From Vulnerability To Resilience

Editor’s Note

Hisham WALY

Practice Manager
Governance Global Practice / MENA
The World Bank

 

The concept of VUCA — volatility, uncertainty, complexity, and ambiguity— was introduced in the late 1990s after the end of the Cold War. It followed a shift from a world of problems which demanded speed, analysis, and elimination of uncertainty, to a world of dilemmas which demand patience, sense-making, and an engagement in the midst of uncertainty. Volatility (the rate of change), uncertainty (a lack of clarity about the present situation and future outcomes), complexity (a multiplicity of key decision factors), and ambiguity (conflicting interpretations) shape the new “normal” in many parts of the world where attempts to develop elegant, immediate and complete solutions are unrealistic, naïve and even detrimental (1)

Today in the Middle East and North Africa (MENA) region, we are living mostly in a VUCA environment, where we are faced with a diverse and discouraging picture— especially with Iraq, Libya, Syria and Yemen mired in violent conflicts that are devastating people’s lives, infrastructure and national economies. Conflict spillovers are also impacting neighboring countries such as Jordan, Lebanon and Tunisia.  The transition countries of Egypt, Jordan, Morocco and Tunisia are slowly but steadily reforming their economies, albeit in a context of anemic growth, high fiscal deficits, rising youth unemployment and security concerns. Also, low oil prices are dragging down economic growth in oil-exporting countries.  The Gulf Cooperation Council (GCC) countries are expected to lose about US$215 billion or 14 percent of their combined GDP from lower oil prices this year. In addition, the Palestinians are still feeling the impact of the 2014 Gaza war and attendant precarious political and security situation (2).

In addition, the Arab Spring showed that the old social contract, where the state provided jobs, free health care and education, and subsidized food and fuel, in return for limited voice and accountability to citizens is broken. However, developing a new social contract between the state and its citizenry  (vertical process) is challenging in a region where a number of countries have limited social cohesion between different societal groups due to diverse identities (religious, ethnic, or tribal), and with little trust in the state. In this context, a new social covenant where the major groups within a society come together and agree on a new framework for cooperation is crucial (horizontal process).

In the World Bank, we are faced with the challenge of finding ways to operate in this VUCA environment, and to respond in an adaptive and timely manner to help the people and institutions of MENA mitigate, adapt to and recover from exogenous and endogenous shocks and stresses in a manner that reduces chronic vulnerability.  In other words, we are working to enhance resilience and reduce vulnerability. 

The Organization for Economic Co-operation and Development (OECD) defines a resilient state as one that is “capable of absorbing shocks and transforming and channeling radical change or challenges, while maintaining political stability and preventing violence.

Resilient states exhibit the capacity and legitimacy of governing a population and its territory. They can manage and adapt to changing social needs and expectations, shifts in elite and other political agreements, and growing institutional complexity.” (3)

Strengthening resilience thus demands a twin-track approach. On the one hand, it is important to create policies that place resilience center stage (for example, those that are based on an assessment of the risks to which a country is exposed and its relative vulnerability).

On the other hand, the adaptive capacity needs to be reinforced so as to strengthen a state’s inherent ability to take decisions and renew itself in light of changes in its environment ( for example, at the subnational level).  It is important to note that there is a risk that too much emphasis will be placed on the resilience of state institutions while other sources of resilience outside the state will be ignored. (4)

According to a World Bank 2009 Policy Note on The Global Economic Crisis: Assessing Vulnerability with a Poverty Lens, the capacity of governments to cope with the impacts of the crisis on poverty depends on: (i) the fiscal capacity/space to incur an increased fiscal deficit; and (ii) institutional capacity to implement programs aimed at mitigating the poverty impact of the crisis. This includes the country’s institutional abilities to manage the budget process, design and implement policies, provide services, and deliver accountable and transparent government (5).

In this context, the ability of governments to design and implement the right combination of short-, medium- and long-term policy measures is critical, yet complex. On the one hand, it requires specific technical capacities in the institutions and, on the other, it is affected by the overall functioning of country systems (for example, the civil service, public financial management, procurement mechanisms), institutional qualities (performance, adaptability and stability) and governance structures that largely set the rules of the game (6).

Compared to a number of other regions of the world, MENA’s governance indicators tend to have lower scores, particularly in areas such as transparency, government effectiveness, civil liberties, media freedom, participation and social accountability. As a consequence, overall governmental accountability, trust in government institutions, and public sector service delivery are all negatively affected.

Complicating matters, the VUCA environment compounds these difficulties, bringing one crisis after the other. In some instances, this has acted as a trigger for embarking on reforms, whereas in other cases, it has made the design and implementation of programs much more challenging.

Although not unique to MENA countries, most suffer from significant gaps between laws and procedures (de jure) and actual practice and implementation (de facto). Another issue is the low execution rate of investment budgets due to ineffective public investment management systems.

On the corporate governance and financial reporting (CGFR) front, there are serious deficiencies in structure and function of the CGFR framework, as well as a lack of awareness among national policy makers of its importance. For instance, a mere 20 percent of countries maintain independent audit regulators.

In Iraq, the country is currently faced with volatility in oil prices at a time when oil accounts for more than 90 percent of total government revenues. The conflict is also affecting its non-oil economy (for example, in the destruction of infrastructure), and is leading to more spending on security and humanitarian activities. Also, Iraq’s wage bill is very high. At an average of 30 percent of total expenditures or 18 percent of gross domestic product (GDP) during 2005–10, it is the most rapidly growing budget item. In the past, higher oil revenues translated into higher wage bills. However, payroll and human resource practices are weak as a result, and now significant resources are being wasted through inappropriate practices, including “ghost workers” and “double dippers.” A World Bank policy note estimated the potential cost to the government to be as much as US$260 million a year (7).

