledge of someone who is an SSN benefi- ciary could be a proxy for the accuracy of targeting in some major pro- grams. When people displayed awareness of a particular SSN program, MENA SPEAKS asked them if they personally knew someone who had received assistance from this program. 166 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa FIGURE 4.11 Awareness of SSN Programs in the Middle East and North Africa, Selected Countries, 2012 percentage of population a. Egypt, Arab Rep.: Number of programs known by b. Jordan: Number of programs known by the population the population 6 9 3 9 6 23 17 12 20 10 30 21 14 22 0 1 2 3 4 5 6 c. Lebanon: Number of programs known by d.Tunisia: Number of programs known by the population the population 4 5 17 6 12 23 13 20 22 29 24 26 0 1 2 3 4 5 6 Source: Authors’ calculations based on MENA SPEAKS Survey 2012. Note: SSN = social safety net. Plotted against income quintiles, this information is revealing and can potentially provide insights into programs’ targeting accuracy. However, interpretation of the results has to be predicated on two assumptions about social networks in the Middle East and North Africa: (a) that the density of social networks is fairly similar across income quintiles, and (b) that the probability of knowing someone outside one’s own income group can be somehow estimated. In reality, the poor tend to have sparser social networks (so one would expect the rich to simply know more peo- ple, including more poor people, than the poor would know). In addition, The Political Economy of SSN Reforms in the Middle East and North Africa: What Do Citizens Want? 167 FIGURE 4.12 Awareness of SSNs, by Income Quintile, in the Middle East and North Africa, Selected Countries, 2012 4.0 3.0 No. of SSN programs known 2.0 1.0 0 Q1 Q2 Q3 Q4 Q5 Egypt, Arab Rep. Jordan Lebanon Tunisia Source: Authors’ calculations based on MENA SPEAKS Survey 2012. Note: SSN = social safety net; Q = income quintile (1 = lowest, 5 = highest). the rich tend to know many more poor people by being their potential employers; the poor, on the other hand, do not generally have a compa- rable way of becoming known to the rich. Figure 4.13 shows that people in Jordan and Lebanon are more likely than people in Egypt and Tunisia to know someone who receives assis- tance from SSNs. In part, this finding could be driven by the larger area and population size of the latter countries; holding nationwide coverage of a program constant, a person in a small country such as Lebanon is more likely to know someone who is participating than a person in a large country such as Egypt. The most striking result from the figure, however, comes from the within-country comparisons: • In Jordan, the average number of SSN programs for which a respon- dent knew an assistance beneficiary was 1.4 for those in the bottom quintile and less than 1.1 for the top quintile. With the caveats men- tioned above, this is in line with the observation that SSNs in Jordan are targeted to the poor and vulnerable. • In Tunisia, on the other hand, the pattern is surprising: in the bottom quintile, the average number of programs for which respondents knew a beneficiary was very low, at 0.3. Although most of those in the wealthiest quintile didn’t know even one person participating in an SSN program, their probability of knowing an SSN beneficiary was 168 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa FIGURE 4.13 Average Number of SSN Programs of Which Respondents Know a Beneficiary, by Income Quintile, in the Middle East and North Africa, Selected Countries, 2012 2.0 1.8 Average no. of SSN programs of which 1.6 respondent knows a bene ciary 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0 Egypt, Arab Rep. Jordan Lebanon Tunisia Q1 Q2 Q3 Q4 Q5 Source: Authors’ calculations based on MENA SPEAKS Survey 2012. Note: SSN = social safety net. Q = income quintile (1 = lowest, 5 = highest). 2.4 times that of people in the bottom quintile. Indeed, the probability of knowing someone who received SSN assistance rose fairly steeply between the bottom and the middle-income quintiles. • In Lebanon, those in the top two quintiles knew an SSN beneficiary of, on average, 1.8 SSN programs, while the corresponding figure for the bottom quintile was only 1.2. • In Egypt, the probability of knowing someone in an SSN program appeared to be relatively uncorrelated with income. Therefore, under this indirect measure of targeting, SSNs in Tunisia and, to a lesser extent, in Lebanon appear to have high rates of leakage. Coverage and Targeting of SSN Programs Around 60 percent of the bottom quintile in the respective countries know someone who participates in Egypt’s Sadat Pension, Jordan’s Na- tional Aid Fund and school nutrition program, and Lebanon’s hospital fee waivers, as figure 4.14 illustrates. This finding implies that these pro- grams probably have the best in-country reach to the bottom quintile. In terms of targeting accuracy, most programs in Jordan had the ex- pected downward slope, which conforms well to the SSN performance assessment based on the household survey analysis in chapter 3. There- The Political Economy of SSN Reforms in the Middle East and North Africa: What Do Citizens Want? 169 FIGURE 4.14 Knowledge of Specific SSN Program Beneficiaries, by Income Quintile, in the Middle East and North Africa, Selected Countries, 2012 a. Egypt, Arab Rep. b. Jordan 80 70 Respondents knowing an SSN bene ciary, % Respondents knowing an SSN bene ciary, % 60 60 50 40 40 30 20 20 10 0 0 Q1 Q2 Q3 Q4 Q5 Q1 Q2 Q3 Q4 Q5 Sadat pension Nasser social bank NAF Zakat fund CT for students Productive families’ projects MOSD emergency assistance School nutrition program Micro-grants Child law pension Enhanced productivity program King’s makrame c. Lebanon d. Tunisia 100 35 Respondents knowing an SSN bene ciary, % Respondents knowing an SSN bene ciary, % 90 30 80 70 25 60 20 50 40 15 30 10 20 5 10 0 0 Q1 Q2 Q3 Q4 Q5 Q1 Q2 Q3 Q4 Q5 Hospital fee waivers MOSA welfare program PNAFN National solidarity fund Vocational training programs Disability training/ THIMO CNSS health cards support In-kind transfers from MOSW Source: Authors’ calculations based on MENA SPEAKS Survey 2012. Note: CNSS = Caisse Nationale de Sécurité Sociale; CT = cash transfer; MOSA = Ministry of Social Affairs; MOSD = Ministry of Social Development; MOSW = Ministry of Social Welfare; NAF = National Aid Fund; PNAFN = Program of Assistance for Needy Families (Programme National d’Aide aux Familles Nécessiteuses); Q = income quintile (1 = lowest, 5 = highest); SSN = social safety net; THIMO = Public Works (Travaux à Haute Intensite de Main d’œuvre). fore, among the specific SSN programs, Jordan’s NAF and school nutri- tion programs appear to perform well on the implicit measures of both coverage and targeting of the poorest quintile. In Egypt, the Sadat Pension seemed to be the best-targeted program (and was mildly progressive), followed by micro-grants; for other pro- 170 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa grams, the propensity to know someone receiving assistance fluctuated across quintiles (for example, regarding cash transfers for students and Productive Families’ projects) or was mildly regressive (as in assistance from the Nasser Social Bank and Child Law Pension). For all but one SSN program in Lebanon and for all SSN programs in Tunisia, those in the wealthiest quintile were more likely to know some- one receiving assistance than those in the poorest quintile. For example, more than 90 percent of respondents from the richest quintile knew someone who used hospital fee waivers, while only 60 percent of respon- dents from the poorest quintile could say the same. In Tunisia, most SSN participants had friends or family in the middle or top quintile; for virtu- ally all programs, respondents in the bottom quintile were about 10–15 percent more likely to know an SSN program participant; for the middle quintile, that figure was 25 and 32 percent for the Program of Assistance to Needy Families (Programme National d’Aide aux Familles Nécessiteuses; PNAFN) and Caisse Nationale de Sécurité Sociale (CNSS) health cards, respectively. A diverse literature discusses whether public support for redistribution can best be obtained through loose or universal targeting, rather than through a narrow targeting of the most needy. Some researchers argue that targets are difficult to identify and that targeting is administratively difficult; for this reason, they predicate that loose targeting would be best for public support or even that a program should have both a universal and a targeted component for it to be politically sustainable (Gelbach and Pritchett 2002; Pritchett 2005; Sen 1995). However, earlier sections have shown that the nonpoor may also be ready to support redistribution—for instance, when they find inequality to be excessive—without expecting a direct individual gain. In other words, considerations beyond self-interest may influence public opinion in support of narrow targeting. One of them is the concern that public funds be used efficiently. For instance, De Janvry et al. (2005) showed that the expansion of Brazil’s Bolsa Escola program among the poor at the mu- nicipal level predicted positively mayors’ reelection, while high leakage to the nonpoor had the opposite effects. Therefore, the accuracy and level of targeting of existing programs matter not only for program effective- ness but also for programs’ political support. SSN Design Features that Rally Support MENA SPEAKS collected data on respondents’ preferences related to design features of a hypothetical nonsubsidy SSN program. Specifically, the survey asked respondents (a) whether, in their opinion, this SSN pro- The Political Economy of SSN Reforms in the Middle East and North Africa: What Do Citizens Want? 171 gram should support the poor or support specific groups of people; (b) whether the assistance should be provided in cash or in-kind; and (c) whether any conditions should be attached to continued support (and, if so, the preferences on specific conditions). Policy makers can use this wealth of information to gauge potential public support when designing new SSN programs or when reforming existing ones. Categorical Targeting versus Targeting the Poor When asked whether they thought SSNs should focus mainly on serving the poor or specific groups of people (such as widows, orphans, the sick, and the elderly—whether or not members of those groups are poor), re- spondents in all four Middle Eastern and North African countries un- equivocally supported targeting the poor, as shown in figure 4.15. The share of people who preferred categorical targeting ranged between 8 percent in Egypt and 16 percent in Lebanon. People who felt poor (based on the MENA SPEAKS subjective in- come question) were more likely to prefer SSNs targeted to the poor. In Egypt, for example, 96 percent of those who felt poor wanted SSNs to target the poor, as opposed to 87 percent of those who put themselves in the top two income categories. Interestingly, subjective income predicts preference on this question better than the more objective income quin- tiles: for example, although preference for targeting decreased monotoni- cally with subjective income groups in Egypt, Jordan, and Lebanon, when plotted against objective income quintiles, the lowest preference for tar- geting SSNs to the poor was in the middle quintiles for these countries. Cash versus In-Kind Benefits Based on the MENA SPEAKS survey, most people prefer SSN programs to provide cash rather than goods (in-kind transfers). More than two- thirds of respondents in each of the four countries under study expressed a preference for cash-based SSNs (from 68 percent in Lebanon to 85 percent in Jordan), as shown in figure 4.16, panel a. The relatively low preference for cash in Lebanon can probably be explained by its politici- zation, given that many political parties use cash to garner electoral sup- port. In Egypt and Lebanon, the poor had a much stronger preference for cash-based SSNs than the self-identified upper-middle and wealthy groups; this can perhaps be attributed to a paternalistic view of the poor as being unable to spend cash wisely. Interestingly, in Jordan, those who categorized themselves as lower middle class had the highest preference for cash in SSNs, providing a potential support group for the government if it were to reform price subsidies or cash out its in-kind Food Security Program. 172 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa FIGURE 4.15 SSN Targeting Preferences in the Middle East and North Africa, Selected Countries, 2012 a. Poverty targeting vs. categorical targeting b. Preference by self-reported wealth status 100 100 Preference for targeting the poor, % 80 95 60 90 Responses, % 40 85 20 80 0 75 Egypt, Arab Rep. Jordan Lebanon Tunisia Poor Lower middle Upper middle and rich Serving speci c groups of people Serving the poor Egypt, Jordan Lebanon Tunisia Arab Rep. Source: Authors’ calculations based on MENA SPEAKS Survey 2012. Note: SSN = social safety net. FIGURE 4.16 SSN Design Preferences in the Middle East and North Africa, Selected Countries, 2012 a. Preference for cash bene ts vs. in-kind b. Preference for cash bene ts, by wealth status 100 90 Preference for cash, % of wealth group Bene t preference, % of respondents 80 80 60 70 40 60 20 0 50 Egypt, Arab Rep. Jordan Lebanon Tunisia Poor Lower middle Upper middle and rich Goods (food, clothes, etc.) Cash Egypt, Jordan Lebanon Tunisia Arab Rep. Source: Authors’ calculations based on MENA SPEAKS Survey 2012. Note: SSN = social safety net. The Political Economy of SSN Reforms in the Middle East and North Africa: What Do Citizens Want? 173 Conditional versus Unconditional Benefits The MENA SPEAKS survey tested respondents’ preferences for condi- tioning SSN transfers on recipient behavior, as is done in some highly successful SSN programs in Latin America, such as Mexico’s Oportuni- dades program and Brazil’s Bolsa Familia. The survey respondents were told that “in some countries, recipients of government SSNs are required to do something in exchange for monthly assistance. For example, they could be required to have their children attend school regularly. If their children stop attending school, the assistance would no longer be pro- vided.” Respondents were then asked if they thought recipients of SSN programs should be required to do something in exchange for the assis- tance or whether there should be no requirements. Unlike Latin America and the Caribbean, where conditionality of cash transfers increased support for SSNs, most respondents in the Middle East and North Africa were not ready to impose requirements on safety net recipients, as shown in figure 4.17, panel a. About two-thirds of re- spondents in Egypt and Lebanon and three-fourths of respondents in Jordan and Tunisia rejected the idea of conditioning SSN transfers. In- terestingly, in Egypt, the self-identified poor were much more open to the idea of conditionality (with 45 percent supporting it) than the middle class and the wealthy (about 30 percent). In Lebanon and Tunisia, the middle class and the wealthy were more supportive of conditionality, FIGURE 4.17 Preferences for Conditionality of SSN Programs in the Middle East and North Africa, Selected Countries, 2012 a. Support for conditionality b. Preference for conditionality, of wealth group 80 50 Preference for conditionality, % of wealth group 40 60 30 Respondents, % 40 20 20 10 0 0 Egypt, Arab Rep. Jordan Lebanon Tunisia Poor Lower middle Upper middle and rich No requirements Some requirements Egypt, Jordan Lebanon Tunisia Arab Rep. Source: Authors’ calculations based on MENA SPEAKS Survey 2012. Note: SSN = social safety net. 174 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa while in Jordan, the preference was relatively flat across self-identified income groups. There are several possible interpretations for the apparent limited sup- port for conditionality. Although in Latin America conditionality became a key factor to secure the buy-in of middle classes toward redistributive programs, it is possible that citizens do not find it fair to condition aid on recipients’ behavior, given the historical legacy of universal targeting of many public transfers through subsidies. It is also possible that Middle Eastern and North African citizens do not want beneficiaries to depend on public services to receive aid because they are aware that many of the poor have little access to them (as shown in chapter 2), or even that they do not consider it right to reward individuals to comply with what should otherwise be considered a duty (such as sending children to school). Re- gardless of the reason, this finding calls for further qualitative research to understand the main motives for these preferences. If conditionality is to be introduced in a program, a well-designed communication campaign to explain the rationale and benefits is warranted. Respondents who thought that there should be some conditionality for SSN assistance were asked follow-up questions related to specific con- ditions used around the world in conditional cash transfer programs. The most popular conditions in the Middle East and North Africa were re- lated to recipients (a) ensuring that children attend school regularly and (b) actively searching for work, as shown in figure 4.18. The lowest ac- FIGURE 4.18 Types of SSN Conditions Preferred in the Middle East and North Africa, Selected Countries, 2012 100 Preferred conditionality, % of those 90 supporting conditioning 80 70 60 School Medical Job training Actively search Participate in attendance checkups courses for work public works Egypt, Arab Rep. Jordan Lebanon Tunisia Source: Authors’ calculations based on MENA SPEAKS Survey 2012. Note: SSN = social safety net. The Political Economy of SSN Reforms in the Middle East and North Africa: What Do Citizens Want? 175 ceptance rates were for attendance at job training courses and for accept- ing work provided by the program in exchange for the assistance (that is, participating in a public works program). The reluctance to condition SSN transfers implies that if a government were to establish such a pro- gram, an effective information and communication strategy would be es- sential to convince the public of the benefits of the program and its proven effectiveness in other regions. The Jordan Gives behavioral experiment provides empirical evidence on some of the characteristics that drove preferences for particular meth- ods of redistribution. Participants in the experiment were offered the pos- sibility to give up a gasoline voucher in exchange for helping the poor under different scenarios (see box 4.1 and annex 4B for details). In each scenario, participants could choose to give up their vouchers in exchange for one of the following methods of assistance: • Unconditional in-kind transfer to poor families, in the form of food • Unconditional cash transfer to poor families • Unconditional cash transfer that would go half to a local school, half to poor families • Cash transfer to poor families who complete a training course increas- ing their employability. In addition, the experiment enabled the evaluation, through a random- ized controlled trial, of the impact of introducing additional information meant to enhance the participants’ confidence that the transfers would reach the intended target (see figure 4.19). Overall, individuals in the treatment group tended to donate more than those in the control group (though this difference is not statistically significant). The treatment, however, significantly increased donation rates among two large groups of participants: young people, and those who had low trust in the accu- racy of the existing targeting of national SSN programs. An important consequence of enhancing transparency was that while in the control group the SSN design that achieved the highest rate of fuel voucher donations was unconditional in-kind transfer, in the treatment group the most popular decision was unconditional cash transfers, which may be perceived as more prone to elite capture in spite of being more beneficial for the welfare of the poor. The econometric analysis of participants’ behavior (see table 4.3) high- lights some individual characteristics that predict the decisions to donate in different forms: • Overall, individuals who defined themselves as belonging to the lower- middle-income group showed a higher propensity to donate their fuel 176 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa FIGURE 4.19 Propensity to Donate Vouchers by SSN Design and Treatment Group in Jordan, 2012 80 Respondents who would donate fuel 75 voucher to help poor, % 70 65 60 55 50 Unconditional In-kind (food) Unconditional cash Conditional cash transfer transfer transfer and transfer cash transfer to local school Control Treatment Source: Authors’ calculations based on Jordan Gives 2012. Note: SSN = social safety net. Results based on data. TABLE 4.3 Jordan Gives Experiment: Significant Correlates of Decision to Donate Voucher under Different Social Assistance Scenarios Cash + school Cash conditional Participant characteristics Cash Food basket donation on training Adults (base = youth) 0.357*** — 0.375*** 0.325** Elder (base = youth) — — 0.671* — Subjective income: medium (base = low) 0.292** 0.509*** 0.475** — Subjective income: high (base = low) — — — — Perceived ineffectiveness of existing social assistance programs 0.210** 0.229** — — Low confidence that public SSNs reach intended beneficiaries −0.181** — −0.173* — Success comes from hard work 0.335*** 0.413*** 0.305** 0.253** Poverty caused by laziness (base = “social injustice or bad luck”) — — −0.287** — Source: Authors’ calculations based on Jordan Gives 2012. Note: SSN = social safety net. — = not significant. Preliminary Results. Include controls for education, gender, employment status, number of cars in the household, and participation in treatment group. Results represent marginal effects of probit regressions significant at * = 10%, ** = 5%, and *** = 1% levels—that is, the added probability of donating for a given option, compared with being in the baseline situation. vouchers than those who defined themselves as being in the poor or upper-income groups. Although it is understandable that lower- income people may value the voucher relatively more, this finding is more surprising for upper-income individuals who may actually be less The Political Economy of SSN Reforms in the Middle East and North Africa: What Do Citizens Want? 177 inclined to donate. Only cash donations conditional on training found similar acceptance across groups. • Finally, individual opinions about the social order mattered: those who believed that poverty is caused by laziness rather than an unjust society or bad luck chose less often to donate to the school, while, surprisingly, those who thought that career success comes from hard work (as op- posed to luck and connections) were more likely to donate to the poor in all options. Subsidy Reforms: Acceptance and Options Public Awareness of Subsidies The MENA SPEAKS survey collected information on public aware- ness of subsidies like it did for awareness of nonsubsidy SSN programs.3 The extent of general awareness of governments’ efforts to subsidize product prices varies by country and by the type of product being sub- sidized, as shown in figure 4.20. Egyptians and Tunisians were more likely to know about price subsidies in their countries than were Jorda- nians and Lebanese. Two goods subsidized in all four countries are diesel fuel and bread or flour. The recognition of the diesel subsidy ranged from 25 percent in Jordan to 47 percent in Tunisia. The aware- ness of the bread subsidy ranged from 47 percent in Lebanon to 87 percent in Egypt. Notably, public awareness of food subsidies was much higher than awareness of fuel subsidies. In Egypt, for example, the awareness of fuel subsidies for liquefied petroleum gas (LPG), diesel, and gasoline was around 40 percent, while more than 80 percent of Egyptians recognize that their cooking oil, sugar, and baladi bread are sold at subsidized prices. This is an important finding since chapter 3 showed that Egypt spends much more on fuel subsidies (6.9 percent of gross domestic product [GDP] in 2009) than on food subsidies (1.8 percent of GDP). Similar differences in awareness of food and fuel subsidies exist in the other three countries under study. The results in figure 4.20 suggest that the political economy of fuel subsidy reform should be relatively easier than food sub- sidy reform, given the higher recognition of the latter. Knowledge about subsidies improves with income, especially for fuel subsidies. The gradient for awareness of fuel subsidies is typically much steeper than for food subsidies (see figure 4.21). In Egypt, the awareness of sugar, cooking oil, and baladi bread subsidies is fairly stable across quin- tiles, while the recognition of gasoline, diesel, and LPG subsidies rises by 15–20 percentage points between the third and fourth quintiles. In Tuni- 178 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa FIGURE 4.20 Awareness of Specific Subsidies in the Middle East and North Africa, Selected Countries, 2012 Cooking oil Egypt, Arab Rep. Sugar Baladi bread LPG Diesel Gasoline Gasoline Water Electricity Jordan LPG or gas cylinders Diesel Bread or our Tobacco Lebanon Bread or our Mazoot (diesel) Diesel Cooking oil Tunisia Sugar Semolina Bread or our 0 20 40 60 80 100 Respondents aware of subsidy, % Source: Authors’ calculations based on MENA SPEAKS Survey 2012. Note: LPG = liquefied petroleum gas. sia, the awareness of food subsidies by the richest quintile is 1.3 times that of the poorest quintile when it comes to bread and semolina subsidies, while the corresponding ratio for diesel is 2.6. If the wealthy are much more likely to know about some subsidies than the poor, this could imply that they are much more likely to benefit from them, a hypothesis sup- ported by the information presented in chapter 3 on the regressiveness of fuel subsidies. Public Acceptance of Subsidy Reform Acceptance of subsidy reform is very country-specific: people in Lebanon and Tunisia appear more tolerant of debate on this topic than people in Egypt and Jordan. MENA SPEAKS asked respondents in all four coun- tries the following two questions: “If the government could not afford to subsidize all of the following products, which product’s price would you The Political Economy of SSN Reforms in the Middle East and North Africa: What Do Citizens Want? 179 FIGURE 4.21 Knowledge of Subsidies, by Income Quintile, in the Middle East and North Africa, Selected Countries, 2012 a. Egypt, Arab Rep. b. Jordan 100 100 Respondents aware of subsidy, % Respondents aware of subsidy, % 80 80 60 60 40 40 20 20 0 0 Q1 Q2 Q3 Q4 Q5 Q1 Q2 Q3 Q4 Q5 Gasoline Diesel LPG Bread / wheat our Gasoline Diesel Baladi bread Sugar Cooking oil LPG / gas cylinders Electricity Water c. Lebanon d. Tunisia 80 100 70 Respondents aware of subsidy, % Respondents aware of subsidy, % 80 60 50 60 40 30 40 20 20 10 0 0 Q1 Q2 Q3 Q4 Q5 Q1 Q2 Q3 Q4 Q5 Mazoot Bread / Tobacco Bread / wheat our Semolina Sugar (diesel) wheat our (growers' subsidy) Cooking oil Diesel