April 2018 - Number 167 REFUGEE WELFARE: A GLOBAL PUBLIC GOOD refugees grew exponentially in one year Lili Mottaghi.1 (between 2012 and 2013) from 647,000 to 1.9 million and then quintupled in March 2018 “The moment we settle down and start to feel stable reaching 5.6 million (UNHCR). In addition, there our reality is ripped apart once again. My family and may well be well over a million unregistered I came to Lebanon 5 years ago, and since then we have refugees in the region plus around a million or so moved more than three times. Every time we lose asylum seekers in Europe. While Turkey has the everything and have to start over from scratch,� says single largest number of Syrian refugees at 3.6 Ali, a Syrian refugee from Lebanon’s Bekaa million, many are hosted in the much smaller Valley. countries of Jordan and Lebanon. For every five Lebanese there is one refugee (excluding Introduction: Migrants and refugees are Palestinian refugees) in Lebanon. different. Migrants choose their countries of destination mainly for economic reasons and A recent World Bank report Refugee Crisis in cross borders to improve their earnings. Refugees MENA, Meeting the Development Challenges escape violence and prosecution and go to the first country that they can reach, typically a neighbor of the conflict-ridden country. There are also Internally Displaced Peoples (IDPs) who flee violence within their own countries. Improving the welfare of large numbers of refugees is considered a global public good that goes beyond the responsibility of the hosting country. What makes refugee protection and well-being a public good? The stability and security implications of managing and hosting large refugee flows not only benefits the host country, but also benefits other nearby countries and those further afield who will be spared the political and social dislocations of having to accommodate such large inflows. According to the UNHCR, there are currently 65 million Displaced Persons globally with two thirds of them internally displaced and the rest refugees. MENA and Syrian Refugee Crisis: The Syrian shows that refugees face four interlinked crises: refugee crisis in MENA stands out as limited or lack of access to, and poor quality of, unprecedented, representing the worst such healthcare, education, employment, and crisis since World War II. Registered Syrian livelihoods (HEEL). Targeting these challenges 1The author is Senior Economist in the Chief Economist’s World Bank. Cleared by Acting MNA Chief Economist, Office of the Middle East and North Africa region of the Hideki Matsunaga. April 2018 · Number 167· 1 not only helps host communities deal with their exposed them to four important interlinked development challenges but also prepares challenges. refugees for when they can return to their homelands. The average length of refugee’s stay Health challenge: The Syrian crisis and resulting in host communities is estimated by the UNHCR refugee influx have tremendously increased to be approximately 26 years, demographically demand for health services in neighboring representing a single generation. Whether or not MENA countries. In Lebanon, in 2015, the this is a lost generation depends on how host country’s Primary Health Care Center network community policymakers and humanitarian and recorded more than 1.5 million visits––more than international development agencies respond to double the 700,000 visits recorded in 2009 before these challenges. If unmet and dealt with these the crisis began. Lack of adequate health challenges will become crises, fueling long-term coverage for refugees has led to the problems and potentially threatening peace and communicable diseases to reemerge. Moreover, a stability worldwide. survey result shows that over 50 percent of Syrian refugees in Jordan cannot afford Refugee flows can significantly alter the social medications and half of pregnant women cannot and economic fabric of host communities, with afford transportation to health centers. Another the impact depending on initial conditions in study, “Nutritional situation among Syrian labor markets, access to resources, refugees hosted in Iraq, Jordan, and Lebanon: demographics, labor laws, and the policy cross sectional surveys� indicates that while responses of host governments. Most refugees acute malnutrition is relatively low in the are concentrated in relatively fragile countries, assessed Syrian refugee populations in Jordan, many relatively small and economically Iraq, and Lebanon, the prevalence of anemia vulnerable, including Kenya, Lebanon, and suggests a serious public health problem among Jordan. The refugees’ demands on these women and children. There is compelling countries’ have strained these economies and evidence that disease and malnutrition their already inadequate public services and contribute to a longer-term development infrastructure as well as exacerbating local problem, especially in education. The effect on unemployment. Even increased demand for food refugees’ children is larger because they have and services which may benefit the broader experienced violence and trauma and economy, often increases inflationary pressures interrupted education. These experiences that adversely affect the livelihoods of the poor. damage children’s cognitive functioning, thus affecting their educational performance Easterly and Levine (1998) show that regional throughout adolescence and into adulthood. economic integration and regional multiplier effects, these spillovers could push beyond close The Education challenge: Estimates by UNHCR neighbors. The spillovers can include reduced show that half of the registered Syrian refugees in trade, low investment, and increased capital two hosting countries in MENA are children flights. But refugee populations can also be a ranging from approximately 51 percent in Jordan source of workers who have education, skills and increasing to 55 percent in Lebanon. To (language, etc.), experience, and specializations. provide for refugee children education services, A recent study finds that refugee supply shocks significant strains are put on the education sector can adversely affect local, low-skilled workers, of the hosting countries. These countries are but that they can also provide a positive forced to expand social services to refugees while complementary effect. Refugees take on low- maintaining education quality for both the skilled jobs that native workers spurn, enabling hosting and refugee communities. Integrating locals to find better-paying jobs. refugee children in the formal education systems of the hosting community is a big challenge Refugee welfare and stability are a humanitarian (Figure 1). as well as a development issue, their prolonged stay outside of their homeland have continuously April 2018 · Number 167· 2 Overcrowding and language barriers impede wages are difficult to assess. Before the Syrian learning by refugee children, especially when conflict, labor regulations and active labor teachers have not been trained to manage these market programs in MENA countries had shocks. For example, in Lebanon, schools