MENA: Creation of a Regional Infrastructure Regulatory Forum

January 8, 2010

January 2010 - MENA countries will have to create 40 million new jobs in the next ten years to meet the fast growing labor force. This will require sustaining the economic growth at around 7 percent per year over a long period and this cannot be achieved without significant investments in infrastructure.

On December 7-8, 2009 the World Bank organized in Amman the Middle East and North Africa (MENA) Regional Conference on Infrastructure Reform and Regulation under the patronage of the Jordan’s Ministry of Planning and International Cooperation (MOPIC) and in collaboration with the Public-Private Partnerships Infrastructure Facility (PPIAF) and the International Finance Corporation (IFC).

The Conference brought together policymakers, regulators, service providers, civil society organizations and private-sector representatives from across the region and representing a variety of infrastructure sectors (telecommunications, power, gas, transport, water and sanitation).

The main objectives of the Conference were to take stock of the recent developments in infrastructure reforms in the MENA region and to explore options for the establishment of a MENA multi-sectoral Forum of Infrastructure Regulators.

The Conference adopted a final resolution in which attendees invited the World Bank to formerly launch a process towards the establishment an organization known as the “Middle East and North Africa Infrastructure Regulatory Forum” of which the objectives will be to promote the cooperation among infrastructure regulators within and across countries in MENA. Towards this objective, a working group will be formed to work jointly with World Bank in bringing the process forward.

Relatively high infrastructure investment in recent years has succeeded in ensuring basic infrastructure access to the vast majority of MENA citizens

  • The connection rate to the electricity grid by households is around 90 percent or more; access to acceptable water and sanitation services is above 70 percent.
  • The penetration of mobile telephony has reached the level witnessed in industrialized countries.
  • Paved roads represent between 60 to 70 percent of the total road network.

However, there are some considerable challenges that MENA countries need to overcome in order to move the infrastructure agenda forward

  • The installed generation capacity of the electricity sector is estimated to be 20 percent below the aggregate demand for electricity across countries in MENA: Fifty-five percent of businesses lament power networks as a main constraint to running their enterprise. Likewise the prevalence of highly subsidized electricity tariffs induces wasteful use of electricity therefore increasing pressures for costly expansion of electricity generation capacity.
  • Urban congestion is growing in many megalopolises and therefore increasing transaction costs for businesses or commuting times for workers: In Cairo, the average speed of vehicles is as low as 9 km/h and casualties are many. It is estimated that the total economic and social cost of congestion is about 5 percent of GDP. In Teheran, it is estimated that commuters spent around 4.5 million hours/day in traffic because of congested roads and lack of efficient urban mass transit systems.
  • Energy subsidies cost the region the equivalent of 7.1 percent of its GDP in 2006, whereas reducing these subsidies could raise the region GDP by 2 percent.

To sustain their economic growth prospects in the next five years, MENA countries need to increase investments in infrastructure

Middle Income Countries in MENA will need to invest the equivalent of 9.2 percent of their yearly GDP over the period 2008 – 2015, in order to sustain their economic growth prospects.

This represents a total investment effort between $75 to 100 billion a year, of which 33 percent is for the maintenance of the existing stock of infrastructure. To date about half of this amount is mobilized by countries across the region.

Robust and transparent legal and regulatory frameworks will be necessary to deliver the policy programs and new institutions and capacity required to implement them 

Cooperation among stakeholders, dialogue and knowledge-sharing can serve to accelerate reform progress, promote best practice and enhance the regional harmonization of infrastructure networks and standards.

A multi-sectoral regional Forum of infrastructure Regulation can serve as a valuable platform for experience and information sharing across borders and sectors, problem-solving, and the dissemination of best practices. A well-designed Forum can establish itself as a knowledge sharing center in the region, providing capacity building services to its members.

The increased interchange between regulators can serve to accelerate the progress of reforms and promote the adoption of common rules, norms and standards, leading to more harmonized regulatory frameworks, and strengthen trade links and regional integration.