Public procurement policies in the MENA region that favour local content and companies have been called into question by the World Bank.
In a regional economic update, which included a focus on transparency and accountability, the World Bank criticised the influence of state-owned enterprises (SOEs) in public procurement.
“Procurement policies should be transparent and nondiscriminatory to allow for competitive pressure – foreign and domestic – and not provide any preferences for SOEs,” said the report.
“Although public procurement laws in Middle Eastern and North African economies are transparent and base the adjudication of tenders or bids on objective criteria, some exemptions or preferences exist. In Egypt, for example, agency-to-agency contracts remain possible, and Jordanian SOEs have specific tender rules.”
The report said procurement laws had a “wide range of provisions to benefit domestic firms that may affect the competitive nature of tenders”, citing Egypt, Kuwait, Tunisia, and West Bank and Gaza, which reserve a share of contracts for domestic firms.
“Most Middle Eastern and North African economies analysed require domestic content (personnel, goods, or both),” said the report. “Most Middle Eastern and North African countries, except Kuwait and Morocco, also explicitly permit access discrimination in favour of local firms.”
The report added: “The high government presence in the market continues to influence the governance of most Middle Eastern and North African countries, including in economic sectors where the private sector could thrive and where there are no obvious market failures justifying the government’s presence.”
The report said the economies of the MENA region are expected to grow by 5.5% this year – the fastest rate since 2016, but growth will slow to 3.5% in 2023.
However, the World Bank warned growth would be uneven as countries still struggled to overcome the effects of Covid and faced “jolting new shocks” from higher oil and food prices as a result of the Ukraine war, rising global interest rates, and slowdowns in the US, China, and the eurozone.
The report said oil-exporting countries were benefiting from high hydrocarbon prices, but oil-importing countries “confront different circumstances”.
GCC countries are due to grow by 6.9% in 2022 (3.7% in 2023), while developing oil exporters are expected to grow by 4.1% and 2.7% respectively and developing oil importers by 4.5% and 4.3%.
Ferid Belhaj, World Bank vice president for the MENA region, said: “All countries in the MENA region will have to make adjustments to deal with significantly higher prices for food and other imports, especially if they lead to an increase in government borrowing or currency devaluations.
“What countries need now is smart governance to weather the storm and begin to rebuild after multiple shocks on top of the pandemic.”
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