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1. Arab LDCs: main developments and trends 2. Governance and instability 3. Socioeconomic structural challenges 4. Aid to Arab LDCs under the IPoA: trends and challenges 5. Emerging crises 6. Conclusion and recommendations

Arab LDCs

Development Challenges and Opportunities

The working age population in Arab countries is characterized by stagnant labour force participation, high unemployment levels and limited sustainable and inclusive employment creation, and even before the COVID-19 pandemic, more than 14 million Arab individuals were jobless. It is expected that the pandemic will compound the issue of employment creation even further, putting additional pressure on policymakers to come up with more effective strategies in the short run and strengthen their structural transformation efforts in the medium and the long run.

Realizing the importance of ensuring more equitable and sustainable employment, the Economic and Social Commission for Western Asia (ESCWA) and the International Labour Organization (ILO) Regional Office for Arab States partnered to examine the underlying reasons behind the endemic failure of Arab economies to create sufficient jobs. This joint study focuses on the limited role of the formal private sector in job creation and highlights labour market deficits in the Arab region. Solidarity among countries of the region is indispensable if they want to recover from the effects of the pandemic, boost economic activity and create sufficient decent job opportunities.

Rola Dashti
Executive Secretary
UN ESCWA


Introduction

Four member States of the United Nations Economic and Social Commission for Western Asia (ESCWA) are classified as LDCs: Mauritania, Somalia, the Sudan and Yemen. The latter three are also plagued by conflict and face chronic challenges in meeting the Istanbul Programme of Action (IPoA) graduation criteria from the LDC category. Attempts by these governments to build sound systems of governance that would make their economies more resilient have been hampered by conflict and external shocks such as the global financial, food and oil price crises, weak human, technological and institutional capacities, limited technology transfer, a lack of domestic resources, inequality, and more recently the socioeconomic effects of the COVID-19 pandemic. These factors together induce a vicious cycle of low productivity and investment and ultimately low levels of human development.

the present report provides an analytical overview of the progress and challenges faced by Arab LDCs, with a focus on the special vulnerabilities these countries are experiencing due to conflict and political instability. This report also builds on the lessons learnt from the IPoA decade to provide key findings and recommendations for the next decade which will be launched in Doha, Qatar in January 2022. The aim is to build back better, avoid pitfalls of the past decade and take advantage of the momentum presented by the implementation decade of the 2030 Agenda.

1. Arab LDCs: main developments and trends

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Political instability and poverty are root causes of Arab LDCs problems.

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Arab LDCs are vulnerable to persistent transnational shocks, conflicts and crises, such as the COVID-19 pandemic, and the potential effects of these shocks on their economies, humanitarian needs and population displacement.

Сhapter one explains the basic criteria for inclusion in the international ‘least developed countries’ category. It outlines the main political developments that have affected the four Arab LDCs, namely Mauritania, Somalia, the Sudan and Yemen. These countries are also vulnerable to persistent transnational shocks, conflicts and crises, such as the COVID-19 pandemic, desert locust infestations, floods and other natural disasters, which have significant implications for their economies, humanitarian needs and population displacement.

Key findings:

● UN classified Somalia, Sudan and Yemen in 1971, and Mauritania in 1985, respectively as LDCs;

● Political instability and poverty are root causes of Arab LDCs problems;

● Arab LDCs are vulnerable to persistent transnational shocks, conflicts and crises, such as the COVID-19 pandemic, and the potential effects of these shocks on their economies, humanitarian needs and population displacement.


This table presents Arab LDCs’ performance against the three indicators that determine countries’ inclusion within and graduation from the LDC category.



2. Governance and instability

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Decades of opaque governance are the main causes for instability in Arab LDCs. Unless addressed, prospects for peace and sustainable development are weak.

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Conflicts have caused massive displacement, leaving these countries with unmanageable burdens of people in desperate need.

Chapter Two on Governance and Instability offers a detailed account of governance and instability aspects in Arab LDCS and analyses the interwinding of internal and external factors of corruption, fragility and forced human mobility. Despite the overall negative scorings of governance performance, each Arab LDCs has nevertheless its own political contexts of unrest and feeble and varying attempts to overcome them. The adjacent role of the international community is highlighted in this chapter and considers its current inadequacy and calls for a more assertive and impactful aid intervention and development support, particularly as transition has been underway and presents a unique opportunity for democratic rule, human development and economic growth, needed for graduation from LDC category in the next decade.

