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2014 Cambridge Conference Business & Economics
ISBN : 9780974211428
Poverty Assessment in Low-, Medium- and High-Income Arab Countries
(Yemen, Egypt and Bahrain)
By
Karima Korayem1
1- Introduction:2
The Arab countries differ among themselves in many aspects, economically and socially. Important
differences are the sectors’ structure of the gross domestic product (GDP), per capita income and the
population size. Will those differences affect the type of poverty, its main causes and the policy
measures applied to combat it in the three countries?
The study will start by identifying the type of poverty prevailing in the three countries differentiating
between absolute and relative poverty. The households and individuals who are living in absolute
poverty are those whose income is not enough to buy their basic needs of food , clothes, shelter, etc;
those are living at the poverty line or below. On the other hand, those who are living in relative poverty
are the households and individuals whose income is enough to buy the basic needs, but is lower
significantly than the average income per capita on the country level.
To identify the main causes of poverty in the three countries, we shall, first, discuss those causes on the
theoretical level, then examine which of them exist in each of the three countries, given their economic
differences. Finally, policy measures applied to combat poverty in the three countries will be assessed.
Accordingly, the study will consist of six parts, including the introduction. Part two will discuss the main
economic and social characteristics of the three countries, e.g., population, income per capita, sectors’
contribution to GDP. Part three will include the estimation of poverty and income distribution in the
three countries. Part four will present the macro causes of poverty theoretically and examining their
existence in the three countries. Finally, part five will assess poverty eradication policy measures applied
in those countries.
2- Main Economic Features of the Three Countries (Yemen, Egypt, Bahrain):
One may classify the Arab countries into two groups. One group is the oil producing countries which are
characterized with relatively large extraction sector’s share in GDP and high income per capita. The
second group includes the other Arab countries which are characterized with diversified commodity
1
Professor of Economics, Alazhar University, Cairo, Egypt. Email: [email protected]; & [email protected]
2
This is a modified version of a study written in Arabic.
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sectors (agriculture, manufacturing, etc.) and a lower income per capita as compared to the first group.
Bahrain falls in the first group, while Yemen and Egypt fall in the second group.
The three countries differ among themselves in different aspects, like GDP, population size, income per
capita and the main economic sectors contributing to GDP (Korayem, 1998). Bahrain, which belongs to
t0he first group, had GDP of $ 22945 million in 2010, with population of 1314000 and income per capita
of $ 17464 (Table 1). On the other hand, Yemen and Egypt, which fall in the second group, differ among
themselves with respect to GDP, population size and income per capita. As shown in Table 1, in 2010,
the GDP was $ 218393 million in Egypt and $ 29298 million in Yemen, while population was 78.5 million
and 23.2 million in the two countries respectively. Income per capita was $ 2783 in Egypt and
$ 1265
in Yemen in 2010. Thus, income per capita in Bahrain is about 6 times the income per capita in Egypt
and 14 times the income per capita in Yemen, while income per capita in Egypt is about twice income
per capita in Yemen.
Looking at the commodities sectors’ share3 in GDP, one finds that it is quite close in the three countries;
in 2010, it ranges between a minimum of 45.7% of GDP in Yemen, and a maximum of 49.1% in Egypt,
with Bahrain falling in between with 47.1% (Table 1). However, the share of the extraction sectors,
including oil, in total commodities’ sectors’ differ significantly among the three countries; it ranges
between a minimum of 28% in Egypt and a maximum of 51.2% in Bahrain, with Yemen falling in
between with 41.3% (Table 1). But, despite the oil high price and the relatively high share of the
extraction sectors in total commodity sectors’ share in Yemen as compared to Egypt, the income per
capita is lower in the former as compared to the latter. Comparing the share of the extraction sectors in
GDP in the three countries, it is found that in 2010, this share was 24.1% in Bahrain, 18.9% in Yemen,
and 13.7% in Egypt4. Consequently, the Bahraini economy has the highest income per capita, but the
lowest diversification in economic activities; next comes Egypt after quite a distance in income per
capita; and lastly in order, comes Yemen. Given those differences between Bahrain and the two other
countries, two questions will be raised in this respect. First, does Bahrain suffer from the same type of
poverty prevailing in Egypt and Yemen? Second, is the spread of poverty among the population the
same in the three countries?
3- Type of Poverty in Yemen, Egypt, Bahrain:
Theoretically, there are two types of poverty: absolute and relative poverty. People living in absolute
poverty are those who live at the poverty line or below, which means that their income is just sufficient,
or less, to cover their necessary living requirements of food, shelter, education, etc. of basic needs.
3
The commodity sectors consist of agriculture, fishing and forestry, the extraction industry and manufacturing,
construction, electricity and gas, and water.
4
These ratios have been calculated from Table (1).
