Docstoc

Transports_ Energy and Telecommunications in the Euro

Document Sample
Transports_ Energy and Telecommunications in the Euro Powered By Docstoc
					  Governance, competitivity and networks
     in the euro-mediterranean region:
transports, energy and telecommunications
    Algeria, Egypt, Jordan, Lebanon, Morocco, Tunisia




                    Preliminary version
                                                      TABLE OF CONTENTS
                                                        SUMMARY REPORTS
   Presentation ............................................................................................................................ 5
I – The infrastrucure and network systems ................................................................... 7
   Introduction............................................................................................................................. 9
   1 Transports ............................................................................................................................. 9
     1.1 An overview of the Euro-Mediterranean transport sector.......................................... 9
     1.2 The national framework ................................................................................................. 19
     1.3 The transport and infrastructure system in southern Italy .......................................... 24
     1.4 Critical issues and unanswered questions in certain Mediterranean countries .... 33
   2 Energy................................................................................................................................. 39
      2.1 The Mediterranean scenario ......................................................................................... 39
      2.2 The national framework ................................................................................................. 47
      2.3 Infrastructures and energy networks: the southern Italian regions in the
      Mediterranean context ........................................................................................................ 51
      2.4 Critical nodes and outstanding issues in some countries of the Mediterranean.. 54
   3 Telecommunications......................................................................................................... 57
      3.1 The Euro-Mediterranean scenario ................................................................................ 57
      3.2 The national framework ................................................................................................. 66
      3.3 Critical issues and unsolved problems in certain Mediterranean countries .......... 69
II – Governance, productive systems and networks in six mediterranean
Countries ....................................................................................................................... 71
   Introduction........................................................................................................................... 73
   1 Algeria ................................................................................................................................ 74
     1.1 Governance of productive systems............................................................................. 74
     1.2 Transports, energy, telecommunications .................................................................... 75
   2 Egypt................................................................................................................................... 78
      2.1 Governance of productive systems............................................................................. 78
      2.2 Transports, energy, telecommunications .................................................................... 79
   3 Jordan................................................................................................................................. 82
      3.1 Governance of productive systems............................................................................. 82
      3.2 Transports, energy, telecommunications .................................................................... 83
   4 Lebanon ............................................................................................................................. 86
     4.1 Governance of productive systems............................................................................. 86
     4.2 Transports, energy, telecommunications .................................................................... 87
   5 Morocco............................................................................................................................. 91
      5.1 Governance of productive systems............................................................................. 91
      5.2 Transports, energy, telecommunications .................................................................... 92
   6 Tunisia ................................................................................................................................. 95
      6.1 Governance of productive systems............................................................................. 95
      6.2 Transports, energy, telecommunications .................................................................... 96




                                                                       3
Presentation
by Giuseppe Pennella, C.A.I.MED. Director
The increasing attention that the European Union is paying to infrastructure related to networks
and links in the Euro-Mediterranean area- especially with regards to the transport, energy, and
telecommunications sectors – evidenced by programming documents on the European
Neighbourhood Policy and the new Objective 3 for territorial cooperation, is reflected in national
and regional programming documents in Italy, and in national policies towards the southern shore
of the Mediterranean.
There is an ongoing convergence process in this field which is both an opportunity and a
constraint for the full development of the Euro-Mediterranean area. Indeed, this development
necessitates the promotion and improved functioning of infrastructure networks.
The central role played by inter-connections could potentially lead to a new spatial configuration
of the Euro-Mediterranean territory, with the multiplication of hubs, networks, and corridors.
There is already an “invisible” map of the Euro-Mediterranean area, which does not show up on
our atlases. This map is laced with networks, corridors, hubs, inter-connections, and platforms, as
shown in the logo of the volume presented in these pages. These “invisible” networks show how
much is being achieved, in both the economic and institutional fields, in terms of programmes,
projects, and investments that lead to complex monitoring and management questions on the
durability and functionality of the network system. In this field, market governance and
competion are finding new synergies in terms of the promotion, management, and development
of networks. The creation and sound management of these networks is becoming a tool to
evaluate both new conditions for development and the new relationship between governance and
markets.
Reflections on the public or private nature of the creation, management, access and monitoring of
the network system are very timely. These new issues open up a new dimension in the
relationship between global and local issues, between Europe and the Mediterranean, between
public and private, between the economy and institutions, etc. The future of the network system
will have a major impact on the now-static concept of free markets. Reaching a free market was
the central goal of the Barcelona Declaration, with a target date of 2010. New competition will
not take place merely among and between markets for goods and services, but also with and
between networks. The new cornerstones of development will be inter-connected networks that
are easily maintained and that can coordinate territorial vocations, economies, institutions,
administrations, and current and future resources. These new developments will have an impact
on rich and poor areas, northern and southern Europe, and link centres of excellence and
marginal areas, attributing new roles to territories and administrations. There seems to be a
unanimous consensus on the inherent potential of this procees, especially as chance for southern
Italian regions and for Italy as a whole to take advantage of their geographic advantage in terms
of proximity to the Mediterranean.
We have often referred, in general terms, to the opportunity for promoting the development of
trans-national territorial platforms centred on trans-European corridors and motorways of the sea,
that are able to valorise the local competitive potential of territories, linking the needs of national
system with the European and extra-European systems, benefiting from the increase in traffic and
economic opportunities in the Mediterranean basin. In particular, we highlight southern Italy’s
potential to increase its capacity to intercept and organise trade flows between Europe, the
Mediterranean basin, and the Far East, and thus to serve as a key logistics hub.
At the same time, we highlighted the need to capitalise on Italian successes in innovation in the
telecommunications field in order to ensure that Italy will not merely be a huge




                                                   5
telecommunications market, but also a country capable of integrating the entire productibe
process: technology, products, services1.
The complexity of the goals that are being set makes it imperative to analyse right from the outset
the potential problems associated with the process now under launch.
We must immediately begin to focus on the links between infrastructure networks,
administrations, and productive systems, links that test the strength of the network as a whole,
and which require “directors” and “problem solvers” able to handle administrative, technological,
and economic problems.
An indispensable starting point for such a governance process is an integrated knowledge on the
transport, energy, and telecommunications networks of the Mediterranean countries and Italian
regions directly affected by EU connectivity policies. It is only by strengthening the links
between administrations and institutions working on infrastructure networks and the economic
needs of those who promote such networks that an efficient, integrated governance of this
network that meets the requirements of competition can be reached. The key question tackled by
our research is to link local economic needs (and the promoters of network creation) with the
governance of relevant institutions and administrations, which, although they are expressions of
different cultures, play important roles in defining the rules that apply to networks, as well as
monitoring and enforcing them. The necessary knowledge to govern processes associated with
new infrastructure networks must be augmented with further studies that look at both the
productive and institutional systems in the territories involved in this new spatial configuration of
the Euro-Mediterranean territory.
Once the starting point and the key initial elements for the process to connect territories,
administrations, and productive systems are identified, the network concept we are dealing with
will assume an increasingly dynamic nature. We must take into account from the very beginning
the importance of the network development process, along both the north-south and east-west
axis, and keep in mind the possibility to extend it to neighbouring regions and countries, such as
those of eastern Europe and the Balkans.
In such a process, it is necessary to adopt planning processes that can guarantee the good
functioning of the network as a whole, especially with regards to leadership and problem-solving
in situations where administrations and productive systems cross paths. These functions must be
taken care of in a planned manner, by placing independent, neutral authorities in charge of them.
These authorities must be able to intervene without disturbing the natural evolution of ongoing
economic processes. It is with this spirit that we have drafted these initial study and research
documents, and thanks to the input of local and regional administrations, we have organised a
seminar to tackle these issues in depth with the involvement of institutions and economic
partners.
The research and publications are organised in 5 sections.
The first two are available in English, French, and Italian:
I – The infrastructure and network system
II – Governance, productive systems, and networks.
The other three are available separately and in Italian only:
III – Governance dei sistemi produttivi in sei Paesi del Mediterraneo
IV – Reti materiali e immateriali in sei Paesi del Mediterraneo
V - Lo strumento di vicinato e partenariato e lo strumento di adesione.


1
 Cfr: “Relazione annuale sull’attività svolta e sui programmi di lavoro”,Autorità per le Garanzie nelle
Comunicazioni, giugno 2006.

                                                   6
                          I – The infrastrucure and network systems



Mediterranean transport corridors                                                                   GEANT network




Motorways of the sea                Proposed gasduct prioritary axes       NIGAL gasducts   EUMEDCONNECT network




                                                                       7
Introduction
The first part of the research tackles, in three different chapters, issues related to infrastructures
and networks in the transport, energy, and telecommunications fields. Each one of these issues is
analysed with reference to the Euro-Mediterranean dimension, through the presentation of the
Community institutional and regulatory framework, and an overview of the main European
Union programmes and projects for 2007– 2013. A second section is dedicated to the Italian
national framework, through an analysis of programming documents relevant to the three sectors
in question, with particular emphasis being paid to the indications contained in the National
Strategic Framework (2007-2013). The third section deals with the regional dimension and
provides a summary of regional transport plans and projects in the infrastructure and energy
network fields in southern Italian and Mediterranean regions.
The second part of the publication instead contains a summary of the issues related to the
governance of productive systems and infrastructure networks – in the transport, energy, and
telecommunications fields – in six Mediterranean countries: Algeria, Egypt, Jordan, Lebanon,
Morocco and Tunisia. For each country, we begin with a brief overview of the macro-economic
framework, then move on an analysis of the governance of public sector interventions in the
economy, with comments on the presence of the state in the various sectors of the economy.
Special attention is paid to reforms on market regulation and competition, and to the institutional
aspects related to the creation and functioning of authorities to oversee markets. We provide a
detailed analysis of the dynamics that affect transport, energy, and telecommunication networks.
We also look at: the extent to which each country’s economy is open at the international level,
their industrial structure, and the programmes launched by each country to increase the
competitiveness of their productive systems.
The research is completed by three in-depth sections (available only in Italian) that include: the
full version of the country reports on the governance of productive systems; the full version of
the country reports on material and immaterial networks (transport, energy, telecommunications)
including a section on normative evolution and/or the protection of competition on the part of
public authorities or independent agencies in the sectors in question in the six Mediterranean
countries; and a final section on EU proximity policies.
The work was written by a team of researches. Single contributors are credited in footnotes for
each chapter.

1 Transports

1.1 An overview of the Euro-Mediterranean transport sector 2
The strengthening of political, economic, and social ties between the two shores of the
Mediterranean that has arisen out of a wider, deeper Euro-Mediterranean partnership necessitates
the development of a Euro-Mediterranean transport network, in terms of both South-South links
(between Mediterranean partner countries) and North-South links (inter-connections with the
trans-European transport network).
The creation of energy and transport networks is both a fundamental condition for the new Euro-
Mediterranean partnership and an incentive for integration between the Mediterranean partner
countries themselves. A shared Mediterranean space also requires the creation of a network of
physical infrastructure based on procedural and legislative harmonisation to integrate economic
and institutional governance with the productive processes that are already underway in the areas
affected by these networks.



2
    By Paola Russo and Clementina Persico

                                                  9
The activities in support of the transport network are based on the objectives identified by the
Commission on the development of the Euro-Mediterranean transport network in 2003. In
particular, planned programmes focus on the promotion of a Euro-Mediterranean airspace, the
strengthening of marittime security, the promotion of local coastal navigation and of ‘motorways
of the seas’, and the extension of the Galileo satellite navigation system to the countries on the
southern shore of the Mediterranean.
Funding for each programme is strictly linked to the identification of specific projects. Planned
activities aim to help create a Euro-Mediterranean transport network, and in the longer run a free
trade zone in this area, through technical assistance, training, and exchange programmes to
promote capacity building and a gradual harmonisation of procedures.
Figure - Euro-Mediterranean transport network




Source: The Trans-European Transport Networks

1.1.1 The evolution of EU transport policies with regards to the Mediterranean
The transport issue, although it has acquired strategic urgency in light of planned integration with
European networks, does not constitute an innovative field of intervention for the EU.
As early as 1995, with the Barcelona Declaration, the linking of Mediterranean and European
transport networks had been emphasised, along with the development of south-south links. The
action plan adopted during the Fifth Euro-Mediterranean Conference of Foreign Ministers that
took place in Valencia (Spain) on April 22-23, 2002 reiterated the prioritary nature of the
development of transport networks and infrastructure in the Mediterranean, especially inter-
connections.
The European strategy for links with transport routes in neighbouring counties, elaborated during
the Pan-European Transport Conferences in Prague (1991), Crete (1994), and Helskini (1997)
had not included the Mediterranean areas, although it had already set up a specific network (the
so-called “corridors”) in Central and Eastern Europe and the Balkans.
The issue of linking the trans-European transport network with the Mediterranean was discussed
during the meeting of the European Council in Copenaghen on 12-13 December; the indications
that emerged from this meeting are included in the Communication of the European Commission
of June 2003, which highlighted the need for the development of a Euro-Mediterranean transport
network. The same communication also stresses the low level of sub-regional cooperation and



                                                10
integration, which would benefit from a push from the EU. This issue has become a priority in
light of its strategic interest for the creation of a free trade zone.
The EU strategy to create transpor links between EU countries and their neighbours also
includes: Tina - Transport Infrastructure Needs Assessment (to develop transport networks in
Eastern Europe), the Pan-European Transport Areas - Petra (which cover coastal areas in the
Mediterranean, Baltic, Black Sea, and Ionian and Adriatic Seas); the trans-siberian corridor
(which links pan-European corridors to China, Korea, and Japan); the southern corridor (which
links them to central Asia through Turkey and Iran); the North-South corridor (which links them
to the Persian Gulf through Russia and central Asia); the Traceca – Transport Corridor Europe-
Caucasus-Asia (which links Pan-European corridors to central Asia through the Caucasus, along
parts of the ancient Silk Road).
The construction of a trans-European transport network, which calls for the inter-connection and
compatibility of national transport networks within the EU, is a fundamental tool for the
development of the internal market in the EU, and for the strengthening of social and economic
cohesion.
Figure - Planned trans-European corridors in Italy




Source: The Trans-European Transport Networks

1.1.2 Communication 376/2003 on the development of a Euro-Mediterranean transport
network
All advanced economies are based on dense, reliable, and competitive transport networks that
facilitate international trade and set the stage for economic growth; therefore, the current
vulnerability of the transport networks on the southern and eastern shores of the Mediterranean,
due to an insufficient grid, lack of traffic management mechanisms, incomplete openness of
transport markets, and poor sub-regional cooperation, constitutes a significant obstacle to
investmenr and socio-economic development in the region. Improved sub-regional cooperation
would make it possible to better exploit synergies, thus facilitating the creation and functioning
of a Euro-Mediterranean transport network. The creation of such a network would be an
important push towards South-South integration.



                                                     11
With the Communication from the Commission to the Council and European Parliament on the
development of a Euro-Mediterranean transport network (Com (2003) 376), the Commission
formalised and systematise community policy on transport. The goal of the Communication was
to promote cooperation with countries on the southern shore of the Mediterranean in order to
improve transport infrastructure and raise awareness in both the public and private sectors.
The Comminication defines the challenges of this network and its characteristics, taking into
consideration the inherent limits to its development, whether in terms of security or funding.
Over the last several years, new needs and obligations have emerged that directly impact the
transport sector in the Mediterranean: development of tourism, security concerns related to the
marittime transportation of hydro-carbons and to international terrorism, and the increasing
characterisation of the Mediterranean as a transit area, especially in light of increased traffic
flows from Asia.
Traffic flows between the two shores of the Mediterranean are very intense. The EU is this
region’s main partner in terms of air and marittime traffic, particuarly with regards to the
Maghreb. At the same, time, new needs and new constraints have emerged with regards to the
development of tourism, and concerns in terms of security and international terrorism.
Activities to plan the network and identify priority projects have been launched within the
framework of the Meda Programme. The Commission recommends a corridor-based approach to
prepare the list of priority infrastructure projects, which makes it easier to set priorities. As an
example, we cite two multi-modal corridors, which are particularly suited to promoting regional
integration:
    •    The trans-Maghreb multi-modal corridor: a railroad and highway network that will link
         Morocco, Tunisia, and Algeria’s main cities.
    •    The eastern Mediterranean double corridor: the corridor starts in Bulgaria, and crosses
         Turkey before splitting in two: one branch follows the coast through Syria, Lebanon,
         Israel, and Egypt, while the other crosses the Syrian and Jordanian plateau.
Figure - Mediterranean Transport Corridors




Source: The Trans-European Transport Networks

1.1.3 Maritime transport
Maritime transport will play a central strategic role in the future of relations between the Eu and
Mediterranean countries, especially with regards to the strategic reconfiguration of transport
networks and “motorways of the sea”.


                                                12
The central role of maritime transport was re-iterated by the former Commissioner for Transport
Loyola De Palacio, who reccommended that maritime transport be emphasised in order to
overcome the shortcomings arising out of the lack of a complete European rail network and the
congestion of road-based traffic that now affects the entire continent, while at the same time
having a lower cost in terms of energy and a lower environmental impact. The central role of
maritime transport means that shared efforts will have to concentrate on the development of
certain fundamental tools such as:
    •   high quality of maritime transport, based on frequent and reliable services, economically
        balanced with the volumes of traffic on motorways of the sea, and offering special
        services with regards to customs procedures and security, with improvements on the
        quality of ships, crews, and ports;
    •   an up-to-date level of financial cooperation between the public and private sectors that
        will make it possible to finance activities to develop motorway of the sea infrastructure in
        order to create new short sea-shipping lanes that can be qualified as being of general
        interest and to promote inter-modality.
The location of Italy, and in particular of its island regions, is highly strategic from a geo-political
point of view, since it has the potential for becoming a logistical platform linking Europe with the
Mediterranean area; the latter is a new and interesting theatere for trade, with potential
competitors and an expected increase in transit traffic, and therefore with many new opportunities
for development.

Short-range maritime transport
“Short-range martitime transport is defined as the movement of goods and passangers by sea
between ports located in Europe, or between these ports and ports located in non-European
countries with a coastline on seas closed to European borders”. (Comunication 317/1999 of the
European Commission).
The European Commission issued a first communication on this issue in 1995, which was
followed up upon in 1997. The latest communication on short-range maritime transport dates
back to 1999.
The main reasons why short-range maritime transport should be promoted in the Italian portion
of the Mediterranean Sea are summed up below:
1) promoting the general sustainability of transport: coastal navigation is a valid (and in some
ways more enviornmentally friendly) alternative to road transport, which is now saturated;
2) strenghtening the geographic and economic cohesion of areas in which this modality of
transport is applicable, thus facilitating links between different regions and revitalising
peripheral areas;
3) increasing the efficiency of the transport sector as a whole, in order to meet current and future
demands linked to economic growth.
To this end, short-range maritime transport should become an integral part of the logistical chain,
and an efficient door-to-door service.
Despite the lack of up-to-date, detailed national statistics on coastal navigation, available data
shows that it has grown steadily in the last decade, along with general traffic in Italian ports,
especially container traffic. We can thus reasonably state that maritime transport is a growing
sector, and indeed the main Italian ports are equipping themselves to create newer and more
efficient infrastructures to support this type of transport.
Ports are essential to coastal navigation. Stopover times, shortcomings in terms of infrastructures,
non-transparent tariffs, service inefficiencies and poorly equipped staff are all problems that need
to be resolved in order to improve short-range maritime transport. Ports need to promote coastal


                                                  13
navigation within the framework of their overall trade strategies, including terminals reserved
exclusively for short-range maritime transport (as some Italian ports have already done) that
include specially tailored services. Promoting coastal navigation thus implies a new organisation
of terminals and the application of new technologies.
Another fundamental aspects is the creation of motorways of the sea that link maritime corridors
in the Eu with those of neighbouring countries.
1.1.4 Motorways of the sea in the Mediterranean
The increase in sea-land transport services plays a strategic role in the modal re-equilibrium of
the transport sector. The goal is to create an system of integrated links that offer an alternative to
road-based transport, thus guaranteeing a more rational distribution of freight traffic and
overcoming the congestion of the national road system.
The term “motorways of the sea” was coined to indicate transport along axes that are partly
terrestrial (motorways in the strict sense) and partly maritime, in order to achieve door-to-door
transportation between different areas in Italy, in an alternative and equally efficient manner
compared with traditional, land-based motorway traffic.
In order to translate into concrete terms Italy’s strategic role in terms of logistical infrastructure,
the Ministry of Infrastructure and Transports has launched a dialogue at three different levels: the
EU level (including the 10 new member countries), the bi-lateral level (with individuals EU and
Mediterranean countries), and the national level. At the EU level, the importance that the
Government has granted to maritime transport within the overall national and European transport
system is underscored by the “Naples Charter”, underwritten on July 4-5, 2003 during the
Informal Council of EU Transport Ministers in Naples, which affirms the need to facilitate
international links, especially those that are made more difficult due to geographical constraints,
thus improving the competitiveness of the European Union. During this meeting, the ministers
also gave their favourable opinion on the report of the High Level Group on Ten-T, reiterating
the key importance of “motorways of the sea”.
At the bilateral level, an expert group on the development of short-range maritime transport and
“motorways of the sea” was created in Livorno on February 15, 2000, while the Transport
Ministers of Italy, France, Spain, Greece, and Portugal issued a joint declaration on regional
cooperation for the development of short-range navigation in southern Europe during the
European Council of Transport Ministers in Naples on July 5, 2003.
The “motorway of the sea” programme has been included in the list of priority projects at the EU
level, in order to achieve a better equilibrium between transport modalities. For Italy, this
programme is an absolute necessity, due on the one hand to the predominance of road-based
transport, and on the other on Italy’s geographic position, which makes it well suited to efficient
maritime alternatives. Indeed, this is in accordance with the new government’s programme. The
development of national and regional strategies towards cooperation policies in the
Mediterranean thus should include the implementation of Project n. 21 “Motorways of the sea” of
the TEN-T Programme. Priority project n.21, included in decision 884/2004, highlights four main
corridors within which to develop motorways of the sea ; these so-called “quick-start projects”
are marked for specific attention on the part of the Commission, and thus for priority financing.
The main motorways of the seas identified by article 12a of Decision 884/2004 are as follows:
    •   Motorway of the Baltic Sea (linking the Baltic Sea Member States with Member States in
        Central and Western Europe) inclding the route through the North Sea / Baltic Sea Canal
        (Kiel Canal) (2010);
    •   Motorway of the sea of western Europe (leading from Portugal and Spain via the Atlantic
        Arc to the North Sea and the Irish Sea) (2010);



                                                  14
    •    Motorway of the sea of south-east Europe (connecting the Adriatic Sea to the Ionian Sea
         and the Eastern Mediterranean to include Cyprus) (2010);
    •    Motorway of the sea of south-west Europe (western Mediterranean), connecting Spain,
         France, Italy and including Malta, and linking with the motorway of the sea of south-east
         Europe.
The adoption of article 12a of the “TEN-T Guidelines” of April 29, 2004 provides a legal
framework for financing motorways of the sea, and identifies three main objectives for projects
in this sector:
    1. concentrate flows of freight traffic, and passengers as well, towards maritime transport
       modalities;
    2. increasing cohesion among member states, since at least two European states need to be
       involved in each motorway of the sea project;
    3. the reduction of road congestion through the shift of freight traffic towards other
       transport modalities.
In order to ensure the success of motorways of the sea, three main conditions need to be kept in
mind:
    1. choices must be made regarding ports, inter-modal corridors, and services in order to
       achieve the necessary concentration of traffic flows;
    2. all the actors on the chain of logistics must be actively involved in these projects;
    3. motorways of the sea need to employ the best available technologies in the chain of
       logistics in order to be attractive to potential users.
The Commission has set the year 2010 as the final deadline for the completion of an operational,
efficient network of motorways of the sea; it is now actively involved in implementing projects
related to these motorways and making them operational.
Figure - Motorways of the sea




Source: The Trans-European Transport Networks

Furthermore, the inter-modality of short-range maritime transport can be enhanced thanks to
participation in pilot projects of the Marco Polo programme.


                                                 15
1.1.5 The “Marco Polo” programme
The Goteborg European Coucil of 15 and 16 June 2001 placed the re-euilibrium of transport
modalities at the centre of its sustainable development strategy.
In 2002, the European Commission adopted the proposal made by the European Council and
Parliament on the granting of Community financial contributions to improve the environmental
performance of freight transport system through a new financial tool to promote intermodality
called the “MARCO POLO Programme " .
"MARCO POLO" replaced the preceding PACT Programme (Pilot Action for Combined
Transport - 1997-2001) which aimed to increase the use of combined transport through financial
support for original activities (pilot activites) in the sector of combined transport.
The Marco Polo programme’s objective is to reduce road congestion and improve environmental
performance of the entire transport system by shifting road freight traffic to short sea shipping,
rail, and inland waterways. Marco Polo sets quantifiable, verifiable goals for modal transfers.
The final goal is to contribute to the shift of international road freght traffic to short sea shipping,
rail, and inland waterways.
The Marco Polo programme helps finance three types of project:
    a. Start up support for modal shift actions and new non-road freight transport services.
    b. Catalyst actions for innovative projects aiming to make up for the structural weaknesses
       of markets (such as the creation of motorways of the sea or high-quality international rail
       freight transport services, managed through a one-stop shop)
    c. Common learning actions.
The Marco Polo programme applies to actions that involve the territories of at least two Member
States, or at least one Member State and one neighbouring third country.
1.1.6 Ports in the Mediterranean
Most transborder trade flows, especially in North Africa, take place via maritime routes, thus
meaning that ports are crucial hubs. Simplifying port operations is a high priority since ports are
not merely locations where goods are exchanged, but also an inter-modal hub, as suggested by
the European Commission in its work on trans-European transport networks.
Port operations are often very complex, and obstacles to the full development of the port sector in
Mediterranean countries include bureaucratic constraints, dysfunctions caused by controls, and
poor management.
The restructuring of ports is undoubtedly the most urgent reform needed by the maritime
transport system. Another important issue is the market for ships, as well as a new framework for
trans-shipment activities.
In order to understand which operational characteristics are needed by Mediterranean ports in
order to be competitive on the international markets, and which organisational models must be
adopted in order to maximise efficiency and functionality, a complete database on maritime
traffic as a whole is needed.
Over the last 10 years, Mediterranean ports have taken important steps to bridge the gap between
dividing them from northern European ports. This has helped give the Mediterranean a central
role in international trade flows.
The fundamental elements that characterise maritime transport in the Mediterranean include: the
high number of ports and countries with intra-Mediterranean and extra-Mediterranean links;
services on at least a weekly basis, not just between strong economic areas, but including niche
relationships as well; a significant contribution made by trans-shipment, which is promoting the


                                                  16
development of port systems that could not, by themselves, produce traffic volumes large enough
to attract direct ports of call for major intercontinental services.
Port systems that represent logistics hubs have acquired importance, and they are increasingly
independent of national borders and management constraints. The potential of ICT and e-
business should be exploited in order to increase the efficiency of port affairs and commercial
and logistic activities, which will play an increasingly important role in the new economic
scenario.
The reform of the transport sector is thus a necessary condition for identifying alternative
solutions and organisational and structural changes.
The beneficiaries of transport “no longer move goods, but rather manage flows” and it would
thus be desirable to have a systematic approach that pays less attention to physical infrastructure
and more to logistical services. The public sector is thus asked to create an environment that is
compatible with market dynamics and tailored to the new needs of clients.
The new role of ICT, new port equipment, and the new role of logistical intermediaries all help
transform the transport sector as a whole, and at the same time they require new investments and
changes once strucural inefficiencies and inadequacies become apparent.
Changes in transport markets and trade goods have profound implications for the integration of
developing countries in the international economy. The creation of a common space for
transports requires the minimisation of transition costs and of economic distance, and the removal
of barriers and causes of friction. Costly, unreliable, and excessively lengthy trans-border
transport processes must be reformerd and require investments in infrastructure.
Many necessary reforms will take place at the national level and many projects will remain
national or supra-national in nature. This could conflict with the goal of the neighbourhood
policy, which is developing relations at the sub-state level. For this reason it is imperative that –
on the basis of these projects – local trans-border cooperation projects be encouraged and
developed, whether they are industrial, tourism-based, or people-to-people.
Additionally, projects in the transport sector will likely be implemented slowly and in a
disorderly fashion, and will depend on unpredictable political and financial circumstances. It
would thus be advisable to concentrate attention on a limited number of routes, and try to create a
network of projects of various types (tourism, industrial, environmental, etc.) in order to
strengthen their credibility and thus their feasibility, as well as encouraging similar projects in the
rest of the Mediterranean region.
1.1.7 Air transport
Much like maritime transport, air transport plays a central role, especially due to the development
of the tourism sector and the mobility of immigrant populations.
The stated goal of the Communication of the Commission is to improve airport capacities and the
integration of traffic management system in light of the creation of a common European airspace.
Initiatives in this sector will possibly include the signing of “open sky” agreements between the
EU and interested Mediterranean partners, as well as the participation of the European Agency
for Air Security.

