Dark spaces are lagging areas.

SPATIAL GOVERNANCE AND SPATIAL GOVERNANCE AND SPATIAL DISPARITIES IN THE SPATIAL DISPARITIES IN THE

MIDDLE EAST AND NORTH MIDDLE EAST AND NORTH AFRICA (MENA)AFRICA (MENA)

Publication due April 2010Publication due April 2010

22

No country has grown rich without No country has grown rich without agglomerationagglomeration

The 2009 World The 2009 World Development ReportDevelopment Report

1)1) Good development policiesGood development policies everywhere: everywhere: “institutions”“institutions”..

2)2) ConnectivityConnectivity to link metropolises, to link metropolises, cities and villages: cities and villages: “infrastructure”“infrastructure”..

3)3) Spatially-targeted interventions,Spatially-targeted interventions, where divisions prevent migration where divisions prevent migration to leading areas: to leading areas: “incentives”.“incentives”.

But how to get agglomeration But how to get agglomeration without unacceptable spatial without unacceptable spatial disparities?disparities?

Plan of presentationPlan of presentation

A.A. What’s the lagging area governance What’s the lagging area governance question in MENA? question in MENA?

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

C.C. What do “institutions”, What do “institutions”, “infrastructure” and “incentives” “infrastructure” and “incentives” mean in MENA?mean in MENA?

D.D. A way forward.A way forward.

A. What’s the lagging A. What’s the lagging area problem in MENA?area problem in MENA?

We start with a cycle of We start with a cycle of economic agglomeration…economic agglomeration…

Explicit Explicit policiespolicies

Economic Economic incentivesincentives

Poor track Poor track recordrecord

efficiency

economies oflocation

enterprisesmove in

agglomeration

Policy response

Politicians’ concerns : spatial inequalityPoliticians’ concerns : spatial inequality

= migration to the = migration to the cities, cities,

= urban unemployment, = urban unemployment,

= religious radicalism= religious radicalism

= political opposition= political opposition

= a colonial vestige= a colonial vestige

But what if we add politics ?

Does spatial history …Does spatial history … C19th – 1950sC19th – 1950s: Limited geographical spread of : Limited geographical spread of

colonial settlement. Investment concentrated colonial settlement. Investment concentrated in port cities and administrative capitals.in port cities and administrative capitals.

Post-independencePost-independence: consolidation of unitary : consolidation of unitary administrations on governorate model.administrations on governorate model.

*interior ministry

sector ministry

sector ministry

governor governorsector

directoratesector

directoratesector

directoratesector

directorate

… … tell us where we are tell us where we are now ?now ?

1960s-70s:1960s-70s: state-led industrialisation strategies: state-led industrialisation strategies: regional and metropolitan preferences.regional and metropolitan preferences.

1990s-2000s:1990s-2000s: fiscal constraints undermine fiscal constraints undermine governments’ ability to guarantee livelihoods: governments’ ability to guarantee livelihoods: perceptions of exclusion from growth.perceptions of exclusion from growth.

Now is it the squeaking Now is it the squeaking wheel … wheel …

60%

65%

70%

75%

2,000and less

2,000-5,000

5,000-10,000

10,000-20,000

20,000-50,000

50,000-100,000

500,000and

more

size of town

con

fid

ence

in

go

vern

men

t

Political support for government is weakest in large Egyptian cities.

Source: World Values Survey

… … that gets the oil ?that gets the oil ? Implicit taxation of farmers Implicit taxation of farmers

until 1990s: forced deliveries until 1990s: forced deliveries (rice) and low prices (cotton).(rice) and low prices (cotton).

Central transfers to Central transfers to governorates not governorates not compensating for differences compensating for differences in tax base.in tax base.

36% of government spending 36% of government spending on energy subsidies (2006).on energy subsidies (2006).

Local govt share of spending Local govt share of spending 22% to 16% 1996/7 to 22% to 16% 1996/7 to 2005/6.2005/6.

Sanitation coverage. Cairo Sanitation coverage. Cairo 98%. Qena 10%. 98%. Qena 10%.

Govt transfers as % of expenditure 02/03

82

84

86

88

90

92

94

0 2000 4000

GDP per capita USD ppp 01/02

%

Govt transfers as% of expenditure02/03

.

Egypt

T

The twin cycles of spatial governance

The spatial balance of the provision of public The spatial balance of the provision of public services in my country …services in my country …

1 2 3 4

17%

6%

39%39%1.1. Has always been Has always been appropriate.appropriate.

2.2. Has always favoured the Has always favoured the metropolitan area at the metropolitan area at the expense of outlying areas.expense of outlying areas.

3.3. Has favoured the Has favoured the metropolitan area too much metropolitan area too much in the past, but this is no in the past, but this is no longer the case.longer the case.

4.4. Has always favoured Has always favoured outlying areas at the expense outlying areas at the expense of the metropolitan area.of the metropolitan area.

Conclusion …Conclusion …

The region needs policies for lagging The region needs policies for lagging regions thatregions that

(1)(1) respond to therespond to the political political demand for demand for reduced disparities in welfare reduced disparities in welfare

(2)(2) without sacrificing the without sacrificing the growthgrowth benefits benefits of agglomeration.of agglomeration.

But which policies?But which policies?

