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

1. Enhancing legal conditions for infrastructure
investment in the Mediterranean
Raising awareness of risk mitigation instruments

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. 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. … 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. … 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. 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. 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. 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. 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. The ISMED Support Programme
Stages of intervention

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. 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