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PRIVATE PARTICIPATION IN MEDITERRANEAN INFRASTRUCTURE Public Disclosure Authorized NNNEEEWWWSSS

Programme on Private Participation in Mediterranean Infrastructure World Bank/European Commission

Issue no. 15 – April 2003

Public Disclosure Authorized Telecom

Regional The number of mobile subscribers in the Middle East and Africa region grew 35 percent during 2002. The subscriber base has reached nearly 84 million at the end of December 2002. The Middle East ended the year with just over 47 million subscribers and a penetration rate of 16.6 percent. Yearly growth of just below 30 percent in the region was down slightly, compared to 32.6 percent in 2001. The boost in number is likely to be the result of a trend that has seen international operators and vendors giving emerging markets a greater proportion of their attention in the last year, given the growth potential of such regions compared with the saturated markets of the more developed world. (Cellular News, 10/04/2003, http://www.cellular-news.com) Public Disclosure Authorized Telecom regulators from fourteen Arab countries attended a forum on telecom regulation in Algiers. The forum was jointly organized by the Algerian Regulatory Authority for Post and Telecommunication and the International Telecommunication Union. The purpose of the meeting was to create a knowledge network to further the development of telecommunication legislation and technologies in the region. More information is available at http://www.ituarabic.org/reg/index.htm. (Le Soir d’Algerie, 21/04/03, http://www.lesoirdalgerie.com)

Algeria Orascom Telecom , the new entrant in the Algerian mobile market, launched its service in February 2002. After less than 10 months of operations, the company occupies 70 percent of the market. The start of duopoly competition between Orascom and Algérie Télécom, the incumbent operator, in the GSM segment has increased GSM

Public Disclosure Authorized penetration by 400 percent in 2002, and 330,000 new subscribers were added in 2002. (Menareport, 23/04/2003, http://www.menareport.com)

Bahrain The Telecommunications Regulatory Authority (TRA) has selected the Bahraini company MTC-Vodafone, a consortium owned by UK's Vodafone and Kuwaiti and Bahraini investors, to provide the Kingdom’s second mobile telephone license. The new entrant plans to launch its services by the fourth quarter of 2003 and invest more than

1/9 US$120 million over three years in building its network and developing third-generation (3G) mobile services. The concession to operate the licence is valid for 15 years. MTC- Vodafone Bahrain will compete with Batelco to meet rapid expanding demand for mobile services in Bahrain. (Gulf Daily News and other sources, 20/03/2003, http://www.gdn.com.bh)

Egypt 's two mobile phone firms, Vodafone Egypt and the Egyptian Company for Mobile Services (MobiNil), are discussing with state-owned operator Telecom Egypt to extend their exclusivity rights on the mobile network. They each offered to pay Telecom Egypt one billion Egyptian pounds (US$168 million) not to launch its mobile network for another five years. Vodafone Egypt and MobiNil run the only two cellular networks in Egypt. Telecom Egypt was expected to launch the country’s third GSM licensee in 2003. Egypt had just 4.4 million subscribers at the end of 2002, with a penetration rate of just 6%. However, it is feared that due to the current economic climate and market outlook, the local market cannot support another operator. (various sources)

French telecommunications giant Vivendi Universal has agreed to sell its 7 percent stake in Vodafone Egypt to British mobile operator Vodafone for US$48 million. This is pending the appropriate authorizations. Vodafone Egypt (formerly branded Click GSM) initially launched mobile services in 1998 as Misrfone Telecommunications. The company is owned by an international consortium, has over 1,900 employees, and paid-in capital of 1.2 billion Egyptian Pounds (US$202 million). (Menareport, 14/04/2003, http://www.menareport.com)

Egypt has joined the World Trade Organisation's Information Technology Agreement. This commits signatory countries to remove all tariff barriers to information technology products, such as personal computers and telecommunications equipment. (WTO News, 25/04/2003, http://www.wto.org)

Energy

Regional The African Energy Commission (AFREC) was inaugurated in Algiers on April 23, 2003. The Commission, which will serve as a central information exchange for energy related issues on the African continent, is the result of a three-year long process that started during a meeting of the Organization of African Unity in 2000. AFREC will develop a database to facilitate the flow of information on energy issues among African countries. AFREC is also expected to collaborate with the African Union, the New Partnership for Africa’s Development, as well as extend its network to include cooperation with Latin America. (La Tribune, 24/04/2003, http://www.latribune-online.com)

