Middle East and North Africa countries considered in the analysis of this chapter were included because of the availability of sec-toral data on government expenditures. For countries such as Lebanon, Iraq, and the Republic of Yemen, publicly accessible data were not available at a level of disaggregation sufficient to provide a robust analysis and compare with the rest of the region and com-parator countries. We include information on these three countries below.
To the authors’ knowledge, Lebanon does not have a national budget. The team reviewed a list of projects that Lebanon intends to invest in, as reviewed in the World Bank’s assess-ment of the country’s Capital Investassess-ment Plan (Harake and Kostopoulos 2018). Given the limitations of this data, we did not include our analysis of it in the chapter; however, we reflect the distribution of projects based on our spatial classification criteria (table 4D.1).
Another source that could have been used is the lagging regions report produced by the Lebanese Center for Policy Studies, which has data on the actual expenditure, by district, of t he C ou nc i l for D evelopment a nd Reconstruction as of September 2017 (Atallah et al. 2018). However, this expenditure repre-sents a partial picture of the total expenditure executed in Lebanon, and using it would mis-lead the reader.
Data on Iraq and the Republic of Yemen are highly aggregated, so the classification shown in the table 4D.1 should be considered with caution. For the Republic of Yemen, we used data classified by function in the National Budget 2013, which only has a three-digit classification used by the IMF. For Iraq, we used data published in the Citizen Budget 2018, albeit with few functional categories.
No detailed data on expenditures are available for Algeria, Djibouti, Libya, West Bank and Gaza, and the GCC countries.
Notes
1. The Gulf Cooperation Council (GCC) coun-tries are Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates.
2. This score includes the GCC countries, which average a GCI score of 4.75. Excluding the GCC subregion results in an average score of 3.93.
3. The 2017–18 index considers 137 countries, with 66 countries scoring higher than 4.28 and 93 countries higher than 3.93 (Schwab 2017).
4. The Oslo Accords, a set of agreements signed by the government of Israel and the leader-ship of the Palestine Liberation Organization (PLO), were ratified in 1993 (Oslo I) and 1995 (Oslo 2). Under the Accords, the PLO agreed to formally recognize the state of Israel, and Israel in turn allowed for limited self-governance in West Bank and Gaza.
5. “Registered factories” refers to those regis-tered with Egypt’s Industrial Development Authority (IDA).
6. Exceptions are Israel and the Islamic Republic of Iran.
TABLE 4D .1 Estimated shares of public expenditures, by category, in Lebanon, the Republic of Yemen, and iraq Percentage of public expenditure
Policy option Lebanon Yemen, Rep. Iraq
1. Broad-based governance and institutional reforms 2 43 14
2. Basic health, education, and related human capital improvements 12 11 29
3. Provision of basic public services 38 21 20
4. Skill development, worker training, wage subsidies 1 17 2
5. Physical infrastructure for connectivity and to support local production 34 0.4 0
6. Subsidies and other incentives to capital 14 8 22
7. Growth poles, industrial districts, other location subsidies 1 0 1
8. Public sector industrialization and industrial location regulations 0.2 0.03 11 Sources: Harake and Kostopoulos 2018; National Budget 2013, Republic of Yemen; Citizens Budget 2018, Iraqi Ministry of Finance.
7. See, for instance, the “China shock” debate in the United States (Autor, Dorn, and Hanson 2016).
8. For the analysis underlying the following estimates, see Ianchovichina and Ivanic (2014).
9. The only country from the Middle East and North Africa in the IMF database is the United Arab Emirates, but its data are not disaggregated by specific function, mak-ing the spatial classification unmeanmak-ingful.
Moreover, the only Latin America country in the IMF database with disaggregated data is El Salvador, which is not comparable with most Middle East and North Africa countries.
10. Government units include all nonmarket nonprofit institutions that are controlled and mainly financed by the government, including budgetary and extrabudgetary data.
11. General government expenditure includes those performed by the central, state, and local governments, including any social security fund in the administrative organization of the country. Annex 4C includes the spatial classifi-cation of expenditure by each level of govern-ment, including social security funds at the central level. There were no disaggregated data for Austria.
12. Extrabudgetary entities are those with indi-vidual budgets not fully covered by the main (or general) budget (such as road transporta-tion or nonmarket productransporta-tion of health and education services).
13. It is important to highlight that this classifi-cation is subjective and that each of the 69 subcategories may contain more than one of the 8 spatial categories; however, this exer-cise offers a general sense of the degree of spatial distortion introduced by government expenditures. Additional disclaimers, by spatial category, as well as specific percent-ages by country and category are shown in annex 4B.
14. The classification of each of the 69 subcate-gories is listed in annex 4C.
15. The period considered for each country uses the oldest and most recent years available in the IMF database.
16. An important difference between the IMF database and the analysis of the countries in the Middle East and North Africa is that the IMF database excludes public corporations, which are highly relevant to understand the
government’s expenditure in the Middle East and North Africa region. This means that allo-cation of expenses in comparator countries may be underestimating shares in place-based interventions, while the expenses in the Middle East and North Africa will be considering them. It is also crucial to highlight that public corporations in the region are focused not only on place-based policies but also on peo-ple-based policies, diminishing the potential bias toward place-based policies.
17. With the exception of the United Arab Emirates, which is included in GFS but for which there are significant data gaps that ren-der developing an allocation profile unfeasi-ble currently. Although the definition of the expenditure profile of GFS countries using our territorial development spectrum is imperfect, doing so for Middle East and North Africa countries based on national instruments for planning and budgeting is also imperfect. We will make accessible the files within which we assigned line items to territorial intervention categories, and we will engage in consultations in Middle East and North Africa countries to ground-truth the categorizations.
18. The analysis of MENA countries is based on one year of analysis and for the most recent year for which complete data were available.
Patterns observed may be the result of speci-ficities in spending in the given year (or five years in the case of Tunisia).
19. Countries may differ on how to classify spe-cific types of subsidies or expenses.
20. To classify functions of subsidies by spatial dimension, only the four categories men-tioned above are considered. Moreover, within these four categories, only subsidies that accounted for more than 5 percent of the total subsidies by category are included.
21. Although subsidies for primary products and transport were established in the 1990s, the energy subsidy was introduced for the first time in 2003 to promote the competitiveness of the private sector and support the purchasing power of the middle class because of increases in energy prices in the international market.
22. The nine functional categories on on-budget data for Egypt are public services; public safety; economic affairs; environmental pro-tection; housing and social infrastructure;
health; youth, culture, and religion; educa-tion; and social protection.
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