Source: Authors’ calculations based on MENA SPEAKS Survey 2012. Note: LPG = liquefied petroleum gas; Q = income quintile (1 = lowest, 5 = highest). want the government to stop subsidizing? And what would be your sec- ond choice?” The general acceptance of subsidy reform varied by coun- try: 59 percent of Egyptians, 56 percent of Jordanians, 11 percent of Lebanese, and 37 percent of Tunisians refused to accept subsidy reform of any one product on the list, implying strong aversion to this reform, as shown in figure 4.22. One important finding is that, in all countries, the lower-middle- income group is slightly less likely to be opposed to subsidy reform than the upper-middle and wealthy group. And in all countries except Leba- non, the lower-middle-income group is more willing to consider subsidy 180 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa FIGURE 4.22 Opposition to Subsidy Reform on Any Product, by Self- Reported Income Group, in the Middle East and North Africa, Selected Countries, 2012 70 60 Respondents opposed, % 50 40 30 20 10 0 Poor Lower middle Upper middle and rich Egypt, Arab Rep. Jordan Lebanon Tunisia Source: Authors’ calculations based on MENA SPEAKS Survey 2012. reform than the self-reported poor. One hypothesis explaining this could be that those of lower middle income do not depend on subsidies as much as the poor, but they also do not consume most of the subsidy benefits, as do those of upper-middle income and the rich. Governments can use this information in building a pro-reform coalition when discussing the re- form agenda with the public. Figure 4.23 illustrates the relative tolerance of subsidy reform for spe- cific products. This response, of course, was only available for people who were willing to consider subsidy reform of at least one product. It also combines the first- and the second-choice answers. This comparison reveals that, in the Middle East and North Africa, people are much more tolerant of fuel subsidy reform than of food sub- sidy reform, as follows: • In Egypt, out of those willing to consider subsidy reform, only 6–17 percent of respondents named a food subsidy as their first or second choice to reform, while 31–53 percent were willing to consider remov- ing the subsidy on diesel, LPG, or gasoline. • In Jordan, out of those willing to consider subsidy reform, the most popular candidate for reform was diesel (picked by 50 percent), but it was followed by the bread subsidy. (The electricity and LPG subsidies in Jordan appear to be very politically sensitive.) • In Lebanon, bread was the most sensitive subsidy, which only 7 per- cent of respondents were willing to consider reforming. However, 20 percent were willing to sacrifice the mazoot (diesel) subsidy, and 97 percent were perfectly willing to get rid of the tobacco subsidy (which The Political Economy of SSN Reforms in the Middle East and North Africa: What Do Citizens Want? 181 FIGURE 4.23 Preferred Product for Subsidy Removal (Assuming Reform Is Inevitable) in the Middle East and North Africa, Selected Countries, 2012 Cooking oil Sugar Egypt, Arab Rep. Baladi bread LPG Diesel Gasoline Gasoline Water Electricity Jordan LPG or gas cylinders Diesel Bread or our Tobacco (growers) Lebanon Bread or our Mazoot (diesel) Diesel Cooking oil Tunisia Sugar Semolina Bread or our 0 20 40 60 80 100 Responses, % Food subsidies Fuel and other nonfood subsidies Source: Authors’ calculations based on MENA SPEAKS Survey 2012. Note: LPG = liquefied petroleum gas. is a producer subsidy to tobacco farmers and considered part of the country’s SSN). • In Tunisia, 13–15 percent offered bread and semolina as the most pre- ferred goods for subsidy reform, 28 percent suggested sugar or cook- ing oil, and more than 40 percent preferred to let go of the subsidy on diesel. Given that fuel subsidies are notoriously expensive and regres- sive, it appears that their removal would face less opposition than re- form of any food subsidies. Policy Options for Subsidy Reform Figure 4.24 plots the share of respondents in each self-identified income group mentioning a certain product as their most preferred or second- 182 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa FIGURE 4.24 Preferred Product for Subsidy Removal, by Self-Reported Income Group, in the Middle East and North Africa, Selected Countries, 2012 a. Egypt, Arab Rep. b. Jordan 60 80 50 60 40 Responses, % Responses, % 30 40 20 20 10 0 0 Poor Lower middle Upper middle Poor Lower middle Upper middle and rich and rich Gasoline Diesel LPG Bread/ our Diesel LPG/gas cylinders Baladi bread Sugar Cooking oil Electricity Water Gasoline c. Lebanon d. Tunisia 100 60 90 80 50 70 40 Responses, % Responses, % 60 50 30 40 30 20 20 10 10 0 0 Poor Lower middle Upper middle Poor Lower middle Upper middle and rich and rich Mazoot (diesel) Bread/ our Tobacco Bread oor Semolina Sugar (growers) Cooking oil Diesel Source: Authors’ calculations based on MENA SPEAKS Survey 2012. Note: LPG = liquefied petroleum gas. most preferred candidate for subsidy reform. Such disaggregation allows for the analysis of potential subsidy reform coalitions that governments can draw on for support of specific reforms, as follows: • In Egypt, the middle class prefers to sacrifice the gasoline and LPG subsidy more than the poor. If the poor can be compensated for the loss of the subsidy with a targeted SSN cash transfer, the government could save significant fiscal resources and invest in other priority social sectors. • In Jordan, a coalition of the middle class and the wealthy appears to be possible for subsidy reform of bread, LPG, and diesel. Because the poor are very averse to subsidy reform of these products, they would The Political Economy of SSN Reforms in the Middle East and North Africa: What Do Citizens Want? 183 have to be adequately compensated to avoid immiseration and poten- tial unrest. • In Lebanon, everyone appears to support elimination of the tobacco growers’ subsidy, which should be relatively easy for the government to do, given the detrimental effect of tobacco on health. A portion of the savings from this subsidy should be used, at least in part, to com- pensate tobacco farmers who would be the losers from the removal of this subsidy. • In Tunisia, the lower middle class appears to be more tolerant of the removal of the sugar subsidy, while the poor are more willing to con- sider the removal of the subsidy on diesel. MENA SPEAKS respondents who were willing to consider subsidy reform for at least one product were asked the following question: “In- stead of spending money on subsidizing the price of [the good you were most willing for the government to stop subsidizing], the government could spend that money on something else.” The respondent was then asked to choose among the following four options: (a) distribute that money to the poor; (b) distribute that money to all families except the wealthy; (c) distribute that money to all families including the wealthy; or (d) distribute a portion of that money to the poor and spend the rest on health care and educational programs for all. As shown in figure 4.25, the option of distributing the money to the poor was the top choice in Egypt, Jordan, and Tunisia, while distributing a portion of the money to the poor and spending the rest on health and education was preferred by most Lebanese respondents. However, it is important to read these results in light of the fact that a broader spectrum of the population defined themselves as poor than those belonging to the bottom consumption quintile, and it is likely that these individuals would also feel entitled to the compensation as “poor.” Disaggregating subsidy reform preferences by self-identified income group sheds light on the preferred reform options for different groups of people in the country. In all countries except Lebanon, the poor are the most likely to want distribution of all savings from subsidy reform to the poor, as shown in figure 4.26. This is not surprising, as they expect to get the highest private gain from this reform option. In addition, in all countries except Lebanon, the preference for investing in health and education for all rises with self-identified income group. In Egypt and Tunisia, the upper middle class and the wealthy are the most likely to support the option of giving some money to the poor in addition to investing in health and education for all. Usually, governments worry about the middle class demanding com- pensation for subsidy reform; this is usually the justification for loose targeting. As figure 4.26 illustrates, only a small minority of the self-iden- 184 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa FIGURE 4.25 Preferred Destination of Savings from Subsidy Reform in the Middle East and North Africa, Selected Countries, 2012 80 60 Respondents, % 40 20 0 Egypt, Arab Rep Jordan Lebanon Tunisia Only the poor All except wealthy All Only the poor, plus investment in health and education Source: Authors’ calculations based on MENA SPEAKS Survey 2012. tified middle class prefers this option to the option of paying cash com- pensation only to the poor: among the middle class, 8–10 percent of Egyptians, 15–30 percent of Jordanians, 10–15 percent of Lebanese, and 15–18 percent of Tunisians chose cash transfers to the poor as their most preferred compensation for subsidy reform. Individuals from the Jorda- nian middle class who participated in the Jordan Gives experiment con- firmed the patterns from MENA SPEAKS: redistribution to the poor and to public goods was strictly preferred among the simulation participants, but this preference was weaker among those who self-reported a lower income, as shown in figure 4.27. What Works? International Experience of SSN Reforms that Increased Acceptability Assessing and building public opinion are the first steps toward building a broader consensus and getting wider support for policy reforms. How- ever, an even bigger challenge is to navigate the complex world of politics to actually change existing policies. A vast literature discusses the strate- gies that have enabled the successful implementation of reforms. This section reviews such literature and illustrates specific country examples from around the world to highlight which strategies could also facilitate SSN reform in the Middle East and North Africa—particularly the tran- sition from universal subsidies to better-targeted interventions. The Political Economy of SSN Reforms in the Middle East and North Africa: What Do Citizens Want? 185 FIGURE 4.26 Preferred Compensation for Subsidy Reform, by Self-Reported Income Group, in the Middle East and North Africa, Selected Countries, 2012 a. The Arab Republic of Egypt b. Lebanon 100 100 80 80 Responses, % Responses, % 60 60 40 40 20 20 0 0 Poor Lower middle Upper middle Poor Lower middle Upper middle and rich and rich Only the poor All except wealthy All Only the poor plus investment in health and education c. Jordan d. Tunisia 100 100 80 80 Responses, % Responses, % 60 60 40 40 20 20 0 0 Poor Lower middle Upper middle Poor Lower middle Upper middle and rich and rich Only the poor All except wealthy All Only the poor plus investment in health and education Source: Authors’ calculations based on MENA SPEAKS Survey 2012. Four major aspects emerge from the existing literature on successful reforms: • Timing and pacing of the reform • Appropriate communication strategy • Broad coalitions of support and compensation to short-run losers • Technical capacity, leadership, and commitment. 186 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa FIGURE 4.27 Preferred Compensation for Subsidy Reform within the Jordanian Middle Class, by Self-Reported Income Group, 2012 Higher middle Middle Lower middle 0 10 20 30 40 50 60 Responses, % Redistribute to the poor Redistribute to all individuals Redistribute to and to public goods (but the rich) poor people Source: Authors’ calculations based on Jordan Gives 2012. Note: Results based on data. Timing and Pacing of Reform The existing literature highlights the importance of crisis while imple- menting a reform. Grindle and Thomas (1989) distinguish between “crisis-ridden” reforms and “politics-as-usual” reforms. Crisis-ridden re- forms are forced on policy makers, and decision making in these reforms tends to be dominated by concerns about major issues of political stabil- ity. In particular, crisis moments can facilitate consensus building among opposing coalitions because all parties involved are aware that noncoop- eration would be overly costly. Graham et al. (1999) suggest that acting early on in a government’s mandate, immediately after a crisis, usually is the best time for these reforms: rice subsidy reform in Indonesia and the social security reforms in Peru in 1992 took place during such periods (see boxes 4.2 and 4.3). During crises, external pressure from international creditors can also play a major role, as was the case in Egypt (see box 4.4). However, there is a limit to what crisis politics can achieve, and an effort to reform labor law in Argentina serves as a good example (see box 4.5). Reforms are also possible under noncrisis circumstances, when policy makers have the freedom to choose the reform and have much greater au- tonomy in pushing the necessary institutional change (Grindle and Thomas 1989). The main risk associated with these politics-as-usual reforms is that they tend to be dominated by bureaucratic and micropolitical concerns. The Political Economy of SSN Reforms in the Middle East and North Africa: What Do Citizens Want? 187 BOX 4.2 Indonesia: Rice Subsidy Reform during the Asian Crisis Indonesian policy makers have historically quantities of rice and other food grains defined food security in terms of the na- were smuggled out of the country. As sup- tion’s ability to provide itself with adequate plies became scarce, there was almost supplies of rice at an affordable price. Sub- panic in urban markets, and the govern- sidies through BULOG (the National ment was forced to reform its existing Food Logistics Agency) had ensured stable subsidy policy. It introduced Special Mar- prices in the 1980s and 1990s. However, ket Operation ( Operasi Pasar Khusus; because of the currency crisis, the food se- OPK) to protect the food security of poor curity system had been badly compro- households. BULOG was confined to do- mised. The government reacted by impos- mestic procurement activities and dis- ing sweeping controls on trade and posed of its nonrice food stocks. These marketing of food grains to hold down reforms were possible only because of the food prices. Food price subsidies, which ongoing currency crisis, and they show were budgeted to be Rp 4 trillion, eventu- the importance of circumstances in im- ally reached Rp 12 trillion in 1999. plementing reforms. In addition, as the gap between domes- tic and international prices widened, large Source: Tabor and Sawit 2001. BOX 4.3 Peru: National Debate and Reforms Peru successfully reformed the pension sys- garner public support. The press campaign tem in 1993–94 by running an effective for privatization of the pension system publicity campaign during the economic highlighted efficiency and ownership of crisis. President Alberto Fujimori struggled contributions rather than loss of benefits. to overhaul the health and education sector After the law was reformed, most new but better succeeded in reforming the pen- workers opted for the new private system. sion system because it was directly linked to Support from the new stakeholders in the the crisis. The link between successful ad- financial sector and labor market has sus- justment of the pension system and allevia- tained the reforms. The Peru case high- tion of fiscal pressure formed the basis of a lights the role of the media in enlisting high-profile publicity campaign that helped allies. Source: Graham et al. 1999. 188 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa BOX 4.4 Egypt: Reduction of Subsidy Burden Egypt’s successful policy reform can be tion of subsidies. However, in the 1980s, it ­ attributed to external pressure, an effec- started to compare the cost of subsidies tive information campaign, and gradual with the revenues from the Suez Canal to changes. The country tried to reduce its highlight the magnitude of the subsidy cost subsidy burden in 1977, but major food ri- upon the population. Furthermore, it re- ots prevented any meaningful change. As duced the overall costs of subsidies by grad- Egypt’s external debt started increasing, it ually changing unit costs as well as the was forced to sign standby agreements with number of products it subsidizes (Alder- the International Monetary Fund to reduce man 2002). For instance, when the govern- its subsidy burden in 1977 and 1987. Hence, ment implemented the first set of subsidy the government was forced to use various reforms, it kept the main bread of Egypt strategies to reduce the subsidy burden in (baladi) heavily subsidized (Adams 2000), the early 1980s (Ali and Adams 1996). but it stopped subsidizing the high-quality Earlier, in 1977, the government had bread (fino) failed to prepare the public for the aboli- Source: Authors, using Adams 2000 and Ali and Adams 1996. Apart from timing, adopting an appropriate pace for reform is also an important factor, specifically when reforming subsidies. There is evi- dence to support both slow and rapid reform strategies: Egypt gradually phased out its subsidies in the 1980s after a failed attempt in 1977. How- ever, Indonesia and Zimbabwe (see box 4.9) used the economic crisis to carry out rapid subsidy reforms. Communications Strategy Policy makers need to explain reforms to the public, create a clear con- sensus on their direction, and build central-level commitment (Graham 2002). The effectiveness of a communication campaign depends on the leader’s ability to assess the prevailing environment (Graham et al. 1999). The right communications strategy should depend on the circumstances around the reform and on the sophistication of the public debate in that area (Graham et al. 1999). For instance, in situations where the press’s technical competence is low, a low-profile strategy will prevent the de- bate from being captured by political opposition to the reform. However, in the case of social security and other complex reforms, information campaigns become important to the success of the reform strategy. Fur- The Political Economy of SSN Reforms in the Middle East and North Africa: What Do Citizens Want? 189 BOX 4.5 Argentina: The Limits of Crisis Politics The Argentine government successfully past, Menem had to negotiate with the Con- passed several reforms during the economic gress to overhaul the social security system. crises in the late 1980s and early 1990s, but Eventually the technical and political ca- as the crisis-related urgency subsided, the pability of the finance minister enabled the pace of reform slowed down. The Carlos Menem government to partially reform the Menem government, elected during a se- social security system. However, the gov- vere economic crisis in 1989, used the crisis ernment’s efforts to reform the labor law to convince people to bear the short-term were not at all successful because there was costs of reforms. This need for quick action no urgency and the administration did not increased the pressure for building coali- create visible winners to replace the support tions. Menem also attracted support from of the losers from the reform. The Argen- the disgruntled public by successfully priva- tine case tells us that there are limitations to tizing a telecom company, and he chose re- crisis politics and that coalitions formed form leaders to please all sides of the coali- during a crisis can also disband quickly. tion. However, as the crisis faded into the Source: Graham et al. 1999. thermore, D. Romer’s (2003) model of misconceptions suggests that ef- forts to improve officials’ and voters’ understanding of policy reforms can systematically change outcomes. Particularly in the case of subsidy reform, informing the public of the cost of the current system is fundamental. In illustrating strategies that have worked in successful subsidy reforms, Alderman (2002) points out, among other things, the importance of publicity regarding the reform. The broad public—including the poor and the illiterate—need to be informed of its rationale at an early stage of the reform. For example, the government could publicize that subsidy reforms will create fiscal savings for other pro- grams such as education. Egypt used this strategy effectively by comparing the cost of subsidies with the revenues from the Suez Canal, which high- lighted the high cost of subsidies. In general, the relatively low degree of public awareness of subsidies shown by MENA SPEAKS (particularly awareness of the most regressive subsidies) suggests that there is more scope for information to influence public opinion in Middle Eastern and North African countries and to build consensus on the need for reform. A key reason for a communication strategy is that the media are likely to spontaneously cover changes in major welfare reforms. A study by Lindert and Vicensini (2010) on the media coverage of Brazil’s Bolsa Fa- 190 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa milia program (a conditional cash transfer program) exceptionally cap- tured the behavior of the media in this respect. This study showed the following: • Large welfare programs can receive high attention and scrutiny be- cause of their scale and direct impact on the general public. This holds true even if there is general endorsement of the objectives of the pro- gram within society. • Scaling up the program can be perceived either negatively or posi- tively. Media coverage is highly dependent on the maturity and imple- mentation quality of the institution implementing the program. • There is technical interplay between the press and the government. The government tends to react to press coverage about inadequacies of the program, and reportage often becomes favorable when the gov- ernment improves the welfare program. This implies a “virtuous cy- cle” for accountability between the government and the press, which helps strengthen the program. • The program falls under higher scrutiny during election time. Compensation to Short-Term Losers Every reform will create winners and losers, and compensating the politi- cally relevant losers will be critical to the success of a reform. The fiscal constraints can sometimes make it difficult to give direct monetary bene- fits. In this case, innovative ways of reconfiguring the stakeholders or cre- ating new stakeholders (Graham et al. 1999) can be a successful strategy. New stakeholders will change the balance of power and can be ex- tremely useful in broadening the support base. For instance, in Peru and Bolivia, new stakeholders created by social sector reforms (private pen- sion funds) became long-term political supporters. However, in Uruguay, the government struggled to reform health care as it confronted a major interest group (see box 4.6). Furthermore, gradual reforms diffused the major political opposition groups in Bangladesh (see box 4.7). Several strategies can be used to compensate for loss in purchasing power while reducing subsidy expenditures. Individuals may strongly pre- fer to avoid immediate losses than reap greater future gains (Kahneman and Tversky 1979). Thus, even if subsidy removal may be beneficial col- lectively in the medium term, reducing the scope for short-term discon- tent is politically essential because it is essential to protect the purchasing power of the poor. Putting in place credible compensation policies for subsidy removal is thus crucial to building coalitions, particularly among poor people who could become net winners from the reform. These com- The Political Economy of SSN Reforms in the Middle East and North Africa: What Do Citizens Want? 191 BOX 4.6 Uruguay: Avoid Antagonizing Powerful Interest Groups Sometimes major reforms cannot be passed tion, a high-profile publicity campaign was because they face opposition from a power- instrumental in building a coalition of win- ful interest group. Uruguay’s struggle with ners. However, the Minister of Health Al- health care reform is a good example. The fredo Solari struggled with the same strate- country successfully reformed its social se- gies when trying to achieve health care curity system under President Julio Maria reform. The health reform directly con- Sanguinetti, even though the background fronted the powerful, well-organized medi- for reforms did not seem auspicious: no cal establishment (the medical profession- economic crisis, power abundantly distrib- al’s union, Federación Médica del Interior uted among the various branches, low party [FEMI]), while the winners (health con- loyalty, and continual citizen votes for in- sumers) were diffused. Even bundling the creased social spending. reform with the budget bill did not work. Sanguinetti was still successful for three Subsequently, the passed reform did not reasons: new pressures for coalition build- confront FEMI. Uruguay shows us that ing, timing of reforms with respect to the clear losers and diffused winners are diffi- election cycle, and political knowledge cult conditions for reforms, even in a suc- gained from the previous reforms. In addi- cessful administration. Source: Graham et al. 1999. pensation policies can be cash transfers or direct compensation, but they should be designed to provide net fiscal savings after the subsidy reform. Furthermore, the presence of an effective SSN program during the re- form will boost government credibility and enhance public support. In this context, gradual targeting (such as that used in Indonesia) may be politically effective because, in the short term, most individuals will receive benefits to adjust for price increases, while eventually only the poor would continue to benefit (see box 4.2). A more radical case is the recent subsidy reform in the Islamic Republic of Iran, where the entire population received undifferentiated cash compensation to meet the en- suing loss of purchasing power (see Guillaume, Zytek, and Reza Farzin 2011). A successful way to increase targeting and reduce spending is to introduce self-targeting in the system by differentiating certain products more consumed by the poor in terms of “time costs, stigma and quality” (Tuck and Lindert 1996). Many case studies prove that self-targeting can be a useful political economy strategy—for example, in Egypt, Bangla- desh (see box 4.7), Pakistan (see box 4.8), and Tunisia (as discussed in chapter 3, box 3.4). This strategy is useful especially when governments’ capacity to identify the poor is limited. 