Opening Remarks of the Flagship Launch: How MENA Can Rise Above Spatial Disparities

Honorable Minister and Distinguished Guests
 
I am pleased that we have gathered here for the launching of the World Bank’s Report on Poor Places, Thriving People: How the Middle East and North Africa Can Rise Above Spatial Disparities.   Our special thanks to Dr. Bassem Awadallah and the Dubai School of Government for partnering with the MNA region of the World Bank to organize this event.
 
Globally we have seen some turbulent times over the last couple of years.  Recovery is undoubtedly underway but vulnerabilities remain.  Prior to the crisis, global economic growth provided an opportunity to address widespread poverty and social issues but the crisis is a reminder that hard won gains in this area can fast evaporate.  Furthermore while economic growth is a necessary condition for the reduction in spatial and social disparities, it is not a sufficient condition.  Spatial disparities – a term used for gaps in income and access between disadvantaged and developed areas -- are a reality both in developed and developing countries.  These disparities exist both in good and bad times.  Given the magnitude and severity of the crisis and its impact on economic growth, it has had significant impact on those near the margin and resulted in a rise in the ranks of unemployed.
 
The crisis took us all by surprise, but it also took us swiftly out of the state of complacency.  Like any other region, MNA faces challenges, but the application of a fiscal and monetary stimulus, a resurgence in oil prices, and the use of reserves helped the economic revival process.  Aside from efforts to regain macroeconomic stability, post crisis, MNA, like other parts of globe, needs to strive for well balanced, high quality and equitable economic growth to avoid the aggravation of spatial disparities and attendant risks of social cohesion.
 
It is in this context that this flagship report on “Poor Places, Thriving People” is timely.  The report draws on a rich body of global analysis conducted as a part of 2009 World Development Report that offered new frameworks and approaches for “Reshaping Economic Geography.”   Spatial economics has received a lot of attention in development literature, albeit in different contexts and frames.  Policy makers have tried and tested a range of strategies and options for tackling issues of spatial development.  While the track record in this area is mixed, many lessons have been learned about what works and what does not.  In the MNA region, even more than elsewhere, there is a need today to nurture political and social cohesion, and within that context the Report offers diagnostics and perspectives on how to address spatial disparities.
 
Spatial disparities are an age old problem, but continued policy neglect aggravates disparities and dislocations; and these can threaten the social fabric.   Before one offers any policy prescriptions it is critical to lay out a few facts about MNA to appreciate the dimensions and gravity of the situation.

• While MNA has made decent inroads against income poverty, a broader definition of poverty adds to the ranks of the poor --particularly in poorer or disadvantageous regions within national jurisdictions;
• Unemployment rates on average in MNA are more than twice as high as those in other middle income countries;
• The MNA region is arid and mountainous, facing considerable water and agricultural land constraints.  As a result, populations in the region are concentrated, providing a conducive environment to respond to spatial disparities;
• MNA is urbanizing at a fast pace: today 65% of its population lives in urban area compared to the 1960s when only one third lived in urban areas;
• 3% of MNA’s surface area is home to 92% of its population reflecting highest economic density;
• Urban areas are better off than rural areas and those rural areas closer to urban centers gain from their proximity; and
• Women face particularly severe spatial disparities.

Despite these harsh realities and country-wide differences, MNA’s urban-rural divide or interprovincial divides are no greater than those in other developing countries.   In parallel, evidence in this report points to a deeper correlation of spatial disparity with social disparity.  Notably, “areas lagging in development” have been found to face exceptionally high demographic pressures including a high ratio of dependents to people of working age; and weaker education standards relative to the “leading areas in development.”   Though migration and convergence in living standards offers a natural resolution mechanism, MNA has been found to have slower redistribution of population from lagging to leading regions.  These tendencies capture the lack of resources available to the poorest and to women as well as social pressures against regional migration and/or the complexities for regional migrants to grasp urban opportunities.
 
To some extent, regional disparities emerge from MNA’s age old preoccupation with resource extraction relative to a focus on broad based economic development and the lack of holistic state policies and institutions alongside over-centralization that together deterred the promotion of redistributive growth and balanced regional development.
 
Besides questions of political economy and the need for appropriate voice to lagging regions, there is no single solution or a consensus on how to address spatial disparities.   For many years, in both developed and developing countries, the predominant myth was that spatial disparities could be tackled by large-scale infrastructure spending, or setting up public sector industry, or providing tax incentives and subsidies.   By now, however, the evidence is quite clear that these policies are neither effective, nor efficient, nor sustainable.  The resources and time lost in pursuit of this myth is quite unfortunate.
 
However, recognizing the inherent risks and dangers of spatial disparities, countries in the MNA region are rapidly changing their strategic direction and emphasis. A range of countries have now evolved comprehensive vision statements for their economic development and are working to address spatial disparities.   To effectively tackle spatial disparities, it is critical to promote:

1. Diversified economic growth through development and the promotion of non-oil sectors;
2. Private sector investment through an improvement of investment climate and economic liberalization;
3. Mainstreaming and integrating of the spatial dimension into fiscal policies and public expenditure management;
4. Fast tracking implementation of a well targeted program to address social disparities in lagging areas with a proper emphasis on gender development, through effective public education and health systems that have strong outreach and quality of delivery;
5. Shifting the fiscal policy emphasis from commodity subsidies such as energy and food subsidies that are broad based and regressive to well targeted social safety nets that properly incentivize disadvantaged populations to seek education through special social funds, conditional cash transfers or other mechanisms;
6. Recipes for spatial convergence through increased agricultural productivity over the medium term to ensure MNA’s growing work force in rural areas is catered for, but at the same time smoothing the growth of urban areas and facilitating labor shifts from lagging to leading areas.

In our interaction we hear from MNA policy makers how concerned they are for lagging areas such as Northern and Southern Lebanon, the north east of Syria, the north-west of Tunisia, the south-west of Saudi Arabia and the mountainous hinterlands of Morocco.  The World Bank is partnering with national efforts to reduce spatial disparities. To quote a few examples of our support: 

• The rural development project in Sohag in Egypt – one of the country’s poorest areas.  This project has helped raise local investment with community involvement – and 71% of households in the area have reported improvement in living standards and women’s participation in community planning.
• Tunisia’s Northwest Mountainous and Forestry Areas Development Project, which boosted real incomes by 85% in project area between 2003 and 2009, and raised the communities access to potable water from 69 to 81%.
• The Saudi Ministry of Municipal and Rural Affairs has been benefiting from technical advice from the World Bank on options for the spatial allocation of investment budgets.  Similarly, the Bank is sharing with the Morocco’s Royal Commission on Regionalization its experience of equalization grants and local economic development strategies.  Again, across the region we are working on public expenditure prioritization and management with a particular emphasis on public delivery and financial management.

To conclude, let me reiterate that spatial disparities impact both developed and developing countries.  There is no single solution to resolving this complex issue, but enough collective wisdom is available to offer us a rich menu of options and lessons learned.  Drawing from this the Report, I would emphasize a strong diagnostic of  the problem and the adoption of proper fiscal policy approaches and tools to target spatial development and address the social disparities that are at the core of regional inequalities and disparities.   Spatial development cannot be achieved by strategies alone.  It requires dedicated and effective leadership and political commitment backed by strong institutional capacities at both central and local levels with a defined multisectoral interface among development agencies.  We hope that with the dissemination of this Report and our work with our partners there is a growing broad based recognition that “Good development is good spatial development.”