This blog is part of a series of blogs that the Arab Development Portal is conducting with the Arab National Statistical Offices to provide updates on the reforms and plans taking place at the NSOs.
The environmental sector is particularly important in the Arab region due to the pressing environmental challenges the region witnesses. In fact, the Arab region continues to face critical environmental threats such as desertification, water scarcity, land degradation and low efficiency of natural resource usage.
The average annual precipitation ranges from low levels as in Bahrain, Qatar and the United Arab Emirates, where the average precipitation did not exceed 100 million cubic meters in 2017, to a less severe level, as in Sudan and Algeria, where precipitation rate exceeded 200 million cubic meters[1]. Equally, the rapidly growing population and high urbanization rates of 58.8 percent of the total population are putting tremendous pressure on the available natural resources and the sustainability and quality of the environment of the cities in the Arab countries[2].
The region also faces challenges related to the environment statistics sector which is represented by the absence of a clear framework governing the production and collection process. Furthermore, there is limited cooperation between the relevant government institutions, lack of financial resources allocated for the development of this sector and lack of technical staff, as the unit specialized in the production and compilation of environment statistics in some Arab countries is considered one of the smallest units in the government institutions and national statistical offices.
Consequently, all Arab countries are currently attributing particular importance to this sector, especially with the adoption of the 2030 Agenda for Sustainable Development. Arab countries are also working on the production of country-specific Sustainable Development Goals (SDGs) environment related indicators.
In an exclusive interview with the Arab Development Portal, Khaled Al-Shatarat, environment expert at the Qatar Planning and Statistics Authority (PSA), spoke about the efforts undertaken by the PSA to improve the production and dissemination of environmental indicators, especially that the environmental issues are reflected in the objectives of the Qatar National Vision (QNV) 2030, knowing that the PSA’s experience is considered as pioneering in providing 76% of the total 88 environmental indicators.
1. How is the environmental pillar reflected in the Qatar National Vision 2030?
Environmental issues have been reflected within the Qatar National Vision 2030 (QNV 2030) by paying due attention and consideration to the environmental development vision along with four other pillars of the vision. Qatar’s vision, QNV 2030, constitutes a beacon and serves as a clear roadmap that guides the country’s economic, social, human and environmental development. QNV 2030 aims to propel Qatar forward by balancing the accomplishments that achieve economic growth with Qatar’s human and natural resources on one hand, and the development needs and the protection of its natural resources (air, water and land) on the other.
As such, the National Vision represents a reflection of the environmental issues through its focus on developing a legal framework and building effective environmental institutions to preserve Qatar’s environmental heritage. QNV 2030 emphasizes the importance of supporting the international efforts to reduce the adverse effects of climate change and encourages regional cooperation among countries around the Arab Gulf to adopt preventive measures to mitigate the negative impacts of economic activities, along with developing a comprehensive plan that adopts a clear policy of urbanization and population distribution. In addition, QNV 2030 emphasizes the importance of increasing citizen’s awareness of their role in protecting the country’s environmental heritage.
2. How does the PSA coordinate with the other government institutions? What is the role of each party in terms of environmental indicators?
The aspirations for Qatar’s economy, society, people and environment, embodied in the QNV 2030, have been translated through a national development strategy in various sectors, including the National Environment Strategy, which is shared by the private and public sectors, civil society and Qatar citizens, through a collaborative mechanism.
The process of integrating the 2030 Agenda for Sustainable Development into the National Development Strategy came at the same time as the development of the Second National Strategy 2018-2022. Government institutions, the private sector, civil society organizations and research and academia are working hard to support the implementation of the second national development strategy, which includes environmental indicators and the goals and objectives of the 2030 Agenda for Sustainable Development. The tools used for reporting on the progress achieved in the implementation of the Second National Development Strategy are the same technology innovation and scientific research tools used in the implementation, monitoring and follow-up processes in order to report on progress in the SDG indicators, including environmental indicators.
3. What challenges do you face in collecting and monitoring SDGs environmental indicators?
The main challenges are:
4. Can you give us an idea about the availability of SDGs indicators and in particular the environment related indicators?
The Planning and Statistics Authority—represented by the Department of Statistics and in cooperation with some ministries and other governmental institutions— has been producing national indicators that are related to the SDGs and their targets (all SDGs indicators). Currently there are 186 available indicators, representing 76.3% of the total number of 244 indicators, while 37 indicators (representing 15.1% of the total number of indicators) are not available. The availability of these indicators requires surveys or administrative records. Furthermore, 11 indicators are being monitored and 7 indicators do not apply to Qatar, representing 4.5% and 2.9% of the total indicators, respectively. Custodian agencies are responsible for the calculation of three indicators making up 1.2% of total indicators.