192 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa BOX 4.7 Bangladesh: Politics of Food Subsidy Reforms Bangladesh’s food subsidy reforms provide lifted the off-take price from the ration valuable lessons in gradual speed of re- channels by linking it to the procurement forms, diffusion of major political opposi- price, thus reducing the subsidy in ration tion groups, enlisting allies, and self- channels. This helped in enlisting the sup- targeting. The Bangladesh Public Food port of the powerful Ministry of Agricul- Distribution System (PFDS) dispensed ture and the Planning Commission, whose food grains through ration channels to con- top priority was to increase the food grain sumers at varying rates of subsidization and production. It also slowly eroded the incen- procured grains from farmers. It faced two tives for card holders to draw rations and competing policy objectives: increase farm for ration dealers and food officials to re- productivity by maintaining high prices route them (Ahmed, Haggblade, and and improve food access to the poor by Chowdhury 2000). The off-take from subsidies. It tried to achieve this dual objec- PFDS decreased from 2.5 million tons in tive by providing price support to farmers the late 1980s to 1.6 million tons in 1998. through domestic procurement and dis- This averted possible opposition from ur- tributing subsidized food grains to different ban ration recipients and diffused a major groups of consumers through various ra- opposition group. tion channels. However, this policy did not The government in Bangladesh was also achieve any of the set objectives. effective in enlisting the support of external Because of rent-seeking lobbies (mill and internal allies. External allies, particu- owners and the military and police) and larly the World Bank, the U.S. Agency for rent-seeking bureaucrats, the system failed International Development, and Canada, to benefit the poor. Even after setting up a helped in executing reforms by placing rural rationing channel in the 1970s, the conditions on food and lending programs. program had 69.4 percent leakage (Ahmed The donors also diverted some of the “po- 1992). On the procurement side, mill own- litical heat” to themselves from the internal ers and Ministry of Food officials “split” reform advocates (Ahmed, Haggblade, and the difference between market price and Chowdhury 2000). Internally, enlisting in- procurement prices (Adams 1998). Apart terministerial allies was also critical because from organized rent seekers, the govern- the Ministry of Agriculture was eager in ment reforms would have also potentially increasing procurement price to benefit the faced opposition from the 15 million farmers and pushed the reforms. ration-­card holders. Bangladesh also instituted a Food-For- In the early 1980s, when the govern- Works (FFW) program, which reduced ment started its reform process, it decided rent seeking and leakages. The FFW pro- to adopt a gradual reform process instead of gram offered wheat wages to the rural poor, a quick shock treatment because it faced who were willing to work in construction too many vested interest groups. First, it jobs. Wheat has a negative income elastic- The Political Economy of SSN Reforms in the Middle East and North Africa: What Do Citizens Want? 193 BOX 4.7 Continued ity of demand in Bangladesh. According to needy participated. Finally, it reduced the the humanitarian organization CARE, the need for government bureaucrats because FFW leakages were as low as 30–35 per- it relied on self-targeting. Del Ninno and cent, compared with about 70 percent in Dorosh (2002) also conclude that in-kind the earlier programs. FFW was successful transfers, such as the FFW program, lead for three reasons (Adams 1998): First, it fo- to greater wheat consumption than would cused on inferior food, which was not result from an equivalent increase in cash highly valued by nonpoor people, further income. The results of these reforms have reducing the incentives for rent seekers. been impressive. Overall, the government Second, because FFW demanded work in has saved more than US$75 million in costs exchange for wheat, only the poor and the since 1992. In spite of coalitions of public support, small interest groups that face large losses are among the main opponents of subsidy reform and should not be ignored. Small groups united by important interests have a great incentive to organize, while large groups may find it more difficult to coalesce around a common interest because the incentives to bear the cost of collective action are attenuated (Olson 1965). Each country has several groups whose survival may depend on the existing subsidy system and for whom adjustment could be particularly costly. These include subsidized producers (such as mills, bakeries, and refineries); retailers (such as special shops for subsidized food); industries that consume subsidized input in- tensively; and organized rent seekers (see box 4.7). For instance, energy- intensive industries in Egypt in 2007 directly consumed more than 50 percent of energy subsidies in the country (Abouleinein, El-Laithy, and Kheir-El-Din 2009). Hence, it is important that policy makers recognize the repercussions of these strong interest groups and devise a concrete compensation strat- egy for the losers of the subsidy reforms. In Pakistan, retail shops received loans to restock and sell different products. In Egypt’s case, losers can be compensated through credit and technical assistance to facilitate a transi- tion to more energy-efficient production. Another potential strategy is to change institutional arrangements such that economic rents received by these small groups are passed on to the general public even if there are no immediate savings. This would be helpful in two ways: First, the reforms would garner larger public support because of the added benefits. Second, interest groups that were benefiting from the status quo would be weakened. 194 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa BOX 4.8 Pakistan: Derationing of Flour Subsidies in the 1980s Pakistan’s derationing of subsidies is a good ers. First, it created a transitional price, example to see the importance of compen- which lowered the price of flour for the ma- sating the losers of the policy reforms, en- jority and avoided a sudden change to the listing allies through incentives, and choos- unsubsidized open market price for the ra- ing the right timing for the reform. The tion shoppers. Second, it did not dismantle Pakistani government decided to imple- the administration of the ration shops, even ment comprehensive derationing reforms though their jobs were redundant; the shops following a marked decline in the number received loans of up to PRs 25,000 to assist of households relying on ration shops. The in transition to a fair-price shop. Last, low- flour subsidy had declined from a high of paid government employees received a raise 2.2 percent of GDP in 1974 to 0.6 percent at the same time as derationing and even ad- of GDP in 1986. Pakistan’s flour subsidy ditional compensation for the expected was already self-targeting to a large extent. change in flour prices. These measures As incomes increased, families started pur- helped the Pakistani government gain new chasing flour from the open market, which supporters and mute potential opposition. was perceived to be of higher quality. Sur- The Pakistani government also paid veys had estimated that 69 percent of the special attention to the timing of the re- subsidized wheat was not drawn by con- forms. The derationing reforms were an- sumers but leaked through the system. In nounced to be effective in April, which co- light of this, the government anticipated incided with the beginning of the wheat opposition from three major interest harvest. The salary increase of employees groups: ration depot shoppers, ration depot was announced at the same time as the de- employees, and public sector employees rationing reform. The government also who benefited the most from this subsidy. used the media to emphasize the ineffi- To win the support of all the different ciency of the ration system, even though interest groups, the government devised a this was an indirect admission of its own compensation strategy for each of the los- inefficiency. Source: Alderman 1988. Technical Capacity, Leadership, and Commitment Finally, technical and committed leadership is key in shaping reforms (Graham et al. 1999; Grindle and Thomas 1989). Leaders need to have a sound understanding of the institutional structure of the country and so- ciety, and their technical and ideological coherence is needed to over- come political opposition and administrative obstacles. The Political Economy of SSN Reforms in the Middle East and North Africa: What Do Citizens Want? 195 BOX 4.9 Zimbabwe: Reforms during a Crisis Zimbabwe reformed its subsidy system un- Last, the instability of maize sales depen- der donor pressure after a fiscal crisis in the dent on less reliable rainfall further strained 1980s. After gaining independence, Zim- the fiscal health. babwe expanded the state procurement in- The fiscal crisis in the 1980s and the fail- frastructure to control maize supplies and ure of partial reforms led donors to lose pa- pricing. Though the system initially served tience. Because the state infrastructure was the objective of boosting maize production, beneficial only to a dominant elite com- several problems emerged: First, market- posed of bureaucrats, urban consumers, and ing costs escalated, making the existing sys- industry, the reforms were met with little tem unaffordable. Second, the state infra- opposition. The donor pressure and the fis- structure became increasingly unreliable cal situation left the government with no for both consumers and producers. Third, choice but to reduce marketing subsidies farmers started to switch to other crops. and allow private trading of grains. Source: Jayne and Jones 1997. Technical analysis and advisors have been crucial in shaping outcomes in Indonesia (Grindle and Thomas 1989), the Republic of Korea, and Turkey (Önis and Webb 1992). A study by Lee, Moretti, and Butler (2004) further highlights the role of policy makers in reforms. The em- pirical analysis in the study shows that there is little evidence that mem- bers of the U.S. Congress change their position on policies in response to a large exogenous change in voter preference. The finding suggests that the public doesn’t affect policies, it just elects them. 196 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa Annex 4A MENA SPEAKS Questionnaire Egypt Each stack of coins on this card represents a different income group in 1.  this country. In which income group is your household? (Show card) 1 Group 1 2 Group 2 3 Group 3 4 Group 4 5 (DK) 6 (Refused) Now please think about the total wealth held by individuals in Egypt. 2.  What portion of this total wealth do you think is held by the rich in Egypt? (Read 1–4) 1 The rich hold almost all of the total wealth held by individuals. The rich hold more than half of the total wealth held by 2  individuals. 3 The rich hold about half of the total wealth held by individuals. The rich hold less than half of the total wealth held by 4  individuals. 5 (DK) 6 (Refused) The Political Economy of SSN Reforms in the Middle East and North Africa: What Do Citizens Want? 197 Which one of the following groups do you think should be most re- 3.  sponsible for helping the poor in this country, if any? (Read 1–5) (Allow ONE response) 1 The government 2 Family and friends 3 Religious organizations 4 Charitable organizations 5 No group should be responsible 6 (DK) 7 (Refused) 4. How effective is the government in providing SSN for the poor in this country? (Read 1–4) 1 Very effective 2 Somewhat effective 3 Not very effective 4 Not effective at all 5 (DK) 6 (Refused) (If code 1 in Q86/WP13275, Skip to Q89/WP13278; Otherwise, Continue) How much responsibility should the government take for helping the 5.  poor in this country? (Read 1–4) 1 A great deal (Skip to Q90/WP13279) 2 Some (Skip to Q90/WP13279) 3 Not very much (Continue) 4 None at all (Continue) 5 (DK) (Continue) 6 (Refused) (Continue) 197 198 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa An SSN project is a government project in which money or other 6.  goods and services are provided to the poor. Do you think the govern- ment should provide SSN to people in this country who are poor, or not? 1 Yes (Continue) 2 No (Skip to Q91/WP13280) 3 (DK) (Continue) 4 (Refused) (Continue) 7. Ideally, do you think that an SSN project should focus mainly on serv- ing the poor OR mainly on serving specific groups of people, such as widows, orphans, the sick, and the elderly, whether or not they are poor?  (If respondent says “both,” read:) Please tell me which group you think the project should focus on. 1 Serving the poor 2 Serving specific groups of people, whether or not they are poor 3 (DK) 4 (Refused) Do you think it would be better for recipients of government SSN to 8.  receive assistance in the form of cash OR to receive assistance in the form of goods, such as food or clothes? (Allow ONE response) (If respondent says “both,” read:) Which do you think is better for them to receive? 1 Cash 2 Goods (food, clothes, etc.) 3 (Neither) (Do NOT read) 4 (DK) 5 (Refused) The Political Economy of SSN Reforms in the Middle East and North Africa: What Do Citizens Want? 199 9. In some countries, recipients of government SSN are required to do something in exchange for monthly assistance. For example, they could be required to have their children attend school regularly. If their children stop attending school, the assistance would no longer be provided. Do you think recipients of SSN should be required to do something in exchange for the assistance, or should there be no requirements? 1 Yes, there should be some requirements (Continue) 2 No, there should not be any (Skip to Q94/Text requirements before WP13317) 3 (DK) (Continue) 4 (Refused) (Continue) Please indicate whether each of the following should be required in 10.  order to receive government SSN on a regular basis. (Read A–E) Yes No (DK) (Refused) R ecipients must ensure their A.  1 2 3 4 children regularly attend school. R ecipients must get medical B.  1 2 3 4 checkups for children and expecting mothers. Recipients must attend job training C.  1 2 3 4 courses. Recipients must actively search for D.  1 2 3 4 work. Recipients must accept the work E.  1 2 3 4 provided by the program in exchange for the assistance. 200 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa Please name any government SSN projects in this country that you 11.  know about. (Do NOT read A–F) (Open ended and code) Mentioned Not mentioned Social Solidarity pension (Sadat A.  1 2 Pension) Child Law pension (Child Cash B.  1 2 Assistance) C ash transfers for students in C.  1 2 school (children in families benefiting from the SS program) D. Grants for Micro projects 1 2 A ssistance from Social Nasser E.  1 2 Bank F. Productive Families’ projects 1 2 Please tell me whether or not you have heard of the following gov- 12.  ernment SSN projects. (Read A–F, as appropriate) (INTER­ VIEWER: Read all programs listed below that were NOT men­ tioned in Q94) Yes No (DK) (Refused) Social Solidarity pension (Sadat A.  1 2 3 4 Pension) Child Law pension (Child Cash B.  1 2 3 4 Assistance) Cash transfers for students in C.  1 2 3 4 school (children in families benefiting from the SS program) Grants for Micro projects D.  1 2 3 4 Assistance from Social Nasser E.  1 2 3 4 Bank F. Productive Families’ projects 1 2 3 4 (If code 1 to ANY in Q94 A–F or code 1 to ANY in Q95 A–F, Continue; Otherwise, Skip to Q97/Text before WP13335) The Political Economy of SSN Reforms in the Middle East and North Africa: What Do Citizens Want? 201 Do you personally know anyone who has received assistance from 13.  any of these projects? (Read A–F, as appropriate) (INTER­ VIEWER: Read all programs listed below that were mentioned in Q94 or were code 1 in Q95) Yes No (DK) (Refused) [WP13329] A. Social Solidarity 1 2 3 4 pension (Sadat Pension) [WP13330] Child Law B.  1 2 3 4 pension (Child Cash Assistance) [WP13331] Cash transfers C.  1 2 3 4 for students in school (children in families benefiting from the SS program) [WP13332] Grants for Micro D.  1 2 3 4 projects [WP13333] E. Assistance from 1 2 3 4 Social Nasser Bank [WP13334] F. Productive 1 2 3 4 Families’ projects 202 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa In some countries, governments subsidize the prices of certain prod- 14.  ucts by keeping their prices fixed or at least preventing their prices from rising too fast. Which products do you think the government of your country is subsidizing? (Do NOT read A–F) (Open ended and code) Not Mentioned mentioned [WP13335] A. Gasoline 1 2 [WP13336] B. Diesel—fuel for 1 2 vehicles [WP13337] C. LPG—fuel for heating 1 2 [WP13338] D. Baladi bread and flour 1 2 [WP13339] E. Sugar 1 2 [WP13340] F. Cooking oil 1 2 Do you think the government of Egypt is subsidizing the price of any 15.  of the following products? (Read A–F, as appropriate) (INTER­ VIEWER: Read all programs listed below that were NOT men­ tioned in Q97) Yes No (DK) (Refused) [WP13341] A. Gasoline 1 2 3 4 [WP13342] B. Diesel—fuel for 1 2 3 4 vehicles [WP13343] C. LPG—fuel for 1 2 3 4 heating [WP13344] Baladi bread and D.  1 2 3 4 flour [WP13345] E. Sugar 1 2 3 4 [WP13346] F. Cooking oil 1 2 3 4 The Political Economy of SSN Reforms in the Middle East and North Africa: What Do Citizens Want? 203 If the government could not afford to subsidize all of the following 16.  products, which product’s price would you want the government to stop subsidizing? (Read 1–6) (Prompt for second response:) What would be your second choice? (Allow TWO responses) (If re­ spondent says “None” or “Don’t know,” read:) If you had to pick one product, which one would it be? 1 Gasoline 2 Diesel—fuel for vehicles 3 LPG—fuel for heating 4 Baladi bread and flour 5 Sugar 6 Cooking oil 7 (None) 8 (DK) 9 (Refused) [WP13347] A. (First response) ________________________________ [WP13348] B. (Second response) ______________________________ (If code 7, 8, or 9 in Q99A/WP13347, Skip to Q101/WP12213; Otherwise, Continue) [WP13316] Instead of spending money on subsidizing the price of (response in 17.  Q99A/WP13347), the government could spend that money on something else. Should the government (read 1–4)? (Show card) 1 Distribute that money to the poor 2 Distribute that money to all families except the wealthy 3 Distribute that money to all families including the wealthy 4 Distribute a portion of that money to the poor and spend the rest on health care and educational programs for all 5 (DK) 6 (Refused) 204 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa Annex 4B Methodology of MENA SPEAKS Surveys and Jordan Gives Experiment Because the literature on SSN support is largely based on high-income countries or on a few Middle East and North Africa-specific qualitative studies, two data collection projects were conducted as part of this re- gional study. The findings presented in this report represent an unprec- edented attempt to shed light on the specificities of the political economy of SSNs in the region through nationally representative data. These data are also unique in their application of behavioral economics to study the preferences for SSNs in the Middle East and North Africa. MENA SPEAKS: MENA Social Protection Evaluation of Attitudes, Knowledge, and Support (SPEAKS) MENA SPEAKS surveys are four nationally representative surveys con- ducted as part of the Spring 2012 wave of Gallup’s World Poll in Egypt, Jordan, Lebanon, and Tunisia. The surveys collected data from 1,000 randomly selected households in each country about their subjective in- come; perceptions on existing inequality; the role of the state as the main provider of SSNs; knowledge of existing SSN programs; preferences on SSN design features (cash versus in-kind, categorical versus poverty tar- geting, conditional versus unconditional transfers, and acceptability of different types of conditionality); knowledge of existing subsidies; and preferences regarding subsidy removal and different compensation pack- ages. For an example of a MENA SPEAKS questionnaire (Egypt), see annex 4A. Jordan Gives: Jordan Behavioral Experiment on Redistribution Preferences Jordan Gives is a behavioral game that collected information on people’s preferences and support for several redistribution alternatives. The value added of the game through a simple survey is that participants tend to think more deeply about trade-offs when the consequences of their choices translate into concrete monetary costs and benefits. Thus, the ­ information elicited through their decisions should be a more reliable measure of their true preferences for redistribution. The game was carried out in Jordan with 42 groups of 10 citizens each by the Center for Strategic Studies at the University of Jordan. The sam- pling units were drawn from a sample of the Jordanian middle class (ex- The Political Economy of SSN Reforms in the Middle East and North Africa: What Do Citizens Want? 205 plained further below). In each randomly selected primary sampling unit (PSU), two groups (treatment and control) played simultaneously in separate rooms, with participants randomly assigned to one of the groups. At the beginning of the game, each participant received fuel vouchers is- sued by Jordan Petroleum Refinery: a JD 5 (Jordanian dinars) voucher as a show-up fee and a JD 10 voucher to play the game. The magnitude of the voucher for the game (JD 10) is essentially equivalent to the minimum daily wage (the mandated minimum wage in Jordan in 2012 was JD 190 per month). Participants were offered four independent proposals, as listed below, and for each proposal they had to decide whether to accept it (implying willingness to give up the JD 10 voucher to have the proposal implemented) or to reject it (implying a preference to keep the JD 10 voucher instead of implementing the proposal). Each redistribution proposal had a total value of JD 100 (correspond- ing to the sum of the vouchers of the 10 participants in the room). The proposals, which portrayed as closely as possible different SSN designs, were the following: • [Cash transfer] You give up your JD 10 voucher. Our team gives JD 20 cash per family to five poor families in this community. Do you accept or reject the proposal? • [In-kind transfer] You give up your JD 10 voucher. Our team gives a food basket worth JD 20 per family to five poor families in this community. • [Conditional cash transfer] You give up your JD 10 voucher. Our team gives JD 20 cash per family to five poor families in this community conditional on their completion of a free training program on work- related skills. • [Cash transfer and money to the local school] You give up your JD 10 voucher. Our team gives JD 20 cash per family to two poor families in this community, and JD 60 cash will go to the local school. After participants marked the decision on each proposal on a decision card, they were also asked to pick their most preferred and second-most pre- ferred proposal out of the four proposals. All cards were then collected and placed in a glass bowl. Another glass bowl contained numbers 1 through 4 corresponding to proposal numbers. Facilitators proceeded to draw one decision card from the first bowl and one number from the second bowl. The decision on the selected decision card for the selected proposal num- ber was implemented on the whole group. If the selected decision was “ac- cept,” then the JD 10 voucher was collected from each participant and the selected proposal was implemented in that local community. 206 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa The difference in acceptance rates between the presented alternatives can be attributed to the differences in preferences for particular proposal features (cash versus in-kind, conditional versus unconditional, private goods only versus private and public). The difference in the game played in the treatment groups as opposed to the control groups consisted of additional information provided only to the treatment groups. This in- formation appealed to the Arab values of solidarity and listed the potential “shopping cart” a poor family could buy with JD 20 (including, for ex- ample, enough essential supplies to allow a poor family to get by for sev- eral weeks or two bottles of gas that would provide either supplies for cooking for two months or for a gas heater for three weeks). Moreover, treatment groups were offered the option to accompany the facilitator after the game to witness the implementation of the proposal if the se- lected decision was “accept.” Thus, the first part of the treatment ap- pealed to the cultural norms for redistribution, the second sensitized middle-class participants to the value of JD 20 for a poor family, and the third increased transparency of implementation. These treatments were chosen as a result of a focus group on the perceived barriers to redistribu- tion as well as consultations with Jordanian experts and experimental game practitioners. This activity was complemented by evidence collected through a ques- tionnaire implemented after each participant recorded his or her deci- sions and cards were collected but before the final decision was selected and before focus group discussions at the end were framed by a more concrete sense of redistribution options. The sample was nationally representative of the middle class to repre- sent the median voter, who was expected to have lower self-interest in increasing redistribution and to be more likely to actively oppose SSN reform. The sample adopted the definition of “middle class” developed by the government of Jordan’s study of the middle class (ESC 2008), which comprised those individuals between twice and four times the pov- erty line. This corresponded to the population between the fourth and the eighth income deciles according to the 2004 Jordanian census data. Income deciles were estimated by applying a proxy-means-testing for- mula to the census data, which included the following variables: average household size, owning a fixed phone, owning a computer, having an Internet connection, having central heating, owning a microwave, home ownership, and having at least one family member with a university education. Because of the national scale of the experiment and to ensure homo- geneity of implementation across groups, a video in the local language was used in all groups. This video provided detailed instructions to the participants and projected each of the proposals on the screen. The role The Political Economy of SSN Reforms in the Middle East and North Africa: What Do Citizens Want? 207 of the facilitator was to stop the video to distribute or collect items and allow participants to make decisions, to answer questions according to a predeveloped answer script, and to lead the focus group discussion that followed the game. The order of the proposals was randomized for each PSU to distinguish preferences for each proposal from anchoring on pre- ceding proposals; for within-PSU comparability, the order of the propos- als in the control and treatment groups was always the same. 208 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa Annex 4C Public Awareness of SSN Programs and Subsidies Awareness of Nonsubsidy SSNs Egypt Awareness of the Social Pension (formerly known as the Sadat Pension) is very high and fairly uniform across income quintiles. The program has very high association with a safety net, since 25–32 percent of Egyptians mentioned it as a safety net program without being prompted. The ­ second-highest association for an SSN is the Social Nasser Bank (with 11 percent of the middle and top quintiles mentioning it as an SSN pro- gram), but awareness of this program increases with income (from 26 percent in the bottom quintile to 53 percent in the top quintile). The Child Law Pension has the lowest recognition, especially among the poor. Jordan Awareness about National Aid Fund Assistance is very high and fairly uniform across income quintiles. This program also has a very high as- sociation with being a safety net, since 38–53 percent of Jordanians men- tioned it as a safety net program without being prompted. The second- highest association for an SSN is Zakat Assistance (with 68 percent of the middle quintile and 62 percent of the top quintile mentioning it as an SSN program). The Enhanced Productivity Program has the lowest rec- ognition, especially among the poor. Lebanon Awareness about SSN programs seems to be high in Lebanon across in- come quintiles. The hospital fee waivers program has the largest aware- ness among the programs surveyed. It also has a high association with a safety net, since 21–59 percent of Lebanese mentioned it without being prompted. The second-highest association for an SSN is with the Wel- fare Program. The awareness about this program is also high across quin- tiles (over 80 percent in the highest quintile). Vocational training pro- grams have the lowest recall, but awareness increases with income. Tunisia Awareness about SSN programs seems to be high in Tunisia and increases with income for all programs. The National Solidarity Fund has the high- est awareness among the programs surveyed. It also has a very high as- sociation with being a safety net, since 33–58 percent of Tunisian respon- The Political Economy of SSN Reforms in the Middle East and North Africa: What Do Citizens Want? 209 FIGURE 4C.1 Public Awareness of Nonsubsidy SSNs in the Arab Republic of Egypt, 2012 a. Social Pension (Sadat Pension) b. Child Law Pension 100 100 Respondents knowing of program, % Respondents knowing of program, % 80 80 60 60 40 40 20 20 0 0 Q1 Q2 Q3 Q4 Q5 Q1 Q2 Q3 Q4 Q5 Voluntary Prompted Voluntary Prompted c. Student cash transfer d. Micro-grants 100 100 Respondents knowing of program, % Respondents knowing of program, % 80 80 60 60 40 40 20 20 0 0 Q1 Q2 Q3 Q4 Q5 Q1 Q2 Q3 Q4 Q5 Voluntary Prompted Voluntary Prompted e. Social Nasser Bank f. Productive families’ projects 100 100 Respondents knowing of program, % Respondents knowing of program, % 80 80 60 60 40 40 20 20 0 0 Q1 Q2 Q3 Q4 Q5 Q1 Q2 Q3 Q4 Q5 Voluntary Prompted Voluntary Prompted Source: Authors’ calculations based on MENA SPEAKS Survey 2012. Note: SSN = social safety net; Q = income quintile (1 = lowest, 5 = highest). dents mentioned it without being prompted. The second-highest association for an SSN is with the Health Insurance Card from CNSS (Assurance Santé CNSS). The awareness about this program also in- creases with income (over 90 percent in the highest quintile). Awareness about in-kind transfers is relatively low relative to other SSN programs in Tunisia. 