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Analytical & Advisory Activities

The Middle East and North Africa Economic Development Department delivered a total of 48 analytical and Advisory products covering several sectors and countries.

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Economic PolicyEconomic PolicyTradeTrade
 PovertyPoverty Gender Gender 
 Economic PolicyPublic Sector Management and Governance Private SectorPrivate Sector Development 
 Economic Policy Finance Other activitiesOther Activities
 

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Economic Policy and Management

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Egypt and the Global Economic Crisis: A Preliminary Assessment of Macroeconomic Impact and Response 
Between FY06-08, Egypt benefitted from a friendly international environment (favorable terms of trade, rapid growth of external demand and abundant international liquidity), and domestic economic reforms to grow at a yearly average of 7 percent. Unfortunately, the global economic slowdown that began in 2008 has reversed the favorable international environment that supported Egyptian growth. The global downturn is bound to have an adverse impact on Egypt’s growth during FY09-10. This note provides a preliminary assessment of the impact of the crisis on Egypt and the policy response to it. It is based on three technical background documents. The first one quantifies the overall impact using sector and long term growth data. The second one analyzes the short term fiscal, monetary and exchange rate policy choices that Egypt faces. The third piece reports on the results of a survey of 200 Egyptian firms probing their sales, employment, capacity utilization, and investment in recent months. The present note presents an integrative synthesis of the background work. The findings can be organized in six points. First, there exists a high correlation between the rates of economic growth in Egypt and the OECD countries and this correlation tends to be even higher during recessions. Second, the survey of private firms reveals a fall in output but not a corresponding reduction in labor or capital utilization. Third, the analysis of the employment elasticity of growth suggests that unemployment will rise to about 10 percent during 2009-10. The fourth point shows that public debt sustainability exercises are very sensitive to nominal GDP growth assumptions, and, in the near term, the factors that led to the rapid fall in public debt in the past few years are not likely to operate. The fifth finding reveals that the main constraint to Egypt’s growth in the short run is more likely to arise from the balance of payments. Lastly, factor productivity falls during periods of unsustainable policies (excessive public spending, public deficits relying on inflation tax financing, overvalued currencies and large current account deficits) while it tends to increase in periods of economic reform that lead to higher private investment. In terms of policy response, the report finds that the fiscal stimulus package equivalent to 1.3 percent of GDP is not likely to offset the full impact of the decline in aggregate demand. The report suggests an increase of 2 to 4 points in the public investment rate. Also, the note recommends the stimulus to be temporary for the fiscal situation to be sustainable. Another policy response finding appreciates how relevant non-spending measures as short-term intervention as long as they are revised constantly to ensure long-run sustainability and development of labor-intensive industries. Going forward, the note suggests the policy package aims at enhancing both labor productivity and fiscal sustainability in the medium term.

Policy Note: Export Diversification in Algeria (online soon)
In recent years, Algeria has experienced strong growth and macroeconomic stability due to a sound management of hydrocarbon wealth. However, the country faces the challenge to diversify its sources of growth, further reduce unemployment, and decrease vulnerability to adverse fluctuations in oil prices. Therefore, the Government of Algeria committed in mid-2007 to implement an industrialization strategy focused on export diversification. This strategy is the central component of its goal to diversify the economy. Eight sectors have been selected to benefit from an active industrial policy. This policy note introduces a new methodological approach based on the concept of “structural transformation” of the economy, and in particular of the export basket. Structural transformation is the process whereby countries change what they produce as part of their non-hydrocarbon export supply. The methodology integrates three complementary strategies for non-oil export growth: (a) exporting better of the same non-oil products, (b) exporting more of the same non-oil products, and (c) moving to new goods. This policy note analyses Algeria’s structural transformation status and its opportunities to move forward in a broader context. First the report reviews some of the traditional explanations for a lack of export diversification in an oil-exporting country and shows that these explanations do not seem to hold in Algeria. In fact, the report found that Algeria is overly concentrated in oil exports despite its relatively small endowments. Then, the policy note explores in detail Algeria’s production structure and develops a new methodology. Finally, the report offers policy recommendations.

Trade

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Morocco: Reorienting Trade Policy for Growth and Competitiveness  (online soon)
As a central part of its growth enhancing strategy, the Government has defined a vertical plan, focused on picking winner sectors and known as “Programme Emergence” to stimulate faster growth. As a complement to this, the Bank produced the 2006 Country Economic Memorandum (CEM). This report identified the horizontal main binding constraints to growth. It identified the anti-export bias embedded in trade policy as one of them. Since its publication, the Government has acted on many fronts to reduce such bias, but important challenges remain. In his letter dated November 13th, 2006, Morocco’s Minister of Finance has explicitly requested the World Bank’s technical support for the development of the country’s trade reform agenda, the elaboration of a comprehensive agricultural reform proposal, and for the completion of Customs reform. In addition, TA on trade modeling for assessing the impact of the FTAs and analytical and advisory activities on Morocco’s trade in services and agricultural goods, focused on the European Union, has been undertaken. The proposed work program aims to continue supporting the government’s growth and competitiveness agenda in the context of the Programme Emergence by pursuing five complementary objectives: (a) Quantify the impacts of ongoing tariff reductions in the context of regional trade agreements (notably the Euro-Med agreement) on fiscal revenues, imports, and employment; (b) Enhance the transparency and reduce the anti-export bias of the trade regime, including with respect to non-tariff measures, so as to provide better information to policy makers; (c) Collaborate with the elaboration of an agricultural trade reform strategy; (d) Contribute to the dialogue on developing a list of supply and offer priorities for negotiations with the EU, while reforming bilateral trade in agriculture and services; and (e) Collaborate with the completion of the on-going Customs reform; and more specifically with the simplification of procedures, including the reduction of dwell time in ports and airports.