Key findings:

● Decades of opaque governance chiefly induced instability in Arab LDCs. Unless addressed, prospects for peace and sustainable development are weak;

● Conflicts have caused massive displacement, leaving these countries with unmanageable burdens of people in desperate need of humanitarian assistance;

● Problems of weak institutions and governance have been exacerbated by major population displacement, both internally and due to the arrival of refugees from neighboring conflicts. These additional burdens on national financial and administrative resources have left millions as ‘populations of concern’ for international agencies.








The four Arab LDCs have negative scores, indicating weak perceptions of participation in selecting government and freedom of expression, association or media (voice and accountability); high perceptions of political instability or violence (political instability); poor quality of public and civil services as well as government credibility in formulating and implementing policies without political pressures (government effectiveness); the inability to create and enforce policies that promote the development of the private sector (regulatory quality); low confidence in and compliance with the rules of society (rule of law); and use of public power for private gain (control of corruption).

Figure 1 provides details for each of the six indicators and shows clearly that the Arab LDCs have performed badly, with the most prominent shortfall being in political stability which dropped to -2.2 as a result of the civil wars and conflicts mainly in Yemen and the Sudan.




3. Socioeconomic structural challenges

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Consumption-based growth has failed to help develop sustainable productive sectors.

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Inadequate social infrastructure has weakened population resilience and ability to resist disease and develop economic potential.

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Imported development policies have weakened State institutions and failed to bring about equitable social and economic development.

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Worsened poverty has been a consequence of all these issues. Therefore, new approaches are essential to reverse the negative trends.

Chapter Three analyses the process of both economic and social development and growth in these countries, starting with the size and structure of the economy as a whole, its growth rates, the extent of its sustainability and its inclusion, in addition to shedding light on the macroeconomic problems such as unemployment and inflation. It then assesses the strengths and deficiencies of societal development in Arab LDCs, including health, education, social and physical infrastructure and technology needed for sustainable development. The influence of international institutions on development policies and the overall impact of all these aspects on the poverty situation in the countries complete the analysis. The comparative cross-country analysis is a more appropriate method based on assumptions regarding homogeneity and independence.38 The investigation is implemented at two levels: the external level, comparing the Arab LDCs to other LDCs worldwide as a whole; and the internal level, comparing the four Arab countries to each other.

Key findings:

● Consumption-based growth has failed to help develop sustainable productive sectors;

● Inadequate social infrastructure has weakened population resilience and ability to resist disease and develop economic potential;

● Imported development policies have weakened state institutions and failed to bring about equitable social and economic development;

● Worsened poverty has been a consequence of all these issues. Therefore, new approaches are essential to reverse the negative trends.





Unemployment rate in Arab LDCs is double that of non- Arab LDCs, which is a further indicator of the difficult economic and social situation. Despite variation between the Arab LDCs, they are all characterised by rates higher than 9 per cent, as in Mauritania, while it is approximately 13 per cent in both Somalia and Yemen, as seen in figure 10. The highest rate was in the Sudan, with an average of over 16 per cent.

High levels of unemployment and limited productive capacity explain the country’s low rate of employment creation, especially after the secession of South Sudan and recent political strikes. Overall, official unemployment figures for these countries are likely to significantly underestimate reality.










The low social development of the four Arab LDCs is easiest demonstrated by their rankings and scores within the United Nations Development Programme’s Human Development Index ranking and scores.

Arab LDCs score below the international average in all categories. Somalia and Yemen rank among the least secure countries when it comes to global health. Somalia’s scores are farthest from the international average in terms of rapid response, the health sector (including healthcare capacity and access), compliance with international norms, and the risk environment (which includes political, security, socioeconomic, environmental, infrastructure and public health related factors). Yemen has low scores in health sector and detection and reporting, but scores highest among Arab LDCs on compliance with international standards. The Sudan’s prevention and rapid response scores are the closest to the average, although it has the lowest detection and reporting score. Mauritania scores closest to the average in detection and reporting, health system and risk environment, whereas it has the lowest score on preventing the emergence or release of pathogens.

Both Somalia and the Sudan succeeded by doubling the access to electricity in the second decade compared to the first one, as seen in figure 13. Despite this, their percentages remain very modest, especially in Somalia, where only a quarter of the population has access to electricity. In contrast, more than 70 per cent of Yemenis were connected to an electricity network, outperforming the LDCs group overall, although in most cases they were not operational. With regards to basic sanitation, although, there has been a gradual increase in access to improved sanitation over the study period, 41 per cent of the LDCs’ population was without “improved” sanitation facilities in 2019, resulting in high levels of environmental contamination and exposure to the risks of infectious diseases. Arab LDCs slightly outperformed the rest of the LDCs group. Nevertheless, the improvement in all countries is minimal and two-thirds of the population of these countries continue to lack access to sanitation facilities, as shown in figure 13. The annual rate of increase needs to double in order to significantly improve conditions, and concerted efforts are also required to narrow the gap in coverage between urban and rural areas.




