The World Bank

History making Policy

The political economy of spatial policy in the Middle East and North Africa

REGIONAL AND TERRITORIAL DEVELOPMENT: THE WORLD BANK’S EXPERIENCE

Alex Kremer

Middle East and North Africa Region

Sustainable Development DepartmentEuropean Commission’s “Open Days”

Brussels, October 8, 2008

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We think of a cycle of economic agglomeration…

• Explicit policies• Economic

incentives• Poor track

record

efficiency

economies oflocation

enterprisesmove in

agglomeration

Policy response

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• 2008-9 World Bank study on Spatial Inequality in Middle East and North Africa

• A response to politicians’ concerns : spatial inequality = migration to the cities,

= urban unemployment,

= religious radicalism

= political opposition

= a colonial vestige• How to give good economic policy advice that

still takes account of political concerns ?

What if we add politics ?

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Does spatial history …

• C19th – 1950s: Limited geographical spread of colonial settlement. Investment concentrated in port cities and administrative capitals.

• Post-independence: consolidation of unitary administrations on governorate model.

*interior ministry

sector ministry

sector ministry

governor governorsector

directoratesector

directoratesector

directoratesector

directorate

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… tell us where we are ?

• 1960s-70s: state-led industrialisation strategies: regional and metropolitan preferences.

• 1990s-2000s: fiscal constraints undermine governments’ ability to guarantee livelihoods: perceptions of exclusion from growth.

migration urban unemployment

urban opposition

political demand forurban/metropolitan

subsidies

regional transfers asa political strategy

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In Egypt, people feel left out of growth …

• Male youth unemployment rate• 21% in 2002

• Since 2006 …• Real GDP growth 7%• Real wage fall 1%

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… and there is spatial inequality …

الوادىالجديد

مطروح

البحراالحمر

المنيا

قنا

أسوان

الجيزةجنوبسيناء

شمالسيناء

أسيوط

البحيرة

سوهاج

السويس

سويف بنى

الفيوم

القاهرة

كفرالشيخ

االسماعيليةالشرقية

الدقهليةالغربية

المنوفية

االسكندريةبورسعيد

دمياط

القليوبية

مدينةاألقصر البحراألحمر

المتوسط البحر

الفقر معدل

فقيرا االقل

الفقيره

االكثرفقيرا

´

Low poverty rate

Medium

High

Rural person 2 ½ timesMore likely to bebelow poverty line.

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… but is it the squeaking wheel …

60%

65%

70%

75%

2,000and less

2,000-5,000

5,000-10,000

10,000-20,000

20,000-50,000

50,000-100,000

500,000and

more

size of town

con

fid

ence

in

go

vern

men

t

Political support for government is weakest in large cities.

Source: World Values Survey

The World Bank

… that gets the oil ? Implicit taxation of farmers until

1990s: forced deliveries (rice) and low prices (cotton).

Central transfers to governorates not compensating for differences in tax base.

36% of government spending on energy subsidies (2006).

Local govt share of spending 22% to 16% 1996/7 to 2005/6.

Sanitation coverage. Cairo 98%. Qena 10%.

Govt transfers as % of expenditure 02/03

82

84

86

88

90

92

94

0 2000 4000

GDP per capita USD ppp 01/02

%

Govt transfers as% of expenditure02/03

.

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metropolitanpolitical

demand

metropolitanspending

bias

migrantsmove in

And we have a politico-economic cycle

efficiency

economies oflocation

enterprisesmove in

agglomeration

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“Spatially-blind” policies that might erode the politico-economic cycle

Letting farmers benefit from high world prices; Administrative deconcentration; Bottom-up planning of local investments; Improve quality of provincial public health and education

facilities; Converting commodity subsidies to targeted social

programmes. Giving provincial businesses adequate access to officials

Reforming public fiscal and administrative systems and structures Addressing the social motivation for migrationMaking government more accountable to provincial populations

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THANK YOU

akremer@worldbank.org