As the price of oil falls, the discussion is heating up on what the impact will be for countries in the Arab World – especially online through the popular Arabic hashtag النفط_دون_50_دولار # translating to “oil below US$50 . The World Bank’s Chief Economist for the Middle East and North Africa, Shanta Devarajan, weighs in on the conversation.
Governments in the Arab world have long subsidized the price of energy. This gives citizens throughout the region access to cheap petrol and diesel, and electricity supplied at below-market rates. But what has been the real impact of subsidies, and do they justify the huge financial burden they place on national budgets? This is a critical question in the Middle East and North Africa (MENA), as the region represents a disproportionate share of the world’s energy subsidies.
On assignment in the Morocco office for about three months, I had the chance to have what I could confidently describe as a rich development experience. Getting away from Egypt’s years of unrest helped me develop a clearer vision.
Walking past the Check-in counter in Casablanca’s Mohamed V International Airport, a digital sign claims X amount of solar energy used and X amount of energy savings occurred in powering a transit hub with the use of polycrystalline panel technology. As a tourist, this may come as a pleasant surprise if she has not yet had the opportunity to see other improvements, like Rabat’s tram system. As a citizen, this may be inspiring as the term “smart city” hints at better infrastructure and technology use. However, what qualifies a city as a “smart city” is more often a topic for discussion only among Maghreb countries and not implementation.
Source: Flickr Creative Commons
Recently, the Dubai Supreme Council of Energy (DSCE) and the World Bank agreed to design a funding strategy for a green investment program in Dubai that would look at financing green investments through a variety of sources, including green bonds and sukuk (Islamic certificates).
Following Russia’s annexation of Crimea after the popular voting in early March, the European Union and recently the U.S. and Canada have imposed their first round of sanctions—an asset freeze and travel ban on some officials in Russia and Crimea. This week NATO's foreign ministers, warning that Russian troops could invade the eastern part of Ukraine swiftly, ordered an end to civilian and military cooperation with Russia. Should the crisis escalate, potential fallout on Middle East and North Africa (MENA) countries is likely. The effects would be transmitted directly through trade and indirectly through commodity prices.
In a conversation I had recently with the Minister of Public Works, the Minister proposed an ambitious program: to provide road access to one thousand Yemeni villages. He reckoned it would cost around US$1 billion. This was on top of something the Minister had already started, a project for an expressway to connect the cities of Aden, Taiz, Sana’a, Amran, and Saada to the Saudi Border. Financing for part of this other ambitious project had been secured from Saudi Arabia and the World Bank. We are working together to secure funding to finance the rest of the expressway.
At the heart of the upheavals that swept across the Middle East region during the Arab Spring was the call for more transparent, fair and accountable government. In the aftermath of the uprisings, specialists are left to address the issue of transition to democratic rule. In doing so, they have to answer the following questions: how can we systemize the culture of accountability and democratic governance? How can we channel the popular energy of street mobilization into a powerful institution that keeps duty-bearers in check?
- social accountability
- Social Development
- Middle East and North Africa
- Yemen, Republic of
- West Bank and Gaza
- United Arab Emirates
- Syrian Arab Republic
- Saudi Arabia
- Iran, Islamic Republic of
- Egypt, Arab Republic of
The World Bank’s latest Quarterly Economic Brief for the MENA region warns that short term prospects for many countries in the region are poor. For reasons related to ongoing political turmoil, these countries face high fiscal and current account deficits and are not undertaking structural reforms that could make things better in the medium run. On the other hand, one part of the region, the hydrocarbon-rich members of the Gulf Cooperation Council (GCC), faces a much rosier short term economic outlook. This is of some consolation because the GCC economies account for almost half the region’s GDP and have a significant impact on some neighboring economies (including Egypt, Jordan and Yemen) through financial transfers related to remittances, tourism, foreign investment and aid.