Enhancing legal conditions for infrastructure
investment in the Mediterranean
Raising awareness of risk mitigation instrum...
Infrastructure is key for job creation
and economic growth

• Strengthened infrastructure reduces production costs, raises...
Rising demand for infrastructure
in the MENA region…

• Demand for infrastructure in the MENA region has been rising due t...
… in a context of declining private
investment ...
• Private infrastructure investment has become increasingly scarce, due...
… creates an urgent need for improved
legal conditions for investment ...

• Attracting more private investment means crea...
Enhanced investment security
for Mediterranean infrastructure:
Two pillars of EU support
The Investment Security in the
Me...
Enhanced investment security
for Mediterranean infrastructure:
Two pillars of EU support
The ISMED Risk and Cost Sharing
T...
The ISMED Support Programme
Scope of intervention

New infrastructure projects characterized by:
• Private sector particip...
The ISMED Support Programme
Approach

Evaluate

• Evaluate, through project-specific
assessment missions, the level of pro...
The ISMED Support Programme
Stages of intervention
ISMED Support Programme assistance:
Egypt River Transport Project
Beneficiary: River Transport Authority (RTA)
Project: Pu...
Key contacts

Mr. Carl DAWSON
ISMED Support Programme Coordinator
MENA-OECD Investment Programme
Carl.Dawson@oecd.org
Mr. ...
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Enhancing legal conditions for infrastructure investment in the Mediterranean: Raising awareness of risk mitigation instruments

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Presented at the inaugural conference of the MENA-OECD Investment Security in the Mediterranean Working Group, 9 December 2013

Published in: Economy & Finance, Business
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Enhancing legal conditions for infrastructure investment in the Mediterranean: Raising awareness of risk mitigation instruments

  1. 1. Enhancing legal conditions for infrastructure investment in the Mediterranean Raising awareness of risk mitigation instruments
  2. 2. Infrastructure is key for job creation and economic growth • Strengthened infrastructure reduces production costs, raises productivity and has long term beneficial impacts on living standards and employment opportunities. • It also has a direct short-term impact on jobs – according to a recent study1, the MENA region could create 2 million direct jobs (2.5 million direct, indirect and induced infrastructure-related jobs) by meeting estimated annual infrastructure investment needs. • Longer term, a 1% rise in GDP growth from infrastructure spending could create 9 million jobs over 10 years. 1 World Bank [2012], Job creation through infrastructure investment in the Middle East and North Africa, by Elena Ianchovichina et al., Policy Research Working Paper 6164.
  3. 3. Rising demand for infrastructure in the MENA region… • Demand for infrastructure in the MENA region has been rising due to longstanding factors such as population growth, rapid urbanisation and economic expansion • This trend has been greatly amplified by the Arab Awakening as governments come under pressure to increase living standards and improve public services and the business environment • MENA region infrastructure needs through 2020 are estimated at about $106 billion per year or 6.9% of annual regional GDP1 1 World Bank [2012], Job creation through infrastructure investment in the Middle East and North Africa, by Elena Ianchovichina et al., Policy Research Working Paper 6164.
  4. 4. … in a context of declining private investment ... • Private infrastructure investment has become increasingly scarce, due to the global economic crisis and commercial bank deleveraging, political instability in some countries, and tightened bank prudential regulations. Private participation in infrastructure (PPI) projects in the MENA region, by type of PPI, 1990-2012
  5. 5. … creates an urgent need for improved legal conditions for investment ... • Attracting more private investment means creating the improved legal and regulatory conditions that investors require – and highlighting guarantee instruments that could cover residual risk • Sound legal and regulatory conditions include:  Strong commercial law  Intellectual property rights and arbitration rules  Transparent licensing processes  Anti-corruption provisions  Adherence to international investment treaties
  6. 6. Enhanced investment security for Mediterranean infrastructure: Two pillars of EU support The Investment Security in the Mediterranean Support Programme (ISMED Support Programme) • Seeks to expand private infrastructure investment in the Mediterranean region via:  Advisory services to governments on reducing the legal and regulatory risks of private investors in specific infrastructure projects  Policy dialogue bringing government and private sector together to help ensure that project-specific recommendations lead to broader reforms  Information for investors on risk mitigation instruments available to cover residual risk in the MENA region
  7. 7. Enhanced investment security for Mediterranean infrastructure: Two pillars of EU support The ISMED Risk and Cost Sharing Toolkit of the NIF (Neighbourhood Investment Facility) • The ISMED Risk and Cost Sharing Toolkit will provide targeted measures like support to risk-sharing mechanisms (making funds available to help private investors by reducing their exposure to risk) and guarantee schemes. • Much of the €200 million in EU grants expected by the NIF through 2014 will underpin the toolkit, which could leverage at least €2 billion from European public institutions and private investors for infrastructure projects in the Neighbourhood region.
  8. 8. The ISMED Support Programme Scope of intervention New infrastructure projects characterized by: • Private sector participation • Advanced implementation stage: post-feasibility study but pre-financial closing • Experiencing legal, regulatory or guarantee-related obstacles • Likely to have high development impact in terms of :  Growth and jobs – for example, highways and ports facilitate the transit of goods from producer to market to end-consumer  Basic services essential to development – water, electricity, sewage, hygiene, housing  Technology transfer
  9. 9. The ISMED Support Programme Approach Evaluate • Evaluate, through project-specific assessment missions, the level of protection offered by legal frameworks Recommend • Identify gaps in protection and make policy recommendations to address them, via project-specific assistance missions and broad policy dialogue. Inform • Provide relevant information concerning risk mitigation products to potential investors and public officials (via an online database and a quarterly newsletter)
  10. 10. The ISMED Support Programme Stages of intervention
  11. 11. ISMED Support Programme assistance: Egypt River Transport Project Beneficiary: River Transport Authority (RTA) Project: Public-private partnership (PPP) for the construction and operation of 4 ports on the Nile. Part of a national strategy for port development that aims to increase the market share of river and Nile River Transport Project Egypt rail transport to reduce pollution, lighten road traffic density, and limit the cost of road fuel subsidies. ISMED Support Programme assistance: To improve the legal framework and risk-sharing mechanisms involved in the construction and operation of port infrastructure under PPP. Forms of assistance: - Advice on the horizontal legal framework (PPP Law) and sectoral legal framework with the objective of eliminating obstacles to private investment - Definition of an optimal allocation of risk between the public and private parties - Preparation of model tender documents including the standard terms and conditions for this type of project and a clear risk allocation that is acceptable to all parties
  12. 12. Key contacts Mr. Carl DAWSON ISMED Support Programme Coordinator MENA-OECD Investment Programme Carl.Dawson@oecd.org Mr. Andrew FITZPATRICK MENA-OECD Investment Programme Andrew.Fitzpatrick@oecd.org www.oecd.org/mena/investment With the financial assistance of the European Union
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