Strengthening MENA’s Trade and Investments Links with China and India 
The spectacular economic rise of China and India over the past two decades has accelerated their trade with Africa, Latin America, and the Middle East and North Africa (MENA). Their demands for oil, gas, and other natural resources have been driving new relationships with MENA countries based not only on energy but also on trade, investment, and political ties. Indeed, Dubai has become the center of a new Silk Road, the intersection where people, capital, and ideas meet. And while the financial crisis that hit global markets in 2008 has placed downward pressure on growth, these new relationships are likely to deepen in the coming years. The report's main messages are as follows: a) demand for energy from China and India is expected to increase substantially in the future, thus greatly benefiting oil producing countries in the MENA region; b) the oil exporters in the Gulf have laid big bets on economic diversification and knowledge enterprises, bets they might win, but with lots of risk along the way. Oil price volatility may threaten the sustainability of the recent expansion; and c) the growth of China and India offers new market opportunities for the countries in MENA. Besides energy, potential opportunities, for fertilizers, petrochemicals, crude materials, agricultural products, and a number of manufactured goods where MENA has strong comparative advantages, remain unexploited.

Palestinian Trade: West Bank Routes
Trade flows in WBG account for nearly 85 percent of GDP. Israel is the major partner with probably 90 percent of exchanges. However, because of the deteriorating security situation, the Government of Israel has increasingly imposed restrictions and closures that impede trade. In addition, changes in the Israeli economy will reduced the market for traditional Palestinian products. Though the Israeli economy will remain WBG’s main trading partner for some time to come, future growth will depend upon Palestinian enterprises ability to reach beyond Israel and access new markets in the rest of the world. A previous paper analyzed the logistics of trade corridors from Gaza through Egypt as an alternative to sending exports via Israel. This paper extends this work and examines the viability of different trade routes from the West Bank. Another early paper describes the complex agglomeration of physical obstacles, administrative barriers and permit policies that Israel uses to restrict movement in the West Bank. This paper also builds on this work by quantifying some of the resulting costs.

Changes in Cross-Border Trade Cost in the Pan-Arab Free Trade Area, 2001-2008
Regional integration is a major feature of the trade policy strategy of all countries in the Middle East and North Africa. An important vehicle to achieve greater integration of Arab countries was the agreement to form the Pan Arab Free Trade in 1997 under Arab League auspices. Under the PAFTA all tariffs on goods of Arab origin were to be removed by January 1, 2008, which was subsequently brought forward to January 1, 2005. More recently, signatories of PAFTA have launched efforts to extend integration efforts to encompass trade and investment in services, and to increase efforts to deal with non-tariff measures restricting trade flows. This paper summarizes the results of a survey of trading firms in 9 PAFTA members. The survey compiled information on the extent to which the costs of trading across Arab borders have declined since PAFTA was implemented. The survey spans official trade and tax policies, the administrative requirements that confront traders, and the costs/quality of transport infrastructure. The survey suggests firms perceive PAFTA as being beneficial due to the removal of tariffs on intra-PAFTA trade. It also reveals a marked improvement in customs clearance-related procedures, with a substantive decline in the number of required documents and signatures, a significant reduction in the variance of clearance times, and fewer firms reporting having to make informal payments to officials. Thus, the survey reveals substantial satisfaction with implementation of PAFTA tariff liberalization. It also suggests that further action to reduce the trade costs associated with trade facilitation, enforcement of standards and other non-tariff policies is needed.

