Shanta DevarajanWorld Bank

www.brookings.edu/futuredevelopment

Managing the transition to the long run in MENA

The payoffs: (1) Peace dividend

  Pre-conflict During Post-conflictAfghanistan 1978-2001 2.6 -6.5 10.4

Angola 1975-2002 3.4 -1.3 11.8Azerbaijan  1991-1994 -2.2 -17.8 9.4Bosnia and Herzegovina  1992-1995

-11.9 3.6 10.5

Cambodia 1970-1991 … -4.0 4.8Chad 1965-1990 … -0.3 2.3Congo-Dem. Rep 1996-2001 -4.0 -5.2 2.6Croatia  1991-1993 … -12.9 4.5El Salvador 1979-1991 2.0 -2.5 1.9Ethiopia 1974-1991 1.1 -0.9 2.3Georgia 1991-1993 2.4 -26.4 7.7Guatemala 1965-1995 … 0.9 0.6Lebanon 1975-1990 0.0 -5.0 3.7Liberia 1989-2003 -2.0 -9.3 2.8Mozambique 1976-1992 1.6 -1.4 5.3Namibia 1973-1989 -2.8 -1.0 1.6Rwanda 1990-1994 0.7 -8.4 4.0Solomon Islands 1998-2003 0.3 -5.7 3.2Sierra Leone 1991-2001 -0.1 -7.3 8.0Tajikistan  1992-1997 -2.3 -15.2 7.1Uganda 1979-1991 -1.0 -2.0 2.9

Average annual per-capita GDP growth rates

The payoffs: (2) The democracy dividend

-10

-5

0

5

10

mea

n po

lity

inde

x

1960

1965

1970

1975

1980

1985

1990

1995

2000

2005

2010

2015

year

MENA High income countries Other developing countries

MENA is the least democratic region in the world

Source: Mean Polity index (1960-2015)

The payoffs: (2) The democracy dividend (cont’d)

-4-3-2-10123456789

Gro

wth

pro

ject

ion

(%)

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020Year

Counterfactual growth pathGrowth path with a permanent transition to democracyGrowth path with a permanent transition to an improved economic rights

Simulated growth effects of a permanent transition to democracy or economic rights

Source: Kraay and Kindriebeogo (2015)

The payoffs: (3) Alignment between economic growth and life satisfaction

5 6 7 8 9 10 11 123

3.5

4

4.5

5

5.5

6

6.5

7

7.5

8

4.3198566 4.2060916

5.3774806

ARE

6.2755278

4.3989497

7.35152277.2620213

4.5372543

3.6775597

6.985035

3.66713953.941987

4.9978703

3.9122764

BHR

4.8159957

5.517235.7223925

6.8429857

4.5009335

3.5678925

7.54132397.5245206

6.2897902

4.6542875

4.1971815

4.5302475

3.8197922

6.2826173

3.6440487

7.246895

6.53553216.2496178

6.5954895

DJI

7.8084628

5.0039079

DZA

5.7185737

EGY

6.5578546

5.2944418

7.5320721

6.69743946.9741761

4.0238521

4.5905699

5.939169

6.3853743

5.3928404

5.7729325.518877

3.8058874

4.8096979

5.2529755

4.8874383

7.339747

IRNIRQ

6.8882842

7.3244114

6.4892547

JOR

5.9267633

5.5927626

4.1336606

4.934357

4.2389185

5.71641555.5264211

6.6919105

5.044099 LBN

4.2087007

LBY

4.2056968

5.2920001

7.0508527

4.90669MAR

5.5489595

4.6400789

6.8647059

4.3046233

3.9511867

5.9599782

5.1265905

4.53963654.6535832 4.561386

5.1482395

5.5895283

4.2010991

4.8925419

5.3805242

7.56644477.6322876

4.5695928

7.3022673

5.0022452

7.0952146

5.4206067

4.8039147

5.8479214

5.3020577

5.6621651

QAT

5.13851775.3874204

4.195772

SAU

4.44108184.4633568

6.5075245

3.5649187

6.2583358

4.4205556

5.9977307

7.4262314

SYR

4.0049282

5.7726056

4.6751947

6.56771336.6964439

TUN 5.2741429

3.6692758

4.457829

5.1330815

6.004774

7.2007158

5.2222955

6.9726809

5.3610401

WBGYEM

5.0720735

3.9838486

4.994297

3.9705735

Log GDP per Capita (2005 US dollars)