Communication from the Commission on a Community Aviation Policy towards its Neighbours
(Com 2004/74)
The Commission feels that the implementation of an aviation policy towards its neighbours must
be considered a high priority policy objective.
In this regard, it is in favour of a coherent, flexible approach: on one hand, through negotiations,
based on a single model for an aviation market, with all the countries with which the Community
is already cooperation in the aviation sector within a pan-European framework; on the other,
through negotiations based on Euro-Mediterranean agreements in the aviation sector with all the

                                                  17
Mediterranean partners participating in the Barcelona process, starting with Morocco, Lebanon,
and Jordan. With regards to Turkey, the Commission calls for opening preliminary discussions
with an outlook towards reaching an agreement at a later date.
From an economic point of view, most of the EU’s neighbours are important trade partners. For
them, the EU is the main trade partner and the main reference point for their economic policies.
Due to the fact that the impact of air transport on the economy as a whole is constantly increasing
(the economic impact of air transport on gross global production is estimated at a minimum of
850 billion euros), the improvement of relations in the aviation sector between the enlarged
Community and its neighbours will contribute to reciprocal economic growth, especially through
the tourism sector and trade in goods and services.
Nevertheless, economic growth based on air transport is compatible with sustainable
development only if certain conditions are met. To this end, the Commission has expressed
reservations with regards to fiscal exemptions for aircraft fuels obtained through bilateral air
service agreements. It should be stressed that in the last several years the Commission has
acknowledged the growing interest in establishing closer relations in the air transport sector in the
part of some neighbouring countries that had never participated in any negotiations with the EU
up to now.
Additionally, contacts with interested neighbouring countries have been initiated: most of them
have expressed interest in finding an answer to this legal problem through an agreement with the
Community. In parallel with the necessary negotiations to make existing bilateral agreements
compatible with the treaty, the Commission feels that a more complete approach is necessary, in
which the Community will have to negotiate a series of agreements in the air transport sector
between itself and the countries that are already willing to do so.
The Commission intends to reach aviation agreements with each Mediterranean countries that are
as similar to each other as possible. The experience that will be acquired through negotiations and
the application of agreements will be the basis for future approaches at the (sub)regional level. In
the long term, the creation of a Euro-Mediterranean common airspace could be envisages, as
already suggested by the recent communication by the Commission for the development of a
Euro-Mediterranean transport network.
The Community intends to create a single aviation market for all signatory countries through a
common European airspace. Nevertheless, the differences that exist between the air transport
sectors of each interested country (in judicial, administrative, and economic terms), and the fact
that negotitions in the air trasport sector with Mediterranean partners will not be held with a date
for adhesion in mind, the idea of extending Community aviation norms and using Community
institutions is not the best way to launch negotiations. With regards to Mediterranean countries,
the Community proposes an approach based on classic aviation agreement, with a regional focus
if possible and with the possibility of increased cooperation in sectors of shared interest.
The fragmentation of relations in terms of air transport can be avoided only with the conclusion
of agreements in this sector with all involved partners. Furthermore, this can facilitate operations
between the various Mediterranean partners and thus improve the possibilities for (sub)regional
integration. It is thus necessary for negotiations with the various countries to follow a coherent
approach.
The Commission feels that its Mediterranean aviation policy must rest upon a new type of
agreement: Euro-Mediterranean Aviation Agreements. They are based on the traditional
approach of Open Aviation Agreements, which discipline a series of aspects that are tied to
reciprocal market opening and the elimination of economic barriers to trade and investment.
According to this approach, each party to the agreement will be responsible for the application of
the agreement in its territory and with regards to its citizens. Furthermore, the agreement will call
for specific controls to ascertain compliance with the obligations that have been made, including


                                                 18
information on systems adopted by other countries to avoid competitive distortions and control
over these systems.
Technical and operational safety measures will be an integral part of each agreement. They will
take into considerations the norms and procedures applicable in the Community, as well as
ongoing development (including the creation of the European Agency for Air Security). The
same goes for the protection of people, infrastructure, and aircraft.
With regards to air traffic control, the agreement should provide a very strong push towards
harmonisation and integration.
1.1.8 Terrestrial transport and other sectors
The priority of terrestrial transport is to ensure efficient links between hinterlands and ports,
airports, road networks and railways. Due to the way regional cooperation is set up, the
identification of physical bottlenecks along these corridors is a top priority, along with
coordination facilitation measures.
Terrestrial transport is mostly road based, and as such the truck industry is particularly important.
Overloaded trucks damage roads and violate safety and environmental rules. Just as for the
maritime and air transport sectors, it is important to establish technically sound, up-to-date
environmental regulations.
With regards to rail freight transport, the restructuring of state-owned companies is an important
issue in terms of efficiency. Opportunities for private sector participation are rather limited in this
sector.
Customs reform is one of the most important questions on the political agenda, and advantages in
terms of facilitating transport would be enormous. The Lebanese experience in customs reform is
exemplary in terms of efficiency, reduction and simplifications of bureaucratic operations, and
time savings.

1.2 The national framework
1.2.1 National strategic framework 2007-2013
National transport policies are affected by the goals set in the General Plan for Transport and
Logistics (Piano Generale dei Trasporti e della Logistica - PGTL) of 2001, which have been
further developed by the Regional Transport Plans (Piani regionali dei trasporti - PRT) and
follow-up activities (Strategic infrastructure plans, ANAS plans, and railway plans, for example).
Regional policies for southern Italy can thus be evaluated in light of these objectives, and of
broader national policies for networks and communication and transport links. From this point of
view, the experiences made in 2000-2006 show that in general terms regional policies for
southern Italy should be based on strategic and operational national, central, and regional
planning that sets specific goals and realisting timelines for planning and implementing policies
to link up with the major European transport networks.
With regards to developing the national transport network, regional, national, and community
policies will have to concentrate on re-focusing on logistics for a better strategic placement of
Italian ports and airports and their connected services, exploiting the growth potential inherent in
the increased flow of goods from the Far East towards western Europe.
According to the National Strategic Framework 2007-2013, Italy must follow new paths that can
have a significant impact on the entire system in terms of efficacy and efficiency.
Five specific lessons must be followed. The first has to do with strengthening the planning
capacities of authorities in charge of managing networks, especially with regards to ANAS and
RFI (the Italian rail network). The second lesson is to integrate the planning and evaluation of
large scale projects, in order to jointly plan needed infrastructure, its maintenance, and service
management; furthermore, it is important to strengthen the implementation strategy for

                                                  19
programmes to increase openness and competitiveness in the transport sector at the national and
regional (local public transport) levels, by creating favourable conditions and supporting, in
accordance with community norms, the emergence of new operators serving new routes. The
fourth lesson is the consolidation of the results that have been achieved through the creation of an
airport network in southern Italy that is well conncected to international hubs and the
development of services to open up new segments out the tourism market and to establish mid-
range trans-national links with the countries of the European Economic Space and the
Mediterranean.
Finally, new modalities to extend the motorway of the sea model to the Mediterranean countries
must be sought out, thus giving southern Italy the opportunity to become a logistics hub for major
trans-oceanic routes, with links to both central Europe and major Asian markets.
It will be important to accelerate the planning phases for projects included in Law 443 of 2001,
and set priorities and realistic timelines. One of the most important aspects of these projects is the
organisation into multi-modal corridors of the activities to guarantee connections between Italy
and Europe and their insertion into pan-European corridors, whose management is to be entrusted
to specific coordinators who must ensure that the choices that are made are coherent with the
overall goal of the corridor itself.
It is imperative that the setting of priorities and timelines be accompanied by adequate
monitoring efforts, unlike what has happened so far.
The problem remains of how to integrate these activities with local collective services. This is
necessary in order to ensure that these activities will have a significant impact on local
development. The intensity of this impact will depend in part on the level of competitiveness and
the number of actors in the local public transportation market, who will help improve service
quality and increase the offer of services.
With regards to internal and international logistics, in 2000-2006 its development has focused on
both certain fundamental infrastructures, such as ports and freight villages, and the re-
organisation of the efficiency of logistics processes. Rail-based freight transport has been opened
to competition, conditions for combined transport modalities have been enhanced, and databases
for road-based transport have been created in order to optimise loads for return trips.
In northern and central Italy, the focus was on the development of inter-modality and motorways
of the seas, in order to best exploit the advantages of Italy’s position at the heart of the
Mediterranean.
At the same time, technological and managerial aspects of logistics (especially with regards to
public-private management of freight villages) have been studied in depth, in part thanks to
interest on the part of universities and specialised training schools.
Unfortunately southern Italy has not shown itself to be capable to catch up with the
modernisation of the national logistics system.
Within a national policy framework, concrete options to invest in organisational links between
logistic and management aspects of ports and airports to exploit the strategic position of Italy,
and especially the south, in the Mediterranean and Balkan area, have not been fully defined.




                                                 20
Figure - Trans-European Corridors in Italy: Corridor I and VIII




Source: The Trans-European Transport Networks

1.2.2 The general plan for transport and logistics (2001): goals achieved and unresolved
issues
An analysis of the transport sector in 2001 highlighted serious shortcomings in terms of
infrastructure, management, and organisation, and in general the inadequate quality of the
services offered.
The main problems were identified as follows:
    •    A strong bias towards road-based transport: the demand for transport (especially
         passangers) has grown rapidly due to increasing income, changing lifestyles, increasingly
         scattered workplaces and homes, the expansion of the service industry, and new ways to
         organise production. The transport of goods on roads became increasingly important,
         with significant social, economic, and environmental consequences. The analysis of
         current traffic volumes, for both passengers and goods, confirmed the unquestioned
         dominance of road based transport.
    •    A lack of homogeneity in services in the country’s various regions: congestion was
         prevalent in northern and central Italy, while the South’s main problems were low levels
         of accessibility, due to the insufficient quality of services and transport infrastructures.
         Both phenomena were obstacles to social and economic development: in northern Italy
         congestion slowed down development, while inadequate transport systems in the south
         prevented it from starting.
The entrepreneurial structure of sectoral operators was weak. Italian private transport firms,
especially in the sectors of goods and logistics and of airplane transport, were generally



                                                     21
subordinate with regards to foreign firms, the latter being far more advanced in terms of size,
entrepreneurial capacity, organisational innovation, and technology.
In order to allow for a more efficient and sustainable use of the transport of goods, and to achieve
high quality services, the former government sought to emphasise integrated logistics in its
financial, legislative, infrastructural, and systemic choices, according to the best practice
available in the transport sector at the global level.
This entailed the promotion of efficiency and entrepreneurship in every aspect of the transport
sector, in order to achieve an increasing specialisation of services and meet the needs of the
various productive processes, with a particular emphasis on the distribution of consumer goods,
urban distribution, the management of hazardous materials, the treatment of perishable goods, the
transfer of inter-modal transport units to rail and boat transport, the security of fuel
replenishments and industrial supplies, and on the application of modern quality monitoring
systems to regular land, air, railroad, and maritime transports.
In terms of infrastructure, the government sought to emphasise the most essential ones for the
sustainable growth of the country, for its improved integration within Europe, and for
strengthening its natural competitiveness within the Mediterranean region..
The identification of priorities began with an analysis of current and future demand for transport
of both goods and passengers, in order to identify the best services to meet it. The most suitable
interventions to improve the existing network and reach desired levels of service were then
identified and ranked according to priority.
Investments in infrastructure were addressed towards developing a highly integrated network free
from the problems and shortcomings of the previous one. In order to meet these goals, a national
integrated transport system (Sistema Nazionale Integrato dei Trasporti - SNIT) was created. This
was an integrated infrastructure system to host national and internationally important services and
the backbone of the Italian transport system for goods and passengers; its functionality was to be
ensured by the central government, including financially.
The creation of the SNIT made it possible to clearly assign responsibilities to the various levels
of government, and at the same time provided local governments with a reference framework
within which to set their policies. It also made it possible to formulate proposals within a broader,
more organic project, thus going beyond traditional procedures that were often motivated by
short-term needs.
1.2.3 Plan for logistics (2006)
With the CIPE resolution of March 22, 2006, the Government approved the Plan for Logistics of
January 2006. Transport policy, particularly with regards to road transport and logisitcs, was a
challenge focused on four key issues: first of all, interventions on infrastructure in order to bridge
the gap with European partners and third countries, with a particular focus on ports and Alpine
passes; the second issue was security; the third was inter-modality; and the fourth regulations and
markets. In this light, the Plan for logistics intended to ensure the harmonisation between the
supply of infrastructure and the demand for transport, identifying some priorities for intervention
summarised below:
    •   Re-equlibrating the modal system with an emphasis on the main axes, especially with
        regards to the transport of goods;
    •   Re-organising ports and airports;
    •   Reducing congestion in major metropolitan areas;
    •   Ensuring the safety of the transport system;
    •   Reducing the competitiveness gap with other European countries;



                                                 22
In terms of infrastructure policy, the Plan for Logistics is a continuation of the 2001 General
Plan for Transport and Logistics, and it is the reference point for any strategic action in terms
of infrastructures and territorial management.
The plan’s strategic guidelines have led to the identification of the following “macro-areas of
interest in terms of logistics”, which, with the right functional characterisations, can become the
country’s logistic platforms:
Le indicazioni strategiche contenute nel piano hanno portato alla identificazione territoriale delle
seguenti «macro-aree di interesse logistico», macro-aree che, con adeguata caratterizzazione
funzionale, possono diventare le piattaforme logistiche del Paese:
    •   the north-western logistic platform;
    •   the north-eastern logistic platform;
    •   the northern Thyrennean-Adriatic logistic platform;
    •   the central Thyrennean-Adriatic logistic platform;
    •   the southern Thyrennean logistic platform;
    •   the southern Adriatic logistic platform;
    •   the southern Mediterranean logistic platform;
Within this macro-territorial context, the backbone is made up of:
    •   nine hubs for land-based transport: Novara, Milan, Verona Quadrante Europeo, Padua,
        Bologna, North Rome, Naples-Marcianise, Bari, Catania; these hubs intercept traffic
        flows along the main transport axes and serve as access portals to a more complex
        system made up of the remaining inter-modal railroad terminals, which, along with the
        networks of freight villages, rear harbour facilities, and production platforms, make up
        the distributional infrastructure for transport and logistics;
    •   eleven hubs for marine traffic:             la Spezia/Savona-Genoa Venice/Chioggia,
        Trieste/Monfalcone, Ravenna, Livorno/ Marina di Carrara- Piombino, Civitavecchia-
        Olbia, Ancona, Naples- Salerno, Bari-Brindisi, Palermo- Trapani, Catania/Augusta-
        Messina; these hubs are strenghtened by rear harbour and freight village facilities,
        which help provide breathing room for ports that are not large enough to be fully
        integrated with their territory of influence;
    •   three hubs for port services: Gioia Tauro, Taranto, Cagliari;
    •   two air freight hubs: Milan Malpensa, Rome Fiumicino;Detto sistema portante,
        programmato nella logica di uno sviluppo diffuso del territorio, deve essere
        adeguatamente supportato sia da una rete infrastrutturale, che migliori l’accessibilità alle
        macro-aree di cui sopra, sia da una rete telematica integrata, entrambe finalizzate a
        migliorare i livelli di capacità della rete, gli standard degli operatori e la gestione delle
        imprese dei servizi di trasporto e logistica anche ai fini della sicurezza;
This so-called backbone, that was planned within the framework of broader territorial
development, must be adequately supported both by an infrastructure network that improves the
accessibility of the macro-areas listed above, and by an integrated telematic network. Both these
networks should aim to improve the network’s capacity, the standards of operators, and the
management of firms working in the transport and logistic fields, in order to improve security
among other things;
The strengthening of transport and logistics must be accompanied by a new organisational model
through the offer of integrated services;
In particular, the transport policy measures identified by the plan are aimed at the following:

                                                   23
    •   encouraging the growth of firms, progressively reducing aid for road transport, which
        should be attributed according to merit, and creating a “guarantee fund” for access to
        credit, financed in part by contributions from firms;
    •   re-equilibrating the international competitiveness of Italian road transportation firms,
        through the reduction of their fiscal burden and a revision of the annual permit tax;
    •   ensuring an efficient allocation of traffic, with the establishment of “corridor-based
        tariffs”, a toll system that can lead to the “separation of traffic”, and incentive for
        maritime traffic and combined transport;
    •   renewing the stock of vehicles, in part by providing incentives for scrapping;
    •   defining de-regulation measures in order to remove barriers for the road transport market;
The “Plan for Logistics”, which was considered a natural and necessary complement to the
“objective law” for the re-positioning of Italy in geo-economic terms, sets the stage for an
intensification of trade with northern Europe and the Mediterranean, and identifies Italy itself as
the bridgehead for trans-oceanic traffic, thus allowing Italy to bridge a gap of four percentage
points with average European costs for logistics;
The plan provides opportunities to improve organisation and regulation, in order to allow sectoral
operators to plan their activities with certainty. The key points that still need to be finalised are
    •   well-equipped centres for combined terrestrial and maritime transport and safe service
        areas for road transportation, as well as logistical platforms and rear harbour facilities for
        the backbone network detailed above;
    •   Implementing logistics policies for the various macro-areas through a coordination unit,
        and reaching programming agreements between the various nodes present within each
        corridor;
    •   Implementing an integrated logistical system in terms of physical infrastructure and
        telematic support.

1.3 The transport and infrastructure system in southern Italy
As shown by the document on “Proposals for a new transport and infrastructure system in
southern Italy”, of February 2, 2006, the Coordinating Unit for Southern Italian Regions
identified mobility and logistics as one of the key issues for southern Italy, and a national priority
as well. Improved transport service quality and the bridging of the infrastructure gap are essential
conditions for the economic development of the south, which would have positive repercussions
for the entire country, especially in light of the current international scenario. So far, southern
Italy’s regional administrations have failed in terms of drafting joint plans to integrate networks
and services; efforts have instead been rather fragmented, which has led to a lengthy list of
projects that are often in contrast with one another, and to the evident inefficiency in terms of
links and services between the various regions of the south. Indeed, resources for investments
have historically been scarce in terms of quantity, and limited with regards to speed and spending
capacity. In order to improve transport in the south, it is imperative for regional administrations
to plan structural interventions that cover the medium and long term (10-20 years), with a
strategic, integrated approach to the planning of infrastructure and services and joint proposals to
be presented to political, economic, and social actors at the national level. This proposal must be
innovative and based on clear planning, and emphasise the concentration of resources on priority
interventions identified through well-defined strategies, within a broader overall vision that
clearly identifies the necessary resources and timeframe. It must include a series of integrated,
multi-modal strategies and focus on infrastructure and services, as well as legislative,
management, and technological critieria in order to create a “new system for mobility and
logistics”, which is integrated, accessible, and of high quality. It needs to identify new sources of


                                                 24
revenue and financing mechanisms, as well as new organisational systems to guarantee the
adequate spending capacity to implement planned programmes within their defined timelines.
Higher quality transport services and a bridging of the infrastructure gap are essential for the
economic development of the region and will have positive effects on the entire country,
especially in light of an international scenario that suggests a significant increase in the
importance of the role of the Mediterranean in the next several decades.
The Italian political and economic systems strongly agree on the high priority of transport and
logistics in southern Italy. It is nevertheless necessary to translate this conviction in coherent,
efficient policies that will overcome the undeniable shortcomings of the development policies
that have been implemented in southern Italy over the last few decades .
In order to reform the transport sector in the south, the area’s regional administrations need to put
forward a strong, unified proposal. The increased importance that the macro-regional dimension
of territorial governance has acquired in the last few years provides the south with an opportunity
to re-organise its development model in a more autonomous and unified manner than in the past.
Indeed, the Draft National Strategic Document and the Strategic Government for Southern Italy
called for by the Guidelines for the Elaboration of a National Strategic Framework for Cohesion
Policies 2007-2013, strongly stresses the absolute priority of transport and logistics for the south,
and the chance for a unified strategic approach arising out of the presence of shared problems that
must be tackled jointly along with opportunities for development that can be fully taken
advantaged of only through sharing strategic options. Regional administrations need to identify
their basic priorities early in the planning process, in order to bring shared priorities to the
attention of the national government and to best take advantage of existing regional funds as well
as those of the new European Programme for Objective 1 Regions. The proposal must be based
on a new model for mobility, based on the needs of both passenger and freight traffic, that
defines an integrated transport service plan that can adequately satisfy demand. Once this model
is in place, priorities can be identified along with the necessary infrastructure to implement the
plan. This innovative proposal would overturn the “shopping list” logic, according to which, in
order not to make anyone unhappy, decisions on infrastructure are taken without any systemic
vision, and without identifying the necessary resources and timeframes for achieving visibile,
progressive improvements in accessibility. It would include a series of integrated, multi-modal
strategies affecting infrastructure and services, as well as legislative, management, and
technological critieria in order to create a “new system for mobility and logistics”, which is
integrated, accessible, and of high quality.
1.3.1 The central importance of southern Italy in the Mediterranean and on the
international scene
Thanks to its strategic position in the middle of the Mediterranean, southern Italy is a natural
logistics platform that must be valorised and developed through efficient relations with other
Mediterranean countries, in light of increasing trade with the Far East and especially the future
creation (in 2010) of a Free Trade Area. A vision for the future of the Mediterranean must be
based on a “Mediterranean System”, meaning the creation of a network of priority relations
between the various Mediterranean countries. It is important for southern Italy to exploit its
geographic position to play a leading role in the creation of the “Mediterranean System”, and
develop a network of social, cultural, and economic relations with other countries in the region,
especially those on the southern shore. In order to encourage and support this process it will be
necessary to create new direct air and sea links between southern Italy and these countries, and to
strengthen strategic infrastructures through the creation of an integrated system of ports, freight
villages, and airports, broken down according to traffic axes and goods to be trade. It is also
important to encourage the inter-connection and compatibility of the TEN (Trans European
Network) corridors (especially between corridor I and corridor VIII) and between Mediterranean
transportation networks and the TEN, in order to ensure the development of national corridors
that will link southern Italy with European networks.

                                                 25
Figure - Interventions of the PON for transports




Source: www.infrastrutturetrasporti.it

1.3.2 Regional Transport Plans (Objective 1 Regions)
In June, the Conference of Autonomous Regions and Provinces approved a document “Proposals
of Autonomous Regions and Provinces on issues related to Infrastructure and Transports”
through which they propose the launch of a permanent dialogue between the national and
regional governments that will provide an opportunity for inter-institutional comparaisons for the
implementation of institutional and territorial strategic choices. This dialogue is considered an
important tool for the improved valorisation of territories interested in the planning stage for
general-interest strategic infrastructure, thus facilitating the identification of priorities for
intervention on the basis of the level of advancement of regional infrastructure plans and
available financial resources.
The above document expresses a particular interest in the role of ports, in light of the
Mediterranean’s newly acquired central role in international trade, with the consequent increase
in actual and potential traffic to Italian ports. It would thus be advisable to implement a law to
reform and classify ports and to adopt norms to make available resources destined to
infrastructure for freight villages and logistics platforms as well, along with improving the
efficiency of links, rail services, and intermodal terminals.
In terms of planning for transport infrastructure systems, the regional administrations feel that the
basic document should be the 2001 General Plan for Transport and Logistics, which specifies that
interventions on infrastructure not included in the SNIT become the responsibility of the regions
themselves, who will include them in their regional transport plans (PRT).
In order to guarantee the necessary coherence of planning choices and instruments, it is necessary
to define a general methodology which the regions are asked to follow, in order to make contents
and proposals homogeneous and comparable. For PRTs, a “planning process” is proposed,
meaning a continuous process to re-organise regional transport systems through actions that go
beyond the typically sectoral planning that is usually associated with transport.



                                                   26
Basilicata3
In the Regional Strategic Document of 30 December 2005 for planning for 2007-2013, Basilicata
offers itself as a logistics hub for the entire southern Italian transport system, with the goal of
completing the buckle between the North-South axis Lauria- Potenza- Melfi- Candela (which
links the Gioia Tauro port with the Adriatic port system and the TEN VIII corridor) and the East-
West axes that link Naples with Taranto and Salerno with Barletta along with Naples and Bari (in
order to link the TEN I and TEN VIII corridors). In an outlook towards increased openness and
intergation with the logistics and infrastructure systems of the other southern Italian regions,
there is a need to prepare the right administrative and operational tools in order to work with the
Campania and Apulia regional administrations to create a link between the TEN I and the TEN
VIII corridors and strengthen the links between the Adriatic and the Thyrrenean shores.
Basilicata, which does not have any ports, is nevertheless located in a strategic position to link
these important port systems that could transform southern Italy into a logistical platforms that
could rival the northern European one.
It must be made clear that this ambitious goal can only be reached by strengthening logistical
links between the port and airport systems and local productive hubs, especially industrial
districts, in order to improve their access to export markets. Therefore, there is a need for an
integrated strategy with improved road and railway links between the productive hinterland and
the most important air and sea hibs in southern Italy, with adequate infrastructures to efficiently
move the products of southern Italian firms that are destined to be exported, and built inter-
modal infrastructures that are suitable for the specific productive outputs of southern Italian
entrepreneurial systems.
The inadequate infrastructures currently in place in southern Italy, and especially in Basilicata,
cannot be overlooked. This means that there is a need for intense activity during the 2007-2013
planning period, and in order to overcome the current shortcomings it will be crucial to
coordinate national and regional policies in the transport sector in order to improve the efficacy
of public spending by improving the currently weak synergy between national and regional
planning in terms of road and railway infrastructure.
The logic behind law 443 of 2001 and the General Plan for Transport and Logistics must be
revisited, but work must still be continued towards the completion of existing projects and on the
basis of approved feasibility studies, such as the North-South axis (the Lauria – Potenza –
Candela-Foggia motorway), which speeds up traffic between the Adriatic and Thyrennean
shores, the Salerno - Potenza-Bari axis, and the Murgia – Pollino corridor (which connects the
A14 motorway with the A3 motorway). In the railway sector, in order to extend the benefits of
port systems throughout southern Italy, Matera and Bari will have to be linked, and the Salerno-
Potenza-Taranto link will have to be strengthened, and the extension of the high-speed rail
network from Naples to Taranto will have to be evaluated.
At the regional level, a traffic plan, a transport plan with amendments, specific programme
framework agreements, and numerous feasibiliy studies and projects have already been approved.
Priority goals that need to be pursued in the transport sector include modal integration and a
unified tariff system, the revitalisation of railways, the liberalisation of road transport, and the
implementation of sustainable transport with incentives for environmentally friendly buses.
Sectoral reforms will have to improve the region’s accessibility to both the main connection hubs
and the closest European network hubs (ports, airports, high-speed railways), and through less
used regional routes, and they will have to overcome problems related to overlapping activities
thanks to regulatory activities undertaken by municipal and provincial administrations under
regional supervision. An integrated tariff system is planned, which will make it possible to use a
single pass for all regional routes, thus attracting new users and helping monitor the entire system
in terms of safety and quality.