Morocco: Impacts of Free-Trade Agreements (online soon)
Morocco is one of the first countries in Africa and the Arab world to opt for economic and trade liberalization. This liberalization started in the 1980s in the framework of the Structural Adjustment Programs. This policy has recently being reinforced by the adoption of reforms on the elimination non-tariff measures on imports and exports, the simplification of the tax system on imports and the rationalization of customs. Also, Morocco has signed some free-trade agreements with the European Union, the European Association for Free-Trade, the United State of America, and Turkey. These agreements serve as principal means of the openness strategy aimed at strengthening the integration of the country in the global economy and in the regional environment. The liberalization and its requirements constitute a global challenge for the Moroccan economy, especially for domestic producers facing increased competition with imported goods and services. These agreements have short term challenges but also medium and long term opportunities. The gradual movement to the regime of free-trade should be facilitated by an effort to create a greater level of competitiveness and flexibility of production structures as well as the administration. Already, the openness has begun to create some gaps between common and preferential tariffs. To understand the impact of these agreements on the Moroccan economy, a macroeconomic and sectoral evaluation is necessary. This evaluation will help appreciate the potential effects of the liberalization of trade on economic activity in general. The general equilibrium model is used to compute these effects. Two simulations were conducted and the results show that the elimination of tariffs creates a faster growth in imports than in exports. The results also show that the domestic activities suffer greater competition by imported goods even though they benefit from lower inputs costs. Finally, sectoral plans adopted by the government have corrected for deficits through the improvements in the commercial balance and the current account.

Poverty

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Economic Growth, Inequality and Poverty: Social Mobility in Egypt between 2005 and 2008 (online soon)
This report is a fruit of the World Bank collaboration with the Ministry Social Development and CAPMAS. The report explores the new Household Income, Expenditure and Consumption Panel Survey conducted by CAPMAS to trace household consumption and living standards over 2005-2008. The report aims at assessing the effect of economic growth on poverty. What are the mechanisms of trickledown effect of growth, why is there some public discontent with the economic situation in Egypt despite improvement in key macroeconomic indicators? The report also addresses the effect of growth on different groups above and below the poverty line, and more importantly discusses the implications of poverty dynamics over 2005-2008 for the immediate future in the context of global economic crisis. The report demonstrates that Egypt has achieved impressive poverty reduction due to rapid economic growth. The number of poor has been reduced by 1.8 million which supports a view that a strong link exists in Egypt between macroeconomic processes and poverty reduction. The report finds that agriculture was the main engine of poverty reduction. However, economic growth has not resulted in immediate and universal improvement of living conditions for all. In fact, poverty remains a serious problem with 10 percent of the population still in chronic poverty. The report’s main finding points to the large degree of vulnerability and instability in households’ living standards. Even though per capita average consumption increased steadily by 3 percent per year during the period under investigation, at the household level, some experienced much faster growth, while others were exposed to large losses. At the same time, the quantity and quality of jobs have only weakly responded to growth. The report recommends policy action to sustain poverty reduction.

Technical Assistance on Poverty Analysis and Social Statistics, Lebanon (online soon)
Poverty monitoring, a priority area for the Government of Lebanon, requires an array of social and demographic statistics unavailable or not readily available in Lebanon. The World Bank is developing a project to develop the capacity of the Central Administration for Statistics (CAS) to produce demographic and social statistics for this and other purposes. The census of buildings and dwellings that CAS is planning for 2010-2011 has been identified as an initial candidate for implementation-technical assistance under the current project. In the absence of population censuses in Lebanon, the census of buildings and dwellings is one of the few sources of comprehensive data and information at the national level. The CAS has requested technical support for the Census of Buildings and Dwelling from the World Bank. This technical assistance will run over the life of the census, from the initiation of the census to the analysis of data, which would extend over the current and the coming fiscal year. In this context, the World Bank organized a one month mission to explore the prospects from this technical assistance. This note reports the assessment made during the first half of the mission. The assessment of the capacities of CAS in conducting censuses reveals that while CAS has qualified and experienced staff, there are serious problems on many other dimensions involved in conducting censuses. The systemic problems have been addressed in detail in the Statistical Master Plan (SMP) prepared several years ago. The most severe impairment of CAS capacity to conduct censuses is due to the deficit of mandated staff. Current staffing is below the critical mass required for sustainability. The assessment of the past reveals that previous census work was poor due to insufficient budget, insufficient staff, insufficient high level support from the government, and extreme administrative inflexibilities with respect to government support that made successful field operations next to impossible. This report recommends the implementation of the Statistical Master Plan as a basis for creating a modern statistical system in Lebanon.

Employment Dynamics and Job Creation in Iran’s Special Zones: Evidence from an Employers’ Survey (online soon)
The objective of this report is to compare employment dynamics between Iran’s mainland and some special zones which are subject to different labor and business regulations. This report follows a broader study of employment and labor market issues that was delivered to the Government of Iran in 2008. The early report focused on five broad policy areas that effect job creation, namely, macroeconomic stance, investment climate, labor market regulations, education and social protection. As follow-up, the Ministry of Labor and Social Affairs requested an in-depth comparative examination of labor market outcomes across the mainland and the special zones. Iran has experimented with a variety of special zones since 1980s. The main objectives of the zones were to attract inflow of foreign investment and diversify Iran’s non-oil exports and to act as a springboard for manufactured exports. An important factor differentiating the business environment in the zones and the rest of the country relates to labor laws. The labor laws applicable in the zones are known as “Regulations of Employment of Human Resources, Insurance and Social Security in the Free Trade – Industrial Zone”. Iran’s Labor Code, by contrast, is applicable elsewhere in the country, and is overseen by the Ministry of Labor and Social Affairs and the Ministry of Justice. Zone regulations tend to be more flexible than the Labor Code. This report assesses labor dynamics in the special zones as compared to the mainland through a survey of employers. Some recommendations of the report suggest that certain modifications in Labor Code may be worthwhile, that certain labor market reforms are necessary, and that labor market flexibility needs to be complemented by improvements in monitoring and regulatory enforcement within the zones.

