May 11, 2006 Inquiry & Analysis Series No. 274

Poverty Issues in the Middle East

May 11, 2006 | By Dr. Nimrod Raphaeli*
Libya | Inquiry & Analysis Series No. 274


The World Bank has recently released a study on poverty reduction and human development in the Middle East. The study focuses on the paradox that while development indicators, e.g., education and health, have improved in the last decade, income poverty has remained stagnant. [1]

Because of data constraints, the study focuses on seven Middle Eastern and North African (MENA) countries - Algeria, the Arab Republic of Egypt, the Islamic Republic of Iran, Jordan, Morocco, Tunisia and the Republic of Yemen. In some instances, Lebanon, Libya and Syrian Arab Republic are included in the analysis. The ten countries account for approximately 85 percent of the total population of the region. With the exception of Iran, none of the region’s oil producing countries is included.

The World Bank study should be read in conjunction with two earlier reports - one by the International Labour Organization (ILO) and one by the United Nations Development Programme (UNDP). The ILO report, which focuses on unemployment, finds that the Middle East and North Africa (MENA) stands out as the region with the highest rate of unemployment in the world, higher even than sub-Saharan Africa, the poorest region in the world with a rate of unemployment at 9.7 percent. [2]

An earlier report, by UNDP, focuses on human development, which is defined as a process expanding "the range of human choice." In the developed countries the choices cover a wide range of elements that affect the quality of life - from shelter to food, education, medical services, political association, and culminating in the exercise of the various forms of leisure. A low level of human development indicates a paucity or even the absence of choices that people have at their disposal to enjoy the fullness of life and freedom. [3]

Major Findings

Absolute poverty for most international comparisons is defined as the head count ratio of $1 PPD (Purchasing Power Parity) per capita per day. [4] When measured at the $1/day line, poverty in MENA is relatively insignificant. However, if the $2/day line is used the poor account for 20-25 percent of the population. Yemen has the highest rate of poverty at 45 percent followed closely by Egypt with 44 percent in 1998 and 1999/2000 respectively. The comparable figures for Iran (1998), Jordan (2002) and Tunisia (2000) is 7 percent. [5] Even at the $2 poverty line, the number of poor people in 2001 in Egypt and Yemen is substantial and is significant in Algeria, Iran and Morocco. The poverty population of the seven countries included in the survey was almost 52 million people (at the $2 line) in 2001 rising from 40 million in 1987, an increase of 30 percent. [6]

However, the World Bank study notes that if the poverty line is raised from $2 to $3, the result will be a doubling of the number of people who are poor from about 52 million to approximately 95 million. Raising the bar provides evidence that a large number of people live so close to the poverty line that, according to the study, they "can easily drop below it as a result of economic shocks." [7]

Welfare Employment

Some researchers have established that reasons for the low level of poverty in MENA compared with a sample of countries from other regions include the high level of remittances from those who live/work overseas, and from a deliberate policy of providing what is defined as a "welfare employment" in the public sector.

Welfare employment is not uniquely a Middle Eastern phenomenon. During the rapid expansion of the British Empire in the 19th century, employment in East India Company was treated as a form of welfare for the aristocracy. Welfare employment continues to be practiced widely by most developing countries. However, a modern version of welfare employment is not without cost. While it can reduce poverty in the short term, it can also lower economic efficiency at the level of the enterprise and thereby depress growth and profitability. At the level of public bureaucracy, overstaffing in government departments is often the cause of poor morale, low productivity and corruption. It is not uncommon for government employees to be asked to stay home for lack of office space or because of the non-existent workload. One of the ironic observations in the study is that, in MENA, the chance of being poor is much higher in the private than in the public sector. It is because the government provides a social safety net which the private sector in the initial stages of a full market economy is not expected or equipped to provide.

Human Development Indicators

The UNDP, which issues an annual report on the subject, defines human development as creating an environment in which people can develop their full potential and lead productive, creative lives in accord with their needs and interests. People are the real wealth of nations. Development is thus about expanding the choices people have to lead lives that they value. And it is thus about much more than economic growth, which is only a means-if a very important one-of enlarging people’s choice. [8]

Education and health are two of the significant indicators of human development. The sub-sets of these indicators are education attainment, female education attainment, child mortality and life expectancy. Between 1960 and 2000, MENA score on all these indicators was quite impressive. For example, years of education for people age 15 and above rose sixfold, years of education for females age 15 and above rose ninefold, and child mortality fell more than fivefold. During the same period, life expectancy rose by 44 percent. [9]

Education Attainment (Females)

The study shows impressive improvement in number of years of education for females. In fact, the study notes, given the traditional social and cultural constraints on women, the achievement is "remarkable." Judged against comparators of similar levels of income Egypt and Libya have exceeded all comparators, whereas Tunisia, Algeria and Iran have performed below the comparators. [10]

Despite this achievement, the literacy rate among females in MENA, 60 percent, remains relatively low in comparison with the literacy rate of 85 percent in its comparators. On the other hand, the literacy gap between males and females is diminishing. The study shows that while the ratio of literate females to literate males was only 0.63 in 1980, it had risen to almost 0.87 in 2000. [11]

Equally impressive is the life expectancy of women, which has risen from 48 years on average in 1960 to almost 70 years in 2000. The gap between female and male life expectancy has increased in favor of women in most MENA countries. [12]

