Middle East Institute

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Population Challenges and Economic Growth

The following text is a summary of the proceedings of the Middle East Institute/World Bank Fourth Annual Conference. The theme of the conference was Population Challenges and Economic Growth. This event took place on April 14, 1999 in Auditorium AH@ of the World Bank.

Panel I. Socio-Economic Implications of Rapid Population Growth

The participants were Thomas Merrick, senior population adviser for the Population, Human Development Network of the World Bank; David Bloom, deputy director of the Harvard Institute for International Development and professor of population and health economics at Harvard University’s School of Public Health; Tarek Yousef, an economist for the African and Middle Eastern Department at the International Monetary Fund; and May Rihani, senior vice president and director of gender and educational development at the Academy for Educational Development. David Mack, vice president of MEI, served as moderator.

Thomas Merrick

Merrick discussed the current demographic situation in the Middle East and North Africa (MENA) region. He identified five salient features and trends: the diversity of the demographic patterns of the region and the rapidity with which they have changed; the slowing of population growth and the decline of birth rates; the fast-paced change in the age structure of the populations; the geographic distribution of those populations and its implications; and the issue of water scarcity as it relates to population growth in the MENA region.

Merrick pointed out that there exists great diversity among the MENA countries in terms of the sizes of their populations. Whereas some MENA countries such as Iran, Egypt, and Turkey have about 60 million people, others, like Bahrain and Qatar, have very small populations. Similarly, the sizes of the economies of the MENA countries vary widely.

Merrick cited statistics showing that, over the past decade, birth rates have declined. In 1980, population growth rates in the MENA region were generally very high. Most MENA countries had fertility rates of 5 births per woman or more. This is one of the key factors driving labor force growth in the region today. However, in recent years, most of the MENA countries—including Turkey, Iran, Algeria, and Egypt—have experienced very rapid declines in their fertility rates. As a result, overall population growth rates are slowing.

Because of the high birth rates in the past, Merrick stated, there is still substantial growth potential in those populations. Those who were born in the 1980s will soon be of working and reproductive age. In absolute terms, they will have an even larger number of children in the next two-to-three decades. Thus, when formulating social and economic policies, Merrick argues, it will be necessary to pay close attention to the age distribution of the MENA populations.

According to Merrick, population distribution in the MENA region “really matters.” Despite the large geographic expanse of the MENA region, the population is highly concentrated along river valleys and

seacoasts—areas that are already experiencing environmental stress. This has major implications for economic, social and environmental policy.

How to manage physical, as well as human, resources in the coming decades “will determine long-term sustainability outcomes” in the MENA region. Many of the countries of the region already face the problem of water scarcity. In Merrick’s estimation, this problem is growing, and will continue to do so, given the underlying demographic pressure on water use.

David Bloom

Bloom discussed the relationship between rapid population growth and economic growth. According to Bloom, population data suggest promising opportunities for economic growth in the MENA region.

Bloom noted that there is little evidence to support the proposition that rapid population growth leads inexorably to high unemployment, poverty, and greater human misery. Instead, academic research has shown that, after taking the many factors that influence the rate of economic growth into account, there is almost nothing left over that is associated with the overall rate of population growth. Until recently, this finding, which became known as “population neutralism,” was the conventional wisdom. As a result, the international development community ceased to regard population as a potential instrument for promoting economic growth.

According to Bloom, however, recent studies have shown that the “neutralist” view is erroneous. Bloom explained that during a “demographic transition”—a shift from high rates, to low rates, of fertility and mortality—a change occurs in the structure of the population. The size of the youth cohort initially swells, and later contracts, as the demographic transition proceeds. This “bulge” thus progresses through the age distribution of a population. Proponents of "neutralism,” however, by limiting their examination to the overall growth of the population, had failed to account sufficiently for this change.

From the standpoint of economic growth, Bloom argued, the age structure of the population can influence the pace of economic growth. When a large youth cohort reaches working age, the productive capacity of the economy on a per capita basis begins to expand. In addition, those of working age tend to save and invest more than either children or the aged. The injection of savings into the economy, like the infusion of new entrants into the work force, is an important engine of economic growth.

Bloom contended that the combination of demographic change and health improvements is the most influential factor governing the pace of economic growth. From the point of view of the ratio of workers to non-workers, Bloom stated, the future of the MENA appears bright. Labor force growth in the MENA countries could add 1-1.5 percent to their annual economic growth rates. Bloom emphasized that the “demographic gift” merely provides a “window of opportunity” for positive gains in economic growth, and that wise policy choices are needed to capitalize on it. How to absorb the youth cohort into the labor force, Bloom concluded, is one of the most important challenges facing the MENA countries.