Having sound public administration systems, including civil service and public financial management systems, can help enhance Iraq’s macroeconomic stability, efficient allocation of resources, service delivery and state-building activities. These measures would help Iraq become more resilient and better equipped in handling future crises.

We realize that operating in a protracted VUCA environment is challenging and draining. To continue the dialogue on this important topic, we just completed our annual Connecting Voices conference “The Exchange” in Tunisia from May 27-28 2015 under the theme: “From Vulnerability to Resilience”. This was an opportunity to engage with members of the executive, legislative, judiciary, media and civil society organizations in the region. Discussions helped us define the best way to refine our vision, enhance our understanding, gain clarity and be more agile in supporting the people and institutions of the MENA region as they seek to rebound from crises. 

At the Exchange conference, we focused on five key areas that we believe constitute the pillars of our future intervention in MENA to enhance resilience:

-          Rule of Law

-          Citizen Engagement

-          State Institutions

-          Service Delivery

-          Jobs and the Private Sector

In our discussions, we reflected on the critical challenges, lessons learned from previous interventions, and successes we can we build on in the future. 

In the Jobs and the Private Sector session, we discussed ways of shielding the private sector policies from privileges, discretion, and unequal treatment through policy instruments and operational entry points.  We reflected on an organizing framework consisting of: (i) policy formulation (for example, transparency, inclusion and consultation in the process of policy design); (ii) policy implementation (that is, delivery systems and compliance); and (iii) corrective measures (for example, access to information and data).

At the Service Delivery session, we discussed how MENA states over the last decade have been unable, in many cases, to provide effective educational systems, efficient healthcare systems, clean drinking water and sanitation, reliable energy, and modern and resilient infrastructure. Moreover, citizens throughout MENA have expressed significant dissatisfaction with service delivery,. Indeed, such socio-economic grievances were the triggers of many of the uprisings in 2011 (8). The participants agreed that helping governments provide these basic services to citizens will be crucial, both for building stronger and more credible institutions and for reaching the most underprivileged populations and regions. This means not only providing greater access for citizens, but also fostering more accountable and efficient governance regarding basic public services (World Bank, 2015b). To this end, several measures were reflected upon: (i) ending the cycle of poor performance; (ii) rebuilding trust in governments; (iii) increasing accountability; (iv) supporting better management of human resources; and (v) promoting citizen feedback (9).

A cross-cutting theme of discussions concerned governance, with the World Bank’s new Governance Global Practice (GGP) leading the agenda. 

Our cover story for this issue is the formation of the GGP in July 1, 2014. The GGP aims to support countries in building open, effective, and accountable institutions for inclusive development. In this context, the GGP takes an inclusive approach to governance issues by concentrating on the fundamental aspects of engagement between public institutions and citizens. This positions the GGP at the heart of the discussion regarding helping the people and institutions of MENA become more resilient. 

In the cover story, we interview Mario Marcel, Senior Director of the GGP. We discuss with him a number of topics from a global and regional perspective, ranging from ways to give governance more weight in the development agenda, to a new generation of governance reforms, to lessons from the Latin America and Caribbean (LAC) region that might be useful to MENA countries. Then we reached out to World Bank senior management from outside the GGP (for example, MENA’s Strategy Director, Country Directors and Practice Managers) to better understand their perspectives on governance — what it is and why it matters. We received responses from around the region and other Global Practices (GPs), reflecting local, regional and international perspectives on the issue. Our staff in the GGP had their say as well.  Five governance staff conversed about the opportunities, challenges and future of the governance agenda in the MENA region. Last but not least, we highlight a recent event attended by 250 MENA governance professionals at which we introduced the GGP. We listened to and learned from our clients about their expectations and received valuable feedback on the mandate, structure and plans for the GGP.

We hope you enjoy this issue of Connecting Voices.

 

Notes:

(1)       Paul Kinsinger and Karen Walch of the Thunderbird School of Global Management.

(2)       MENA Economic Monitor 2015. “Towards a New Social Contract.” The World Bank. By: Shantayanan Devarajan and  Lili Mottaghi. April. 

(3)       OECD. (2011). “State-building in fragile contexts: key terms and concepts.” In Supporting State-building in Situations of Conflict and Fragility: Policy Guidance.

(4)       Resilience: a Trojan horse for a new way of thinking. By: Frauke de Weijer. ECDPM Discussion Paper No. 139. World Bank.

(5)       The World Bank (2009) Policy Note was prepared by Louise Cord, Marijn Verhoeven, Camilla Blomquist and Bob Rijkers, with inputs by Vivek Suri.

(6)       Towards Human Resilience: Sustaining MDG Progress in an Age of Economic Uncertainty. UNDP. September 2011.

(7)       Republic of Iraq, Public Expenditure Review: Toward More Efficient Spending for Better Service Delivery. The World Bank (2014).

(8)       Hessling, L. (2013), “Water and the Arab Uprisings – the Human Right to Water and Sanitation in Post-Transition Egypt”.

(9)       The World Bank (2015a), “Trust, Voice, and Incentives: Learning from Local Success Stories in Service Delivery in the Middle East and North Africa