Abstract
The end of the 1990s witnessed the questioning of the classical organization of the electricity sectors of the Middle East and North Africa (MENA). This book comes at an interesting time. The world is emerging from years of economic growth followed by a major recession. In parallel, oil prices and capital costs had escalated dramatically. Consumers’ bills (in deregulated markets) and governments’ budgets (in highly regulated markets) were put under increasing pressure. Government intervention has been more dynamic. The need for such a study stemmed from three main reasons: a clear absence of a complete and comprehensive study on electric reforms in the MENA region; the unique concentration of hydrocarbon reserves in the region; the relative success of the MENA region as a market for investment in the electricity sector. This is a region with remaining substantial needs over the coming two decades at least.
The electricity sector has unique characteristics which influence the sector’s structure. It is a capital-intensive industry where balancing supply and demand is challenging. For a nation, the electric system is a vital infrastructure. Electricity is a commodity that cannot be economically stored with current technologies, and electricity grids are complex and fragile. The analysis is built on the evaluation of existing structures and the measurement of the feasibility, attractiveness, credibility as well as remediability of current and future reforms. Moreover, because the electricity sector cannot be analysed in isolation from the rest of the economy, such an evaluation exercise would not be complete without a more holistic approach, integrating macro-economic policies and development needs.
One first emerging conclusion concerns the central role in the region of the single buyer model (SBM), or wholesale competition with a unique buyer. The region today is facing new challenges and issues which in turn call for new policy orientations. It is timely for some MENA countries to consider feasible alternatives to enhance their sectors’ structures, with the caveat that market power could have already significantly developed to make future reforms less feasible. In parallel, some MENA countries are making a better use of their resources and their revenues than during former periods of high oil prices. It will be important to shed light on whether the fuel pricing policies in the region and the way the electricity sector is treated enables to build wealth and sustainable growth. In other words, the determinism of the Dutch Disease as it applies to hydrocarbons’ exporters in MENA is questionned.
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Notes
- 1.
The World Bank and the IMF were created following the financial devaluations of the 1930s and the willingness to create a stable financial system and an international commercial system. Both promoted controlled liberalism. With the rise of market-oriented ideologies in the 1970s, they encouraged a more intense liberalization by imposing conditions related to external opening and the reform of state-owned firms. The Asian crisis, the failure of public aid to development and the bankruptcy of US hedge fund LTCM, questioned that rationale and resulted in a higher political intervention to find ad-hoc solutions for each nation. See Béatrice Hibou, Economie politique du discours de la Banque Mondiale en Afrique sub-saharienne, du catéchisme économique au fait (et méfait) missionnaire, les Etudes du CERI, no. 39, mars 1998.
- 2.
M. Jean-Paul Villain, First Advisor, Investment Strategy, Abu Dhabi Investment Authority (ADIA), interview of May 22 2002.
- 3.
Joskow and Schmalensee (1983) bet that the reform can only be a positive sum game, i.e. that transaction costs incurred because of the reform will be offset by production and efficiency gains.
- 4.
A review of existing literature (Jamasb et al. 2004; World Bank 2005) shows that “rigorous empirical and policy-relevant evidence on the performance and determinants of electricity reform in (developing) countries is rather limited”.
- 5.
Concepts developed respectively by World Bank, Menard and Shirley, Levy and Spiller, and Williamson.
- 6.
For example, in the UK, for a typical annual household electricity consumption of 3300 kWh, the cost was £62 in 2001, just before market opening. It fluctuated between £57 and £62 until 2006 when it jumped to £88. Source: British Gas, UK’s Department for Business, Enterprise and Regulatory Reform.
References
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World Bank (1995) Bureaucrats in business: the economics and politics of government ownership. Oxford University Press, Oxford, p 346
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Benali, L. (2019). Introduction. In: Electricity-sector Reforms in the MENA Region. Perspectives on Development in the Middle East and North Africa (MENA) Region. Springer, Cham. https://doi.org/10.1007/978-3-319-96268-9_1
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