Global Arab Network | World Bank Tackles Infrastructure Challenge in Middle East and North Africa region

Translate this article to your language:

GANPublications

e-Publications

Add Site to Favorites

Add Page to Favorites

Make Homepage

Share This Page

RSS Feed

--------------------------------------------------------------------------------------------------------------------
| |

World Bank Tackles Infrastructure Challenge in Middle East and North Africa region

Global Arab Network - - Adnan Kassar

Thursday, 19 May 2011 21:21

World Bank Tackles Infrastructure Challenge in Middle East and North Africa region

Global Arab Network - The Middle East and North Africa region needs to invest between $75 and $100 billion a year in infrastructure to sustain the growth rates achieved in recent years, and to boost economic competitiveness.

Currently it is estimated that half the region’s population does not have adequate access to water and, per capita water availability— already less than a fifth of global access—is expected to drop even further in the next 15 years. As the population grows, electricity consumption is also set to increase significantly over the next few years and will require investments of $30 billion a year to meet demand. In recent popular protests citizens have voiced frustrations with poor services, many of which need supportive infrastructure to work effectively.

Addressing this daunting infrastructure agenda for the region, a recent conference in Amman, Jordan, attracted over 200 participants from Arab League nations, private sector and public institutions. The gathering firmly endorsed the newly launched Arab Financing Facility for Infrastructure (AFFI) in which the International Finance Corporation (IFC) and the Islamic Development Bank have joined the World Bank as potential anchor investors in a regional investment vehicle to support both conventional and Shariah-compliant investments in infrastructure, as well as grant financing for technical assistance and policy coordination. AFFI is designed to increase investment into infrastructure in the MENA region in an effort to drive economic growth and meet the needs of a young and growing population.

“The Arab spring has demonstrated that people want better public services and a cleaner urban environment and that means more efficient, better-designed infrastructure services," Shamshad Akhtar, World Bank vice president for the Middle East and North Africa region told the two-day conference in Amman. “At the same time, government budgets are under pressure and the private sector perceives risk in the political upheavals, so it's become harder to finance those necessary infrastructure investments. This is where the International Finance Institutions can step in to help with financing and mitigating the risks faced by private investors.”

The technical assistance facility for project development was launched at the conference, in addition to the modalities of a public sector window to provide funding and political risk coverage for strategic infrastructure projects. The conference agreed on the need to create a regional policy forum to coordinate infrastructure policies and promote a regionally coordinated approach to common problems.

Jordan’s Minister of Planning and International Cooperation, Jafar Hassan said: “Infrastructure will be a strong driver for growth in the region and indispensable for the increasingly critical water and energy deficit in many of its countries. Restructuring the risk-sharing mechanisms for the provision of private sector and development funding for such critical development and regional infrastructure programs is a key priority in enabling governments and the private sector in advancing such projects jointly.”

AFFI aims to raise up to $1 billion in new financing that will leverage infrastructure investment in Arab countries and help catalyze financing for the $40 billion annual funding gap. It will specifically target projects with a regional dimension, linking countries with each other and with the wider world to build pathways of economic integration. It will initially focus on a few demonstration projects that will act as a catalyst for further investments. Countries interested in supporting AFFI have started a dialogue with the World Bank and the Islamic Development Bank to identify and develop priority projects for financing.
The Bank and its partners are moving ahead to mobilize private sector money for regional projects, and efforts to recruit a Fund Manager to oversee the investment fund vehicle being created, are at an advanced stage.

World Bank (IBRD) lending to the Middle East and North Africa region for infrastructure, including electricity, transport and water, has already exceeded $1 billion a year and is expected to increase further in the years ahead to help close the infrastructure gap. In addition, over the past four years, IFC has invested more than $1 billion in infrastructure projects in the region. IsDB investment in infrastructure projects in the region over the past 5 years has exceeded $1.3 billion a year, including about $300 million in PPP projects.

MENA: Infrastructure status and challenges

• The recent events have demonstrated that people want better public services and that means more efficient, better-designed infrastructure services.
• At the same time, government budgets are under pressure and the private sector perceives risk in the political upheavals, so it's become harder to finance those necessary infrastructure investments.
• While most people have access to public services in the region, the quality and reliability of service is a real challenge which constrains competitiveness, regional economic activities and growth prospects.
• Add to this one of the world’s largest youth population, and clearly infrastructure is both a need and a tremendous opportunity for creating jobs and driving productivity.
• The Arab countries have been spending around 5% GDP per annum on infrastructure whereas other developing countries have been spending up to 15% (for example, China) which gave them a comparative advantage.
• Arab countries need to double their spending in infrastructure up to 10% GDP per annum (equivalent to US$ 75-100 billion) to sustain the growth rates that have been achieved in recent years, and to boost economic competitiveness.

Importance of leveraging the private sector

• It adds value to government and population to involve the private sector with the right risk allocation.
• PPPs are very important for the Arab countries to keep pace with the infrastructure needs in order to ensure growth.
• Involving the private sector in infrastructure can be cost-effective if projects are properly prepared and procured, and resulting in much needed job creation.

About the Arab Financing Facility for Infrastructure (AFFI)
AFFI is a partnership of the World Bank (IBRD), International Finance Corporation (IFC) and Islamic Development Bank (IsDB). It is an integrated facility which aims at fostering infrastructure development and regional dialogue in the Arab countries. It focuses on regional infrastructure programs and public-private partnerships (PPPs).

AFFI will support infrastructure projects designed to boost regional connectivity and with strong regional demonstrative impact including for electricity, rail, road and maritime networks. A private sector window with IFC and IsDB as anchor investors will provide private investment to support Public Private Partnership deals and the possibility of Shariah-compliant financing.

Components of AFFI:

• The Arab Infrastructure Policy Forum (AIPF): is a high-level ministerial forum which offers a platform for dialogue on regional infrastructure issues.
• The Technical Advisory Facility (TAF) grants advisory services to develop infrastructure PPPs.
• The Public window provides funding to Arab IBRD countries for infrastructure and PPP projects.
• The Private window fund provides equity and mezzanine (Sharia compliant and non-Sharia) financing to the private sector for infrastructure projects.
(© 2011 The World Bank Group, All Rights Reserved)

Global Arab Network

< Prev		Next >

Add comment

The opinions of the authors in articles published are theirs alone and do not necessarily reflect the views of Global Arab Network
------------------------------------------------------------------------------
Published comments are the opinions of private individuals and do not reflect the views of Global Arab Network