On the other hand, out of the 88 environment-related SDGs indicators, 67 indicators are available in Qatar, representing around 76% of the total indicators, in contrast with 15 unavailable environment-related indicators or 17% of the total indicators. Their availability requires running surveys or administrative records among other efforts. As for the indicators that do not apply to Qatar, they amount to 6 indicators, representing 6.8% of the total indicators relevant to the environment sector.
5. What are the main sources of data specific to environment indicators?
The SDGs indicators, including the SDGs environment related indicators, were adopted according to the principle of Mixed Approach which was represented in the administrative records of data producers, namely ministries, governmental and private institutions, the general census data sources, specialized data survey sources such as the labor force survey, household income and expenditure survey, the scientific research and development survey, multiple indicator cluster survey (MICS), etc.
6. How do you overcome the challenges and how are you working on producing the unavailable SDGs indicators?
To overcome the abovementioned challenges and produce the unavailable indicators, we mainly:
7. What is Qatar’s future plan regarding the environment sector and its related indicators?
[1] United Nations Statistics Division. 2018. Statistical Database. [Online] Available at: https://unstats.un.org/home/ [Last accessed 1 July 2019].
[2] Population Division of the Department of Economic and Social Affairs of the United Nations Secretariat. 2018. World Population Prospects. [Online] Available at: https://population.un.org/wup [Last accessed 27 June 2019].
Khaled Al Shatarat an Environmental Expert in the environmental statistics section - population and social statistics directorate at the Planning and Statistics Authority (PSA) in Doha – Qatar.
The views expressed here are solely those of the author in his/her private capacity and do not in any way represent the views of neither the Arab Development Portal.
Digital transition is reshaping economies and societies. The ongoing digitalization of the economy show a lot of promise to stimulate innovation, generate efficiencies, and ameliorate services throughout the economy. It became a necessary condition for inclusive and sustainable growth and the overall well-being.[1]
Defining “Digital Economy” is sometimes narrowly scoped as online platforms and their inherent activities, yet, in a broad sense, all activities that use digitized data are part of the digital economy. Thus, in modern economies, the digital economy could encompass an enormous part of most economies, ranging from agriculture to R&D.[2]
The digital economy goes beyond the information and communication technology (ICT) industry. More countries are acknowledging its significance to boost competitiveness, economic growth and social well-being. Almost all of the OECD countries have a digital strategy- except the USA[1]; and in most of the cases these strategies are over-arching and cross sectoral.[3][4]
With the growing importance of the digital economy, it became essential to measure the status of advancements of the Arab countries towards such a rising phenomenon. Many measurements can be found on the international level. There is the Digital Adoption Index (2016) by the World bank, the Digital Evolution Index (DEI) (2017) by the Fletcher School at Tufts University, in partnership with Mastercard, the Digitization Index (2016) by BBVA Research, the IMD World Digital Competitiveness Ranking (2018) by IMD World Competitiveness Center, and the Enabling Digitalization Index (EDI) (2018) by Allianz and Euler Hermes.
Mostly these indices focus on both the demand and supply sides of the digital economy; comprising three main agents, the citizens, the government and the businesses. Institutional and regulatory elements of the digital ecosystem were also captured by these indices. But there are some nuances between these developed efforts; for instance, the DEI integrates additional indicators pertaining to innovation. On the other hand, the EDI is somehow different as it does not measure the outcome of digitalization but rather focuses on the conditions for companies to transform or thrive digitally. Also the IMD World Digital competitiveness is defined into three main factors (Knowledge, Technology & Future readiness); to measure country’s ability to adopt and explore digital technologies leading to transformation in government practices, business models and society in general.
At the regional level, some efforts have been made to measure digital economy. Most recently, The ESCWA has carried out a study entitled “Perspectives on the Digital Economy in the Arab Region” to measure the transition of the Arab countries towards the digital economy. The methodological approach is based on the study of six aspects (the ICT sector: innovation and finances; ICT infrastructure and affordability; Human capacity and research; ICT use by individuals, businesses and governments; Economic impact; Social impact).
To analyze such aspects, two indices were studied, the Networked Readiness Index (NRI) and the Global Innovation Index (GII), along with other specific indicators.