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Table (1)
The Economic Features of Yemen, Egypt & Bahrain
Yemen
2009
2010
Egypt
2009
2010
Bahrain
2009
2010
Gross Domestic Product (GDP)
at market prices ($ millions)(1)
28125
29298
188489
218393
19586
22945
Rate of Growth of GDP at Domestic
Currency (constant prices)(2)
3.9
8.0
4.7
5.1
3.1
4.5
Population (in thousands)(3)
22492
23154
76822
78462*
1215
1314*
Rate of Growth of Population
(2009-2010) %
--
2.9
--
2.1
--
8.1
GDP Per Capita ($)(4)
Rate of Growth of GDP Per Capita
At Constant Prices (%)(5)
Percentage of all Commodity Sectors to
GDP (%)(6)
Percentage of the Extraction Industry to
all Commodity Sectors (%) (7)
Percentage of Agriculture and Manufacturing
to all Commodity Sectors (%) (7)
1250
1265
2454
2783
16120
174654
1.0
5.1
2.6
3.0
-5.0
-3.6
45.4
45.7
38.7
49.1
44.3
47.1
43.8
41.3
29.1
28.0
53.0
51.2
41.4
43.2
59.1
60.0
33.8
37.1
* Primary data.
(1) Arab Leagues & Others (2010 & 2011); Appendix 2/2.
(3) Same Source above; Appendix 8/2;
(2) Same Source above (2011); Table 1 .
(4) Same Source above; Table 2.
(5) Calculated from the above as (= rate of growth of GDP at domestic currency (at constant prices) – rate of population growth), assuming that
the population growth rate in 2009 is the same as in 2010.
(6)Commodity sectors consist of agriculture, fishing & forestry, extraction industries, manufacturing, construction, electricity , gas & water.
(7) Calculated from the same source above (Report 2011), Appendix 2/3 & 2/4.
Source: Arab League & Others (2010, 2011).
There are three methods of estimating the poverty line. The first method is estimating the expenditure
on necessary food which provide the individual with the required calories that make him live a healthy
life and the expenditure on necessary non-food items, like shelter, clothes, education, and health. Food
items used in estimating the poverty line consists of those items with the lowest price available, which
reflect the consumption patterns of the low-income people in the country concerned. This is called the
national poverty line. The problem with this poverty line is that the consumption pattern of the lowincome people and the prices of the necessary commodities and services differ from one country to
another and, also, differ in the same country over time. Estimating the food expenditure at the poverty
line, which represents the most important component of basic needs consumption of the poor, depends
on the food items chosen and the prices applied, which can be politically manipulated to get a lower
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poverty line and, hence, a lower poverty level which does not reflect the reality of the size and condition
of the poor. Consequently, the national poverty line does not reflect accurately the poverty levels
between countries, or in the same country over time.
The second method is the international poverty line as defined by the World Bank. It sets the poverty
line as equal to $ 2 or less daily5. According to it, those who are living in poverty are those individuals
who live at $ 2 a day or less. The disadvantage of this poverty line estimate is its dependence on the
exchange rate, with the Purchasing Power Parity (PPP) applied. But its advantage as compared to the
national poverty line is that it is easier to apply in estimating comparative poverty levels in different
countries.
The third method is estimating the level of poverty subjectively. This method is based on assuming that
the lowest three or four deciles are those who live in poverty, without applying any objective criteria to
substantiate the identification of the 30% or 40% of the population as the poor in the society.
The second type of poverty, relative poverty, is defined as those who are living above the absolute
poverty line and, consequently, have their basic needs satisfied. But, on the other hand, the individual’s
income (expenditure) is significantly below the average income (e.g., by half or by 1/3) of the country he
is living in.
Yemen and Egypt suffer from absolute poverty. National and international poverty lines have been
estimated for each of the two countries at different points of time. On the other hand, Bahrain suffers
from relative poverty. A field survey carried out on the Bahraini receiving social insurance from the
government, who represent the Bahraini poor in the society, found that all of them owned consumer
durables, like fridge, stove, washing machine and about 90% of them owe a car; moreover, some of
them have two cars6. These consumer durable goods cannot be owned by those who live in absolute
poverty who just opt to get their basic needs of food, shelter, etc. The result of this survey shows that
Bahrain has relative poverty, and not absolute poverty as in Yemen and Egypt.
To avoid the negative aspects of the absolute poverty measures pointed out above, and to make
objective comparison between the three countries despite the difference in the type of poverty they
have, a suggested methodology will be used, based on the decile distribution estimates in the three
countries, to estimate the relative share of the low-income (expenditure) group of people including the
poor. According to this methodology, an objective indicator based on economic theory will be applied to
differentiate between low-, medium-, and high-income people and an indicator is derived to estimate
the income distribution in each of the three countries.
5
6
This international poverty line estimate was set, first, at $ 1 daily, then raised to $ 2.
