A Comparative Review of Economic Performances of Egypt, Iran and Turkey (and South Korea as a Benchmark)

There is a strong statistical relationship between a country’s per capita GDP (expressed in PPP dollars) and per capita health expenditures also expressed in PPP dollars. In 2013, on average, 8.4 percent of per capita GDP was spent on health as a regression among 179 countries showed. Given their income levels, all four countries (EIT and South Korea) spent less than the norm based on this yardstick. Egypt had the lowest share of budgetary expenditures on social sectors, particularly health and education. In turn, the shares of social spending in all three countries were considerably lower than the average for EU-28 in 2014. For instance, health expenditures in Egypt was 5.6 percent of total budget expenditures in 2014, contrasted to 17.5 percent in Iran, 12.3 percent in Turkey and 15 percent in the European Union. Key health indicators, in a way, reflect the relationship between the resources allocated to the sector and outcomes. There were also significant improvements in sanitary facilities contributing to improvements in health outcomes in three countries. Egypt had the lowest life expectancy at birth and the highest infant mortality rate among the EIT countries in 2014. In terms of resources of the health care systems, there are significant differences among the EIT. Compared to South Korea, the number of hospital beds per 1,000 in Egypt, Iran and Turkey are significantly lower and showed little improvement during the last thirty years. The number of health care practitioners varies a lot among the EIT. Unlike Iran and Turkey, Egypt has many more physicians and nurses on a per capita basis than the cross country comparisons suggest. Because of the concentration of doctors in the Cairo area, the rest of the country is not well served despite the relatively larger numbers of practitioners who also run parallel practices in addition to their jobs at public health care facilities. The Iranian health care system went through a series of reforms since 1983 by creating the National Health Network including “Health Houses”, staffed by trained “Behvarz” in rural areas and a chain of Rural and District Health Centers. The Family Physician Program which was established in 2005 and implemented in rural areas and cities with populations of less than 20 000 people to improve the referral system and provide health-care services did not prove to be effective. Rising health costs and slow improvements in health care led to the adoption of the “Health Sector Evolution Plan” in 2014. While the plan has helped bring down out-of-pocket (OOP) costs for patients, there is room for further significant improvements in the health care system. Turkey embarked on an ambitious health reform program in 2003 intended to separate policymaking, regulatory, financing, and provision roles. The Social Security Institution was established as a single payer, on pooling both risk and funds from contributory health insurance and the government-financed Green Card. It also included the introduction of a family practitioner scheme nationwide, the introduction of a performance-based payment system in Ministry of Health hospitals, and transferring the ownership of the majority of public hospitals to the Ministry of Health. Lack of cost controls and favorable treatment of private providers pushed up health care costs which doubled in real terms between 2001 and 2014. The share of expenditures on hospitals went up from 38 percent in 2001 to 49 percent in 2014, contrary to the intentions of the program. In the latest Human Development Index which is for 2014, Iran ranked the 69th, Turkey the 72nd and Egypt the 108th compared to South Korea which ranked the 17th. While the EIT showed progress over time in improving their scores, their relative ranking has not changed since 1990. On the Gender Inequality Index Turkey ranked the 71st, Iran the 114th, Egypt the 131st and South Korea the 23rd. The Global Gender Gap Index (GGI) compiled by the World Economic Forum (WEF) shows deterioration in Iran’s score between 1996 and 2015 and some improvement for Egypt and Turkey during the same period. Rapidly declining mortality rates and high fertility rates led to large increases in populations of the EIT; in 1965-2015 the population of Turkey almost tripled; the populations of Egypt and Iran more than tripled. The fertility rate in Egypt continues to be higher than that of in Iran and Turkey. It is projected that the population of Egypt will reach about 109 million in 2025, while that of Iran will be 86 million and the population of Turkey will be 85 million. The young population in the EIT creates an important window of opportunity. The education, health, and employment indicators suggest that Turkey is nearer to make use of this opportunity than Iran and Egypt. The population growth in Egypt, Iran and Turkey has been faster than employment growth. Egypt created 10.7 million jobs against a population increase of 29.9 million during 1991-2013. Iran and Turkey created 10.3 and 6.3 million jobs for a population increase of 19.9 and 20.1 million respectively, during the same period. In the EIT labor force participation rates and overall employment rates are low in comparison to many other countries. The low level of particularly female participation rates creates serious social and economic problems. In the urban areas these problems become more acute. Another problem is the low level of education of the labor force. In the EIT more than half of the labor force has just primary education. The labor force in Egypt is more educated than the others in relative terms. However, the female labor force in Iran is more educated than in the others. There is a mismatch between education and occupational needs in varying degrees in these countries. For instance, the number of graduates of humanities and Islamic studies is four times more than the graduates in other areas in Iran. While the unemployment rates in Egypt and Iran seem settled to a plateau of 13 percent, the policies implemented in Turkey starting in 2009 were relatively successful and the unemployment rate is around 10 percent. The unemployment rates for women in Egypt and Iran are significantly higher than males in contrast to Turkey where there is not a significant difference between them. In Egypt and in Iran and to some extent in Turkey women face many hurdles even though their educational attainment is high. In Iran, the education level of women is very high; more than 30 percent of female labor force has a tertiary education; on the other hand the female university graduates have a 50 percent unemployment rate. The governments do not have specific policies for supporting employment or for supporting labor intensive industries in Egypt and in Iran. The existing labor codes have an anti-business biases which cause strong rigidities in the labor markets and the non-wage expenses on labor are higher than the wages in all three countries. Particularly in Iran absence of independent labor unions, low labor mobility, lack of collective bargaining, and inflexibility of wages created strong structural barriers to a well-functioning labor market. While social justice and distributive dimension of Islam religion are emphasized by the EIT politicians, in general, the inequality of income distribution has not changed much over the decades. Egypt presents a better picture of income distribution than the others. Egyptian income distribution was relatively egalitarian since the mid-1950s, have improved over time where the Gini coefficient declined from 36.1 percent in 2000 to 30 percent in 2013. It was estimated at 37.8 percent for Iran and 40.1 percent for Turkey in 2013. On the other hand, absolute poverty is a real problem in Egypt while Turkey and Iran reduced poverty to a great extent. During the 1950s, there was not much difference between these countries. Their integration with the global economy and their transition to a market economy is an ongoing process. Turkey’s joining the Customs Union and candidacy for the EU provided a strong impetus for diversification and a competitive environment. Egypt and Iran were not successful in diversifying industry and providing competition. In both countries established interests were protected. Furthermore, Iran fought with embargoes and economic sanctions and the economy depended on oil exports. Overall the political system in Turkey, although it lacks a lot, is more conducive to inclusiveness and economic growth than in Egypt and Iran.