Agglomeration is productive Home market effect: production close to consumers

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2 not to scale

3 Increase in industrial Agglomeration is productive Home market effect: production close to consumers Localization effect: firms share information and inputs Urbanization effect: clusters breed innovation. production by province as a return on industrial investment Tanger- Tetouan Grand Casablanca 100 1,000 10, ,000 Industrial production by province Morocco

4 220% 200% 180% Urban mean per capita consumption as % of rural Capital region mean per capita consumption as % of national 160% 140% 120% 100%

5 %age points 20 rural poverty rate minus urban rate urban improved sanitation rate minus rural rate rural stunting rate minus urban rate

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7 COVERAGE 13 (non-gcc) MENA countries: Algeria Djibouti Egypt Iran Iraq Jordan Libya Lebanon Morocco Syria Tunisia West Bank & Gaza Yemen DATA Sub-national data are scarce. The approach was therefore to illustrate general principles from local examples Sources: published materials and WDR(2009) household survey database.

8 1. LEVEL THE PLAYING FIELD 2. BUILD SPILLOVERS 3. NEW ECONOMIC TARGETING MODEL removing spatial biases in human development and the business environment linking lagging areas to nearby growth poles shifting from ineffective subsidies to facilitating clusterled growth

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10 30% Share of inequality explained by urban-rural disparities 20% Share of Theil index explained by urban-rural disparities 10% 0% Jordan DHS 2002 Jordan NHHS 2002 Djibouti NHHS 2002 Yemen NHHS 1999 Syria NHHS Yemen NHHS 2005 Egypt DHS 2005 Egypt NHHS Morocco NHHS 2001 Morocco NHHS 1999 Morocco DHS 2004 Source: study team, using WDR2009 database of household survey data (NHHS), and DHS wealth indicator (WHO)

11 urban rural slum 10 0 % of malnourished children under five years (children underweight) % of births UNattended by skilled health personnel % of children under 5 years with diarrhoea Average of Egypt, Morocco and Yemen. Source: UN Habitat

12 PovertyRATE (%) 60% Iraq, % Muthanna 40% Sala'addin Babel 30% Basra 20% 10% Kirkuk Baghdad 0% - 200, , , ,000 1,000,000 Number of poor people

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14 Observed rural-urban gap in per capita consumption Gap with standardized hh composition and education of hh head 54% 48% 41% 40% 34% 32% 34% 22% 24% 24% 17% 3% Egypt Djibouti Jordan Morocco Syria Yemen The key features of a lagging area: low education and high dependency ratios. Source: WDR 2009 household survey database

15 120% Decomposing the gap in per capita consumption: Upper and Lower Egypt 100% 80% 60% 40% 20% 0% -20% All households Farming households Dependency ratio Earnings per worker Employment rate Source: World Bank 2009b

16 Algeria Births/1000, 1998 Iran, Total Fertility Rate Source: Sutton, Urban Rural

17 Région Ouargla Région B Boumerdes Qualyubia Région D Oran Région H Ghardaïa Kafr-el-sheikh Gharbiya Région C Blida Région A Alger Beheira Région G Sétif Région F Bordj BA Bani-suef Gaza Strip Port said Amman Cairo Irbid Région E Annaba West Bank Suez Région Tlemcen Al-Zarqa Minya Alexandria Sharkiya Giza Damietta Menoufiya Rabat/Casablanca Tanger/Tétouan Dakahliya Ismailia Fès Settat red=algeria yellow=egypt green=jordan blue=morocco white=west Bank & Gaza Composite index of objective investment climate components Source: World Bank investment climate surveys

18 1. Spatial categorization of spending 2. Formula-based local government transfers. 3. Shifting from commodity subsidies to targeted safety-nets. Iraq: fuel subsidies miss poor places Ninevah Duhouk Erbil Kirkuk Sulaimaniya Poverty Rates (%) <10[ [10-20[ [20-30[ [30-40[ >40 Al-Anbar Baghdad Kerbela An-Najaf Diala Wasit Al-Qadisiya Missan Thi Qar Fuel Subsidy, per capita Kilometers

19 The key problems are user incentives, staff motivation, gender gaps and quality: building more facilities may not be the answer. The key strategies: stimulating household demand, motivating workers, innovating delivery mechanisms. Spatially-targeted conditional cash transfers / insurance Spatially-adapted delivery systems e.g. community health workers Systematizing personnel postings systems Incentives for employees in lagging areas Local recruitment Focus on girls and women teachers GIS and MIS technology to improve spatial efficiency of infrastructure ICT technology to improve teaching and curriculum quality

20 RURAL DEVELOPMENT DEPENDS ON URBANIZATION MENA s labor force overbalanced towards farming. >70% of gap between MENA and Spain in farm labor productivity is due to small farm sizes*. Out-migration needed. Inadequate food demand from urban consumers: downward price trends. SMOOTHING THE PATH FOR CITY GROWTH Decentralization to municipalities. Transparent and simple land markets Public services that try to anticipate settlement patterns, not to lead them. *except Iraq

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22 Agglomeration index, EGY JOR LEB LIB DJI SYR MOR CHINA IRAN ALG TUN 20 YEM log of GNI per capita PPP, current international $, 2000 (Libya 2007)

23 61% of lagging area populations <3h from major city (red & pink) 77% of lagging area populations in areas of >400 persons/km 2 (red & orange)

24 LOW DENSITY % of lagging area population in areas with population density <50/km2 35% 30% TUN MOR 25% 20% YEM ALG 15% 10% 5% SYR IRQ JOR LEB IRN MENA12 LIB 0% WBG EGY 0% 10% 20% 30% 40% 50% 60% 70% DISTANCE % of lagging area population > 3 hours from a city of 0.5 million

25 LOCAL CONNECTIONS AND PUBLIC TRANSPORTATION 100% Rural Access Index (2004) (% of rural population with access to all-season road) 6% MENA comparators* 80% 5% 4% 60% 3% 40% 2% 20% 1% 0% EAP ECA LAC MNA SA* AFR** 0% Buses as % of fleet * Chile, Pakistan, Romania, Turkey

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27 60% (proj.) 40% Lagging areas share of population 20% 0% Egypt Iraq Iran Jordan Morocco Syria Tunisia -20%

28 Median per capita household consumption as % of national median 160% 150% 140% Greater Tunis 130% 120% 110% Center-East 100% 90% 80% South 70% 60% année

29 LAGGING AREA SUCCESS STORIES Morocco s Tanger region Tunisia s centre-east Hard to predict. Agglomeration theory not always helpful. Others in MENA? Consistent time-series data lacking. LESSONS FROM EXPERIENCE Out with the old Spatial investment subsidies are expensive and do not work. In with the new Education/infrastructure combination is powerful Private sector/central/local government dialogue can facilitate cluster growth.

30 MENA s history. Vertical compartments MENA s future? Joined-up spatial policy: 1. The territorial planning approach 2. Needs-based fiscal allocations 3. Special programs 4. Deconcentration 5. Decentralization

31 Analyze lagging areas Shift from investment subsidies to cluster facilitation Define institutional roles and processes Economic agglomeration is an inevitable part of growth. Spatial disparities are a matter of policy choice. Invest in shortdistance spillover connectivity For social services: adjust incentives and delivery systems Shift from commodity subsidies to targeted transfers