See Korayem (2012),
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4- Absolute Poverty, Relative Poverty, and Income Distribution in the three Countries:
4. A- The Methodology Applied7:
The low-, middle- and high-income (expenditure) households group will be estimated by
applying the decile distribution of households’ income (expenditure). The state of income distribution is
measured by applying the income inequality index (III). The development of this index,
methodologically, is based on the equal-distribution concept of income. Income is equally distributed
among the population, if a given percentage of the population receives an equal percentage of national
income; i.e., five percent of the population receives five percent of national income, ten percent of the
population receives ten percent of national income, etc. Accordingly, income is unequally distributed if a
given percentage of the population receives a smaller percentage share of national income, while other
equal percentage of the population receives a greater percentage share of national income. The former
group is the population who fall in the lower-income intervals, while the latter group is those who
belong to the upper-income intervals.
In the decile income-distribution, one may differentiate between three groups: the household
deciles whose shares of national income are less than 10 percent for each decile; the household
deciles whose shares of national income are around 10 percent of national income for each
decile; and those household deciles whose relative shares are greater than 10 percent of national
income for each decile. Hence, in the decile income-distribution, the 10 percent share of national
income is the equal income-distribution share (EIDS), while in the quintile income-distribution
pattern, the EIDS will refer to 20 percent of national income, etc. The EIDS will be used in
identifying the three household groups: the lower-income households, the middle-income
households, and the upper-income households; the first group includes the poor and the last
group includes the rich.
When the income distribution data are not available, the expenditure data in the Households
Expenditure Surveys can be used to identify the low-income households group in the society, since
household’s expenditure and income are closely related. In this case, the equal expenditure-distribution
share (EEDS), instead of the EIDS, will be used to differentiate between the three household groups: the
lower-expenditure (lower-income) households group include all deciles the expenditure share of each is
below the EEDS; the middle-expenditure (middle-income) households group, which consists of all deciles
7
For the development of the methodology ,and its application on Egypt, see Korayem (2002).
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the expenditure share of each is around the EEDS; and the upper-expenditure (upper-income)
households group, which encompasses all deciles the expenditure share of each of them is higher than
the EEDS.
According to this methodology, income distribution is measured by the Income Inequality Index (III), the
value of which falls between zero (in case of perfect income equality), and one (for the extreme case of
income inequality).
The income inequality index (III) is presented as follows:
N
[  ( X - RSi ) ] / 2
III =
i=1
---------------------------
(1)
( 100 - X )
where X = fixed population interval = equal income-distribution share (EIDS)
RSi = relative income share of the ith population interval.
N = number of the population intervals; i.e., N = 5 for the quintile distribution
of the population, N = 10 for the decile distribution, etc.
The Meaning of the III:
N
The numerator: [  ( X - RSi ) ] / 2
i=1
represents the relative share of national income (or expenditure) that is unequally distributed. Since we
are taking the sum of the absolute value of differences from EIDS, it is necessary to divide by 2 in order
to avoid double counting8.
8
This is because we are taking the sum of the absolute values (i.e. disregarding the + & - signs) of the differences
between the decile expenditure shares and the EIDS which fall below the EIDS, and also the absolute values of
the differences between the decile expenditure shares and the EIDS which fall above the EIDS. This entails
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The denominator: (100 - X )
represents the extreme case of inequality in income distribution, when all the national income is
received by one population interval ( X ), i.e., by one quintile, or one decile, etc.
In the extreme case of equality in income distribution, III = 0, since in this case RSi = X for all i,
and hence the numerator in equation (1) is equal to zero. In the extreme case of income inequality, the
general solution of equation (1) will be:
N-1
[  ( Xi - 0 )  + ( X - 100) ] / 2
III = i=1------------------------------------------- = 1
(2)
( 100 - X )
where N = 5 for the quintile distribution of the population; N = 10 for the decile distribution, etc.9
Thus, the value of the income inequality index falls between 0 and 1,
i.e.
0 < III < 1
4. B- Estimating the Three Income (Expenditure) Groups in Yemen, Egypt, and Bahrain:
The estimation of the low-, medium-, and high-income (expenditure) groups in the three countries has
been made by using the Households Budget Survey in Yemen (2006), Egypt (2009), and Bahrain (2002)
as shown in Table (2). Applying the methodology explained above and assuming a range of 2 % around
double counting and, hence, the total of the summation of all those differences should be divided by 2 to rectify
it.