3
    Fonte: www.basilicatanet.it - Documento Strategico Regionale, dicembre 2005.

                                                    27
With regards to major infrasturcture, Basilicata will have to speed up the completion of east-west
road and rail axes cited above, and also complete important logistical platforms such as the
regional airport at Pisticci and the Tito freight village.

Calabria4
The Framework Agreement on the Transport Infrastructure system in Calabria focused on
implementing a series of activities on railways, road traffic, airports, and ports, in order to make
the region more accessible.
Strategic interventions must thus focus on developing a road network that is compatible with
sustainable development and that can guarantee an adequate level of service for existing traffic
flows, as well as improved safety and a reduction in the number of accidents; the strengthening of
the main railway lines in order to shift part of the road traffic to railways; the modernisation of
ports and airports; and the improvement of the existing regional road network to connect
mountain towns to coastal hub, in order to improve links with major national transport
infrastructure.
These activities must be implemented within an integrated planning framework and in a
concentrated manner, in order to complete the following infrastructure systems: a road network
with improved existing roads and the building of new east-west roads; a system of commercial
and tourist ports; a well-structured airport system; and a rail network in the metropolitan areas of
Lamezia Terme - Catanzaro and Villa San Giovanni - Reggio Calabria.
The agreement signed on August 30, 2006 between the new Minister of Transport, Alessandro
Bianchi, the president of the Calabria regional government, Agazio Loiero, the CEO of RFI (Rete
Ferroviaria Italiana), Mauro Moretti, the president of the Consortium for the Industrial
Development of Reggio Calabria province, Giuseppe Fragomeni, and the president of the Gioia
Tauro Port Authority e, Giovanni Grimaldi for the revitalisation of the Gioia Tauro port is an
important step forward for the development of the entire transport sector in the region. It includes
plan to create rail links with the national rail network, and increased integration with international
networks, in order to make the Gioia Tauro port one of the Mediterranean’s largest logistical
platforms, with an important role in freight traffic at the Italian and European level, hus providing
an alternative to Spanish and Dutch ports. The agreement puts RFI in charge of the management
and maintenance of the rail lines at the Gioia Tauro freight terminal, which will link the San
Ferdinando rail station (located inside the port) with Rosarno, in order to make railway corridors
accessible to container traffic (which is now limited to sea and road corridors), thus improving
safety and cutting costs and time. The rail network and the TEN corridors will have a multiplier
effect, and the integration of the Italian port system with the European transport network will
have positive effects on the entire socio-economic system in southern Italy. The Calabria regional
government is responsible for a 13 million euro investment for the technical modernisation of
national security standards (a committment it shares with RFI), and it has committed itself to
disburse 608 000 euros a year for the maintenance and management of the railway link.

Campania5
The Campania regional government, with its Regional Law of March 28, 2002 n. 3 “Reform of
Local Public Transport and Mobility Systems in the Campania Region” regulated the local
transport system (trasporto pubblico locale - T.P.L) and regional mobility system. In accordance
with the criteria set out by the Community Support Framework 2000-2006 (QCS) implemented
by the Strumento Operativo per il Mezzogiorno (SOM) and with the programming guidelines
introduced by legislative decree n. 422/97 and by the General Plan for Transport, the law aims to
achieve the following objectives:

4
 Fonte: www.regione.calabria.it - APQ Infrastrutture di trasporto, maggio 2002.
5
 Fonte: www.regione.campania.it - Documento Strategico Preliminare per la Politica di Coesione 2007-
2013, dicembre 2005.

                                                 28
    •   achieving greater accessibility and ease of use for the entire region, through the
        development of an intergrated regional transport and mobility system, both in terms of
        space through the developmet of inter-exchange links, and in terms of time with
        integrated schedules;
    •   encouraging the re-equilibrium of modalities through improvements in the quality of the
        public transport system, thus contributing to the reduction of congestion, pollution, and
        accidents;
    •   providing incentives to establish new rules for choosing T.P.L. service managers, in
        order to improve efficiency, efficacy, and quality, both in terms of meeting demand for
        public transport, and in terms of improving the cost-benefit ratio of services. In addition
        this would encourage the development of organisational and financial models consistent
        with intervention programmes and transport policies of regional and local interest, and
        promote the separation of the administrative and management functions of T.P.L.
        services.
In accordance with Law 3/2002, the Campania regional government launched a planning process
for transport sector infrastructure, and approved a “General Plan for Interventions in
Infrastructure”, which identified the needs for mobility in the region, general intervention
strategies, and actions and objectives for each sector or “system”. In particular, reference
“systems” include:
            1. the regional light railway system (with links to the main railroad network),
            2. the road network (regional and national),
            3. the port system (tourist and commercial ports),
            4. freight villages,
            5. airports
The overall strategy aims to encourage integrated regional development with mobility strategies,
and develop the regional transportation system with an emphasis on integration between local
and national networks and between different transport modalities, a lower environmental impact,
and lower general transport costs.
The Preliminary Regional Strategic Document for Cohesion Policy 2007-13 sets out a vision of
Campania as an “open” region. The development programme, of which the next Community
intervention package will be one of the tools for implementation, is based on the principle that a
“closed” vision for the region’s future cannot be reconciled with opportunities for growth.
Campania thus wants to establish connections with European transportation networks (corridor I
and corridor VIII), and contribute to their completion with its available resources, working with
other southern regions and with the national government to draft a shared strategic programme
titled “Southern Italy, a major integrated logistics platform in the Mediterranean” in order to be
able, over the next several decades, to intercept traffic flows from China, the Far East, India,
eastern Europe, and the Balkans that will cross the Mediterranean.
The goal is to improve regional competitiveness by completing the primary and secondary hib
system and the road, rail, port freight village, airport, ICT, and energy networks along both
longitudinal and latitudinal axes, and their inter-connection. Another priority is to ensure the
environmental sustainability the activities to revitalise intermediate areas, by promoting the
quality of local productive processes, upon which the equilibrium between cities and the
countryside in the entire region will depend.
In particular, Campania intends to invest in its marine resources in terms of developing tourism
and comminication routes, with their economic and industrial implications, through the
strenghtening of sea-based local public transportation (Metrò del Mare) and maritime links with
the rest of the Mediterranean; activities to further increase cruise traffic (through the creation of

                                                 29
new ports, the upgrading of existing ones, and the diffusion of integrated transport services that
can allow cruise passangers to visit inland destinations as well). Particular attention will be paid
to developing “motorways of the sea”, with an increase in the volume of intra-Mediterranean
freight traffic transiting through Campania’s ports.
Campania accounts for 50% of national “motorway of the sea” traffic and 60% of Thyrennean
traffic, and it will thus be important to focus on synegies and systemic actions to launch projects
with which to attract and use European resources. Measures adopted in this light include the
broadening of the Naples Port Authority to include the port in Castellammare di Stabia, and the
planned addition of the port in Torre Annunziata in order to better distribute traffic and launch
investments, which will have an enormous positive impact on employment. Thanks to the Naples
and Salerno ports, the regional port system is one of the most lively and dynamic ones in all of
southern Italy; these ports are a natural platform for Mediterranean trade, and they are two of the
most successful examples of the use of motorways of the sea (Naples and Salerno have access to
54% of Italian motorways of the sea).
Furthermore, the promotion of logistics service centres that can support the investments of local,
national, and international companies working on the transport, assembly, and refining of goods
and services aimes to “industrialise” the logistics sector in Campania. This sector will enjoy the
support of the three freight villages that are being built and that will soon be fully operational: the
Southern European freight village (Marcianise), the Campania freight village (Nola) and the
Salerno-Battipaglia freight village. Another key element in the development of the Campania
logistics system will be the creation of the Grazzanise and Pontecagnano airports, which, along
with the existing Capodichino airport, will constitute a “system within the system”. Furthermore,
along with the expected expansion of Campania’s two main ports in Naples and Salerno, other
intermediate ports will be identified in order to optimse the flow of goods through the entire
regional territory.
Another of the region’s strong suits is the creation of a regional light railway system, which in the
future will guarantee: the improved flow of passengers and freight throughout the region, even
for passengers with widely different mobility and communication requirements; the
environmental sustainability of local transport; a high-quality, safe, and efficient system; close
links with national and international networks; reduced congestion in metropolitan areas; and the
revitalisation of peripheral areas.
The strategy underlying such a complex, integrated regional system, which impacts all
development sectors (social, economic, and environmental) as wel as the entire regional territory
and that of southern Italy as a while (along with Europe and Asian markets thanks to the strong
links created by Corridors I and VIII) must rely on a sharing process between institutional and
public actors, and on the integration of environmental concerns in order to identify, share, and
implement the most sustainable options.

Apulia6
In Apulia’s preliminary strategic document for 2007-2013, adopted on August 9, 2006, an entire
chapter is dedicated to transport and networks. The main priorities for interventions in
infrastructure must be identified within the framework of a policy that must be increasingly
oriented towards the completion, integration, and rationalisation of networks, and in the
awareness that investments in the transport sector are a top priority in order to pursue broader
competitiveness and re-organisation goals. The analysis of the transport sector in Apulia shows
that existing infrastructures remain inadequate both in terms of current demands and in light of
future technological innovations, as well as with regards to current internationalisation processes
and the need for the strategic repositioning of Apulia in the international scenarios that focus on
eastern Europe, the Middle East, and the Mediterranean, and finally in terms of further

6
  Fonte: www.regione.puglia.it - Documento Strategico Preliminare della Regione Puglia 2007-2013,
gennaio 2006.

                                                  30
improvements in quality and accessibility. The identification of policies for infrastructure
priorities in Apulia must rest on the awareness that, along with passenger traffic and related
problems that need to be solved, an important impulse for regional development can come from
strenghtening and integrating logistical platforms, especially with regards to ports and rear
harbour areas. Apulia’s great potential comes from its geographic position at a crossroads
between national and international communication corridors, and thus investments should focus
on the “motorways of the sea” project as a valid alternative to road transport, within the
framework of the EU’s TEN-T project and the 2001 General Plan for Transport and Logistics.
Specific goals of these interventions include: the strengthening of ports and airports (for ports,
with regards to necessary investments in infrastructure and strenghtening rear harbour areas, and
for airports, with regards to improved service quality and better integration with other regional
transport services and infrastructure); the strenghtening of the railway network both within the
region and in terms of national links (with specific reference to improving connections with
Corridor VIII and eastern Europe, and Corridor I and Campania and the Thyrennean sea); the
promotion of homogenous targets for regional transport services (especially with regards to
improving actual service levels and encourage the compatibility of the different networks, the
modal integration of networks, the integration of tariffs, and the improvement of rolling stock).

Sardinia Autonomous Region 7
The strategic reference point for Sardinian transport policies is the Update to the Regional
Transport Plan. The Regional Transport Plan of the Sardinian Autonomous Region, presented in
September 2001, made it possible to:
      •    provide an up-to-date overview of the transport system in Sardinia, during a moment in
           history in which global, and especially European transport systems are undergoing
           radical changes (market globalisation and liberalisations, new legislative frameworks,
           etc.);
      •    call for the launching of a new planning process for the transport sector, through a
           reference framework focusing on a series of interventions, and further analysis of needed
           methodologies for future decision-making, that will become a systematic, indispensable
           tool to bring about a shared logic for development activities in Sardinia;
      •    realise that the transport system’s complexity requires in-depth, continuous planning that
           reflects the evolution of the sector and the best practices that have been implemented
           throughout the world.
Goals and strategies that have been identified include:
      •    the integration of Sardinia within European, Mediterranean, and national transport
           networks in order to achieve the so-called “territorial continuity";
      •    the strengthening of the multi-modal corridor between Sardinia and the mainland, with
           improvements in the quality, productivity, and efficiency of transport services;
      •    the strengthening of internal connections in order to better link urban areas and improve
           internal connections within the new provincial districts;
      •    improvement of mobility within major urban areas;
      •    the active role that Sardinia must play in managing transport policies.
In order to reach the goals that have been set, the Regional Transport Plan identifies Sardinia as a
unitary pole within the global network, which is integrated with its various internal population
and productive centres.



7
    Fonte: www.regione.sardegna.it - Piano Regionale Trasporti, settembre 2001.

                                                     31
In particular, as the Economic and Financial Planning Document for 2006-2008 reiterates,
Sardenia enjoys a strategic position as a natural logistics platform in terms of cooperation
between Europe and the countries of the southern shore of the Mediterranean. It already has a
good port and airport system, and can provide the necessary basic services to attract firms that
work in the logistics sector.
The Regional Transport Plan highlights the opportunity Sardinia has in intercepting the main
flows of inter-continental traffic; in offering logistic and inter-modal services (ex. Cagliari
container port); in enjoying the support of ICT-oriented economic systems, as well as the support
of internationally renowned scientific institutions (universities, scientific and technological
centres).

Siciliy8
Sicily’s regional transport and mobility plan includes significant choices and launches major
investments in infrastructure, the completion of certain strategic projects, and the launching of a
freight village, airport, and carport system, in order to reverse current negative trends. The
Strategic Infrastructure Programme for Sicily includes planned investments amounting to 28.861
million euros, of which almost 11 million have already been allocated for activities currently
being undertaken within the framework of the 5 AA.PP.QQ..
The Sicilian regional transport plan includes strategic direcitves such as the strengthening of
Sicilian ports in order to guarantee a rapid and efficient movement of freight towards northern
European countries and to intercept east-west freight traffic. Sicily’s wide network of commercial
ports is a useful tool for Ro-Ro transport and feederage. Ports along the southern coast aim to
become links with the North African coast in light of possible increases in trade caused by the
opening of the free trade area, while ports situated along the northern coast will guarantee links
with Italian and European ports.
The interventions called for by the APQ on Freight Traffic and Logistics also fall within this
framework. They include the completion of financing for the creation of two freight villages at
Catania - Bicocca andTermini Imerese and a network of seven carports scattered over the entire
regional territory. This will also make it possible to valorise RFI’s planned investment on the new
high-speed line between Palermo and Catania, and to speed up rail traffic on the Catania -
Siracusa line, thus providing further links with the Catania and Termini Imerese freight villages
and the Augusta port.
The Framework Agreement for air transport (which called for investing in infrastructure in the
Palermo, Catania, Lampedusa, Trapani, Comiso and Pantelleria airports) seeks to strengthen air
transport, which is a fundamental need to increase the competitiveness of the regional productive
system and to contribute to improving territorial equilibrium.
National and regional planning documents highlight the desire to make Sicily the “Euro-
Mediterranean logistics platform”, which would serve all of Italy and the EU as well, given
Sicily’s priviledge geographic position at the heart of the Mediterranean.
The indications of the regional transport plan thus aim to favour the growth of the necessary
conditions to improve logistics infrastructure and stimulate the growth of local productive
systems inserted into a broader international trade network. In a European framework, the plan’s
goal is to turn Sicily’s ports into Italy’s strategic terminals within the European transport
network, thanks to their favourable geographic position both in terms of proximity and
operational capacity, with an ability to intercept incoming and outgoing traffic along the main
east-west and north-south corridors. Sicilian ports can play a particularly important role for trans-
shipment, short shipping, and the development of motorways of the sea. In light of the above, and
of the way the TEN network is set-up, the regional port system called for by the plan will access


8
    Fonte: www.regione.sicilia.it - Piano Regionale Trasporti, giugno 2002.

                                                      32
the European continent through Corridor I (Palermo-Berlin) of the TEN, as well as access North
Africa and, to a certain extent, the Middle East and the Far East as well. The goal is to create an
“Integrated Logistics Platform” that takes advantage of Sicily’s location at the heart of the
Mediterranean, and thus turning its insular nature from a disadvantage in terms of marginality to
an advantage in terms of intercepting ever-greater traffic flows.

1.4 Critical issues and unanswered questions in certain Mediterranean countries
Over the last several years, the governments of the Mediterranean countries (Algeria, Egypt,
Jordan, Lebanon, Morocco, Tunisia) that we have focused our studies on have undertaken
ambitious reform processes aiming to improve the governance and competitiveness of national
transport systems and related infrastructure.
Adopted measures aim to strengthen the sector’s institutional and administrative framework,
improve its regulatory and legislative context, open it to the private sector, promote the social
dimension and sustainability of transport, and increase investments in its modernisation.
Currently, Mediterranean countries have taken significant steps in terms of institutional and
administrative restructuring, as well as in terms of training and updating the technical capacity of
human resources.
There is also an ongoing liberalisation process for services in the main transport sub-sectors (road
freight transport, air transport, maritime sector) and many activities and future development plans
are in the pipeline for infrastructure-related aspects.
National transport policies have been accompanied by multiple initiatives made possible with
regional and sub-regional cooperation efforts between Mediterranean countries.
In particular, all the countries of the Meda area have intensified their efforts to launch
administrative and institutional reforms in the transport sector.
Despite the fact that significant progress has been made in terms of political, social, economic,
and regulatory reforms in the sector, there are still a number of unresolved issues and unanswered
questions that require targeted actions on the part of national governments.
A country-by-country analysis of the sector (see country reports for Algeria, Egypt, Jordan,
Lebanon, Morocco, Tunisia) shows a rather diverse regional framework that does not allow for
generalisations on the region’s needs. With regards to the institutional context, for example, in
some of the countries there is only one ministry in charge of managing all transport modalities,
both in terms of infrastructure and services (Jordan, Morocco, Lebanon), while in other countries
responsibilities for infrastructure and services are held by two different ministries (Algeria,
Tunisia).7
We can deduce that even with different initial contexts (for example, in countries such as Jordan,
Egypt, and Lebanon the process to separate competences is already ongoing, while in Morocco,
Tunisia and Algeria it is still at an embryonic stage), institutional commitment is needed in all
these countries in order to modernise administrative structures, and institutions are a necessary
element to strengthen the national and regional transport system.
Furthermore, efforts to improve the integration and cohesion of infrastructure networks need to
be intensified, along with those to diversify sources of financing and to enhance security and
sustainability.
In order to fully take advantage of the potential of the maritime and air transport sector, further
reforms and upgrading efforts are needed (organisation and management of ports,
decentralisation of port authorities, reduction of transition costs, removal of barriers, bureaucratic
streamlining, legislative harmonisation with EU norms, etc.).




                                                 33
In conclusion, in order to create a shared space in the transport field, it is imperative to encourage
cooperation projects at the local, regional, and international level that include, and go beyond, the
maintenance and modernisation of existing infrastructure




                                                 34
Tabella - Summary of interventions on transport infrastructure planned by southern Italian regional administrations.
Regions         Port infrastructure                     Rail infrastructure                  Airport infrastructure                           Road infrastructure                  Freight village
                Despite its lack of commercial ports, • Creating a Matera-Bari link;         Completing      important       logistic         • North-south motorways:             • Tito freight village
                the region is nevertheless located in a • Strengthening the Salerno-Potenza- platforms:                                       • Lauria- Potenza- Melfi - Candela
                strategic area to favour the linking Taranto link, including a high-speed                                                     • Salerno- Potenza- Bari axis
   Basilicata   and creation of important port line between Naples and Taranto.              • Regional airport in Pisticci;                  • Murgia-Pollino secondary corridor
                systems.                                                                                                                      (link   between    A14     and   A13
                                                                                                                                              motorways)

                   Agreement of 30/08/06 to make the         • Creating a railway link between the    Modernising airport services in         • Creating a road network with         • Gioia Tauro freight village;
                   Gioia Tauro port a Platform for the         San Fernando station (located in the   order to create a well-structured         improved existing road and new       • Lamezia Terme freight village.
                   Mediterranean                               Gioia Tairo port) with Rosarno, in     airport system.                           east-west roads.
    Calabria
                                                               order to develop land-based
                                                               container traffic along existing
                                                               railway corridors;
                   • Strengthening and diffusion of          • Completing the regional light rail     • Strenghtening the Grazzanise andi • Strengthening the Rome-Caserta- • South Europe (Marcianise) freight
                     maritime local transport (Metrò del       transport systyem;                       Pontecagnano airports.              Reggio Calabria- Palermo axis       village;
                     Mare);                                  • Mitigating the “barrier” effect                                              (Corridor I);                     • Campania (Nola) freight village;
                   • Increase in cruise traffic;               created by the FS line between                                             • Linking Corridors I and VIII,     • Salerno- Battipaglia freight
                   • Development of “motorways of the          Naples and Salerno;                                                          between the Thyrrenean and          village;
   Campania          sea” with a consequent increase in                                                                                     Adriatic seas, along the Naples-
                     the volume of freight traffic                                                                                          Salerno- Bari – Barletta polygon;
                     transiting through Campania’s ports;                                                                                 • Valorising inland areas in
                   • Widening the jurisdiction of the                                                                                       Campania, thus increasing the
                     Naples port authority; developing                                                                                      importance of Avellino and
                     the Naples and Salerno ports.                                                                                          Benevento provinces.
                   • Strengthening and integrating                                                                                        • Strengthening the Bari –Naples l
                     logistical platforms and port                                                    • Strengthening airport systems and axis
                     systems, especially with regards to     • Strengthening of inter-regional rail     improving service quality;
     Apulia          the links between ports and rear          system;                                • Improving the integration between
                     harbour areas                           • Improvement of rolling stock.            services and regional transport
                   • Focus on investments for the                                                       infrastructures.
                     “motorway of the sea” project.
                   • Promotion of cruise, nautical, and      • Strengthening the multi-modal          • Improving ground services in          • Linking coastal and inland areas     • Interception of major trans-
                     sports tourism along urban                corridor between Sardinia and the        airports;                             • Alghero-Sassari-Olbia link             continental traffic flows through
                     coastlines;                               Continent ;                            • Improving air traffic control         • Cagliari-Tortolì and Tortolì-Nuoro     the offer of logistics and inter-
                   • Functional and managerial               • Creating the Central and Southern        systems;                                links                                  modal services.
    Sardinia         integration of ports as a single port     Sardinia rail system;                  • Widening the user basins and          • Nuoro-Olbia
                     system;                                 • Tempio-Olbia Airport link;               improving links between the           • Coordination between road, rail,
                   • Classification of the Oristano and      • Modernising the Cagliari-Oristano        airports of Alghero- Sassari, Olbia     and maritime transport.
                     Arbatax ports as ports of regional        and San Gavino lines, improving rail     and Cagliari;
                     and inter-regional interest.              stations, Olbia junction               • Completing the Tortolì airport
                   • Interventions on the SNIT system        • Messina-Catania-Siracusa               • Strengthening the transport           • Creating links between urban    • Palermo-Termini Imprese;
                     ports of Palermo, Messina, Catania      • Messina-Palermo                          capacity of airportsi;                  areas, and between coastal and  • Catania-Bicocca;
                     and Augusta;                            • Interventions in Calabria to improve   • Favorirng the concept of polarity       inland areas;                   • Interventions related to the
                   • Encouraging the creation of logistics     private and F.S. docks, and to           in the airport system, developing     • Strengthening highway by-passes   Palermo-Termini Imerese and the
      Sicily         bases for sea-sea trade in ports          launch speedboat passenger service       local airports in accordance with       in metropolan areas.              Catania-Bicocca freight villages
                   • Favouring the creation of cruise ship     to Messina and the Eolian islands,       local vocations.                                                          are included in the First
                     docks in ports by creating links with     and to create an integrated railway-                                                                               Programme for Strategic
                     airports.                                 speedboat service between Reggio                                                                                   Infrastructures of Pre-eminent
                                                               Calabria and Messina.                                                                                              National Interest.
Tabella: Indicatori quali- quantitativi delle dotazioni*, delle priorità programmatiche** e delle vocazioni territoriali*** delle infrastrutture dei settori trasporti ed energia Regioni
Meridionali.
                                                                                                                                                       Transport hubs and
               INFRASTRUCTURE Port Infrastructure Railway Infrastructure                 Airport                                    Freight village                                  Energy
                                                                                                        Road Infrastructure                                  networks
REGIONS                                                                              Infrastructure                                 Infrastructure                               Infrastructure
                                                                                                                                                          infrastructure

                 Resource index                 0                       54,8                        0                       89,9                      0                      13,8                     39,8
                 Programme
Basilicata       priorities                     ⊥                        ∆                          ▬                        ∆                        ▬                       ∆/⊥

                 Regional suitability         NAZ                        IR                        NAZ                       IR                       IR                    IR/NAZ
                 Resource index              162,4                      94,2                      111,4                    125,5                     2,8                     63,0                     43,8
                 Programme
Calabria         priorities                    ∆                         ⊥                          ▬                        ⊥                        ∆                       ∆/⊥

                 Regional suitability         MED                       REG                        NAZ                       IR                   NAZ/MED                  NAZ/MED
                 Resource index               29,1                     145,4                        20                     137,5                     4,5                     61,5                    116,5
                 Programme
Campania         priorities                    ∆                         ⊥                          ▬                        ⊥                        ∆                       ∆/⊥

                 Regional suitability      REG/MED                    REG/IR                    NAZ/MED                   IR/NAZ                    MED                    REG/NAZ
                 Resource index               82,3                      84,8                       75,2                    137,5                    75,2                     61,0                     79,7
                 Programme
Apulia           priorities                    ∆                         ⊥                          ▬                        ⊥                        ▬                      ⊥/▬

                 Regional suitability      MED/REG                    IR/MED                     REG/NA                      IR                     MED                     IR/MED
                 Resource index              173,7                      17,1                      207,8                     71,9                     6,8                     25,9                     32,4
                 Programme
Sardinia         priorities                    ∆                         ∆                          ⊥                        ⊥                        ▬                       ∆/⊥

                 Regional suitability       IR/MED                      REG                     REG/NAZ                     REG                     MED                    REG/MED
                 Resource index               82,8                      80,6                      102,8                     95,5                     6,7                     46,5                     76,0
                 Programme
Sicily           priorities                    ∆                         ⊥                          ⊥                        ⊥                        ∆                       ∆/⊥

                 Regional suitability      MED/REG                       IR                     NAZ/MED                     REG                     MED                    REG/MED
* Source: SVIMEZ- Rapporto 2005 sull’Economia del Mezzogiorno

Captions: The resource index (Italy= base100) for port infrastructure is based on the surface areas of berths, warehouses, and squares; for railway infrastructure it takes into account single-rail lines,
non-electrified rail lines, electrofied lines, and double-rail lines: for airport infrastructure it takes into account the surface areas of runways and parking and taxying areas, for road infrastructures it takes
into account municipal, provincial and national roads plus motorways; for freight village infrastructure it takes into account total surface area, materials handling capacity, and availability of rails.