Lebanon: Social Impact Analysis – Electricity and Water Sectors
This study considers implications for the consumer of current service provision and impending reforms in Lebanon’s utility sector. It aims to assess how different categories of households, specially the poor are affected by weak electricity and water service, the potential social impact of alternative reform scenarios, and implications of better cost recovery measures in both sectors on household welfare. The findings are based largely on analysis of primary data collected as part of a household survey specifically designed for this study; the recent technical sector assessment undertaken by the World Bank and by other domestic or external agencies and information gathered in the field during the preparation of the study. The electricity and water sectors face major challenges in increasing supply and improving service, and they both are in need of significant reforms. One of the most striking aspects in the electricity sector is the heavy dependence on the informal, private generation sector, which nonetheless operates outside any state supervision or guiding framework.

Gender

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Gender-Based Differences among Entrepreneurs and Workers in Lebanon
This report approaches the issues of the differences between the perceptions and labor markets experiences of male and female entrepreneurs and workers and their effect on the optimal deployment of females in the workforce empirically through two surveys conducted in 2007. The first was a survey of 235 formal sector firms and the second a survey of 615 workers. Given the important role of the Lebanese private sector in job creation combined with an interest to increase income earnings opportunities for women, this report seeks to explore the working environment for females and the conditions as well as barriers that women entrepreneurs face in the business and investment environment. All the analyses are gender based comparing male and female indicators. The findings of this report show that compared to males, female entrepreneurs tend to hire more women and to provide better working conditions to them. Thus making it easier for more women to become entrepreneurs should make a positive contribution both to female labor force participation and to working conditions in the country. The findings of this report also show that some categories of female workers (such as single women) find it difficult to get leave for various reasons. Married women appear to struggle in maintaining the same level of work commitment compared to those not married. To support work for women with children government could support initiatives for childcare. Going forward, it would be useful to complement these findings with a survey of the gender characteristics of the informal and micro enterprise sectors as well.

Public Sector Management and Governance

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Egypt: Governance and Anti-Corruption (online soon)
Issues of transparency and anticorruption are sensitive everywhere. In Egypt, the Government has adopted a cautious and incremental approach to these issues that seeks to make progress without alienating powerful constituencies. This study is being conducted as the Bank’s support for the Committee on Transparency and Integrity as requested by the GoE. The Bank’s strategy has been to provide technical assistance by supporting action-oriented research on a number of priority topics for the Government. One of the top priorities for the Bank’s analytic support has been conducting survey work on public attitudes towards corruption and the quality of service delivery, including data on both perceptions and actual experience. The Bank also supported assessments of Egypt’s legal and institutional framework for combating corruption and helped analyze a number of policy proposals, ranging from the creation of an Ombudsman to strengthening whistleblower protection legislation. This work was highlighted in a major policy workshop for senior decision makers in Cairo on May 13-14, 2009. Going forward, MNSED will produce a formal concept note to lay out next steps, and a follow-up mission is scheduled for after Ramadan.

Yemen: Anti-Corruption (online soon)
This technical assistance relates with assisting Supreme National Authority for combating Corruption in developing a national strategy. In order to develop the national strategy, the World Bank conducted two major diagnostic studies. The first study focused on National Survey on Registration, Investigation, Prosecution and Conviction under Corruption Crimes and the second study is a diagnostic study on Legal and Regulatory Framework and Institutional Arrangements to Combating Corruption. Based on the findings of both these studies, the Bank developed a Logical Framework Approach for National Anti Corruption Strategy and a Draft National Anti Corruption Strategy, both of which were presented in the National stakeholder’s workshop at Aden.

Jordan: Public Expenditure Management (online soon)
Jordan introduced a three-year medium expenditure framework (MTEF) with its 2008 Budget. The MTEF is part of an ambitious and far reaching agenda of budget management reforms that have included introduction of a new Chart of Accounts, installation of a Government Financial Management Information System, introduction of a program classification in the presentation of the Budget, earlier submission of the Budget to the Parliament, and revision of Jordan’s Organic Budget Law. The MTEF has been supported by a number of donors. The World Bank provided assistance during 2006 and 2007, through its Public Expenditure Management Technical Assistance (PEM-TA) operation, with the update of the joint Public Expenditure Review and initial design of the MTEF reforms and in coordinating donor assistance. This note provides an assessment of the progress in introducing the MTEF reforms. It has been prepared by the PEM-TA team at the request of the Director General of the General Budget Department (GBD). It is based on findings of a review mission that was undertaken in November 2008 and subsequent discussion of these findings at a forum meeting organized with GBD in January 2009. First, this note provides an overview of the progress made since the decision was taken in 2007 to introduce an MTEF. Then, the report considers MTEF process and architecture issues and emphasizes the urgency of developing a more robustly sequenced MTEF/Budget preparation calendar. Next, the report looks at the analytical capacity building issues that will need to be addressed in taking forward the MTEF reforms. Finally, the note summarizes the main recommendations from the review exercise.

