Democracy is necessary but not enough, says UNDP’s Arab Development Challenges Report

19 Feb 2012


Cairo
– Economic issues, central to the Arab uprisings, trail behind political issues in the post-revolution public discourse between the State, civil society and the International community, asserts the Arab Development challenges Report 2011, discussed today in Cairo in a public meeting which brought together representatives of a wide range of Egyptian political forces, academia and development professionals. The Report warns that if economic challenges (particularly social justice) are not addressed properly, they risk thwarting Arab progress on democratic transitions.

Going beyond numbers, the report examines the interrelationship between the political and socio-economic factors that underlie policy choices and the development results they produce for the ordinary citizen. It observes that the development path followed in the Arab region has not managed to transform the region's natural wealth into sustained improvements in the human condition.

The Report attributes such poor performance to the corrupting influence of rents on the choice of development paths and governance relations. The politics of patronage practiced in the region weakened mutual accountability mechanisms that govern critical State-Citizen relationships. It also rendered powerless checks and balances between the economic and political spheres.

The report builds on analyses contained in the first Development Challenges Report for Arab Countries, produced jointly by UNDP and the League for Arab States and endorsed by the Arab Economic and Social Development Summit in 2009.

Towards a developmental state in the Arab region

In order to respond to the demand for dignity, social justice and freedom that reverberated across Arab streets since late 2010, the Report argues that Arab states need to adopt a “Developmental state” model based on a new social contract of mutual accountability and shed the rentier-based political economy model. This would allow states to become more responsive and accountable to citizens, and allow citizens to take a more proactive role in societal affairs while breaking the vicious pattern of dependence on the state that has been the hallmark of the Arab social contract.

“This Report could not have come at a more suitable time, when the region is passing through a critical historical juncture,” said Paolo Lembo, Officer-in-Charge of UNDP’s Regional Centre for Arab States. “It goes beyond insightful analysis of social, economic and political exclusion to make specific and practical remedial policy recommendations that can contribute meaningfully to debates—currently thriving in many Arab countries— on how to define the future.”

Major development challenges requiring urgent Arab attentionExclusionary processes persistently stifling Arab development: The report identifies a number of exclusionary processes that have led the Arab region down a path of unequal development, including:

  • non-performing and unaccountable public services;
  • control of markets by politically well-connected businesses;
  • increasing concentration of assets, including prime agricultural land in the hands of elites and disenfranchisement of traditional group rights of use;
  • neglect of interior regions;
  • exclusion of particular population groups from social and economic benefits; and
  • lack of access to economic opportunities by the poor

Underpinning all of the above is the exclusion of ordinary citizens from political processes and denying them necessary means to hold the State accountable. Together, these exclusionary processes continue to constitute the root causes of development challenges tenaciously persisting in the region.

Rent-based governance relations and unaccountable concentration of power and wealth: The State in most Arab countries maintains control over physical assets through which economic rents can be extracted or political rents exacted. Direct access to financial resources that flow from such assets has freed the State from dependence on taxation to sustain itself. As a result, a social contract notable for lack of mutual accountability between the State and citizens has been in operation. Furthermore, the State by and large looked at stability through a security lens. This has led to a situation where the State has no public accountability for its actions, thus paving the way for concentration of power and wealth in an interlocking web of political and economic elites.

Growth failing to reduce poverty or create decent employment: Despite having registered reasonable rates of economic growth over the past 40 years, the dependence of this growth on extractive industries has meant that dividends of growth can only be distributed through intermediation of the State. This growth has actually been accompanied by a process of premature de-industrialization with the contribution of manufacturing to GDP being lower in the Arab region than Sub-Saharan Africa.

Governance failures as noted above have led to a context where human and income poverty (measured in terms of national poverty lines) have remained stubbornly high, especially in rural areas. Sub-national disparities prevail in most Arab countries and are increasing in some. Women remain largely excluded from economic activities with female labour force participation rates half the global average at 26 percent. Unemployment remains very high by global standards; with the rate for youth double the global average at over 20 percent. In addition, most of the new jobs created in the region have been in the informal sector with low pay and without social protection.

Unsustainable growth– based on poorly managed natural resources: The growth in the region has come at the expense of an increasingly fragile natural resource base, with most countries in conditions of water scarcity and stress and rising threats from desertification and climate change. Many population groups, notably nomads, have seen their livelihood systems threatened and the increasingly volatile rainfall has subjected rural populations to perpetual threats of destitution. At the same time, the huge potential of the region in solar and wind power has not been utilized.