9Applying the general solution (equation 2) to the quintile and decile distribution of the population, we get the
following:
(a) For the quintile distribution: X = 20, N = 5
4
[   ( Xi - 0 )  + ( X - 100 ) ] / 2
III = ---i=1------------------------------------------- = [ ( 4X + 80 ) / 2] / 80 = 80/80 = 1
( 100 - X )
(b) For the decile distribution: X = 10,
N = 10
III = [ ( 9X + 90 ) / 2] / 90 = 90 / 90 = 1
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the EIDS (EEDS) for the middle income (expenditure) group, the three groups are defined as follows,
using the households' expenditure data: the low-income (expenditure) group are those households
whose expenditure for each decile is less than 8 % of total expenditure on the country level; the
medium-income (expenditure group) are the households whose expenditure for each decille ranges
between 8 % - 12 % of total expenditure; the high-income (expenditure) group are the households
whose expenditure for each decile is higher than 12 % of total expenditure. Thus, according to Table (2),
the low-income (expenditure) households represent 50 % of the population in Yemen and Bahrain,
having 26.2% of total expenditure in the former country and 24.2 % in the latter; while this group
represents 40 % of the population in Egypt and have 22.2 % of total expenditure. The middle-income
(expenditure) group represents 30 % of the population in Yemen and Bahrain, having 29.4 % of total
expenditure in the former and 30.3 % in the latter; in Egypt, the middle-income (expenditure) group
represents 40 % of households and have 39.3 % of total expenditure. The high-income (expenditure)
group represents 20 % of households in the three countries and its relative share in total expenditure is
44.5 % in Yemen, 38.4 % in Egypt and 45.9 % in Bahrain.
To estimate the equality in income distribution in the three countries, two indicators are used: The first
indicator is the ratio of the expenditure of the highest household's decile to the lowest decile. The
second indicator is estimating the Income Inequality Index (III) in the three countries. Table (2) is used in
estimating the two indicators.
For the first indicator, the ratio of the households' expenditure of the highest decile to the lowest decile
is 9.7 % in Yemen, 7.4 % in Egypt and 11.5% in Bahrain. For the second indicator, the III is equal to 0.288
in Yemen, 0.232 in Egypt and 0.306 in Bahrain. These two indicators show that the income distribution is
the worse in Bahrain and the best in Egypt, with Yemen falling in the middle. One may conclude that for
the two indicators the income distribution is the worse in the rich country, Bahrain, as compared to the
two relatively poor countries, Yemen and Egypt.
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Table (2)
The Decile Distribution of Households’ Expenditure in
Yemen, Egypt & Bahrain(1)
Households’ Decile
Distribution
First Decile
Yemen
(2006)
3.1
Egypt
(2009)
3.4
Bahrain
(2002)
2.6
Second Decile
Third Decile
Fourth Decile
Fifth Decile
Sixth Decile
Seventh Decile
Eighth Decile
Ninth Decile
Tenth Decile
Income Distribution
(III)(2)
4.4
5.3
6.2
7.2
8.3
9.6
11.5
14.5
30.0
0.288
5.3
6.3
7.2
8.0
9.0
10.3
11.8
13.8
25.1
0.232
4.1
4.8
5.8
6.9
8.6
9.9
11.8
16.1
29.8
0.306
(1) The country order in the Table is according to income per capita (see Table 1).
(2) Calculated using equation (1) in the text.
Source: for Yemen, Korayem (2011);for Bahrain, Korayem (2012); for Egypt, calculated from : CAPMAS (2009),
Table (10.1).
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5- Macro Causes for Poverty in the Three Countries:
Theoretically, poverty is associated with low income per capita and unequal income
distribution. However, with the estimation of poverty level and income distribution in Yemen,
Egypt and Bahrain, it has been found that there is a direct relation between poverty and income
per capita, but opposite relation may exist between poverty and income distribution. As has
been shown above, income distribution is the worse in Bahrain, where no absolute poverty
exists, as compared to Yemen and Egypt that suffer from absolute poverty. This means that the
low income per capita is one of the causes of poverty, but it is not necessarily one of the factors
affecting the equality or inequality of income distribution. Also, in addition to the low income
per capita as one of the causes of poverty, there are other factors which are responsible of
poverty in absolute or relative terms. Thus, we shall try to find out the main causes of poverty
on the theoretical level in general, then we shall examine the relative effectiveness of those
causes in each of the three countries.
5. A- Macro Causes of Poverty on the Theoretical Level10:
One may classify the causes of poverty into direct and indirect causes. The first are those
factors that have direct impact on the average income generated on the national level and,
hence, on poverty. The second are the factors that underlie and affect the direct causes. One
may point out four direct causes: low annual rate of growth of gross national product (GNP) per
capita, low labour productivity, high support burden ratio11, and unequal income distribution.
The assignment of a set of indirect causes to a certain direct cause is somewhat arbitrary, since
some of the indirect causes affect more than one direct cause. For example, a high population
growth rate is identified as one of the indirect causes responsible for the low growth rate of
GNP per capita, while it is responsible also for another direct cause, the high support burden
ratio. Also, there is a correlation between some indirect causes (like unemployment and
inappropriate macroeconomic policies; inadequate access to assets and credits and the unequal
distribution of assets), and some of the direct causes (like low labour productivity and the rate
of growth of GNP per capita). For the sake of clarity Figure 1 presents the links between each of
the direct causes and a set of specified indirect causes chosen as the ones more directly
responsible for the identified direct cause.