Morocco: Public Administration Reform (online soon)
Since 2001, the government of Morocco has undertaken a deep reform of the public administration. This reform covers the public service, the budgetary system of the State. The budget reform aims at putting in place a new approach based on results and performance. This report is a guide which objective is to present the methodology to put in place a management system of performance: how to define for each program a set of indicators coherent with the strategic orientations of the ministry; how to make sure that the information system provides adequate data; and how to articulate the monitoring system with the budgetary procedure. There is a need to create a management system of performance to support the budget process by focusing on performance. The performance information will help improve the budget preparation. In general, monitoring the performance allows for measuring the progress and the actual results of a program in comparison to expected results. It also creates a sense of performance accountability to the government, the elected representatives and the citizens.

Tunisia: Performance Based Budgeting (online soon)
The Government of Tunisia has undertaken a reform of it budget process as well as public policies management. This reform known as “budget management by objective” combines a budget management system by program and a public management by performance. The reform substitutes results logic with resources logic to improve the efficiency and the transparency of public actions. At the end, the State budget, structured by programs, will contain objectives and indicators in order to measure the expected effects of public expenditure. Program managers will give account of the utilization of allocated resources and the results achieved. Evaluations will target both the performance and the financial rigor. Currently, four departments are selected as pilots to apply the new reform (agriculture and hydraulic resources, higher education, research and technology, professional training, and public health). This guidance note addresses the justification for a management dialogue, its institutional framework, object, means, principles and difficulties. The management dialogue constitutes the way of conceiving the relations between administrative services associated with a program based on procedures, datelines, and means.

Yemen: Public Finance Management (online soon)
This is the second phase of the Yemen Public Finance Management reform action plan. The Public Finance Management reform program adopted by Yemen was informed by a number of studies carried out by the World Bank and the IMF including a Country Financial and Accountability Assessment (2004), and a Country Procurement Assessment Report (2003). The first phase of the reform was to be implemented in the years 2006, 2007, and 2008. The basic objectives of this action plan, in the first phase were: the adoption of modern government budgeting principles; enhancing control and financial accountability, reducing resource leakage, improving financial reporting integrity and timeliness; and, improving transparency. The reforms are already bearing fruits: the reform of taxation with the implementation of self assessment basis; the enactment of a number of laws including the Anti-Corruption Law, the Tender law and the Local Authorities Law; the adoption of the GFS/COFOG budget classification standard; the cleaning up of the personnel rolls and the introduction of a biometric identification system under the Public Service Modernization project; and, the testing and piloting of an integrated financial management system. This report is one of the deliverables of World Bank’s Technical Assistance to the Ministry of Finance and is aimed to assist the government in finalizing its future PFM Action Plan (Phase 2) and in preparing the Public Finance Modernization project to be assisted by the World Bank.

Private Sector Development

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From Privilege to Competition: Unlocking Private-led Growth in MENA
The objectives and intended impacts of this report are threefold: informing policymakers and other stakeholders, proposing a new angle on private sector policies, and provoking a debate. First, informing. The report brings together new evidence on private sector development across the Middle East and North Africa (MENA), as well as the findings from the literature on this topic, particularly country-specific analysis. Its aim is to present current knowledge on business environment challenges in MENA—at least on selected issues presumed to be most pertinent to the region. It also aims to inform policymakers and other stakeholders of successful policy reforms in the region or elsewhere. Second, proposing a new perspective on public policies shaping the investment climate. This report is prescriptive, offering new routes for policy reforms. Rather than reiterate the list of standard reforms that might be ongoing in the region, this report will offer different angles to the business environment reform agenda. For example, in the legal and regulatory environment, the report emphasizes the institutional underpinnings of the reform process and its public sector governance aspects. Similarly, for industrial strategies the report will distance itself from dogmatic views on whether they are good or bad. Instead, it will focus on the institutional underpinnings of good industrial strategies, as well as on the design and evaluation of these interventions. Third, provoking a debate. Ultimately, this report aims to bring public sector governance to the center of the private sector development agenda. Public sector governance, accountability, transparency, credibility, rents, privileges, discretion, and state-capture are terms sprinkled throughout the report, much more prominently than the vocabulary usually associated with the private sector—technology, innovation, entrepreneurship, competitiveness centers, small and medium enterprises, incubators, and the like. Another objective of this report is to provoke debate among stakeholders in the MENA countries and to raise awareness that the private sector agenda in this region is mostly one of public governance.