Algeria State energy company Sonatrach has awarded an AD10,141 million (US$123 million) million contract to a local joint venture to supply 300 kilometres of pipeline to expand the Transmed pipeline, which runs to Italy via Tunisia. Groupement Euro-Algerien des Tuberies (GREAT) is expected to take nine months to manufacture the 48-inch- diameter steel pipes. This will boost capacity of the pipeline to 27 billion cubic metres a year (cm/y) from 24 billion cm/y at present. The additional gas will be purchased by Italy’s Enel as part of a contract due to come into effect in 2005. GREAT is a joint venture of Alfatus and Pipe Gaz (Ghardaia), local subsidiaries of state-owned steel company Sider and steel tube manufacturer Anabib respectively. (MEED, 18/04/2003, http://www.meed.com)

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Jordan Turkish contractor Ozaltin Construction Company signed on April 6, 2003 a JD61.7 million (US$86 million) contract with the Government of Jordan to build the Wihdeh dam on the Syria-Jordan border. Construction is scheduled to last 30 months and entails building a 600 meter long dam with a capacity of 125 million cubic meters. The dam will supply water for some 11,750 acres of cultivated land in the Jordan Valley and drinking water for the residents of Zarqa. Syria will not be allocated water from the dam. Jordan is financing 25 percent of the construction costs, with the remainder being funded by the Arab Fund for Economic and Social Development, the Islamic Development Bank and the Abu Dhabi Development Fund. (MEED, 11/04/2003, http://www.meed.com)

Water

Lebanon The Lebanese Council for Development and Reconstruction (CDR) has called for bids to design, build, finance and operate a new wastewater treatment plant at Bourj Hammoud in north . The deadline for the submission of bids is October 14, 2003. The plant, which will cost between US$75 million and US$100 million, will have a flow rate capacity of 446,000 cubic meters a day and will serve all of north Beirut. The contract includes staff training and plant operations and maintenance for three to five years. It also includes the construction of a sludge incineration plant and the rehabilitation of an existing sea outfall. The two-stage scheme will be fully financed by the contractor. Jacobs Gibb, the UK arm of US consultant Jacobs Engineering Group, drew up the project specifications. (MEED, 11/03/2003, http://www.meed.com)

West Bank and Gaza International groups are preparing to submit bids for the contract to supervise, manage and maintain the water and wastewater system of the . The project would be funded by the World Bank and the Palestinian Water Authority will act as the executing agency. The client will be the Coastal Water Utility Board (CWU), which will be established and composed of representatives from Gaza’s 16 municipalities. Under the terms of the eight-year contract, the successful bidder will undertake full responsibility for the operations and maintenance of the infrastructure, in which some US$11.5 million will be invested, and for billing. It will also manage the municipality staff seconded to CWU, but it will have to seek approval from the PWA before exercising its power to hire and fire CWU staff. Various incentives are being offered to encourage international companies to participate in the bidding. The selected group will receive US$1 million a year if they meet predefined targets, while the World Bank has agreed to guarantee the revenues collected by the operator during the first four years of the contract. (MEED, 11/04/2003, http://www.meed.com)

Bulletin

EU/Regional Cyprus and Malta, signed the European Union (EU) Treaty of Accession on April 16, 2003 in Athens, Greece and are set to join the EU on May 1, 2004. The acceding countries will, from now on, take part in the Euro-Mediterranean meetings as active observers. (Euromed Synopsis no. 223, 24/04/2003, http://europa.eu.int/comm/external_relations/euromed/publication/synopsis224_en.pdf)

3/9 The 2003 MEDA Regional Financing Plan (€32 million), the 2003 Financing Plan for West Bank and Gaza, and the Support Fund to the Facility for Euro-Mediterranean Investment and Partnership (€25 million) were approved by the Euro-Med Committee on April 2, 2003. The Committee also discussed the mid-term review of the National Indicative Programmes (NIPs) for 2002-2004, and approved small changes to the NIPs of Algeria, Jordan, , Morocco, and Syria. The total amounts earmarked for each of these countries remain unchanged. (Euromed Synopsis no. 221, 03/04/2003, http://europa.eu.int/comm/external_relations/euromed/publication/synopsis221_en.pdf)