210 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa FIGURE 4C.2 Public Awareness of Nonsubsidy SSNs in Jordan, 2012 a. MOSD emergency assistance b. National aid fund assistance 100 100 Respondents knowing of program, % Respondents knowing of program, % 80 80 60 60 40 40 20 20 0 0 Q1 Q2 Q3 Q4 Q5 Q1 Q2 Q3 Q4 Q5 Voluntary Prompted Voluntary Prompted c. Zakat assistance d. Enhanced productivity program 100 100 Respondents knowing of program, % Respondents knowing of program, % 80 80 60 60 40 40 20 20 0 0 Q1 Q2 Q3 Q4 Q5 Q1 Q2 Q3 Q4 Q5 Voluntary Prompted Voluntary Prompted e. School nutrition program f. King’s makrame 100 100 Respondents knowing of program, % Respondents knowing of program, % 80 80 60 60 40 40 20 20 0 0 Q1 Q2 Q3 Q4 Q5 Q1 Q2 Q3 Q4 Q5 Voluntary Prompted Voluntary Prompted Source: Authors’ calculations based on MENA SPEAKS Survey 2012. Note: MOSD = Ministry of Social Development; SSN = social safety net; Q = income quintile (1 = lowest, 5 = highest). The Political Economy of SSN Reforms in the Middle East and North Africa: What Do Citizens Want? 211 FIGURE 4C.3 Public Awareness of Nonsubsidy SSNs in Lebanon, 2012 a. Hospital fee waivers b. Vocational training programs 100 100 Respondents knowing of program, % Respondents knowing of program, % 80 80 60 60 40 40 20 20 0 0 Q1 Q2 Q3 Q4 Q5 Q1 Q2 Q3 Q4 Q5 Voluntary Prompted Voluntary Prompted c. National poverty targeting program d. Welfare program 100 100 Respondents knowing of program, % Respondents knowing of program, % 80 80 60 60 40 40 20 20 0 0 Q1 Q2 Q3 Q4 Q5 Q1 Q2 Q3 Q4 Q5 Voluntary Prompted Voluntary Prompted e. Disability training or support program 100 Respondents knowing of program, % 80 60 40 20 0 Q1 Q2 Q3 Q4 Q5 Voluntary Prompted Source: Authors’ calculations based on MENA SPEAKS Survey 2012. Note: SSN = social safety net; Q = income quintile (1 = lowest, 5 = highest). 212 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa FIGURE 4C.4 Public Awareness of Nonsubsidy SSNs in Tunisia, 2012 a. National program of assistance to needy families b. Public works (travaux à haute intensité de main ď œuvre; (PNAFN) THIMO) 100 100 Respondents knowing of program, % Respondents knowing of program, % 80 80 60 60 40 40 20 20 0 0 Q1 Q2 Q3 Q4 Q5 Q1 Q2 Q3 Q4 Q5 Voluntary Prompted Voluntary Prompted c. Provision of Infrastructure to rural areas d. Health insurance card from CNSS (national solidarity fund) (assurance santé CNSS) 100 100 Respondents knowing of program, % Respondents knowing of program, % 80 80 60 60 40 40 20 20 0 0 Q1 Q2 Q3 Q4 Q5 Q1 Q2 Q3 Q4 Q5 Voluntary Prompted Voluntary Prompted e. In-kind transfers from ministry of social welfare 100 Respondents knowing of program, % 80 60 40 20 0 Q1 Q2 Q3 Q4 Q5 Voluntary Prompted Source: Authors’ calculations based on MENA SPEAKS Survey 2012. Note: CNSS = Caisse Nationale de Sécurité Sociale; SSN = social safety net; Q = income quintile (1 = lowest, 5 = highest). The Political Economy of SSN Reforms in the Middle East and North Africa: What Do Citizens Want? 213 Awareness of Subsidies Egypt Awareness about food subsidies is much higher than awareness of fuel subsidies in Egypt across income quintiles. Most Egyptians volunteered being aware of food subsidies (more than a 50 percent response across quintiles in all programs). Contrarily, fuel subsidies have a very low recall; most people responded only after being prompted (less than 10 percent voluntary recall in most quintiles in all programs). Jordan Awareness of the bread and wheat flour subsidies is very high and fairly uniform across income quintiles. These subsidies also have a very high voluntary recall: 44–64 percent of Jordanians mentioned them without being prompted. There is also high awareness about the LPG subsidy (with 31 percent of the middle quintile and 32 percent of the top quintile mentioning it voluntarily). All other fuel subsidies have very low aware- ness, especially among the poor. Lebanon Awareness about bread, wheat, and flour subsidies seems to be highest among the people surveyed in Lebanon; 16–39 percent of Lebanese men- tioned them without being prompted. The second-highest awareness is of fuel subsidies (with 32 percent of the top quintile mentioning it volun- tarily); it increases with income (from 27 percent in the bottom quintile to 59 percent in the top quintile). The tobacco subsidy has the lowest recognition, across income levels. Tunisia Awareness about the bread and flour subsidy seems to be highest among the people surveyed in Tunisia. It also has a high voluntary recall, since 29–51 percent of Tunisians mentioned it without being prompted. Awareness about the semolina subsidy is also very high (with 45 percent of the top quintile mentioning it voluntarily), and it increases with in- come (from 62 percent in the bottom quintile to 84 percent in the top quintile). The diesel subsidy has the lowest recognition, especially among the poor. 214 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa FIGURE 4C.5 Public Awareness of SSN Subsidies in the Arab Republic of Egypt, 2012 a. Gasoline b. Bread and our 100 100 Respondents knowing of subsidy, % Respondents knowing of subsidy, % 80 80 60 60 40 40 20 20 0 0 Q1 Q2 Q3 Q4 Q5 Q1 Q2 Q3 Q4 Q5 Voluntary Prompted Voluntary Prompted c. Diesel d. Lique ed petroleum gas (LPG) 100 100 Respondents knowing of subsidy, % Respondents knowing of subsidy, % 80 80 60 60 40 40 20 20 0 0 Q1 Q2 Q3 Q4 Q5 Q1 Q2 Q3 Q4 Q5 Voluntary Prompted Voluntary Prompted e. Sugar f. Cooking oil 100 100 Respondents knowing of subsidy, % Respondents knowing of subsidy, % 80 80 60 60 40 40 20 20 0 0 Q1 Q2 Q3 Q4 Q5 Q1 Q2 Q3 Q4 Q5 Voluntary Prompted Voluntary Prompted Source: Authors’ calculations based on MENA SPEAKS Survey 2012. Note: SSN = social safety net; Q = income quintile (1 = lowest, 5 = highest). The Political Economy of SSN Reforms in the Middle East and North Africa: What Do Citizens Want? 215 FIGURE 4C.6 Public Awareness of SSN Subsidies in Jordan, 2012 a.Bread and wheat our b. Diesel 80 80 Respondents knowing of subsidy, % Respondents knowing of subsidy, % 60 60 40 40 20 20 0 0 Q1 Q2 Q3 Q4 Q5 Q1 Q2 Q3 Q4 Q5 Voluntary Prompted Voluntary Prompted c. Lique ed petroleum gas (LPG) d. Electricity 80 80 Respondents knowing of subsidy, % Respondents knowing of subsidy, % 60 60 40 40 20 20 0 0 Q1 Q2 Q3 Q4 Q5 Q1 Q2 Q3 Q4 Q5 Voluntary Prompted Voluntary Prompted e. Water f. Gasoline 80 80 Respondents knowing of subsidy, % Respondents knowing of subsidy, % 60 60 40 40 20 20 0 0 Q1 Q2 Q3 Q4 Q5 Q1 Q2 Q3 Q4 Q5 Voluntary Prompted Voluntary Prompted Source: Authors’ calculations based on MENA SPEAKS Survey 2012. Note: SSN = social safety net; Q = income quintile (1 = lowest, 5 = highest). 216 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa FIGURE 4C.7 Public Awareness of SSN Subsidies in Lebanon a. Mazoot (diesel) b. Bread, wheat, and our 80 80 Respondents knowing of subsidy, % Respondents knowing of subsidy, % 60 60 40 40 20 20 0 0 Q1 Q2 Q3 Q4 Q5 Q1 Q2 Q3 Q4 Q5 Voluntary Prompted Voluntary Prompted c. Tobacco 80 Respondents knowing of subsidy, % 60 40 20 0 Q1 Q2 Q3 Q4 Q5 Voluntary Prompted Source: Authors’ calculations based on MENA SPEAKS Survey 2012. Note: SSN = social safety net; Q = income quintile (1 = lowest, 5 = highest). The Political Economy of SSN Reforms in the Middle East and North Africa: What Do Citizens Want? 217 FIGURE 4C.8 Public Awareness of SSN Subsidies in Tunisia, 2012 a. Bread and our b. Semolina 100 100 Respondents knowing of subsidy, % Respondents knowing of subsidy, % 80 80 60 60 40 40 20 20 0 0 Q1 Q2 Q3 Q4 Q5 Q1 Q2 Q3 Q4 Q5 Voluntary Prompted Voluntary Prompted c. Sugar d. Vegetable oil and olive oil 100 100 Respondents knowing of subsidy, % Respondents knowing of subsidy, % 80 80 60 60 40 40 20 20 0 0 Q1 Q2 Q3 Q4 Q5 Q1 Q2 Q3 Q4 Q5 Voluntary Prompted Voluntary Prompted d. Diesel 100 Respondents knowing of subsidy, % 80 60 40 20 0 Q1 Q2 Q3 Q4 Q5 Voluntary Prompted Source: Authors’ calculations based on MENA SPEAKS Survey 2012. Note: SSN = social safety net; Q = income quintile (1 = lowest, 5 = highest). 218 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa Annex 4D Determinants of Redistribution Preferences among Jordan’s Middle Class TABLE 4D.1 Determinants of Redistribution Preferences among Jordan’s Middle Class, 2012 Ordered probit Disapproves redistribution Subjective income: middle 0.312 (2.45)* Subjective income: upper 0.476 (2.31)* Can rely on informal safety net –0.354 (–2.63)** Thinks poor are lazy 0.298 (3.75)*** Worried to lose job or income 0.103 (1.40) Observations 395 Source: Authors’ calculations based on Jordan Gives 2012. Note: z statistics in parentheses. Controls for gender, education, and employ- ment. Baseline subjective income: lower middle class. “Subjective income” = self-reported perceived income level. *p < .1 **p < .05 ***p <.01 The Political Economy of SSN Reforms in the Middle East and North Africa: What Do Citizens Want? 219 Annex 4E Determinants of Perceiving High Inequality TABLE 4E.1 Determinants of Perceiving High Inequality in the Middle East and North Africa, Selected Countries, 2012 Perceives high inequality. Variables Egypt, Arab Rep. Jordan Lebanon Tunisia Living standard getting better –0.0921** –0.116*** 0.00504 –0.113*** (0.0408) (0.0374) (0.0504) (0.0411) Income q2 –0.0249 –0.0612 –0.0372 –0.0486 (0.0557) (0.0516) (0.0589) (0.0594) Income q3 –0.0524 –0.118** –0.0682 -0.0659 (0.0609) (0.0508) (0.0632) (0.0591) Income q4 –0.0884 –0.148*** –0.172*** –0.120* (0.0592) (0.0484) (0.0578) (0.0648) Income q5 –0.159*** –0.120** –0.279*** –0.0262 (0.0606) (0.0543) (0.0543) (0.0744) Observations 1,003   883   960   737 r2_p 0.0263 0.0511 0.0757 0.0393 Source: Authors’ calculations based on MENA SPEAKS Survey 2012. Note: q = income quintile (1 = lowest, 5 = highest). Robust standard errors in parentheses. Controls for gender, age, education, work status, and household assets. *p < .1 **p < .05 ***p <.01 220 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa Annex 4F Effects of Perceptions about Corruption, Inequality, and Deteriorating Economic Situation on the Evaluation of SSN Effectiveness TABLE 4F.1 Effects of Selected Perceptions on Evaluation of SSN Effectiveness in the Middle East and North Africa, Selected Countries, 2012 Find social assistance effective Egypt, Arab Rep. Jordan Lebanon Tunisia Income quintile 2 0.04 0.23 –0.03 –0.07 Income quintile 3 0.07 0.01 –0.23 0.07 Income quintile 4 –0.10 0.36 –0.39 0.28 Income quintile 5 –0.10 0.24 –0.44* 0.38 Economic worsening –0.17 0.01 –0.50*** 0.18 Gov. corrupt –0.60*** –0.76*** –0.57*** –0.93*** Low inequality 0.14* 0.15* –0.13 0.04 Donated 0.16 –0.11 –0.34 –0.74** Feels poor –0.39** –0.44** –0.15 –0.14 _cons –0.34 0.65 2.51*** 2.41** pseudo R-sq 0.086 0.145 0.084 0.133 N 992 794 925 663 Source: Authors’ calculations based on MENA SPEAKS Survey 2012. Note: SSN = social safety net. Dependent variable is equal to 1 if the individual responded that SSN in his country is effective or very effective, and equal to 0 otherwise. The coefficients are probit marginal effects. Results control for gender, age squared, education, work status, and household size. *p < .1 **p < .05 ***p <.01 The Political Economy of SSN Reforms in the Middle East and North Africa: What Do Citizens Want? 221 Notes 1. To the authors’ knowledge, no study had previously examined attitudes to- ward SSNs or redistribution in the Middle East and North Africa. Several studies that conducted experiments on trust with university students in Gulf countries (Kuwait, Oman, Saudi Arabia, and the United Arab Emirates) and two Western countries (Switzerland and the United States) found a lower level of trust in the Gulf states than in the West, as well as lower responsive- ness to changes in the payoffs associated with giving trust to unknown indi- viduals (Bohnet et al. 2010; Bohnet, Herrmann, and Zeckhauser 2010). 2. The first question explained what an SSN program is and then asked the re- spondents to name any government SSN projects in their country that they knew about. Programs were defined as “a government project in which money or other goods and services are provided to the poor.” The interviewer checked off programs on a preset list of five or six existing programs (obtained from the MENA SSN Inventory and validated by Gallup’s country experts). If a program on the list was not mentioned, the interviewer followed up by ask- ing whether the respondent had heard about it. See annex 4A for the full questionnaire. 3. After defining what a price subsidy is (“in some countries, governments subsi- dize the prices of certain products by keeping their prices fixed or at least preventing their prices from rising too fast”), the interviewer asked respon- dents whether they thought their governments were subsidizing any products and checked the mentioned items off a preset list (obtained from a desk review of World Bank publications and cross-checked with Gallup country experts). 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CHAPTER 5 The Way Forward: How to Make Safety Nets in the Middle East and North Africa More Effective and Innovative Introduction This report has made a case for putting in place more effective social safety net (SSN) programs in the Middle East and North Africa. As de- scribed in the framework for SSN reform (chapter 1, figure 1.4), SSNs can be a powerful instrument to promote • Social inclusion, by enabling investment in human capital (such as sup- porting school attendance or better nutrition for children); • Livelihood, by protecting against destitution; and • Resilience to crises, by helping households navigate the effects of shocks. Achieving these outcomes requires a focus on the following goals: • Enhance the emphasis on the poor and vulnerable • Empower individuals with tools to improve their lives • Ensure ready and rapid temporary support in response to crises to bet- ter promote resilience • Give citizens a greater voice to promote civic engagement and policy ownership. To fulfill these goals, SSNs need to be carefully designed and imple- mented in ways that ensure they are reaching the most vulnerable since 2009, through improved administrative and governance systems. Cur- rently, 80 percent of developing countries have plans to initiate or strengthen their safety nets, according to World Bank assessments (World Bank 2012). 225 226 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa Continued growth and poverty reduction, as well as a growing middle class in the Middle East and North Africa, often go hand in hand with increasing inequality and economic volatility that have created pockets of poverty and exclusion, as well as high vulnerability to shocks. Against this background, current SSN systems feature a program mix highly depen- dent on fuel and food subsidies; have low coverage and high fragmenta- tion of nonsubsidy SSN programs; inadequately target most cash trans- fers, relying mostly on categorical or geographical methods; and provide limited opportunities for either activation or graduation (previously cov- ered in chapter 3). These human development and institutional challenges call for cost- effective SSNs that promote social inclusion and productivity. The emerging safety net agenda emphasizes that (a) well-designed SSN pro- grams work and can be both efficient and affordable; (b) SSNs are needed at all times, and having them in place before a crisis increases effectiveness of coping with the consequences; (c) SSNs should reduce poverty as well as promote growth; and (d) SSNs should be conceived as part of a broader social protection system. This chapter addresses the main points discussed during extensive con- sultations in the region, followed up with online discussions. Consulta- tions in the context of this report included two main types of activities: 1. Three regional consultation workshops were jointly organized with the team developing the World Bank Social Protection Strategy for the Middle East and North Africa. Workshop components included a pre- sentation of the preliminary results from the regional report, expert cafés or roundtables on key challenges and options for reform in each country, showcases of best SSN practices in the region and internation- ally (with posters and a quiz with prizes), and focus group discussions using a modified version of the Jordan Gives game. (See box 5.1 for an overview of the main issues discussed in the consultation workshops.) 2. In-depth national consultations in Jordan, Lebanon, and Tunisia sought feedback on the draft report. The proposals presented in this chapter are based on these extensive con- sultations as well as international experience (success stories and key prac- tical steps on how to get there). The evidence presented in the preceding chapters—such as rigorous analysis of the needs of the region’s poor and vulnerable (chapter 2), the performance assessment of existing SSN sys- tems (chapter 3), and citizens’ SSN preferences (chapter 4)—lays the foundation for moving forward. This chapter builds on this evidence base, proposes a reform agenda (aligned with the SSN objectives dis- cussed in chapter 1), and translates its key items into practical suggestions for how to proceed. The Way Forward: How to Make Safety Nets in the Middle East and North Africa More Effective and Innovative 227 BOX 5.1 Main Issues Discussed at SSN Consultation Workshops Extensive consultations on SSN reform • How can benefits best be targeted to the truly were held in the Middle East and North Af- needy? Most delegations wanted details rica, including three regional workshops— on how to target various programs. Par- in Beirut (January 13–14, 2012), Tunis ticipants acknowledged that each exist- (January 16–17, 2012), and Muscat (April ing program uses a different targeting 16–17, 2012)—jointly organized with the mechanism to reach its beneficiaries. A World Bank’s MENA (Middle East and consensus seemed to emerge on the North Africa) Social Protection Strategy need to target the poor, and questions team. There were more than 80 partici- were centered on the best way to do so pants in each workshop, including repre- in each country. There was significant sentatives from government, academia, civil interest in international experience on society, nongovernmental organizations proxy means tests (PMT). The advan- (NGOs), community-based organizations, tages and disadvantages of alternative and donors in the region (including the In- targeting methods were discussed. ternational Labour Organization and the United Nations Economic and Social • What is the role of NGOs and civil society Commission for Western Asia). Represen- organizations (CSOs) in SSNs? The con- tatives from Algeria, Bahrain, Iraq, Jordan, sultation process witnessed CSOs de- Kuwait, Lebanon, Morocco, Oman, Saudi manding greater involvement, not only Arabia, Tunisia, the United Arab Emirates, in the context of SSN design and imple- and West Bank and Gaza identified the mentation but also more broadly in so- main issues and challenges in designing cial, political, and economic issues. SSNs. Workshop participants raised the There was a lot of interest in how NGO following questions, among others: and CSO participation in service provi- sion and social accountability can be en- • How can countries ensure that the tempo- hanced, and when such participation rary income support given by the SSN pro- adds the most value. grams has long-lasting results for beneficia- ries? Participants felt that just giving • In practice, how have subsidy reforms been income to families may not have long- implemented, and how has the compensation term effects. The consensus was that in- package been designed? A lot of concern come support should be temporary, tar- surrounded increasing fiscal spending geted to those in need, and associated on subsidies as well as political economy with enhancing beneficiaries’ liveli- issues; therefore, there was substantial hoods and increasing their employment interest in the practical implementation possibilities through better access to so- and sustainability of subsidy reforms, cial services such as education, health, such as the features of the compensation and employment services. package. (box continued on next page) 228 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa BOX 5.1 Continued • How can countries best balance limited re- were struggling to curtail dependency, sources and widespread needs? Participants especially when programs switch from acknowledged that significant amounts categorical to poverty-based targeting. are spent on SSN systems with limited Strategies used around the world to impacts on poverty and inequality. The avoid dependency were discussed, in- consensus was that it is important to cluding targeting on correlates of pov- make programs more cost-effective and erty rather than labor income; condi- results-oriented. Participants were inter- tioning transfers on behaviors that ested in achievements of cost-effective enhance human capital; requiring regu- SSN programs around the world. lar recertification; and channeling the assistance to women. • How can social programs avoid dependency? Beneficiaries of some unconditional • How can SSNs be seen in a broader context? cash transfer (UCT) programs in the re- The main concerns raised were (a) how gion were perceived to treat the cash to ensure that SSNs adequately serve all they receive as their “salary.” Although the poor, given their different circum- this situation may reflect the fact that stances and needs (for example, the dis- many beneficiaries comprise categories abled, the elderly, and young couples of disabled and elderly persons or others without children); and (b) how to make unable to work, there was a consensus SSNs true insurance mechanisms, given that it is important to move from per- that insurance is currently largely miss- ceiving programs as an entitlement to ing. The consensus was to focus on a few perceiving them as an opportunity—as large-scale programs with different win- an investment in people rather than as a dows and use a common targeting data- handout. Governments in the region base as the anchor. A Path toward Effective and Innovative SSNs SSNs in the Middle East and North Africa are ripe for reform. As chapter 3 showed, the region relies heavily on inefficient and pro-rich price subsi- dies and ration cards. Subsidies aside, SSNs in the region are small and fragmented. Most of the poor and vulnerable fall through the cracks of nonsubsidy SSNs because of low coverage. Moreover, poor targeting practices lead to inefficient use of resources. Although subsidies are often pro-rich and ineffective relative to other SSN interventions, many people depend on them for their livelihoods. Thus, moving from the status quo toward more effective, reliable, and equitable SSNs requires careful think- ing about technical aspects as well as the political economy of reform. SSNs in the region can better promote inclusion, livelihood, and resil- ience, and citizens expect them to do so. Because of their politically sensi- The Way Forward: How to Make Safety Nets in the Middle East and North Africa More Effective and Innovative 229 tive nature, SSN reforms require consensus building, the grounds for which already appear to exist: The MENA SPEAKS survey and Jordan Gives experiment have revealed that people hold the government respon- sible as the main provider of SSNs, and many are not satisfied with the effectiveness of current SSN policies and programs. In fact, the kinds of programs preferred by citizens in several Middle Eastern and North Af- rican countries are in line with the best practices in SSN design. Thus, governments have an enabling environment that can be rallied behind SSN reform. Moreover, several economies in the region have already implemented successful reforms that have attained significant positive results (see box 5.2). While there are no single solutions, the path toward more effective and innovative SSNs calls for action on four agenda items: improving the impact of SSN programs; enhancing the reliability and flexibility of SSN BOX 5.2 Emerging SSN Best Practices in the Middle East and North Africa Djibouti: Making a Workfare Program Lebanon: Establishing a Targeting Work for Women and Children System Using Modern Technology At the time of the 2008 food and fuel crisis, Lebanon recently launched the National the country did not have SSNs in place that Poverty Targeting Program (NPTP), could be scaled up. Following the crisis, the which establishes a central targeting data- government implemented a “workfare base for social safety nets. The program plus” program. The innovative SSN pro- automates data entry of applications and gram provides short-term employment relies on local Social Development Centers opportunities in community-based, labor-­ ­ to conduct household visits and outreach. intensive works and supports the improve- Morocco: Launching a CCT Program to ment of nutrition practices among partici- Boost School Attendance pating households, focusing on preschool Morocco’s conditional cash transfer (CCT) children and pregnant or lactating women. program has had a significant positive im- This combination of a workfare program pact, as demonstrated through impact eval- with a nutrition intervention is designed to uation. To reduce school dropouts in rural have a multigenerational impact by lever- areas, especially of girls, the government aging, through transfer of knowledge on launched a cash transfer conditional on pri- nutrition, the use of additional income to mary school attendance. The impact evalu- improve a family’s health status. It pro- ation of the pilot demonstrated that dropout motes a holistic, community-driven ap- rates decreased by 57 percent and the rate of proach, providing employment opportuni- dropouts’ returning to school increased by ties for both men and women. (box continued on next page) 230 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa BOX 5.2 Continued 37 percent. Recently, program coverage in- The Republic of Yemen: Having a creased from a pilot of 80,000 students in Working Safety Net for Rapid Crisis 2009 to 690,000 children in 406,000 house- Response holds in 2011–12. The total budget rose The existing cash assistance and workfare from US$10 to US$62 million. programs provided instruments for a rapid response to the 2008 food and fuel crisis. West Bank and Gaza: Reducing They consisted of (a) temporary cash assis- Fragmentation and Building tance (US$15–20 per month for 12 months) Administrative Capacity to poor households, and (b) scaling up the West Bank and Gaza has a fully fledged un- workfare program, which provided tempo- conditional cash transfer (UCT) program rary job opportunities to 16,824 house- in place, which resulted from a merger of holds. The vast majority of beneficiary the two largest donor-funded cash transfer households (95 percent) used the funds to programs. The program uses PMT target- bridge a consumption gap. The workfare ing methodology and a unified registry of program also created community assets by beneficiaries that enabled it to provide as- rehabilitating water harvesting systems, sistance to more than 93,000 of the poorest clearing up land for agricultural activities, households in the country in 2011. More- rehabilitating terraces from erosion, and over, to respond to crisis conditions in fixing feeder roads, among other activities. 