The COVID-19 Pandemic in the Arab Region: An Opportunity to Reform Social Protection Systems – Social Development Report 4 [EN/AR]

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Executive summary

Prior to the COVID-19 pandemic, social protection systems in the Arab region were weak, fragmented, not inclusive and non-transparent. They were also costly and unsustainable. Underinvestment in these systems and exclusion of vulnerable populations were key challenges. Less than 30 per cent of the population in the Arab region were covered by social protection programmes.

Most social protection systems were funded through Government budgets or external assistance and not through contributions from beneficiaries or employers. The COVID-19 crisis spotlighted the problems of the social contract between people and Governments and presented a historic opportunity to address some of the challenges facing social protection systems. Lessons learned in various countries were identified as useful examples for change, in addition to certain innovations.

The level of spending on COVID-19 in the Arab region varied from one group of countries to another but generally remained lower than global spending. In the Arab region, 3.9 per cent of the gross domestic product (GDP) was spent on COVID-19 compared to a global average of 22.6 per cent. The wealthier member countries of the Gulf Cooperation Council (GCC) spent the most, namely $69.9 billion, compared to $24.78 billion spent by the remaining Arab countries. Sources of spending also differed from one country to the other. In Tunisia and Morocco, the private sector provided funds worth $410 million and $104.5 million, respectively. While most Arab countries reprioritized their national spending or created special funds, conflict-stricken countries relied mainly on humanitarian aid and donor funding.

In addition, spending on COVID-19 went towards different areas, including social assistance (cash transfer, school feeding and others), loan and tax benefits (tax exemption, interest rate waiver and others), social insurance unemployment waiver, sick leave pensions and others), labour markets (wage subsidies, paid leave and work from home), health-related support (free vaccines, testing, heath-care systems, and others), financial policy support (soft loan and credit support, tax exemption and others) and general policy support (creation of funds, digital solutions and others).

In this context, the Arab region, in general, allocated 18 per cent of fiscal support for social protection. Somalia allocated as much as 100 per cent, followed by Lebanon with 96.8 per cent and by Iraq with 95 per cent. Oil-importing countries focused spending on health and targeted social transfers, while oil-exporting countries prioritized temporary tax reductions, extended payment deadlines and increased other spending such as partial salary payments to preserve jobs.

The response to the COVID-19 pandemic in terms of social protection measures demonstrated strong political will with the substantive disbursement of funds to alleviate the needs of vulnerable populations, and social solidarity through the innovative use and creation of solidarity funds. In an unprecedented manner, this effort drew assistance from the private sector and other stakeholders to feed into these governmental social protection programmes.

The Arab region witnessed a policy shift from targeting only the poorest population to also including the “missing middle”, such as informal workers who often did not receive any social protection benefits prior to the pandemic because they were not deemed eligible (for example Egypt, Jordan and Morocco). This shed light on the extent to which this group of workers was neglected pre-COVID-19 and the connected structural challenges.

Arab countries excelled in using innovative technologies for the delivery of social protection programmes, especially cash transfers that were delivered to beneficiaries in just a few days through newly created outlets, e-wallets and digital registration. The unique constraints imposed by COVID-19 inspired innovations in the design and delivery of education, health and social protection, which not only protected access to services under extraordinarily challenging conditions, but also facilitated more inclusive outreach.

In many Arab countries, the pandemic accelerated stronger partnerships and greater collaboration between different stakeholders. This was especially demonstrated, among others, through collaborations between different governmental parties at the national level, the sharing/using of databases of beneficiaries (civil registry, vital statistics, tax and social insurance database) and e-platforms such as Government-to-Government (G2G) sites in Egypt.

However, since most response measures to COVID-19 were temporary, they are less likely to be sustained and will not constitute sufficient incentive (or contribution) to transforming social protection systems in the region into sustainable, life-course systems that are contribution-based, inclusive and equitable. Ideally, these systems should evolve into the universal entitlement of basic services that are provided to all and not tied to contributions alone.

Rather than putting in place new legislation, countries relied on other mechanisms to deliver the spending packages, such as extrabudgetary funds or executive decrees. While these measures promptly facilitated spending on social protection programmes, they undermined accountability mechanisms of fiscal policy decisions in Arab countries.

Transforming traditional systems into life-course systems will require some major reforms including legislative reforms, particularly on taxation, expansion of the contributory base and other sources of funding. This will also require strong political will, which can be reinforced through societal dialogues between the State, the private sector, employees, unemployed non-contributory potential beneficiaries, and other stakeholders.

Reform of social protection systems can build on the level of maturity of the existing system and can benefit from rich global experiences in building social protection systems and from the responses to the COVID-19 pandemic. These experiences include legislation, sustainable sources of funding, technology and innovation, improved targeting, universal entitlement such as universal child allowance or basic income guarantee, and strong and transparent institutions (effective public procurement, open government, anti-corruption measures, and others). These types of universal and permanent programmes can constitute a major step in the right direction towards life-course-based social policy.

A transition period will be required between current and reformed systems that may require solidarity funding to bridge the gap. Meanwhile, contingency planning can help address potential future crises.

Source: UN Economic and Social Commission for Western Asia