Thirty-seven countries, including the acceding countries set to join the European Union (EU) in 2004, participated in The 7th Meeting of Euro-Mediterranean Experts on Economic Transition, which was held in Brussels on April 23-24, 2003. The topic of the conference was "The economic impact of EU Enlargement on the Mediterranean partners: opportunities and challenges." The conference concluded that the main economic problems of poverty and unemployment in the Mediterranean economies need to be addressed by accelerated economic policy reforms. Information on the conference is available at http://europa.eu.int/comm/external_relations/w17/4.htm. (European Commission Weekly News Digest, 29/04/2003)

Averroès Finance, a €26.5 million venture capital fund for the Mediterranean region, was launched on April 24, 2003 by the European Investment Bank (EIB), and three French financial companies, CDC PME (Caisse des Dépôts Group), Proparco (AFD Group), and CEPAC (Caisse d’Epargne Group). The Fund will acquire holdings in venture capital funds established in Mediterranean partner countries of the Maghreb and Mashrek, which will in turn invest in Mediterranean SMEs. Averroès Finance is a joint stock company based in Marseilles, with capital contributions from CDC PME (€9 million), Proparco (€9 million), CEPAC (€5 million), and the EIB (€3.5 million). The Fund should increase its capital gradually to €30 million with the inclusion of new subscribers, such as European and Mediterranean public and semi-public shareholders, institutional investors and financial institutions. (EIB Press Release, 24/04/2003, http://www.eib.org)

EU/Egypt Egypt’s People’s Assembly ratified the Euro-Mediterranean Association Agreement on April 7, 2003. The Agreement had been signed between the European Union and Egypt in June 2001, and is due to enter into force in 2004 upon ratification by all EU Member States of the European Union. (Euromed Synopsis no. 222, 10/04/2003, http://europa.eu.int/comm/external_relations/euromed/publication/synopsis222_en.pdf)

WB/Lebanon The World Bank, in collaboration with the Brussels based Joint European Commission/World Bank Program on Private Participation in Mediterranean Infrastructure (PPMI), is organizing a Roundtable on Opportunities and Challenges in the Water/Sanitation and Power Sectors in the Middle East and North Africa Region. The event is scheduled to take place on May 27-28, 2003 in Beirut, Lebanon. The roundtable will bring together key policy-makers, water and power providers, operators and investors, expert guest speakers, donors and the international financing community. Discussions will cover economic growth and competitiveness, the role of reform and lessons learned with public-private sector participation. World Bank and European Commission experts will attend the event. More information is available at http://www.ppmi.org

4/9 The SMExchange Program: A Capacity Building Program for the Development of the Private Sector

Small and Medium Enterprises (SMEs) are a powerful force for poverty reduction. A dynamic SME sector can galvanize an entire economy by creating jobs and spurring growth. SMEs represent between 92% and 98% of all firms in Morocco, Algeria, Tunisia and Egypt, and the large majority (95%) of these SMEs have less than 10 employees. However, while SMEs dominate in numbers, and employ a large proportion of the population in these countries, they contribute insufficiently to the country output and have large untapped potential for generating growth and creating employment. In Morocco, for instance, SMEs employ 48% of the workforce but only accounts for 39% of value added and 35% of exports.

The impediments that SMEs face in the Middle East and North Africa (MENA) region are many and generally similar across countries. The firms operate in a business environment that is not conducive to small-scale investments, with high barriers to entry, distorted policies and regulations, limited access to the banking sector, low levels of professional and management skills, market access constraints, and inefficient commercial legal systems. Banks in the region operate in distorted markets and have limited expertise or incentives to lend to the SME sector, which have limited access to capital. This is particularly pronounced in the case of Algeria (and to a lesser extent in Egypt and Morocco) where a few large public banks dominate the financial scene. Moreover, SMEs lack access to quality business services and managerial and technical skills. They are poorly represented in the multitude of chambers of commerce and business associations that exist in the region, and generally do not benefit sufficiently from the services that these organizations provide.

Many of these constraints are being addressed through a variety of programs and instruments. One particular problem, however, that has received little attention until now is SMEs’ weak representation by their chambers and associations, which is where the SMExchange Program anchors.