A similar assessment was done for some of the Arab Region countries (Bahrain, Egypt, Jordan, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia, and the United Arab Emirates) by McKinsey through the so-called Industry Digitization Index in 2016.
Generically speaking all of these measurements in most of the cases yield to the same results. The following is based mainly on the analysis provided by ICANN’s report published in 2017 under the title of “Accelerating the Digital Economy in the Middle East, North Africa and Turkey” with some modifications based on the findings from other sources.
The Arab region countries can be categorized into four different groups with regards to their progress towards the digital economy; despite the economic and cultural diversity. The most developed group is the high-income countries of the GCC. These states have high internet penetration, high literacy rates, and in most cases relatively low youth unemployment. The second group includes Jordan & Lebanon; with higher internet penetration due in part to their compact, urban nature. The third is the rural, lower-middle income countries of North Africa (Algeria, Egypt, Morocco & Tunisia). These countries have GDP levels similar to their cousins, but literacy rates are lower and a total of 100M citizens are unconnected. The final group includes countries affected by conflict namely Yemen, Iraq, Syria, Palestine, Sudan and Libya and least developed countries (LDCs) (Comoros, Djibouti, Mauritania and Somalia).
It should be noted that not all the indices rank the Arab countries in the same order or yield to the same analysis; there is of course some differences. A country like Jordan surpassed Kuwait (one of the GCC countries) in both the Digitization Index and the Enabling Digitalization Index; however, it was ranked after Tunisia and Morocco in the Digital Adoption Index. Lebanon is another example; surpassed by Morocco in the Enabling Digitalization Index and ranked at the 90th position in the Digitization Index out of 100 countries worldwide.
Also, there is a difference in the number of the Arab countries included in these indices. For instance, the Digital Competitiveness and Digital Evolution are the less comprehensive in terms of the number of the Arab countries included; with only 4 Arab countries in the first and 6 Arab countries in the second.
More in depth analysis are provided from the McKinsey Digitization Index (2016). It shows that from the demand side, citizens are leading the Middle East’s digitization. UAE, Qatar, and Bahrain are among the top countries in the world, with more than 100% smartphone penetration and more than 7% social media adoption—even higher than the United States. But the case is different with regards to businesses and governments with only 6% of the Middle Eastern public lives under a digitized smart government. Moreover, countries in the region lag far behind in business digitization, with low availability of venture capital funding for start-ups and low share of the workforce employed in digital careers and industries. Again, the GCC countries are performing better with more digitized businesses than Egypt, Jordan, and Lebanon. From the supply side and despite that other countries in the region have achieved considerable progress; they are facing implementation problems in their efforts to promote innovation and push the public sector’s adoption of digitalization to the next level. Qatar and Bahrain lead ICT supply and innovation thanks to high 3G coverage and low prices.
In conclusion, the region is a net importer and consumer of digital, rather than developing digital assets and services. However, the Arab region has the opportunity to reap the digital dividends with concerted action by companies, governments, and individuals especially with the gap between the demand from a digital savvy young population and the supply.
[1] USA adopts a decentralized market-driven approach to its Digital Strategy.
[1] Organization for Economic Cooperation and Development. 2017. Key issues for digital transformation in the G20. [ONLINE] Available at: https://www.oecd.org/g20/key-issues-for-digital-transformation-in-the-g20.pdf [Accessed 28 December 2018].
[2] International Monetary Fund. 2018. Measuring the Digital Economy. [ONLINE] Available at: https://www.imf.org/~/media/Files/Publications/PP/2018/022818MeasuringDigitalEconomy.ashx [Accessed 28 December 2018].
[3] Organization for Economic Cooperation and Development. 2015. OECD Digital Economy Outlook 2015. [ONLINE] Available at: http://www.oecd.org/sti/oecd-digital-economy-outlook-2015-9789264232440-en.htm [Accessed 28 December 2018].
[4] Organization for Economic Cooperation and Development. 2017. OECD Digital Economy Outlook 2017. [ONLINE] Available at: http://www.oecd.org/internet/oecd-digital-economy-outlook-2017-9789264276284-en.htm [Accessed 28 December 2018].
The views expressed here are solely those of the author in his/her private capacity and do not in any way represent the views of neither the Arab Development Portal nor the United Nations Development Programme.
Jordan is characterized by an arid climate and limited natural water resources. Yearly freshwater resources amounted to 780 mcm1 and dams’ capacity amounted to 325 mcm in 2015. To complement the withdrawal of surface and groundwater, the country relies on the treatment of wastewater and desalination (Jordan’s Ministry of Water and Irrigation).