Tarek Yousef

Yousef, echoing Bloom’s closing remarks, argued that the "demographic gift” represents the potential for, rather than a guarantee of, positive gains in economic growth. Warning of the dangers of complacency, Yousef stated that demographic changes will not spontaneously generate spectacular rates of economic growth.

Yousef pointed out that demography exerts its influence through changing the age structure of the population. When this happens, there is a large growth in the labor supply and an associated higher accumulation of productive capital. Yet, Yousef emphasized, these are mere channels through which the rate of economic growth might, rather than must, increase. In Yousef’s estimation, capitalizing on the demographic gift will require, above all, a flexible and dynamic work force, and accumulation processes such as financial and stock markets.

According to Yousef, the number of people that Middle Eastern labor markets are expected to absorb in the next 20 years is enormous: about 160 million between the years 2000-2020; and 30 million in the next 5-6 years alone. Nevertheless, he believes that this challenge is surmountable. He identified two specific labor structure problems that require immediate attention: public sector employment practices and labor force segmentation. Yousef cited the case of Kuwait, where 98 percent of the Kuwaiti labor force is employed in the public sector, while 95 percent of the private sector workforce consists of expatriate labor. This is happening at a time when Kuwaiti government is struggling to contain the pressures of absorbing more people.

Yousef pointed out that, in Morocco and Yemen, for example, there are legal regulations and constraints that inhibit fluid movement into and out of public and private enterprises. In a number of Middle Eastern countries, educational systems continue graduate students with skills that cater to the “civil service track,” rather than to the private sector.

What will it take for MENA countries to equip these people, thereby boosting savings and sustaining investment in productive capital? According to Yousef, it will take well developed financial markets, as well as macro and fiscal policies that give priority to the private sector and that ensure contract enforcement within a reliable institutional setting. Yousef cited the case of Egypt in the 1930s, whose “private sector liberal experiment” resulted in impressive growth rates, to demonstrate that this “demographic opportunity” can be exploited.

May Rihani

Rihani highlighted the importance of the linkages between gender, population and economic growth. According to Rihani, the potential of the “demographic gift” will be squandered unless and until governments of the MENA countries recognize the linkages between gender issues on the one hand, and population and economic growth rates on the other.

Rihani stated that population policies (in those Middle Eastern countries which have them) tend to be top-down exercises. These policies emerge when Middle Eastern governments become convinced that economic development is restrained by continuous large demographic growth. The evolution of Egypt’s population policy, for example, “has been guided primarily by a concern that population growth threatens the fiber of the country’s economy.” The underlying rationale of this concern (though not always stated explicitly) has been that population size must be controlled in order to reduce poverty and improve the daily lives of the economically disadvantaged. Rihani acknowledges that poverty reduction is a legitimate concern. However, she argued, until governments recognize the strong impact of gender issues and its linkages to population and economic growth, their policies to combat poverty, enhance the economy and reduce high population growth rates will fail.

According to Rihani, studies reveal that gender issues such as gross enrollment ratios for girls in primary schools have a greater impact on fertility rates and infant mortality than GNP does. Statistics show that female education and fertility rates are closely linked: lower rates of female enrollment in primary school are strongly correlated with higher fertility rates. Rihani cited the case of Yemen, which, in 1998 , had the lowest gross enrollment ratio for girls in primary school (41 percent) among the MENA countries, and the highest fertility rate ( 7.6percent) in the region.

Rihani demonstrated that delay of the minimum age of first marriage and use of contraception are also important factors in reducing population growth. She noted that the onset of marriage has changed significantly in Tunisia and Egypt. In Egypt, for instance, between the early 1970s and the early 1990s the average age of first marriage for women increased from 18.3 to 20.7 years of age. Much of the delay in marriage was attributable to increased girls’ education. Rihani noted, however, that about 20 percent of Egyptian women—largely concentrated in rural areas—still marry below the legal minimum age of 16.

Rihani emphasized that the degree of success of population efforts is "often conditioned by the existence of strategies and interventions that are designed to influence individuals and communities to effect a change in women’s desires and needs for smaller families.” These strategies include girls’ education, child mortality, and women’s economic options. Rihani mentioned that women’s groups in Tunisia and Egypt helped to advance the notion of integrating comprehensive reproductive health services and gender equality within population policies.

Rihani stated that future population policies and programs must be integrated and comprehensive; and that policies to promote economic growth must incorporate elements designed to tackle inequities across gender, as well as racial, ethnic, and regional lines.

