Remarks by Mahmoud Mohieldin, World Bank Group Senior VP
at the Union for the Mediterranean: Suez Canal Conference on Maritime Transport and Logistics Conference: "Success Stories fostering Intermodality and Connectivity in the Euro-Mediterranean Region"
Delivered Tuesday, May 8, 2018
Your Excellency Eng. Sherif Ismail, Prime Minister, Arab Republic of Egypt, Your Excellency Admiral Mohab Mameesh, Chairman of Suez Canal Authority and Chairman of the General Authority of Suez Canal Economic Zone, Distinguished Guests, Ladies and Gentlemen,
I am delighted to be here today on behalf of the World Bank Group. As you know, the Mediterranean has been an active trading area for many millennia, and always one of the world’s most vibrant.
For the Mediterranean and other regions, geography matters greatly in deciding what is needed, what is necessary, and also what will fail in the area of trade and in development. One of the key findings of the World Development Report entitled “Reshaping Economic Geography” was that to achieve rapid, shared growth, governments must promote economic integration which, at its core, is about the mobility of people, products, and ideas.
Global Trends and Challenges:
To put these matters of policy and institutional reform in context, we need to consider some global trends which shape our opportunities and challenges at the regional and local level.
First, demographic transitions: people are living longer and people are getting younger as many countries, especially in Sub-Saharan Africa and MENA, still have high birth rates and thus a larger youth population.
This is accompanied by rapid urbanization
Climate change is a defining feature of our planet and how we live in it
There is a continued volatility in commodity prices
Technological disruptions have major implications on job markets, productivity, and the way we live.
Meanwhile, there are several parts of the world are suffering from fragility, conflict and violence; and finally,
The global economy is shifting eastward.
Each of these trends will impact our choices and our ability to achieve the right policy objectives.
SDGs and Twin goals
An even larger contextual lens is through the global goals called the Sustainable Development Goals. These 17 global and national goals were designed to protect people, the planet, and leave no one behind, and they are consistent with the World Bank Group’s own twin goals to: end extreme poverty and boost shared prosperity in a sustainable manner.
At their core these goals implore us to make investments in human capital – including education and health care – not just because it’s the right thing to do, but also because it increases growth and prosperity. Likewise, we need to invest in physical infrastructure, to both bolster growth and improve resilience shocks. And given the technical and financial hurdles, it is imperative that the private sector play a central role in making these investments and managing the outputs.
These frameworks provide an integrated approach to development. They take into account the interconnected and interdependent nature of development challenges and opportunities. And sustainable transport serves as an excellent example – almost a metaphor, really -- of this integrated approach.
There has been a paradigm shift towards sustainable transport. Previously, the transport agenda was defined by the goal of providing access to transport infrastructure. Under the new framework, the international community has committed itself to much more.
First, the issue is no longer simply access but equitable access for all. Second, other, equally important objectives have been added, including the efficiency and reliability of mobility services, transport safety, decarbonization, and environmental sustainability.
Although shipping is considered the most energy-efficient mode of transport, it still uses huge amounts of so-called bunker fuels, a byproduct of crude oil refining that takes a heavy toll on the environment.
If the shipping industry was a country of its own, it would rank as the 6th largest greenhouse gas (GHG) emitter worldwide, right between Japan and Germany. While the sector’s share in global emissions is currently at 2-3 percent, the demand for maritime transport is soaring – and so are emissions. In this context, mobilizing action by the maritime trade sector on climate change is important.
The World Bank Group proposed a new strategic global initiative to support implementation of the SDGs and transform the sector – called Sustainable Mobility for All. It brings together a diverse and influential group of transport stakeholders, with a commitment to speak with one global voice and act collectively to transform the transport sector.
Sustainable mobility is not an end in itself. It is an enabler of trade -- and trade creates jobs, reduces poverty and increases economic opportunity. After a protracted period of low growth, the global economy saw trade volumes grow by 4.3 percent in 2017, the fastest rate in 6 years. Trade has made a significant contribution to increasing GDP in many countries, where companies are trading goods across borders, and people are able to access goods and services at lower prices.
The modern era of international trade is one of increasingly complex interactions between people, firms, and organizations. Supply chains cross countries and regions. Trade now requires connectivity beyond roads, rail, and sea, and now including telecommunications, financial markets, and information-processing.
Not everyone has shared fully in the benefits of trade and globalization, and public attitudes certainly reflect this. Evidence shows that trade has resulted in job losses in certain regions and industries, while technology has accelerated and deepened these changes for workers. To protect the larger trading system, we need acknowledge these effects, and act to give workers more opportunities to benefit from them.
The increasing complexity of trade has serious implications for the world’s poor, who often are disproportionately disconnected from global, regional – or even local – markets. These pockets of poverty may be close to dynamic, urban markets, for example, but economically isolated from them. Thus, their firms and communities can’t develop skilled, competitive workforces, aren’t integrated in global production chains, and can’t diversify their products and skills.
Today trade connectivity in the Mediterranean combines lessons from the past identified by economic historians with 21st century approaches. The Mediterranean is a smaller part of the global chain of trade -- transiting global container shipping organized around China, Singapore, the Panama Canal, the Strait of Gibraltar, and the Suez Canal. Its sea routes no longer operate on a point-to-point system within the rim but as a hub-and-spoke system where local shipping links transshipment hubs to regional ports. China’s One Belt, One Road initiative includes the Mediterranean as part of its main trade routes.