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

Spatial Disparity Diagnostics for MENA.Spatial Disparity Diagnostics for MENA.4 empirical questions with policy implications4 empirical questions with policy implications

i.i. Is there really a major spatial Is there really a major spatial component of inequality?component of inequality?

ii.ii. Is my lagging area a low-Is my lagging area a low-densitydensity fringe or a high-fringe or a high-densitydensity pocket? pocket?

iii.iii. Is internal migration mitigating Is internal migration mitigating disparities fast enough (or is there disparities fast enough (or is there ““divisiondivision” ?)” ?)

iv.iv. Does my lagging area have Does my lagging area have unrealised potential?unrealised potential?

Rural-urban disparities of vast Rural-urban disparities of vast significance in some countries, negligible significance in some countries, negligible in others.in others.

P:/…/sommeiller ELMO Nov08.xls

0% 10% 20% 30% 40% 50%

Djibouti

Egypt

Jordan

Morocco

Syria

Yemen

MENA

Latin America & Caribbean

Europe & Central Asia

East Asia and Pacific

Africa

Rural-urban disparities in consumption as % of maximum

Morocco’s rural-urban divide is a key component of inequality. Syria’s is not.

Share of spatial disparities explained by Share of spatial disparities explained by household characteristicshousehold characteristics

Rural-urban per capita expenditure differences explained by differences in household Rural-urban per capita expenditure differences explained by differences in household size, and gender, age and education of household head:size, and gender, age and education of household head:

0%

20%

40%

60%

80%

100%

Jordan Egypt Morocco Djibouti

Unexplained

Explained

Jordan’s spatial inequality is explained by household characteristics. Djibouti’s is not.

Is internal migration eroding Is internal migration eroding disparities?disparities?

Tunisia’s internal migration is eroding inter-Tunisia’s internal migration is eroding inter-provincial disparities. Iran’s is not.provincial disparities. Iran’s is not.

0

5

10

15

20

25

30

35

40

Tunisia 1986-26 Iran 1996-36

Before

After

% of populationin poorest 50%of “provinces”.

Water agglomeration makes…Water agglomeration makes…population agglomerationpopulation agglomeration

pocket

pocket

fringe

Low-density fringe

or

High-density pocket?

C. What do “institutions”, C. What do “institutions”, “infrastructure” and “incentives” “infrastructure” and “incentives”

mean in MENA?mean in MENA?

(i)(i) Institutions: Institutions: correcting a historical correcting a historical metropolitan bias in spatial metropolitan bias in spatial governancegovernance

(ii)(ii) Infrastructure: Infrastructure: more efficient use of more efficient use of existing hardwareexisting hardware

(iii)(iii) Shifting Shifting targeted development targeted development interventionsinterventions from subsidisation to from subsidisation to catalysis. catalysis.

Sectoral studies are Sectoral studies are describing spatially describing spatially equitable policy directions equitable policy directions for:for: Public expenditure management Public expenditure management

systemssystems EducationEducation HealthHealth The business environmentThe business environment RoadsRoads Cellular and broadband connectivityCellular and broadband connectivity

C(i) C(i) Correcting historical metropolitan bias in Correcting historical metropolitan bias in institutionsinstitutions

Examples of findingsExamples of findings

The politics of proximityThe politics of proximity, confirmed by cross-, confirmed by cross-country econometrics: formal political country econometrics: formal political accountability mitigates spatial polarisation and accountability mitigates spatial polarisation and urbanisation.urbanisation.

Adjusting public expenditure. e.g. Adjusting public expenditure. e.g. from commodity from commodity subsidies to targeted social protection (>20% of subsidies to targeted social protection (>20% of public spending on fuel subsidies in 2007).public spending on fuel subsidies in 2007).

Adjusting business environment:Adjusting business environment: e.g. Morocco: e.g. Morocco: differences in quality of institutions more important differences in quality of institutions more important for productivity than agglomeration economies.for productivity than agglomeration economies.

Health, education, sanitation, social protectionHealth, education, sanitation, social protection: : adjusting delivery architecture to remedy adjusting delivery architecture to remedy disparities.disparities.

C(ii)C(ii) Efficient use of existing connectivity Efficient use of existing connectivity infrastructureinfrastructure

MENA’s concentrated settlements MENA’s concentrated settlements and trunk road density ensure and trunk road density ensure trunk connectivity (except Yemen)trunk connectivity (except Yemen)

But “software” improvements can But “software” improvements can make the infrastructure more make the infrastructure more efficient.efficient.– road maintenance fundingroad maintenance funding– border proceduresborder procedures– commercialisation of public transport and freight commercialisation of public transport and freight

sectorssectors

Travel Time to Major CitiesAssuming Open Borders

C (iii) Shifting C (iii) Shifting targeted development targeted development interventionsinterventions

from subsidisation to catalysis.from subsidisation to catalysis. Lessons from developed countries and MENA.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 state’s 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.

There is a role for political choicee.g. Centre-East Tunisia:

Major spatial component

of inequality ?

Level the playing field for

development

yes

Is migration makingthe problem disappear

fast enough?

Low densityfringe area?

no

yes

Level the playing field for

development

Level the playing field for

development

High-density,low-potential

area?

noyes

High-density,high-potentialpocket area?

no

yes

Improve efficiency of

infrastructure use

Improve efficiency of

infrastructure use

Catalytic intra-governmentaland public-private

development coordination

(“Institutions”)-------(”Infrastructure”)-------(”Incentives”)

D. D. Lagging areas in MENALagging areas in MENA DiagnosticsDiagnostics………………..………………..& Policy Package& Policy Package