Notwithstanding the above achievements, as well as the decline in fertility (births per woman aged between 15 and 49 years), female labor force participation between1980 and 2000 remained below other regions, with much lower per capita incomes. Participation rate of women in MENA has reached 32.2 percent compared with sub-Saharan Africa (62.5 percent) and South Asia (46.5 percent) As another World Bank study has concluded with some disappointment, the "potential to integrate women into the regional economy, determined by past investment in female education and recent fertility trends, has not been realized." [13]

The Link Between Education and Poverty

One of the intriguing questions is the degree to which the acquisition of education helps poverty reduction. The study notes that given the high rate of unemployment in the region, especially among the educated (also highlighted by the ILO study referred to in footnote 2) "it is debatable whether the acquisition of education is an automatic route to employment and higher income." [14] Reasons for the disconnect may be poor quality of education or an education inappropriate to market demands. UNDP’s Human Development Report for 2002 underlined the propensity at the level of tertiary (post-secondary) education to focus more on language and literature than on mathematics and science. [15]

The failure to design the educational output to changing market needs has created a higher rate of unemployment among the educated segment of the population in MENA than in countries of similar level of economic development. Data on unemployment for 12 Middle Eastern and North African countries show that unemployment rose from an average of just over 8 percent of the labor force in 1980 to 15 percent in 2000, compared with 9 percent unemployment in a similar economic range. [16] This is a potent force that could easily subvert the established political order by espousing extremist political and religious ideologies.

Health and Poverty

The study is quite complimentary about the significant progress in improving the average health status of the people in MENA. Between 1980-2000 the level of progress was "above and beyond" the level which prevailed in 1980. [17] However, the study points to health inequalities between the rich and poor. For example, in Egypt and Morocco, under-age-five mortality rates are three times as high as for the poorest quintile as for the richest, and infant mortality rates are more than twice as high. Child malnutrition is also prevalent among the poor. This leads the study to repeat a common wisdom that "health and wealth are frequently correlated." [18]

As for the next two decades, the study highlights a new problem. While population growth in the region has declined to about 2 percent, it is estimated that by 2015 the number of adults in the region will have increased by 140 percent, representing the highest adult population growth in the world after sub-Saharan Africa. With lower birth rates, higher life expectancy and fewer communicable diseases, the challenges of an aging population with its demand for costly long-term care, will be a great strain on the financial resources of the region. This demographic transition will have implications for the poor by being squeezed out in favor of the richer segments of the population. [19]

Conclusion: Sustaining the Gain in Poverty Reduction

While gains have been made particularly in the education and health sectors, sustaining these gains presents a big challenge to the countries of the region. To do so, the economies of the region must complete three fundamental transformations:

(a) From public to private sector dominance

(b) From relatively closed to more open international trade and investment; and

(c) From excessive reliance on oil to more diversification. [20]

The study mentions, but perhaps not forcefully enough, that for these transformations or realignments to take place, the countries in the region "should pay greater attention to issues of governance," which is a code word for political reforms. More specifically, governance means political competitiveness, reduced controls and regulations over the national economy, independent judiciary, human rights and gender equality, particularly with regard to the employability of women.

Perhaps equally important is improving the quality of education and introducing changes in the curriculum that would teach practical skills more in demand and more valued in the private sector than in the public sector. The inevitable transition to private sector will require urgent and sustained changes in the curriculum which few countries in the region appear to be addressing in a systematic fashion.

Alleviating poverty goes beyond brick and mortar. A long-term solution requires a wide range of operational economic policies and, above all, a change in the culture of governance that would enable people to unleash their energies for their own weal.

*Dr. Nimrod Raphaeli is Senior Analyst of MEMRI's Middle East Economic Studies Program.

[1] Farrukh Iqbal, Sustaining Gains in Poverty Reduction and Human Development in the Middle East and North Africa. The World Bank, Washington, D.C. 2006.

[2] MEMRI Inquiry and Analysis No. 265, "Unemployment in the Middle East-Causes and Consequences," February 10, 2006, Unemployment in the Middle East – Causes and Consequences.

[3] MEMRI Inquiry and Analysis No. 219, "The Arab Human Development Report III: An Appeal for Openness and Freedom," April 29, 2005, The Arab Human Development Report III: An Appeal for Openness and Freedom.

[4] The Organization for Economic Co-operation and Development defines PPPs as "currency conversion rates that both convert to a common currency and equalize the purchasing of different currencies. In other words, they eliminate the differences in price levels between countries in the process of conversion." In short, it is a way to compare the average costs of goods and services between countries.

[5] World Bank Study, Table 1.4 and p.13.

[6] Ibid., table 1.5, p.14.

[7] Ibid., p.73.

[8] UNDP, Human Development Report 2001. Oxford University Press, 2001, p.9.

[9] World Bank Study, p.21.

[10] Ibid., pp.25-26.

[11] Ibid., p.29.

[12] Ibid., p. 29.

[13] Ibid., pp.30-31.

[14] Ibid., p.33.

[15] United Nations Development Programme, Human Development Report 2002. New York: Oxford University Press, 2002.

[16] World Bank Study, p.38.

[17] Ibid., p.47.

[18] Ibid., p.48.

[19] Ibid., pp.55-56.

[20] Ibid., pp.73-74.

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