73006 September 2012 – Number 71 Inclusion and Resilience: The Way Forward for Social Safety Nets in MENA Joana Silva, Victoria Levin, and Matteo Morgandi 1 or precarious employment in jobs with limited upward mobility. Effective SSNs can break the cycle Introduction: The Arab Spring and subsequent of intergenerational poverty by helping families to transitions provide opportunities for better keep children healthy and in school. SSNs and governance, economies free of cronyism and more increased social services can also deal with spatial inclusive models of growth. Social safety nets (SSN)2 pockets of poverty in slums and rural areas by will be a key component of building more inclusive promoting the demand for social services and by economies and societies. And here too there are building community assets. In addition to those in grounds for optimism. Most SSN programs around chronic poverty, a large share of the region’s the world were introduced during transition periods population hovers close to the poverty line and (post-Soviet independence, Indonesia’s exhibits low resilience to shocks. As many as 15 –17 decentralization, and regime change in Brazil and % of Egyptians, Iraqis, Syrians, and Yemenis, and 10 Portugal), and have remained in place since. % of Moroccans, have per capita consumption levels that are no more than US$0.50 per day above the SSNs and Addressing Human Development US$2 per day poverty line in purchasing power Challenges: In MENA, growth, poverty reduction, parity [PPP] terms. If SSNs were not in place, and a growing middle class exist together with vulnerable households could face irreversible loss of chronic poverty and high vulnerability. More than a human capital during shocks. In addition to poverty quarter of children in the bottom income quintile in and vulnerability, specific populations, such as Egypt, Morocco, and Syria are chronically women and the disabled, face particular barriers in malnourished. By the age of 16–18, children in the access to social services and labor market poorest quintile in Egypt and Morocco are more opportunities. likely to have dropped out of school than to have continued studying. Low levels of human capital Reforming SSNs in MENA: Most MENA SSNs accumulation carry a higher risk of unemployment finance energy subsidies, crowding out more effective interventions. On average, 6% of gross domestic product (GDP) goes to subsidies. Fuel 1 Joana Silva, Senior Economist, World Bank, Victoria Levin, subsidies represent an average of 4.6% of GDP. Economist, World Bank. Matteo Morgandi, Young Professional, Other SSNs in the region are under-resourced with The World Bank. This MENA K&L Quick Note was cleared by less than 0.7 % of GDP on average and fragmented Yasser El Gammal, Sector Manager, Human Development Group, Middle East and North Africa Region (MNSHD), The World among small overlapping programs. Most of the Bank. poor and vulnerable fall through the cracks: two out of three people in the lowest quintile are uncovered 2 Social safety nets (SSNs) are defined as non-contributory by non-subsidy SSNs. Coverage of the bottom transfers targeted to the poor or vulnerable. They include quintile is less than half the world average. income support, temporary employment programs (workfare), Moreover, inadequate targeting results in significant and services that build human capital and expand access to finance among the poor and vulnerable. leakages to the non-poor. The average MENA non- subsidy SSN program distributes only 23 % of benefits to the bottom quintile. Comparator programs in Latin America and the Caribbean and (a) much scope remains to increase support for in Eastern Europe and Central Asia manage 59 %. reform by raising awareness on the true cost of Although subsidies are relatively inefficient and subsidies; and (b) customizing the design of ineffective, their sheer size means that many depend renewed SSNs can help shift public opinion in favor on them to stave off poverty. Moving towards more of reform. effective, reliable, and equitable social safety nets requires thinking not just about the technical aspects of reform but also about its political economy Text Box 1: aspects. Listening to MENA: Political Economy of Reform: Political economy considerations have largely stalled or prevented The activities conducted in preparation for this report reform in some MENA countries. New evidence reached over 4,000 MENA citizens through the suggests that better information, improved design, nationally representative MENA SPEAKS (Social and increased transparency of SSNs can help Protection Evaluation of Attitudes, Knowledge, and reforms to move forward. Opinion surveys in Egypt, Support) surveys done in collaboration with Gallup in Egypt, Jordan, Lebanon, and Tunisia. The report also Jordan, Lebanon, and Tunisia conducted as part of engaged a nationally representative sample of over 400 this study (see Text Box 1) reveal that close to 90 % Jordanian middle-class citizens , in a behavioral game of citizens see the government as the main provider (Jordan Gives) that looked at revealed preferences for of SSNs. Yet, in