54015 March 2010. Number 23 THE ARAB WORLD INITIATIVE AND REGIONAL INTEGRATION Shamshad Akhtar1 Introduction: The March 24, 2010 Ministerial framework for integration; the absence of well Consultation to discuss Regional Cooperation structured, readily accessible financial and Integration initiatives for the Arab World arrangements; and deep differences in was a key milestone in the Arab World competitive, legal and regulatory frameworks Initiative, one of the six strategic directions across countries have impeded the region's outlined by President Zoellick in October 2007 2. ability to work collectively. This important first round of regional deliberations was hosted under the patronage of Tackling the regional integration agenda the Ministry of Investment of Egypt. The undoubtedly appears daunting, but so it was for backing of Egypt and its leadership in all other successful regional blocs ­ two cases in supporting cooperation within the region is point are the European Union and ASEAN, that critical given its strategic standing, location and have emerged as strong blocs after only decades resource base. Going forward, the plan is to of incremental political commitments supported rotate events to discuss Arab World cooperation by negotiation and background work on through different locations across the region. institutional, legal, and policy frameworks. Challenges of Regional Integration in MENA: The Challenge of Unemployment and the The Middle East and North Africa (MENA) is a Promise of Regional Integration: Today, region with both commonalities and diversity, countries across the MENA region are faced and has significant potential to come together to with a serious problem of unemployment, underpin regional prosperity and stability. The particularly high among youth - a rapidly region has already made some important growing demographic. These young people inroads on this front, often overlooked amidst cannot all be absorbed within national the political noise of international relations. Not jurisdictions alone, and industries cannot only has the region a tradition of sharing its expand employment sufficiently unless they resources but strong regional ties have already have competitive access to larger markets. In laid the foundations for discussions on an Arab particular, the region needs to better exploit the gas pipeline, an Arab power grid and the potential of small and medium industry, which sharing of scarce water resources. There is also is the engine of growth and employment evidence of growing capital and labor mobility generation. within the region. It is these considerations and factors which have However regional initiatives remain somewhat motivated our client countries to think beyond patchy and fragmented and the process of their own boundaries, and demand support integration is complicated by political realities. from the World Bank to support and structure The lack of a common and effective institutional initiatives which would help in fostering collective action, the adoption of common standards and regulations -- be it in electricity, 1 Shamshad Akhtar, Vice-President, The Middle East North Africa banking or other sectors -- and the promotion of Region, The World Bank. 2 regional facilities and products. For more on the Strategic Themes go to: http://go.worldbank.org/56O9ZVPO70 World Bank Initiatives on Regional management and building regional Integration: Responding to this demand, the capacities in this area. World Bank has launched two important regional initiatives backed by stakeholders from The Bank will soon launch a GCC within and outside the region. environmental initiative with the support of funding from Kuwait. The Bank is also The Center for Mediterranean Integration (CMI) working on a Food Security Facility to help was launched in October 2009. The Center, regional partners strengthen logistics for which has the backing of the Union for procurement, storage facilities and Mediterranean political process, will focus on commodity hedging mechanisms within the knowledge and information sharing from good Region. practices, alongside network building between the region and Europe3. Under the AWI, the World Bank is supporting the development of one gigawatt The focus of this Quick Note, however, is on of Concentrated Solar Power generation in activities that fall under the second regional the MENA region. This will involve setting initiative --The Arab World Initiative (AWI). Six up eleven commercial-scale power facilities, months ago at the Annual Meetings of the alongside associated transmission World Bank in Istanbul, the Bank, with the infrastructure in the Maghreb and Mashreq support of the Bank's Governors from the Arab for domestic supply and exports, as part of countries agreed that the AWI would focus on Mediterranean grid enhancement. This three broad areas: (i) launching a range of project will exploit the untapped potential of regional projects to enhance resource sharing, solar power in the region and help resource infrastructure development and connectivity; (ii) and energy diversification in countries promoting best practices, advocacy and witnessing a decline in access to traditional knowledge sharing mechanisms; and (iii) energy resources. The Bank has mobilized promoting harmonization of regional standards Clean Technology Fund concessional and regulations. financing of $750 million to support this. Based on this framework, the World Bank is The WBG has developed a concept paper for well advanced in a number of areas. A few an Arab Infrastructure Facility which will specific milestones and initiatives are listed promote development of cross border below: infrastructure and trade facilitation to enhance regional trade and connectivity. A range of regional flagship studies have Our estimates suggest that MENA needs to been completed providing regional invest $75-100 billion per year in perspectives to private sector development infrastructure to sustain the 5% average challenges, education and water resource growth rate of recent years and improve its management, and work is underway on economic competitiveness as demand for financial sector and climate change issues 4. infrastructure rises. Cross-border The Bank is to launch more sub-regional infrastructure such as a pan-Arab Railway, economic analysis, including on cross electricity grid interconnections, a gas border transport and facilitation. pipeline extension, regional road network and investments to mitigate climate change The Bank and the Arab Water Academy had all require us to leverage a range of rich deliberations in the UAE to agree on a instruments in the Bank Group and the way forward for promoting water resource Region as a whole. We need also to look at ways to pool both public and private 3 resources at the regional level for the For more on this see MNA K&L Quick Note #19 ­ delivery of regional products. In this accessible by typing Quick Note at Worldbank.org search site. regard, we have launched diagnostics around PPP policy, legal and regulatory March 2010 · Number 23 · 2 frameworks related to regional infrastructure projects, and IFC colleagues will offer advisory and transaction support. Contact MNA K&L: Emmanual Mbi, Director, MNA Operational Core In addition, we have developed a potential Services Unit: pipeline of cross-border projects that might David Steel, Manager, MNA Development be privately or publicly financed under the Effectiveness Unit: Facility. Regional Quick Notes Team: The WBG has developed a conceptual Omer Karasapan, Roby Fields, and Aliya Jalloh framework for an Arab MSME facility which Tel #: (202) 473 8177 will help resource mobilization; risk The MNA Quick Notes are intended to summarize mitigation arrangements; and needed lessons learned from MNA and other Bank Knowledge capacity building for both micro and small and Learning activities. The Notes do not necessarily entrepreneurs as well as participating reflect the views of the World Bank, its board or its financial institutions. member countries. In working on these initiatives, the Bank plans to focus on unleashing the potential of the Region's private sector, whose involvement is critical in promoting investment, trade, employment, and economic growth. However, in a number of cases we will have to back private sector initiatives with creative public- private partnerships. A considerable amount of consultation on these facilities has already taken place in the region. Including a one day workshop in Beirut in Mid- March of this focused on a recently completed study on Mashreq cross border transport and logistics that is an input to potential activities under the Infrastructure Facility. The findings and project details will be part of the discussions at the Conference. These and other proposals will benefit from the advice and counsel of the participants as the region moves forward on both initiatives March 2010 · Number 23 · 3