Jordan faces significant obstacles addressing the water demand of its population that increased by 42 percent over the last decade (World Population Prospects). The consumption of water is largely absorbed by agriculture. This sector consumed 51 percent of freshwater, 46 percent of groundwater resources and 28 percent of surface water (2015). In 2018, water consumption per capita was estimated at 126 liters per day whereas available renewable water resources per capita amounted to 110 cubic meters per year (MWI, 2018). In addition, water supply amounted to only 1,009 mcm for the same year while water demand was estimated at 1,400 mcm. To address this gap, a first national water strategy for the period 2008–2022 was adopted in 2008, followed by an updated national water strategy for the period 2016–2025. The two strategies are complementary and aim to implement sectoral integrated water resources management approach, to update the legislature system to enhance performance, to reform the water institutional sector for improved internal efficiencies, and build national capacities (MWI).
In addition to increasing the capacities of desalination and wastewater treatment, the Red Sea–Dead Sea water conveyance project has been planned since 20052 to provide additional 500 mcm per year, making up 30 percent of water supply by 2022.
The Red Sea–Dead Sea water conveyance project is a joint project with Israel and Palestine, managed by the World Bank. It addresses two major environmental problems. The project proposes the conveyance of water from the Red Sea to the Dead Sea to solve the alarming declining water levels of the Dead Sea and provides fresh water to Jordanians3 through desalination to solve the water shortage crisis. Nonetheless, there are environmental implications that experts warn against such as the quality and biophysical characteristics of the Dead Sea water, disturbances to the ecosystem at the Wadi Araba and concerns about the contamination of aquifers if any failure of saltwater conveyance occurs. Moreover, “significant concerns exist for the loss or destruction of archeological and culturally significant sites” (World Bank, 2014).
As part of the project’s feasibility study, several alternatives have been studied and evaluated, such as the desalination of water from the Mediterranean Sea and conveyance to Jordan, a pipeline from the Euphrates in Iraq and pipeline from Turkey.
Addressing the environmental effects of climate change on the Dead Sea levels and freshwater supply in Jordan is crucial. However, the environmental impacts of any plan should be highly considered and mitigated as well, given the predictable repercussions on the environment and residents of Jordan.
[1] Million cubic meters
[2] The 3 beneficiary countries have agreed to study the feasibility of the project.
[3] Water generated from the project will be sold to the 3 beneficiary countries, as stated in the project report.
Sources:
Therese El Gemayel is an environment, energy and statistics consultant. She has worked on development projects in the Western Asia region targeting the enhancement of statistical capacities of government officials in the data collection, validation, analysis and reporting, and the development of evidence-based policies.
The views expressed here are solely those of the author in his/her private capacity and do not in any way represent the views of neither the Arab Development Portal nor the United Nations Development Programme.
Morocco relies heavily on the import of energy products, reaching 19.3 Mtoe[1] in 2015, to address its energy needs. In 2015, most of the total primary energy supply originated from imports of the various energy products. The country dependence on renewable energy amounts to 8.9 percent of total energy demand. Renewable energy sources in Morocco include biofuels and waste (78%), geothermal, solar and wind (12%) and hydropower (9%) (International Energy Agency). Morocco has been generating electricity from hydropower since 1929 and from wind energy since 2000.
In 2009, Morocco has set the National Energy Strategy focusing on increasing the share of electricity generation from renewable energies to 42 percent by 2020. Further, during the COP22 in 2016 in Morocco, King Mohammed VI pledged to increase the share to 52 percent in 2030, of which equal shares are to be attributed to solar, wind and hydropower.
In this regard, Morocco has fully phased out energy subsidies in 2015 and launched the NOOR project that aims to generate 2000 MW of electricity from solar power, using concentrated solar power and photovoltaic techniques (Ministry of Energy, Mines, and Sustainable Development). The project is part of Morocco’s Solar Integrated Projects adopted in 2009 and will be implemented over a period of five years. It is expected to be fully operational and reach full capacity by 2020, making Morocco home to the world’s largest concentrated solar plant. Generating electricity through solar energy will help save 1 Mtoe from oil products and 3.7 million tons of CO2 equivalent yearly (World Future Council, 2015).
