National poverty targeting and employment programs

From the bottom

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The conquest of poverty is a core target of the World Bank. Even as it often is viewed—or maligned—as an instrument of capitalism and capitalist interests, the World Bank’s focus on poverty alleviation and on achieving the United Nations’ sustainable development goals means that the multilateral institution has a strong role to play wherever countries struggle with poverty. In Lebanon, efforts to overcome poverty are hampered already by a dearth of information regarding how much poverty actually exists, when measuring deprivation along two lines of extreme and upper poverty—which, for Lebanon, were defined respectively as living on less than $2.4 a day, and having a budget of $4 a day. The World Bank is engaged in a number of programs in Lebanon that are aimed at improving the fortunes of the poor and the poorest of the poor.

The issue of poverty in Lebanon is not extraordinarily grim, in the sense that the country on the whole is in the upper-middle-income bracket, but Lebanon, unlike many other countries, has not embarked on a poverty alleviation program based on systematic surveys on poverty and household incomes and expenditures. Such surveys, which Lebanon appears to shun for reasons of political interest groups and denial of some demographic realities, function as a base upon which a targeted strategy—including such elements as health education, social safety nets and social protection, as well as job creation and employment—can be designed and rolled out.

“It is no secret that Lebanon does not have a poverty alleviation strategy at large that is agreed upon by the government as is done in other countries,” says Haneen Sayed, World Bank program leader for human development, poverty, jobs, gender, and fragility in a region comprising Jordan, Lebanon, Iran, Iraq, and Syria. While Lebanon has not made efforts to collect concise population data and design such a strategy, Sayed notes that over the past 10 years there has been increased support for the poor. She cites the development of a National Poverty Targeting Program (NPTP), which was first announced in October 2011.

The extent of poverty

Sayed tells Executive that the available data on poverty in Lebanon can provide a certain sense of the extent and severity of the poverty that exists in the country, but that past initiatives to survey poverty—in 1997, and again in 2004 under a joint project of the United Nations Development Programme (UNDP) and the Central Administration for Statistics (CAS), and then in 2011/12 by the World Bank and CAS—cannot be compared due to the different methodologies employed.

Based on what one can derive from these and other non-comparable surveys conducted by international charities and aid organizations, Sayed explains that there appears to have been a shift in the geographic distribution of poverty across Lebanese regions, and specifically a reversal of situations in north and south Lebanon. “Although this is not from specific analysis and assessment but only a quick look at data, what happened is that probably a lot of private money went into the south, in the form of remittances that were much higher than [the remittances] that reached the north. One characteristic of poverty in Lebanon is, therefore, that today it has main areas of concentration in Akkar and the Bekaa, with significant pockets of poverty elsewhere, such as in Mount Lebanon,” she says. “Another characteristic is that poverty would have increased since the Syrian crisis as we have documented through projections, not surveys. This increase is due not just to the influx of refugees, but due to the impact of the crisis at large, on trade, [foreign direct investments], and general security in the country,” she says.

According to Sayed, the shifting geographies and increasing intensities of poverty are coalescing factors that make all the more pertinent current efforts at poverty alleviation—including, but not limited to, Lebanon’s NPTP, the pilot phase of which has been completed and the scaling up of which has been indicated by the government in Beirut. What differentiates the NPTP according to Sayed—other than it being the only real poverty alleviation program pursued by the Lebanese state—is its method, which does not stipulate geographic location or membership in certain predefined social groups (e.g. being a widow) as a qualifier. “The main feature of [the NPTP] is that it uses poverty as the only criteria for eligibility, based on a method called proxy means testing [PMT] that assesses household by household. Under the NPTP, households below the extreme poverty line are eligible for assistance, and it is a big achievement for Lebanon to have adopted this methodology and developed a database on this basis,” says Sayed.   

In a broad view of existing measures that provide the Lebanese poor with benefits, Sayed highlights the essentially free provision of primary and secondary education and the financing of medical services under the Ministry of Public Health’s budget. She emphasizes that deficiencies exist in the areas of redistributive taxation, pensions, and employment; World Bank studies indicate that the Lebanese economy does not create many highly productive jobs but rather low-scale and seasonal jobs.

“There are many reasons why poverty in Lebanon is the way it is, having to do on one level with the structure of the economy, and on another level with the structure of social policies that the government has or has not adopted over the years,” Sayed says. “On the structural side of the economy, the correlation between employment and poverty is strong. The story about the Lebanese economy is in this regard that the loss of a breadwinner’s job can cause a whole household to fall into poverty. Here, social protection and safety nets as measures to fill in gaps become part of the story. The NPTP is part of this story, but another part that is not solved is pensions.” She adds that the pensions issue is presently—not for the first time—on Parliament’s agenda.

Alleviating poverty

Once the NPTP advances from the pilot phase of implementation into being fully active, the program, in Sayed’s opinion, has the potential to contribute to the economic mobility of poor residents of Lebanon, meaning mainly Lebanese, but also, to a lesser extent, Syrian refugees. When fully functioning, the program will include a humanitarian asset transfer to eligible recipients in the form of $27 in cash/cash equivalent per household member per month. Beyond this assistance in the form of cash or e-vouchers, the poverty alleviation project will entail an employment graduation plan or, in official speak, a program for “Creating Economic Opportunities in Support of the Lebanon National Jobs Program.”