2010, the system was quickly scaled up by 25,000 additional households. infrastructure for better crisis preparedness, achieving cost-effectiveness through consolidation; and rebalancing SSN financing and priorities. Engaging citizens and other stakeholders in this agenda can improve fea- sibility and facilitate success: • Improving the impact of SSN programs. Currently, most nonsubsidy SSN programs in the Middle East and North Africa have a limited impact on poverty and inequality because of a combination of low cov- erage, inefficient targeting practices, and inadequate or nonexistent monitoring and evaluation (M&E) systems. Hence, the way forward could entail C Prioritizing interventions that promote investment in human capital; C Enhancing programs’ targeting toward the poor and vulnerable; C Improving the focus on results through M&E and social account- ability; and The Way Forward: How to Make Safety Nets in the Middle East and North Africa More Effective and Innovative 231 C Reaching out to other stakeholders, including citizens, NGOs, CSOs, the private sector, and nonprofits. • Enhancing reliability and flexibility of SSN infrastructure for better crisis preparedness. An effective SSN system can help citizens navigate the effects of both idiosyncratic and systemic shocks. The recent global economic crisis underscored the weak capacity of existing SSN sys- tems in the Middle East and North Africa to serve this function. Pro- moting households’ resilience to shocks through SSNs requires a strong administrative infrastructure. Having this infrastructure in place ahead of a crisis allows for quicker and more efficient develop- ment of remedial and mitigation actions, such as scaling up of benefits for the most vulnerable or expanding coverage, thus enhancing resil- ience. Specifically, strengthening the administrative SSN infrastruc- ture could entail C Creating unified registries of beneficiaries; and C Using effective service delivery mechanisms. • Consolidating fragmented SSN systems. In the Middle East and North Africa, direct transfer programs (cash-based or in-kind) are often small and highly fragmented. International experience suggests that having a few comprehensive programs, specifically designed to reach different segments of the poor and vulnerable, can address current vulnerabili- ties and social protection gaps by increasing both coverage (currently below 20 percent of the poor in most countries) and benefits (currently at about 5–10 percent of consumption of the poor). Parts of the region (for example, Morocco and West Bank and Gaza) have already started reforming their SSNs in this direction. • Rebalancing SSN financing and priorities. Effective reforms include focusing on targeted programs rather than on subsidies. Middle East- ­ ern and North African countries spend the lion’s share of SSN expen- diture, in terms of GDP, on energy subsidies and a small share on targeted safety nets. Reducing costly and regressive general fuel and food price subsidies would decrease fiscal imbalances and free up re- sources for safety net programs. In particular, this effort could entail C Increasing spending on and improving coverage of nonsubsidy SSNs to protect against destitution; and C Reforming price subsidies through wholesale and internal reforms. In what follows, the chapter will follow the agenda outlined above to provide key practical steps using best practices from the Middle East and 232 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa North Africa and elsewhere to enable the region’s SSNs to better pro- mote inclusion, livelihood, and resilience. Improving the Impact of SSN Programs Prioritizing Interventions that Promote Investment in Human Capital Middle Eastern and North African countries differ in their human devel- opment challenges. To better promote social inclusion, the prioritization of SSN programs should reflect this diversity. For example, in countries where the key challenge is high malnutrition (such as in Djibouti), pro- grams can be geared toward the prevention of this problem. In other countries, where low educational outcomes are the most pressing social issue (such as in Morocco), providing incentives for school enrollment and attendance is crucial. In many countries around the world—including some in the Middle East and North Africa—these concerns have been tackled by scaling up existing successful CCT and workfare programs; tweaking program design to make them work better for children, youth, and women; creating new interventions to fill the gaps based on best practices around the world; and collaborating with supply-side providers and involved agencies. Scaling Up a Successful Program.  Morocco’s Tayssir program, which started out as a pilot, was based on solid empirical evidence of high drop- out rates in rural areas (especially among girls) and higher absenteeism of teachers in rural areas. The CCT intervention targeted pockets with higher dropout rates and poverty (Benhassine et al., forthcoming). The Tayssir program has been shown to decrease dropout rates, especially for girls, and to improve learning outcomes for boys. Since 2009, the pro- gram has expanded in coverage and budget. Success stories such as these can be scaled up further to promote human capital investment nation- wide. To scale up a program, governments need to assess supply-side availability (for example, the presence of schools and teachers in the area) as well as to evaluate the administrative capacity to provide transfers to a greater number of recipients. Tweaking Program Design for Greater Effectiveness.  Improving the reach of existing SSN programs can help them work better for subgroups of recipients while also strengthening their impact on education, nutrition, and job skills. Some UCTs can be transformed into CCTs by introduc- ing conditions linked to the main human development challenges in the country, such as by complementing cash transfers with training vouchers for disadvantaged youth, early childhood development interventions, or conditions linked to nutrition. However, findings from the MENA The Way Forward: How to Make Safety Nets in the Middle East and North Africa More Effective and Innovative 233 SPEAKS survey and the Jordan Gives experiment suggest that the use of conditionality as a mechanism to promote human capital accumula- tion—which would be largely new to the Middle East and North Af- rica—remains little endorsed (or understood) in the four surveyed countries. Thus, qualitative research to understand the reasons for these views (or the factors behind the success of existing pilots in the region in spite of these perceptions), together with piloting and communication cam- paigns, are all important elements to consider when planning to intro- duce such an innovative program design. Moreover, including gender- sensitive activities in workfare programs could promote women’s participation, which might have positive externalities on their children. In tweaking the design of UCTs, governments need to be careful to protect the income support function of SSNs for groups that cannot comply with the selected conditions (such as the elderly and the disabled). Creating New Interventions Using Global Best Practices.  In countries where programs that promote inclusion are absent, new programs can be de- signed with the existing global best practice in mind. Djibouti provides a good example of program creation to tackle a country’s most pressing problems. Rigorous analytical work indicated that unemployment and malnutrition were priority challenges in Djibouti (World Bank 2009). Unfortunately, in 2009, no SSN programs attempted to address those challenges directly. The government has since developed a workfare program that also provides a nutrition intervention, aiming to leverage the effect of the additional income on the families’ nutritional status through behavioral change. The design of the nutrition component was inspired by the international best practice of Madagascar’s Expanded Food Security and Nutrition program (Sécurité alimentaire et nutrition élargie; SECALINE). Unlike existing programs, newly created interven- tions have more flexibility to choose the target group that maximizes the intervention‘s impact because they do not take away benefits from any particular group. Collaborating with Supply-Side Providers and Involved Agencies.  Use of health and education services depends on both demand and supply fac- tors. As discussed above, effective SSNs can increase demand for school- ing or preventive care, but the desired impacts can be achieved only in the presence of effective supply of such services. In scaling up, tweaking, or designing new SSN interventions, governments need to assess the sup- ply-side capacity to absorb the extra demand that CCTs or workfare pro- grams would stimulate. Close collaboration with involved agencies such as the Ministries of Education, Health, and Labor can facilitate the right 234 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa sequencing of supply and demand interventions, thus helping to ensure success. Enhancing Targeting toward the Poor and Vulnerable Poverty-based targeting is important for three main reasons: (a) it con- tains costs and ensures that money is spent on those who have the greatest needs and for whom funds will deliver the highest returns; (b) it ensures equity; and (c) it allows SSNs to act as true insurance (state-contingent transfers), which is still missing in most Middle Eastern and North Afri- can countries. Strategic policies and programs that define, identify, and reach the intended beneficiaries through targeting can deliver more re- sources to the poorest groups of the population—ensuring that all who are eligible to receive benefits are included, that those who are no longer eligible are systematically removed, and that new or newly poor house- holds can access safety nets in a crisis. Countries using targeting have increased the amount of assistance for each targeted beneficiary, enhanc- ing program impact and containing the system’s total cost through over- all savings.1 However, although the importance of targeting is recognized in the Middle East and North Africa, there is no consensus yet on which combination of methods fits each country’s situation best. Two decisions frame the targeting strategy. The first decision is whether to use poverty-based targeting. Chapter 3 shows that in the re- gion, many SSN programs are targeted categorically (that is, to single mothers, widows, orphans, and the disabled, irrespective of their poverty level). When poverty is not concentrated in these groups, this targeting method often leads to leakage of program resources to the non-needy as well as undercoverage of the poor who do not fit these categories. Cate- gorical targeting also limits programs’ ability to scale up when govern- ments try to reach beneficiaries who do not fit any of the predefined categories. Finally, categorical targeting may negatively associate a pro- gram with charity, thus stigmatizing SSN beneficiaries. The second decision revolves around the selection of the specific poverty-based targeting method. Other than categorical and geographi- ­ cal, the main targeting methods used in the Middle East and North Africa are (unverified) means tests, PMT, community targeting, and self-target- ing. Often different methods are combined for higher effectiveness, as illustrated below. Poverty-Based Targeting Methods.  The main methods, their advantages and disadvantages, and strategies for making them work are as follows: The Way Forward: How to Make Safety Nets in the Middle East and North Africa More Effective and Innovative 235 • Means tests. This method relies on information about households’ income or wealth. A verified means test verifies the information pro- ­ vided by applicants against independent sources, while an unverified means test relies only on self-reported information. C Verified means tests are more accurate but can be costly and can lead to exclusion of people who meet the eligibility criteria but lack proof of income (for example, those who have informal jobs). Veri- fied means tests are most common in countries where the govern- ment’s information systems allow for cross-linking of registries and where interagency cooperation and data sharing are in place. When this is not possible, households may be asked to submit copies of records of transactions, such as pay stubs, utility bills, or tax payments. C Unverified means tests are easier to administer but are less accurate, are subject to underreporting by applicants, and have high leakage due to inclusion of ineligible beneficiaries. Few countries use this method; Brazil is an exception, but its program management runs a PMT on household welfare information to check its plausibility (and mandates a household visit if the PMT and the self-declaration do not match), publishes the list of beneficiaries in a local newspaper and on the Internet, and has established a complaint mechanism.2 • Proxy means tests. PMTs generate a score for each applicant household based on observable characteristics such as education, household size, location, quality of dwelling, and ownership of durable goods. The information provided by the applicant at registration is usually verified either by a home visit from a program official or by having the appli- cant bring written verification of part of the information to a program office. Eligibility is determined by comparing the household’s score against a predetermined cutoff. This method is fairly accurate in iden- tifying the poor, can be quickly implemented, and is suitable for ­ national-scale programs. PMTs are a good alternative to means tests in contexts where there are many informal workers or where few data are available for cross-checks across tax records, pay stubs, and pension systems.3 • Community-based targeting. This method uses a group of community members not associated with the programs to decide who in the com- munity should benefit. Usually, special committees composed of com- munity members, or a mix of community members and local officers, are formed to determine eligibility for a program. Often the central government or the program’s implementation agency provides a list of 236 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa characteristics that beneficiaries should have based on the main cor- relates of poverty from a national household survey (no job, education below a certain level, no land or business, and so on). Community members rank eligible households by poverty and vulnerability level. Community lists are then periodically updated and used in combina- tion with discussions at community meetings. This method can be highly acceptable by communities but often can be captured by the elite. It is a good alternative for countries with high community participation. • Self-targeting. Self-targeted programs are technically open to all but are designed in such a way that take-up is expected to be much higher among the poor than the nonpoor. Most workfare programs define eli- gibility based on geographical targeting (by which only people who live in designated areas are eligible). Wages are set at a level at which less-poor households will not be interested in participating because they will be able to command higher wages elsewhere. Key Lessons for Targeting-Related Reforms.  Eight key lessons (and steps) drawn from these and other experiences could be useful for Middle East- ern and North African countries when undertaking targeting reforms (see box 5.3 for examples of such reforms in the region): • Gather information on poverty and estimate costs for different benefit amounts and coverage levels. Using a new household survey or existing data, esti- mate the share of the population in poverty and their main character- istics (individual characteristics such as education and employment as well as possession of assets, such as the material used in walls or floors of the dwelling or number of cars). Using this information, simulate the total cost of the program under different scenarios for the amount of the transfer and the desired number of beneficiaries or coverage of the poor. • Build political consensus. Changing the targeting method of programs can cause some current beneficiaries to become ineligible and lose ac- cess to SSN programs. Thus, this reform requires political will, sup- port from the highest level of government, and a broad-based consen- sus on poverty reduction. As shown in chapter 4, MENA SPEAKS respondents generally had a strong preference for poverty-based tar- geting of SSN programs (as opposed to provision of transfers to spe- cific groups). Given government commitment to the targeting reforms and effective communication campaigns that explain their objective, The Way Forward: How to Make Safety Nets in the Middle East and North Africa More Effective and Innovative 237 BOX 5.3 Examples of Enhancing Targeting in the Middle East and North Africa West Bank and Gaza: Improving though its budget grew from US$4 million UCT Targeting in 1996 to US$200 million in 2008/09, the The Cash Transfer Program underwent a program suffered from a combination of major targeting reform in 2010. An effec- low benefits, poor targeting, and chroni- tive, unique PMT mechanism and central cally low coverage of the poorest, resulting registry were established, which facilitat- in negligible poverty impact. Based on the ed the merger of the two largest cash findings of the 2007 Yemen Poverty As- transfer programs into a Palestinian sessment (Government of Yemen, World Authority-­ a dministered cash transfer Bank, and UNDP 2007), the government program. The reform improved targeting implemented a program of fundamental re- (confirmed by independent consulting forms to the SWF to improve poverty tar- firms) and increased donor trust, which geting (with a PMT formula), strengthen has resulted in greater flows of funds into capacity for service delivery, and imple- the system. ment a new legal and policy framework. As The Republic of Yemen: a result, the SWF is now an increasingly Increasing Coverage of the Poorest effective mechanism for reaching the poor; The Social Welfare Fund (SWF) adminis- during the recent global economic crisis, it ters Yemen’s cash transfer program. Al- reached 1.5 million poor households. the findings from MENA SPEAKS imply that governments can pro- ceed with confidence in their citizens’ support. • Ensure administrative capacity for getting accurate information and verify- ing eligibility. When administrative capacity is limited, a mix of target- ing methods often works best. For example, in a developed-country context, means tests and PMTs can be implemented based on available data. In many middle-income countries, PMTs can provide a good starting point, balancing between information needs and administra- tive capacity. In a data-constrained context, a mix of geographic and community-based methods may be used, particularly to reach more remote settings. • Avoid targeting criteria that carry stigmas, which might affect people’s decision to participate. In many countries, poverty is associated with shame, and this can lower program take-up. Locally based registration processes and payment of benefits through smart cards can mitigate this effect. 238 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa • Link the targeting method to a specific benefit. Targeting is an instrument, not an objective in itself. If the poor and vulnerable do not understand the advantage of registering, they are not likely to do so, and the pro- gram targeting based on this registry will suffer from large exclusion errors. • Reach out to the extremely poor. Complementing mobilization campaigns aired on television with campaigns on the radio and those aimed at the level of community committees has achieved high coverage of the in- tended beneficiaries. Alternatively, governments can consider con- ducting a census of the poor to reach the pockets of greatest need.4 • Develop strategies that minimize applicants’ program registration costs. Costs include the time and cost of traveling, queuing for registration, and complying with any conditions. Strategies for lowering these costs include setting up registration points near the targeted communities, applying simplified verification procedures (for example, verification documents that can be mailed rather than presented in person, simpli- fying the requirements for obtaining identification documents), and providing staff to help households fill out simple registration questionnaires. • Within eligible households, consider transferring benefits to women. Litera- ture and experience around the world suggest that intrahousehold al- location of resources matters for spending priorities (Haddad, Hod- dinott, and Alderman 1997; Quisumbing and Maluccio 2000). In general, SSN benefits received by women are as likely (but frequently much more likely) to be invested in children’s welfare than benefits received by men. Existing CCT programs already use this finding by delivering benefits explicitly to mothers or their proxies (Grosh et al. 2008). For example, the CCT benefits in Oportunidades in Mexico, Bolsa Familia in Brazil, and Familias en Acción in Colombia are all de- livered into the hands of women in eligible households. In the context of the Middle East and North Africa, transferring SSN benefits to women instead of men can also increase women’s decision-making power within households and promote social inclusion. Improving the Focus on Results through M&E and Social Accountability Importance of M&E and Accountability.  M&E can help allocate budget re- sources between programs, monitor day-to-day operations, and track re- sults of interventions. It has been particularly effective when the evalua- tion results and empirical data produced are used to inform budgetary The Way Forward: How to Make Safety Nets in the Middle East and North Africa More Effective and Innovative 239 decisions and reshape programs.5 This was the case in West Bank and Gaza and the Republic of Yemen, for example. Moreover, introducing well-functioning social control systems can improve efficiency and ac- countability while combating corruption. A central M&E system would define strategic outcomes as well as specific indicators and track their progress and results. To implement ­ such a system, data requirements (type and frequency of information) and transmission methods from each agency to the central government need to be defined. Successful information technology (IT) systems establish a harmonized set of core indicators, standardized tables, and updating schedules. Indicators are normally linked with the SSN strategy defined by the line ministry. In countries where a unified registry of the poor and vulnerable exists and payment of benefits is linked to this registry, auto- matic reports on the number of beneficiaries (disaggregated by gender as well as other characteristics of particular concern) and main outcomes can be produced. Program administrators can use such reports to assess whether the system is functioning well or whether any adjustments need to be made. In the Middle East and North Africa, enhanced M&E for SSNs at the central level could help governments better allocate budget resources among programs and track results of their investment in fight- ing poverty. Beyond simply tracking outcomes, an M&E system creates a commitment to accountability that enhances the overall efficiency of the system. To monitor progress in reaching the poor, core indicators at the cen- tral level are the total number of beneficiaries, the budget or number of SSN programs, and the percentage of the poor receiving assistance (ag- gregated coverage of the poor across programs). It is also important to have an inventory of programs by type of benefit provided and the num- ber of beneficiaries and expenditures across different programs by benefit type (for example, beneficiaries of UCTs, CCTs, social pensions, other cash transfers, in-kind transfers, cash-for-work, food-for-work, school feeding programs, and other SSN programs). These data are normally available from program or project administrative records, but their ac- curacy should be verified. In addition, it is important to track the impact of the overall SSN system through indicators across programs, such as the number of person-days of work or the number of employment opportu- nities generated (for workfare programs), or the increase in school atten- dance or visits to clinics among participating households (for CCTs). Us- ing a common identification across programs also enables the government to know which households are receiving more than one program and helps to focus a bundle of interventions according to household needs. Central M&E systems can become a platform for sharing knowledge and experience. Meeting to discuss the global outcomes of programs can 240 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa be a good opportunity to bring practitioners together to share best prac- tices and lessons learned and to establish an effective community of SSN experts. In addition, the better management resulting from M&E systems tends to increase donor and private sector trust and funding. M&E and Accountability Trends.  