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Opinion: The Time is Right for Social Welfare Reform | ASHARQ AL-AWSAT English Archive 2005 -2017
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A beggar asks for donations in a street in Belgrade, Serbia, Thursday, March 7, 2013. There are fears in Serbia that the troubled Balkan nation’s economic recovery may slow down because of global financial crisis and rising poverty. (AP Photo/Darko Vojinovic)

Ever since their introduction, social safety nets (SSNs) have played a critical role in fighting poverty. They provide government assistance, whether in kind or in the form of cash payments, which can be vital in helping the most vulnerable withstand the effects of sudden shocks, such as a natural disaster or an economic crisis. If well designed, they can also empower citizens to prepare for better livelihoods, with benefits that allow people to stay healthy and ready to seize new opportunities. Equally important, they can work against the cycle of poverty by ensuring all children, regardless of the circumstances of their birth, have a chance to acquire the skills they need to prosper. Without SSNs, poor families who are systematically unable to afford their basic needs are likely to lose hope of ever escaping poverty, malnourished children are likely to grow up as poor adults, and, in the face of crises, vulnerable families are likely to face difficult choices between immediate survival and avoiding irreversible damage to their future welfare.

SSNs in the Middle East and North Africa (MENA) have a long and proud tradition, but they could be doing so much more to meet popular aspirations and to confront the many challenges the region faces.

I recently led a group from the World Bank that conducted an extensive review of the performance of SSNs in MENA. We discovered that despite the large amounts of money allocated, on average 6% of GDP, SSNs have a limited impact in helping people climb out of poverty. The region’s spending on safety nets is dominated by universal subsidies, the vast majority of which—4.5% of GDP—goes towards fuel subsidies. While an SSN system based on subsidies ensures affordable access to food and fuel, it is an expensive system that does little to help people develop skills, provides inadequate protection against shocks, and benefits the rich more than the poor. In Jordan, for example, before the November fuel subsidy reform, the richest segment of society captured 50% of all benefits from subsidies to fuel. In addition, non-subsidy safety nets are often small and fragmented with limited coverage. Two thirds of those in the poorest segment of society do not benefit from any SSN program other than universal subsidies.

Inspired by the popular desire for change sweeping the region, we went further. We worked with Gallup to survey MENA citizens to try to figure out exactly what they expected from their country’s SSNs. It turns out that the vast majority hold views very much in line with the experts on how an effective SSN should function. In a representative sample of adults from Egypt, Jordan, Lebanon and Tunisia, eight out of ten believed that the government bears the primary responsibility for caring for the poor. An equally overwhelming majority responded that eligibility for social assistance should be based on levels of poverty rather than on the often-used method of relying on broad social categories such as “widows” or “the disabled,” irrespective of economic means. More than two-thirds in each country, from 68% in Lebanon to 85% in Jordan, insisted that support should come in cash instead of in kind (see the Gallup poll for more details).

Not only are current SSNs expensive , with the rich capturing as much of the benefits as the poor—if not more—they also operate in stark contrast with the majority of public opinion on how and what they should deliver.

There has been past acknowledgement of the problem, but the general view was that there was no program of reform that either the poor or the middle class would be likely to support. Times have clearly changed, and there is now an opportunity to be seized. Historically, periods of transition have led to the transformation of SSNs. This is true of Russia following the collapse of the former Soviet Union, during Nepal’s transition to democracy, the process of decentralization in Indonesia, and regime change in Brazil and Portugal. In each case, new systems were designed to meet the specific goals and aspirations that drove the transitions. The newly designed systems have delivered positives results overall, and continue to do so today.

The reform of SSNs could be a central component of regional efforts to protect and promote citizens’ livelihoods. Moreover, in difficult economic times it is particularly important that public funds are spent where they can have the greatest impact. In this sense, welfare systems could be redesigned to address the region’s ongoing challenges, such as malnutrition, chronic poverty and building up the resilience of the large group of people that hover just above the poverty line. More than a quarter of the poorest children in Egypt and Morocco are severely malnourished. These same children, by the time they are 16 to 18, are more likely to have dropped out of school than be continuing with their education. This is the cycle of poverty which a well-designed and effective SSN can help break.

There is no simple or single formula for reform. It is always a challenge, but we hope our analysis combined with the survey will help launch a debate on the unexploited potential of SSNs. The evidence suggests public opinion is on the side of reform. The goals of renewed social welfare systems—to promote social inclusion and self-reliance—are also clearly in line with popular aspirations. These alignments could be further developed through better information, improved design and increased transparency as a path toward building the necessary consensus to launch and sustain a reform process.

There are positive signs across the region, with several reform efforts underway. In Morocco, for example, a program was implemented in which eligible families with school age children receive cash benefits on the condition that their children stay in school. The program led to a significant reduction of school dropouts. Similar programs, where benefits are linked to enhancing children’s education and health, have been successfully implemented in more than 40 countries around the world. In the West Bank and Gaza, reforms at the administration level have led to more resources reaching the poor and the system proved efficient in delivering increased benefits to the most vulnerable during crises to mitigate the most damaging consequences. With the establishment of a unified registry that clearly identifies the population in need, and an effective payment mechanism to reach them, they have laid the foundation of an effective SSN. There have also been attempts to rebalance financing and priorities within social welfare systems. Countries as diverse as Brazil and Indonesia have accomplished extensive reforms of their subsidy system, and their experience demonstrates the importance of gaining citizen’s trust in the government’s capacity to deliver fair and reliable compensation and having effective SSNs in place for a successful program of change.

Reform is possible. The time to start building the systems and consensus to support change is now. The current transition period offers MENA countries an unprecedented opportunity for enhancing SSNs that should not be missed, as they are a critical policy lever for responding to social and economic demands, as well as meeting ongoing challenges.

The World Bank publication, “Inclusion and Resilience: The Way Forward for Social Safety Nets in the Middle East and North Africa,” is available here.