The objective of the SMExchange Program is to build capacity through local intermediary organizations (chambers of commerce, business and trade associations, investment promotion agencies), by channelling expertise from similar European networks and institutions. Linking intermediary organizations from both sides of the Mediterranean can contribute to an increase in partnerships and business integration in the MENA region. SMEs can thus take advantage of stronger intermediary organizations which, in turn, can facilitate access to international markets, disseminate global industry knowledge, and provide SMEs with increased learning and investment opportunities. Intermediary organizations in developed countries, and especially in Europe, have been crucial in strengthening their SME members for a long time. The Chamber of Commerce of Milan, for example, has more than 300,000 members which it supports on a continuous basis with more than 900 employees. Other chambers and associations in the European Union provide similar assistance to member organizations, such as the Chamber of Commerce of Barcelona with 250,000 members, Marseille, with 50,000 members, or business associations like BDI in Germany or trade associations such as WKO in Austria.

5/9 Partnerships between organizations in developed and developing countries can be cost and time effective. Some of these partnerships are already taking place, although mostly on a bilateral basis. This tends to produce duplications, inefficiencies and put an excessive focus on micro-strategies instead of situating projects within a strategic and comprehensive framework.

The SMExchange Program and Key Areas for Action

The SMExchange Program started in 1999 at the initiative of the Chambers of Commerce of Milan and Barcelona, along with the International Chamber of Commerce and Crown Agents. This demand driven pilot program received the support of the World Bank through a US$100,000 grant from the Development Market Place and was tested in Morocco, Tunisia and Romania. A one week training seminar on procurement dedicated to both intermediary organizations and consulting companies was organized in Romania by Crown Agents in partnership with the Chamber of Commerce of Bucharest. Another forum for SMEs from Spain, Italy and Morocco was organized in Casablanca by the Chamber of Commerce of Barcelona in partnership with the Federation of Chambers of Commerce of Morocco.

The main observations that emerged upon the program’s initial testing phase, can be summarized as follows: a) intermediary organizations in Europe have developed a large set of tools to help their SME members; b) there is a tremendous interest from the intermediary organizations in the European Union to support their counterparts in the South; c) transfer of expertise has been provided, if any, only on a bilateral basis, which until now is outside of a strategic framework and is not providing a wider sharing of knowledge; d) the World Bank, at the end of the pilot phase, appeared as the only stakeholder with sufficient convening power to structure this transfer of know-how within a framework involving all interested participants e) a light and sustainable structure should support the implementation of the capacity building program.

Building upon these observations, five key areas for action were defined among the partner organizations: (i) institutional Environment: Intermediary organizations in the MENA region suffer from an inadequate institutional environment, which does not provide them with the minimum regular income needed to develop, on a sustainable basis, the appropriate range of products and services for their SME members; (ii) access to foreign markets: Intermediary organizations need to strengthen their competence for export promotion and access to foreign markets (e.g., organization of trade fairs locally or abroad, facilitation of export procedures, provision of basic intelligence on foreign markets); (iii) access to Financing: Intermediary organizations could provide crucial support to their members by informing them in a timely and efficient manner on how to access various sources of financing, including subsidized credit lines of bilateral donors; (iv) access to Training: All intermediary organizations should focus on providing, either directly or indirectly, access to training courses to their members; and (v) information and communication technology: Intermediary organizations in Northern Africa are facing a strong demand in the field of information technology, where the Internet is not yet a common means of communication between SMEs and intermediary organizations.

Implementation of the SMExchange Program

The SMExchange program is currently being implemented in the region through the establishment of local SMExchange desks. The desks have three main roles: a) to coordinate and improve the exchange of information on available SME support services between intermediary organizations in the European Union and the MENA region; b) to facilitate the launch of capacity building projects, in particular by

6/9 identifying possible bilateral and multilateral sources of financing; and c) to become a competent authority in the country on SME issues, i.e., a “knowledge hub.”

The SMExchange desks are managed by a liaison officer who is seconded by an intermediary organization from the European Union and is supported by a local officer from the hosting local intermediary organization. The liaison officers are seconded to the MENA region for a three year period. Officers work for all the intermediary organizations in the North and South and operate as network engineers linking the two regions through better communication, information sharing, and capacity building. They are also responsible for mobilizing funds for SME development.

The first SMExchange desk has been opened in Morocco and is hosted by the Federation of Chambers of Commerce in Rabat. The desk is co-managed by Frédéric Szabo from the Chamber of Commerce of Marseille and Mohammed Boudhaim from the Moroccan Federation.