Mobilizing Long-Term Finance: Next Steps in Egypt’s Capital Market Development
Egypt has a long history of capital market. At least, as early as 1870, Egypt was selling sovereign bonds to foreign investors. The Alexandria Stock Exchange, founded in 1888 hosted a lively marker in cotton futures until 1950. The Alexandria Stock Exchange eventually merged with the Cairo Bourse to form the Cairo and Alexandria Stock Exchange, now named the Egyptian Exchange. During the recent years of strong economic growth, Egypt has taken significant steps to modernize and invigorate its capital markets. This report finds a number of areas where further reforms can not only improve capital market efficiency, but also bring new investors into the process of accelerating Egypt’s economic development. Observers of the capital market generally agree that Egypt has made the most progress on reform of its equity market and governance, followed by development of its institutional investor base, with development of debt instruments and markets in last place. This assessment suggests a reverse order of priorities and effort going forward – i.e., first emphasis on broad and sustained efforts to develop debt instruments and markets; second on continued broad efforts to develop Egypt’s institutional investor base; and third on consolidation of recent reforms and gains in Egypt’s equity market and governance. This report looks at long term financing needs for Egypt’s corporate sector and infrastructure development before addressing debt instruments and markets. Also, the report reviews equity market development and corporate governance issues and makes recommendations about measures to encourage development of a broader base of institutional investors.

Egypt Investment Climate Assessment 2009: Accelerating Private Enterprise-Led Growth (online soon)
Egypt’s long-term vision of development includes the twin goals of achieving “high and sustainable growth and the alleviation of poverty and income disparity”. The government’s poverty reduction strategy has three pillars: growth, education and social safety nets. The growth pillar is all about private sector development, because employment growth and rising living standards are seen to depend on it. The government’s commitment to growth and poverty reduction led the Minister of Investment to request this assessment to better understand the dynamics and diversity of the Egyptian private sector, as well as the impact of the Government’s reform program. The Investment Climate Assessment begins from a framework that suggests that reform is not an issue of policy alone. Rather, the private sector response to a Government’s actions depends on a combination of the rules on the books, the way those rules are implemented, and the credibility of a government with investors. The response of private investment to past reforms has been weaker than in other regions --- a sign that investors do not fully trust that seemingly pro-business policies will be applied to them equally. Thus, the focus of the ICA is not only on the progress of policy reforms, but how they are experienced by firms. This ICA uses a parallel methodology and questionnaire and the same implementation arrangements as the previous ICAs to understand the state of the investment climate and the impact of reforms. It expands coverage to the informal sector utilizing a questionnaire with a number of comparable questions.

Morocco: Improving Business Environment: Toward a New Reform Process (online soon)
The improvement of business climate requires a better coordination of the reform process. The Government of Morocco has taken a step toward this reality by deciding to create the National Committee for the Improvement of Business Climate. The objective of this report is to propose to the government the main steps going forward in order to put in place the new committee to be at the center of the institutionalized and systematic reforms process. This process is founded on the concept of “project cycle” including for each reform project a preparation and identification phase, a mechanism of political decision, and an implementation phase. A survey of diverse inter-ministry reform groups reveals the following issues: a weak reform impact; a governance problem; lack of mechanism for decision and coordination; lack of project management logic; less formalized work methodology. This diagnosis reveals that the efficiency of the new committee will depend on its capacity to remedy the institutional weaknesses.

Finance

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West Bank and Gaza: Financial Sector Review 
The Paris Protocol in 1994 provided the Palestinians the authority to administer monetary and financial affairs in order to support the expected economic growth. In spite of the difficult environment, the Palestinians have managed to establish a financial sector composed of most of the expected sub-sectors: banks, a security market, insurance companies, payments system, housing finance companies, microfinance institutions and financial leasing companies. Yet, important needs for financial services have not been met. The PA has established two main institutions to regulate and supervise the financial sector: the Palestinian Monetary Authority for the banking sector, and the Capital Market Authority for the non-banking sector. This review makes some reform recommendations which coupled with the actions undertaken and planned by the PMA and CMA would provide an adequate financial sector structure and infrastructure to support expanded economic activity. Additionally, a comprehensive Financial Sector Development Plan could be considered, including monetary policy management issues.

West Bank and Gaza Housing Finance: Proposed Technical Assistance to the Palestinian Authority (online soon)
Housing needs are very important in WBG; however the financial system provides few resources for this purpose. Establishing of the Palestine Mortgage and Housing Corporation with the World Bank Group’s support at the end of the 1990s was an attempt to promote a market based supply of this financial service, by facilitating the channeling of long term resources towards mortgage originators and providing enhanced security through mortgage insurance. This proposal results from a request of the Palestinian Authority and the Palestinian Investment Fund to develop a technical assistance program to enhance the provision of housing finance in WBG, and to improve the environment of mortgage lending. Promoting this financial service has become an urgent goal due to the launch of large housing projects, in particular initiated by PIF, establishing of a new mortgage lender, and the availability of massive financial support by external donors for the development of housing. The first phase of this TA will address the legal infrastructure by focusing on consolidating disparate mortgage provisions, improving the mortgage enforcement process, associating judicial staff in the reform and developing judges’ awareness of lenders’ constraints, and designing a safety net aiming at easing the social consequences of foreclosures without inducing a relaxation of payment discipline. This phase will also address mortgage lending regulation, housing supply, access to housing and housing finance, and a sector-wide housing Finance training. A possible second phase could address some structural issues with a medium term impact. Three areas could be considered: the support functions to the mortgage market development through an overhaul of PMHC services; key elements of the real estate market infrastructure and functioning; and the PA strategy in the housing sector.