Panel II. Population: Issues and Policies

The participants were Jacques Baudouy, manager of the Human resources Division for the Middle East Department of the World Bank; Farzaneh Roudy, population analyst with the Population Reference Bureau; Mohamed Bouzidi, senior adviser to the International Planned Parenthood federation (IPPF) and a member of the IPPF senior management team; and Ismail Sirageldin, professor of population dynamics, international health and economics at Johns Hopkins University and visiting professor of international economics at Johns Hopkins University, SAIS. Elaine Ruth Wolfensohn, vice president of the Board of American Friends of the Israel Philharmonic and a person who has been active in the field of education and the arts for over 30 years, served as moderator.

Jacques Baudouy

Baudouy discussed the World Bank’s objectives, approach, and efforts to address the adverse impact of population growth on the poor in the MENA region. He stated that the World Bank is committed to advise and support the MENA governments to develop country-specific policies, albeit within the scope of the Bank’s mandate and the limits of its resources.

Traditionally, population policies and programs were quantitatively oriented, and focused on numerical targets. Gradually, however, and especially since the World Population Conference in Cairo in 1994, the thinking on population policy has evolved. Issues related to population are now situated within the broader framework of sustainable development. According to Baudouy, this is reflected in the World Bank’s current “population interventions” in the MENA region.

Baudouy identified four areas in which the Bank can support the efforts of the MENA governments: (1) in coping with the impact of high population growth, especially by improving water management;

(2)in accelerating the demographic transition, particularly through girls’ education and the eradication of non-communicable diseases;

(3)in preparing for the aging of the population, by developing pension systems; and

(4) in enhancing productivity and growth to make use of the large labor force, by attracting investment.

Baudouy stated that the World Bank’s approach is a “comprehensive” one, encompassing a variety of sectors. The Bank’s efforts focus on improving the efficiency of public spending; feature new policy agendas for health and education; give priority to gender and children’s issues; and emphasize the strengthening of partnerships with the European Union, UNICEF, and other international institutions.

Baudouy described the two major tools that the World Bank utilizes :policy dialogue and lending instruments. The former includes regional and country sector strategies; technical assistance; and data and knowledge transfer. The latter consists of funds earmarked for social protection, education, and health-related programs and projects.

Baudouy examined three cases of “successful” population policies in the MENA region—those of Tunisia, Egypt and Morocco. Baudouy emphasized the striking differences in the approaches taken by these countries. Tunisian authorities imposed a national policy, from the top down. Egypt was assisted greatly by the US Agency for International Development (USAID). Morocco’s population policy was led by non-governmental organizations (NGOs). These examples illustrate that positive results are attainable, and that there is no single formula to produce them.

Further progress, Baudouy concluded, requires leadership and sustained political commitment at the national level, as well as the willingness of national authorities to empower individuals and communities to participate in the development process.

Mohamed Bouzidi

Bouzidi argued that political commitment and population policies do matter. He examined the population policies of the Maghreb countries, noting their common attributes and highlighting the wide divergences between them.

Bouzidi described Tunisia’s population policy as “coherent,” Morocco’s as “timid,” and Algeria’s as “negative.” Bouzidi characterized Tunisia’s approach to population issues as part of a “progressive” gender policy. This began in 1956, when President Bourguiba adopted a family law statute abolishing polygamy and one-sided divorce. At a later stage, abortion was legalized. In 1960, family allowances were limited to four children. Five years later ,Bourguiba annulled the pro-natalist French laws that had been in place since 1920. Tunisia also established ambitious demographic targets, reducing the birthrate from 46 percent in 1996 to 30 percent in 1972.

In the Moroccan case, there was no political consensus in favor of instituting a meaningful population policy. During the first decade after independence, both the Moroccan “right” and “left” opposed population policy, albeit for different reasons, while the bureaucracy was somewhere in between. Morocco’s policy thereafter consisted essentially of “empty political pronouncements and unrealistic targets.”

The Algerian case was altogether different. Algerian authorities rejected the idea of establishing a population policy. In the Bucharest Conference in 1964, Algerian authorities emulated the pre-1966 Chinese “development-first” approach.

Bouzidi assessed the policies of these three countries by examining their contraceptive prevalence rates and fertility rates. Despite their divergent policies, all three countries reached virtually the same contraception and fertility rates. This begs the question: How much of an impact does population policy have, after all? According to Bouzidi, it is plausible that social dynamics, rather than population dynamics, were primarily responsible for these results.

Notwithstanding their many differences, the Maghreb countries face three population-related challenges in common: neglect of the rural areas; lack of management systems and procedures to deal with population issues; and non-existent or inadequate programs dealing with youth sexual and reproductive health practices. Bouzidi also identified key problems related to family planning programs that are specific to each country: cost sharing in Tunisia; contraception distribution in Algeria; and over-reliance on external sources of funding by Morocco.