The first direct cause of poverty is the low annual rate of growth of GNP (GDP) per capita. A
high GNP rate of growth per capita implies a rise in production, increased generation of income
and, hence, less poverty. Consequently, taking the rate of growth of population into
consideration, the low rate of growth of GNP per capita is one of the direct causes of poverty.
Factors underlying this direct cause are: high population growth rate, inappropriate
macroeconomic policies, and the external factors that affect the availability of resources at the
country level. Main external factors are: deterioration in the terms of trade, debt burden, wars,
and inadequate regional and international co-operation. Given a certain rate of growth of GNP,
10
Korayem, 1998.
Support burden ratio is defined as the number of persons supported by one worker's income on average. This is
estimated as equal to total population / employed labour force on the country level.
11
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the higher the population growth rate, the lower will be the annual rate of growth of GNP per
capita. Inappropriate policies will affect the annual rate of growth of GNP per capita through
their impact on the availability of resources and their inefficient utilization in production. For
example, tight fiscal and monetary policies that reduce investment will decrease production,
employment creation and income generation and, hence, GNP per capita. The external factors
affect, also, the rate of growth of GNP per capita, and hence poverty, through their impact on
the availability of resources in the country concerned. The deteriorating terms of trade and the
debt burden reduce the foreign exchange available to the country, which is needed for the
import of final goods (e.g. food) and intermediate factors of production (like capital and
intermediate goods), which will reduce production and GNP rate of growth. The outbreak of
war in a country, not only destroys physical capital which will have to be replaced later, but also
directs resources toward the purchase of military equipments and away from investment to
raise production and income. Moreover, the negative economic impact of war extends to many
countries directly or indirectly involved in the war. Another external factor is inadequate
regional and international co-operation; it affects the amount of funds available for economic
development and for poverty alleviation.
The second direct cause of poverty is low labour productivity. Neo-classical economic theory stipulates a
proportional relation between labour marginal productivity and wages. However, there are institutional
and structural factors in the contemporary economies that result in wage setting deviating from this
rule12. Nevertheless, productivity cannot be disregarded as one of the important determinants of
labour's income in any country. Higher labour productivity means higher production and higher income
generation. Labour productivity is affected by three factors: access to education, access to health
services, and access to assets and credits. Inadequate access to education and health services reduces
the work capabilities of labour and reduces its productivity. Inadequate access to assets and credits
reduces availability of assets that can co-operate with labour in production and raise its
productivity.
12
For example, the bargaining power of labour unions is effective in raising wages periodically in the developed
countries. Also, it is argued that wages in the government sector in some Arab countries are higher than labour
productivity (e.g. the case of Egypt).
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Figure (1)
Economic Causes of Poverty on the Macro Level
1.A. High
Population
Growth Rate
1.B. Inappropriate
Macroeconomic
Policies
1.C. External Factors:
-Deteriorating Terms of Trade
-Debt Burden
-Wars
-Inadequate Regional and
International Cooperation
-Inadequate Regional and International
Cooperation
4.B.
Inadequate
Net Transfers
to the Poor
2.A.
Inadequate
Access to
Education
Services
1. Low Annual
Rate of Growth of
GNP (GDP) per
Capita
4.A. Unequal
Distribution of
Assets
4.Unequal
Income
Distribution
POVERTY
2. Low Labour
Productivity
3. High Support
Burden Ratio
2.B.
Inadequate
Access to
Health
Services
2.C.
Inadequate
Access to
Assets and
Credits
HIGH
3.C. High
Unemployment
Rate
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3.B. Low Female
Participation in the
Labour Force
3.A. Low Labour
Force Participation
Rate
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The third direct cause of poverty is the support burden ratio which indicates how many
persons are supported by each worker on average. A high support burden ratio in a
country (equals to 3 or 4) means that the income earned by one worker is used to
support three or four persons on average which implies, given a certain wage level, a
lower income per capita as compared to the countries where this ratio is lower. There is
a direct relation between the value of the support burden ratio in a country and the
level of poverty in that country, taking labour productivity as given. The support burden
ratio is affected by three indirect causes of poverty: the labour force participation rate,
the female participation in the labour force, and unemployment. The lower the labour
force participation rate, the higher will be the support burden ratio. Given the
dependency ratio13, the lower the female participation rate in the labour force, the
higher is the support burden ratio. The third underlying cause of the support burden
ratio is unemployment; the higher the unemployment rate, the smaller is the number of
the employed labour force and, hence, the higher is the support burden ratio.
The fourth direct cause of poverty is the unequal distribution of income which is
affected by two indirect causes. One is the unequal distribution of physical and financial
assets among the population, which is aggravated by the inadequate access of the poor
to assets and credits. The second indirect cause is the inadequate net transfers to the
poor to compensate for the skewed income distribution. Net transfers to the poor are
the outcome of the indirect taxes which the poor have to pay on their consumption
expenditures, and the subsidies and transfers they receive (in kind or in cash) from the
government and the civil society (like the NGO's).
