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In Conversation with the World Bank's Vice-President for MENA - ASHARQ AL-AWSAT English Archive
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 World Bank VP Inger Andersen talks to Asharq Al-Awsat. (Asharq Al-Awsat)

World Bank vice president Inger Andersen. (Asharq Al-Awsat)

London, Asharq Al-Awsat—On her recent trip to London to attend the G8 Deauville Partnership Investment Conference, Ms. Inger Andersen, the vice-president for the Middle East and North Africa at the World Bank, spoke with Asharq Al-Awsat about the economic challenges facing the Middle East.

Ms. Andersen, an eloquent speaker of Arabic, has a great understanding of the Middle East, and a passion for the many countries of the region that she has visited. While the countries for which she is responsible make an expansive list, including the Arab world and Iran, she is currently quite concerned with Syria and the disastrous humanitarian consequences the war there has on its people and on neighboring countries.

Below is an extract of the interview:

Q: If I could first ask you about the G8 Deauville Partnership Investment Conference, which is why you’re in London. What was your assessment of the conference’s outcome, particularly as challenges increase in countries in transition, rather than decrease?

Inger Andersen: First of all, I thought it was really impressive how many people turned up, from the private sector as well as the International Financial Institutions (IFIs). I think we have to give the credit to the government of the UK, the Islamic Federal Bank, and the European Bank for Reconstruction and Development (ERBD) for pulling this one off, because the situation in the region is obviously complex. The people who attended were listening and there was an understanding of the importance of this. And I think there were four messages that probably came out of it.

First, this region will need a massive-scale up to stabilize. A massive scale-up is needed in terms of investment, but the private sector is not going to grow fast, in the sense that if it is very unstable the private sector will hold back. Therefore, the public sector needs to come in and that is where the IFIs come in. We have to be there—and that would then be the second message. The IFIs have to come in with massive investments on service deliveries, so people can see that garbage is being picked up, water is flowing, schools are working, and health clinics are open, as well as a deeper investment in finance. The big infrastructure pieces could take seven to eight years to complete but will drive infrastructure so that when growth picks up, you’re not short of energy, you’re not short of transport, and so your ports will be functioning. Third, we absolutely need to stabilize the governments with respect to interim, fast-dispersing resources and budget support. The Gulf countries have been generous in some cases, and we have provided budget support, but there is a fiscal shortfall which we have to be aware of. However, all of this needs to see something on the government side, and that would be the fourth point. The governments need to make reforms, and some of these reforms are easy to do in the sense that they are low-hanging fruit: establishing the Freedom of Information act, a good NGO law, a greater level of transparency in the government budget. These are things that will generate greater trust between the government and the people. And then there are some things that are harder to do, such as figuring out how to get macroeconomic stability, deal with social safety nets. In order to ensure that you protect the poor, you have to raise prices on subsidies or reduce subsidies, but these things come together so that was really what the conference discussed.

I think that there was an overarching agreement: Budget support and its importance in the short-run, some early winds in terms of investment so people can see that things are happening again, as well as the longer, deeper-term investments. These three issues, coupled with the government reforms, will bring in the private sector. The private sector often feels that there is too much red tape, that they can’t move their money in and out. There are a lot of issues that have been played around with that are difficult in the business environment. And the private sector is looking for an efficient business environment. And so, cleaning up the business environment, simplifying the red tape, the bureaucracy around it, would be critical. These reforms are doable, but will take a concerted effort. At this time, of course, many of the governments are focused on constitution rights and such, but once they get over this, we have always said that once you have had the political revolutions, you have to have the economic revolutions, and these two cannot be sequential. They have to take place in parallel.

Q: You have spoken about the importance of “early winds,” but it’s more than two years since the Arab revolutions, while these countries continue to lurch from one crisis to another, so what can the World Bank point to in terms of achievements?

Correct, and obviously one sees the headlines and this would be what one would see, but in a number of the countries, Egypt included, we have rolled out small- and medium-size enterprise financing very quickly so a micro-entrepreneur can get a small business loan. In addition to this, we approved a project in Egypt that will produce a quarter of a million jobs; however, of course, when you have millions and millions of people looking for opportunities, that is not enough. But it is something that can begin to create confidence but it needs sustained effort. We have also seen growth in Tunisia, Morocco and Jordan, although Jordan has had the influx of refugees that has obviously hampered this. As well, there is still political instability and discussion in Tunisia, for example, about whether will they form a new coalition or not.