Morocco’s Integrated Wind Energy Programme, launched in 2010, aims to increase wind electricity production to 2000 MW by 2020, which will provide 6,600 GWh of annual electricity production. Increasing wind energy production will help the country reduce its yearly energy imports by 1.5 Mtoe and CO2 emissions by 5.6 million tons of CO2 equivalent (Ministry of Energy, Mines, and Sustainable Development).
Expanding the already developed hydropower sector is also part of this strategy. It targets building 2 large hydropower facilities and micro-sized plants to achieve the 2000 MW capacity by 2020.
By the end of 2020, Morocco would shift from an energy import-dependent country to a sustainable and secure energy country with a diversified energy mix, with a probable potential of exporting electricity to Algeria and Europe.
Sources:
[1] Million tonnes of oil equivalent
Therese El Gemayel is an environment, energy and statistics consultant. She has worked on development projects in the Western Asia region targeting the enhancement of statistical capacities of government officials in the data collection, validation, analysis and reporting, and the development of evidence-based policies.
The views expressed here are solely those of the author in his/her private capacity and do not in any way represent the views of neither the Arab Development Portal nor the United Nations Development Programme.
Renewable energy should be a centerpiece of the plans to improve Lebanon’s energy system rather than an add-on.
At a time when some countries have already achieved close to 100% renewable energy penetration, Lebanon has set its sights on just 12% renewable energy generation by 2020-2030[1], a target that is both unambitious and financially short-sighted. Additionally, it ignores the ideal conditions for renewable energy generation in Lebanon.
Lebanese policymakers certainly face an unenviable task when it comes to energy planning. With the current state of the electric system, in which most of the population is putting up with daily electricity cuts and relying on private generators to make up the difference, there is a strong temptation for decision-makers to choose quick fixes over long-term planning.
The government’s primary objective in its current energy plan is to provide a 24-hour supply of electricity to the population over the medium term. However, the current plan disregards the potential for renewable resources to be an integral part of Lebanon’s energy mix and a key part of the solution to the country’s energy shortages, rather than simply a policy “add-on.”
The plan to rely on rented power barges in the near term doesn’t take into consideration the huge cost it needs to operate. The cost of the barges is expected to be $700 million per year, with a capacity of 825 megawatts. They are expected to operate for three years, which is the time needed for the government to invest in new gas-fired plants. However, it seems that the tendering process alone will likely take two years and the construction phase up to four, meaning that the new gas-fired plants will not be operational before 2024. Now if we modestly assume that the barges will only operate for four more years, the total cost will amount to $2.8 billion. For that amount, it would be possible to build a state-of-the-art solar power plant, in less than two years, which would produce the same amount of energy as the barges over the next 25 years, not only four.
Naysayers will usually argue, first, that Lebanon does not have enough suitable land to support a major expansion of solar power; and second, that the grid as currently configured is not capable of supporting a much higher penetration of solar power because of the intermittent nature of the technology.
Contrary to popular belief, Lebanon has an abundance of potentially suitable land. I co-authored a recent study by the Energy Policy and Security Program at the American University of Beirut (AUB) and the National Council for Scientific Research (CNRS) in which we found that Lebanon has a minimum of 60 square kilometers of land suitable for utility-scale solar projects of capacity greater than 300 megawatts peak. Most of the land is in eastern and northeastern Lebanon, areas which are among the most underdeveloped in the country and could benefit substantially from the jobs that would be created, as well as from the supply of 24-hour electricity.
As to the question of the grid, it is true that to fully realize the potential of solar power, upgrades will be needed. But the grid needs to be modernized, in any case, and this should be a priority. In the meantime, the grid is most likely able to support solar projects with capacity higher than what the government is currently opening bids for.
It is also true that Lebanon is not realistically capable of approaching 100% renewable penetration in the near future, as countries like Iceland and Costa Rica have already done. But that does not mean that Lebanon should give up in investing in renewable energy completely.
Lebanon could realistically increase its renewable energy penetration to 24% by 2024 by building 2,500-megawatt peak of solar photovoltaic facilities in two or more phases: the first 1,000 to be completed by 2020 and the remaining 1,500 by 2024.
By doing so, we could limit the need for the power barges to two or three years, saving billions of dollars in the long-term. The construction of the added solar capacity would also eliminate the need for about 500 megawatts of gas-fired power generation, which would add further cost savings over the next 25 years. This would have environmental benefits beyond the usual air quality and climate arguments for switching from gas to solar, as some of the sites currently slated for new gas-fired plants have serious suitability issues. The Selaata site, for instance, is a marine protected area with archeological significance.