5. B-Causes of Poverty in the Three Arab Countries:
Examining the existence of the direct and indirect causes of poverty, one finds that these
13
The dependency ratio is the summation of the very young (less than age 15) and very old (greater than age 65)
divided by total population.
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causes differ significantly in the three countries. Some of these causes apply strongly to one
country or more while others do not apply, given the differences in the type and extent of
poverty among them.
The first direct cause of poverty, the annual rate of growth of income per capita, differ
considerably in the three countries. In 2010, it was 5.1% in Yemen, with the lowest income
per capita ($ 1265), 3.1% in Egypt with income per capita $ 2783 and was negative in
Bahrain (-3.6%) with the highest income per capita among the three countries ($ 174654)
(see Table 1).
Looking at the indirect causes affecting the rate of growth of income per capita (Figure 1),
one finds that in Yemen and Egypt where absolute poverty prevails, the population rate of
growth which affects income per capita and its rate of growth negatively, is 2.9% in the
former and 2.1% in the latter as compared to a significantly high population rate of growth
of 8.1% in Bahrain (Table 1). This shows that a high population growth rate and a low rate of
growth of GDP per capita, even a negative one like in Bahrain, can be tolerated for some
period of time without causing absolute poverty, if income per capita is high enough. On the
other hand, if income per capita is low and absolute poverty prevails, like in Egypt and
Yemen, having high GDP growth rate and low population growth rate should be put as
important national targets, otherwise income per capita will fall and poverty increases.
The second indirect cause, the inappropriate macro-economic policies applied on the
national level, affect the rate of growth of income per capita through its negative impact on
prices, cost of production, employment creation, etc. A good example of that is the
Economic Reform and Structural Adjustment Policies (ERSAP) applied in Egypt in 1991, and
in Yemen in 1995. Those policies have led to an increase in prices and cost of production in
Egypt by the devaluation of the Egyptian pound and raising interest rates. In Yemen, those
policies have led to the removal of food subsidy, which has resulted in increasing prices of
food commodities that have the largest share in the budget of the poor. However, the
positive impact of ERSAP was the reduction in the international debt for Egypt and Yemen.
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But despite that, the final impact on the poor in the two countries was negative (Korayem,
1995/96; and Korayem, 2011).
For the external factors, which are among the indirect causes affecting income per capita
and its rate of growth, one finds that the net barter terms of trade estimated by the World
Bank fell in Bahrain from 124.7 to 114 during 2007 – 2010, while increased in Egypt from
131.3 to 139.3, and in Yemen from 149.4 to 151.2 in the same period14, implying that this
factor did not have a negative impact on the two countries with absolute poverty, while its
fall in Bahrain did not, supposedly, hurt the poor who live in relative poverty, having income
above the poverty line. The other external factor that has negative impact on the country is
the international debt. This factor does not exist in Bahrain, while it is an important factor in
Yemen and Egypt. In the period 2007-2010, the ratio of international debt to GDP fell from
27.5 % to 21.0 % in Yemen, and from 25.7 % to 16.0 % in Egypt. Accordingly, the ratio of
annual international debt service to export of goods and services fell from 3.4 % to 2.8 % in
Yemen and from 8.9 % to 6.0 % in Egypt during the same period, 2007-2010 (League of Arab
States & others, the Economic Report, 2008 (p.167) and 2011 (p. 166)). The other
international factor which had a large negative impact on the Yemen economy is the break
out of the civil war in 1994, which has cost the country $ 11.13 billion, amounting to 3
years of the country GDP during that time (Korayem, Poverty in Yemen, 2011). Finally, the
last international factor which was effective in the three countries is the reduction in the
international and regional cooperation.
Looking at the second direct cause of poverty, the average labour productivity, it is much
higher in Bahrain with relative poverty as compared to Yemen and Egypt; both having
absolute poverty. In 2009, the annual average labour productivity was $ 49297 in Bahrain,
as compared to $ 7435 in Egypt and $ 3678 in Yemen (Table 3). This is attributed mainly to
the capital intensive technique applied in the oil production activity in Bahrain as compared
to Egypt and Yemen with more diversified economic activities, given the relative availability
14
The net barter terms of trade is estimated as the percentage of the export price index to the import price index
in the country under consideration; see: http//data. worldbank.org/indicator.
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of capital and relative scarcity of labour in the former country as compared to the two latter
countries.