** PROGRAMME PRIORITIES: ∆ high;               medium; ▬ stable (Data re-elaborated on the basis of regional programming documents for Cohesion Policy 2007-2013 of the Regional Transport and
Mobility plans)

***REGIONAL SUITABILITY: Regional (REG); Inter-regional (IR); National (NAT); Mediterranean (MED) (Data re-elaborated on the basis of regional programming documents for Cohesion Policy
2007-2013 of the Regional Transport and Mobility plans)
2 Energy9

2.1 The Mediterranean scenario
2.1.1 Introduction
Relations between the EU and the countries of the Mediterranean are governed by the partnership
inaugurated by the 1995 Barcelona Process. It involves 12 countries on the Mediterranean
seaboard: Algeria, Cyprus, Egypt, Israel, Jordan, Lebanon, Malta, Morocco, the Palestinian
Authority, Syria (Mashrek), Tunisia (Maghreb) and Turkey (Libya currently participates as an
observer).
The EU states and the Mediterranean countries (MC) agree that energy policy is fundamentally
important element of the partnership, from the point of view of the creation of a Euro-
Mediterranean (EM) free trade zone by 2010 (a principal objective of the Barcelona Declaration)
and in view of the rapidly increasing populations of the 12 Mediterranean partners. Global energy
demand is on the increase and forecasts say that by 2030 it will be 60% greater than at present.
The partnership is an important step forward for the EU in terms of policy towards the
Mediterranean countries. It has gone beyond the previous arrangement of exclusively bilateral
agreements between governments. One ambition of the partnership is the creation of a “common
space” where the historically prevalent factors of conflict and separation can be superseded by
integration.
Energy is a central sector in cooperation. There are two reasons for this, both linked to the
security of EU energy provisioning:
      1. The geographical importance of the partner countries; the Mediterranean countries are
         strategically important because of their position between the EU – the energy importer –
         and the exporting countries of the Gulf and the Caucasus;
      2. The existence of oil and gas reserves in some partner countries; as the EU needs to
         import external energy resources, this offers a certain amount of provisioning security.
Euro-Mediterranean cooperation is currently more advanced than in other sectors. The Euro-
Mediterranean Energy Forum established a cooperation framework for the realisation of an action
plan relative to 1998-2002.
The Granada Forum of 2000 (the third forum) was an important stage in the cooperation process.
It identified priorities, among which the reform of the regulatory and legislative framework are
fundamentally important.
In countries where the state holds centralised monopoly powers, it is necessary that reform of the
sectoral regulatory and legislative framework take place, in parallel with the reforms undertaken
by the member states. As the partnership’s basis objective is to create a free trade zone among the
countries and thus promote competition, it follows that global reform is indispensable. This level
of close integration is at the heart of neighbourhood policy, which proposes the gradual
integration of the internal European market. From this point of view neighbourhood policy
represents substantial progress in relation to the structure of Euro-Mediterranean partnership.
As the country reports suggest, liberalisation measures must be taken, along with the institution
of independent regulatory authorities charged with the separation of the various types of activity,
the promotion of subsidy and private sector participation.
Infrastructural links between EU and partner countries are extremely important for the security of
energy provisioning. It is necessary to concentrate on the modernisation of existing
infrastructures as well as the creation of new networks.

9
    By Salvatore Migliaccio and Antonella Leone

                                                  39
There is a risk that those Mediterranean countries interested in moving closer to the EU will
perceive neighbourhood policy as the strengthening of bilateral relations between the UE and
single Mediterranean countries, to the detriment of attempts at multilateral cooperation aimed at
the “construction of a regional energy policy”.
Mediterranean countries have had varying reactions to the proposals stated in the neighbourhood
policy; nor is advancement towards the European internal market a universally shared objective.
Thus, for the transitory period (2004-2006) the Commission decided on a more traditional mode
of creating closer relations, starting with the physical aspect, i.e. infrastructural installations:
(energy-electricity in the Maghreb, gas in the Mashreq, energy in Israel and Palestine. The New
Neighbourhood Programme’s Strategy Paper and Indicative Programme for countries under the
Euro-Mediterranean Partnership 2004-2006 gives priority to the funding of infrastructural
projects (80%) and only 20% for cross-border and trans-national cooperation.
2.1.2 Energy in Euro-Mediterranean relations
The Mediterranean countries play a vitally important role in the energy sector for two reasons: 1)
their involvement in trading of energy resources (oil and gas), which includes the transit of
hydrocarbons produced elsewhere (in the Middle East, Russia and in the future, the Caucasus and
Central Asia). 2) they produce energy for European consumption.
The Mediterranean Sea is bordered by two very important oil exporters: Algeria and Libya; and
two exporters of lesser importance: Egypt and Syria. The western Mediterranean (Maghreb) has
large oil reserves while the eastern Mediterranean (Mashreq) has limited resources. The
consequences are that Algeria and Libya will long remain exporters of oil (especially Libya) and
gas (especially Algeria), while Syria will become a full scale importer and Egypt will have to
import oil. All this has implications for the connections between the countries. A north-south
network of connections exists in the western Mediterranean, based on Algerian energy resources.
This network is however extending to Libya, who could become a potentially important new
partner in the EM partnership and in European neighbourhood policy.
On the other hand, while eastern Mediterranean resources would not seem sufficient for
consistent exportation to Europe, they could instead give rise to a distribution network in the
same sub-region: this is the hypothesis of a gas ring, which we will look at later in greater depth.
Although Turkey is not included in the European neighbourhood policy, it is important as a
hydrocarbon transit country and as a potential seat of a petroleum market.
Despite the strong flow of trade and investment (the European oil companies are heavily involved
in the production of oil and gas in the MC) there has been no significant or coherent development
of the role of energy cooperation among Euro-Mediterranean institutional relations.
The 1995 Barcelona Declaration mentions energy only in the action programme attached to the
declaration; a premature attempt to activate EM cooperation was followed by a lengthy pause.
After two ministerial conferences on energy in the partnership, held shortly after Barcelona
(Trieste - 1996, Brussels - 1998), it was not until 2003 that the theme was relaunched with at
conferences in Athens (May 2003) and Rome (December 2003). The EM Forum held in Brussels
(21 September 2006) was attended by the countries and organisations in order to examine
progress towards EM cooperation in the field of energy, for the period 2003-2006. The meeting
also addressed possible future moves on the new EM energy cooperation programme relative to
the 2007-2010 period.
2.1.3 European projects and energy networks in the Mediterranean area
The May 2003 Athens conference declared, “the creation of a Euro-Mediterranean energy
partnership must be based on the objectives of secure provisioning, competition, market
transparency and environmental protection; the gradual consolidation of A Euro-Mediterranean
energy policy, contributing fully to the future free trade area, must be based on the definition of


                                                40
regional energy policy initiatives and the realisation of regional infrastructural projects of
common interest”.
Energy cooperation was relaunched also as a possible antidote to the difficulties encountered in
other forms of regional cooperation.
The integration of EM partnership and new neighbourhood policy could be advanced by the
adoption of the possible example of Israeli-Palestinian energy cooperation.
In the transitory phase (2004-06) the energy projects in the MEDA Neighbourhood Indicative
Programme (worth 14 million euro overall, together with another 5 million for projects not yet
defined) are based on agreements signed during the Euro-Mediterranean Conference of Energy
Ministers of December 2003. These agreements concern three sub-regional programmes:
     1. the progressive integration of the Maghreb electricity market (Algeria, Morocco and
        Tunisia) with integration into the European market;
     2. the progressive integration of the Mashreq gas market (based on Egyptian energy
        resources, and covering Egypt, Jordan, Lebanon and Syria) with the goal of integration
        into the European internal market;
     3. Israeli-Palestinian cooperation in the energy sector.
The Meda Neighbourhood Indicative Programme activities relative to these three programmes
deal largely with technical assistance for procedural and normative harmonisation, with the aim
of promoting a sub-regional market that could integrate with the European market.
The ministerial conference in Rome created a crucial role for Italy. 15 October 2004 saw the
launch in Rome of the Rome Euro-Mediterranean Energy Platform (REMEP), a support structure
hosted by the Ministry of Productive Activities, geared to secure the implementation of the
regional initiatives defined in the December 2003 ministerial conference in Rome.
These energy sector cooperation projects represent important steps forward in the hazardous
process of constructing regional and sub-regional agreements. Their value cannot be
overstressed.
Recent progress has been made also in the Communication to the Commission, from
Commissioner Benita Ferrero-Waldner (Implementing and Promoting the European
Neighbourhood Policy, SEC (2005) 1521, 22 November 2005), in which some priority policies
are identified, both generally and at single country level. Steps forward have also been made in
the Competitiveness Council of 24 July10.




10
   The adoption of new Community directives for trans-European energy networks, replacing the
provisions of decision no. 1229/2003/CE, reinforce the base regulations of European energy policy,
delineated by the Commission in spring 2006. The “Competitiveness Council” of 24 July concluded the co-
decision procedure started by the European Commission with the specific proposal of 10 December 2003,
approving the amendments made by the European parliament on 4 April 2006. The most significant
innovation introduced by the parliamentary amendments regard: the insertion of the new category of
European interest projects along the “priority project” axis; the recognition of one of their priorities in
access to funding within the sphere of the pertinent budget line for the TEN-E networks, and also in the
sphere of other forms of Community co-financing; the possibility of the appointment of a European
coordinator in cases where a European interest case encounters exceptional delays or activation difficulties;
the fixing of the execution of procedures in order to assure their rapid conclusion. Within six months of the
new provisions coming into effect, the member states involved in the implementation of European projects
must present the Commission with a calendar of the planning approval procedure, of the feasibility and
planning phase, and of the completion phase and the projects their coming into effect. In total, there are 42
projects involving European and 12 involving Italy: 8 for the electricity networks and 4 for the gas
networks.

                                                     41
The communication specifies, for the area included in the European Neighbourhood Policy (both
Mediterranean and eastern neighbours) the following with regard to energy:
       •   Integration and harmonisation of the European energy market with that of the
           neighbouring countries
       •   Security of supplies and interconnections
The European Commission has defined a series of “priority” infrastructural projects, relating to
the Mediterranean area (see attached maps). The figures on the following pages show that oil is
currently not included, whereas priority goes to the construction and expansion of gas pipelines
(including the Eni Green Stream duct, connecting Libya and Sicily) and the interconnection of
electricity networks. In the last eight years the MEDA budget has allocated more than 55 million
euro to the integration of Euro-Mediterranean electricity markets; in addition, the European
Investment Bank has supported energy infrastructures by injecting around 2 billion for “priority
projects”, i.e. the completion of the electricity and gas networks.
2.1.4 Gas projects in the Mediterranean Basin
Recent years have seen a surge in demand for natural gas in the Mediterranean area; consumption
has risen from 27 bcm (billions of cubic metres) in 1971 to 288 bcm in 2005. In the same period
the gas contribution to the energy budget rose from 6 al 26 per cent.
Today natural gas has the highest growth potential in the Mediterranean. Demand is predicted to
rise from the current 288 bcm to 500 bcm and the gas share of the energy budget will reach 31%
by 202011.
The next few years will see an increase in gas exports from North Africa, thanks to new
infrastructures, as described below.
The figure below illustrates the EU “priority” projects dealing with the Mediterranean area.
Figure - “Gas Export Projects in the Mediterranean”




Source: OME Report “Energy & Gas Prospects in the Mediterranean Area” March 2006



11
     OME Report “Energy & Gas Prospects in the Mediterranean Area” March 2006

                                                      42
Ongoing and completed projects in the Mediterranean context include:
    •   The Transmed, renamed the “Enrico Mattei”, shall be operational in 2008 and will be
        further extended in 2012 (see figure). It exports Algerian gas from Hassi R’Mel through
        Tunisia to Mazara del Vallo in Sicily, and from there goes to Minerbio, in Emilia;
    •   The Maghreb-Europe-Gas (MEG) was designed to transport Algerian produced gas to
        Spain and Portugal. Operational since 1996, it connects Hassi R’Mel to Cordoba in
        Spain, by way of Morocco.
    •   The Medgaz should connect Beni Saf to Almeria in Spain, with a possible extension to
        France (estimated cost 1.3 billion dollars, completion in);
    •   The GALSI will connect Algeria and Italy, via Sardinia (cost 2 billion dollars, completion
        also in 2008).
    •   The gasduct “Green Stream”
    •   The Libya – Tunisia gasduct.

The Transmed (Enrico Mattei) gasduct
The Transmed (recently renamed the “Enrico Mattei”, is 2,525 kilometres long, stretching from
Hassi R’Mel in Algeria to Minerbio, in Emilia, northern Italy. Begun in 1978, it became
operational in 1983, and represents one of the main achievements of Italo-Tunisian energy
cooperation.
In 1995 a second line, the (Transmed II) became functional, and together with the first line
overall carrying capacity was augmented. The six compression plants constructed for the first
Transmed line were extended and improved, necessitating the construction of only two wholly
new installations. The first part of this expansion will be operational in 2008 and will conclude in
2012.
As the figure shows, Transmed was the start of what is becoming an increasingly complex
network of gasducts connecting Algeria with the main European consumers.
The next phase of this north-south integration strategy was concluded in 1996 with the
completion of the Maghreb Europe Pipeline (GME), which crosses Morocco to Spain and
Portugal.
As the map shows, other projects are underway, connecting Algeria directly to the final consumer
markets, by way of Morocco or Tunisia.
The estimated cost of the (Transmed I e II) gasducts – excluding the Algerian section – is 6,030
million dollars, 3715 of which is funded through credits.




                                                43
Figure - “Transmed gasduct”




Source: OME Report “Energy & Gas Prospects in the Mediterranean Area” March 2006

Figure - The West Libya Gas Project (WLGP or “Green Stream”)




Source: OME Report “Energy & Gas Prospects in the Mediterranean Area” March 2006

The “Green Stream” gasduct is a recently completed ENI initiative. It connects the deposits in
western Libya to Gela in Sicily and is very important for the future formation of a Euro-Maghreb
gas market.




                                                   44
The Libya – Tunisia gasduct project
This is a project for a gasduct that will run from the deposits in Libya to Mellita in Libya and
Gabès in Tunisia. It is expected to become functional in 2007. From the Libyan perspective, it
does not match the scale and importance of the line to Italy, but it still represents a further
development in an otherwise quite neglected gas sector.
When complete, the Libya – Sicily gasduct, coming after the preceding one running from Algeria
through Tunisia, will allow the Sicilian Region to play a central role in the Euro-Maghreb gas
market, targeted for development by the European Commission.
2.1.5 Electricity projects in the Mediterranean Basin
The EM region can be divided into 4 blocks, as illustrated by the figure:
       •   South-West Mediterranean block (SWMB: Morocco, Algeria and Tunisia)
       •   South-East Mediterranean block (SEMB: Libya, Egypt, Jordan, Syria ad Lebanon)
       •   Turkish Block (Turkey constitutes a block in itself)
       •   Mediterranean Isolated System (Palestine, Israel, Cyprus and Malta)
The European Block (UCTE 1&2: includes the greater EU plus Bulgaria, Romania and the
Balkan countries). It is interconnected to the two SWMB and SEMB as illustrated.
Figure - “Electrical interconnections: UCTE Network & Mediterranean Ring”




Source: OME “Electricity Interconnections in the Mediterranean Countries” May 2006

South-West Mediterranean Block (SWMB: Morocco, Algeria and Tunisia):
The undersea connection between Spain and Morocco, completed in 1997, links this area to the
UCTE. Along with this one there are six others: Algeria connected to Tunisia, (4connections) and
to Morocco (2 connections).12. An additional electricity line will soon be added between Morocco
and Algeria, upgrading from the current 225kV to 400 kV. Further development of the

12
     OME “Electricity Interconnections in the Mediterranean Countries” May 2006.

                                                      45
interconnections are imminent: in December 2003 an agreement was reached between ONE, Red
Electrica de Espana, and a consortium comprising Norwegian firm Nexas and Italian Pirelli, for
the installation of undersea infrastructures allowing the construction of a second interconnection
network under the Straits of Gibraltar and the subsequent doubling of the electricity flow between
Spain and Morocco. The Tunisia – Sicily interconnection, carrying exported Tunisian electricity
to Italy, is valuable in that it offers both sides greater security of supply and constitutes a step
closer to the creation of a Euro-Maghreb electricity market.

South-East Mediterranean Block (SEMB: Libya, Egypt, Jordan, Syria and Lebanon)
The following connections exist in this area:
       •   Libya to Egypt (1998)
       •   Egypt to Jordan (1999)
       •   Jordan to Syria (2001)
Future plans exist for strengthening of the connection between Syria and Lebanon, towards the
west (Damascus to Kesara); for the north a line already exists but is not yet operational.

Turkish Block
Includes two existing interconnection lines between Turkey and Bulgaria, and another between
southern Turkey and northern Syria. These lines are currently not in use.

Mediterranean Isolated System
The electricity system of Palestine, Israel, Cyprus and Malta constitutes an “electricity island” as
they are not connected to other electricity networks in the Mediterranean Basin. This situation
will change with regard to Palestine and Israel, who are due to join the Mediterranean Ring when
the two Egypt-Gaza and Gaza-Israel lines open in a few years.
In conclusion, these new projects could improve connections between the countries of SEMCs13
and the European network and bring the completion of the Mediterranean Electricity Ring a step
closer.
The table below lists the major electricity network interconnection projects.




13
     South East Mediterranean Countries

                                                46
Table - “Major Electricity Interconnection Projects in the Mediterranean Region”




Source: OME “Electricity Interconnections in the Mediterranean Countries” May 2006

2.2 The national framework
2.2.1 Introduction
The experience of 2000 – 2006 teaches a number of things about energy efficiency and
renewable energy sources. The first lesson is the importance of secure provisioning, which must
be achieved through the completion of interconnections, especially in the case of Trans-European
networks. The focus here should be the improvement of electricity networks and the completion
and strengthening of gas transport and distribution networks14.
The QCS channels around 2% of funds from the Regional Operative Programmes into renewable
sources and energy efficiency. This action also helps to level out the disparities in the national
distribution of methane.
It must also be said that the recent liberalisation of natural gas and electricity markets in Italy has
occurred against a background of demand exceeding supply, and of delay in the adjustment of
infrastructure and of policies for placating demand15.
The dominant operator in natural gas sector is ENI subsidiary Snam Rete Gas, which controls the
importation and stockpiling infrastructure. The sector has seen some progress towards the
diversification of supply and adjustment of infrastructure.
The strengthening of the networks (see Figure 5) and the construction of infrastructures for
production, importation and stockpiling are essential not only for the effective ingress of new
market operators, but also as guarantees of system security, as it adapts to new needs.
Below is a list of priority actions, reported in the Preliminary Regional Strategic Document 2007
– 2013, aimed at fulfilling the objectives of cohesion and competitiveness by 2013:
     •   Construction of renewable energy production plant (biomass, biogas, wind power,
         photovoltaic and hydroelectric power – with output greater than 10 MW);

14
   “Documento Strategico Preliminare: Continuità, discontinuità, priorità per la politica regionale 2007-
2013”, November 2005
15
   Annual report of the Department of Development Policies, 2005

                                                      47
    •    Development of cogeneration (electricity and heat) and trigeneration (electricity, heat
         and cold) with high-yield distribution, for meeting local energy demand especially from
         SMEs; also using renewable sources;
    •    promotion of energy efficiency in the industrial sector (through the renewal of power-
         hungry production plant, especially in southern Italy), and also in the domestic sphere,
         through the promotion of efficiency initiatives in final use of energy;
    •    support for research and experimentation for the diffusion of competences and
         experiences, and the development of technological alternatives, including the production
         of renewable fuels.
Policies of this kind can stimulate the development and growth of the production chain at
national level.
The execution of priority actions must go hand in hand with a national sectoral policy for the
development of networks for national transmission and local distribution, capable of supporting
increased use of renewable energy sources, but without imposing further restrictions on their
efficient management.
Like other European countries, Italy must attempt to diversify primary sources and create new
natural gas provisioning infrastructures, such as LNG terminals, gasducts and underground
stockpiling facilities.
Figure – Snam rete gas – network infrastructure




Source: www.snamretegas.it

2.2.2 Energy services
The consumption of energy – both electricity and gas - in Italy has in recent years outstripped
production. Further increases were recorded in 2005, when network electricity demand grew by
1.5%, with increases of over 3% observed in Lombardy and continental southern Italy.




                                                  48
The 2005 balance reveals significant changes in the structure of final consumption per sector and
sources, and in composition of provisioning, availability for internal consumption and
transformation of energy16.
Table - Balance of energy in Italy in 2005




Source: Ministero delle Attività Produttive

Chart – Energy intensity of GDP




Source: AEEG, based on data by Ministero delle attività produttive and ISTAT

Structural problems remain in the sector. The competitive tone of the markets is still modest
owing to the high concentration of demand and despite the wider range of electricity and gas
supply sources. Delays are also observed in the European context on account of insufficient
harmonisation of sectoral policies.
To ensure that increased energy consumption does not undermine the security and quality of
supply, it is necessary to upgrade and expand network infrastructures (new regasificators,
completion of methane conversion).
Although the current stagnant phase must be tackled by measures on a national scale (the highest
levels of governance of energy networks, interconnected upstream of the distribution phase,
expressed locally in both sectors), the liberalisation process and increased consumption are
producing different outcomes among territories (higher prices in centre-south continental Italy
owing to lack of local supply: in 2005 the price difference in the cheapest zone, the centre-north
was around 10%).




16
     Annuale report, Energy Authority, March 2006


                                                        49
2.2.3 Projects for completion in 2006 - 200917

Plan for increased stockpiling facilities:
     a. accelerated completion of new stockpiling fields, which should be operational by 2009.
     b. Ministry of economic Development to grant five new stockpiling facilities in 2006,
        currently under Verification of Environmental Impact (VEI) and the offer to third parties
        of depleted gas deposits for conversion into stockpiling.

Plan for increasing gas input into the network
     a. actions by the Ministry of Economic Development and the Electricity and Gas Authority
        for bringing forward (to 1 October 2008, instead of April 2009) the second phase of the
        expansion of gasducts to Austria (TAG: Trans Austria Gasleitung).
     b. monitoring of the completion of the two expansion phases of the gasduct to Tunisia
        (TTPC), scheduled respectively for 1 April 2008 with a transport capacity of 3.2 bcm,
        and 1 October 2008 with a transport capacity of a further 3.3 bcm of gas.
     c. advancement of the construction of new regasification of LNG terminals. The first ones
        will be operational no earlier than 2008.
     d. promotion of the development of new gasducts (operational no earlier than 2010) to
        Greece for the importation of Caspian Sea gas through Turkey (IGI - the Greece-Italy
        interconnection project), and with Algeria (the Galsi project, a gasduct through Algeria-
        Sardinia-Italia).
     e. new national deposits operational no earlier than 2007.
     f. entrata in produzione di nuovi giacimenti nazionali operativi non prima del 2007.

Creation of new importation capacity for certain projects:
     a. LNG terminals at Brindisi and Rovigo to yield 16 bcm per year.
2.2.4 The normative framework 18
The national and international normative framework is evolving continually; the regions in recent
years have taken on a more important role in all planning activities; so the past ten years the
energy sector has seen a transition from the National Energy Plan to the Regional Environmental
Energy Plan (PEAR).



17
   http://www.attivitaproduttive.gov.it
18
    There follows a list of the basic laws for the promotion and regulation of renewable sources and of
rational energy use:
• Law no 9 of 9 January1991 “Norms for the implementation of the new national energy plan: institutional
  aspects, hydroelectric installations and power lines, hydrocarbons and geothermal energy, auto-
  production and tax provisions”.
• Law 448/98, introduced the “carbon tax” on fossil fuels, for the creation of a fund to be used (also) for
  the promotion of actions aimed at reducing the emission of greenhouse gases.
• Legislative decree 79/99 (Bersani), in implementation of Directive 96/92/EC on the liberalisation of the
  electricity market.
• Legislative decree 164 (Letta), acknowledges and activates nationally Directive 98/30/EC on the
  liberalisation of the gas market
• Protocol of Understanding of the Conference of Regional Presidents for the coordination of greenhouse
  gas emission policies, Turin, 5 June 2001
• Ministerial decree 24 April 2001, Promotion of energy efficiency in final use of energy. Two recent
  decrees by the Ministry for Industry and the Environment, regarding energy saving
• Deliberation of the Electricity and Gas Authority, 15 May 2002, Priority access to new LNG terminals

                                                    50
2.3 Infrastructures and energy networks: the southern Italian regions in the
Mediterranean context
Southern Italy is characterised by: a much lower consumption of natural gas and electricity
compared with the centre-north regions and the European average; a lower level of reliability of
the existing networks; insufficient penetration of the natural gas network; scant input from
renewable energy sources, despite the potential for wind and solar energy.
All this infers that with regard to the construction of interconnection infrastructure in southern
Italy, which involve above all the coastal cities, it is essential to guarantee the social-economic
development of the area, through the expansion of the Trans-Mediterranean and Balkan gas
pipelines, the improvement of the various countries’ electricity networks and interconnections,
and the development of new forms of energy sources and integrated systems of control.
In the Mediterranean context (bearing in mind also the new possibilities of Libyan collaboration),
the Barcelona Process countries are the natural interlocutors with which to analyse growing
productive capacity (particularly in Algeria and Egypt) and thus propose or apply forms of
greater self-sufficiency in the entire Mediterranean Basin.
Electricity policy in the last few years has led the way to an encouraging opening up of local
markets: Egypt, Morocco, Tunisia, Turkey and Jordan have gradually introduced liberalisation
and privatisation processes into industry and have moved towards cooperative management
through the use of competitive international tenders. The most important development in the
operational sphere is the completion of the Mediterranean Electricity Ring (as shown in the
preceding charts), which       will help boost the energy markets of all the Mediterranean coastal
countries.
Despite the current political tensions (whatever the price of oil and its derivatives), it is believed
that savings can be made by Mediterranean countries north and south, through collaborative
efforts in the realisation of new production plants and especially in the construction of more
rational and economically beneficial treatment and distribution installations (including internal
distribution networks).
The matter of energy and regasificators is opening a breach between the southern regions and
those of the centre-north, which seems to be the more active of the two areas (in making
decisions on the localisation of regasificators). There is a risk that the regasificators end up being
constructed in regions far from the Mediterranean.
2.3. Projects of the Objective 1 regions: internal networks and Trans-European electricity
and gas networks

Sardinia
In 2005 the regional government approved the new Regional Environmental Energy Plan, with
the objective of delineating a strategy for taking the region out of energy isolation. This action is
designed to facilitate a more solid structural interconnection between Sardinia and the Trans-
European energy networks. Two possible paths were identified for the achievement of this
objective: grasping the opportunities offered by the EU for the strengthening of the Trans-
European networks, or diversifying provisioning sources and boosting the development of
renewable sources by exploiting endogenous assets.

Projects
- completion of the new SAPEI 500 Mw undersea power line, enabling the region to deliver
8,000 GWh more electricity to the mainland for export by 2008.
 - the GALSI gasduct (dealt with above): a more valid hypothesis has been reached with regard to
cross border integration, with the solution of the Algeria – Sardinia – Corsica – Italy gasduct in
2010 – a better option economically and strategically.


                                                 51
 - Methane conversion plan for urban networks: this plan emerged also because of the strategic
importance of attributed to the Sardinian terrestrial platform in the Mediterranean and its role in
the development of Trans-European energy networks, particularly between continental Europe
and the North African coast.
- Thermoelectric installations using Sulcis coal: coal continues to be an important factor in the
possible reduction of electricity production costs, but it does however present the problem of high
CO2 emissions.
Law no. 80/2005 called for the Sardinia Region to grant an integrated licence for the extraction of
Sulcis coal and the production of electricity; this project also aims to construct a plant with
gasification technology, fired at least 50% by Sulcis coal, and the remainder by foreign coal.

Sicily
The experiences accumulated in bi-directional exchange in various energy development and
environmental protection actions represent springboards for the construction of new paths of
stable collaboration with other Italian regions and, in support of processes of sustainable growth,
with countries on the Mediterranean.

Projects
- Construction of two new regasification plants at Priolo and Porto Empedocle, currently in the
VEI stage. The two new plants will be able to process around 17 bcm annually, making a
combined total of over 30 bcm imported via pipeline from Algeria and Libya. This will bring the
volume of gas imported into Sicily to 47 bcm per year; a huge quantity, making up 73% of the
quota of gas imported into Italy.
 - Increase in imports from Libya (GREENSTREAM) and Algeria through existing or planned
gasducts to satisfy growing European demand for gas, which by 2020, should be 60% covered by
imports from non-EU sources.
 - Studies are being carried out for a possible electroduct between northern Tunisia (Kelibia) and
Sicily; this would be strategically important for Tunisia, freeing it from energy “isolation” and
connecting it to the European network. Depending on circumstances, the country would be able
to import/export energy from the continental network or in turn act as an interconnection bridge
with other Maghreb countries.