At the same time, they’ve tried very hard to move forward on the economic front. Let’s also not forget that they are sitting in a context where the Eurozone crisis is there, where trade is generally down, where tourism is down, not only because of the issues that might be happening in the Middle East and North Africa (MENA) regions, but also because Europeans have less money to travel with simply as a result of the Eurozone crisis.

We did a study where we looked at something like 103 transitions in countries, so when you have a political transition, what happens to the economy? Invariably you see a dip, because investors hold back and so the economy tends to contract. The trick is: How can one keep one’s attention on the political wheel while also ensuring that the economic wheel keeps turning?

Q: Let’s turn to the situation in Syria. How can the Syrian economy deal with the repercussions of the conflict taking place there?

We don’t operate in Syria, so everything I am telling you is from secondary sources. That’s just how it is, because we don’t have people within the country for obvious reasons. However, we do understand—from outside looking in—that, invariably, reserves would have dropped significantly. We don’t know exactly what they were before the war but if we were to estimate, probably they were around USD 18 billion. We would expect and project that they are way down into single digits now. We know that oil production has completely shrunk to next to nothing, which of course was an important element for the economy prior to the conflict. We also know, just from the images coming out of the country and the media, that we are seeing effective deindustrialization due to the destruction. So, as well as the flight of capital and presumably also looting, we can only imagine that the economy will have shrunk significantly. Most estimates—and you can find them in the public domain—say that the Syrian economy probably shrunk by around 4 percent in 2011 and probably around 20–30 percent in 2012. We don’t know what the shrinkage might have been in 2013, and these are all guesstimates, but they indicate that the total decline in GDP over this period would have been massive.

On the human level, at least 3,000 schools have been destroyed, while at least another 2,000 schools are being used for housing and shelter for people who’ve lost their homes. From other reports, we’ve seen that some 32 government hospitals have been destroyed and that around a third of primary health centers have probably gone. We estimate that probably some 20 million now live in poverty; i.e., below the poverty line. One would have to have much more decent analysis to be really firm around this, but knowing what we know and knowing of the intensity of the conflict and where the population centers are, one could estimate that approximately 20 percent of the population are living in poverty. Of course, on top of that, there is the refugee flows. For those who move and lose everything. . .&#160. This is an absolutely devastating experience and only those who have gone through it can imagine its effects on the human, family and community level. As for the host countries, the impact is equally high in economic and social terms. So these are real issues.

Q: Let’s talk about the refugee problem. You have made several visits to Jordan, which is suffering a refugee crisis on top of the economic problems that already existed in the country prior to the Syria crisis. So how can Jordan, and Lebanon also, deal with these issues?

First of all, it is remarkable that Jordan and Lebanon, as well as Turkey, have kept their borders open and have essentially welcomed their Syrian brothers and sisters into their countries in this manner. Had it not been for this, we would have seen something on a humanitarian scale that is unimaginable. And so the generosity of these hosting communities is something to behold. Of course, invariably, when you have family visiting, it’s lovely when they’re there but you also don’t want them to stay forever in your small house or apartment—and so the same goes for the flow of refugees. . .&#160. The point is, this has added burden on the economy.

Jordan, prior to the influx, was hit by the global economic crisis: trade was down; tourism was not as vibrant as it could have been. . .&#160. So the Jordanian economy was really under stress pre-Syria crisis. And now we have this influx of refugees, and I think around 60–70 percent of the refugees do not live in camps. And so, whilst obviously a lot of the focus has been on the camps, and rightly so, most of the people actually live in the communities. They live in these communities and this impacts on normal things like health services, schools, water supplies, garbage, and municipal solid waste. This has a cost on the budget.

When King Abdullah II of Jordan visited Washington and met with President Obama, he also met with President Jim Yong Kim of the World Bank. We moved very fast to mobilize a project for USD 150 million that we prepared in six to seven weeks, approved it, and had it out of the door, precisely to help with the increased pressure on medical imports, medicines, food, flour, and things of this nature. It was becoming hard for the Jordanian government to meet their obligations to their citizens and their guests, so to speak.

In addition to that, the Jordanian government asked us to see if we could work on supporting Jordanian local governments: those that provide the garbage collection, those that provide water supplies, to strengthen their abilities. We have gone out seeking grant financing and we hope at our annual meetings to sign with a number of donors. We hope to be able to come with a significant grant amount to support the Jordanians’ local governments in providing services. That’s important because of the resilience of these communities: to avoid tensions—social tensions between host and guest if you like—and to ensure that the standard of living is not undermined. No one would want to see escalating tension between communities. . .&#160. That is not good for any country.