For the indirect factors affecting the average labour productivity, Bahrain, as compared to
Egypt and Yemen, is more superior in the education and health services as reflected by the
education and health indicators (Table 3), which have positive impact on labour
productivity. For health indicators, life expectation at birth in 2009 is 76 years in Bahrain as
compared to 70 years in Egypt and 62 years in Yemen. Also, for child deaths before 5 years
of age, the rate is 12.1 child per thousand alive child in Bahrain, as compared to 21 child in
Egypt and 90.2 child in Yemen. Health expenditure differ, also, in the three countries; it
represents 9.8% of total public expenditure in Bahrain with the highest income per capita,
and fell to 7.3% in Egypt and to 5.8% in Yemen with the lowest income per capita. For
education indicators, enrollment in the primary education is close in Bahrain and Egypt,
despite the large difference in income per capita between the two countries; it is 105.3 % in
Bahrain, 104.7 % in Egypt, as compared to 85.4 % in Yemen. In the high school enrollment,
the three countries differ significantly, with a lower level in Yemen, 47.7, as compared to
86.2 in Egypt and 96.8 in Bahrain (Table 3). However, the illiteracy rate for those 15 years
and older is closer in Egypt (33.6%) and Yemen (39.1%) and significantly lower in Bahrain
(9.1%). On the other hand, the ratio of education expenditure to total public expenditures is
the highest in Yemen with the lowest income per capita reaching 17.7%, as compared to
11.9% in Egypt and 11.7% in Bahrain (Table 3).
For the third direct cause of poverty, the support burden ratio, it is 3 in Egypt and 4 in
Yemen and Bahrain15. This means that every worker in Yemen and Bahrain supports on
average 4 persons, while in Egypt, every worker supports on average 3 persons. In the
developed countries, the support burden ratio is 2, indicating that every worker supports on
average 2 persons only, despite the high income earned in those countries. It is worth
noting that the support burden ratio in Bahrain and Yemen is among the highest in the Arab
15
For Egypt (Korayem, Pro- Poor Plicies, 2002); for Yemen (Korayem, 2011); and for Bahrain (Korayem, 2012).
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Table 3
Indicators of the Causes of Poverty in Yemen, Egypt & Bahrain (2009, 2010)
Healtlh & Education Indicators
Yemen
2009
2010
Egypt
2009
2010
Bahrain
2009
2010
62.0
--
70.0
--
76.0
--
90.2
--
21.0
--
12.1
--
5.8
--
7.3(1)
--
9.8(1)
--
A- Enrollment Rate in Primary
Education (%)(2)
85.4(1)
--
104.7(3)
--
105.3(1)
--
B- Enrollment Rate in High School (%)(2)
47.4(4)
--
86.2(4)
--
96.8(1)
--
C- Illiteracy Rate (15 years & over) (%)
39.1(1)
--
33.6(3)
--
9.2(1)
--
D- Education Expenditure to Total
Public Expenditure (%)
17.7
--
11.9(5)
--
11.7(5)
--
1- Health Indicators:
A- Life Expectancy at Birth
B- Children Mortality Rate under age 5
(for every 1000 children alive)
C- Ratio of Health Expenditure to
Total Public Expenditure
2- Education Indicators:
E- Labour Force as a percentage
In total Population (%)
34.0
--
33.0
--
32.7
--
F- Ratio of Female Labour Force
(15 years & over)to total Labour
Force (%)
17.3
--
28.0
--
32.5
--
G- Unempolyment Rate (%)
14.6
--
--
8.9
--
3.8(6)
H- Average Labour Productivity ($)(7)
3678
--
7435
--
49297
--
(1) Year 2008.
(2) Enrollment rate is defined as those enrolled in a certain education level to total population of the age which are supposed to
enroll in the
education level under consideration.
(3) Year 2007.
(4) Year 2005.
(5) During the period2006-2007.
(6) Bahraini population only.
(7) Estimated as follows: Average labour productivity = GDP at current prices ($) (Table 1) / (Total population (Table 1) x
percentage of labour force to population (Table 3))
Source: Arab League & Others (2011), Annex 2/10, 2/11, 2/13, 2/15, 2/16, 2/17 & 2/18.
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countries, in which this ratio ranges between 3 and 4 with the exception of Somalia
(Korayem, 1998).
Among the factors affecting the support burden ratio negatively and, hence, affecting
poverty indirectly is the ratio of labour force to population which is almost the same in the
three countries. In 2009, the labour force share in total population was 32.7% in Bahrain
with relative poverty, as compared to 33% in Egypt and 34% in Yemen, both with absolute
poverty. The second factor affecting the support burden ratio is the relative share of
women in the labour force (for 15 years and over); it is the lowest in Yemen (17.3%) as
compared to 28% in Egypt and 32.5% in Bahrain (Table 3). The unemployment rate, which is
the third factor affecting the support burden ratio, is the highest in Yemen (14.6%), as
compared to 8.9% in Egypt and 3.8% in Bahrain with respect to Bahraini nationals only
(Table 3). For the unemployment rate of all the residence of Bahrain, nationals and others,
it was 11.6% in 2002 (20.7% for females and 8.6% for males) (UNDP, 2004).