By incorporating the potential solar capacity into the current power plan, and with the addition of energy storage capacity to deal with short-term power deficits during the day, Lebanon could reach its goal of 24-hour electricity by mid-2025, while creating a cleaner energy system and eliminating the need for expensive and polluting diesel generators.
http://www.executive-magazine.com/cover-story/let-the-sunshine-in
http://website.aub.edu.lb/ifi/publications/Documents/working_papers/20170808_solar_pvs.pdf
Lebanon’s Electricity Policy Paper (2010), Ministry of Energy, Republic of Lebanon, available at http://s50.omsar.gov.lb/Docs/Strategies/NEstrategy_en.pdf
[1] http://s50.omsar.gov.lb/Docs/Strategies/NEstrategy_en.pdf
Ali Ahmad is the director of the Energy Policy and Security Program at the American University of Beirut.
The views expressed here are solely those of the author in his/her private capacity and do not in any way represent the views of neither the Arab Development Portal nor the United Nations Development Programme.
On March 21st, the members of 44 African nations, out of a total of 55 African nations, signed the African Continental Free Trade Area (CFTA) signaling the birth of the largest FTA in the world. The CFTA is still at its infancy, where the number of its legal instruments (protocols, annexes, etc) are still under negotiation, not to mention that it still needs to be approved by at least 22 nations. However, would such an agreement prove beneficial for Egypt, and on which fronts?
The track record of Egypt’s engagement in the African FTAs shows that Egypt - despite meager trade gains - has decided to be part of any regional agreement, probably for political economy and geopolitical reasons including mainly the cooperation on Nile river-related issues. Egypt is a member of the Common Market for Eastern and Southern Africa (COMESA) since 1999 despite the fact that trade within COMESA members reached only 1.6% of its total trade and never surpassed the 4% after Egypt joined COMESA, where a large part of such increase is attributed to Libya joining COMESA in 2005, who had already substantial amount of trade with Egypt. Egypt has been among the countries which inaugurated the Tripartite Free Trade Area (SADC, COMESA, and EAC), in which CFTA was built on. The challenges associated with the membership of Tripartite agreement remains valid for Egypt in the case of CFTA, yet with a twist. For example, there was fear of South Africa displacing Egypt in specific markets such as the South African Development Community (SADC) members[1] This fear remains true in the case of CFTA, even though so far South Africa has not joined CFTA, but it will happen soon as signaled by President Ramaphosa.
In the case of CFTA, there are additional challenges associated with the presence of several large powerful economies including Kenya and Nigeria, and while the latter has stepped back, it is still expected to join soon. Moreover, the engagement of North African countries (e.g. Morocco and Tunisia), besides Libya, adds a more convoluted dimension to the geopolitical situation. The engagement of Morocco and Tunisia could entail potential benefits but pose challenges in the near future. The potential benefits would emerge from extending the European Union initiatives with the Mediterranean countries through the Agadir agreement and Neighborhood Policy to reinforce the idea of neighbors of neighbors, which has been brought up lately linking the EU with South Mediterranean countries (e.g. Egypt, Morocco, and Tunisia) with Sub Saharan Africa. Mechanisms as a cumulation of rules of origin as well as regional and global value chains could be explored where the potential is vast especially in agro-industrial products.
Yet, the conventional challenges of competing for the same markets - given that the export structure of Egypt, Morocco, and Tunisia is highly similar - could imply a potential risk; especially considering the modest success of these countries in deepening integration within the frameworks of existing regional initiatives such as the PAFTA and Agadir agreement. However, such a risk remains minimal for Egypt due to the high orientation of Morocco and Tunisia trade towards the EU, which captures around 60-70% of their total trade, and their weak cooperation within Africa. However, the interest of Morocco and Tunisia in Sub Saharan Africa is increasing rapidly on both trade and investment fronts, which might pose a challenge for Egypt in the near future.
Moreover, the large number of countries involved in such an agreement, with diversified economic structures, living standards, economic, political, and geographical conditions will probably entail hurdles in finalizing the details. The fear that with such diversified conditions, exceptions will become the norm, and if this happens then the CFTA will be pre-empted. Hence, the prudential pragmatic approach must be adopted in the negotiations to avoid any setbacks on such initiative.