A SMExchange Portal has been set up (http://www.smexchange.org). The website, available in Arabic, English, and French, is a market place for information sharing among intermediary organizations from the northern and southern parts of the Mediterranean, and serves as a strategic tool for capacity building of intermediary organizations in MENA countries, with the aim of increasing trade and direct investment among SMEs on both sides of the Mediterranean.

This article was written by the SMExchange Program team. Fore more information, please contact Christian Schmidt ([email protected]) or Gilles Garcia ([email protected]), or visit the SMEXchange Program website at http://www.smexchange.org

Upcoming Seminars and Training

Energy European Wind Energy Conference 2003 Organiser: European Wind Energy Association Location: Madrid, Spain Date: June 16-19, 2003 Fore more information: http://www.ewea.org/src/2003EWEC.htm

MEED Power & Water Organiser: MEED Location: Abu Dhabi, UAE Date: June 2-4, 2003 Fore more information: http://www.meed.com/nav?page=meed.conflist.conference&resource=258375

Regional Consultation Workshop - Middle East and North Africa Region Organiser: Extractive Industries Review Location: Marrakech, Morroco Date: June 29-July 2, 2003 Fore more information: http://www.eireview.org

7/9 PPI/PPP Debt & Equity Finance for PPP/PFI Organiser: SMi Conferences Location: London, UK Date: June 30, 2003 For more information: http://www.smi-online.co.uk/events/overview.asp?is=3&id=822

Infrastructure in a Market Economy Organiser: Harvard JFK School of Government Location: Cambridge, MA, USA Date: July 13-25, 2003 Fore more information: http://www.execprog.org/programs.asp?programid=16&displaymode=view

Public-Private Partnership Policies and Strategies: Improving Efficiency and Quality in Public Service Delivery Organiser: IP3 Location: Washington, D.C., USA Date: July 14 - August 8, 2003 http://www.ip3.org/t_workshops_1312.htm

Regulation Managing Regulatory Commissions: Mastering the Process and Procedures of Regulation Organiser: IP3 Location: Washington, D.C., USA Date: June 2-20, 2003 Fore more information: http://www.ip3.org/t_workshops_1309.htm

Transport 1st Mediterranean Logistics and Transport Forum/MEDA-Logistics Forum 2003 Organizers: Consorci Zona Franca, Barcelona Chamber of Commerce, Association of Chambers of Commerce and Industry of the Mediterranean Location: Barcelona, Spain Date: June 17-18, 2003 Fore more information: http://www.silbcn.com/new2003/english/default.htm

Publications and Articles

Competition in European Electricity Markets – A Cross-Country Comparison Author: Jean-Michel Glachant & Dominique Finon (eds) Publication date: May 2003 Fore more information: http://www.jm.u-psud.fr/~adiselec/papiers/jmgdf.htm

8/9 European Direct Investment in the Mediterranean Countries Author: Stéphane Quefelec, EuroStat Publication date: April 2003 Fore more information: http://europa.eu.int/comm/eurostat/

A First Assessment of Meda Economic Co-operation Author: DG EuropeAid, European Commission Publication date: April 2003 Fore more information: http://europa.eu.int/comm/external_relations/euromed/publication/special_feature36_en. pdf

Private Participation in Infrastructure in Developing Countries: Trends, Impacts, and Policy Lessons Author: Clive Harris, Private Sector and Infrastructure, World Bank Publication date: April 2003 Fore more information: http://publications.worldbank.org/ecommerce/catalog/product?item_id=2379513

ICT, Economic Growth and Poverty Reduction Author: John Daly, Global Information and Communication Technologies, World Bank Publication date: March 2003 Fore more information: http://www.developmentgateway.org/node/133831/sdm/docview?docid=495495

This newsletter is issued on a monthly basis. All material contained in the newsletter reproduces articles and press releases and is intended to provide information on PPI-related news in the Maghreb and Mashrek regions. All material is reproduced without any endorsement or value judgment on the part of the World Bank, the European Commission or its staff. If you wish to receive additional information or to subscribe/unsubscribe, please contact us at [email protected] or fax no +32 2 552 00 25. The newsletter is also available by accessing the PPMI website at http://www.ppmi.org

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