1. Dark spaces are lagging areas. S PATIAL G OVERNANCE AND S PATIAL D ISPARITIES IN THE M IDDLE E AST AND N ORTH A FRICA (MENA) Publication due April 2010

2. 2 No country has grown rich without agglomeration The 2009 World Development Report

3. 1) Good development policies everywhere: institutions. 2) Connectivity to link metropolises, cities and villages: infrastructure. 3) Spatially-targeted interventions, where divisions prevent migration to leading areas: incentives. But how to get agglomeration without unacceptable spatial disparities?

4. Plan of presentation A. Whats the lagging area governance question in MENA? B. What kind of lagging areas do we have? C. What do institutions, infrastructure and incentives mean in MENA? D. A way forward.

5. A. Whats the lagging area problem in MENA?

6. We start with a cycle of economic agglomeration… Explicit policies Explicit policies Economic incentives Economic incentives Poor track record Poor track record efficiency economies of location enterprises move in agglomeration Policy response

7. Politicians concerns : spatial inequality = migration to the cities, = urban unemployment, = urban unemployment, = religious radicalism = religious radicalism = political opposition = a colonial vestige But what if we add politics ?

8. Does spatial history … C19th – 1950s: Limited geographical spread of colonial settlement. Investment concentrated in port cities and administrative capitals. 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. Post-independence: consolidation of unitary administrations on governorate model. * interior ministry sector ministry sector ministry governor sector directorate sector directorate sector directorate sector directorate

9. … tell us where we are now ? 1960s-70s: state-led industrialisation strategies: regional and metropolitan preferences. 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. 1990s-2000s: fiscal constraints undermine governments ability to guarantee livelihoods: perceptions of exclusion from growth.

10. Now is it the squeaking wheel … Political support for government is weakest in large Egyptian cities. Source: World Values Survey

11. … that gets the oil ? … that gets the oil ? Implicit taxation of farmers until 1990s: forced deliveries (rice) and low prices (cotton). Implicit taxation of farmers until 1990s: forced deliveries (rice) and low prices (cotton). Central transfers to governorates not compensating for differences in tax base. Central transfers to governorates not compensating for differences in tax base. 36% of government spending on energy subsidies (2006). 36% of government spending on energy subsidies (2006). Local govt share of spending 22% to 16% 1996/7 to 2005/6. Local govt share of spending 22% to 16% 1996/7 to 2005/6. Sanitation coverage. Cairo 98%. Qena 10%. Sanitation coverage. Cairo 98%. Qena 10%.. Egypt

12. T The twin cycles of spatial governance

13. The spatial balance of the provision of public services in my country … 1. Has always been appropriate. 2. Has always favoured the metropolitan area at the expense of outlying areas. 3. Has favoured the metropolitan area too much in the past, but this is no longer the case. 4. Has always favoured outlying areas at the expense of the metropolitan area.

14. Conclusion … The region needs policies for lagging regions that (1) respond to the political demand for reduced disparities in welfare (2) without sacrificing the growth benefits of agglomeration. But which policies?

15. B. What kind of lagging areas do we have?

16. Spatial Disparity Diagnostics for MENA. 4 empirical questions with policy implications i. Is there really a major spatial component of inequality? ii. Is my lagging area a low-density fringe or a high-density pocket? iii. Is internal migration mitigating disparities fast enough (or is theredivision ?) iv. Does my lagging area have unrealised potential?

17. Rural-urban disparities of vast significance in some countries, negligible in others. P:/…/sommeiller ELMO Nov08.xls Moroccos rural-urban divide is a key component of inequality. Syrias is not.

18. Share of spatial disparities explained by household characteristics Rural-urban per capita expenditure differences explained by differences in household size, and gender, age and education of household head: Jordans spatial inequality is explained by household characteristics. Djiboutis is not.

19. Is internal migration eroding disparities? Tunisias internal migration is eroding inter- provincial disparities. Irans is not. % of population in poorest 50% of provinces.

20. Water agglomeration makes… population agglomeration

21. pocket fringe Low-density fringe or High-density pocket?

22. C. What do institutions, infrastructure and incentives mean in MENA? (i) Institutions: correcting a historical metropolitan bias in spatial governance (ii) Infrastructure: more efficient use of existing hardware (iii) Shifting targeted development interventions from subsidisation to catalysis.

23. Sectoral studies are describing spatially equitable policy directions for: Public expenditure management systems Public expenditure management systems Education Education Health Health The business environment The business environment Roads Roads Cellular and broadband connectivity Cellular and broadband connectivity

24. C(i) Correcting historical metropolitan bias in institutions Examples of findings The politics of proximity, confirmed by cross-country econometrics: formal political accountability mitigates spatial polarisation and urbanisation. The politics of proximity, confirmed by cross-country econometrics: formal political accountability mitigates spatial polarisation and urbanisation. Adjusting public expenditure. e.g. from commodity subsidies to targeted social protection (>20% of public spending on fuel subsidies in 2007). Adjusting public expenditure. e.g. from commodity subsidies to targeted social protection (>20% of public spending on fuel subsidies in 2007). Adjusting business environment: e.g. Morocco: differences in quality of institutions more important for productivity than agglomeration economies. Adjusting business environment: e.g. Morocco: differences in quality of institutions more important for productivity than agglomeration economies. Health, education, sanitation, social protection: adjusting delivery architecture to remedy disparities. Health, education, sanitation, social protection: adjusting delivery architecture to remedy disparities.

25. C(ii) Efficient use of existing connectivity infrastructure MENAs concentrated settlements and trunk road density ensure trunk connectivity (except Yemen) MENAs concentrated settlements and trunk road density ensure trunk connectivity (except Yemen) But software improvements can make the infrastructure more efficient. But software improvements can make the infrastructure more efficient. –road maintenance funding –border procedures –commercialisation of public transport and freight sectors

26. Travel Time to Major Cities Assuming Open Borders

27. C (iii) Shifting targeted development interventions from subsidisation to catalysis. Lessons from developed countries and MENA. Most targeted interventions fail. Most targeted interventions fail. Success stories have common features: Success stories have common features: – –the national regulatory environment is favourable. – –lagging area has market access + density OR location- specific resources. – –The states key role is coordination within itself and with anchor investors. – –Infrastructure without institutional coordination usually fails. – –investment incentives to the private sector are rarely important and often counter-productive.

28. There is a role for political choice e.g. Centre-East Tunisia:

29. Major spatial component of inequality ? Level the playing field for development yes Is migration making the problem disappear fast enough? Low density fringe area? no yes Level the playing field for development Level the playing field for development High-density, low-potential area? no yes High-density, high-potential pocket area? no yes Improve efficiency of infrastructure use Improve efficiency of infrastructure use Catalytic intra-governmental and public-private development coordination (Institutions)-------(Infrastructure)-------(Incentives) D. Lagging areas in MENA Diagnostics………………..& Policy Package D. Lagging areas in MENA Diagnostics………………..& Policy Package