The flight of Tunisia’s President Ben Ali has underlined the tightrope many of the region’s leaders are treading. The Maghreb countries have a lot to lose if they stick with their current failure to integrate their economies, argues Larabi Jaidi
The failure of the Maghreb countries – Algeria, Libya, Mauritania, Morocco and Tunisia – to increase their economic co-operation has become such a persistent phenomenon that it has a name, the “non-Maghreb.” Estimates of its cost to the region range between one and two percentage points of annual economic growth. The Arab Union says the integration stalemate costs each country 2% of its annual growth, while the African Economic Commission, reckons that if a Maghreb Union existed the five countries would each gain 5% of GDP. The World Bank has estimated that deeper integration, including the liberalising of services and reforming investment rules would have increased the per capita real GDP between 2005 and 2015 by an additional 34% for Algeria, 27% for Morocco and 24% for Tunisia. But if these countries maintain the growth rates they recorded over the past five years, it will take them more than 20 years to reach the per capita income currently enjoyed by less wealthy OECD countries like Mexico and Turkey.
These estimates differ according to whether or not they take into account such variables as trade in services and foreign direct investment (FDI). But the problem is neither accuracy of these estimates nor the methods used. What counts, given the symbolism of comparing the cost of the “non-Maghreb” with the benefits of the European Union, is the political message: the need to lift all trade barriers. In a region that aspires to greater integration, it has to be stressed more strongly than ever that a dynamic single market will create investment opportunities for companies throughout the region.
Only 1.2% to 2% of each of the five Maghreb countries' trade is with others in the region, so the key question is whether it is structural problems or institutional and political factors that are hindering the development of intra-regional trade. In economic terms, the very low level of intra-Maghreb trade can be explained by factors such as the small size of the markets involved and the low trade complementarity among the Maghreb countries – the weak match, in other words, between exports and imports.
The Euromediterranean Forum of Economics Institutes (FEMISE) estimates the region’s trade complementarity index at 0.856 for 2000 and 0.737 for 2007 (where 0 is the best match between imports and exports and 1 is the worst). By comparison, the EU’s trade complementarity index in 2007 was 0.48. The potential for intra-Maghreb trade seems to be partly constrained by the similarity of the economies of some countries, notably Morocco and Tunisia. According to the Finger-Kreinin index, which measures trade similarities, exports from Tunisia resemble Moroccan exports by more than 70% in the EU market.
Deeper economic co-operation and broader geographical integration (notably with the EU) could have a substantial impact on growth, trade and foreign direct investment in the Maghreb, with greater economic gains than would occur simply by freeing up trade in goods. Regional integration could contribute to higher growth in two ways. First, through economies of scale and competition. The integration of the Maghreb would create a market of more than 75m consumers, similar in size to several of the world’s most dynamic trading nations and certainly large enough to make the region much more attractive to foreign investors. Second, regional integration would reduce “hub-and-spoke” effects between the EU and the Maghreb, of the kind that arise when a large hub country or region signs bi-lateral trade deals with several smaller countries.
As well as acting as a powerful regulator of economies, the globalisation of markets is destabilising the world’s weakest zones. This means that if the Maghreb countries were to fragment further into hostile protectionist entities, the only possible outcome would be economic growth too low to meet the expectations of their populations. In such a scenario, the mounting contrasts between the living standards north and south of the Mediterranean would eventually reach a point of no return. In the face of globalisation’s growing challenges, the only force strong enough to harness the region’s economic potential is a shared political will. Otherwise, the Maghreb seems destined to become a porous economic and political space buffeted by uncertainty and instability. In an unstable world, an integrated Maghreb is both a necessity and an opportunity – albeit a very challenging opportunity.
It is therefore vitally important to identify the main factors that will shape the region’s future. Progress towards an integrated market isn’t nearly as visible politically as major projects, infrastructure ones especially, of common interest to several countries. Joint transport ventures, for example, would have a strong political impact and maximum visibility, and would undoubtedly bring Maghreb citizens closer together physically and psychologically. Energy projects could also be strengthened, given that energy needs are expected to grow even faster south of the Mediterranean than in Europe. Such projects would greatly boost integration between the Maghreb countries if they were accompanied by industrial projects based on gas as feedstock or as an energy source and jointly developed with EU partners. The region’s abundant gas resources should also be used to power desalination plants to meet the Maghreb countries’ enormous water needs.
The development of water infrastructure is vital for the Maghreb, so if there is one issue that should unite the region it must be management and allocation of water resources. The region’s population explosion and rapid urbanisation, along with the accelerated development of tourism, already means water scarcity is holding back development.
But integration policies can only succeed if they also mobilise civil society actors who have a role in economic, social and political development. It is a process that's both participatory and interactive; participatory because profound change cannot succeed without the support of both those who must implement it, and interactive because although the political decisions must be taken by governments, their legitimacy depends on whether they respond to the aspirations of civil society. The idea of an integrated Maghreb will be taken up by the people only through a patient process of reaching out to citizens by the private sector, civil society and local authorities. This makes it essential that a new regional integration framework be developed to strengthen the role of non-state actors.
The idea of an integrated Maghreb is still looked on with ambivalence by many in the region; policymakers and the public alike have their doubts. There’s a need to redefine a mobilising political project that can break out of the overly formal framework that has so far constrained integration. What we also need is to identify obstacles that often origins in inter-state conflicts such as the Algerian-Moroccan conflict over the western Sahara that are preventing the creation of a unified Maghreb. For without the political will strong enough to resolve these conflicts it will be difficult even to discern the outlines of our common future. $0