4. Aid to Arab LDCs under the IPoA: trends and challenges

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The principles of aid effectiveness highlight the complex issues of competing interests between funders, receiving state administrations and the intended beneficiary populations.

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The difficulties in implementing them have resulted in a low level of development and a worsening of the absorptive capacity in the four countries.

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The shift from development to humanitarian assistance presents long-term challenges and risks for the future and should be reversed and replaced by a humanitarian-development-peace strategy.

Сhapter four demonstrates that in Arab LDCs aid flows and donor activities since 2011 had little alignment with the objectives and priorities set out within the IPoA. Conflicts, political instability, natural and man-made disasters, climate shocks, and weak institutional capacity of recipient economies have been the key factors shaping the trajectory of donor operations in these countries. In the context of Arab LDCs’ fragile political and socioeconomic circumstances, the bulk of aid has concentrated in the humanitarian sector, with far less resources allocated to long-term development. This humanitarian focus has both undermined these countries’ potential for structural transformation as envisioned in the IPoA, and weakened their resilience and ability to respond to further crises. As a result, shocks often turn into full blown disasters and catastrophes, with long-lasting implications for economic development and people’s livelihoods.

Key findings:

● The principles of aid effectiveness highlight the complex issues of competing interests between funders, receiving state administrations and the intended beneficiary populations;

● The difficulties in implementing them have resulted in a low level of development and a worsening of the absorptive capacity in the four countries;

● The shift from development to humanitarian assistance presents long-term challenges and risks for the future and should be reversed and replaced by a humanitarian-development-peace strategy.


ODA disbursed to LDCs from 2011 to 2018 gradually increased from $46.6 billion to $58.5 billion. For LDCs to meet their development targets, ODA commitments should be higher. As presented in figure 19, there is a spike in ODA disbursed to Yemen post-2014 from $1.2 billion to $8.1 billion in light of the conflict. ODA disbursed to Somalia has increased from $913 million to $1.6 billion, while ODA disbursed to the Sudan has decreased from $1.7 billion in 2011 to $980 million in 2018. ODA disbursed to Mauritania remained relatively low and slightly increased from $368 million in 2011 to $554 million in 2018.

Somalia, the Sudan and Yemen remain countries with prominent humanitarian needs. Figure 20 shows that the majority of ODA allocated to these countries is humanitarian aid, while aid to social sectors such as education, health and social infrastructure remain low. ODA to Mauritania is more diverse. As economic and productive sectors remain underfunded, shifting away from aid dependence and meeting development targets remains unattainable.

5. Emerging crises

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The need for humanitarian work will remain high but they should be provided within the framework of the humanitarian-development-peace nexus.

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The long-term impact of the COVID-19 crisis must be addressed throughout the decade with capacity-building and financing for all related needs – social, financial and medical.

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Climate-related crises are likely to increase in frequency and severity; mitigation measures must be included in all national planning and in development financing.

Chapter Five on Emerging Crises tackles arising emergencies in Arab LDCs during second decade of the 21st century. Detailed account of main four crises are provided, namely: a) grave and increasing humanitarian emergencies, b) impact of covid-19 on health sector and economy, c)ramifications of climate change on land and people, lastly d)desert locust invasion and its ensuing damages to livelihoods and food security.

Key findings:

● Climate-related crises are likely to increase in frequency and severity. Consequently, mitigation measures must be included in all national planning and development financing in Arab LDCs;

● The COVID-19 pandemic has placed additional pressure on the economies of Arab LDCs, beyond the destructive impact of political instability;

● The long-term impact of the pandemic on LDCs must be addressed with capacity-building and financing for all related needs











To address the long-term impact of the pandemic, additional funding and assistance are essential to help populations emerge from this additional strain on their survival, and to support the reconstruction of their economies and social services, particularly the medical sector. This has implications well beyond the supply of vaccines to all, an element which must be provided for a few years, possibly longer, depending on the duration of effectiveness of the vaccines. It will also be important to include the development of mitigation measures against similar diseases in the future. International aid needs to support health systems while strengthening local capacities’ resilience and ability to provide adequate socioeconomic responses through increased access to international liquidity and debt relief. COVID-19 has highlighted the need for preparedness, early warning and early response and a disaster risk reduction framework at the country level, as well as the need to ensure the resilience and functioning of the whole food system, from production to consumption. The pandemic has also reinforced the need for structural transformation to build resilience, generate employment and establish or strengthen social protection programmes. The pandemic has illustrated gaps in institutional capacities, hence, addressing the long-term impacts of the COVID-19 pandemic must be rooted in capacity-building and financing for all related needs. This will help ensure preparedness for any emerging crisis, not just health-related ones.