The fourth direct cause of poverty is unequal income distribution. The Income Inequality
Index (III) in Bahrain is among the highest in the Arab countries (Korayem, 1998); it is 0.306,
as compared to 0.288 in Egypt and 0.232 in Yemen (Table 2). Another income distribution
indicator is the ratio of the highest income (expenditure) decile to the lowest decile, which
is 11.5 in Bahrain, as compared to 7.4 in Egypt and 9.7 in Yemen (calculated from Table 2).
Both indicators show that the income distribution is the worse in Bahrain with relative
poverty, as compared to Egypt and Yemen with absolute poverty, with Egypt having the
relatively best income distribution among the three countries.
One of the indirect factors affecting income distribution is the unequal distribution of
assets. This factor is expected to be more prevailing in the relatively rich country, Bahrain as
compared to Egypt and Yemen. The second indirect factor is the insufficient net transfers
from abroad, which applies to Egypt and Yemen where some of their labour work in the
Gulf countries. This factor does not apply to Bahrain, since it is among the labour receiving
countries.
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6- Poverty Eradication Policy Measures in the Three Countries:
The three countries differ in the policy measures applied to combat poverty. However,
some of these policies, like giving Social Assistance (SA) to the poor by the government and
the Non-Governmental Organizations (NGO's) are applied in the three countries. Yemen,
which is the poorest among the three countries, is the least interested regarding applying
poverty eradication measures. Yemen has eliminated the subsidy and raised the energy
prices in 1995 according to the Structural Adjustment Policies suggested by the
International Monetary Fund (IMF) and the World Bank (WB). The policy measures applied
in Yemen during 2000-2005 has led to an increase in the number of the poor and the
deterioration in their standard of living due to the elimination of food subsidy on the
consumers' goods, the deterioration in the exchange rate of the Yemeni currency and,
hence, the increase in the general price level. Moreover, the social expenditure have been
reduced to about 7% of the GDP (Korayem, 2011).
In Egypt, where there is absolute poverty as in Yemen but at a lower degree, the
government gives monthly Social Assistance to the poor who do not have income, as well as
a one-time subsidy in specific occasions which the poor may suffer from, like becoming a
widow, or loosing the job, etc. Also, among the most important poverty eradication policy
measures applied in Egypt is the commodity subsidy policy. There are two types of
commodity subsidy (Korayem, 2013). One type is the distribution of necessary food
commodities (rice, sugar, oil and tea) at subsidized prices through ration cards, which are
supposedly distributed to the low-income people in Egypt16. The second type is the
subsidized bread (Baladi Bread) which is sold at almost 1/5 of its market price. This is
distributed in certain outlets on the basis of first come first serve. In addition to the food
subsidy, there is also energy subsidy covering electricity, gas and other type of fuels which
benefit the private car owners, private transportation cars of commodities and individuals
and, also, factories which are heavy users of energy. The purpose of the energy subsidy to
those factories is to reduce the cost of production of the commodities produced by them to
16
Unfortunately, part of these ration cards are owned by well-off people, which represent a waste that the
government is trying to find a way to reduce it.
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enable them to sell their product at low prices. Energy subsidy opts, also, to decrease the
transportation cost of the commodities and individuals, aiming to reduce the cost of living
of the low-income people by reducing market prices of the commodities and private
transportation tariffs for the public. But, unfortunately, the energy subsidy is not achieving
its purpose efficiently in lowering the prices of heavily used energy commodities and private
transportation cost for the public to benefit the low-income people. Accordingly, waste is
high. The burden of the energy subsidy is considerably high on the budget; it represents
about 80% of total subsidy in the budget. Thus, the government is trying to find out
alternative ways to reduces energy subsidy without affecting the cost of living of the lowincome people in Egypt (Korayem, 2013).
In Bahrain, which is the richest among the three countries and has relative poverty only,
one finds that subsidy policies applied there are more intensive and comprehensive as
compared to Yemen and Egypt. The Constitution states that the government is responsible
for the welfare of the Bahraini people. Accordingly, the government subsidizes bread, rice,
oil, sugar and meat to all the population. Also, education is free for the Bahraini nationals17.
The Bahraini government subsidizes, also, housing for the relatively low-income nationals,
either by assisting them in rent payments, or renewing their old houses, or building houses
for them and enabling them to get easy loans from banks. The government subsidizes, also,
electricity and water for the low-income people. The Ministry of Social Development gives
monthly assistance to the needy households and individuals. Moreover, in December 2001,
the King gave the low-income Bahraini nationals, under the name of "El-Makrama ElMalakeya"18, 30% of the shares of a commercial Mall called Seif-Mall to those people
receiving assistance from the government to enable them, as owners of those shares,to get
their profits and to get capital gains when the shares’ price increases. At the same time,
those people continue to receive financial assistance from the government (Korayem,
2012).
17
Free education in public schools has been also adopted in Egypt after the 1952 revolution. However, over time
the quality of education in these schools is deteriorating.
18
This means in the Arabic language "Kingdom Generosity".
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