Apulia
In recent years Puglia has also tended towards the use of natural gas in place of oil, both in the
civil and industrial sector (including some transport applications), and in electricity generation.
There is therefore a real need to increase provisioning capacity in terms of quantity and in terms
of diversification of import sources.
The geoeconomic position of Puglia is in a part of the Mediterranean that finds itself in a corridor
of international development running from the east towards the more developed markets of
northern Europe. This factor influence’s Puglia’s choice of general and specific objectives and
impacts upon its vision of regional development to 2013.

Projects
- Strengthening of the Ipiros (GR) – Puglia connection
- Regasificator in Taranto (at the VEI stage)
- Offshore wind resources
- Relocation of wind power installations (present only in the province of Foggia)
- Turkey – Greece – Italy gasduct, which will reach Otranto


                                                52
Campania
The Regional Energy Plan states that: “In the sphere of possible actions intended to achieve
energy savings and rational energy use, the region promotes and incentivises in residential and
tertiary sectors, actions and projects in line with national and regional energy and environmental
policy, with particular reference to actions and projects with the greatest potential for
application in regional territory”.
Campania imports more than 81% of its electricity requirements; demand is rising continually at
a rate of 2 – 3 per cent.

Projects
- New large scale plants are being finalised by the Ministry of the Environment, to produce 400-
800-1200 respectively MW for a total of around 3000 installed MW. Other large plants exist at
earlier stages in the planning process.
Terna (the National Electricity Network) are planning the following projects for development of
the electricity network:
1. Benevento - Foggia (+500 MW productive capacity freed up);
2. Matera - Naples Santa Sofia (+1000 MW of productive capacity freed up, with minor network
losses;
3. "Monte Corvino (SA) - Benevento" (+1200 MW of productive capacity freed up, with minor
network losses);
4. Station in the Vesuvius area (more reliable electricity supply in the Salerno area and fewer
losses).

Calabria
The Preliminary Strategic Document of Calabria 2007–2013 states: “The Tagliacarne Institute
indicators of infrastructural endowment suggest that in 2005 the endowment of the energy-
environment networks and installations, was only 48.3% of the national average”.
Although recent years have seen a reduction in the gap between Calabria and the rest of Italy, the
regional energy system retains structural weaknesses regarding in its supply service of gas and
electricity.
Calabria comes last, along with the Valle d’Aosta, in terms of regional population served by
methane (71.9% of the total population), around 20 percentage points less than the rest of Italy
and 7 points less than southern Italy. The share of electricity from renewable sources has
increased in recent years (from 10.3% in 2000 to 20.3% in 2004). Furthermore, the consumption
of electricity produce by renewable sources reached 30.5% in 2004, compared with 8.2% in the
rest of southern Italy and 16% in the rest of Italy.
A plan to remedy this negative situation was approved in January 2005 with the Regional Energy
Plan, which calls for the realisation of the following projects.

Projects
- 800 MW combined cycle gas-fired cogeneration plant at Scandale (Crotone).
 - The port authority of Gioia Tauro has prepared a series of works involving the construction of a
regasification terminal near the port. The investment required for the project is 600 million euro
and will come entirely from private sources. Currently at the VEI stage.
- Construction of wind farms – small auto-production installations.




                                                53
Basilicata
The region has made considerable efforts in the field of energy, adopting in September 2001 the
Regional Energy Plan with the aim of identifying the region’s energy needs. It emerged that the
total available energy supply was not sufficient to satisfy civil and industrial demand, and that the
percentage of energy produced by renewable sources was negligible.
The issue of reliability of the service, particularly for industrial consumption, needed to be
addressed by upgrading and modernising the distribution network. Such action would also help
bridge the gap with the rest of the country and optimise the use of plant, thus helping reduce
network losses, which affected mainly the development of medium voltage lines (25% of the
medium voltage lines are longer than 30km, while 6% of them are longer than 60 km).
The fulfilment of sectoral objectives entails the overhaul of the regional energy offer,
concentrating production on environmentally friendly sources, and improving the standards of
energy supply. This can combine with the former to reduce the region’s dependence on external
sources.

Projects
The Regional Operative Programme Basilicata 2000 – 2006 dedicates a specific measure in Axis
I (Natural Resources), with a budget of 34 million euro. As described in the needs analysis, the
lines of action to be taken entail:
- investment aid for the production of energy from renewable sources as defined in Directive
2001/77/CE
- support for the demand for energy savings and improvement of efficiency
- support for SMEs for auto-production of energy from renewable sources
- regional programme for completion of the methane conversion programme

2.4 Critical nodes and outstanding issues in some countries of the Mediterranean
Energy consumption in the Mediterranean region has risen in the past and will continue to do so
in the future, necessitating increasing amounts of financial resources. Energy sector investment in
the countries of the South and Eastern Mediterranean Countries (SEMCs) are forecast to be 190
billion dollars by 201019.
New infrastructures (extension of existing networks and the creation of new ones) has allowed
increased levels of gas exports from North African countries. In 2005 the percentage of gas in the
energy balance was around 64% in Algeria, 42% in Egypt, 42% in Tunisia, 40% in Italy and 38%
in Libya20.
Gas importation will increase after 2020: the countries of the Mediterranean will import
approximately 350 bcm and 50% of this will most probably come from north Africa, specifically
Algeria, Libya and Egypt21.
The overall increase in demand for energy and natural gas is result of a sharp increase in the
demand for electricity, which represents around 50% of the total demand for gas.


19
   OME Conference OME on “Investment Needs in the Energy Sector in the SEMCs by 2010’’, Lyon,
March 22 -23 1999. 1999 estimates were around 190 billion dollars, 12 of which go to the energy sector in
the SEMCs in 2010, and others distributed in various other sub-sectors as follows: oil (32 billion dollars),
natural gas (48 billion dollars), electricity sector (109 billion dollars including 60% for the electricity
installations) and the coal sector (1 billion dollars).These estimates will be updated by the OME in the
studies currently underway.
20
   OME “Energy & Gas Prospects in The Mediterranean Area” marzo 2006
21
   Total estimated gas 2005 exports from Algeria, Libya and Egypt, reaching around 80 bcm in 2005, with
64.5 bcm from Algeria, 8 bcm from Libya and 7 bcm from Egypt.

                                                    54
The market for natural gas in the SEMCs is growing more rapidly than that of the northern
Mediterranean countries. Other new projects for the production, transport and distribution are
being studied or are underway, an aspect that will be dealt with more closely in the country
papers.
The increasing demand for electricity22 will have to be met with the construction of new plant,
especially in the southern countries, where demand is higher.
The critical points differ sharply:
- high cost of plant construction in the SEMB23 countries; substantial funding id therefore
necessary; in fact the steep demand in these countries would need around 50 billion dollars worth
of finance.
- the Mediterranean Electricity Ring is not yet perfectly integrated; three distinct regional blocks
persist (SEMB – SWMB24 – UCTE25). In the last ten years strong efforts have been made
towards expanded interconnections, when before there were virtually none in the Maghreb
countries. At the present time south-south connections remain weak, with the exception of the
connections between Morocco and Spain. The ring is due to be terminated in 2007 – 2008.
Economic studies made on the electricity interconnections that should result from the completion
of the MedRing process indicate that fuel savings will be worth several billion dollars. Savings
on investments are predicted to be equally high.
There are basically two outstanding issues to be resolved: on the one hand consumption from the
electricity networks must be optimised, and on the other, the interconnections between the SEMB
countries need to be strengthened. These interconnections cancel the need for new plant to be
constructed and thus lead to savings on investment and fuels.
In conclusion, the changes that will take place in the electricity sector specifically and in energy
generally between 2010 and 2020 will impact upon the future economic development of the
Mediterranean countries and on their cooperation.
These aspects will be considered in more detail in the country papers.




22
   Electricity production in the Mediterranean increased by 8% per year from 1971 – 2003 in the SEM
countries and by 3,7% per year in the countries of the northern Mediterranean. OME Report “Electricity
interconnections in the Mediterranean countries”, May 2006.
23
   SEMB, South Eastern Mediterranean Block
24
   SWMB, South West Mediterranean Block
25
   UCTE, Union for the Co – ordination of Trasmission of Electricity

                                                 55
Figure - “Gas Export Potential from SEMCs”




Source: OME, March 2006




                                             56
3 Telecommunications26

3.1 The Euro-Mediterranean scenario 27
3.1.1 Premessa
The strategic framework in Europe with regards to the information society and the media is set
out in the June 1, 2005 Communication of the European Commission to the European Council,
European Parliament, European Economic and Social Council, and the Committee of the Regions
titled “i2010 – A European information society for growth and employment”28
With the i2010 initiative, the Commission tackles in an integrated manner the issues concerning
the information society and EU audio-visual policy. The strategy aims to coordinate the actions
of member states in order to facilitate digital convergence and meet the challenges of the
information society.
The Commission sets three priority goals to be met by 2010: the creation of a common European
information space; the strengthening of innovation and investments in ICT research; the creation
of an inclusive information and media society.
In order to stimulate an open, competitive internal market for media and information society,
i2010’s first objective is to create a common European information space that offers safe, reliable
broadband communications, with diverse, high-quality contents and digital services.
The Commission plans to revise the legislative framework for electronic communications,
including the definition of an efficient strategy to manage the entire spectrum of radio
frequencies. It should be pointed out that this framework is currently made up of Directive
2002/21/CE of the European Parliament and Council of March 7, 2002, which creates a common
legislative framework for electronic networks and communication services, and by four other
directives: the directive on authorisations for networks and electronic communication services
(2002/20/EC ); the directive on access to electronic communications networks and related
resources and their interconnection (2002/19/EC); the directive on universal service
(2002/22/EC); and the directive on the treatment of personal data and the protection of privacy in
the telecommunication sector ( 2002/58/EC).
Additionally, there is the decision on a legislative framework on radio frequency policies
(decision 676/2002/EC).
The first objective also includes activities to create a coherent framework for media and
information society services, such as: the updating of the judicial framework for audio-visual
services, starting with Commission proposal to revise the “Television without borders” directive
(Directive 89/552/CEE of the Council);
the implementation of all necessary adaptations on the part of the community acquis regarding
media and information society services (2007); and the promotion of a rapid, efficient
implementation of the existing, updated acquis.
According to the Commission, the creation of a common European information space requires
the adoption of a series of actions to provide continuous support for the creation and diffusion of
the contents of the European strategy, through programmes such as “eLearning” and
“eContentplus “ and their successors. Additionally, the Commission highlights the need to define
and implement a strategy that takes into account security aspects, especially through awareness


26
   By Luciano Loffredo
27
    The structure of this section of the document, dealing with telecommuncation networks and
infrastructure, is similar to that of previous sections (energy and transport), but it does not include
information on regional aspects as there is a lack of relevant programming at the regional level.
28
   COM(2005) 229.

                                                  57
raising on self-protection, vigilance, and surveillance with regards to threats associated with the
management of digital rights.
The second strategic objective set by the Commission is to increase innovation and investments
in ICT research.
The Commission aims to encourage research and innovation in ICT, in order to bridge the gap
with Europe’s main competitors, and calls for an 80% increase in financial support to
Community research on ICT by 2010, and invites Member States to do likewise. The
Commission also highlights the need to give priority to the main technological pillar of the
Seventh framework programme for competitiveness and research (2007-2013) – “Building
Knowledge Europe” – such as technologies in the service of knowledge, contents, and creativity,
advanced and open communication networks, safe and reliable software programmes, integrated
systems, and nanotechnology.
The second strategic objective also includes a series of fundamental actions to be implemented:
     •   Launching research and diffusion initiatives aiming to overcome the main bottlenecks,
         such as compatibility, security, and reliability, the management of identity and of rights
         that require solutions that are both technological and structural;
     •   Defining complementary measures to encourage private investments in research and
         innovation in ICT;
     •   Elaborating specific proposals for an information society accessible to all, within the
         strategic community guidelines on cohesion 2007-2013;
     •   Defining policies for e-commerce aiming to remove technological, organisational, and
         legal obstacles to the adoption of ICT, with a particular emphasis on small and medium
         firms;
     •   Elaborating instruments to support new types of work that support private sector
         innovation and adaptation to new needs in terms of competences.
The third objective aims to create an inclusive information society and media, with improved
service quality and a higher quality of life, in order to ultimately strengthen social, economic, and
territorial cohesion. Reaching this goal requires the diffusion of political commitment to e-
accessibility and the extension of broad-band networks over the entire territory, in order to
promote ICT use among as many people as possible. At the same time, the Commission feels it
would be useful to promote a European initiative on electronic inclusiveness (e-inclusiveness)
that takes into account issues related to equal opportunities, the necessary skills for ICT use, and
the existing gaps between European regions. It is also imperative to adopt an action plan on e-
Government and on strategic guidelines to encourage the use of ICT in public services. The
Commission hopes to launch demonstrative projects to experiment with technological, judicial,
and organisational solutions in terms of on-line public services.

New trends in the European telecommunications sector29
The European telecommunications sector is undergoing profound changes that are having a
significant impact on its competitiveness. At the centre of this process is the development on IP-
based new generation networks and related services. We are seeing the birth of new integrated
services (integration of mobile and fixed activities), which are the result of this convergence
process30.


29
   Data and information contained in this paragraph are drawn from: “Relazione annuale sull’attività svolta
e sui programmi di lavoro” - Autorità per le garanzie nelle comunicazioni (2006).
30
   Numerous integrated operators have followed this pattern: Telecom Italia integrated the two activities in
2005, while France Télécom and Deutsche Telekom did so earlier; and Telefonica did the same in March
2006.

                                                    58
The fixed-mobile convergence impacts both operators working in the fixed-mobile field and
those working in only one of these markets.
A second process regards convergent offers for telecommunication services and audio-visual
contents. The last year has seen the launching of many initiatives in terms of convergence, which
include IP-based television (IP TV) and mobile television (through technologies such as DVB-H,
MediaFLO and DMB).
Operators, in order to counter-balance the continuing reduction in average profits from voice
traffic and broadband services, are now starting to invest in providing users with value added
services. The chance to provide innovative services to users and the need to optimise the
management and maintenance costs for infrastructure are the main factors behind the decision to
undergo a transition towards new generation IP-based networks. These services (fixed-mobile
integration and IP TV) require investments in networks in order to guarantee service quality.
Convergence is adding additional services to the now traditional voice and broadband Internet
services (double play) currently offered by fixed network operators; the integration of
telecommunications with the audio-visual sector broadens the offer to include television services
(triple play), while the fixed-mobile convergence completes the offer, providing users with a
single complete communication services package (quadruple play).
The emergence of convergent products and services is leading to profound changes in
competition dynamics in the sector.
In this constantly changing market and technological scenario, there has been a significant
evolution in the regulatory strategies defined by sectoral authorities in Europe and elsewhere.
The issues at the centre of the debate have to do principally with access rules to the networks of
incumbent operators, especially new generation ones, on the part of competing operators (fixed
telecommunication operators, ISPs or value-added ISPs, such as VoIP services), the regulatory
status of telecommunication operators on one hand and cable operators on the other (in a context
that sees these operators, traditionally subject to different regulations, offering the same services)
and the neutrality of network operators (the principle according to which the operator that makes
its own telecommunication networks available is not responsible for the contents that are
broadcast).
The debate on new generation network access for incumbent operators has important implications
for the supply of convergent services, especially with regards to IP TV, which exploits the
technological potential of these infrastructures.
For telecommunication operators, the offer of these services is both a tool to differentiate their
offer and acquire a regular clientele, and an alternate source of income that can compensate for
the drop in income arising out of increase competition in traditional service sectors. New
generation networks also make it possible to prepare fixed-mobile integrated services that allow
operators to meet all the communication needs of final users, thus offering clients a single
integrated package (fixed/mobile/Internet/IP TV).
For these reasons, rules on new generation network access are a crucial issue for the future
development of the sector.
Regulatory authorities must thus identify the right equilibrium to encourage investment in
network innovation on one hand and on the other enforce conditions to guarantee competition in
the sector and in each of its single markets.
Initiatives undertaken by regulatory authorities in the last few years have focused on providing
incentives for the adoption of a competitive model based on the use of alternative infrastructures
compared to those of incumbent operators.
Measures adopted in different countries inevitably depend on each country’s infrastructure, and
in particular on the presence or lack thereof of alternatives to the incumbents’ networks.

                                                 59
The Community’s regulatory approach tries to stimulate competition in terms of infrastructure,
and not merely in terms of the re-sale on the part of alternative operators of incumbents’
wholesale services; this target must be reached in a context in which national markets are
characterised by the presence of few (if not just one) access networks owned by dominant
operators. European authorities, who feel that the duplication of access networks is not
economically feasible in the short and medium term, have thus identified the disaggregated
access to the local incumbents’ network (so-called unbundling) as the most suitable tool to launch
the sectors towards a more mature type of competition.

Euro-Mediterranean cooperation in the fields of telecommunications and the information society
Three Euromed ministerial conferences on the information society have taken place since the
Euro-Mediterranean partnership was launched in 1995. Meetings between ministers have become
more frequent in recently (two in the last two years), in parallel with efforts to develop ICT in
Mediterranean countries and close the digital divide between the two shores of the
Mediterranean.
The guidelines approved during the latest Euromed inter-ministerial conference31 on the
information society, which took place in Dundalk (Eire) on 10-11 April 2005 aim to:
     •   Foster a Euro-Mediterranean dialogue on the development of the information society,
         including regulation of electronic communications, and promotion of infrastructure for
         broadband networks and online services based on benchmarking and best practices;
     •   Promoting the exchange of knowledge and information on security, fighting cyber-crime,
         protecting consumers, reducing spam, and dealing with privacy issues;
     •   Considering e-Government as a priority for the area (the Commission is encouraged to
         examine the possibility of including this issue in its future initiatives);
     •   Encouraging the increased use of ICT in education, in collaboration with the Global e-
         School and Communities Initiative ;
     •   Re-examining current EUROMED cooperation on this issue, including technical
         assistance projects within the MEDA framework;
     •   Defining a joint development strategy.
The Euro-Mediterranean summit that took place in Barcelona on 28-29 November 2005 merely
re-iterated the need to implement the recommendations made during the Dundalk Euromed
Conference, without achieving any further progress.

Initiatives to reduce the digital divide between the two shores of the Mediterranean
The main regional cooperation initiatives financed by MEDA on the information society are
listed below:
EUMEDIS (Euro-Mediterranean Information Society), this initiative was launched in 1999 and
aims to develop the information society in order to reduce the ICT gap between the two shores of
the Mediterranean. It complements the NATP project, which is a regional structure to regulate the
telecommunications sector (see below).
So far, the initiative financed 22 regional projects, with an overall budget of 46 million euros.
The projects deal with the use of ICT in the following fields: public health networks, e-
commerce, tourism and cultural heritage, industry, research and innovation, education. In June
2006, the final EUMEDIS conference, “Closing the digital gap in the Mediterranean region”
took place in Alexandria, Egypt. During the course of the conference, the main results reached by


31
  Euromed Ministerial Conference on the Information Society Dundalk 10/11 April 2005         Final
Declaration, Euromed Report, Edition n°.88, 13 April 2005.

                                                  60
the initiatives were presented, and it was pointed out that all the activities related to the projects
that were financed will continue even once the project itself ends.
EUMEDIS Pilot Projects’ Partners per country




Source: www.eumedis.net

EUMEDIS Pilot Projects by Sector
Sector         Title                                                Budget           EU       MEDA
                                                                                     Partners Partners
E-commerce     EMED-TDS.COM Agrifood E-platform                     2.249.314,00 €
               MEDCHARTNET      -   Digital    maps     for   the                      11        21
               Mediterranean coasts                                 8.395.360,58 €

               AVICENNA - Virtual Campus for Open Distance 4.615.774,00 €
               Learning
               MED NET'U - Mediterranean Network for Unified 5.137.515,00 €
               Distance Learning
               MEDFORIST - Education for E-business
Education                                                           2.812.044,00 €     26        63
               MVU - Mediterranean Virtual University               3.992.065,00 €

               ODISEAME - Open Distance Inter-University
               Synergies between Europe, Africa and Middle East 2.724.743,00 €
Health         BURNET - Interconnection of Mediterranean Burns
               Centres                                         2.062.500,00 €

               EMISPHER - Euro-Mediterranean Internet-Satellite
               Platform for Health, Medical, Education and 2.350.101,00 €
               Research
               EMPHIS - Euro-Mediterranean Public Health                               48        52
               Information System                               3.349.292,00 €

               EUMED CANCER - Euro-Mediterranean network for
               Genetic Medicine and Cancer Prevention        1.300.000,00 €

               PARADIGMA - Participative Approach to Disease
               Global Management                             2.311.785,00 €

Industry       E-MED TEX-NET - Cluster for the Development of
               a Euro-Mediterranean Partnership Network in the 1.549.521,00 €          24        65
               Textile Clothing Sector



                                                  61
               ICT SOLUTIONS MED SMEs - ICT Solutions in the
               Mediterranean SMEs                            2.374.912,00 €

               MEDPRIDE - Mediterranean Project for Innovation
               Development                                     2.281.836,73 €

               MOUVEMENT EUROMED - Euro-Mediterranean
               Movement for Management and Quality by the
                                                                 2.099.865,00 €
               tools of the Information Society in Small
               Businesses and Crafts Trades
               SMITE - Improving Competitiveness of SMEs
               through    IT-based     Environmental    business 1.622.997,40 €
               planning
               DAEDALUS       -   Delivery    of   Mediterranean
               Destination Links in Unified Environment          2.510.367,91 €

               MEDINA - Mediterranean by Internet Access, An
               Access Gate for Sustainable Development of 2.898.862,00 €
               Cultural Tourism in the Mediterranean Area
Tourism        NETWORKED JOURNEYS - Tourist Itineraries                           44     34
               following the ancient trade Routes of the
                                                                1.339.532,00 €
               Mediterranean: trade and culture a bridge
               between civilisations
               STRABON       -   Multilingual  and   multimedia
               information system for the Euro-Mediterranean 3.705.000,00 €
               cultural heritage and tourism
Source: www.eumedis.net

Within the EUMEDIS regional programme, a special mention should be made of the
EUMEDCONNECT project, which benefited from funding totalling 12 256 206.40 €.
EUMEDCONNECT is an Internet-based network that links research and education institutes in
Mediterranean countries, and which is itself linked to the GEANT pan-European research and
education network. The project is coordinated by DANTE (Delivery and Advanced Network
Technology to Europe), an organisation made up of the national research and education networks
of France, the United Kingdom, Greece, Italy, and Spain, and that also involves the national
research and education networks of Algeria, Cyprus, Egypt, Israel, Jordan, Lebanon, Malta,
Morocco, Syria, Tunisia, Turkey, and the Palestinian Authority.
The project’s first phase, which began in December 2001, focused on identifying the main
problems and the key areas of intervention to reduce the digital divide with the Mediterranean
region, and to encourage the participation of regional researchers in European and international
projects, through the links that GEANT has with education and research networks throughout the
world. The second phase will end in 2006, and focuses on the actual development of the network.
The first EUMEDCONNECT hub was established at Catania University in January 2004 (the
second one was established in Cyprus in December 2004); the latter is connected to the Milan
PoP (point of presence), which is part of GEANT. Thanks to its geographic location and its
digital technology firms, Catania has become a nerve centre for the fibre optic networks serving
the Mediterranean basin.




                                                  62
Map – EUMEDCONNECT




Source: www.eumedconnect.net

Map – GEANT




Source: www.geant.net




                               63
Map - GARR – Network of universities and scientific research in Italy




Source: GARR

The MEDA Global Satellite Navigation System (GNSS) project was launched by the European
Commission in September 2004, concurrently with the inauguration of the Euro-Mediterranean
cooperation office for Galileo, the European satellite navigation programme. The project aims to
promote and diffuse Galileo and the European Geostationary Navigation Overlay Service
(EGNOS) in MEDA countries.
EGNOS, Galileo’s precursor, is a joint project of the European Space Agency, the European
Commission, and Eurocontrol for satellite navigation. It is based on the activation of three geo-
stationary satellites (satellites with a fixed position over the Earth, unlike GPS satellites, which
are in orbit) and a network of land-based stations processing the delays of signals emitted by GPS
satellites. The system covers Europe and North Africa, including northern Morocco, Tunisia,
Algeria, and Libya (see map).
Italy hosts a Master Control Centre (MCC,) located at the air traffic control centre of Ciampino
International Airport near Rome, two Ranging and Integrity Monitoring Stations (RIMS), at
Ciampino and Catania, which receive GPS signals and broadcast them to control centres for
processing, and two land-based navigation stations, one located on the Fucino plain (Abruzzo)
and the other in Scanzano (Palermo). One of North Africa’s two RIMS is on the island of Djerba
in Tunisia , while the other is at El Daba in Egypt.
There are two twin systems to EGNOS, one for the North American continent (WAAS), and one
for the Far East (MSAS).




                                                     64
Map - EGNOS




RIMS (Ranging and Integrity Monitoring Stations) gather GPS signals (the Global Positioning System is a satellite
based on a navigation system relying on 24 satellites placed in orbit by the U.S. State Department)

MCCs (Master Control Centres) process the data sent by RIMS and transmit them to the stations that send the signal
to three geo-stationary satellites, which then beam them back to users.

Source: European Space Agency

EU projects to harmonise the regulatory frameworks and liberalise the telecommunications sector
in MEDA countries
The main EU-financed project, through the MEDA regional programme, for harmonising
regulatory frameworks and liberalising the telecommunications sector in Mediterranean countries
is NAPT (New Approaches regarding Telecommunication Policy among Mediterranean
Partners). The NAPT’s specific goal is to help along with the opening of the telecommunications
sector and to increase private sector participation in the modernisation of telecommunications
infrastructure in the countries of the southern shore of the Mediterranean. The ultimate goal is to
increase competitiveness by improving the quality and reducing the costs of telecommunications
services in order to facilitate the integration of Mediterranean partner countries in the global
economy.
The project’s first phase (1999-2002) focused on the following activities:
    •    Organisation of events, such as regional conferences on telecommunications, to
         encourage the exchange of information and experiences;
    •    training for decision makers;
    •    public relations and communications (bulletins, newsletters, press releases);
    •    Creation of a Mediterranean Telecommunications Observatory.
NAPT II began in late September 2005. It is scheduled to receive 4 million euros in funds from
the European Commission. The goal of the second phase is to provide consultancies on
normative reforms in the telecommunications sector based on European sectoral norms to the
relevant authorities in MEDA countries. The programme will last three years.

International fibre-optic networks in the Mediterranean area
With regards to fibre-optic networks in the Mediterranean area, we need to mention the Sea-Me-
We 4 (South East Asia-Middle East-West Europe 4) project for the creation of an underwater
fibre-optic communications network. This project was launched in March 2004 by a consortium
of 16 international telecommunications companies. It will link Europe with South-East Asia

                                                         65
thanks to a highly efficient technology in terms of transmission, and to almost 20 000 km of
underwater cables. A 102 km long fibre optic cable will link Bizerte (Tunisia) and Palermo
(work began on March 30, 2005), and from here it will link with the main cable, which connects
Marseilles with Singapore, Algeria, Tunisia, Italy, Egypt, Saudi Arabia, the United Arab
Emirates, Pakistan, Sri Lanka, India, Bangladesh, Thailand, and Malaysia. The SEA-ME-WE-4
cable, which is compatible with DWDM technology (Dense Wavelength Division Multiplexing,
which helps increase bandwidth in existing fibre-optic backbones) will increase bandwidth and
thus transmission capacity between the countries involved, and will be used for telephone
communications, Internet, multimedia and other broadband transmission and data application
activities. It has a capacity of 1.28 Tbit/s, six times higher than current capacity. The project,
which is jointly run by Alcatel Submarine Networks (France) and Fujitsu Ltd (Japan), has an
estimated cost of 500 million dollars.
Map - Sea-Me-We 4




Source: www.seamewe4.net

3.2 The national framework32
3.2.1 The Italian telecommunication market
Economic aspects are the first ones that need to be highlighted in this brief analysis of the
national framework in terms of telecommunication networks and infrastructure. It is interesting to
note that, counter to national economic trends that show a stagnant situation, the Italian
telecommunication service industry grew by 4.3% in 2005, with a market of over 36 billion
euros.
Not all sub-sectors contributed evenly: mobile telephony, which has outgrown fixed telephony in
the last two years, is the leading market in terms of turnover (+7,8%)33
The fixed telephony market has instead remained stable (+0.4%)34. Within this market, Internet
services 35, grew very rapidly, by almost 20%.