Q: Lebanon is also suffering from a refugee crisis. Are there any projects specific to Lebanon to help them deal with this?

We received a request late-July from the prime minister to see if we could pull together some sort of an assessment of the impact of Syrian refugees on the economy and on the overall economic wellbeing of the country. The team is writing as we speak, and we have tried to make a very sober, fact-based analysis of the impact of such an inflow of arrivals in a short time-span, in a small country where the population is around 4.2 million Lebanese in total. The UNHCR has said that approximately 710,000 Syrian refugees have registered in Lebanon, and presumably there are large numbers of unregistered refugees as well. When you have a small country such as this, obviously, large numbers will impact you. And so we’ve done this analysis looking at service delivery, water, energy, solid waste, sanitation, schools and health, and so on, but also on the disruption. Lebanon was a port for many in terms of trade access, so there was also revenue from trade, the impact on the trucking industry, as well as tourism. Lebanon also has all of these people being hosted within these communities, so it is harder to ensure that assistance is provided when people are dispersed. But I will say that our friends at the UNHCR and many of the Arab charity organizations, the EU, and others, have really stepped up. But the numbers are large.

There is a meeting in New York, which has been called by the UN and will be chaired by Secretary-General Ban Ki-moon, while World Bank president [Jim Yong] Kim will attend, while the foreign ministers of the P5 countries [the five permanent Security Council members] have also been invited. There will be three elements on the agenda. One element will deal with the security aspects, another element will deal with the political aspects, and the third element will deal with the economic and development aspects. And this is where the assessment that we have prepared with the UN—particularly the UNHCR, United Nations Development Programme (UNDP), UNICEF, and others, as well as the EU and IMF—will be presented. Therefore, we want to try to increase global awareness about the plight of Lebanon and about the plight of refugees and about the importance of securing the long-term sustainability of this situation in Lebanon.

Q: What more can the international community do for Lebanon and Jordan and the other neighboring countries being affected by the Syrian crisis?

From the World Bank’s side, our work will be in providing and trying to create a platform that can provide financial flows. It need not be managed by us by any means, but create a funnel for financial flows to the priority areas that are the most impacted. I asked a young Lebanese person the other day what was most needed, and her answer was very simple: peace. The bigger issue is that this is needed in the long run, and that is the only thing that can end this refugee crisis and allow people to return home safety and re-establish themselves where they came from. In the meantime, however, it has to be about creating resilience at the community level: to ensure that the services will be provided, to ensure that the Lebanese kids can still go to school, that the Syrian kids can still go to school, so that we don’t lose a generation. So it is a band aid, because when you have that amount of people arriving, the solution cannot be other than what the young woman told me: peace.

Q: You were last here in London last May to attend the Friends of Yemen meeting. What is your view of what is happening in Sana’a?

I think we’ve seen really good progress. You may recall that USD 7.9 billion was pledged in the donors’ meeting in 2012. Of this figure, USD 6.7 billion has been committed to projects and programs, so that is quite significant. That’s important because one of the lessons we all learned from a similar exercise in 2006 is getting the signatures, so having 6.7 billion committed is important. A total of USD 2 billion of this has been dispersed. Now the Kingdom of Saudi Arabia has been particularly generous, because they came in with a pledge of USD 3.25 billion, of which USD 1 billion was dispersed immediately. So out of the USD 2 billion that has been dispersed, USD 1 billion is from Saudi Arabia. So there has been markedly good progress on the economic side.

If we looked at the countries that witnessed transition in 2011, Yemen was not on the top of the list of countries most likely to succeed; however, remarkably, Yemen has remained steady despite facing all kinds of challenges, including poverty, geography, separatists, and even piracy. Despite all this, the country is holding together in a national dialogue process that has brought everyone together under the same tent, so to speak. Now the process is not yet over. I understand that it will finish at some point in October, but that process has been important. The UN, the GCC and others have been critical in supporting this process—this is obviously not the work of the World Bank. But really, all the credit goes to the Yemenis for having managed to move this forward. At the same time, it was very clear that this process will need economic development. People need to see a dividend, they need to see that this is all worth it, that this political change brings results, and I think that therefore it is very important that we keep pressure on these resources that have been pledged and committed and dispersed. No-one should let up, no donor should think that enough is now good enough. At the same time, the Yemeni government needs to deal with some of their reforms, and they have done so and continue to do so. They have a program that is reflected in what we call the mutual accountability framework. This will be discussed in New York, in addition to the political and security aspects.