The Economic Effects of Restricted Access to Land in the West Bank
In the West Bank, land takes on a particular significance, as economic activity has been stifled by the ongoing conflict, and as much of the land is inaccessible due to Israeli restrictions on movement of people and access to natural resources. This policy note aims at analyzing the channels through which land access restrictions and market distortions constrain productive and public sector investment, and trace their effects on the development of key economic sectors. This note focuses on the West Bank, where the territorial fragmentation continues to have developmental implications. The land area controlled by the Palestinians is fragmented into multitude of enclaves, with a regime of movement restrictions between them. The effects on the Palestinian economy of the current territorial distribution extend much beyond its most obvious manifestations. The physical access restrictions are the most visible, with 38 percent of the land area reserved by the Government of Israel to serve settlements and security objectives and a system of checkpoints, road closures, the Separation Barrier, and permit requirements for access that constrain movement of people and goods within and out of the West Bank. These regulations tend to limit development within the confines of existing villages, with too little suitable space for demographic growth, causing irrational land use and unsound environmental management.

Yemen Financial Sector Reform (online soon)
The financial system in Yemen plays a limited role in the economy despite the implementation of a number of recent reform measures. Yemen’s financial sector is the weakest in the MENA region. The formal financial sector is in desperate need of reform. It is dominated by an underdeveloped banking system and has serious structural and institutional challenges. At the same time, the small size of the financial sector reflects deep-seated structural obstacles that limit its contribution to economic growth and development. Nonbank financial institutions, such as insurance companies, moneychangers and pension funds, and the Postal Savings System, play only a marginal role. There is no local stock market, although the government has a long-stated desire to set one up. The strategic objective of this activity is to strengthen the capacity of the financial system in Yemen, facilitate private sector development, and improve the performance and soundness of the system, in addition to enhancing the system’s capacity for financial intermediation. More specifically, the objective is to support reforms to strengthen the currently fragile financial system. These reform measures are aimed at: (i) improving the enabling legal and regulatory framework; (ii) strengthening the monitoring, supervision, and enforcement functions of the central bank; (iii) increasing compliance with international standards of capital adequacy and loan loss provisioning and related party lending; (iv) improving the governance of the banking sector; (v) conducting independent audits of state-owned banks, (vi) financial restructuring of state-owned banks and introducing measures to improve bank loan recovery; (vii) undertaking institutional and operational restructuring of state-owned banks and their possible privatization; and (viii) developing non-bank financial institutions.

Yemen Financial Sector Reform: A Proposed Action Plan (online soon)
Despite the Government’s reform measures during the last decade, Yemen’s financial sector continues to play a limited role in the economy. Deep-seated structural obstacles limit the size of the sector and its contribution to economic growth and development. Although progress has been made in recent years, underlying weaknesses in the legal and judicial framework, lack of proper accounting standards and disclosure practices, and scarcity of banking and financial skills remain major impediments to the development of the financial sector and the channeling of savings to productive investment. Yemeni authorities have expressed interest in developing a Financial Sector Reform Program, with the objective of building a more competitive financial sector, with a sound banking system industry, able in the medium-term, to provide modern and efficient financial services. A prerequisite for undertaking such an effort is the identification constraints preventing greater financial sector contribution in the economy which are discussed in this report.

Iraq budget Strategy Committee Workshop (online soon)
This workshop finalized work carried out to develop a Budget Strategy Document 2010-2012, Budget Circular and Ceilings. The workshop also included task specific training sessions. This is the first time the Government of Iraq has followed a systematic approach in compiling the budget strategy involving a broad participation from across Government. The participants were exposed to and receptive of the concepts of top-down and rigorous macro-fiscal forecasting and the consequences of dependence on petroleum revenues. The discussion on intergovernmental fiscal relations was open and substantive and the participants welcomed the Bank’s introduction on the subject. Going forward, the co-sponsors of the workshop will analyze the Budget Strategy Document and identify areas for future refinement and further capacity building assistance.

Iraqi Food Ration Program Workshop (online soon)
The workshop has three objectives. First, the workshop aimed to provide Iraqi decision makers with information about the characteristics of the poor in Iraq based on the work of the Poverty Reduction Strategy High Committee. Second, the workshop provided Iraqi decision makers with information about international experience with safety net reform. The workshop included participation and presentation by practitioners from India, Indonesia and Egypt, and the World Food Program. The last objective related to discussions on next steps in reform of the PDS. Next steps will focus on three aspect of reform: (i) poverty targeting of the ration; (ii) decentralization of PDS management; and (iii) modifications to the basket to emphasize domestically produced products.

