Peter Mousley, World Bank Group, 11 May 2016, Regional conference: Investment and inclusive growth in the midst of crisis, Beirut

1. Mobilizing the Private Sector for Growth and
Job Creation in
Situations of Fragility and Conflict
MENA-OECD COMPETITIVENESS
PROGRAM CONFERENCE
11th MAY, PHOENICIA HOTEL
2016
Investment and Inclusive Growth in the Midst of Crisis: Lessons
Learned and Way Forward

2. WORLD BANK APPROACH TO FRAGILITY
AND CONFLICT SITUATIONS
RECENT DEVELOPMENTS
PRODUCTS AND APPROACHES
MOBILIZING THE PRIVATE SECTOR FOR GROWTH AND JOB
CREATION IN SITUATIONS OF FRAGILITY AND CONFLICT

3.  WORLD DEVELOPMENT REPORT 2011: Defines the challenge for the
World Bank Group with priority on:
 Support to institutional strengthening for credibility and legitimacy
 Investing in jobs, especially through the private sector
 Ensuring a more synergistic humanitarian-development linkage
 A layered approach – country and regional-level strategies
 IDA: Increased funding to low-income countries (<US$1,215 per capita)
facing fragile and conflict-affected situations
 Increased Allocations - IDA financing to FCS has multiplied six fold
since IDA11 (< US$ 2 billion to US$ 10 billion).
 From IDA12 to16 concessionality to FCS increased from 63% to 84%
 CONCESSIONAL FINANCING FACILITY (CFF)
 Recognizing a Global Public Good – Forced Displacement
 New Financing for Middle Income Countries facing FCS
 Pledging conference that took place at Spring Meeting 2016
WORLD BANK GROUP APPROACH TO FRAGILITY
AND CONFLICT SITUATIONS

4. FRAGILE SITUATIONS …
 Are associated with key risk factors that can drive conflict and violence
 Are diverse and dynamic with countries moving in and out of fragility
 Can exist at sub-national level in some higher capacity countries
 Spread beyond national borders (“conflict systems”)
KEY IMPLICATIONS:
 Provide a differentiated response to FCS  act earlier, faster (when
opportunities arise) and in a more sustained manner
 Mitigate fragility risks (incl. in non-FCS), if possible, by engaging early by
detecting and addressing FCV risks
 Address sub-national fragility in higher-capacity countries
 Address regional dimensions of FCV and mitigate impact of forced
displacement  Regional outlook on FCV and support refugees and local
communities in host countries
WORLD BANK GROUP APPROACH TO FRAGILITY
AND CONFLICT SITUATIONS

5.  Managing global public goods in the context of middle income status
 Growing challenge of forced displacement in the Mashreq Region
 Need for concessional financing for development as well as humanitarian
needs to meet host community and displaced needs
 Conference In London, February 2016
 Presentation of the Lebanon and Jordan Compacts - investment pipelines for
combatting the impact of the crisis on these countries
 Proposal for the establishment of a Concessional Financing Facility (CFF) to
help fund the priority projects in the pipeline
 IDA Special Allocation
 Agreement with IDA Donors for special US$ 100 million each - immediate
allocation - to Lebanon/Jordan
 WBGIMF Spring Meetings, CFF Pledging Conference, April 2016
 Over $1 billion initially pledged to draw down cost of International Financing
Institutions lending costs to IDA-levels
 Allows for a 4 to 1 leverage – i.e. the initial $1 billion will make possible $4
billion in lending
RECENT DEVELOPMENTS

6.  WORLD BANK CORE LENDING PRODUCTS (via Government)
 Investment Project Financing (IPF)
 Development Policy Financing (DPF)
 Program for Results (PforR)
 Political Risk Guarantees (PRG)/Risk-Sharing/First Loss
 INTERNATIONAL FINANCE CORPORATION (via Private Sector)
 Full suite of Debt, Equity, Guarantee products
 MULTILATERAL GUARANTEE AGENCY (via private sector)
 Political Risk Insurance
 ADVISORY SERVICES AND ANALYTICS (ASA)
 Both World Bank and IFC support ASA work (e.g. Doing
Business, Enterprise Surveys, AML/CFT, PPP and other
specialized financial and private sector development services
WORLD BANK GROUP PRODUCTS

7.  HORIZONTAL INITIATIVES
 Improving the investment climate for private investment – firm entry, growth and exit.
Heightened attention to predictability
 Fostering trade and regional cooperation
 Can be difficult to accomplish with fragmented governments.
 VERTICAL INITIATIVES
 Targeting specific competitive sectors/industries or regions – including SEZs
 Integrated support, e.g. financial and non-financial services, infrastructure, capacity building
 Political will and coalition of “champions” is more easily mobilized
 DESIGN FEATURES
 More iterative than blueprint with strong emphasis on Public-Private Dialogue
 Closer collaboration with UN and other international/bilateral partners
 Use of innovative financing instruments including matching grants, viability gap financing,
impact bonds, output/performance-based aid to foster private sector investment and market-
driven skills development
 Strong attention to evaluation framework and impact assessment
APPROACHES FOR PRIVATE SECTOR GROWTH AND
JOB CREATION