On another front, it is worth noting that the vast virgin African market is not likely to enhance Egyptian exports at the envisioned pace. The reality of COMESA reveals that the market, despite being vast and huge, suffers from large number of market failures associated with poor infrastructure, limited transport facilities, landlocked countries, modest banking systems, proliferation of non-tariff barriers, rendering the vast geographical market to a humble effective economic market when modest standard of living of many African countries is considered. The enthusiasm for the Tripartite agreement and the serious steps undertaken by Egypt, as well as other countries to negotiate its modalities was a good sign, yet aborting it before its birth for the sake of CFTA should be revisited.
It is important to note that the CFTA or any other regional integration agreement is not likely to add much if market failures are not adequately and effectively addressed. The CFTA does include several modalities aiming to overcome market failures, including a dispute settlement mechanism, and different protocols on several issues as rules of origin, investment, etc. But it is too early to judge whether these mechanisms will become operational given that their details are not yet clear and the modalities of negotiations are still not set; though a few experts view that these will follow a single undertaking approach. However, at this stage, it would be fair to say that it will not be an easy task.
To conclude, joining the CFTA for Egypt makes a clear message that Egypt is at the heart of Africa. However, whether economic gains would follow suit is pending the finalization of the agreement and its operational modalities, in addition to addressing some of the market failures.
[1] Angola, Botswana, Democratic Republic of Congo (DRC), Lesotho, Madagascar, Malawi, Mauritius, Mozambique, Namibia, Seychelles, Swaziland, United Republic of Tanzania, Zambia and Zimbabwe.
Ahmed Ghoneim is a professor of economics in the Faculty of Economics and Political Science at Cairo University. He is a research fellow at the Economic Research Forum for Arab Countries (ERF) in Egypt, and at the Center for Social and Economic Research (CASE) in Poland.
The views expressed here are solely those of the author in his/her private capacity and do not in any way represent the views of neither the Arab Development Portal nor the United Nations Development Programme.
Now that Lebanon has signed the first two exploration and production agreements (EPAs) for offshore oil and gas, companies will prepare the groundwork to start drilling at the beginning of 2019. This achievement is a long time coming. The first oil-related legislation, the Offshore Petroleum Resources Law, was enacted in 2010; the sector’s regulator, the Lebanese Petroleum Administration, started operating back in 2012; the block delineation and the model EPA were enacted as decrees in January 2017, almost four years after they were first drafted; and the petroleum-income tax law—a necessity to complete the Lebanese petroleum fiscal regime—was enacted in October 2017, two years after it was first drafted.
This process has taken far too long. Egypt started production of the giant Zohr gas field within three years of finding it. But the constant delays that Lebanon’s oil and gas sector witnessed over the past years—very much interconnected to major regional crises—should not be the reason for interest groups such as Lebanese Oil and Gas Initiative (LOGI) to be blasé when evaluating the current efforts to complete the legal foundations of the sector, which are a prerequisite for a successful, well governed, well invested, and regulated sector. The late arrival of LOGI to the game does not mean the work that has been done over several years needs to be halted because LOGI thinks so.
There are still very important laws that need to be enacted to promote confidence in the Lebanese petroleum investment climate, ensure transparency toward the public—the ultimate owner of any resources found—and lay down solid legal and governance foundations for operating the sector. Four important laws are currently at the initial stages of the parliamentary process: They cover the establishment of a petroleum asset-management department, a sovereign wealth fund (which this author helped draft), and a national oil company, as well as prospects for onshore exploration. The proposed legislation is not being hurried through Parliament, but rather is being discussed at length in subcommittees. The fact that Lebanon currently has the right set of circumstances to make up for the years that we missed should not be mistaken for the conspiracy theory that the laws are being rushed.
These laws have been prepared by very capable Lebanese policymakers and legislators for more than two years. It is vital in any policymaking process to involve interest groups, the media, civil society, and independent experts. It is also essential that Lebanon not fall into the trap of the resource curse, a situation where countries rich in resources tend to have poorer economic growth, flawed democracies, and less development than those without. Interest groups and experts are rightfully highlighting the risks—however, they should know that these laws have been proposed to protect us from the resource curse, and so should be careful about what kind of messages they are trying to send to the public. Halting the laws is not the solution, reaching out to the legislators behind them and providing constructive comments is far more useful. Joining in the efforts to achieve the ideal legislative framework is more productive than campaigning against the need for new laws.
Additionally, last year’s Right of Access to Information law, the Petroleum Transparency Law—which is reaching the final stages in parliament committees—and the plan to join the Extractive Industries Transparency Initiative will all contribute to the transparency of the sector.