Iraq Government Accounting Workshop (online soon)
The main objectives of the workshop were to review and refine a draft manual documenting the Iraqi government accounting framework, and to introduce key Government of Iraq officials to International Public Sector Accounting Standards. This will contribute to building the capacity of the GoI to understand and apply in Iraq international standards of government accounting practice. The workshop was designed in consultation with Iraqi government officials who had been working in Baghdad with British and American counterparts to document the Iraqi government accounting system. The aim was to review in detail all sections of the draft manual so as to develop a clear statement of the legal and regulatory framework in which government accounting is practiced in Iraq. The major outcome of the workshop was a revised user reference manual that documents the Iraqi Government Accounting Framework. The accounting manual will need to be the subject of a concerted training to ensure that the necessary implementation capacity is developed. The Bank’s PFM project may provide a suitable vehicle for this.

Joint Workshop on Civil Service Reform, Kurdistan Regional Government 
The objectives of this workshop were to assist the KRG to define its priority for achieving improved public administration and civil service management based on international best practices, and to engage counterparts, to encourage participation in defining reform priorities and action plans, to build capacity of counterpart agencies. The workshop provided an important opportunity for the KRG, federal Ministry of Planning and the World Bank to work together to identify key priorities necessary to strengthen the civil service in Kurdistan. Given the presence of federal government officials, the workshop was also able to act as a catalyst in arousing interest in the issue of civil service reform in the rest of Iraq. Areas of focus during the workshop included: international and regional experience in civil service reform; the KRG’s civil service reform strategy; the KRG’s legal and institutional framework; pay and employment reform in an international perspective and in Yemen; and KRG Civil Service Reform Action Planning.

Joint Procurement, Financial Management and Disbursement Workshop, Iraq-Jordan (online soon)
This is a workshop organized jointly for Iraq and Jordan on May 6 – 7, 2009 on Project Management with regard to procurement, financial management and disbursement. The training was organized in four sessions. The first session introduced the concept of project management and presented the Project Appraisal Document. The second session addressed the notions of project logical framework, project implementation plan and procurement planning. The subject of the third session included the procedures for control of project (time, cost, resources and scope) and how to manage variance (change management). The final session presented the project reporting requirements

Syria Governance Symposium and Reform Action Plan (online soon)
In August 2008 the Government of Syria requested World Bank support to organize a Symposium on Governance. The Symposium’s objective was to discuss and endorse
a governance reform action plan and to launch a public dialogue aimed at raising awareness about the importance of governance within Syria’s broader reform agenda. As a result of consultations during the preparatory missions, three areas were identified as potential pillars: public financial management, anti-corruption and civil service reform, and corporate governance. The reforms under the PFM pillar include: the budget preparation process, budget integration and fiscal reporting. The anti-corruption and CSR pillar of the action plan combines reform measures with diagnostic and analytical tools. One component under this pillar is the decision to expedite ratification of the United Nations Convention Against Corruption. Ratification will be accompanied by a gap analysis and a legislative stocktaking exercise that will lead to the harmonization of the Syrian legal framework with UNCAC. The CSR component also includes the introduction of job descriptions and a new ranking system within the public administration. Finally, the corporate governance pillar was included as a result of high demand from the private sector. The recent launch of the Damascus Securities Exchange has led representatives of the private sector to realize the importance of adopting corporate governance standards in order to improve their regional and global competitiveness. Another component of this pillar is a banking sector assessment that is already underway based on a request from the Central Bank and with the strong support of the Minister of Finance. The next steps consist of forming task teams for implementing the various components of the action plan in 2009, which will involve detailed inputs on both the Government of Syria and Bank sides.

Other activities

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Infrastructure and Economic Growth in Egypt 
This study analyzes the situation, trends, and growth effects of infrastructure in Egypt within an international context. It examines the major sectors of infrastructure, including electricity generation, transportation, telecommunication, and water and sanitation. The study shows that Egypt has attained a level of infrastructure performance consistent with its level of economic development, and that Egypt performs as well as, or better than, comparator countries in most infrastructure indicators. However, Egypt performs slightly lower than expected on road network length and access to sanitation facilities. The study shows that if infrastructure expenditure in Egypt rose permanently from its current level of 5 percent of GDP to 6 percent, the growth returns would be rather small in the first years but would gradually rise. The calculations presented in this paper reveal two very important aspects about the decision of investing in infrastructure: fiscal sustainability and social welfare. The study implies that the merits of increasing infrastructure have to be weighed against the costs of an expansion in government size and that renewed infrastructure investment should be considered in the larger context of public sector reform. Rationalizing public expenditures can release resources to be used in the generation of infrastructure. The study recommends Egypt consider the experience of other countries where stronger participation of the private sector in the provision of infrastructure had led to significant productivity gains.

 




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