Egypt and Lebanon, less than a third redistribution, using real trade-offs. found the SSNs effective. In Jordan and Tunisia the poor reported much more dissatisfaction than the In consultation workshops across MENA more than rich. The surveys showed the uneven coverage of 250 representatives from government; academia; civil SSNs and, partly, their regressive nature. In Egypt, society; nongovernmental organizations (NGOs) were 23 % of all respondents—particularly the poor—did involved, including participants from Algeria, Bahrain, not know the main SSN programs. In Lebanon and Iraq, Jordan, Kuwait, Lebanon, Morocco, Oman, Saudi Tunisia, the rich were more likely to know an SSN Arabia, Tunisia, the United Arab Emirates, and West beneficiary. Despite their large fiscal cost, awareness Bank and Gaza; and multilateral and bilateral donors such as the International Labour Organization and the of fuel subsidies is below 50 % in all four countries. United Nations Economic and Social Commission for The opposition to subsidy reform varies (higher in Western Asia. Egypt and lower in Lebanon) and in terms of priority, with gasoline in Egypt, tobacco in Lebanon, and diesel in Jordan and Tunisia being the subsidies most accepted for reform. In all countries but Recent experience has demonstrated the feasibility Lebanon, those who could tolerate subsidy reform of SSN reform in the MENA. There are examples of opted for cash transfers targeted to the poor rather successful reforms that have attained significant than broad-based compensation. In general, citizens positive results: showed a clear preference for SSNs that focus on the poor (rather than on specific groups) and that  West Bank and Gaza created a unified registry deliver cash (rather than in-kind benefits). across SSN programs significantly improving targeting accuracy and crisis response capacity. In addition to surveys, this study conducted a  The Republic of Yemen responded quickly during behavioral experiment (Jordan Gives) among a the last crisis with a workfare program to bridge representative sample of the Jordanian middle class, a consumption gap of the poor and vulnerable collecting information on preferences for while also creating community assets. Important redistribution to the poor using valuable trade-offs. reforms were also implemented in the Social This experiment showed that middle-class Welfare Fund, such as improved poverty individuals support redistribution to the poor, but targeting with a proxy means-test formula, also, more important, that this support varies strengthening capacity for service delivery, and according to the design of the assistance and the implementing a new legal/policy framework. credibility of targeting. These activities suggest that September 2012 · Number 71 · 2  Morocco’s Tayssir program—a pilot cash transfer preference for poverty-based targeting as program conditional on school attendance and opposed to categorical targeting. There is targeting areas with high incidences of school already substantial movement on this in Iraq, dropouts and poverty—has had a significant Jordan, Lebanon, West Bank and Gaza, and positive impact in reducing dropouts in rural Yemen. Results there have shown the power of areas, especially among girls. such reforms and outlined a path.  Djibouti has adopted an innovative program design to make a workfare program work for children and women. o Improving the focus on SSN program results  Lebanon recently launched a central targeting through M&E and social accountability. In database (National Poverty Targeting Program), MENA, enhanced M&E for SSNs can help laying the foundation for an effective SSN. allocate budget resources among programs,  Jordan has made important steps toward monitor day-to-day operations, and track the rebalancing SSNs away from subsidies and results of interventions. M&E has been developing a targeting and poverty reduction particularly effective when the evaluation strategy. results and empirical data are used to inform budgetary decisions and reshape programs. This For more effective and innovative SSNs action is was the case in West Bank and Gaza and the needed on several fronts. Better results can be Republic of Yemen. Moreover, introducing well- achieved through action on the following four functioning social accountability systems can agenda items: improve efficiency and accountability and combat corruption. I - Improving the impact of SSN programs in the MENA. Currently, most of the region’s nonsubsidy o Reaching out to other stakeholders: Citizens’ SSN programs have limited impact on poverty and awareness about existing SSN programs is low inequality because of the combination of low and skewed toward the wealthy. coverage (with inefficient targeting) and at best, Comprehensive communication campaigns are inadequate monitoring and evaluation (M&E) needed to inform poor and vulnerable citizens systems. The way forward on this front could entail: of available safety nets. Also, engaging a spectrum of stakeholders (NGOs, CSOs, the o Prioritizing interventions for investments in private sector, and nonprofits) in financing