The latter program was approved by the bank’s board of directors on June 27 and allocated $400 million, which, according to a World Bank statement, comprises a $70 million grant and a $330 million soft loan. The latter carries an interest rate of 1.71 percent and is to be repaid over 22 years, inclusive of a six-year grace period. The $400 million package is moreover aligned with the CEDRE strategy, which the Lebanese government presented last April in Paris to the international community. As such, the loan deal would be implemented under the CEDRE umbrella and according to its disbursement mechanisms, meaning payouts of any loan funding would, according to the World Bank, be contingent upon the Lebanese state’s “achievement of a set of targeted results established in consultation with the government.”

Going into further details of the Creating Economic Opportunities program, Zeina Khoury, a private sector specialist at the World Bank, tells Executive that the program uses a novel integrated approach in order to tackle job creation challenges on both the supply side and the demand side. “Other programs used to target one side. The new program engulfs three components and areas where it seeks to bring results: the first is policy related, the second is focused on investments, and the third on the supply side, such as skill development,” she says.

Khoury notes that the program was designed in collaboration with nine Lebanese ministries. Its policy component will focus on the facilitation of legal frameworks such as the public-private partnership (PPP) law, which still requires implementation decrees to be adopted. It will also entail a credit infrastructure package and a trade facilitation package, in the context of the policy support component.

On the investments side, it will include elements in support of women, youth, and lagging regions, such as support for Ogero—and also newly licensed IT organizations—in rolling out fiber-based communications infrastructures. In Tripoli, it will help in the development of the Tripoli Special Economic Zone and in finding a private operator for it.

Job creation

Then there is a value chains program, in collaboration with the Ministry of Economy and Trade (MoET), with plans to identify four promising value chains in different sectors and establish a value chains committee with public and private sector stakeholders. Selected value chains will then be correlated with a fund for matching grants. This fund will be designed to co-finance firms in the targeted value chains for up to 50 percent on a grant basis, and will be overseen by the MoET and loan guarantee institution Kafalat. A corresponding skill building and training program will be implemented in cooperation with the Ministry of Labor that will also entail a wage subsidy component for new entrants to the labor market, and will include provisions for the establishment of an entrepreneurship fund.   

The Creating Economic Opportunities program, once in full swing, is clearly designed to impact Lebanon across many sectors of economic importance, and to help the poor in the realms of self-employment and employment. On top of that, its design offers a glimpse into what working on a World Bank “program for results” under the CEDRE umbrella will mean in practical terms for Lebanon. “Under a program for results, we give money only when disbursement-linked indicators (DLIs) are achieved,” Khoury explains. “We agree with the government of Lebanon on specific results that are jointly designed by the bank and the government. Each of these is priced, so, for example, in the case of PPP, where we want to support PPP implementation, we said that whenever an implementation decree is adopted, we will disburse an amount of money, and once you have completed five feasibility studies under the PPP, we [will] pay you another chunk. Once there are two projects signed with the private sector, as PPP, there will be a payment. There are a list of DLIs, and we will pay upon those. This is how the whole program is designed.”

Khoury says that the World Bank’s original projections for the jobs program predict that, over the course of 15 years, some 52,000 jobs will be created for Lebanese job seekers and new graduates. These estimates were made at a time before the Syrian crisis had fully unfolded and are double the number of jobs that were expected to be created organically in Lebanon. Khoury concedes that while this would help in alleviating the jobs gap in a country with high annual numbers of new job seekers—23,000 had been estimated—it would not be near enough to solve Lebanon’s current job creation problem.

According to her, the target of the jobs program is still to create 52,000 jobs for Lebanese, but intended beneficiaries today include some 3,000 Syrian refugees who are to receive training but no job placement support or wage subsidies. Their work participation is envisioned only in sectors in which Syrians are allowed to work in Lebanon and is expected to reach 225,000 labor days, equivalent to 987 temporary jobs, she says.

Another crucial detail yet to be worked out in the implementation of the jobs creation program is its formal adoption by cabinet and Parliament. Sayed and Khoury say that the implementation of the jobs program on the ground,  alongside the NPTP, is still some time away. Given that approval from the Council of Ministers and Parliament is still required, the expectation in the Beirut World Bank office seems to be that the program could become effective late in 2018 or early next year. But there are also hints that the World Bank might move the allocated $400 million to another program in Lebanon if the Lebanese side—for some reason—ends up not signing.   

So while many signs point to a well-designed and almost affordable program for job creation in Lebanon with far more than just financing engagement by the World Bank, it remains to be seen whether the program will advance Lebanon toward achieving the UN’s sustainable development goal of eradicating poverty, or at least extreme poverty. To this, the World Banks’ Sayad says, “First we have to measure it.”

Thomas Schellen

Thomas Schellen is Executive's editor-at-large. He has been reporting on Middle Eastern business and economy for over 20 years.