Business and government leaders at the World Economic Forum on the Middle East and North Africa (MENA) called on countries in the region to forge public-private partnerships to drive urgently needed infrastructure development. Infrastructure development “is a huge opportunity not just because of the high youth unemployment and the need for facilities but because interest rates have been low and there is a surplus in savings,” said meeting Co-Chair Gordon Brown, who served as British prime minister from 2007 to 2010 and is currently Chair of the World Economic Forum Global Strategic Infrastructure Initiative, speaking in a session on the issue.
MENA countries spend only 5% of GDP on infrastructure, compared with 15% in China. With oil prices low, governments in the region can divert money that would normally go on energy subsidies to infrastructure development instead, Brown said, adding that, by doing so, “you can have a greater impact on the quality of life of people”.
“The main investor in infrastructure in the region is the public sector, but it cannot do it alone,” said Hani Mulki, Chief Commissioner of the Aqaba Special Economic Zone Authority (ASEZA) in Jordan. “The main problem is that the private sector is shying away from coming into long-term infrastructure projects.” Brown said: “Public-sector guarantees may be more important than public-sector money in the long run.”
Infrastructure development must move forward, despite the geopolitical and economic instability in the region, Mulki told participants. “We need the political will for these partnerships. We cannot wait for [the conflict with] Daesh (ISIS) to end. We need to get to work.” Majid Jafar, Chief Executive Officer of Crescent Petroleum in United Arab Emirates, agreed: “We can’t wait for the stability to make the investments. The investments will lead to the stability.”
Cross-border infrastructure development would offer major benefits to the region, Mulki argued. “We need to look at projects that transcend boundaries of countries. This will create an interdependent region. That should reduce risk. It would help minimize disparities in income. It would combat terrorism and extremism and, at the same time, provide for transparency.” While certain countries, such as Jordan, have shaped frameworks for public-private cooperation on infrastructure, there are significant impediments to regional collaboration. “We can’t ignore the politics,” Jafar said. “International trust is at its lowest level ever and that is an obstacle to cross-border investments and the multinational cooperation that we say we need.”
Thierry Déau, Chief Executive Officer of Meridiam Infrastructure in France, was optimistic. “You can mobilize long-term capital if you have the right project partnership,” he said. “There is a lot of capital in this region and it needs to commit to this region to give comfort to the capital from outside.” He appealed to investors, including private institutions and sovereign wealth funds, to “commit to their own people”.
MENA economies should focus on infrastructure aimed at meeting basic needs such as water and electricity, said meeting Co-Chair John Rice, the Hong Kong-based Vice-Chairman of GE. He proposed that the World Bank and other international financial institutions relax their lending requirements for projects aimed at the bottom of the pyramid. “Without sovereign guarantees, I don’t see foreign capital being available [for infrastructure development] at the level close to what is required,” he concluded.
© World Economic Forum 2015