Farzaneh Roudi

Roudi discussed the evolution of Iran’s population and family planning

policies. She divided the history of these policies into three periods,

highlighting the drastic policy shifts that occurred at each juncture and

Iran’s noteworthy achievements in the past decade.

Under the rule of the Shah, Iran’s population and family planning

policy aimed to reduce fertility and population growth. Iran was

among the first developing countries to establish a family planning

program. The Tehran Declaration in 1967 acknowledged family

planning as a human right and sought to promote it for the social and

economic welfare of families and society.

With the Islamic Revolution in 1979, the family planning program

came under attack for being “pro-Western.” The Shah’s successors

dismantled the family planning program and the structures which

supported it. The Family Planning Law was abolished. In its place,

the Islamic regime instituted a pro-natalist policy. Iran’s leaders

justified this by stating that more Muslims were needed to defend and

export the Revolution. Involvement in the eight-year war with Iraq

reinforced this rationale; until 1989, the regime maintained the

position that Iran’s growing population was a “comparative

advantage.”

Following the war with Iraq, Iranian authorities made national

reconstruction their highest priority. This led to the reinstatement of

Iran’s family planning program. This new version of Iran’s family

planning program encourages 3-4 year spacing of pregnancies,

discourages pregnancy among women less than 18 years of age and

older than 35, and promotes limiting family size to three children.

During the 1990s, Iran’s family planning program has been bolstered

by additional legislation and an effective information campaign.

Endorsement by clerical leaders has provided religious legitimation,

and participation by males has lent further support to the program.

According to Roudy, the fact that family planning services are

integrated into the health care system is an additional reason for the

program’s success.

There are a number of indications that Iran’s family planning

programs are effective. The prevalence of contraception is very high,

compared to other MENA countries. Meanwhile, over the past

decade, fertility rates in Iran have declined sharply. These

encouraging results have been achieved in rural as well as in urban

areas. Moreover, Roudy observed that there is synergy between

these and other development sectors. She noted, for example, that

maternal, as well as infant and child mortality, have declined rapidly in

recent years.

Ismail Sirageldin

Sirageldin discussed the policies required for the Arab countries of

the MENA region to capitalize on the potentials of the present phase

of the demographic transition. Sirageldin argued that an “integrated

population-development policy” offers the best hope for exploiting

the current demographic “window of opportunity.” This approach

would incorporate supply-side and demand-side elements that aim to

“enhance and sustain social welfare.”

On the supply side, Sirageldin argued, it is necessary to devote

attention to both the quantitative and qualitative dimensions of human

resource development (HRD). In short, this means seeking ways to

improve health and education. In the area of education, Sirageldin

noted, almost all studies of educational achievement indicate that the

MENA region lags behind, especially in math and sciences, and

particularly (though not exclusively) at the basic level. The MENA

region is also lagging the area of health. Whereas in recent years there

have been improvements in health status (e.g., in infant and maternal

mortality rates), there are problems with programs’ effectiveness and

efficiency. There is also a wide and increasing variance in health

utilization by educational and socioeconomic status, and by

rural-urban residence. These problems, Sirageldin stated, must be

addressed. So must the problem of “achievement motivation.”

Sirageldin pointed out that decades of socialism, oil-based

subsidization, and protectionism have produced a “culture of

dependency” in the Arab world. The decline of the price of oil and

the opening of global competition have, in Sirageldin’s opinion,

triggered a “motivation adjustment.” Fiscal and social policies should,

he maintained, aim to understand and shape this adjustment.

On the demand side, Sirageldin stated that internal demand for labor

“has not gained enough strength to provide opportunities for the

growing labor supply.” Furthermore, he stated, transparency in

governance and fundamental factors of labor quality have not

improved sufficiently to attract foreign investment in hi-tech industries.

Sirageldin emphasized that internal reforms must be undertaken to

meet the demand-side challenges of the final phase of the

demographic transition.

Sirageldin identified two additional population-related development

challenges: labor mobility and support for the elderly. He noted that

“globalization” increases the demand for labor mobility for the highly

skilled and motivated segments of the work force. Yet, MENA

countries have large and growing unskilled segments of the work

force, with low levels of quality education. To address this, the

MENA countries must accelerate education quality at the basic level

and provide extensive job training. Regarding the elderly, Sirageldin

noted that MENA countries tend to have social security programs

that have non-sustainable benefits. As the result of poor design or

fundamental structural flaws, these programs are likely to face

financial crises just as the aging of the population reaches its peak. In

anticipation of the demands of older age structures, the MENA

countries must make the development of a “viable and sustainable

intergenerational social contract” one of their highest priorities.

The views expressed by the participants do not necessarily

reflect those of the Middle East Institute, which does not take an

institutional position on Middle East issues. This summary was

prepared by MEJ book review editor, Dr. John Calabrese.

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