32
   Data and information contained in this paragraph are drawn from: “Relazione annuale sull’attività svolta
e sui programmi di lavoro” - Autorità per le garanzie nelle comunicazioni (2006)
33
   Amounting to 19.6 billion euros, with a growth of 7.8%
34
    With an increase of +0.4% and a value of 16.5 billion euros, due to a drop in profits from vocal
telephony, only partially compensated by the slight increase in data transmission services (+1,4%).

                                                    66
These trends show that the gap between fixed network services and mobile telephony services is
increasing, and is destined to continue to do so.
Chart: Dynamics of the fixed and mobile telephony markets in Italy (turnover in billions of euros)




Source: IDC 2006 *Predictions

The second aspect that must be highlighted concerns the fundamental contribution being made by
telecommunications regulation, through an increasing reduction in final prices , to the
containment of inflation: this is a unique case both for sectors under regulation and those under
free competition. In 2005, prices for telephony services dropped by 0.6%, versus an inflation rate
of 1.9%.
Overall, in the period between 1998 and 2005, final prices for telephony services dropped by
15%, compared with a general increase in the prices of consumer goods of 17%, and 15%
increase in the price of public utility services.
The drop in the prices of telecommunication services is particularly relevant if it is compared to
the general index of consumer goods prices and that of a basket of public utility services 36, , as
evidenced by the graph below.
Chart: Trends for consumer prices and public service tariffs (1990=100)




Source: Authority analyses of Ministry of the Economy data

The unfavourable macro-economic framework seems to negatively impact investments in the
sector, which in 2005 dropped by 2.8% compared to the previous year, as shown in the table
below.




35
   Il totale di questo mercato è di 3,3 miliardi di euro. Gli utilizzatori di internet hanno superato i 28
milioni.
36
   Il paniere tiene conto delle tariffe praticate nei seguenti settori: elettricità, gas, telefonia, poste,
radiotelevisione, ferrovie, acqua, trasporti urbani.

                                                        67
Table – Investments in immobilization (millions of euros)




Source: Authority analysis of private sector data

A closer analysis of the data highlights some very interesting aspects. In the first place, average
reduction is far smaller than last year’s (-9.3%). Data on investments on the part of Other
Licensed Operators (OLO), runs counter to existing trends, with an increase of over 30% in
investments in fixed networks. This highlights the shift to a competition model based on
infrastructure investments: OLOs are in fact investing in access networks (especially through
unbundling) in order to position themselves as single suppliers of integrated communication
products.
Special mention must be made of the development of integrated fixed-mobile offers, since, as we
have already written in the chapter on the European scenario, this is a process that will lead to
profound changes – some of which are already evident – not only in the way operators provide
services, but also in the future organisation of competition in this sector. The convergence
process between fixed and mobile telecommunication services , reflects the transition of operator
infrastructure towards New Generation Networks (NGN), based on IP. These NGNs feature
infrastructure capable of carrying voice and data on the same physical network thanks to the use
of IP technology.
This model is radically different from the “historical” model of fixed telecommunication
operators, characterised by multiple physical networks (ATM, PSTN and IP), each using
different network technologies. Additionally, each service has its own specific applications. The
shift to NGN significantly simplifies this scenario, and allows operators to reduce operational and
infrastructure management costs, as well as to achieve savings in terms of access tools (such as
telephone exchanges). Simplification affects not only physical infrastructure (for example, by
reducing the number of network hubs), but also the “logical” framework of the network. The
adoption of NGNs ultimately makes it possible to provide value-added services and applications
in a scenario of convergence that blurs the historical distinction between fixed and mobile
telephony services.
3.2.2 Italy and international competitiveness
Italy has several advantages in terms of international competitiveness, especially in terms of the
promotion of technologically innovative services in the telecommunication sector. Italy has been
identified as a “country of excellence” at the European level.
The European Commission, in its latest report on the state of electronic communications in
Europe, highlights Italy’s leading role in mobile telephony and unbundling, as well as the
importance of pro-competition measures adopted by the Communications Authority (Autorità
per le garanzie nelle comunicazioni) that have, among other things, made it possible to cut
mobile terminal prices and to achieve a development of broadband networks that is higher than
the European average37



37
     There are about 7 million total lines, the fourth highest such number in Europe.

                                                       68
Italy is the European leader in terms of third generation mobile telephony services (UMTS), with
10 million active lines; the leader in terms of the commercial launch of mobile televisions with
DVB-H technology; and one of the leaders in terms of IPTV.
With regards to regulation and liberalisation in the telecommunication sector, it should be noted
that in 2005 the Communications Authority completed a new regulatory framework for the
communications network and services sector through an analysis of the 18 relevant markets
according to their current Community framework. This analysis places Italy among the most
advanced countries, along with the United Kingdom and Holland.
A fact that needs to be highlighted is that Italy is the second leading European country in terms of
lines whose control has shifted from historical operators to competitors, with 1.6 million such
lines, and has the lowest access tariffs in Europe, which will be further reduced next year.
A testament to Italy’s increasingly important role in the telecommunication sector in Europe is
the recent decision taken by the 33 European countries that make up the European Regulators
Group, which entrusts the Italian authority with the presidency in 2007.

3.3 Critical issues and unsolved problems in certain Mediterranean countries
The picture that emerges out of the analysis of the six Mediterranean countries we have focused
on (Algeria, Egypt, Jordan, Lebanon, Morocco and Tunisia), with regards to legislative trends,
regulations, and protection of competition undertaken by public authorities or independent
agencies in the telecommunications sector is rather varied and complex, as evidence in the
second part of this paper. First of all, we should note that telecommunications is much more
liberalised in these countries compared to energy and transport. This has led to a faster process to
create authorities to regulate the market. All the countries we have examined have already
created an institution in charge of market regulation (except for Lebanon, which is about to do
so), albeit with significant differences between countries with regards to their autonomy and
efficacy. An exemplary case of effective market regulation institutions is that of Morocco, where
the Authority has shown its autonomy from the government, opposing the 2002 attempt to bring
the entire telecommunications sector back under public control.
A fundamental aspect that needs to be kept in mind in order to understand the dynamics and
problems that characterise on-going liberalisation programmes in these countries has to do with
the reasons why national governments decided to undertake these processes. The main impetus
for liberalisation has been financial hardship, and this has influenced both the pace of
liberalisation and the sectors in which progress has been relatively rapid. The choice to prioritise
the telecommunications sector was based on the premise that by providing mobile telephony
licenses to foreign operators, it would have been possible to ensure significant revenues for
public budgets that are in near-permanent deficit. The fact that financial concerns (along with
technological factors, such as in the diffusion of mobile telephony) drove choices regarding the
liberalisation and autonomous regulation of markets shows that not all of the Mediterranean
countries considered here have among their priorities the creation of competitive markets in
public utilities, even when social or technological concerns no longer justify the existence of
monopolies.
The potential of these markets thus remains unexplored, although a trend towards expansion has
emerged in the last several years.
A hint of this potential is evidence by the fact that the first countries to launch liberalisation
processes, such as Jordan (mobile telephony in 1995) have shown impressive growth: in Jordan,
the number of mobile telephony subscribers has grown from 60 000 in 1999 to 3 million in 2005.
Along with the underexploited potential of telecommunications markets, we need to highlight the
fact that in some countries there is still an unmet demand for basic fixed telephony services, and
that Internet services remain under-distributed.



                                                69
        II – Governance, productive systems and networks in six
                       mediterranean Countries



Mediterranean transport corridors                                                                    GEANT network




Motorways of the sea                Proposed gasduct prioritary axes        NIGAL gasducts   EUMEDCONNECT network




                                                                       71
Introduction
What follows is a summary of research on themes inherent to the governance of productive
systems and infrastructural networks - transport, energy and telecommunications – in six
Mediterranean countries: Algeria, Egypt, Jordan, Lebanon, Morocco and Tunisia. Th ecomplete
research is available in the sections III, IV and V and it was written by Marcella Ascione, Laura
D’Aniello, Luciano Loffredo, Clementina Persico, Paola Russo, Valeria Talbot, and Franco
Zallio.
The section on each country will begin with a brief outline of the macroeconomic framework,
before a closer examination of the governance of public intervention in the economy. This will be
followed by commentary on government presence in various sectors of the economy. The study
will concentrate on privatisation and liberalisation programmes undertaken by governments, and
will try to assess how much progress has been made in the transition towards the market
economy, a process in which all six countries are engaged, in varying degrees. Special attention
is given to reform of market and competition legislation and to institutional aspects of the
creation and operation of the market watchdog authorities. The report will give a detailed
account of developments in the sphere of transport, energy and telecommunications networks.
The study will examine how much these countries have opened their economies internationally
and to what extent they have engaged with international trade – especially in relation to other
Mediterranean countries. The figures on imports, exports and trade with EU countries and data
on the flow of direct foreign investment from EU member states offer an initial picture of the
intensity of economic and trade relations between the six countries and the EU states. The
analysis also reports the strategies adopted by the countries for improving the investment climate
and the attractiveness of their economies, (creation of specialised agencies, One Stop Shops, free
trade zones, tax breaks and exemptions, etc.). The concept of trade and commercial is paired with
the idea of “closer physical relations” with the northern shoreline of the Mediterranean, and
therefore with the theme of interconnection and network infrastructures. A country-based
interpretation that accounts for the projects, criticalities and priorities relating to infrastructure
(transport, energy and telecommunications) constitutes a fundamental informative base for the
acquisition of a deep understanding of the potential and implications of the EU new
neighbourhood policy. The reports thus give an analytic description of the three sectors, focusing
on aspects relative to the networks of transport (road, rail, port and airport networks), energy
(energy requirements, energy market and trans-national connections) and telecommunications
(mobile and landline markets, internet services and investment in new infrastructure).
Given the fact that privatisation and liberalisation policies are being adopted, and that economies
are being opened to international competition 38 it seemed appropriate during the research to look
at how the governments of the southern shoreline are making the industrial fabric of their
countries ready to face the scenario of international competition. With this in mind, the reports
analyse the various programmes launched by the six countries with the objective of increasing the
competitiveness of their productive systems in terms of quality, price and innovation. Particular
attention has been given to the problems faced by small and medium enterprises, whose structural
weaknesses have necessitated the adoption of precise remedial measures in managerial,
technological and financial spheres. It is interesting to note that the efforts of the three countries
have concentrated on three key aspects: the simplification of bureaucratic and administrative
procedures by the introduction of One Stop Shops; access to credit through the creation of credit
and guarantee funds; the provision of technical assistance services to enterprises.




38
 Particularly the reference to the coming into effect, in 2010 of the Free Trade Agreement between the
MEDA countries and the European Union, which will involve the abolition of customs barriers and tariffs.

                                                  73
1 Algeria

1.1 Governance of productive systems
The Algerian economy has been characterised in recent years (1999-2003) by sustained growth
(annual average 3.8%) and a good overall level of macroeconomic indicators. Since 1999 the
country has enjoyed a sustained oil boom that has generated unprecedented amounts of state
revenues. The growth rate of GDP in 2004 was 5.2% and forecasts based on the 2005 budget
point to an annual growth rate of 5,3% for the 2005 – 2009 period39. The public deficit is also
improving. The total of foreign debt fell from 25.3 billion dollars in 2000 to 23.2 billion dollars
in 2003, a figure equal to 35% of GDP. The deficit, expressed as a percentage of exports, fell
from 21,68% in 2002 to 17,7% in 2003. This clear improvement confirmed 2003 as an
exceptional year together with the revenues from petroleum exports (23.95 billion dollars in 2003
compared with 18.1 in 2002), and was reinforced by the 2004 results (31,6 billion dollars from
export revenues). The rate of inflation hovered at 3,6% in 2004, slightly higher than the 2000-
2003 average of 2%. Official figures showed a steady drop in unemployment (from 23.7% in
2003 to a forecast 17.7% in 2004). A closer analysis of the data throws into relief the single-
export character of the Algerian economy: in 2003 hydrocarbons accounted for 98% of export
revenues, 48% of added value and 28% of national wealth. It is therefore essential for Algeria to
introduce a series of reforms that will change the economic structure of the country so that its
model of development becomes less vulnerable in the long term. In consequence of this,
government efforts are now directed towards escaping from the binds of the two factors driving
the economy – the international market share of petroleum and the level of public spending.
One of these moves was the 2001 launch of a multi-year spending programme aimed at
stimulating growth: the plan, entitled Programme de soutien à la relance économique (PSRE) –
received funding of 525 billion Algerian dinars (7 billion dollars), and gave a considerable boost
to growth, at least in the short term. It was followed by an ambitious five year 57 billion dollar
(55% of 2005 GDP) investment programme, the “Programme complémentaire de soutien à la
croissance économique”.
At the same time, in response to the need to open the country’s economy to the market, a
privatisation programme was launched, putting 1200 public bodies in private hands. Control and
coordination of the programme is the responsibility of the Ministry of Participation and
Promotion of Investment (MPPI), which can avail of 27 state sponsored management companies,
entrusted with monitoring adherence to procedures and to act as interlocutors with investors
involved. Between 2001 and 2005 the state launched around 270 privatisation operations, 94% of
which were during the second quarter of 2005. There were 102 privatisations in 2005, 30% of
which were with foreign operators and of these, 65% were total privatisations.
The economic reforms launched by the Algerian government in order to consolidate the newly
established rules and modalities for the correct functioning of a market economy include the
legislative device for competition (ordinance no. 03.03 of 19 July 2003) which introduced some
important new market regulations.
From another perspective, in view of the process of Algerian regional and global economic
integration, it is worth noting that despite efforts towards increased liberalisation, the volume of
direct foreign investment (DFI), is still limited and is concentrated in the petroleum sector. The
Central Bank of Algeria announced that 2005, DFI reached 420 million dollars, dropping 200
million dollars (-32,25%) from 2004 .




39
     Cfr. « Note de présentation sur l'Algérie », World Bank, 2005, www.worldbank.org

                                                     74
Similarly, figures for 2005 show that 97.96% of total export revenues (worth 43.5 billion dollars)
came from petroleum sales, while the export share of other Algerian products was marginal,
accounting for the remaining 2.04%, worth 907 million dollars.
It must be said at this point that the move towards a market economy, driven by the above
mentioned reforms, has had the effect of highlighting the weaknesses and critical structural
problems of Algerian industry and enterprise, previously subject to strong protectionist policies.
This has led to the need for a sweeping restructuring programme of the industrial zones (around
70 of them) and the activity zones (of which there are 500). This programme was launched by the
Industry Ministry in August 2005, as part of the more general Five year Programme for Sustained
Growth, and has a budget of 2.8 billion dinars.
As well as the renovation of the industrial zones and activity zones, other important programmes
have been developed for the SME sector. The main one is the Mise à Niveau programme,
involving a package of enterprise support measures, aimed at: developing the fabric of the SMEs
with growth potential; increasing and safeguarding employment levels; strengthening the
capacities of enterprises in the field of investment, partnerships and exports. The programme falls
within the of Law no. 01-18 of 12 December 2001 governing the promotion of SMEs. It
identifies the Ministry for SME and Crafts as the authority responsible for its implementation and
management.
In 2005 management of the programme was handed over to the Agence Nationale de
Développement de la PME (created by executive decree no. 05 -165 of 3 May 2005). The
Agency’s main role is to examine applications from enterprises interested in taking part in the
programme and grant incentives for the execution of the mise à niveau, or upgrade.
The Ministry for SME and Drafts also manages an SME Guarantee and Credit Fund (FGAR),
intended to guarantee banking credits for investments destined for transformation and production
programmes. The enterprise funding system still includes a special fund for the mise à niveau of
enterprises and some microcredit devices, managed by two agencies: ANGEM - Agence
Nationale de Gestion du Microcrédit and ANSEJ - Agence Nationale de Soutien à l’Emploi des
Jeunes.

1.2 Transports, energy, telecommunications
Transports
The Algerian rail network totals 4200 km and is run by the Société nationale de transport
ferroviaire (SNTF). A rail transport development programme was launched with the issue of two
contract notices by the SNTF, for the planning and construction of two new high velocity lines.
The modernisation programme also includes the upgrading of rolling stock with the purchase of
30 new diesel locomotives. It should be noted of the total 700 billion dinars allocated to public
transport under the complementary sustained growth programme, the rail sector received 500
billion. In order to revitalise certain sectors and to make them more accountable, the SNTF
created ten branches, each responsible for a sector of activity.
The road network however covers a total of 105,000 km. The government has plans for the
privatisation of the entire road system, but road construction and maintenance is currently funded
by the state. As most freight in the country is transported by road, the development of the road
system is a government priority. The current road network development programme has these
main aims: strengthening and modernisation of existing roads; the widening of certain arteries;
construction of new intersections in the south, as the region’s mining zones are poorly connected
with the port network. In April 2006 the Algerian government awarded a number of Chinese and
Japanese companies 11.5 billion dollars worth of state-funded contracts for the construction of
six motorways, totalling 1000km.
The sheer size of the country means that air remains one of the most important means of travel
within the territory. The airport network numbers 4 major airports – Algiers, Oran, Annata and

                                                75
Constantine – and 60 smaller airports. Many of the latter are being uprgaded for international
traffic and increased capacity for domestic flights. The aviation privatisation programme includes
the partial privatisation of the Air Algérie carrier.
Sea transport is of fundamental importance in the country’s economic development, being the
means of transit for most of the commercial exchange and oil / gas exportation.
Law no. 98-05 of 25 June 1998 made changes to the structure of sea transport, introducing an
organisational system based on creating distinction between public service tasks and commercial
activities open to competition. This enabled the creation of three port authorities in regional bases
responsible for public service tasks. The authorities participate in maintenance, renovation and
development of port infrastructures – duties previously entrusted to the state.
Energia
Algeria is currently experiencing a wave of economic growth caused largely by revenues from
increased prices of oil and gas, of which it is one of the prime exporters in the Maghreb. Its main
clients are the United States, Italy, Spain, France and Brazil.
Algeria has an estimated 11.8 billion dollars worth of oil reserves and there are believed to be
vast amounts of unexplored resources. The country’s oil sector is dominated by the state owned
company Sonatrach. Its subsidiary companies enable it to maintain a monopoly on oil production,
refining and transport. In recent years foreign investment has increased the share of petroleum
production in the hands of foreign companies. But this has not led to the opening of the sector, as
all the foreign operators must work in partnership con with Sonatrach, which holds the majority
vote in production sharing agreements. The most important foreign producer is Anadarko,
followed by Bhp-Billiton, Amerada Hess, Cepsa and Agip.
2005 figures indicated that Algeria possessed gas reserves amounting to 160 billion cubic metres.
Sonatrach dominates the production and wholesale distribution of gas, while retail gas
distribution is controlled by another state company, Sonelgaz. The sector has been opened to
foreign investment and many foreign producers have signed partnership accords with Sonatrach.
Algerian exports go mainly to Europe and the United States. Two important gas pipelines allow
the exportation of Algerian gas to Europe. One is the Transmed, rechristened the “Enrico
Mattei”, which begins at Hassi R’Mel, crosses Tunisia to Sicily and from there reaches the rest of
Italy. The other pipeline is the Maghreb-Europe-Gas (MEG), which in 1996 completed a link
from Hassi R’Mel through Morocco to the Spanish city of Cordoba. The MEG is managed by an
international consortium formed by Enagas from Spain, SNPP from Morocco and Sonatrach. In
2001 a consortium led by the Spanish company Cepsa and Sonatrach secured an agreement for
the construction of a new pipeline linking Algeria: the Medgaz, which was to connect Beni Saf to
Almeris in Spain with a possible extension to France. The project is due for completion in 2008.
A further gas pipeline connecting Algeria and Italy by way of Sardinia was constructed in 2002
by the Galsi consortium, comprising Sonatrach, Enel and the German company Wintershall. This
project is also due to be completed in 2008.
In recent years the electricity sector has witnessed a notable increase in demand. The country has
a 217,500 km network, reaching almost all the population. A number of plans aim to boost the
network by 5% in order to reach isolated rural zones. Algeria sells electricity to its neighbours
and also has plans to export it to Europe.
Legislation for the opening up of the energy market was passed with law 02-01 of 5 February
2002, introducing competition into the electricity and gas pipeline distribution sector. This
marked the end of the Sonelgaz monopoly; the group was then converted into a public limited
company. The reform has heralded a stable normative framework intended to attract private
finance, and has legally separated the functions of production, transport and distribution. Market
liberalisation is however far from becoming a reality.



                                                 76
Telecommunications
The telecommunications market in Algeria has visibly grown since law 03/2000 came into force,
opening the way to the liberalisation of the sector. The first step in that direction was the creation
of a public limited company, Algérie Télécom, which took control of land and mobile telephony,
relieving the Ministry of Post and Telecommunications of the responsibility. At the same time the
Algerian government made moves to set up an independent control and regulatory authority,
which took the name Autorité de la Poste et des Télécommunications (ARPT).
Since then the ARPT has released three licences for mobile telephony and one for landlines,
while Algérie Télécom has made significant investments into improvement of the quality of it
services, particularly in the mobile sector.
The mobile phone companies currently in operation are: the public company Algérie Télécom
Mobile (a satellite of Algérie Télécom), with the operator Mobilis, and the private companies
Orascom Télécom Algérie and Watania Algérie Télécom, who respectively run the operators
Djezzy and Nedjma.
Since March 2005, a private capital consortium of Egyptian companies has shared the
management of landline services with Algérie Télécom. The consortium consists of the
companies Orascom Telecom and Telecom Egypt, operating under the name Consortium
Algérien des Télécommunications.
The three companies operating in the mobile telephony sector have launched ambitious
expansion plans. Algérie Télécom aims to increase its number of landline customers, with a 2008
target of 3 million ADSL service users and 6 million mobile users. Priority objectives include the
extension of GSM coverage and the 2006 introduction of GPRS (General Packet Radio Service)
medium speed data transfer technology. For these and other projects, Algérie Télécom plans to
invest around 2.5 billion dollars by 2010.
In the sphere of landline telephony, the Consortium Algérien des Télécommunications (CAT)
won a 15 year licence for the creation and management of a landline network in Algeria. The
Egyptian consortium will be able to develop specific service, like high speed data transmission,
but will also address the demand for basic landline phone services. In the meantime the Algerian
government has designated Banco Santander as an advisor for the privatisation of Algérie
Télécom.
The diffusion of Internet services has mushroomed in recent years. According to government
figures for 2004, there were 45 users for every 1,000 inhabitants, compared with 16 per 1000 in
2002. This increase put Algeria on a par with Egypt in terms of the spread of Internet use, but is
still well below Tunisia, which has 70 users per 100 inhabitants. There are about 30 service
providers in operation, along with the government-owned provider, DjaWeb. Algeria plans to
make huge investments in the IT sector in the next five years. Its declared objectives are
increased coverage of Internet services, with a symbolic target of one computer for every family
by 2010, and the extension of the optic fibre network, beyond the 35,000 kilometres of cable
existing today.




                                                 77
2 Egypt

2.1 Governance of productive systems
The Egyptian macroeconomic situation has encouraged renewed optimism on account of the
Egyptian Pound rising against the dollar, confidence among business operators and the
authorities in the face of developing international exchange, the improved international
competitiveness of the Egyptian economy, the growth of exports and a rise in GDP. Contrasting
with these developments, however, are rising inflation and expanding public debts.
Macroeconomic indicators for 2004/05 therefore show an improvement in economic
performance. The 5% level of GDP growth in this period consisted of raw materials (at least
52%), followed by manufacturing (32%) and services (16%).
Policies of economic openness and progressive liberalisation of foreign trade relations have
enabled Egypt, an emerging market, to operate in a sphere of growing integration with Western
countries, as well as the rest of the Arab world and Asia. An Association Agreement with the EU
came into effect on 1 June 2004, contributing to the establishment and/or growth of exchange
with the main western partners. Official IMF figures comparing the general state of Egyptian
foreign trade in the first quarters of 2003 and 2004 show a significant rise in exports, but at the
same time a robust increase in imports, resulting in an overall worsening of the trade balance.
Egypt’s main supplier was the United States, with a market share of 14.46 %, followed by
Germany (7.56%) and Italy (7.23). Italy was also the main recipient of Egyptian exports (mostly
energy and finished products), making up 17.42%40.
Direct foreign investment (DFI) comes in from more than 35 countries, the most important of
which are: Europe, the United States and the Arab countries of the Gulf area. In 2002 the EU
member states with the highest investment stock were, in descending order, the UK, France,
Germany and Italy, with around 52% of overall EU DFI. The outstanding sector for Italian
investment in Egypt is petroleum and gas. Investment opportunities also involve the energy
sector, banking and finance, and the ITC sector. In the latter, Egypt is the country with the
greatest market opportunities of the MENA area.
The investment climate in Egypt does, however, have certain shortcomings: delays are a problem
on the administrative level; the application of customs tariffs is not always coherent; the same
can be said for goods control procedures; the absence of a competition and monopoly law is also
a penalising factor.
Despite these problems, the inflation rate and the social and political situation have encouraged
investment in recent years. Many multinational companies have chosen to invest in Egyptian
construction, agriculture, finance, heavy industry and tourism-related industries. In 2004/05 122
new businesses were established in the Egyptian free zones compared with 53 in 2003/04.
Instituted in 1997, the free zones represent one of main ways attracting investment. These zones
benefit from a preferential regime that extends to tax breaks (5 to 20 years of tax exemption). The
free zones are also subject to specific norms that regulate the territorial limits and the types of
activity that can be carried on, as well as payment of royalties and rules for receipt and dispatch
of goods. Goods produced in these zones and then imported elsewhere in Egypt are considered to
all intents and purposes as goods imported from abroad. Consequently, the importation of
products into the free zones are not subject to customs tariffs or sales taxes.
One of the Egyptian government’s main economic growth initiatives is the Industrial
Modernisation Programme, with a budget of 430 million euro. The programme enjoys the
highest level of European support in the southern Mediterranean area, with EU backing of 20
million euro. The specific objectives are enterprise development (improved productivity, quality,

40
     Rapporti Paese congiunti Ambasciate/Uffici Ice estero 2^ sem. 2005

                                                     78
support for export-oriented activities, boosting of competitiveness and training), support for
specific productive sectors (through the establishment of 20 enterprise resource centres and the
promotion of local or sectoral enterprise clusters, which have the same needs).
A further measure for economic growth was Law 55 of 2002, issued by the Ministry for Foreign
Trade, and designed to promote the competitiveness of Egyptian produce. The law calls for
funding for research, training centres and marketing agencies, and facilitates communication
between Egyptian exporters and their counterparts in overseas markets. Still on the theme of
economic growth, Law no. 1283 of 2002 provided for the creation of a Ministerial Committee
entrusted with the renewed promotion and consolidation of Egyptian exports. The Committee
members were selected from the Ministries of Agriculture, Industry and Promotion of
Technology, Finance, Transport and Civil Aviation.