8.  ONGOING AND PROJECTS UNDER PREPARATION
 Jordan Economic Opportunities initiative – supporting Jordan’s Holistic approach
under the Jordan Compact;
 Lebanon Rural Road Rehabilitation – strengthening economic linkages to
agricultural hinterland;
 Lebanon STEP – support to MSME growth, skills development for job creation
 Iraq Emergency Development Policy Operation – support to fiscal consolidation,
financial sector and SOE reform
 Iraq Emergency Infrastructure project – financing for infrastructure rehabilitation
in targeted Iraqi governorates;
 ANALYTICAL AND PREPARATION DIAGNOSTIC WORK
 Value chain and skills development for Tripoli and the North
 Tripoli Special Economic Zone and Industrial Zone development
 Construction Sector for Syrian Reconstruction
PROJECT PORTFOLIO IN MASHREQ REGION IN SUPPORT OF
RECONSTRUCTION AND PRIVATE SECTOR DEVELOPMENT

9. EMERGING DEMAND FOR CONDUCTING IN-CONFLICT
DAMAGE AND NEEDS ASSESSMENTS
 Focus on the ‘day before’ to better plan for the ‘day after’ – recovery plans need to
be prepared for reconstruction to start as soon as possible
 Programs designed and ready that can be implemented as soon as there is an
opportunity – identify low-hanging fruits that can lead to local-level recovery and
mitigate the risk of conflict relapse
 Establish baselines for all sectors – for cost-effective regular updates
 Strengthen partnerships with other donors – for coordinated recovery planning and
financing
 Segue for undertaking other assessments – construction materials requirement
estimation, institutional capacity assessment, conflict dynamics analysis, etc.

10. KEY UNDERPINNINGS FROM THE DAMAGE NEEDS
ASSESSMENT (DNA) METHODOLOGY
• A methodology for preliminary estimates of physical damage and quality
of service delivery
• Broad brush estimates using percentage and inventory based assessment
models across various sectors
Satellite
Imagery
Social Media
Analytics
Publicly
Available
Information
Ground Partners
(where possible)
Damage data
Validation
Quality of
services

11. FY 16 UPDATE – PRELIMINARY FIGURES (subject to change)
Sector
Median Damage
(US$M)
Education $195
Energy $1,314
Health $356
Housing $4,507
Roads $142
Total $6,515
Footnote 1: Median of the estimated damage cost range due to broad-brush assessment
Damage estimates of physical infrastructure using historical unit cost. Reconstruction
needs would be higher due to inflation, security premium, scarcity of material/labor, etc.
Aleppo,
58.10%
Dar'a,
2.37%
Hama,
12.92%
Homs,
20.50%
Idlib,
6.03%
Latakia,
0.08%
Percentage Of Total Damage By City
City Median (US$M)
Aleppo $3,849
Dar'a $157
Hama $856
Homs $1,358
Idlib $399
Latakia $5
Total $6,625
2.95%
19.83%
5.38%
68.03%
2.14%
1.66%
Percentage of Total Damage by Sector Educati
on
Energy
Health
Housin
g
Roads

12. FY 16 UPDATE – PRELIMINARY FIGURES (subject to change)
$112
$719
$226
$2,651
$200 $68$195
$1,314
$356
$4,507
$142 $110
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
$4,500
$5,000
Education Energy Health Housing Roads WATSAN
US$M
Syria Sector Total Damage Comparison Dec 2014 vs Mar 2016
Dec-14 Mar-16
$1,822
$160
$847
$1,083
$59 $6
$3,849
$157
$856
$1,358
$399
$5
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
$4,500
Aleppo Dar'a Hama Homs Idlib Latakia
US$M
Syria City Total Damage Comparison 2014 vs 2016
Dec-14

13. 0
10000
20000
30000
40000
50000
60000
ALEPPO EXAMPLE - HOUSING SECTOR DISTRIBUTION OF MATERIAL NEEDED
BY TYPE OF HOUSING
Apartment in Building Popular Housing (Sha'bi) Villa
Traditional Arab Home (Dar 'Arabi) Country House Agricultural House
Tent Refugee Camp Hotel

14. THE PROBLEM: THIS DEMAND IS LOOMING BUT IS
NOT THERE YET
 Sizeable and clear market for a whole industry, for the future Syrian
economy and also neighbors.
 But this demand will materialize one day, but no one knows when, so
investors won’t produce the goods today.
 RISK: when peace is restored and reconstruction starts, it may well be too late
for a local/regional industry to develop (e.g. Afghanistan, Iraq… WWII
Germany as a planned exception)
 Planning for reconstruction is not enough, initiating the industrial
investments today is what will bring the benefits of this future demand boom
14

15. A VERY SPECIAL MARKET FAILURE THAT CALLS FOR A
SPECIAL AND EXTRAORDINARY SOLUTION
 Very large and clear market for industrial goods
 Two large uncertainties:
 When will this demand materialize ? (end of war)
 Who will reconstruct and finance reconstruction ? How will
contracts be awarded?
 Investors will not invest today. May not even invest when peace is
restored.
 Can the international community solve this market failure?
15

16. Thank You