Average Life Evaluation

Average income and subjective wellbeing by country (2008-2011)

Source: Arampatzi et al. (2015) based on World Bank data and World Database of Happiness

The payoffs: (3) Alignment between economic growth and life satisfaction

-3 -1 1 3 5 7 9 11 13 15

-1.5

-1

-0.5

0

0.5

1

1.5

0.70753330.634685

ARE

0.12814190.07850040.1093590.2238245

-0.4087764

0.2340697

0.53957210.3765695

-0.2312896-0.1317266

0.406634

0.20056

-1.186347

0.2322979

0.5728043

0.0922413

0.7031848

0.3831708

0.18858860.1485877

-0.287053

0.1049812

-0.248419-0.3529466

0.8138601

EGY

-0.9645231

-0.2791849-0.2954917

0.0458076

0.4267287

0.071232

-0.1667513

0.3883196

0.1316475

0.4696119

-0.2253324

0.0118426

-0.4688008

0.5103213

-0.3589816

0.11314310.185499

-0.4995456

JOR

-0.4590646

0.0383382

0.24987250.3550119

0.5723276

0.7838468

0.0726952

0.7226039

LBN-0.3677055

-0.8886181

MAR

0.4876653

0.2217307

-0.3133966 -0.2517708

0.2587152

-0.4314352

0.3640644

0.0505299

1.226541

0.0378966

-0.2169195-0.0812577

0.5614755

1.193479

0.8019398

0.27156840.1931209

-0.5325255

1.111092

-0.1394824

0.4210306

SAU

-0.2146932

0.068699

0.505771

1.038982

-0.2890795

0.27129070.1197035

0.30807050.3312704

-0.2324628

0.7716134

-0.4376412

0.4592983

0.2536072 0.2761428

-0.0181775-0.13698

0.3088334

0.0021209WBGYEM

-0.4315582

0.8553011

Average Annual GDP Growth 2005-2010

Change in Life Evaluation 2005-2010

Source: Arampatzi et al. (2015) based on World Bank data and World Database of Happiness

Realizing the payoffs: (1) Recall why countries need a transition• Broken social contract

Latin America & Car-ibbean

Sub-Saharan Africa Europe & Central Asia Middle East & North Africa

MENA Female MENA Youth0

10

20

30

6.27.7

9.611.2

21.0

30.0Unemployment rate (latest available), percent

Realizing the payoffs: (1) Recall why countries need a transition• Broken social contract (cont’d)

0

10

20

30

40

50

60

Source: TIMSS 2011.

Realizing the payoffs: (1) Recall why countries need a transition

• Violence and conflict

Realizing the payoffs: (1) Recall why countries need a transition

• Violence and conflict: Alienation

Realizing the payoffs: (1) Recall why countries need a transition

Violence and conflict: Foreign military interventions

Realizing the payoffs: (2) Designing and managing the transition

• « Transition » countries (Egypt, Tunisia, Morocco, Jordan, Lebanon, Djibouti)

• Post-conflict countries (Iraq, Syria, Libya, Yemen)

• Other oil exporters (GCC, Iran, Algeria)

Realizing the payoffs: (2) Designing and managing the transition• « Transition » countries (Egypt, Tunisia, Morocco, Jordan, Lebanon,

Djibouti)

• New social contract:

• State provides

• Level playing field for businesses

• Accountability in service delivery

• Cash transfers

• Citizens

• Pay market prices for private goods

• Participate actively in economy and services

Decentralization as part of the solution?

MENA excluding UAE

SSA

LAC

EAP

ECA

OECD

0 2 4 6 8 10 12 14 16 18 20

Sub-national expenditures (% of total expenditures)

Realizing the payoffs: (2) Designing and managing the transition

• Post-conflict countries (Iraq, Syria, Libya, Yemen)

• Massive inflow of resources for reconstruction and recovery

<<Beware role of foreign intervention>>

• New social contract, not old

• Decentralization may exacerbate tensions

• Distribute resource revenues directly to citizens

Realizing the payoffs: (2) Designing and managing the transition• Other oil exporters (GCC, Iran, Algeria)

• Suffer from same problems as Arab Spring and conflict countries (youth unemployment, poor quality services, etc.)

• Move to more efficient distribution of oil revenues

• Civil service reform

• Subsidy reform

• Strengthen citizens’ ability to hold government to account

• Taxation

• Transparency