A new wave of results-oriented programs in the Middle East and North Africa use integrated M&E systems. Cash transfer programs (such as in Morocco, West Bank and Gaza, and the Republic of Yemen), and workfare programs (for example, in the Repub- lic of Yemen) have generated robust evidence that the programs work, and when they are well implemented they are achieving the intended re- sults. In addition, pilot programs in Djibouti and Tunisia include rigor- ous impact evaluations in their design. This trend in the region is new and promising. Another emerging trend is the development of integrated program monitoring systems. Economies like Djibouti, West Bank and Gaza, and the Republic of Yemen developed (computer-based) integrated manage- ment information systems (MIS) that became the backbone of the pro- gram operation cycle. These systems set up (a) the institutional channels through which the data required to process program transactions circu- late, and (b) the modules from which the data can be accessed. An MIS also establishes procedures for data collection and processing, as well as for access control and database management to provide end users with analytical information for everyday implementation, control, and super- vision. In particular, these systems create and automate business transac- tions under the program, allow for easy control of funds for program administration needs, and systematize information for targeted provision of benefits. Beyond learning how well a program achieves its expected outcomes, it may also be important to determine whether a program meets its objec- tives, whether the program’s benefits outweigh the costs, and what the program’s estimated net impact is. Impact evaluations often involve exter- nal entities such as universities, NGOs, think tanks, and international or- ganizations to guarantee impartiality and credibility.6 In the Mexico CCT, Oportunidades, for example, credible impact evaluations demonstrated that the program had sustainable impacts on education, health, nutrition, and diet, which enabled the program to prevail even after a change in govern- ment.7 Following Mexico’s pioneering of impact evaluation, most CCT programs in Latin America and elsewhere now incorporate robust moni- toring and impact evaluation studies done by independent third parties, usually local universities and international research centers. In the Middle East and North Africa, a few countries are starting to promote impact evaluations of programs, but these are still a minority. The Way Forward: How to Make Safety Nets in the Middle East and North Africa More Effective and Innovative 241 Traditionally SSN budgets have been approved based on historical allocations, regardless of programs’ outputs or results, but many coun- tries are changing this practice. For instance, CSOs, media organizations, and academia have been active in reviewing the policies, operational rules, and procedures of the Philippines’ CCT program Pantawid Pamilyang Pilipino Program (4Ps), leading to significant improvements in address- ing exclusion, payments, updates, and grievances (see box 5.4). In El Sal- vador, NGOs actively help mothers and families meet the conditions of the Red Solidaria CCT program and link them with other social pro- grams. So although SSN programs have not often been subject to open scrutiny by the public or CSOs or to rigorous M&E, these new, well- functioning social accountability systems could provide the scrutiny nec- essary to keep the programs’ focus on results. Reaching Out to Other Stakeholders (Citizens, NGOs, CSOs, Private Sector, and Nonprofits) Currently, awareness about existing SSN programs is low and skewed toward the wealthy. Chapter 4 highlighted the low level of name recogni- tion of some SSN programs in the Middle East and North Africa (for example, in the Arab Republic of Egypt, 23 percent of the MENA SPEAKS survey respondents did not know a single SSN program in the country). For programs with on-demand registration, awareness about the exis- tence of the program, eligibility criteria, and application procedures is essential. Comprehensive communication campaigns are needed to in- form poor and vulnerable citizens of the safety net that is available to them. Moreover, engaging a broader spectrum of stakeholders (such as NGOs, CSOs, and nonprofits) in financing and implementing SSN pro- grams could leverage their existing financial and human resources. The private sector can also participate in financing and implementing SSNs. In countries such as the United States, a significant part of SSN financing comes from individual citizens’ or private corporations’ dona- tions. NGOs and CSOs run many of the programs. In addition, govern- ment funds can finance other operators to implement specific programs. For example, in the city of New York, nonfederal SSN programs are designed by the mayor’s office, which publishes a call for implementation proposals from NGOs and CSOs. After interested CSOs and NGOs send financial and technical proposals, a transparent competition selects the best proposal. A performance-based contract—agreeing to pay a provider for the achievement of an outcome—is then signed with the selected pro- vider. The role of the government then shifts from implementation to funding and regulation, which allows for more efficient use of scarce ad- ministrative capacity. 242 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa BOX 5.4 Social Accountability and the Role of Civil Society Organizations Introducing social control mechanisms is on them. The program also investigates becoming common practice in safety net citizens’ perceptions about the coverage systems. Academia, media organizations, and quality of public services through open and CSOs have become key players in im- forums, town hall meetings, and opinion proving efficiency and accountability and surveys. All information is regularly pub- combating corruption. Two examples— lished in El Tiempo and aired on Bogotá’s one from Latin America and one from television stations. The program has in- Asia—illustrate how CSO participation creased scrutiny of the city’s budget and and oversight have been critical in improv- development plans over several administra- ing budget execution and program results. tions in the past 15 years, and similar mod- els being used in other Latin American cit- Colombia: Bogotá Cómo Vamos ies include Rio Como Vamos and São (Bogotá, How Are We Doing?) Paulo Como Vamos in Brazil. In 1997, civil society developed an innova- tive model for social control, Bogotá Cómo The Philippines: Pantawid Pamilyang Vamos, to monitor and evaluate the delivery Pilipino Program (4Ps) of government services in the capital city CSOs, the media, and academic organiza- and to strengthen public participation in tions participate in the review of the Philip- the supervision of government services. pines’ CCT program’s policy and program The program was developed and funded by operation manuals and procedures. They the Bogotá Chamber of Commerce, the also help with validation procedures to im- daily newspaper El Tiempo, and Fundación prove targeting and address complaints and Corona, a private foundation, and had two grievances. CSOs and the media actively objectives: (a) to build a set of indicators to participate in ensuring that people voice track the performance of government ser- their concerns and inquire about the pro- vices most important to the citizens of Bo- gram and that managers respond in a time- gotá, and (b) to disseminate information ly fashion. Finally, CSOs are involved in about the indicators and promote debate to linking mothers to other social programs, improve the quality of services. including health insurance, early child de- A group of experts defines the relevant velopment programs, and reproductive result indicators and collects information health information. Social Innovation Funds can be a good entry point for public-private partnerships. In 2009, the U.S. government developed such a fund—a program of the Corporation for National and Community Service—to pilot and evaluate innovative SSN programs that could be replicable as a public-private investment. Approximately US$100 million was awarded to 16 intermediary organizations nationwide over two years, matched 3 The Way Forward: How to Make Safety Nets in the Middle East and North Africa More Effective and Innovative 243 to 1 by private funds. New York City’s Social Innovation Fund had five key partners, including NGOs, philanthropists, the city government, and the governments of partner cities where the program was being piloted.8 Programs being piloted nationwide through the Social Innovation Fund include a CCT (Family Rewards, with conditions on children’s educa- tion, family preventive health care, and parents’ work and training); an education-conditioned internship; a community-based workfare program for public housing residents; a sector-focused training and advancement program; and a savings program for the poor linked to tax refunds. Enhancing Reliability and Flexibility of SSN Infrastructure for Better Crisis Preparedness An effective SSN system can help citizens navigate the effects of both idiosyncratic and systemic shocks. The recent global economic crisis un- derscored the weak capacity of existing SSN systems in the Middle East and North Africa to serve this function. Promoting households’ resilience to shocks through SSNs requires a strong administrative infrastructure. Having this infrastructure in place ahead of a crisis allows for quicker and more efficient deployment of remedial and mitigation actions, such as scaling up of benefits for the most vulnerable or expanding coverage, thus enhancing resilience. Two key systems need to be in place, both for smooth functioning of SSNs in good times and for rapid response during systemic shocks (such as the recent food, fuel, and financial crises as well as the ongoing chal- lenge posed by climate change): (a) a unified registry system and (b) an effective service delivery mechanism. Unified Registry Systems In normal times, unified registry systems can reduce costs (because each agency does not need its own registry system) and facilitate coherence and convergence (because all agencies work with the same database [regis- try]). Unified registries also typically result in increased benefits to ben- eficiaries of complementary and synergetic programs by improving the impact and adequacy of safety nets. In times of crisis, unified registries can be used to quickly disburse additional benefits to the target population or to promptly expand coverage by adjusting eligibility criteria. There are issues to consider when introducing a unified registry system: • It requires (a) building administrative and operational capacity; (b) securing a budget; and (c) introducing quality controls, a grievance redress system, and M&E (see box 5.5 for more detailed steps). 244 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa BOX 5.5 Building Unified Registry Systems Unified targeting and registry systems cial benefits every year. In most other were pioneered by Chile in the 1980s and countries, reapplication for benefits is Colombia in the early 1990s. Aided by ad- less frequent (for example, two years in vances in technology and renewed atten- Brazil, or three years or more when tion to safety nets and social protection PMT systems are used). Registries are programs, these registries are regaining generally open to applicants at any time, popularity in many countries. Most regis- and grievance systems are in place. tries include poverty criteria as a way to rank or select beneficiaries. The follow- • Mandate use of the unified registry system. ing are steps to consider when building Existing program administrators are such systems: generally resistant to using the new sys- tem for fear of having to delist noneli- • Select the responsible agency. This agency gible households or facing questions will develop procedures, assemble the about the reliability, objectivity, and ac- database, and share it with other agen- curacy of the system. To overcome these cies. In some countries, this is the Na- concerns, registry systems must develop tional Planning Agency (for example, in quality controls and be able to withstand Chile and Colombia); in others, it is the scrutiny by all stakeholders, including Social Ministry (in Brazil and the academia, CSOs, and the public. Uses of Philippines). the registry for government programs • Decide on welfare (poverty) assessment can also be mandated by decree (as Bra- methods and procedures. Options include zil does for its registry, Cadastro Único) verified income and wealth tests (com- or other legal mandates. mon in Organisation for Economic Co- • Ensure IT and communications support. operation and Development [OECD] Registries involve management of large countries), unverified means tests, and databases that grow rapidly—sometimes PMTs. PMTs using income or expendi- exponentially, with recertifications, tures or multidimensional poverty indi- complaints, grievances, and the required cators are common in middle- and low- feedback from user programs. Sufficient income countries with high informality IT and database capacity is the key to and a lack of property, tax, or other asset having a functional system. Modern reg- or income databases (in Chile, Colom- istries now share data or subregistries bia, Indonesia, Mexico, the Philippines, through the Internet or governments’ and Turkey, among others). secure private networks. Inadequate • Decide on updating, recertification, and staff capacity to develop and support complaints resolution systems. In OECD systems over time is often a major countries, beneficiaries reapply for so- constraint. The Way Forward: How to Make Safety Nets in the Middle East and North Africa More Effective and Innovative 245 BOX 5.5 Continued • Support M&E. Registry systems need ation can examine the incentives to to be supported by sound M&E sys- game the system (through the impact tems. Monitoring is critical for con- on labor effort and informality) and the trolling data quality, assessing inclu- targeting outcomes (the extent to sion and exclusion errors, and dealing which benefits reach the poor and vul- with complaints and grievances. Evalu- nerable population). • There is a risk that some of the poor will be excluded and thus have no access to benefits. The latter concern can be mitigated through comprehensive outreach campaigns and regular updating of the registry. In addition, methods like the aforementioned census of the poor could be used to increase the cov- erage of the poor in the registry. During crises, the usefulness of the information collected in the uni- fied registry depends, in large part, on the nature of the crisis and the selected assessment method. For instance, although PMT has a well- established track record in identifying chronic poverty, it performs less well in spotting transitory poverty, which is usually tied to changes in income rather than assets. Service Delivery Mechanisms In normal times, effective use of modern technologies in benefit delivery systems is important to reduce administrative costs, leakage to nonbenefi- ciaries, and corruption. The ideal system is one that delivers cash or other benefits directly to beneficiaries without passing through intermediaries such as local public officials. During a crisis, modern technology makes cash a much more flexible instrument for rapid response than in-kind transfers. Fortunately for the Middle East and North Africa, citizens seem to be in favor of cash-based SSN transfers, as demonstrated in the MENA SPEAKS surveys (detailed in chapter 4). Use of smart cards, mobile pay- ments, and over-the-counter payments in bank branches also facilitate an effective response during a crisis when benefits need to reach the targeted population quickly. Smart cards can be used to withdraw money at auto- matic teller machines (ATMs) at any time. However, in some countries, ATM networks might not cover rural or periurban areas, calling for al- ternative methods. These alternative modalities include over-the-counter payments in bank branches and mobile payments using direct cell phone 246 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa transfers or cell phone companies’ points of service or correspondents (local stores, pawn shops, or others). The best choice depends on existing infrastructure, cost, and the preferences of beneficiary families. In Brazil, for instance, the 12 million beneficiary families of the CCT Bolsa Familia program use cash cards. Crisis Preparedness The preparation of the SSN system can facilitate action when a crisis hits (World Bank 2012). Food price crises, natural disasters, and financial cri- ses affect different groups and thus call for different SSN responses. Changing the eligibility criteria, thresholds, or benefit levels and duration can be effective for some SSN instruments such as cash transfers and workfare programs. For such adjustments to happen rapidly in a crisis situation, increased funding should be made available quickly with the expectation that it will be scaled down after the crisis. Preestablished rules that define triggers for scaling SSN programs up and down also help to save time during the crisis and to manage entitlement expectations. Fi- nally, continuous open enrollment for SSN programs can improve their effectiveness during crises, while regular recertification can aid the scaling-down process afterward. ­ As mentioned above, SSNs can help poor and near-poor people adapt to changing livelihood and climatic conditions or support them when ad- aptation fails. Heltberg, Jorgensen, and Siegel (2008) note the need to balance institutional development, infrastructure sectors, productive natu- ral resource sectors, and social policy (including SSNs) as part of an adap- tive response to climate change. Most attention to date has focused on policy and infrastructure responses, however, and far less on forward- looking analyses of how SSNs themselves will need to adapt to help ben- eficiaries respond to climate change. Some relevant but still-open ques- tions include the following: How, and by how much, will SSN beneficiary groups change in urban low-lying coastal areas (for example, ports) versus rural low-lying coastal areas? Can SSN program size and disbursements be made scalable with weather indexes in the short term? Can public work- fare programs be integrated in micro-watershed rehabilitation efforts? Consolidating Fragmented SSN Systems In the Middle East and North Africa, direct transfer programs (cash- based or in-kind) are often small and highly fragmented. The region’s countries rely on a multiplicity of low-coverage, low-benefit SSN pro- grams that have different targeting criteria often confined to certain categories of the population (for example, as found in Jordan, Lebanon, ­ Morocco, and Tunisia, further discussed in chapter 3). To effectively fill The Way Forward: How to Make Safety Nets in the Middle East and North Africa More Effective and Innovative 247 coverage gaps, there must be a robust and flexible SSN system consisting of only a few programs that governments can coordinate and run more efficiently and at lower administrative cost. International experience suggests that consolidating many small pro- grams into a few comprehensive programs, specifically designed to reach different segments of the poor and vulnerable, can help to address current vulnerabilities and social protection gaps. For example, simpler and fewer programs were key reforms in Brazil and the Philippines. In particular, by merging four food and cash transfer programs in 2003, Brazil created its flagship SSN program, Bolsa Familia, which provides cash benefits of over 15 percent of average poor households’ consumption and covers nearly 30 percent of the population. The program costs no more than 0.5 percent of Brazil’s GDP because of cost savings and better administration. A few parts of the Middle East and North Africa (for example, Morocco and West Bank and Gaza) have already started reforming their SSNs in this direction. Consolidation of SSNs does not have many prerequisites; thus, Middle Eastern and North African countries can move forward on this agenda item by following three key steps: 1. Identify the different risks faced by the poor and vulnerable, the programs available to help families address these risks, and the existing gaps. Chapter 2 identified several groups that face the most difficult challenges in the Middle East and North Africa (including children in poor households and people living in rural or lagging urban areas), and chapter 3 showed that the region’s SSNs leave many of these groups uncovered or inad- equately covered. Besides coverage or generosity gaps, other gaps can be in terms of program design: for instance, nutrition programs that focus only on food assistance but neither provide nutrition education nor promote behavioral change to improve children’s nutrition, or in- surance packages that do not adequately finance expensive hospital care or medicines. 2. Based on the nature and extent of risks, identify a small number of programs that could be expanded or effectively consolidated. Options to consider in- clude (a) early-childhood development programs (to address malnutri- tion and promote early child stimulation and development); (b) CCTs that link cash assistance to undertaking basic health care activities (such as growth monitoring, vaccinations, and maternal care); and (c) enrollment in schools (as done in Brazil, Chile, Colombia, Mexico, and Turkey). Other programs include public, on-the-job training for youth with NGOs (for example, the Trabajar and Jefes programs in Argentina) and private sector participation (for example, Jóvenes en Acción in Chile and Colombia), as well as community-driven develop- ­ ment funds (such as projects in the Republic of Yemen and under 248 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa preparation in Lebanon with World Bank support). In addition, re- forming the labor code to waive or reduce temporarily or permanently some payroll contributions (as in Colombia’s 2002 labor reform law and later 2011 adjustment) would encourage firms to hire youth in apprenticeship programs. 