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Policy changes 'needed to help poor regions'

Dubai, June 15, 2010

The Middle East and North Africa region can raise living standards in geographic areas that  are less economically developed with an informed mix of policy choices, says a new World Bank report.

The report, “Poor Places, Thriving People: How the Middle East and North Africa can Rise above Spatial Disparity” launched today in Dubai, offers a set of practical policy options for governments confronted by the acute development challenges of citizens living in poor regions disadvantaged by geography.

“The region’s policymakers can address the often intolerable inequities caused by disadvantaged geography without compromising economic efficiency,” says Alex Kremer, principal author of the report and senior economist at the World Bank. “We would like to suggest careful local analysis and the application of a mix of policies tailored to the characteristics of each lagging area. The key here is in the mix itself and to avoid broad prescription.”

The report also challenges the assumption that the Middle East and North Africa has to spend huge sums of money on mega-projects and subsidies for poorer areas. Smart solutions for poorer geographic areas are sometimes less obvious, says Kremer.
“Take education for girls, for example. It’s critical that this be a key priority for the development of disadvantaged areas. Rural roads can make the difference as can thoughtful linkages between businesses and public institutions.”

Shamshad Akhtar, vice president for the Middle East and North Africa at the World Bank, was hosted by the Dubai School of Government for the launch.

Spatial disparities – the gap between disadvantaged areas and those that are more developed – may be less important than they seem, the report suggests. It is essential for policymakers to have an objective understanding of the degree to which location affects household welfare: in some countries location matters more than in others.

For example in Mena, the spatial component of inequality is biggest in Morocco, followed, in order, by Egypt, Yemen and Syria, but is much less important in Jordan and Djibouti.

Nevertheless, in no MENA country does rural-urban inequality account for more than a fifth of total inequality of household expenditure. Overall, Mena’s urban-rural and inter-provincial divides are no bigger than those in other developing regions of the world, the report noted.

While all lagging areas have development indicators in common, their geographical characteristics set them apart and call for different policy responses. The report proposes three policy packages to address this issue.

First, it asserts that leveling the playing field and investing in people must be a cornerstone of any policy response. Mena’s political and colonial history, characterized by strong central bureaucracies, centralized economic and fiscal policies, and weak accountability relationships, have resulted in a general neglect of some regions. To create a level playing field for development, the challenge is to address the historical disadvantages of populations on the periphery.
 
The second policy area urges greater connectivity to build linkages between wealthier areas and those that are economically disadvantaged.  Mena’s lagging areas have a proximity advantage because 61 percent of the population lives within three hours of a major city. Mena can connect its lagging areas to agglomerating hubs by investing in key sectors such as transport, trade facilitation, and information and communication technologies.

Finally, the report demonstrates that governments can help facilitate cluster development in areas with unrealised potential, not by throwing large amounts of money and infrastructure at the problem, but instead by facilitating local actors and helping to coordinate their initiatives. This includes making space for public private partnership, investing in human capital as well as appropriate infrastructure and understanding what initiatives territories can support rather than trying to force investment with subsidies and tax breaks. –TradeArabia News Service




Tags: World Bank | Mena | Poor | spatial disparity |

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