The Lebanese economy has struggled for many decades to overcome various internal and external hurdles on the path to proper growth and is currently at a quarter of its true potential. The proposed petroleum-related laws are important building blocks toward this holistic approach, and there is no shortage of talent in Lebanon to achieve the vision we all share.
Here is a summary of the four laws that have recently been referred to parliamentary committees with a brief explanation of why they are essential:
1. Petroleum Asset Management Department (PAD) Law: This law would establish a new department under the Ministry of Finance with two major duties. The first is to assist the Minister of Finance in drawing up an investment mandate for the sovereign wealth fund (SWF), which would then need to be approved by both the Council of Ministers and Parliament. Following best practice worldwide, the investment mandate would be a technical document prepared by experts at the Ministry of Finance and approved by the government, setting out general guidelines for the SWF in the context of Lebanon’s macroeconomic policy, including risk tolerance of the investment choices. The role of the SWF is to manage the funds and not to design fiscal or investment policies; the investment mandate, prepared worldwide by policymakers at the Ministry of Finance, presented by the minister, and approved by government, is designed to ensure the SWF is in line with the central government’s vision for the economy. The second role of the PAD is to audit the companies operating in the petroleum industry to ensure the proper collection of the 20 percent income tax. Auditing petroleum activities is a new responsibility for Lebanon, and the proper experts should be hired to support the MoF in its revenue collection role.
2. Sovereign Wealth Fund Law: The cost of debt in Lebanon has become very high, and economic fundamentals would suggest that debt should be paid down with an influx of extra government funds before attempting to generate higher returns in financial markets. But this logic is flawed and dangerous in the context of Lebanon. The problems of chronic debt, lack of investment in infrastructure, failing public services, and high yearly deficit are not caused by a lack of funds, so using income from petroleum activities to pay down the debt is not the solution.
Public-private partnerships can resolve the infrastructure and public-services problem while cutting non-productive subsidies and improving the tax-collection system can solve the chronic deficit and debt problem. Income from non-renewable resources should be turned into off-balance-sheet renewable financial resources for future generations, to be used only under strict terms and in the right sectors of the economy.
The current draft of the SWF law has very strict fiscal rules for spending, and only allows minor alleviation of the debt burden in the specific case where the government has turned its chronic deficit problem into a debt-sustainable primary surplus—a major achievement if it were to take place. More importantly, the law ensures checks and balances based on the best corporate governance practices, helping the board of the fund, the finance minister, the cabinet, Parliament, internal auditors, two external auditors, the PAD, and the SWF management interact without overstepping their responsibilities. Moreover, it ensures full transparency of operations by publishing all reports online.
It will take several years to have an able home-grown team in place to manage such a fund, so any delay now will be magnified down the road. The tens of millions of dollars already generated by selling geophysical data to companies could be the seed money for the fund. Lebanon has always been a borrowing country, so launching a culture of savings is important. The fear of building new institutions, overstaffing them, and causing wasteful spending is justified, given the weak corporate governance practices in Lebanon, but should not be a reason to choose the do-nothing approach. Rather, it should encourage a do-it-right approach.
3. National Oil Company (NOC) Law: This law does not establish the NOC, but rather organizes its corporate governance, defines the participation methodology of the government, and starts consolidating government oil and gas assets under one legal entity. The law clearly states that the NOC will be established in accordance with the 2010 Offshore Petroleum Resources Law (OPRL), which states it must be established by a cabinet decree—and after the proof of commerciality, not right away, as some misinformed experts suggested. Hence, this law would send the proper signal to international oil companies about the methodology of government participation. The objective is to be transparent about the incentives of the government in future licensing rounds since the participation method of the state will impact the economics of future exploration and production agreements.
4. Onshore Exploration Law: As the OPRL covers only offshore exploration, production, and decommissioning activities, a legislative framework is clearly missing for any onshore activities, which are usually very different in nature, but equally important to organize the activities of the sector as a whole. This law would set the scope of onshore activities including development, production and decommissioning, the ownership of resources, the methodology for land expropriation, the participation of the state, the role of different government entities, and the preservation of any cultural or historic heritage, among other important components that the OPRL similarly covers.
Talal F. Salman, Project Director of UNDP's Fiscal Reform Project at Ministry of Finance (Republic of Lebanon). He can be reached at talal.salman@undp.org
This article was published first in Executive Magazine and was republished at ADP with permission of the author.
The views expressed here are solely those of the author in his/her private capacity and do not in any way represent the views of neither the Arab Development Portal nor the United Nations Development Programme.