Droughts have caused major shortfalls in agricultural production and water availability for all purposes on numerous occasions in the past decade, while devastating floods have also been more intense, more widespread, more frequent and more destructive than in earlier decades. According to the records of the EM Data Bank, they suffered an unusual frequency of floods and droughts in the first two decades of this century .

6. Conclusion

As has been made clear throughout this report, the last decade has been characterised by a worsening of crises and poverty in the four Arab LDCs. While Somalia and the Sudan have been at war for decades, Yemen entered a full-scale civil war after the Houthi coup in 2014, after decades of instability, while Mauritania is the only one of the four where instability has not led to a major conflict, but it is threatened not only by internal political instability, but also by the rise of militant armed actors and other crises in neighbouring states. There are a number of underlying fundamental structural issues which have all contributed to a greater or lesser extent to the current state of affairs; they have been exacerbated by emerging challenges during the decade, all of which need to be addressed.

Sectoral programmes:

A. Governance

● Support peace-making programmes to end conflicts in Somalia, the Sudan and Yemen. Resolving conflict and supporting post-conflict reconstruction would help significantly to achieve development goals and meet the graduation criteria. There is an urgent need to build peaceful, fair and inclusive communities that provide equal access to justice and are based on respect for human dignity (including the right to development), and good governance at all levels through transparent, and accountable institutions;

● De-politicise the aid landscape: at times, donor alignment with parties to the conflict undermines the independence, impartiality and neutrality of their programmes, resulting in low aid effectiveness and volatilities in aid flows;

● Finance short-term emergency humanitarian aid within programmes rapidly transiting to development investments;

●Provide technical and financial support to strengthen representative civilian government. Aid programmes should be conditional on government commitment to implement fundamental reforms towards good governance;

● Building national statistical capacity to allow for meaningful policy formulation and monitoring;

● Support states in developing the most appropriate distribution between centralised and decentralised authorities, to ensure maximum authority at the level closest to intended beneficiaries;

● Support actions which contribute to eliminating corruption;

● Prevent illicit financial inflows from LDCs while taking care to avoid the underlying risks of ill-managed compliance environment that might constrain the activities of many bilateral donors and their implementing agencies;

● Support demobilisation, disarmament and reintegration programmes to enable former militaries to engage in civilian economic activities;

● Funders should fulfil their pledges promptly and provide reliable, long-term support where needed.


●Develop representative internal government structures including accountable good governance practices;

● Strengthen administrative capacity centrally and locally, providing adequate funds at the local level;

● Focus policies on building long-term capacity;

● Take effective action against corruption and capital flight;

● Develop institutional absorptive capacity to better manage inflation and other financial problems.





B. Social development

Social Development is essential to rebuild these countries, create national economies and provide opportunities for the next generations of citizens.

●Commit to ambitious long-term action plans that strengthen national capacities through comprehensive health and education programmes. This will empower fragile states to be better prepared in mitigating shocks such as the COVID-19 pandemic;

●Prioritize these sectors through strong financing, as they will reduce dependence for future generations;

● Deliver promptly on commitments.


● Ensure that high standard medical services are available to the entire population, without any form of discrimination;

●Social development investments should reduce inequality by ensuring that minorities and the vulnerable receive adequate support;

●Develop education infrastructure and programmes which prepare all youth to benefit from the successful economic sectors of the twenty-first century;

● Provide essential social infrastructure enabling the LDC populations to flourish, such as:

- Domestic water (including sanitation) according to the specificity of the source and population density, ensuring human needs are prioritized;

- Telecommunications, including internet access for all.





C. Economic development

Economic development and improved living standards are the fundamentals for societies to flourish and avoid instability and conflict.

Therefore, measures to reverse economic decline are essential to increase stability.