2.2 Transports, energy, telecommunications
Transports
More than 95% of freight and 70% of passenger transport is moved by road. After a broad
ranging programme of modernisation and expansion begun in 1980, the country had 64,000
kilometres of road, of which 50,000 kilometres was asphalted but in deteriorating condition.
Some large scale projects have recently been completed.
The rail network is characterised by a general degree of inefficiency. The Egyptian government
has therefore proposed the construction of an infrastructural network that will allow the transport
of goods arriving by sea at Egyptian ports to be directed onwards to continental Africa. The plan
will also succeed in increasing the amount of rail freight from 3% to 8% .
The government has also introduced incentives for attracting foreign investors, heralding the
initial partial opening of the sector. It is also studying the possibility of granting licenses for the
use of its lands adjacent to the railways. The first private company to begin operations in the
Egyptian rail sector is Sea Train Egypt, a joint venture involving Italian Sea Train plc, the
Egyptian Kadmar Group and Egyptian National Railways Jet. The consortium has launched a
project for the development and management of a rail link taking tourists to the main
archaeological sites (the first line will connect Alessandria with the station at Giza).
The airport network offers connections to the main tourist centres and the biggest cities. Egypt
has 22 airports, almost all state-owned. In order to be able to cope with expected increased tourist
traffic, the government announced a 2 billion dollar investment plan for the upgrade of the 16
existing airport structures and the construction of 7 new airports. The contracts would be based
on a BOT scheme. Egypt is also planning to borrow from the World Bank in order to construct
new terminals at Cairo and Sharm el-Sheikh airports. In accordance with the growing
liberalisation of the sector, the Egyptian flag carrier EgyptAir has put the management of some of
its most important international airports into the hands of foreign operators.
But it is the port network that has assumed a central strategy and economic role for Egypt, by
virtue of the country’s geographical position. The seaports are capable of handling 80 million
tons of cargo annually, and do in fact clear between 85% and 90% of Egypt’s international
freight. The government has launched a process of partial liberalisation of the port sector, by
allowing private firms to manage (with BOT/BOOT contracts) the ports of Ain Sukna, East Port
Said and Damietta. In March 2005 an agreement was announced between Hutchison Port
Holding of Hong Kong – the biggest international company in the sector – and a consortium led
by the Alexandria Port Authority, for the modernisation, expansion and running of the two freight
terminals at Alessandria and Dekhaila. The deal will involve a 20 year BOT contract.
Energy
The Egyptian energy sector accounts for 9% of GDP. The country exported 18.5 million tons of
hydrocarbons during the fiscal year 2003/2004, and in the following year this amount rose by
almost 50% to 27 tons.

                                                  79
Despite a gradual fall in petroleum production, crude oil extraction still represents an important
element of the Egyptian economy. The depletion of the Gulf of Suez deposits has necessitated
exploration in alternative zones, such as the western desert near the Libyan border, the offshore
Mediterranean and Sinai areas. These exploration activities have been conducted by foreign
companies (primarily BP and ENI) in partnership with the state firm, the Egyptian General
Petroleum Corporation (EGPC). The Suez-Mediterranean pipeline (Sumed) is an important
infrastructure element for oil exportation, providing a complementary and alternative conduit to
the Suez Canal for oil transportation between the Red Sea and the Mediterranean. Egypt retains
50% control of the pipeline and receives transit rights amounting to 27% of the cost of the crude
oil that flows through it.
The government in recent years has given incentives for the use of natural gas resources,
particularly for electricity generation. It has also issued licences to private companies to extend
the gas transmission and distribution network. A project is also underway for the development of
a complex natural gas exportation network. The first phase of the network involves the
construction of a pipeline to Syria, Lebanon, Turkey and eventually Cyprus. The second phase
will see the completion of the gasduct between the Jordanian Red Sea port of Aqaba to the
central plant at Rehab, near the Jordan-Syria border. In the third phase of the project, a tract will
be completed between the Jordanian border and the Syrian base of Deir, and then on to Rayan,
near Homs.
In 2005 Egypt secured an oil exportation deal for the supply of 1.7 billion cubic metres of gas for
fifteen years, beginning at the end of 2006, with an option of a five year extension.
There are also visible developments in the liquefied natural gas sector (LNG). The SEGAS
(Spanish Egyptian Gas Company) plant at Damietta began operating at the end of 2004,
guaranteeing the production of 5 tons of LNG annually. The plant is controlled by the Spanish
company Union Fenosa in partnership with ENI (with an overall share of 80%), the Egyptian
Natural Gas Holding Company (10%) and the Egyptian General Petroleum Corporation (10%).
In May 2005 a plant was completed by Egyptian LNG, created by the British company Bg Group
and the Malaysian concern Petronas at Idku. The Bg Group is considering the possibility of
constructing a third plant for LNG production. With its two plant fully functional, Egypt is set to
become the world’s sixth biggest producer of LNG, with significant prospects for growth.
In the last few years a restructuring and liberalisation process has been underway in the Egyptian
electricity market. However the state still has a dominant position, through the Egyptian Electric
Holding Company. In 2001 the EEHC broke up its production and distribution activities. So at
the moment a number of different companies sell to a single transmission company, the EECH,
which in turn sells electricity to consumers and nine new state-owned distribution companies.
The existence of a single buyer does not allow competition among the producing companies.
With regard to regional interconnections, Egypt is a member of the Mediterranean Electricity
Ring, which links a certain number of North African and Near East countries and which will soon
be connected to the European network. It also cooperates with some African countries in the
construction of a network as part of the Nile Basin initiative.
Telecommunications
The liberalisation of the Egyptian telecommunications market formally began in 1991 with the
definition of the Economic Reform Program.
In 1998 the Egyptian took the first steps towards the effective liberalisation of the sector with the
conversion of Telecom Egypt into a State controlled public limited company. The other action
paving the way for privatisation was the creation of an independent regulatory authority with the
name Telecommunication Regulatory Authority (TRA), later renamed the National
Telecommunication Regulatory Authority (NTRA).



                                                 80
In the same year the TRA issued two mobile telephony licences in order to speed up liberalisation
and create the conditions for the consolidation of competition instruments.
Telecom Egypt, in accordance with the stipulations of the Telecom Law of 2003, relinquished its
exclusive rights over landline telephony services at the end of 2005 and conceded its monopoly
of international telecommunication transit centres. At the beginning of 2006 the provision of
landline service was formally opened to potential new operators. In the meantime 20% of
Telecom Egypt was privatised on 14 December 2005.
The mobile telephony sector has made significant progress towards liberalisation. The first
operator, controlled by Telecom Egypt, launched its service in 1996. In May 1998 it was taken
over by a consortium named MobiNil. In the same year the TRA issued a second licence to the
consortium Vodafone Egypt. When MobiNil started out it had 83,500 clients, inherited from
Telecom Egypt. It now counts about 7 million users. The penetration level of mobile telephony
stands at around 17,5%, with a total of 13.5 million users. The NTRA predicts 20% mobile
telephony penetration by 2008-2009.
The spread of Internet services has been hampered by high costs, insufficient ICT expertise and
inadequate infrastructure. In January 2002 a free Internet service was launched, allowing users to
go online for the cost of a national call – in stark contrast with the hefty subscription charges
existing up to then. The market for Internet service providers is divided up among a series of
companies who lease the Telecom Egypt-controlled network at a cost of 30% of their total
revenues.




                                               81
3 Jordan

3.1 Governance of productive systems
The last ten years have seen the Jordanian economy undergo a number of far reaching reforms
designed to restore fiscal and monetary stability in the country. After the serious debt crisis of
1988-89, the Jordan government asked the IMF to draw up a series of structural programmes
aimed at securing short-mid term economic stability, carried forward by the IMF and World
Bank.
The Jordanian economy has been earmarked for liberalisation in order to encourage regional and
global integration. The role of the State has been redefined, through a process comprising
privatisation programmes, support for investment in export products and a reduction in
unemployment and poverty levels.
The reforms, alongside improving macroeconomic indicators, have not had a strong impact on
living standards, while the uncertainty of the region’s geopolitical situation does not assist the
government’s reform actions.
In 1995 a privatisation process was launched, involving many economic sectors in the country.
Entitled the Jordan Privatization Program, it was run in collaboration with the World Bank,
which also acted as administrator of a trust fund in support of the programme. A number of
transactions have so far been brought to fruition, some of them in strategic sectors, netting
government revenues of over 900 million dollars (about 12% of GDP), while in the next four
years overall direct investments of 500 million dollars are forecast.
Economic reforms began to exert a positive effect in 2000, when GDP began to grow steadily
from 4.2%, reaching over 5% except in 2003 when it dipped to 4,1% as a consequence of the
conflict in Iraq . According to figures published in the 2005 ICE report, as well as data from
official Jordanian sources and the IMF, Jordanian GDP in 2004 was rated at 7.7% in real terms,
the driving factor being strong internal demand. With regard to other economic indicators,
inflation remained low at 3,4%, while the official unemployment rate dropped slightly to 12,5%.
The Amman stock market index grew by 62%, attesting to a considerable flow of foreign
investment on the Jordanian real estate market.
The public balance sheet shows a budget deficit of 1.9% of GDP while the public debt/GDP ratio
has dropped 10 percentage points to 88%. Foreign debt stands at around 66% of GDP. Despite
the good macroeconomic results, both the Jordanian government and the IMF continue to
highlight the weak structural elements of the economy, namely strong dependence on
international aid and extreme vulnerability in the face of price fluctuations of the price of crude
oil.
The trend of main macroeconomic indicators from the first quarter of 2005 gave cause for
concern. International funding has reduced drastically while the price of oil has risen rapidly,
causing total Jordanian oil imports to reach a value 5% of GDP. In addition to this there was a
sharp drop in textile imports to the USA caused by the demise of the Multifibre Agreement, and
then a loss of competitive advantage of the Qualifying Industrial Zones.
Jordan suffers from a notable structural foreign trade deficit, with imports amounting to more
than twice the value of exports. The deficit is partially covered by a surplus in services, mainly
from remittances from abroad and tourism. Europe is the main source of imports, accounting for
1/3 of the total. Import products consist mainly of machinery, transport materials, agricultural and
chemical products, evidencing the country’s dependence on imports for capital goods and energy.
Imports of petroleum and derived products has increased since 2000. An assessment of export
trends brings into relief the economic benefits derived from free trade in the last few years.
A stable exchange rate and the opening up of markets have improved specialisation and
advanced the diversification of exports. The private sector has played a primary role since the

                                                82
1990s onwards. Jordanian exports have then shifted from the traditional mineral sector, such as
phosphates and potassium, to higher added value chemical products, like fertilizers, phosphoric
acid, and pharmaceuticals.
The biggest innovation for foreign investors, however, was the Qualifying Industrial Zones (QIZ)
areas, created in 1996 to boost Israeli-Jordanian economic cooperation. The QIZ are industrial
parks whose product can be exported without quota restrictions and with tax exemptions, to the
United States41. The mechanism determined by the QIZ constitutes an interesting opportunity for
enterprises, particularly in the textile sector. Most of the QIZ exports to the USA in fact come
from this sector. There are currently thirteen QIZ and more are planned. One of their
achievements has been significant growth in exports to the USA. Despite this, there remain
certain critical problems: the production of non-textile goods is limited; there is little trace of any
New Economy activity in the company structures of the QIZ; and finally, few discernable spin-
off effects have been produced among the industries belonging to the single QIZ.
On the other hand, an evolution of the free-zone model is represented by the Aqaba Special
Economic Zone, officially announced in May 2001 with the aim of attracting about 6 billion
dollars from foreign investment in the sectors of tourism, transport, industry, trade, services and
especially IT. It is hoped that 70.000 jobs can be created, three times the number so far created by
the QIZ system. Special tax advatages exist in the Aqaba Special Economic Zone;
manufacturing and service industries in the city and environs (with the exception of banks,
insurance companies and transport services) benefit from a special 5% rate of taxation on
income, 7% on sales, and zero customs tariffs on exports. Also, there are no quota restrictions or
customs tariffs on goods produced in Jordan and destined for the US and European markets.

3.2 Transports, energy, telecommunications
Transports
The port of Aqaba, 300 kilometres south of Amman, is Jordan’s only port infrastructure. The
port cleared more than 2.5 million tons of freight in 2004 (with imports doubling the volume of
exports). The continuation of this positive trend is driven by the growing economy of the
Hashemite Kingdom and the fact that the Aqaba is the main port for cargo bound for Iraq.
The Jordanian government made decision to hand over the port to private management. Since
2001 Aqaba has been within the area of competence of the Aqaba Special Economic Zone
Authority (ASEZA) and the port has been maintained by the Aqaba Development Corporation
(ADC) since 2004.
The ADC has undertaken a 1 billion dollar project to shift the existing port infrastructure to the
southern area bordering with Saudi Arabia, in order to liberate an area that could be used for the
tourism flow, and to redesign and expand the port.
The Jordanian airport network comprises twenty bases, including those for military use. The
principal airports are the Queen Alia International Airport in Amman, the Marka International at
Marka and the King Hussein International in Aqaba.
The Queen Alia International Airport is 32 kilometres from Amman. It is Jordan’s principal hub
and the base of flag carrier Royal Jordan Airlines, as well as being the hub of choice for almost a
dozen overseas carriers.
The Jordanian airport network is currently at the centre of a sweeping and complex process of
modernisation, privatisation and liberalisation that involves the entire aviation sector of the
Kingdom. An immediate objective is to make Jordan the main transit point of flights bound for
Iraq, thus consolidating the partnership between Royal Jordan Airlines, Iraqi Airlines and a series


41
  The incentive mechanisms apply only if a minimum of 35% of the export material is produced in Israel
and Jordan.

                                                  83
of charter flight operators. Royal Jordan Airlines has also launched a plan to create multiple
regional short-medium haul routes, and is preparing the strategies necessary for going into
competition with the major international airlines in 2007.
The Jordanian aviation sector’s main regulatory authorities include the Public Transport
Regulatory Commission, created on 16 November 2001 by Law 48/2001; another is the Jordan
Maritime Authority, a government body with financial and administrative independence, called
for by Law 47/2002. The main objectives for both authorities, within their specific fields, are:
guarantee of high quality transport services conforming to most recent safety standards, at
sustainable cost; open the doors to new investment opportunities; conceive new solutions for the
specialisation of transport services.
The specific duties of the PTRC are: organisation of the public transport network and its
itineraries between and within cities, monitoring, supervision and coordination of public service
enterprises. These are the functions of the JMA: control and vigilance for safe navigation of
Jordanian territorial waters; reporting to the competent Ministry for ratification of bilateral,
regional and international maritime agreements and following their implementation. Jordan is
also involved in the High Level Group project aimed at creating trans-national transport axes
between EU countries and neighbouring countries. One axis in particular concerns Jordan: the
South Eastern Axis. The project contemplates the creation of a transport network to connect the
EU to the Caucasus, the Caspian Sea, Egypt and the Red Sea, by way of the Balkans and Turkey.
The project would then be extended towards Russia, Iran, Iraq and other Gulf countries. Amman
would become part of the multimodal connection line linking Ankara-Marsina-Syria-Jordan-
Suez-Alessandria-East Port Said.
Energy
Jordan does not posses significant amount of oil resources and satisfies internal demand (about
106,000 barrels per day in 2004) mostly through importation.
Jordan’s oil importation habits changed drastically in 2003 following the US invasion of Iraq.
Jordan currently buys from Kuwait and Saudi Arabia, who in 2004 agreed to sell to the
Hashemite Kingdom at discounted rates, before reverting to market prices at the start of 2005.
The country’s reserves of natural gas are also quite modest (around 6.5 billion cubic metres).
There is only one extraction basin at Risha, in the eastern desert region near the border with Iraq
An energy authority, the Electricity Regulatory Commission, was set up in January 2001. It is
governed by Law no. 63 of 2002, known as the General Electricity Law. The body has legal
personality and enjoys full financial and administrative independence. Its tasks are: contribution
to the development and maintenance of the electricity sector; encouragement of investment to
increase the operational efficiency of the sector and to cap electricity prices; ensure that the
companies operating in the sector respect environmental and public safety norms; guarantee that
licensees provide sufficient energy to satisfy user needs; verify the congruity of prices set by
licensees, at such a level that they are able to finance activities and guarantee yields in line with
investments undertaken; safeguard consumer interests and evaluate the adherence to norms and
regulations relevant to the licences.
The ERC is overseen by two bodies, the Council of Commissioners and the Administrative Staff.
The Council of Commissioners has five members, including a Director and Deputy Director,
appointed by the Council of Ministers upon indication by the Prime Minister. The office of
member of the Council is incompatible with direct and in direct interests in any division of the
electricity sector.
Council members remain in office for two to four years. The mandate is renewable only once.
Meetings of the Council are convened by the Director at least once a month, according to
necessity. Majority decisions are taken by members present and the Director holds the casting
vote.


                                                 84
Telecommunications
The liberalisation process of the telecommunications sector in Jordan was launched with the
approval of law 13/1995, which set out the basis for a wide ranging reform. Mobile telephony
was the first beneficiary of the liberalisation policy.
There are three operators currently competing in the market: Fastlink, Mobilecom and the Kuwati
firm Umniah Mobile Communications. Competition between the two main players, Fastlink and
Mobilecom, led to a significant reduction in costs and a staggering increase in subscribers,
leaping from 60,000 in 1999 to 3 million in 2005. The market still shows potential for growth.
The mobile telephony offer has expanded with the advent on the market of the service “Press to
Talk” from the company XPress Telecommunications.
The Telecommunications Corporation, created in 1971 as a government body responsible for
controlling the various telecommunication sectors, was converted into a public limited company
of the government, in 1997. Its new name was the Jordan Telecommunications Company (JTC).
This represented the first step towards the privatisation of landline telephony. The next step, in
December 1999, was the sale of 40% of the JTC to a consortium led by France Télécom and
Arab Bank, the chief private bank in Jordan. The sale price was 508 million dollars. The third
step took place in October 2002 and involved the flotation of 15% of the Jordanian company. The
Jordanian government decided to sell its remaining shares in JTC, allocating them thus: 11% to
the consortium led by France Télécom, 10% to the Gulf Finance House of Bahrain, 10% to the
Kuwaiti concern Nour Financial Investment, and the remaining 5% to the Jordanian Armed
Forces pension fund.
Overall, the operation brought 705 million dollars into government coffers.
In January 2005 the JTC monopoly of landlines and international lines was dismantled and the
entire sector was opened up to private activity.
The spread of Internet services is quite modest: around 20 subscribers in every thousand
inhabitants in 2004 (with an average of six users per subscription). In an attempt to spread
Internet use, the government brokered an agreement in February 2005 between JTC, Wanadoo, a
local bank and two local computer assembly firms. Users were offered a special package deal
consisting of a computer and Internet subscription at a discounted price.
The competent watchdog authority for the sector is the Telecommunications Regulatory
Commission (TRC), created with law 13/1995. The authority possesses legal personality and
financial and administrative autonomy.
The authority has the following functions and responsibilities: regulation of telecommunications
services in line with general policy for the sector, which is to establish and secure the provision
of services at fair, reasonable and sustainable prices; protection of the interests of users and
supervision of the activities of licensees; stimulation of competition in the telecommunications
and information technology sectors; monitoring of anti-competition behaviour, particularly abuse
of dominant position; formulation of draft laws for presentation to the Minister for
Telecommunications and Information Technology.




                                                85
4 Lebanon

4.1 Governance of productive systems
The Lebanese economy is based essentially on the services sector, in which 2002 accounted for
70% of GDP. The Lebanese capital is in fact one of most important banking centres in the region.
The industrial sector is much smaller and is dominated by the cement industry, while agriculture
provides 13% of GDP42.
The political events of 2005 have had a negative effect on the country, contributing to, among
other things, a downturn in investment and service exports, which in recent years represented the
key expansion sector. Economic growth, forecast at 4% for 2005, was in fact zero.
The most vulnerable area of the Lebanese economy is the chronic state of its public debts. The
public debt midway through 2005 was 200% of GDP. Successive administrations have been
unable to realign public accounts, despite a series of unpopular but necessary measures such as
tax increases and reductions in public spending, or privatisation schemes.
The internal market is small, with a preference for imported goods. The most significant export
sectors are cement, food and drink, and jewels. This latter sector, dominated by the small
Armenian community in Lebanon, has grown considerably in the last two years.
The total turn over value of foreign trade for 2005 was 11.2 billion dollars, 9.3 of which went on
imports, and 1.9 billion was earned from exports. The Lebanese trade balance sheet for shows a
deficit of 7.5 billion euro43.
While Italy stands in 23rd position in the league table of purchasing countries, (owing to the
limited offer available from Lebanon), Lebanon absorbs around 11% of Italian exports to the
twelve Arab countries of the Middle East, and is the 3rd biggest buyer of Italian products after
the United Arab Emirates and Saudi Arabia. Italian exports to Lebanon include refined oil
products, textiles and clothing, metal products, chemicals, plastics, rubber, foodstuffs, plant and
machinery.
The chief measures adopted for the implementation of the Lebanese privatisation programme are:
     •   Approval of Law no. 393 of 2000;
     •   Constitution of Supreme Council for Privatisation (HCP), headed by the Prime Minister,
         with the task of establishing, executing and supervising the privatisation process in a
         transparent manner.
One important measure was the “Law for Industrial Development”, designed to create a
favourable climate for foreign entrepreneurs. Other types of similarly oriented law seek to offer a
series of guarantees to foreign investors, most importantly on the legal side, (intellectual property
rights, anti-dumping, competition law).
Incentives for investment are regulated by the “Investment Law no. 360 of 2001” which divides
Lebanon into three zones (A, B, C), offering tax exemption, relief and facilitation 44.
There follows a detailed breakdown of the incentive packages offered by Law no. 360.
Zone A enjoys the following exemptions, reductions and facilitation:




42
   Cfr: «Profil Pays Liban», FEMISE,Forum Euro-Méditerranéen des Instituts Economiques, November
2005.
43
   Rapporti Paese congiunti Ambasciate/Uffici Ice estero 2^ sem. 2005.
44
   Lebanon has the lowest tax burden in the world, with company tax at 15%

                                                 86
    1. The work permit of various categories, exclusively for those relevant to the projects, calls
       for at least two Lebanese employees for each foreign one, and they are registered in the
       National Social Security Fund.
    2. Exemption from income tax for two years. This way the effectively negotiable actions
       are no less than 40% of the enterprise capital.
Zone B enjoys the following exemptions, reductions and facilitation:
    1. The work permit of various categories, exclusively for those relevant to the projects, calls
       for at least two Lebanese employees for each foreign one, and they are registered in the
       National Social Security Fund.
    2. Exemption from income tax for two years. This way the effectively negotiable actions
       are no less than 40% of the enterprise capital. This exemption period must be added to
       other exemption periods enjoyed by the enterprise.
    3. A 50% reduction on revenue tax and taxes on dividends of the project, for a five year
       period. The reduction must be applied at the end of the exemption period for the investor
       to benefit.
Areas in zone C enjoy the following exemptions, reductions and facilitation measures:
    1. The work permit of various categories, exclusively for those relevant to the projects, calls
       for at least two Lebanese employees for each foreign one, and they are registered in the
       National Social Security Fund.
    2. Exemption from income tax for two years. This way the effectively negotiable actions
       are no less than 40% of the enterprise capital. This exemption period must be added to
       other exemption periods enjoyed by the enterprise.
    3. A ten year period of total exemption from income tax, and dividends on project taxes for
       five years. The reduction is applied at the end of the exemption period, if the investor is
       to benefits from it.
On a parallel path, the Lebanese authorities have in recent years tried to support and assist the
SME development process through the adoption of a series of programmes, financed by EU and
United Nations contributions:
    •   Programme for the creation of centres of industrial development aimed at assisting the
        SMEs;
    •   Industrial Modernisation Programme (financed by the EU);
    •   Lebanese Industry Competitive Capacity Development Programme (financed by UNIDO
        -United Nations Industrial Development Organization).

4.2 Transports, energy, telecommunications
Transports
The Lebanese transport sector and road network are in need of thorough reform and renewal. On
paper there are plans for the improvement of traffic management, infrastructure and public
transport. Airport management is also due to be privatised. The Ministry of Transport and Public
Works is currently undergoing internal reorganisation. Under the new structure, the Directorates
of land transport and sea transport will be split into two separate authorities and an autonomous
civil aviation regulatory authority will be created in place of the General Direction of Civil
Aviation.
Air transport is currently controlled by the General Direction of Civil Aviation. A law passed on
December 2002 made the regulatory authority separate from operations. Another 2002 law called
for the creation of a state owned company for Beirut airport, to take responsibility for airport

                                                87
activities and air traffic management services. Lebanon has announced that it wants to adopt an
“open skies” policy and has negotiated a horizontal agreement for aviation with the EU,
modifying the bilateral accords the country previously had with the EU member states.
The Lebanese flag carrier is Middle East Airlines (MEA). The government plans to float 10 to 30
per cent of the company on the stock exchange by 2006. Two other airlines operate out of Beirut
airport: Menajet, which runs charter flights, and TMA, a cargo carrier.
Sea transport is the most commonly used system in Lebanon for foreign trade. More than 70%
of freight goes through the port of Beirut. Inefficient management by the port authority led to a
private consortium being brought in to take over the administration. In July 2004 a ten year
contract was awarded to the consortium, made up of the US company International Maritime
Associates, the British concern Mercy Docks and a local partner, IPMB. The country’s other
ports, Sidon, Tripoli and Tyre, are run by public bodies.
Lebanon does not have a maritime authority, and the inefficiency of state management has led to
the country being classified as “high risk” in the black list of the Memorandum of Understanding
of Paris.
The absence of an internal rail system means that road transport is the principal mode of transit
in Lebanon. Nevertheless most of the road network is in extremely bad condition and there are
seriously shortcomings in traffic control and road safety.
In July 2005 the FEMIP (Facility for Euro-Mediterranean Investment and Partnership) gave a 60
million euro loan for the construction of new roads in Lebanon. The plan has resulted in 11 km of
motorway between Taanayel and Masnada on the Beirut - Damascus route and 6 km of ring road
on the western periphery of Tripoli.
Energy
Lebanon imports oil and gas in equal measure. In 2004 it imported 22.8% of its oil needs from
Russia and 20.8% from Gulf countries. Official figures show that in the first nine months of 2005
say that the country spent 1.6 billion dollars on oil imports. Internal consumption is around
108,000 barrels per day.
Until 1988 the Lebanese government held a monopoly on energy resources importation and on
the petroleum market, while nowadays some private companies – Kogeco, Falcon, Pan Arab
Inter-Trade, Gulf Intertrade, United, Norco and Gas al-Shark – are entitles to hold licences that
enable them to import and distribute refined oil products. The Petroleum Institute, controlled by
the Ministry of Energy and Water Resources, sets the prices of petroleum products, in line with
international price trends.
In August 2005 Lebanon signed an agreement with Kuwait for the importation of 600,000 tons of
oil annually. In November of the same year a contract was sealed with Sonatrach, the Algerian
state oil company, for the importation of 1.1 tons of fuel oil and 1 million tons of diesel for three
years from 2006.
A current project involves the conversion of oil-fired power plants to natural gas. To facilitate
this programme, a 26 mile pipeline called Gasyle 1 was built, linking the Syrian plant at Baniyas
with Deir al-Ammar-Beddawi, in the north of Lebanon. The pipeline was completed in March
2005 and carries over 1,5 million cubic metres per day, a figure that is set to double in the next
few years. Natural gas importation is handled by a single private licensee. In January 2006 Qatar
Petroleum funded a feasibility study into the possibility of re-establishing the refinery at Tripoli.
Law no. 549 of 2003 on refineries and natural gas calls for more private sector involvement in the
energy sector, a new pricing structure and a different role for the state; apart from this legislation
there are no other laws on competition nor is there an independent regulation authority for the
sector.