use structural deficiencies. Domestic labor markets French or English as a language of instruction for face a large pool of untapped young and mathematics and science classes. Many Syrian educated human resources due to the high refugees face serious challenges in inactivity and unemployment rates. The lack of understanding subjects taught in these public sector jobs coupled with limited private languages. sector formal job creation has pushed a growing number of workers into unproductive, Figure 1. Lebanon: Enrollment in Public Schools subsistence-level activities, often in the informal economy. The massive influx of refugees has exacerbated the challenges in local labor markets because more than half of the refugees are in working-age groups. In Lebanon, the arrival of refugees from Syria has increased the size of the labor force by approximately 35 percent. Many refugees work in the informal sector due to lower education levels, skill mismatch, and lack of work permits. Local youth are much more likely to compete occupationally with Syrian refugees in the labor market and are concentrated in sectors such as tourism and trade whose Source: Lebanon Ministry of Education and Higher Education. growth is most impacted by the crisis. Syrian refugees also accept lower wages than hosting unskilled community workers. The situation is These challenges are exacerbated by the fact that worse for Syrian refugees residing in Jordan. Of refugees often reside in some of the most approximately 1.3 million Syrian refugees, of vulnerable localities, which have pre-existing whom only half are registered with UNHCR, challenges in delivering education and other only 40,000 hold a work permit as of Mid-2017 services. In Lebanon, more than half of the Syrian (see next section). refugees live in the 50 most vulnerable localities. The education systems of hosting countries need In Libya, the UNHCR estimates that about half of to undergo a major shift to respond well to the those fleeing to Libya from neighboring conflict- supply shock of catering to many students, many ridden countries are looking for jobs, but they of whom require additional academic, language, end up fleeing to Europe to escape challenging and psychosocial support due to forced economic conditions and instability in the labor displacement. Financing for the sector will need market. The ongoing conflict in Yemen has to be increased too. The cost of not educating displaced approximately 3 million people, the refugee children is a huge loss in building human vast majority IDPs but also some fleeing to capital that is needed for economic development; Djibouti, the Gulf countries, and Sudan. Yemen and for the long-term processes of peace, itself is hosting refugees from the Horn of Africa, stability, and reconstruction. Studies have including Ethiopia and Somalia, who are hoping shown that the cognitive damage to children to find better opportunities despite the ongoing from receiving no education not only lowers their conflict. Lack of decent job and low earning have school performance but also cuts their future contributed to increased child labor, and child earnings. This will cause workers human capital marriage as families become more indebted and to depreciate continuously. struggle to access livelihood options. The Employment challenge: The impacts of refugees on host country labor markets and April 2018 · Number 167· 3 The Livelihoods challenge: Studies show that to registered and unregistered children and adult many refugees cannot establish or maintain their refugees, regardless of gender or nationality. livelihoods, i.e. their "means of securing basic necessities -food, water, shelter and clothing - of World Bank Support to Lebanon and Jordan : To life� because they cannot exercise the rights to recognize the global public good that Lebanon which they are entitled under international and Jordan provided by opening their borders to human rights, humanitarian law, and refugee Syrian refugees, in April 2016, the World Bank, law. The external environment and uncertainty the United Nations, and Islamic Development also influence the refugee’s livelihood. Refugees Bank, in close collaboration with the donor not only have to cope with the often-traumatic community and a range of international partners, experience of flight and displacement but too launched the Concessional Financing Facility often end up with very limited or no resources (CFF). The facility uses donor grants to reduce due to loss of assets and capabilities. Uncertainty the cost of multilateral development bank loans about obtaining work permits due to rapidly to concessional levels for these two middle- changing policies over renewals and the sectors income countries. The CFF focused on helping to which permits apply can negatively influence Jordan and Lebanon address the impact of Syrian refugees’ livelihoods. The uncertainty makes it refugees without having to increase their debt harder for refugees to make decisions and levels. These grants enable them to borrow more calculate the costs, benefits, and risks of various affordably for development projects that benefit livelihood strategies. Conversely, international both refugees and hosting communities. Despite studies show that among refugees whom the facility’s continued focus on Lebanon and UNHCR assisted, the most successful refugee Jordan, whose needs are greatest, at the UN communities were those where refugees had General Assembly in September 2016, partners been given choices: to live where they wanted expanded the CFF’s scope to the global level so with whom they wanted and to support that it could help middle-income countries themselves the ways they wanted. address refugee crises wherever they occur. As of April 2018, the renamed Global Concessional Improving stability and welfare of refugees is a Financing Facility (GCFF) has leveraged more global public good. The 1951 Convention than $2 billion concessional financing to Lebanon Relating to the Status of Refugees, itself based on and Jordan for ten projects. the 1948 Universal Declaration of Human Rights, requires any signatory country to protect refugees who are on their territory. The burden- sharing obligation clearly states that the welfare of refugees has all the characteristics of a global public good. It is both non-rival and non- excludable: If one country contributes to a refugee’s welfare, it does not diminish another country’s satisfaction in seeing that refugee is better off. However, precisely for this reason, as with all public goods, there is the problem of “free-riding.� Since the benefit to the refugee (and hence to everyone else) is a function of the sum of everyone’s contribution, but the individual country bears the cost, there is an incentive for each country to cut its contribution and let others pay. If every country does this, there is no benefit to the refugee and hence no public good. Therefore, collective action is required to address these challenges. This could justify the international community’s and policy- makers’ extending economic and social services April 2018 · Number 167· 4