● Deliver on aid commitments promptly;

● No investments worsening climate change should be made;

● Release hard currency capital in overseas capital as needed by each State;

● Cancel LDC debts. As the challenge of indebtedness in the Arab LDCs has deepened, urgent measures need to be taken to reach sustainable debt levels. If cancellation is unfeasible, the debts need to be restructured adding flexibility to address external shocks and natural hazards;

● Ensure access to other sources of finance, including blended finance and investment promotion:

- Additional resources need to be allocated to the rehabilitation and expansion of infrastructure to facilitate supply chains, support trade and economic activity, attract investment and facilitate private sector development;

- Funders should focus on productive investments, supporting national entities and investments improving social resilience and creating employment of nationals.

●Private sector FDI should prioritize investments which create ‘decent work’ jobs. In the case of extractive industries, nationals of the LDCs should be trained and employed to fill positions at all levels. Investment in productive industrial enterprises adding value to local raw materials should be prioritised;

● Facilitate the transfer of remittances to LDCs and the employment of LDC nationals in their states;

● Improve terms of trade for LDC exports, thus eliminating some of the imbalances in their balance of payments;

● Resource mobilization will be among the greatest of challenges. Therefore, development partners and the United Nations and Bretton Woods institutions must link their aid to development programmes with economic and social returns;

● Support infrastructure needs that are in the public interest, such as:

- Electricity at accessible prices, privileging renewable energy;

- Roads, railways and air connections, minimising negative climate side-effects.


● Support rural economies, giving particular attention to smallholder agriculture and livestock, and assist the development of processing industries in these sectors;

●Develop effective policies to confront climate change, particularly in rural areas to prevent unnecessary exodus to the cities, in order to achieve sustainable development;

● Adopt policies aimed to diversifying the economy and increasing the private sector’s participation in the processing of raw materials and manufacturing, emphasizing job creation;

● Manage limited natural resources to maximise long-term sustainability and create maximum benefit for the population;

● Support locally determined development activities, enabling the highest level of decentralization within a long-term sustainability strategy;

● Institute financial and other incentives to encourage local productive investments and facilitate trade.


7. Public life and decision-making

Women’s representation in political decision-making continues to rise, but is far from achieving equality. Women’s share in parliament has more than quadrupled since 2000; however, it is still below 20 per cent in the Arab region. Similarly, the proportion of women ministers does not exceed 20 per cent.

Proportion of seats held by women in national parliaments, latest year (percentage)
Share of women in government ministerial positions, 2019 (percentage)

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Having a bank account is an important starting point for people to access financial services. Women’s economic empowerment is still low given that the Arab region has the highest gender gap in globally in terms of holding a bank account.

Proportion of adults, aged 15 years and older, with an account at a financial institution or mobile-money-service provider (percentage)

Recommendations

● Include quotas for women’s participation in leadership and decision-making positions, and enforce merit-based recruitment and promotion to ensure equal access for women to leadership positions.
● Adopt an integrated and multiple-entry-points approach, mainstream gender and women’s financial inclusion into national policy agendas, and support financial and digital literacy programmes for women and girls.
● Implement women’s entrepreneurship programmes to improve women’s access to finance and economic empowerment.


8. Human rights of women and girls

Violence against women and girls continues to be an issue, and child marriage remains a widely ignored form of violence. Pregnancy and childbirth complications are the leading cause of death among 15 to 19 year-old girls. In all countries, adolescent birth rates were higher among uneducated and poorest girls.

Adolescent birth rate (births per 1,000 women) by education and wealth, latest available data

The harmful practice of FGM impacts women and girls’ health and wellbeing, and can result in death. FGM remains a significant problem in some countries, with the poorest girls and those living in rural areas at higher risk.

Proportion of women and girls who have undergone female genital mutilation by wealth quintile, latest available data (percentage)

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Recommendations

● Enact, implement and monitor legislation addressing all forms of violence against women, including child marriage and female genital mutilation.
● Institutionalize gender-sensitive planning and budgeting to ensure adequate allocation of resources.
● Establish human-rights based standards and procedures for the provision of services to survivors of violence.


Lack of access to basic and improved water and sanitation services remains a challenge in many Arab countries, especially for poor households and those living in rural areas. Women and girls’ death attributed to unsafe water, unsafe sanitation and lack of hygiene is higher than men’s.

Population living in households using an improved water source by location and wealth, latest year (percentage)

Many still do not have full access to clean fuels and technology, and only a handful of countries have full access to electricity. The burden of not having access to those services falls more on women, because they are mostly responsible for cooking and domestic chores.

Gap between rural and urban areas of population with access to electricity, 2017 (percentage)

Recommendations

● Incorporate water, sanitation, clean fuels and electricity programmes explicitly in national development strategies, and ensure that a gender perspective is mainstreamed in them.
● Prioritize clean-cooking fuels and technologies.


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