                                                 88
In 1964 the public company Electricité du Liban (EDL), operating under the control of the
Ministry of Energy and Water Resources, gained monopoly control of the production (control
and management of power stations), transmission (transit from station to substation) and the
distribution (transit from intermediate substations to single users) of Lebanese electricity. EDL
generates almost 2000 megawatts - more than 90% of energy used in Lebanon. 97% of the power
is generated by thermal plants while a marginal amount derives from hydroelectric installations.
In 2002 the approval of law no. 462 introduced new legislation for the Lebanese electricity
sector. It called for the liberalisation of the market, through the separation of the various bodies
appointed to the definition of policy, of rights of infrastructure ownership, and of sector
regulation. This law has not yet been effectively applied and the EDL continues to operate in
accordance with the legislation dating back to 1964. There are also plans for the creation of an
independent watchdog authority, the National Electricity Regulatory Body (NERB).
Telecommunications
The Lebanese telecommunications sector is controlled by the Ministry of Post and
Telecommunications, which is proprietor of the most part of the country’s infrastructure (lanoline
networks, undersea cables, installation of the two mobile telephony networks). The MPT is
responsible for planning, policy, contract tenders and investment in new infrastructure, although
private companies manage the majority of operations in the sector, including data transfer
services.
The GSM network is managed by private companies, as are the data transfer services. Sodatel, a
joint venture created in 1993 by the Lebanese government (50%), France Telecom (40%) and
Telecom Italia (10%), held a monopoly in the data transfer sector up until the end of the 1990s,
when five new licenses were released to as many private companies. All operators complain of
excessive costs and the poor efficiency of the lines leased out by the government.
The liberalisation process of the Lebanese telecommunications market is a priority of the
economic agenda, even though there is still much to do.
Landline telephony is run by a government-owned operator, Ogero, while the mobile market has
two operators: Alfa, a joint venture between the German Deutsche Telecom and Saudi Fal
Holding, and MTC Touch, controlled by the Kuwait Mobile Telecommunications Company.
The liberalisation of the landline market will begin with the creation of a public limited company
called Liban Telecom. It will initially remain under exclusive government control before
undergoing phased privatisation.
Mobile telephony was partly liberalised in 1994 when two private operators were introduced
into the market, operating through a BOT (Build-Operate-Transfer). The first was France
Telecom Mobiles Liban (FTML), a joint venture between France Telecom (67%) and Najib
Miqati with the remaining 33%. The second partner was Libancell, owned by the Finnish firm
Sonera (14%) and a consortium of Libanese businessmen including Nizar Dalloul, son in law of
Rafik Hariri. Both operators launched their GSM services in 1995.
In April 2004 two four-year contracts for services on mobile frequencies were issued to the
Kuwaiti company MTC, which operates in Lebanon under the brand name MTC Touch, and Fal-
Dete Telecommunications (FDT), a joint venture between the Saudi operation Fal Holding (40%)
and the German Detecon Intl, with the brand name Alfa.
The two new companies utilised the 420,000 already existing lines and added more, reaching a
total of around a million. 75% of the market is absorbed by prepaid cards.
Lebanon is one of the most highly developed markets for Internet services in the Arab world.
There are around 170 users per 100 inhabitants, compared with 92 per 100 in Egypt and 36 per
100 in Neighbouring Syria. The number of Internet service providers has fallen, while the biggest
providers (like Cybreia) have expanded.


                                                89
The Lebanese telecommunications market is governed by 431 of July 2002. This law determined,
among other things, the creation of an independent telecommunications regulatory and control
authority, with legal personality. It is called the Telecommunication Regulatory Authority (TRA).
The mandate of the TRA is to regulate the telecommunications sector in such a manner as to help
create the conditions for a competitive context capable of supporting a wide range of quality
services a competitive prices.




                                               90
5 Morocco

5.1 Governance of productive systems
Morocco is currently engaged in ambitious economic reforms which have already achieved
extraordinary results in a relatively short time. Public accounts are in order, foreign debt is on the
way down, inflation is under control at 1,6%, monetary stability is satisfactory and public
spending is being reduced.
The transformation process was set off by a series of economic, political and social reforms, and
through a new industrial policy based on modernisation and boosting the competitiveness of the
existing industrial fabric.
This process of transformation is a tangible sign of the Moroccan authorities’ desire to embrace
policies that will consolidate and develop foreign relations, starting with the objective of the
Euro-Mediterranean Free Trade Area for the year 2010. The dynamism of Morocco on an
international scale is demonstrated in various guises: the economic reforms achieved in the
framework of the Structural Adjustment, supported by the IMF and the World Bank; the
disengagement of the state and the successive waves of privatisation, which has brought public
finances and the balance of payments back onto an even keel; the anticipated results of the
creation of the Euro-Mediterranean Free Trade Area; the Agadir Ageement with Tunisia, Jordan,
Egypt, and in 2003 the implementation of the Free Trade Area with the USA.
The most critical problems, emerging as strong obstacles to the development of the country, are
ascribable to the level of illiteracy, poverty, unemployment and the negative trade balance. Data
from the Italian Institute for Foreign Trade shows that in fact Morocco has traditionally had a
passive trade balance: the trade deficit is compensated only by the considerable flow of
remittances from emigrants and tourism revenue.
Turning again to the reform processes begun by the Moroccan authorities in the 1980s, it can be
seen that the liberalisations have represented a significant turning point in the modernisation of
the economic system.
The vast majority of prices nowadays are liberalised. However the government continues to
directly influence the price of a basket of basic goods and services through its control of state
enterprises.
Another element of the transformation process is represented by privatisation, launched by King
Hassan in 1993. At the beginning of 2001 the competences of the Privatisation Directorate were
redefined and as a result the programme was absorbed by the Ministry of Finance.
The principal measures of the programme are a follows:
    •   liberalisation of foreign trade
    •   liberalisation of prices
    •   gradual abolition of subsidies
    •   opening of the economy to foreign investment
    •   reform of the tax system
    •   promotion of exports
    •   restructuring of state enterprise.
Some sectors of the Moroccan public administration have been characterised by administrative
centralism and formalism. The job of tackling this problem was begun in 2003; the Moroccan
authorities intensified efforts in institutional modernisation and reform, seeking to improve the
investment climate and at the same time support the development of the private sector. The

                                                 91
authorities ensured the removal of obstacles to new enterprise by adopting measures for the
creation of regional One Stop Shops and approving a specific law for the regulation of
competition.
One development of note is the opening of regional centres for attracting foreign direct
investment.
On the legislative side, foreign investment in Morocco is regulated by the Foreign Investment
Charter of 1995. Its aim is to improve investment conditions and therefore to support the flow of
capital. Investors are entitled to exemptions from the following:
     •   value added tax on materials and capital goods acquired locally or imported
     •   tax levied on importation of materials and imported capital goods
     •   licence tax for the first five years of activity
     •   corporation tax or general taxation of revenue (reduced to 50% after 5 years exoneration
         for exporting enterprises and for enterprises based in the region that ask for a preferential
         tax treatment during the first five years).
In 1996 the Ministry of Overseas Finance created the Department for Foreign Investment. It
provides information and assistance for the organisation and planning of meetings with local
operators, and for the resolution of bureaucratic –administrative procedures and the realisation of
investment.
With regard to the Moroccan productive system, it should be noted that most economic activity is
concentrated around the country’s two biggest cities, Casablanca and Rabat, despite government
attempts to boost industry in less populous areas. The end of the 90s saw the formulation of a
plan to develop the vast northern areas where 20% of the country’s population is concentrated.
Several billion dinars have been invested in these areas for various projects involving industry,
agriculture, fishing, teaching and tourism.
A final note on the matter of the size and scale of enterprises that make up the industrial fabric of
Morocco. Data from 2005 indicates that 92% of productive units in the private sector are
businesses with less than 200 employees. These firms employ 66% of the workforce and generate
33% of GDP.

5.2 Transports, energy, telecommunications
Transports
The port infrastructure makes a fundamental contribution to the Moroccan economic system.
The existing twenty four port structures handle 98% of the overall volume of Moroccan trade,
which amounts to a total of over 56 million tons of exports and imports annually. The port of
Casablanca has a dominant role, handling over 35% of commercial goods entering and leaving
Morocco. Its role in the key sector of petroleum and phosphates45 is equally crucial.
The motorway networks are poorly developed and extend only partly along the routes between
Casablanca and Tangers and Rabat to Fès. There are barely 500 km of motorway in the country,
and this includes a decisive expansion in this infrastructure segment in recent years. The current
tendency is exemplified by comparing the figures from 1996 with those of 2003: the motorway
network doubled during this period.



45
  After Casablanca the volume of cargo passing through Moroccan ports, is in descending order: Jorf
Lasfar (11,15,.517 tons); Mohammedia (8,280,194 tons); Safi (4,865,434 tons); Tangiers (3,420,721 tons);
Laayoune (2,928,684 tons); Nador (2,114,303 tons); Agadir (2,105,672 tons); Kenitra (204,580 tons);
Dakhla (67,514 tons); Tan Tan (62,207 tons).

                                                    92
This is the background to an important investment plan launched by the Rabat government. Its
objective is to almost triple the motorway network (bringing it up to 1,400 km) by 2010 through
the completion of two motorway projects: one that connects Casablanca, Marrakesh and Agadir;
and another linking Fès to the city of Oujda, on the Algerian border.
The rail network is controlled by the Moroccan company Office National des Chemins de Fer
(ONCF), and covers 1907 km; 1537 km of the network is double track and the remaining 370 is
single track. 2004 saw the launch of two high profile projects intended to revitalise the rail sector
and give a boost to freight traffic, which in recent years had been in decline (27 million tons in
2002). The first of these projects centred on the construction of 45 km of railway (from Tangiers
to Nouveau Port) in support of the infrastructural network developed around the new ‘Tanger-
Méditerranée’ port; the second project concerned the realisation of the rail link between Taourirt
and Nador (117 km). In December 2003 Morocco and Spain struck an deal for the construction of
a double track rail tunnel under the Straits of Gibraltar. The projected tunnel will be 39 km long
(28 km will be undersea), and it will constitute the first ever direct rail link between Europe and
Africa.
On the subject of airport infrastructures, the national authority responsible for airport
management, the Office national des aéroports (ONDA) has programmed the expansion of the
network’s passenger handling capacity in preparation for the anticipated increase in traffic to
Morocco, rising from the current level of 7 million passengers to 20 million in 2020.
In February 2004 the Moroccan government began a programme of liberalisation of the air
transport market and at the same time set about eliminating most of the restrictions on companies
who want to introduce routes to Morocco.
Energy
Morocco has relatively modest amounts of energy resources and counts on only a limited level
of renewable energy – hydroelectric, wind and solar. Its coal reserves are nearing depletion and
its reserves of oil and gas are negligible. The country produces about 1,000 barrels of oil per day,
and 50 million cubic metres of gas per year. With about 11.4 million tons of petroleum imported
in 2003 (an outlay of around 260 million dollars, which has clearly grown in the last two years),
the country is clearly highly dependent on foreign imports (90% of the energy it consumes is
imported) and is lacking in energy infrastructures. Any chances of discovering viable deposits of
oil or natural gas have been frustrated by the failure of the tests carried out the north east region
of the Haut Plateau, while investment-hungry offshore exploration has been put on the back
burner.
The country does however play a crucial role in the complex scenario of Mediterranean energy
networks, as it accommodates a tract of the Maghreb-Europe (MEP) pipeline. The MEP was
conceived with the goal of transporting Algerian gas to Spain and Portugal, and has been
operative since 1996. Its 1,850 km length – 45 of which run under the Straits of Gibraltar - is
distributed through Algeria (520 km), Morocco (540 km), Spain and Portugal (745 km). The
system currently operates at a capacity of around 9 bcm (billion cubic metres) per year, but the
intention is to double this capacity, as part of a gradual infrastructure development.
The interconnection theme is also relevant in the context of electricity: the Moroccan distribution
network was kinked up with that of Spain since May 1998. The degree of integration between the
countries is illustrated by the 2003 figures indicating that 9% of total Moroccan electricity
consumption needs were satisfied by importation from Spain. A concomitant development in this
trend was the agreement signed in December 2003 by the Office national de l’électricité (ONE)
and the Spanish electricity distributor, Red Electrica de Espana, and a consortium involving
Nexas (Norway) and Pirelli (Italy). Their shared venture was the installation of undersea
infrastructure necessary for a second connection network through the Straits of Gibraltar. This
project, which should be operational by March 2006, shall be able to double the flow of
electricity between Spain and Morocco.


                                                 93
Where electricity liberalisation and regulation matters are concerned, it should be noted that
distribution remains in government hands, managed through the Office national de l’électricité
(ONE). According to latest information, the national share of electricity production is down to
one third of the total, due in part to the activity of the new foreign owned power stations and the
completion of works on link ups with the distribution networks of other countries. The first
power station controlled by private capital was the Jorf Lasfar plant, managed by an American-
Swiss consortium set up in 1997. More recently the Siemens Power Generation company
invested around 250 million dollars for the construction of a combined cycle plant, inaugurated
on 19 January 2005 at Tahaddart, in the Asilah area.
Telecommunications
The sector has been opened to competition and is expanding rapidly owing to the introduction of
new services and new platforms in the market. The sector’s growth potential remains good: the
diffusion rate of mobile telephony is still quite modest: 29 users per 100 inhabitants in 2004 ,
while landline subscription levels are decidedly low: 4.3 subscribers per 100 inhabitants. The
state telecoms regulation authority, the Agence nationale de régulation des télécommunications
(ANRT), was created in 1998.
At the beginning of 2005, the ANRT completed the liberalisation of landline telephony, issuing
a second licence to Méditélecom, a joint venture led by the Spanish company Telefonica and
Portugal Telecom. This offer prevailed over that of the local Maroc Connect and the Egyptian
Orascom Telecom.
Latest information on the landline telephony market (updated at the end of 2004) gives an
illustration of the monopoly conditions prior to Méditélecom’s entrance on the scene. They
describe a scenario in which MT controlled a pool of around 1.3 million users, with an increase
of 10% compared with the year before. In November 2004 the Moroccan government arranged
the sale of another 30.9% of MT’s capital stock: a 16% tranche was handed directly to the French
giant Vivendi Universal, while a 14.9% share was put on the stock markets of Casablanca and
Parigi.
The mobile telephony sector was liberalised in 1999 with the issuing of a second licence (a third
will probably be announced in 2008) to the operator Meditel, a consortium led by the Spanish
concern Telefonica and Portugal Telecom. Liberalisation has so far affected GSM, VSAT (Very
Small Aperture Terminal), and GMPCS (Global Mobile Personal Communication Services)
services and 3RP. The ANRT is currently preparing for the liberalisation of the third generation
mobile sector (3G), which is expected to attract offers from all the companies operating in
Morocco.
Users of Internet services, according to most recent (late 2005) estimates, number about 3
million, against actual 300,000 subscribers. The Moroccan government is seeking to increase the
number of Internet service connections by offering sensibly priced subscription contracts. In
October 2003 MT launched a fast connection service Asymmetric Digital Subscriber Line
(ADSL) service, currently available in the thirteen biggest cities of Morocco.
So far there has been no legislation for regulation of internet access, although the Moroccan
authorities have in some circumstances attempted to temporarily block access to web sites that
published material considered to be illegal.
The ingress of foreign operators like the French service provider Wanadoo, owned by France
Telecom, has forced MT to lower its monthly subscription charges and abolish connection fees.




                                                94
6 Tunisia

6.1 Governance of productive systems
Tunisia has one of the best performing economies in the Middle East, and its macroeconomic
situation can be considered basically solid, despite high levels of unemployment (13,9 %), a
considerable chronic trade deficit (- 3.809,3 million Tunisian dinars) and a banking system in
need of reform (2004)46.
Against a background of increased growth (5,6 % of GDP), the monetary and budget policies
adopted by the government, accompanied by more flexible management of the exchange rate,
resulted in a significant improvement in external indicators. The progressive consolidation of the
State budget also produced a downturn in the public debt (to 47.3% of GDP%), in line with the
prevailing level in emerging countries. The rise in inflation (+ 0,9%) beginning in 2003, is
instead attributed to price changes, particularly of food stuffs not connected to demand trends.
The Minister of Development and International Cooperation has asserted that the weight of
public intervention in the economy is diminishing, as market forces are now the determining
factor in the majority of prices in the Tunisian economy, “87 % of production prices and 81% of
distribution prices are regulated by market mechanisms. Also, 96% of production is subject to
international competition”.
The application of current legislation (Law of July 1991 on competition and prices) is the joint
responsibility of the Conseil de la Concurrence and the Direction Générale de la Concurrence of
the Ministry of Trade.
In general terms, despite the country’s impressive progress on the legislative front and in
competition policy, there is still evidence of anti-competition practices, caused mainly by the
weakness and insufficient resources of the Conseil de la Concurrence.
Another important aspect concerning public intervention in the economy regards the opening of
new sectors of the Tunisian economy to private investment, called for in the 10th Five Year Plan
for Economic and Social Development (2002-2006). The reform and restructuring of the
Tunisian public sector necessarily goes through the programme of privatisation of the Tunisian
economy, begun in 1987 and still underway.
A number of different measures have been approved in order to stimulate the privatisation
process. The most notable of them are those charged with encouraging the Sociétés
d’Investissement à Capital Risques (SICAR) to participate in privatisation operations. Some lines
of credit agreed between Tunisia and the European Investment Bank have been made available to
the SICARs to support the privatisation programmes. 185 bodies have been privatised since
1987; foreign investments have made up around 74.4% of proceeds from the transfers.
On the subject of international trade, it emerges that Tunisia is the MEDA partner that has
achieved the greatest progress in the realisation of the Free Trade zone with the EU. In
consequence of this, Tunisian exports to the EU market have risen dramatically. They have gone
from 51% in 1976 to 80% in 2003. Almost 80% of exports destined for the EU are industrial
products.
Being aware of the importance of foreign direct investments as a pivotal issue and an integral part
of the country’s economy, the Tunisian government has also made considerable efforts to
improve the investment climate, and has been rewarded by a consistent increase in FDI and a rise
in the number of businesses that have decided to relocate in Tunisia.




46
     Tunisia - Rapporto Paese congiunto Ambasciate/Uffici Ice estero”, ICE, Sep. 2005.

                                                     95
Foreign direct investments increased exponentially between 1990 and 2004, going from 57.7
million euro to 1.229 million euro. They account for 10% of productive investment, generate a
third of exports and give employment to 1/6 of the workforce .
In recent years the country has undertaken important structural reforms, adopting a series of
economic measures suggested by the IMF, the World Bank and the EU., with the objective of
restructuring the principal sectors of the economy. One of the most noteworthy programmes
undertaken by the Tunisian government, aimed at the modernisation of the industrial sector is the
“mise à niveau” programme .
Launched in 1997, this programme has the objective of making the Tunisian industrial system
healthy enough to be able to face international competition when customs barriers and tariffs are
finally abolished as a consequence of the Free Trade Agreement with the European Union. The
programme has so far dealt with 2005 enterprises helping them to reach international standards in
matters of quality and cost; the mise à niveau programmes of 1103 of these companies are now at
an advanced stage of readiness, at a total cost of 2.079 MTND.
An overall look will give a better idea of the other main government initiatives designed to
respond to the stringent requirements of the enterprises.
Tunisia has introduced a network of One Stop Shops to help simplify bureaucratic and
administrative procedures. These front office facilities succeeded in simplifying the rules and
reducing times for starting up enterprises.
The issue of credit access for enterprises has been addressed through the creation of a
sophisticated institutional network (a recent development has been the setting up of the “Small
and Medium Enterprise Bank”, in February 2005). The chief institutions involved are the
SICARs (Sociétés d’Investissement à Capital Risques).Their main function is to boost funding
opportunities for the enterprises. Another is FOPRODI (Fonds de Promotion et de
Décentralisation Industrielle), which targets promoters of new enterprise and SMEs, offering
favourable interests as an aid to those starting new initiatives.
Much work has gone into the construction of a valid, efficient network of services to enterprise,
one that is capable of offering assistance for every phase of the business cycle, including exports.
The system of services is based on a number of institutions that have numerous regional offices
and that guarantee the same level of services throughout the territory. The main institution
offering assistance to enterprise is the Agence de Promotion de l’Industrie, created in 1972 under
the direction of the Ministry of Industry, Energy and SMEs, organised in five action centres.
An important initiative in innovation policy has been the creation of sectoral Technology Parks
all over the national territory, each one responding to the specific characteristics of its region.
One of the aims behind the development of these technology parks is the reinforcement of links
between the fields of education, research and production.

6.2 Transports, energy, telecommunications
Transports
Tunisia’s geographical position, bridging the eastern and western basins of the Mediterranean,
makes it a strategically important territory for the realisation of the Euro-Mediterranean transport
integration project.
Since 1992 Tunisian transport policy has centred on sectoral deregulation, the privatisation of
transport companies and infrastructural renewal. The first companies to be privatised were land
transport concerns, then 20% of the flag carrier airline Tunisair was sold off, followed by the
announcement of the privatisation of part of the Compagnie Tunisienne de Navigation.
Port infrastructures are receiving public investment for the execution of an upgrading
programme and the computerisation of certain terminals. The most significant modernisation
projects involve the ports of La Goulette and Radès, as they are the main transit ports for

                                                96
container traffic and ferries. Another project is underway in the new seaport of Efida Ville, which
could become an extension of the north-south freight corridor Rotterdam- Milan- Gioia Tauro
(Italy) and therefore a part of the Euro-Maghreb freight corridor.
With regard to the road network, there are currently 20,000 km of asphalted and well
maintained primary and secondary roads but only one four lane motorway (140-km from Tunisi
to Sousse, opened in 1996). The project linking Tunisi to Bizerte (51 km) and Tunisi to Oued
Zarga (67 km), towards the Algerian border, is almost complete, at a cost of TD225m
(US$175m). The Tunisian government is planning to extend the motorway network, including
the 780 km Tunisian section of the Trans-Maghreb motorway, which however is a long term
project.
The rail network, mostly single track, covers 2311 km (of which 2256.5 km belongs to the
Société Nationale des Chemins de Fer Tunisiens, and 54,6 km to the Société du Métro Léger de
Tunis). The seaports of Rades, Scusse, Sfax, Bizerte are connected to the SNCFT rail network.
Air transport is managed by the Ministry of Transport/ Civil Aviation Directorate General,
OACA (Tunisia Civil Aviation and Airports Authority) and by airlines such as TUNISAIR,
Nouvel Air and Karthago. In 2003 the total capacity of the 7 Tunisian airports was 10.55 million
passengers per year, while the actual number of passengers was 7.9 million.
The state still has a strong presence in this sector, although in the past ten years there have been
legislative and commercial initiatives aimed at opening up the market. Within the UMA, an
agreement was signed with Royal Air Maroc for “code-sharing” on air routes between Tunis and
Casablanca. Agreements in the sphere of air transport liberalisation have mostly involved charter
and cargo airlines and have been signed also by the Arab League countries. In December 2003 a
group of countries comprising Egypt, Morocco, Tunisia, Jordan, Lebanon and Saudi Arabia met
in Amman to discuss multilateral agreements for a plan to liberalise air transport at regional level.
Energy
Tunisia plays a very important role in the transit of energy resources. But the country’s role
accorded by its geographical position, as a bridge between the energy producers on the southern
Mediterranean shore and the consumers on the northern shore, is the focus of Tunisia’s long term
economic policy. The 10th Five Year Economic Plan, as well as calling for market liberalisation
(stimulated also by the Euro-Mediterranean Association Accord, which from 1 January 2008
shall introduce harmonisation of petroleum legislation with EU norms), also requires the creation
of mixed societies and interlinking networks with neighbouring Maghreb countries.
Among the main European link-up projects are the Transmed pipeline (recently renamed the
“Enrico Mattei”). This noteworthy outcome of Italo-Tunisian energy cooperation became
operational in 1983 with an initial capacity of 12.5 billion cubic metres of gas annually. In 1995 a
second line (Transmed II) began functioning, and together with the preceding one, brought the
overall capacity up to 25 billion cubic metres of gas per year. The addition of two compression
stations in the Algerian section brings the potential for a further increase to 31.5 billion cubic
metres of gas per year. The first part of this increase will be in place in 2008 and the concluding
phase will happen in 2012, adding 6,5 billion cubic metres per year to the current 25 billion.
Plans are being made for a gas pipeline from deposits in Libya to Mellita in Libya and on to
Gabès. Its total length will be 265 km, with 200 km in Tunisian territory and a capacity of 2
billion cubic metres of gas per year. The line has a projected cost of 275 million dollars and is
due to be operational in 2007.
Tunica has so far set up 6 international electricity link ups: 4 with Algeria, and 2 with Libya; a
fifth connection with Algeria is due to begin in the near future.
Other international connections are being researched: ELTAM Project: the STEG – together with
its sister companies SONELGAZ (Algeria), EEHC (Egypt), GECOL (Libya) and ONE
(Morocco) – are carrying out a technical and economic feasibility study for a project to set up

                                                 97
connections with Maghreb countries and Egypt. ENCOURAGE Project: the STEG intends to
participate in the study on future “energy corridors” between the EU and its eastern and southern
neighbours. Tunisia-Italia interconnection project: a technical feasibility study on a link up with
Italy was begun in 2001 but later stalled because of insufficient financial resources; however the
project has not been abandoned.
Turning to the regulatory aspects of the energy market, it should be noted that STEG (Société
Tunisienne de l’Electricité et du Gaz) holds a monopoly on the distribution of natural gas in
Tunisia, whereas the electricity sector is in the process of being liberalised. In 1996 the STEG
lost its monopolistic hold on electricity generation and is now flanked by two independent
producers (CPC and SEEB) and by a certain number of autoproducers. The STEG does
nevertheless hold a dominant position (around 75% of production), followed by CPC with 20-
25% with the remainder divided between SEEB and autoproducers.
Telecommunications
The telecommunications infrastructure of Tunisia is among the most developed of North Africa.
This owes largely to huge government investment in ICT from the mid 1990s onwards. It is no
coincidence that one of the main objectives of the 10th Development Plan is (2002-2006) is the
growth of a knowledge-based economy.
In the mid 1990s the government began a cautious telecommunications liberalisation programme.
1997 saw Tunisia sign up to the World Trade Organisation’s Agreement of Telecommunications
Services, thus committing to the liberalisation of telecommunications according to the following
schedule of events: telex and data transmission in 1999, mobile telephony in 2000, local
telephony in 2003, and the opening up of 10% of Tunisie Télécom capital to foreign investors in
2002.
At the end of August 2005, the Ministry of Technology and Telecommunications launched the
privatisation of landline telephony, with the aim of ceding 35% of the Tunisie Télécom’s capital
to a strategic partner capable of bringing in capacities and capital for the modernisation of the
landline network and for the promotion of broadband services. This constitutes the biggest ever
privatisation exercise ever executed in Tunisia, with estimated earnings of 1.3 billion euro.
Tunisia adopted a new telecommunications regulatory code, the Communications Code (Law no.
2001-1), in January 2001.
Landline telephony continues to grow: subscriptions have risen from 850,069 in 1999 to
1,204,000 in 2004, representing a 7.2% increase. These figures translate into 12 telephones for
every 100 inhabitants. Compared with developed countries, this is indeed low, but is significant
with regard to other North African countries: Tunisia is second only to Egypt (13,52 per 100
inhabitants) and outstrips Algeria (4.30 per 100) and Morocco (7.08 per 100).
Compared with other North African countries such as Morocco, Tunisia was quite late in opening
its mobile telephony market to competition. However the sector has grown rapidly after the
March 2002 issue of the second licence – Tunisie Télécom was the sole operator since 1996 – to
the consortium comprising the Egyptian firm Orascom Telecom and the Kuwait company
Wataniya, for a fee of 454 million dollars.
The number of mobile phone subscribers increased from 561.434 in 2002 to 3.735.695 in 2004.
Internet services are available all over the country through a fibre optic backbone; undersea
cable, terrestrial and satellite connections provide international access. There are currently 12
service providers, seven of whom are state-owned and serve public offices, universities and
schools. The remaining five are Planet Tunisie, 3S Global Net, Hexabyte, Tunet and Topnet.
Internet use in Tunisia has risen rapidly in recent years. According to figures from the Ministry of
Communication Technologies, the number of users had risen from in 150,000 1999 to 835,000 in
2004. In the first eight months of 2005 an increase of almost 100,000 units was recorded.


                                                98

				
DOCUMENT INFO