3. Develop a strategy for implementation of the reform and set up a national database for targeting. A single registry system (as addressed in box 5.5) has effectively been the main instrument of coordination and conver- gence of programs because it allows administrators to quickly assess needs and to target and monitor poor and vulnerable households. Rebalancing Financing and Priorities of SSN Systems Increasing Spending and Improving Coverage of Nonsubsidy SSNs to Protect against Destitution Successful reforms of subsidies around the world have shown the impor- tance of gaining citizens’ trust in their government’s capacity to deliver fair and reliable compensation. Chapter 2 highlighted the multifaceted challenges faced by the region’s poor and socially excluded groups. Thus, the important gaps in coverage identified in chapter 3 call for urgent ac- tion on the part of the government. Also, in light of the evidence provided by the MENA SPEAKS survey and Jordan Gives experiment (covered in chapter 4), demonstrating readiness to deliver effective and inclusive SSN programs would be an essential step on the path toward comprehensive subsidy reform. This could be achieved without overloading the available fiscal space by creating new affordable programs or increasing the cost- effectiveness of the existing SSN system. Expansion of nonsubsidy safety nets should be an integral part of subsidy reform. Targeted SSN programs can reach a large share of the poor and vulnerable at a low cost. The largest CCT programs in the world (Bolsa ­ Familia in Brazil and Oportunidades in Mexico) reach about 30 percent of the population and cost about 0.5 percent of GDP (Fiszbein and Schady 2009). Similarly, the largest workfare programs in the world (the Produc- tive Safety Net Program in Ethiopia and the Mahatma Gandhi National Rural Employment Guarantee Act [MNREGA] in India, reaching more than 7 and 20 million people, respectively) each cost about 0.5 percent of GDP (IEG 2011). Well-targeted UCT programs can also be affordable: Georgia’s targeted SSN program provides benefits to about 10 percent of the population at a cost of 0.6 percent of GDP. To achieve cost-effectiveness, funds can be allocated more efficiently among different SSN programs based on the number of beneficiaries and the coverage goals. In addition, developing effective payment methods is crucial. Four key steps drawn from global experience are to The Way Forward: How to Make Safety Nets in the Middle East and North Africa More Effective and Innovative 249 • Ensure that the funding provided is commensurate with the needs of the number of people who meet the eligibility criteria; • Allocate funds to jurisdictions based on explicit, transparent, and com- plete criteria to minimize arbitrariness at the local level; • Keep eligibility criteria and benefit formulas as simple as possible; and • Use payment mechanisms that operate through financial agencies and that pay beneficiaries directly. Reforming Price Subsidies through Wholesale or Internal Reforms Reducing general subsidies in Middle Eastern and North African coun- tries can result in large fiscal savings, some of which can be devoted to increasing SSN funding—as countries in other regions have also demon- strated. In Indonesia, for instance, fuel price subsidy reform in 2005 re- sulted in savings of about 2 percent of GDP, which allowed the govern- ment to spend about 0.7 percent of GDP on a compensatory cash transfer for 19 million poor households and to increase spending on education and health insurance (see box 5.6). Similarly, Mexico in 1995/96 insti- tuted gradual elimination of general food price subsidies that had bene- fited urban dwellers at the expense of rural areas. This reform led to savings, part of which was redirected toward the introduction of the country’s well-known and successful targeted CCT program, Oportuni- dades.9 In Turkey, reforms to reduce untargeted agricultural support sub- sidies not only eliminated their distortionary effects on local prices but also resulted in large fiscal savings that allowed the government to finance a direct income support program for farmers in 2002/03. Sequencing of sensitive reforms, such as those to reduce or eliminate universal price subsidies, is crucial for their success. To gain credibility, a government could start with internal reforms, such as improving subsidy targeting. This could be achieved through differentiated marketing and packaging, which led to self-targeting in Tunisia (as discussed in chapter 3, box 3.4). It could also be accomplished by narrowing subsidy cover- age—for example, by introducing lifeline electricity tariffs rather than providing a universal subsidy for electricity. Finally, better monitoring of the distribution chain for subsidized products can potentially reduce ex- pensive leakages. Another way to initiate subsidy reform is by identifying the subsidies that people value the most and focusing reform instead on the most re- gressive ones. According to the MENA SPEAKS survey, the least- preferred product for subsidy reform was cooking oil in Egypt, bread in Lebanon and Tunisia, and electricity in Jordan. These subsidies could be subject to reform only when governments have already demonstrated their success at reforming less-sensitive subsidies. Given that fuel subsidy 250 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa BOX 5.6 Indonesia’s Fuel Subsidy Reform and SSN System Increasing international prices in 2005 put tribution and defined as households with increasing fiscal pressure on the Indonesian consumption below 1.5 times the poverty government’s subsidization of fuel. Com- line. Targeting and selection of recipients bined with the regressive nature of the sub- was developed using PMT, with a set of sidy, this pressure led the government of household indicators that are highly corre- Indonesia to sharply reduce subsidies. In lated with poverty and easily verifiable, March 2005, fuel prices increased by a such as floor, wall, and roofing materials; weighted 29 percent, and by another 114 source of drinking water; access to electric- percent in October 2005, with kerosene ity; and asset ownership. prices tripling. To mitigate the impact of Funds were disbursed directly to benefi- price increases on poor and near-poor ciaries through the post office system. The households, the government introduced BLT was always intended as a temporary three SSN programs, also in 2005: a UCT one-off assistance during a time of infla- program ( Bantuan Langsung Tunai or tionary pressures on the poverty basket, BLT); a health insurance program (Asur- and it ended in late 2006 as fuel prices de- ansi Kesehatan Masyarakat Miskin or Aske- clined. The broadly targeted nature of the skin); and an education subsidy program, BLT made the program one of the key re- Operational Aid to Schools. Later, in 2007, sponse options available to Indonesia when the poorest households were enrolled into the food price crisis hit in 2007/08. In 2008, a CCT pilot program (Programme Keluarga with food and fuel prices increasing sharply, Harapan or PKH). The following is a brief the government responded by initiating a description of the BLT and the PKH, new round of BLT. As with the first BLT, which provided immediate and medium- poor and near-poor households, or the bot- term responses to the effects of the fuel tom 30 percent of the consumption distri- subsidy reform. bution, were the intended recipients. Tar- The BLT, under the Ministry of Social geting was based on an updated list from Affairs, ran for 12 months, from late 2005 the first round of the program, resulting in to 2006. This UCT program reached ap- 18.5 million households receiving benefits proximately 19 million poor and near-poor at a cost of about 0.3 percent of GDP. households, giving a flat rate benefit repre- The PKH started in 2007 as a CCT senting about 15 percent of the poverty ­ pilot program and transferred cash to about line. The 2006 cost of the program was 1 million poor households in 2010. House- about 0.7 percent of GDP, or about 25 per- holds receive the equivalent of about cent of the savings from the subsidy reduc- US$150 annually for up to six years, condi- tions. The poor and near-poor were the tional on children attending school and target populations, representing the bot- ­ obtaining preventive basic health and nu- tom third of the national consumption dis- trition services, similar to Mexico’s Opor- The Way Forward: How to Make Safety Nets in the Middle East and North Africa More Effective and Innovative 251 BOX 5.6 Continued tunidades. The program targets poor house- tially suffered from poor MIS and opera- holds with children up to 15 years of age tional difficulties, including supply-side and pregnant women, again using PMT readiness issues, but these have been over- methods to determine household economic come recently and, based on positive re- status. sults from impact evaluation studies, ex- PKH is a long-term assistance program pansion is planned to reach a target of 3 and is designed to provide considerable fi- million households by 2014. The total cost nancial support while also encouraging of PKH in 2007 was less than 0.1 percent of changes in household health and education GDP. However, this is expected to increase behaviors, which lead households out of significantly as PKH is expanded. poverty in the longer term. The PKH ini- spending is more than three times the spending on food subsidies, it ap- pears that nonfood subsidy reform is the lower-hanging fruit. In MENA SPEAKS, citizens indicated that if they had to pick one subsidized prod- uct for reform, this product would be tobacco in Lebanon, gasoline in Egypt, and diesel in Jordan and Tunisia. Compensation packages tailored to citizens’ preferences combined with comprehensive information and communication campaigns can in- crease the tolerance for subsidy reform. Governments can use the find- ings from the MENA SPEAKS surveys to engage citizens early on in a dialogue on preferred compensation packages in their countries. The evi- dence so far shows that people in the Middle East and North Africa prefer to target cash-based compensation for subsidy reform to the poor alone (in Egypt, Jordan, and Tunisia) or to combine such targeted cash transfers with investment of the savings in education and health (in Lebanon). As pointed out in chapter 4 (the “What Works?” section), formulating the right communication strategy and promoting awareness through infor- mation campaigns are crucial to the success of such sensitive reform. Four key lessons (and steps) drawn from subsidy reforms around the world could be useful for the region’s countries when undertaking such reforms: • Identify potential winners and losers of reforms. By using household in- come and expenditure surveys (available in most Middle Eastern and North African countries), winners and losers can be identified by in- come, expenditure, or wealth index quintiles. Work has already been done in some countries with World Bank support, as illustrated in this 252 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa report. Additional studies on the extent of economic distortion and waste caused by fuel and food price subsidies will augment the case for (and public discussion of) policy reform. • Prepare an action plan for reform, including compensation programs. Ade- quate compensation is needed to protect the poor and vulnerable from the effects of policy reform and complementary interventions for the lower middle class. As mentioned in chapter 3, many in the Middle East and North Africa depend on subsidies to stay out of poverty. MENA SPEAKS revealed that when asked to choose among different compensation packages for subsidy reform, citizens prefer cash-based transfers targeted to the poor (in the case of Lebanon, combined with investment in health and education). Such a targeted cash transfer pro- gram can compensate for the inevitable price shock, and targeting it to the poor will absorb only a fraction of the subsidy’s cost. • Determine basic program parameters for a compensation package. These parameters include the target population, benefit levels, institutional arrangements, payment modalities, and M&E systems, including so- cial accountability. All parameters and program costs can be estimated and simulated using household surveys, along with the likely impacts on headcount poverty, the poverty gap, and the severity of poverty. One of the most difficult and time-consuming activities is designing a registry of potential beneficiaries in countries that have limited experi- ence with national targeting systems (see box 5.6 on Indonesia’s experience). • Prepare a registry and a payment system. The purpose of the registry is to capture the population to be targeted by the compensation scheme, and an appropriate payment mechanism should be in place before the subsidy reform is launched. For instance, in the Islamic Republic of Iran, subsidy removal was preceded by establishing a fund, with the government opening bank accounts for all Iranians who registered to receive compensatory payments. The first compensation transfer into these accounts was made on the day of the first subsidy reduction (see Guillaume, Zytek, and Reza Farzin 2011). The Way Forward This section brings together findings from the previous chapters to ana- lyze, in a country-by-country setting, key challenges and possible ways forward for SSNs in the Middle East and North Africa. It summarizes the main poverty and vulnerability challenges facing citizens in the region The Way Forward: How to Make Safety Nets in the Middle East and North Africa More Effective and Innovative 253 (chapter 2); institutional challenges in existing systems that decrease their performance (chapter 3); citizens’ knowledge, attitudes, and support for different reforms (chapter 4); and different possibilities for progress using the agenda discussed earlier in this chapter (improving SSN program im- pact; enhancing reliability and flexibility of SSN infrastructure for better crisis preparedness; consolidating fragmented SSN systems; and rebal- ancing financing and priorities). As established in chapter 2, most Middle Eastern and North African countries lag behind their development peers on human development outcomes. Indeed, with the exception of Jordan and West Bank and Gaza, most of the region’s economies have human development outcomes (as proxied by the United Nations Development Programme’s [UNDP] Human Development Index [HDI] ranks) that are significantly lower than their gross national income (GNI) per capita ranks, even when com- pared with countries at similar levels of development. This demonstrates the scope for improvements in human development outcomes. SSNs can be an important instrument in this process, but while some Middle East- ern and North African countries have well-established SSNs that can be enhanced and expanded, others have limited experience with implement- ing SSNs. Hence, in some countries the reform of the existing systems can be the crucial first step forward, building the foundation for deeper reforms, while in others the creation of new programs and systems is the priority agenda item. The region’s countries also vary in how much their SSN spending tilts toward subsides, and thus in the fiscal pressures associ- ated with subsidization, which might make subsidy reform a more im- mediate priority. General Strategies In each country, an SSN reform strategy would involve short- and ­ medium-run interventions with complementary and mutually reinforc- ing objectives. In the short run, Middle Eastern and North African coun- tries can start demonstrating better results from existing SSN systems by • Scaling up programs targeted to the poor and vulnerable and adding new components to cash transfer or workfare programs that make them work better for women and children; • In countries where existing SSNs are still nascent, designing and rap- idly implementing interventions to protect the poor and vulnerable (for example, starting with piloting programs) and establishing an SSN infrastructure to pave the way for the next generation of reforms; and 254 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa • In countries under increasing fiscal pressure from subsidies, imple- menting internal reforms in this system or wholesale reforms focused on less-sensitive products, gradually introducing these changes while building credibility. In the medium run, the focus can shift to reforms that require more pre- existing capacity, such as refining the SSN infrastructure and comprehen- sive subsidy reform. This second-generation set of reforms can entail • Sharpening the focus on results in SSN programs through M&E and social accountability, reaching out to other stakeholders in financing and implementation, and strengthening administrative capacity among relevant institutions; • Consolidating existing fragmented safety net programs for more ef- fectiveness and results, thereby reducing overlaps and bridging cover- age gaps; and • Launching wholesale subsidy reforms. Country-by-Country Summary and Strategies Countries in the Middle East and North Africa find themselves at differ- ent stages of progress on human development outcomes and SSN re- forms. Table 5.1 presents an overview of the achievements in the region, TABLE 5.1 Progress on Human Development Outcomes and SSN Reform, by Stage, in the Middle East and North Africa, 2011 SSN reform HDI level Advanced stage Intermediate stage Early stage Low HDI Yemen, Rep. Djibouti Medium HDI West Bank and Gaza Jordan Algeria Morocco Egypt, Arab Rep. Iraq Syrian Arab Republic High to very high HDI Bahrain Kuwait Lebanon Oman Qatar Saudi Arabia Tunisia United Arab Emirates Source: Authors using UNDP 2011 data for HDI. Note: Libya and the Islamic Republic of Iran are not included due to insufficient data. HDI = Human Devel- opment Index (of the United Nations Development Programme); SSN = social safety net. The Way Forward: How to Make Safety Nets in the Middle East and North Africa More Effective and Innovative 255 both on human development outcomes (using the UNDP HDI as an aggregate proxy) and their stage of progress to date on SSN reform (early, intermediate, or advanced). Table 5.2 presents a country-by-country summary of human development challenges, SSN system challenges, on- going SSN initiatives, and possible strategies going forward. Low-HDI Countries Djibouti and the Republic of Yemen still have low human development outcomes according to HDI. Their particular challenges (as listed in table 5.2) are chronically high poverty and malnutrition rates, which are among the world’s highest. The Republic of Yemen’s progress on SSN reform has been highlighted throughout the report, especially the targeting re- forms of the SWF as well as the rapid crisis response using a public works program that protected consumption of the poor and vulnerable and built community assets of the poor. While facing similar challenges, Djibouti’s advancement on SSN reform is more recent, but substantial improve- ments have already taken place with the creation of the “workfare plus nutrition” program that addresses child malnutrition in a holistic way. The way forward for these two countries is to build on successful experi- ences, leverage the SSN infrastructure that is already in place, and track closely the results attributable to existing interventions on human devel- opment indicators. Medium-HDI Countries Seven middle-income countries in the Middle East and North Africa have achieved medium human development outcomes according to HDI. Within this group, these economies face varying challenges. In both Iraq and West Bank and Gaza, for example, recent conflicts have negatively affected livelihoods; however, they have attained different degrees of progress on SSN reform. West Bank and Gaza is the region’s pioneer in consolidating its many programs into a single Cash Transfer Program (CTP) and creating a unified registry of beneficiaries that allows for tar- geting transfers across multiple programs; future directions include care- ful management of the rapid expansion of the CTP and strengthening its financial sustainability. For Iraq’s part, while preparing for a move away from ration cards (the Public Distribution System or PDS) toward more targeted SSNs, the country has just started on the path for reform, with the road map including proposals for creating SSNs that promote human capital, improving targeting, and enhancing administrative capacity in the SSN program to build credibility for PDS reform. Jordan and Morocco, despite their large numbers of SSN programs, both have deep pockets of poverty in rural and lagging regions as well as high child poverty and malnutrition among the poor. The progress to TABLE 5.2 256 Challenges for SSN Systems and Possible Ways Forward in the Middle East and North Africa, Selected Countries, 2012 Human development challenges SSN system challenges Main ongoing SSN initiatives Possible way forward Djibouti High poverty (40% live with less than Nonsubsidy SSNs have low coverage of the Implementing a “workfare plus” program, Set up a unified registry of beneficia- $2/day). High malnutrition (33% of all poor (3%) and are highly fragmented. Lack of viewed as a model for the region. High in- ries of social assistance. Scale up children 0–5 years old and 45% in the experience. Strong focus on capacity building. country visibility and ownership. Prepared “workfare plus” program. Use ongoing poorest quintile stunted). High SSN strategy. initiatives as platform for support. En- unemployment (55%). gage new stakeholders. Egypt, Arab High child poverty (29%). High Nonsubsidy SSNs have low impact on poverty, Workfare program under preparation. Rebalance SSN away from subsidies. Rep. vulnerability (17% live with $2–2.5/day) linked to low coverage of the poor (14%), low Create new, cost-effective, and flexible Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa High malnutrition (29%). Spatial targeting accuracy, and low size transfer targeted SSN. Consolidate fragmented pockets of poverty (rural). provided. They are highly fragmented. SSNs. Increasing fiscal pressure from subsidy system. Tunisia Spatial pockets of poverty (rural). High Weak M&E systems at the central, regional, and Implementing pilots: (a) workfare project, and Enhance targeting. Rebalance SSNs by unemployment and discouragement program levels. Leakages to nonpoor for direct (b) skills development in community-driven focusing on targeted programs rather among the poor. Higher levels of SSNs (unconditional cash transfers and health rural development and service delivery than subsidies. Strengthen SSNs that school dropout and maternal mortality cards). Increasing fiscal pressure due to project. Improving information systems and promote human capital and assets of among poor. universal subsidies. creating a unified registry of beneficiaries. the poor and vulnerable. Establish SSN Evaluating national cash transfer and health infrastructure and, in particular, develop card program and building social a unified registry of beneficiaries. accountability systems. Consolidate SSN programs across different programs and agencies or ministries. Iraq High child poverty (27%). High Nonsubsidy SSNs have low impact on poverty, Enhancing targeting of cash transfer program. Create SSNs that promote human vulnerability (16% live with $2–2.5/day). linked to low coverage of poor (6%) and high Developed strategy for subsidy reform. capital and assets of the poor. Enhance Spatial pockets of poverty (rural). leakages. Low transfer size. SSN consisting targeting. Enhance administrative Postconflict environment. mostly of subsidies. are under increasing fiscal capacity. pressure. Food ration system has high leakages. Jordan High child poverty (20%) and Nonsubsidy SSNs have small poverty impact Developing targeting and poverty reduction Prioritize interventions focused on malnutrition rates among the poor linked to low coverage of the poor (23%), strategy. Preparing a unified registry of children and that help build human (15% of children 0–5 years old in fragmentation and low transfer size. Increasing beneficiaries. capital. Rebalance SSNs away from poorest quintile are stunted). Pockets fiscal pressure from subsidy system. subsidies. Establish administrative of poverty in lagging areas (Al-Mafraq). systems. Consolidate fragmented SSNs. Large poor-rich divide in human development indicators. The Way Forward: How to Make Safety Nets in the Middle East and North Africa More Effective and Innovative Lebanon Regional inequities in access to basic Due to limited experience in implementing Developing first national targeting database Expand the coverage of the targeting infrastructure and social services. SSNs, the focus has been on capacity building, (NPTP). database through outreach. Relative deprivation in lagging areas mainly on targeting. Institutionalize NPTP systems and (Akkar, Dinniyeh). business processes. Rationalize and improve the targeting of existing SSN programs. Improve the evidence base for policy making through regular household survey data collection. Morocco High child poverty and malnutrition Nonsubsidy SSNs have low coverage of the Developed social protection strategy. Prioritize interventions focused on rates among the poor (29% of children poor (17%) Scope to improve targeting. Weak Implementing CCT on education. children and that help build human 0–5 years old in the poorest quintile are coordination between institutions capital (e.g., scaling up the education stunted). High vulnerability (11% live implementing SSN and fragmentation. CCT). Rebalance SSNs by focusing on with $2–2.5/day). Spatial pockets of Increasing fiscal pressure from subsidy system. targeted programs rather than subsidies. poverty (rural). High inequality in access Consolidate fragmented SSN. to basic services between poor and rich, urban and rural residents. High unemployment and discouragement among the poor. Yemen, Rep. High poverty rate (35% live with less Limited coverage of the poor (29%, which is Implementing a workfare program, a cash Build on successful workfare and cash than $2/day). High malnutrition rates below world average). Scope to improve assistance program, and a community-driven transfer program and existing (almost 60% of all children 0–5 years targeting. Increasing fiscal pressures from fuel development program. Capacity building for administrative systems. Link SSNs to old are stunted). Spatial pockets of subsidy system. cash transfer program to scale up during interventions that build human capital. poverty (rural). future crises. Has expanded coverage of the Strengthen sustainability and poor. Currently, cash transfer reaches over 1 coordination of implementing agencies. million households. West Bank Conflict has negatively affected Lack of graduation strategies to divert less-poor Expanded coverage of cash transfer program. Manage the rapid expansion of the and Gaza people’s livelihoods and access to food, households to other programs. Despite overall Created unified registry of beneficiaries. program. Strengthen sustainability and health, and education. good targeting, there are concerns about Enhanced targeting. Invested in enhancing coordination. inclusion and exclusion errors. targeting and data collection. Bahrain High vulnerability. Nonsubsidy SSN system has fragmentation. Evaluating and benchmarking existing SSNs. Establish targeted SSN. Develop High leakages to nonpoor. Heavy reliance on administrative systems. Simplify costly universal subsidies. eligibility criteria. (table continued on next page) 257 258 TABLE 5.2 Continued Human development challenges SSN system challenges Main ongoing SSN initiatives Possible way forward Saudi Arabia High population growth, increasing Main types of SSNs are subsidies and transfers Evaluating efficiency and sustainability of Establish targeted SSN. Develop Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa cost of living, and inadequate social from government, families, private and existing SSN. Reviewing global experience on administrative systems. services in some areas. High charitable organizations. Limited program the implementation and results of vulnerability. High rates of disability coordination targeting methods, case community-driven approaches. (15–20% of population). management, and M&E. Kuwait Increasing cost of living. Low female Main types of SSNs are subsidies and transfers Evaluating and benchmarking existing SSN Develop an SSN strategic framework. labor market participation (45% of from government, families, private and programs. Establish targeted SSN. Develop women participate in the labor market charitable organizations. Limited administrative administrative systems. relative to 83% of men) and high capacity. Limited program coordination female-male income disparity (with a targeting methods, case management, and female-to-male earned income ratio of M&E. about 36 percent). Libya Postconflict reintegration of youth at Increasing fiscal pressure from subsidy system Assessment of postconflict priorities for Establish M&E systems. risk (including ex-combatants). High (food, fuel, electricity). Lack of clear eligibility integrating unemployed populations and Strengthen SSN programs, coordinated unemployment (notably youth). Weak criteria for postconflict cash transfer programs. youth at risk. Coordination with international with labor and skills development integration of poor migrants. Weak M&E systems at central and regional agencies on developing work programs and programs that promote human capital levels. support to migrant populations. and assets of the poor, vulnerable, and women. Note: Dollar ($) amounts are in U.S. dollars. CCT = conditional cash transfer; M&E = monitoring and evaluation; SSN = social safety net. The Way Forward: How to Make Safety Nets in the Middle East and North Africa More Effective and Innovative 259 date on SSN reform has had observable achievements in Jordan (where the National Aid Fund has the best targeting accuracy in the region) and Morocco (where a CCT pilot, Tayssir, has been promoting rural chil- dren’s school attendance, with positive results). Moving forward, al- though poverty pockets can in theory call for geographic targeting, lower leakage and greater coverage can be achieved through poverty-based tar- geting methods, such as the PMT, combined with massive outreach in these pockets (through a census of the poor) and on-demand application in the rest of the country. The short-run agenda for Jordan and Morocco is prioritizing interventions focused on children and increasing the cost- effectiveness of their SSN systems through consolidation of existing programs. High vulnerability and child poverty in Egypt stand in stark contrast to the near-absence of SSN instruments; the road ahead for the most populous country in the region is to start creating SSN interventions that promote human capital and to initiate internal subsidy reforms that im- prove SSNs’ internal efficiency. High-HDI Countries Finally, two upper-middle-income countries (Lebanon and Tunisia) and six high-income Gulf Cooperation Council (GCC) countries (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates) al- ready have high or very high performance on human development out- comes. Despite these achievements, the performance of these countries relative to their level of development leaves scope for improvement. Indeed, for all these countries except Tunisia, HDI ranks are much worse than GNI per capita ranks because of lower life expectancy and educa- tional attainment compared with respective development peers. The main challenge in Lebanon, according to table 5.2, lies in regional disparities in terms of access to services and infrastructure, leading to relative deprivation in pockets of poverty. Until recently, SSN provision in Lebanon was very decentralized, with many poor people falling through the cracks of the system. In 2011, Lebanon moved toward building SSN capacity at the national level by developing the first national targeting database (NPTP), which uses a PMT. The forward-looking agenda is to institutionalize NPTP as the database used by multiple SSN programs across ministries, improve the implementation capacity of the Ministry of Social Affairs, and establish a coherent and sustainable SSN financing mechanism. The challenge for Bahrain is high vulnerability to shocks. The coun- try’s heavy reliance on subsidies as an SSN does not allow for an effective crisis response, and the multitude of fragmented and categorically tar- geted cash transfer programs do not provide a reliable safety net for the 260 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa vulnerable population. Bahrain has started the reform process by evaluat- ing and benchmarking existing SSN programs; the road ahead includes establishing targeted SSNs with simple eligibility criteria and developing the SSN infrastructure. Apart from Bahrain, GCC countries currently are at an early stage of SSN reform, with many countries contemplating action on this agenda. Tunisia, facing the particular challenges of spatial disparities and high unemployment, has begun a pilot workfare program and a cash transfer program evaluation, but progress is yet to be made on creating SSNs that promote human capital and assets of the poor, estab- lishing an SSN infrastructure, and enhancing the targeting of cash trans- fer programs. Notes 1. For more information on the rationale for targeting and international experi- ences, see Grosh et al. (2008). 