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In the Middle East, which comes first: growth or airports?

February 12, 2009 by Evan Sparks

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A new paper from the Center for International Private Enterprise at the U.S. Chamber of Commerce examines the development of the aviation sector in the Middle East and North Africa. (Thanks to colleague Mitch Boersma for passing this along.) Jawad Rachami points out that the region’s “share of global passenger traffic is expected to hover at less than 6 percent in the next 20 years, and the region’s share of the world’s total number of flights is expected to remain at about 3.5 percent during the same period,” arguing that “[t]his is reflective of MENA’s poor integration into the global economy and the weakness of its market and governance institutions.” Moreover, the leading node of aviation growth in the region is Dubai, which accounts for nearly three times as much traffic as Cairo, the region’s second-largest airport.

Rachami identifies four “trajectories” for aviation growth in the region. The first are “leaders” like Dubai and the other Gulf states, which have invested oil money and sovereign investment revenues into strategic infrastructure investments.

Next are “flat-liners,” countries that are doing okay but not truly embracing aviation development. Rachami’s key examples are Morocco and Egypt, which he calls well-situated geographically, trade-wise, and with a(n overall) growing economy and tourist trade. But

Morocco should do away with government control over airport ownership and management by abolishing its National Directorate of Airports and instead pursuing decentralized approaches and public-private partnerships in order to foster competition and innovation in airport development.

Egypt is also conceptually in a promising position to develop a successful air transportation sector, although it must now compete for traffic with nearby hubs in the Gulf. The country, to its credit, has recently invited private sector participation into the management and modernization of its airports. Yet, for these efforts to yield measurable results in the future,
Egypt must deepen its institutional development, hasten the aviation liberalization agenda, and lift the regulatory constraints that limit the airport concession agreements it concluded with its European partners.

Of course, far too much of the Middle East is “disrupted” by conflict — from Lebanon to Iraq — which has inhibited both economic development and aviation growth. Rachami’s final category is “unplugged” states — Iran and Libya most prominently — states whose withdrawal from polite world society has led to economic stagnation and a resulting stagnation in air travel.

Rachami emphasizes that aviation development is not a catalyst for economic growth per se but rather that aviation is necessary to create economic opportunity. This especially applies to authoritarian and illiberal regimes in the region, as well as the aforementioned “unplugged” states. Unless economic growth is welcomed and encouraged (in incentives, instituions, and especially laws), all the aviation growth in the world won’t make much of a difference.

While a modern, competitive aviation sector can produce opportunities for economic growth in MENA countries, so far only a few of them have taken meaningful steps in that direction. Those few countries that have moved decisively to modernize and expand their aviation infrastructure are gaining economic opportunity and international prominence. However, simply building new infrastructure is not enough to reap the benefits of globalization. Sustainable economic development must rest on the strong fundamentals of local productivity and global competitiveness. That is why countries of the region should not only make their markets more accessible, but also make them more transparent and more responsive to global demand.

When the Sky Is the Limit [CIPE]

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Posted in Evan's News and Quick Takes | Tagged airports, middle east/africa |

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