and human capital. SSN programs should be implementing SSN programs could add addressing human development challenges for resources to SSN’s financial and human e.g. malnutrition and school dropouts. This can resources. be done by (a) scaling up existing successful conditional cash transfer (CCT) programs II - Establishing a reliable yet flexible SSN (Morocco’s Tayssir program) and workfare infrastructure for normal and crisis periods. The programs (Yemen’s Social Welfare Fund); (b) global economic crisis underlined weaknesses in tweaking existing programs so they work better MENA’s existing SSN systems. Promoting for children and women (Djibouti’s workfare households’ resilience to shocks through SSNs plus nutrition program); or (c) creating new requires a strong administrative infrastructure. If programs based on global best practices. this is in place ahead of a crisis, it allows for quicker, more efficient action, i.e. scaling up of benefits for o Enhanced targeting of the poor and vulnerable. the vulnerable or expanding coverage. Setting up an Improved targeting can decrease costs, ensure improved SSN infrastructure could entail: equity, allow SSNs to act as insurance, and enhance effectiveness. Most MENA programs o Creating unified registries of beneficiaries that are categorically or geographically targeted, can be used to target multiple programs. In even though these are only effective in normal times, unified registries can reduce costs environments of concentrated poverty. In the and facilitate coherence and convergence. In MENA SPEAKS surveys, citizens noted a strong crisis times, unified registries can be used to September 2012 · Number 71 · 3 quickly disburse additional benefits to target achieved by creating new programs, scaling up populations or promptly expand coverage by effective programs, and reforming ineffective adjusting eligibility criteria. West Bank and programs. Gaza provides an example of best practice in the region. o Reforming price subsidies through wholesale or internal reforms. Sequencing of sensitive o Using effective service delivery mechanisms. reforms is crucial for success. Governments Effective use of modern technologies such as could start by: smart cards, mobile payments, and over-the- counter payments in bank branches reduces - Improving targeting, for example though administrative costs, leakages, and fights differentiated marketing and packaging, corruption. It provides rapid response during leading to self-targeting (Tunisia), crises. narrowing subsidy coverage through lifeline tariffs in power, and reducing distribution III - Consolidating fragmented SSN programs . In leakages. MENA, direct transfer programs (cash-based or in- kind) are often small and fragmented. International - Identifying the most sensitive subsidies and experience suggests that a few comprehensive focusing on the most regressive ones. According programs designed to reach different segments of to MENA SPEAKS surveys, reform of food the poor and vulnerable, can address current subsidies is least preferred by citizens. As vulnerabilities and social protection gaps by spending on fuel subsidies is triple the cost increasing coverage and benefits. Some (for of food subsidies, the former is the lower- example, Morocco and West Bank and Gaza) have hanging fruit. started reforming their SSNs in this manner. To progress, governments can identify gaps in SSN - Engaging citizens early and promoting systems and create an inventory of SSN programs information campaigns. Governments can use with their objectives, eligibility criteria, and benefits, MENA SPEAKS findings to raise awareness as in Morocco. With such an inventory, about costly subsidies and initiate dialogue governments can identify programs to expand or on preferred compensation packages. consolidate and formulate an implementation strategy. Contact MNA K&L: Laura Tuck, Director, Strategy and IV - Rebalancing the financing and prioritization Operations. of safety net systems. MENA countries spend a MENA Region, The World Bank large share of GDP on energy subsidies and a small Regional Quick Notes Team: share on targeted safety nets. Reducing costly and regressive subsidies would decrease fiscal Omer Karasapan, and Roby Fields imbalances and free up resources for more efficient Tel #: (202) 473 8177 safety net instruments. This could entail: The MNA Quick Notes are intended to o Increasing spending and improving coverage summarize lessons learned from MNA and of non-subsidy SSN to protect against other Bank Knowledge and Learning activities. destitution. Successful subsidy reforms have The Notes do not necessarily reflect the views of demonstrated the importance of gaining the World Bank, its board or its member citizens’ trust in government’s capacity to countries. deliver fair and reliable compensation for the reduction or loss of those subsidies. In light of the evidence provided by MENA SPEAKS and Jordan Gives, demonstrating readiness to deliver effective and inclusive SSN programs would be an essential step on the path toward comprehensive subsidy reform. This could be September 2012 · Number 71 · 4