2. In Brazil, several verification systems are in place at the community level. ­ Brazil establishes a budget for each community based on poverty measures. Potential beneficiaries are identified based on their reported income, and a cutoff level for the highest income that can be supported is established. The list of beneficiaries is published in the local newspaper for public review. ­ Potential errors (inclusion and exclusion) are investigated and a new list is produced. Recertification is easily done on a regular basis. 3. See Castañeda et al. (2006) for a detailed description of how to implement a PMT targeting method. 4. A census of the poor is an alternative to on-demand application, whereby pov- erty maps are used to identify geographic areas with high poverty incidence, and applications in these areas are done in a census-like way (that is, by going door to door and filling out applications for potential beneficiaries). 5. For more information on the rationale for M&E and its foundation for a results-based culture in SSNs, see Rawlings (2010). 6. For more information on how to develop and implement impact evaluations, see Khandker, Koolwal, and Hussain (2010). 7. For more information on the results of evaluations of the Mexico CCT, see Levy (2006), and for other CCTs, see Fiszbein and Schady (2009). 8. For more information about New York’s Social Innovation Fund, see http:// www.nyc.gov/html/ceo/html/sif/sif.shtml. For more information about the U.S. federal program, see http://www.whitehouse.gov/administration/eop/ sicp/initiatives/social-innovation-fund. 9. For more details on the creation of Mexico’s CCT to promote the transition out of subsidies, see Levy and Rodriguez (2004) and Parker (2003). References Benhassine, N., F. Devoto, E. Duflo, P. Dupas, and V. Pouliquen. Forthcoming. “Unpacking the Effects of Conditional Cash Transfer Programs on Educa- The Way Forward: How to Make Safety Nets in the Middle East and North Africa More Effective and Innovative 261 tional Investments: Experimental Evidence from Morocco on the Roles of Mothers and Conditions.” Castañeda, C., K. Lindert, B. de la Brière, L. Fernandez, C. Hubert, O. Larrafaga, M. Orozco, and R. Viquez. 2006. “Designing and Implementing Household Targeting Systems: Lessons from Latin America and the United States.” World Bank Social Protection Discussion Paper 526, World Bank, Washing- ton, DC. Fiszbein, A., and N. Schady. 2009. Conditional Cash Transfers: Reducing Present and Future Poverty. World Bank Policy Research Report, World Bank, Washing- ton, DC. Government of Yemen, World Bank, and UNDP (United Nations Development Programme). 2007. Yemen Poverty Assessment. Report 53076, World Bank, Washington, DC. Grosh, M., C. del Ninno, E. Tesluic, and A. Ouerghi. 2008. For Protection & Promotion: The Design and Implementation of Effective Safety Nets. Washington, DC: World Bank. Guillaume, D., R. Zytek, and M. Reza Farzin. 2011. “Iran: The Chronicles of the Subsidy Reform.” Working Paper 11/167, International Monetary Fund, Washington, DC. Haddad, L., J. Hoddinott, and H. Alderman. 1997. Intrahousehold Resource Alloca- tion in Developing Countries: Models, Methods, and Policy. Baltimore, MD: Johns Hopkins University Press. Heltberg, R., S. L. Jorgensen, and P. B. Siegel. 2008. “Climate Change, Human Vulnerability, and Social Risk Management.” Paper prepared for the Work- shop on Social Aspects of Climate Change, World Bank, Washington, DC, March 5–6. IEG (Independent Evaluation Group). 2011. Social Safety Nets: An Evaluation of the World Bank Support, 2010–2011. Washington, DC: World Bank. Khandker, S., G. Koolwal, and A. Hussain. 2010. Handbook on Impact Evaluation: Quantitative Methods and Practices. Washington DC: World Bank. Levy, S. 2006. Progress against Poverty: Sustaining Mexico’s Progresa-Oportunidades Program. Washington, DC: Brookings Institution Press. Levy, S., and E. Rodriguez. 2004. Economic Crisis, Political Transition and Poverty Policy Reform: Mexico’s Progresa-Oportunidades Program. Poverty Dialogue Se- ries. Washington, DC: Inter-American Development Bank. Parker, S. 2003. “Mexico’s Oportunidades Program.” Case study summary, Shanghai Poverty Conference, World Bank, Washington, DC. Quisumbing, A. R., and J. A. Maluccio. 2000. “Intrahousehold Allocation and Gender Relations: New Empirical Evidence from Four Developing Coun- tries.” Food Consumption and Nutrition Division Discussion Paper 84, Inter- national Food Policy Research Institute, Washington, DC. Rawlings, L. 2010. “Monitoring and Evaluation: The Foundations for Results.” Safety Nets Core Course presentation, World Bank, Washington, DC. UNDP (United Nations Development Programme). 2011. Sustainability and Equity: A Better Future for All. Human Development Report 2011. New York, ­ NY: UNDP. 262 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa World Bank. 2009. “Republic of Djibouti: Social Assistance Options to Combat Malnutrition.” Unpublished Policy Note, Washington, DC. ———. 2012. Safety Nets Work: During Crisis and Prosperity. Report prepared for the Development Committee Meeting, Washington, DC, April 21. APPENDIX A Description of the Data Used for the Micro-Analysis Country Survey Year Description Egypt, Arab. Rep. Labor Market Panel Surveys (ELMPS) 2006 ELMPS was conducted by the Population Council and the Central Agency for Public Mobilization and Statistics (CAPMAS) with support of USAID (U.S. Agency for International Development), Egypt, and Ford Foundation. Household Income, Expenditures 2005 and HIECS are carried out by CAPMAS. and Consumption Surveys (HIECS) 2008/09 . Survey of Young People in Egypt 2009 The Population Council conducted SYPE in collaboration with (SYPE) the Egyptian Cabinet, Information and Decision Support Center. Iraq Iraq Household Socio-economic 2006–07 The Ministry of Planning and Development Corporation and Survey (IHSES) the Central Organization for Statistics and Information Technology undertook IHSES with the support of the World Bank. Jordan Demographic and Health Survey 2009 The Jordan Population and Family Health Survey (JPFHS) was (DHS) carried out by the Department of Statistics (DOS). Household Income and Expenditure 2010 The Jordan HIES is carried out by the Jordanian DOS. Survey (HIES) Jordan Labor Market Panel Survey 2010 The JLMPS was carried out by the Economic Research Forum (JLMPS) in cooperation with the National Center for Human Resource Development (NCHRD) and the Jordanian DOS. Jordan Gives Behavioral Experiment 2012 Behavioral experiment designed by the World Bank for this study, and conducted by the Center for Strategic Studies, University of Jordan, on a representative sample of the Jordanian middle class. Lebanon National Survey of Household 2004 The NHS was conducted by the Ministry of Social Affairs, the Living Conditions (NHS) Central Administration for Statistics and the United Nations Development Programme (UNDP) in 2004. Morocco The Morocco Household and Youth 2010 The MHYS 2009–10 collected information from a nationally Survey (MHYS) representative sample of 2,000 households across the country. Syrian Arab Household Income and Expenditure 2004 The Syrian HIES 2003–04 was conducted by the Central Republic Survey (HIES) Bureau for Statistics (CBS), Syria’s official statistical agency. Yemen, Rep. Household Budget Survey (HBS) 2005–06 The HBS 2005–06 was conducted by the Central Statistical Organization of Yemen. (table continued on next page) 263 264 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa Country Survey Year Description Multiple Multiple Indicator Cluster Survey 2006 The MICS is an initiative conducted by the United Nations countries (MICS) Children’s Fund (UNICEF) to assist countries in collecting and analyzing data to fill data gaps for monitoring the situation of children and women. MENA SPEAKS Survey 2012 New dataset designed for this study by the World Bank and Gallup Inc., and fielded as part of the Gallup World Poll Survey on nationally representative samples of the population of Egypt, Lebanon, Jordan, and Tunisia. MENA SSN Inventory 2008–11 New database of administrative SSN data, created for this study. A standard questionnaire template was formulated to obtain detailed information on SSN programs, including the number of beneficiaries and budgetary costs. The template was completed by triangulating desk reviews of relevant documents complemented by information obtained from government websites. This data collection was followed up by extensive consultations with World Bank focal points in the region and/or key informants in respective governments, including participants of the consultation workshops held in Beirut, Tunis, and Muscat. It is important to note that the data collected in the Inventory can differ from the latest official estimates. The World Bank envisions this Inventory as a continuing data collection effort to stimulate ongoing monitoring of SSNs in the region, and encourages submission of updated information to the authors. APPENDIX B Nonsubsidy SSN Programs Included in Household Survey Assessment TABLE B.1 Nonsubsidy SSN Programs in Household Survey Assessment of Selected Middle Eastern and North African Countries, c. 2002–10 Type of transfer Program name Djibouti—Djibouti Household Survey (EDAM) 2002 Cash transfers Micro-credit from the government Micro-credit from the FSD Assistance for demobilized from ADETIP Assistance for demobilized from FSD Assistance for demobilized from the government Other direct assistance from FSD Other direct assistance from the government Social assistance from religious Micro-credit from United Nations organizations or NGOs Micro-credit from PRAC Assistance for demobilized from United Nations Assistance for demobilized from PRAC Disability assistance from other NGOs Other assistance from PRAC and United Nations Egypt, Arab Rep.—Household Income, Expenditure, and Consumption Survey (HIECS) 2009 Cash transfers Government cash transfers Social assistance from religious Zakat assistance organizations or NGOs Other NGO assistance Social pensions Monthly Social Pension (Sadat Pension) Iraq—Iraq Household Socio-Economic Survey (IHSES) 2007 Cash transfers In-kind assistance from the government Income from Social Protection network donations Income from gifts, donations, and compensation from the government Cash assistance from government sources Fee waivers and vouchers for Education scholarships education Social assistance from religious Income support from Zakat funds organizations or NGOs Allowances Vocational training allocations (table continued on next page) 265 266 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa TABLE B.1 Continued Type of transfer Program name Jordan—Household Income and Expenditure Survey (HIES) 2010 Cash transfers Transfers from National Aid Fund (NAF)   Zakat transfers Social assistance from religious Cash transfers from NGOs organizations or NGOs Other transfers Morocco—Morocco Household and Youth Survey (MHYS) 2010 Cash transfers Government assistance for weather shocks   Government assistance for unexpected increase in commodity prices or fall in demand Government assistance for reduction in employment Government assistance for unexpected increase in input prices Government assistance for the loss of assets Government assistance for a cutoff in remittances Government assistance for the death of the main earner or other family members Government assistance for serious injury Government assistance for a big amount of dowry Government assistance for divorce or abandonment by husband Housing subsidies  Villes sans bidonvilles Lodging for old people in Entraide Nationale and INDH Micro-finance programs Micro-finance programs in Mokawalati: ANAPEC and INDH Fee waivers and vouchers for Dar Attalib education Transport scolaire Cités universitaires & internats de l’enseignement supérieur Bourses de licence Bourses de 3e cycle Jardin d’enfant Pre-scholaire Cantines Second chance education program Literacy Program Other scholarships and housing assistance for students Social assistance from religious Disability assistance from NGO Association organizations or NGOs NGO assistance for an unexpected increase in commodity prices or fall in demand Old people housing assistance from NGOs NGO assistance for reduction in employment or loss of job NGO assistance for an unexpected increase in input prices NGO assistance for the loss of assets NGO assistance for a cutoff in remittances NGO assistance for the death of the main earner or other family members NGO assistance for serious injury NGO assistance for a big amount of dowry NGO assistance for divorce or abandonment by husband NGO assistance for weather shocks Appendix B: Nonsubsidy SSN Programs Included in Household Survey Assessment 267 TABLE B.1 Continued Type of transfer Program name West Bank and Gaza—Expenditure and Consumption Survey (ECS) 2009 Cash transfers Cash assistance from Social Affairs Cash assistance from other Palestinian Authority foundations Cash assistance from political parties Cash assistance from international organizations Cash assistance from UNRWA Cash assistance from other Arab countries Social assistance from religious Zakat assistance organizations or NGOs Assistance from charities Assistance from labor unions Assistance from national banks Assistance from the local committee Other NGO aid Yemen, Rep.—Household Budget Survey (HBS) 2005/06 Cash transfers Transfers from the Social Security Fund    Transfers from the Social Welfare Fund Transfers from the General Authority for the care of Martyrs’ families Transfers from the fund of promotion of agriculture and fishing Transfers from Tribes Authority Affairs Medicine funds for disabled Transfers from other international and local programs Social assistance from religious Assistance received from charity organizations organizations or NGOs Note: ADETIP = Djiboutian Agency for the Implementation of Public Works (Agence Djiboutienne d’Exécu- tion de Travaux d’Intérêt Public); ANAPEC = National Agency for the Promotion of Employment and Compe- tences (Agence nationale de promotion de l’emploi et des competences); EDAM = Djibouti Household Survey (Enquete Djiboutienne Auprès des Ménages); FSD = Social Development Fund (Fonds Social de Développe- ment); INDH = National initiative for human development (L’initiative nationale pour le développement hu- main); NGO = nongovernmental organization; PRAC = Reinsertion program for demobilized personnel; SSN = social safety net; UNRWA = United Nations Relief and Works Agency for Palestine Refugees in the Near East. APPENDIX C SSN Programs in MENA SSN Inventory TABLE C.1 Middle East and North Africa SSN Inventory, c. 2008–11 Number of beneficiaries Expenditure Country Program name Program type Targeting method (individuals)a (LCUs, millions)b Year Bahrain Food, water, electricity, and oil and gas subsidies Price subsidies and ration cards Universal — 868.4 2011c Djibouti Cash transfers (Zakat) Cash transfers Categorical n.a. n.a. n.a. Food distribution program Food and other in-kind transfers Geographical n.a. n.a. n.a. Scholarships for education Fee waivers, education, and health benefits Categorical n.a. n.a. n.a. School feeding program Food and other in-kind transfers Geographical n.a. n.a. n.a. Egypt, Arab. Rep. Baladi bread subsidy Price subsidies and ration cards Universal — n.a. 2010 . Child cash assistance Cash transfers Categorical 43,562 49.4 2010 Cooking oil ration card Price subsidies and ration cards Universal — n.a. 2010 Education grant Fee waivers, education, and health benefits Categorical 624,996 189.7 2010d Emergency assistance for former public employees Cash transfers Categorical 5,927 2.1 2010 Fuel subsidy (gasoline, diesel, LPG, kerosene, Price subsidies and ration cards Universal — n.a. 2010 natural gas) Martyr’s family cash assistance Cash transfers Categorical n.a. n.a. n.a. Micro grants Cash transfers Categorical 19,899 40.0 2010 Military family assistance Cash transfers Categorical n.a. n.a. n.a. Rice ration card Price subsidies and ration cards Universal — n.a. 2010 Monthly assistance from social security to poor Cash transfers Categorical 105,533 135.0 2010 families Shock assistance Cash transfers Categorical 60,328 68.4 2010 Monthly social pension (Sadat Pension) Cash transfers Categorical 1,180,000 1,570.0 2010 Sugar ration card Price subsidies and ration cards Universal — n.a. 2010 Temporary circumstantial assistance Cash transfers Categorical 132,877 36.6 2010 269 (table continued on next page) TABLE C.1 270 Continued Number of beneficiaries Expenditure Country Program name Program type Targeting method (individuals)a (LCUs, millions)b Year Iraq Ration cards Price subsidies and ration cards Universal — 5,810,000.0 2009 Social Safety Net (Social Protection Network) Cash transfers Categorical 900,000 929,600.0 2009 Jordan Bread or wheat flour subsidy Price subsidies and ration cards Universal — 92.3 2009 Community projects Others Geographical n.a. n.a. n.a. Electricity subsidy Price subsidies and ration cards Universal — 49.2 2009 Emergency assistance Cash transfers Categorical 7,290 0.2 2009 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa Enhanced Productivity Program Micro-credit and income-generating activities Geographical 950 62.9 2009 Food Security Program Food and other in-kind transfers Means tested n.a. n.a. n.a. Health insurance for poor Fee waivers, education, and health benefits Means tested n.a. n.a. n.a. Housing for the poor Housing Means tested n.a. 2.4 2009 Micro-credit Micro-credit and income-generating activities Geographical n.a. n.a. n.a. Micro-credit Micro-credit and income-generating activities Geographical n.a. n.a. n.a. Micro-credit Micro-credit and income-generating activities Self-targeting n.a. n.a. n.a. Micro-credit Micro-credit and income-generating activities Self-targeting n.a. n.a. n.a. Micro-credit Micro-credit and income-generating activities Means tested n.a. n.a. n.a. Micro-credit Micro-credit and income-generating activities Self-targeting n.a. n.a. n.a. National Aid Fund assistance Cash transfers Means tested 441,126 83.7 2009 National Company for Employment and Training Training Self-targeting 4,000 20.0 2009 Petroleum subsidy Price subsidies and ration cards Universal — 41.0 2009 School nutrition Food and other in-kind transfers Geographical 530,000 18.6 2009 Student Support Program Fee waivers, education, and health benefits Means tested n.a. 1.0 2009 Vocational Training Center Training Self-targeting 10,000 13.2 2009 Water subsidy Price subsidies and ration cards Universal — 108.7 2009 Zakat assistance Cash transfers Means tested 70,800 10.7 2009 Lebanon Agricultural exports subsidy (“Export Plus”) Price subsidies and ration cards Categorical n.a. 31,650.0 2010 Bread subsidy (consumer) Price subsidies and ration cards Universal — 42,000.0 2010 Disability Training or Support Program Fee waivers, education, and health benefits Categorical 30,147 9,143.0 2010d Education: scholarships Fee waivers, education, and health benefits Categorical 200,000 450.0 2009c Appendix C: SSN Programs in MENA SSN Inventory 271 Education allowance Fee waivers, education, and health benefits Categorical n.a. 154,500.0 2010 Health Fee Waivers in Public and Private Hospitals Fee waivers, education, and health benefits Categorical 2,113,500 322,500.0 2010e (through Ministry of Public Health) Mazout diesel subsidy Price subsidies and ration cards Universal — 45,000.0 2010 National Poverty Targeting Program (NPTP) Fee waivers, education, and health benefits PMT n.a. 1,315.0 2010 Population and development program Training Geographical 100 202.5 2010 Tobacco subsidy Price subsidies and ration cards Universal — 45,000.0 2008 Transfer to Electricité du Liban (EdL) Price subsidies and ration cards Not specified n.a. 1,800.0 2010 Vocational training programs Training Geographical 50 206.0 2010 Welfare program Not specified Not specified n.a. 100,500.0 2010 Wheat subsidy (producers) Price subsidies and ration cards Categorical n.a. 18,000.0 2010 Morocco Alphabetization of Adults (illiteracy programs) Fee waivers, education, and health benefits Categorical 394,000 144.0 2008f Flour subsidy Price subsidies and ration cards Geographical n.a. 4,886.0 2008 Fuel subsidy Price subsidies and ration cards Universal — 27,014.0 2008 Housing of Entraide Nationale Fee waivers, education, and health benefits Categorical 59,000 12.0 2008 Idmaj Price subsidies and ration cards Categorical 46,000 149.0 2008 Income-generating activities of Agence de Micro-credit and income-generating activities Geographical 6,000 n.a. 2008 Developpment Sociale INDH: Program against poverty in rural areas Others Geographical 3,800,000 611.0 2008 INDH: Program against social exclusion in urban Others Geographical 2,500,000 1,094.0 2008 areas INDH: Program for Fighting Precariousness Others Categorical 50,000 583.0 2008 INDH: Transversal Program Others Geographical n.a. 816.0 2008 Promotion Nationale Workfare programs Self-targeting 45,000 1,000.0 2009 RAMED: Regime d’Assistance Medicale Fee waivers, education, and health benefits PMT 151,000 138.0 2009g School feeding program “canteens” and housing Food and other in-kind transfers Self-targeting 1,039,100 815.0 2008 School supplies program Food and other in-kind transfers Categorical 1,273,800 437.0 2008 Sugar subsidy Price subsidies and ration cards Universal — 2,854.0 2008 Tayssir Cash transfers Geographical 80,000 149.0 2009 Villes Sans Bidonvilles (Cities without Slums) Housing Geographical 136,000 220.0 2009g Syrian Arab Republic Food and fuel subsidies Price subsidies and ration cards Universal — 386,766.0 2010 Public works program Cash transfers Categorical n.a. 13,813.1 2010 Social Welfare Fund Cash transfers Categorical n.a. 13,813.1 2010 (table continued on next page) TABLE C.1 272 Continued Number of beneficiaries Expenditure Country Program name Program type Targeting method (individuals)a (LCUs, millions)b Year Tunisia Subsidized health card program Fee waivers, education, and health benefits Does Not specify 2,312,000 70.0 2011 Program allocation of handicap card Others Categorical 181,000 12.0 2011 Defense program and social integration Training Categorical n.a. 1.0 2011 Programme National d’Aide aux Familles Cash transfers Means tested 940,000 292.0 2011 Nécessiteuses (PNAFN): Cash transfers Programme National d’Aide aux Familles Fee waivers, education, and health benefits Means tested 940,000 39.0 2011 Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa Nécessiteuses (PNAFN): health cards Social counseling, child care, and adult education Fee waivers, education, and health benefits Categorical n.a. 9.0 2011 programs West Bank and Gaza Cash Transfer Program (CTP) Cash transfers PMT 365,466 239.0 2010 Economic Empowerment Program (DEEP) Micro-credit and income-generating activities PMT 12,642 6.8 2010 Emergency Assistance program Cash transfers Categorical 14,502 10.4 2010 Food Parcels Program (WFP) Food and other in-kind transfers PMT 211,510 140.7 2010 Orphans Sponsorship Program Cash transfers Categorical 15,318 10.3 2010 The Disabled Rehabilitation Fund Cash transfers Categorical 858 2.5 2010 Yemen, Rep. Fund for Productive Families Micro-credit and income-generating activities Categorical n.a. n.a. n.a. Agricultural and Fish Production Promotion Fund Micro-credit and income-generating activities Geographical n.a. n.a. n.a. Disability Fund Fee waivers, education, and health benefits Categorical n.a. 2,700.0 2009 Petroleum subsidies Price subsidies and ration cards Universal — 327,000.0 2009 Public Works Project Workfare programs Geographical 6,584,000 19.1 2009e Social Fund for Development Workfare programs Geographical 6,472,402 30,008.6 2009e Social Welfare Fund Cash transfers PMT 7,911,585 40,829.0 2009e Note: INDH = National initiative for human development (L’initiative nationale pour le développement humain); LCU = local currency unit. Nonsubsidy SSN data for Bahrain, Kuwait, and Saudi Arabia are not pre- sented in this table for confidentiality reasons; LPG = liquefied petroleum gas; PMT = proxy means testing; RAMED = Regime d’Assistance Medicale; SSN = social safety net; — = not available; n.a. = not applicable. a. Household figures have been converted into individuals using the latest household survey data. b. US$ figures were converted into LCUs using the exchange rate on May 30, 2012. c. Beneficiaries year is 2010. d. Beneficiaries year is 2009. e. Beneficiaries year is 2011. f. Beneficiaries year is 2007. g. Beneficiaries year is 2008. ECO-AUDIT Environmental Benefits Statement The World Bank is committed to preserving Saved: endangered forests and natural resources. 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