Seizing the moment: A promising window of opportunity for policy change “The Report sees an opportunity for nurturing constituencies for change in the democratic transitions that have started in the region. The authors made a considerate attempt to suggest realistic and practical policy options that such new constituencies may find useful in formulating reform agendas,” commented Abdallah Dardari, Principal Advisor to the Report. “We wanted a report that could guide policy action—not another intellectual contribution to diagnosing the Arab development condition,” he added.

First and foremost, the Report argues for an end to the politics of patronage and redefining the relationship between the State and its citizens through forging a social contract of mutual accountability with genuine representation and meaningful taxation as twin pillars.
A more pragmatic and developmental role for the State: While there is no reason for the State to get involved in commercial activities, the private sector cannot produce socially optimal outcomes without the state assuming responsibility for the vulnerable, ensuring access and quality of services, and exercising regulatory powers over the market without stifling it.

The Report sees a major role for the State to safeguard against mutually reinforcing processes of social and economic exclusion. This requires providing space for civil society to monitor the performance of the State, participatory and accountable local governance mechanisms, and an independent and effective judiciary.

An inclusive growth process: The Report finds that most Arab countries can increase public expenditures to remove developmental bottlenecks without running unsustainably high levels of budget deficit. Increased incomes resulting from productive economic activities can be facilitated by a supportive policy environment and the provision of needed economic and social infrastructure by the State.

In the medium-term, public expenditures can be increased by redirecting expenditures away from inequitable fuel and inefficient food subsidies that account for a major share of public expenditures in many Arab countries. This change will require a vibrant civil society of professional associations, syndicates, and consumer protection and human rights advocacy organizations to ensure that the state actually delivers on its promises.

Immediate attention to addressing rural neglect and sub-national disparities: The Report underlines the necessity of adopting area-based and local development projects with improved provisions of basic social services in deprived regions. Given that most of the poor live in rural areas, development policies would have to encourage growth of agricultural activities and promote rural development through increased public investment in agricultural research and extension, as well as providing incentives for increased involvement of the private sector in rural areas. Local governance relations that are responsive and accountable to a vibrant rural civil society scene are critical to respond properly to rural poverty.

The immediate adoption of well-targeted and labour intensive public works schemes, encouraging local production through imaginative use of public procurement processes, and public investment in strategic industries in deprived region can help deal with sub-national disparities and a general insufficiency of demand. Again, effective judiciary and social accountability mechanisms are critical for transparent public procurement.

Social protection would need to be extended to the large, existing informal sector through providing incentives for informal enterprises to enlist their employees in national social insurance schemes. The access of informal and small and medium enterprises to public contracts and credit needs to be facilitated to allow them to expand their activities and thereby create additional jobs.

Forward-looking environmental vision: Overuse of limited natural resources, notably fossil fuels and water, should be curbed through a more realistic pricing of both, and diversion of revenues generated in the process to the development of water-saving technologies and the creation of an integrated renewable energy sector building on the region's advantage in solar and wind power.

An inclusive political structure: To keep developmental states socially accountable and make sure that political rhetoric is translated into action, the Report emphasizes the need for an inclusive political structure. Such a structure should provide scope for the exercise of countervailing powers by social constituencies, a professional and critical media, and a separation of powers among the judiciary, the legislative and executive branches.

Regional economic integration: The Report argues that reducing barriers to movement of goods and services, labour and investment will help create a market of 350 million persons, thus allowing specialization amongst Arab countries based on their inherent advantages and allowing the region to build up its productive potential for engaging with the world. The mixture of funds from the richer countries, labour of populous countries, and the natural resources of countries that have better access to water for example can help underpin regional food security without the huge cost currently incurred by many countries wanting to achieve a certain level of food security at the national level.

Contact Information

Noeman AlSayyad, Regional Communications Advisor, UNDP Regional Centre in Cairo,
Tel. (+20) 2-2770 2242 Fax. (+20) 2-2773 6420 E-mail: noeman.alsayyad@undp.org

Khalid Abu-Ismail, Poverty/MDGs and Economic Policy Adviser, UNDP Regional Centre in Cairo,Tel. (+20) 2-2770 2254 Fax. (+20) 2-2773 6420 E-mail: Khalid.Abu-Ismail@undp.org

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Arab Development Challenges Report 2011
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