For EU countries, intra-regional trade accounts for 60 percent of the total trade, and this number is 40 percent for East Asia and Pacific countries. The share of intra-Mediterranean traffic (all modes/links included) in total Mediterranean traffic is increasing, from 49 percent in 2009 to about 58 percent in 2016, with the majority of intra-Mediterranean traffic going between European ports (mainly east–west).
Through its geographic position Egypt has two related opportunities to act as the trade hub of the Eastern Mediterranean region. The first is based on the trade that transits the Suez Canal between Asia and Europe, in which Egypt now plays little part. The second is based on the need for all land-based trade between the Mashreq and Maghreb countries and between Europe and the Arabian Peninsula, to transit Egypt.
Egypt is making progress on improving its transport infrastructure. In the maritime sector, major developments include the widening of the Suez Canal in 2016 and the establishment of the Suez Canal Economic Zone. The Government of Egypt has also expanded its national road network by almost 5,000 kilometers in the last four years, dramatically increasing cargo transport by trucks. In addition, a major logistics center is being planned at the City of 6th of October in the Greater Cairo Metropolitan Area.
In the world of modern global value chains, Egypt has the potential to improve freight transport, logistics and customs processing.
Transit transport corridors, multimodality and sustainable shipping:
International maritime transport accounts for the lion’s share of global freight transport: ships carry around 80 percent of the volume of all world trade and 70 percent of its value.
There are a number of SDG targets directly linked to transport, and sustainable transport will enable the implementation of nearly all the SDGs through its impacts on interlinkages, along as its effects on technology, data capabilities, finance and policy coherence.
In this way, trade and the SDGs have a common goal -- and a shared interest -- in promoting shared prosperity as the best way to avoid conflicts and prevent forced migration.
How should policymakers respond? First, they should work across borders and boundaries to smooth pathways to trade. When multiple entities make decisions on the basis of their own sphere of influence, they gain their independence but lose wealth, productivity, and competitiveness. This concept is as old as Adam Smith himself, the father of modern economics, yet has proven to quite reliable over the centuries.
Second, increased competitiveness requires investments in both infrastructure and human capital. The Human Capital Project, launched recently by the World Bank, is a new effort to understand the link between investing in people and economic growth, and to accelerate financing for human capital investments.
Third, the Mediterranean region needs to collaborate to increase intra-regional trade, through the definition of shipping and supply chain routes and modes, collecting data and defining industry standards, and increasing trade and investments in infrastructure and complementary products and services within the region.
Fourth, to promote both growth and stability, the region needs complementary interventions in connectivity and the hinterland. Any development project should be rooted in and envisaged through an integrated port cluster strategy which should be part of a national freight and logistics strategy. One potential strategy is to attract vertically integrated shipping companies that are also involved in inland logistics and terminal operations. The World Bank is pleased to support the Government of Egypt in the upcoming development of this integrated National Multimodal Freight Transport and Logistics Strategy and Action Plan.
Fifth, policy makers could focus on one or a few core ports and core corridors. Cross-border cooperation between ports and countries should also be emphasized to avoid overcapacity. Balanced development of port maritime networks should take into account regional and local connectivity, as through short-sea and coastal shipping, as well as roll-on, roll-off and global maritime connectivity.
Sixth, technology will increasingly impact the sustainable transport landscape, in everything from real-time data on congestion, automated data collection and processing, reducing transport’s time, cost, and environmental impacts. Private sector experience through public–private partnerships are also key. The World Bank has developed a port reform toolkit, a trade and transport corridor management toolkit, and are publishing a book on Maritime networks, port efficiency, and hinterland connectivity in the Mediterranean.
Finally, the Mediterranean needs more intermodal connections. Compared with other regions in global most Mediterranean ports have limited or no intermodal connectivity for moving containers to and from their cargo base or hinterland. A hinterland expansion strategy depends on infrastructure and logistics networks, preferably with rail, inland waterway and road connections, which can bring about the seamless supply chain connections that are essential for success. Barcelona, Tanger Med, and Marseilles are excellent case studies for successful hinterland connectivity strategies.
Belt and Road Initiative
I wanted to make a quick point about China’s Belt and Road Initiative, which seeks to enhance global trade and connectivity, and if policy reforms and investments are coordinated, could certainly make positive impacts on development.
Egypt is a particularly crucial part of the Maritime Silk Road, with the Suez Canal functioning as the main transit point between the Indian Ocean and the Mediterranean Sea. It will be critical to invest in infrastructure, with the Suez Canal as a transit point via land to other markets as well.
The World Bank Group is discussing with governments how to maximize benefits from BRI, providing technical advice on the potential effects, risks, benefits, and needed standards, while also providing financing and convening services when needed.
MFD and Role of Private Sector
Let me again re-emphasize, private sector investment will be indispensable to a more sustainably mobile world.
Through its new approach of Maximizing Finance for Development (MFD), the World Bank Group is helping attract private sector solutions in the most challenging sectors and countries: from BRT (Bus Rapid Transit) services in Lebanon to railways investments and services in India and Morocco.
Finally, I would like to note that all of you here are stakeholders in sustainable transport in this region. You can help shape the future of Egypt, the Mediterranean, and its relationships with the rest of the world -- and the World Bank Group stands ready to help.
For the Mediterranean is not just a monument to the history of trade, it is now a vibrant economic laboratory -- which can transform its economies and create a brighter future for millions who live on its shores.
Thank you very much.