International Monetary Fund Chief Christine Lagarde for a “Revival of the Private Sector” in the Maghreb

By IndepthAfrica
In Algeria
Jan 10th, 2013
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On a recent visit to Mauritania the International Monetary Fund chief Christine Lagarde called for a “revival of the private sector” in the Maghreb, “a market of about 90 million people” whose potential is untapped, she said.  “The Maghreb has great potential to attract investment, but it has not always taken advantage of,” said Lagarde, speaking in Nouakchott during a conference on “Investment inter- Maghreb and foreign direct investment in the Maghreb. ”  Referring to the Arab Spring – that sparked in Tunisia in December 2010 led to the fall of many regimes in the Arab world – she felt that “the Arab Wake ” should “also lead to a revival of the private sector in this region.  “Foreign direct investment is a key element of this strategy,” she said.  “A Maghreb which ensures the free movement of goods and services offers infinite possibilities of a market of about 90 million people. Moreover, none of the Maghreb economies is large enough to ensure its prosperity alone , it is only together that they can become successful, “she said, advocating an” economic complementarity between the countries of the Arab Maghreb Union. ”

 

The need for economic growth is important to ensure the region’s stability. Tunisia faces a number of challenges including poor infrastructure in sub-regions of the country, smuggling at the frontiers, and high unemployment.  Nearly one million Tunisians are unemployed. The longstanding tensions between Morocco and Algeria does not contribute to the possibility of establishing an “economic corridor” between Morocco and Algeria by opening the border for trade.  The private sector in both Tunisia and Libya is influencing the policy debate and playing a greater role as these countries map their futures.  Going forward, the private sector and business class will play a leading role in pushing for greater regional trade.

There is certainly a role for the US and other international actors in supporting Tunisia and other Maghreb countries.  The United States should leverage its considerable expertise with entrepreneurship and private sector development in order to facilitate new partnerships between government, private sector, and NGOs.  While the future situation in the Maghreb is unclear, renewed interest in regional economic development presents a positive path to the region’s future.

The failure of the Maghreb (Morocco, Algeria and Tunisia) to create a common market has cost the region dearly in energy, banking, transport, agribusiness, education, culture and tourism. Trade between North African countries is only 1.3% of their foreign exchange, the lowest rate for a region in the world.   The Maghreb has many natural resources: oil, gas, phosphates, agricultural land (although it suffers from a worsening shortage of grain); a beautiful landscape that attracts millions of foreign visitors; and a youthful population that has become much better qualified since the countries gained independence. The problem is that with so many young people entering the job market, half are now unemployed. The region would need a higher growth rate than China over the next two decades to accommodate them – and not trading with its neighbours costs each Maghreb country two percentage points of growth.

The lack of economic integration in the Maghreb has a major impact on the energy sector. Algeria is the third-largest provider of gas to Europe, after Russia and Norway. Morocco has almost half the world’s reserves of phosphate but to turn it into fertiliser, it needs energy, sulphur and ammonia: three things Algeria has in abundance, and at competitive prices. Morocco’s huge phosphate company, OCP, exports most of its fertiliser to India, Brazil and China. A partnership between OCP and the Algerian state-owned oil company Sonatrach could turn the Maghreb into the most competitive centre of fertiliser production in the world, attracting foreign investment, supporting subcontractors and creating a huge number of jobs. But the only cooperation that exists between the countries is the Maghreb-Europe gas pipeline that crosses Morocco from Algeria to Spain – and even that will soon be replaced by a new pipeline, Medgaz, which will link Algeria and Spain directly.

It is a similar story with the car industry. Renault has invested in a new car plant near Tangiers to produce 400,000 vehicles a year by 2012. But it would never occur to the Algerian leadership to negotiate with Morocco to be part of that venture, or to set up a sovereign wealth fund to invest in Renault, or in another multinational company, so that it could get much needed new technology. Algeria’s leadership lacks the vision to make strategic investments of this kind. It is also unwilling to give up absolute control of the country’s resources and take part in any transaction that would require transparency and the application of internationally recognised rules. Morocco’s leadership has repeatedly deployed great efforts  for greater cooperation.

Trade within an industrial sector such as agribusiness can contribute substantially to economic growth. Such trade would be ideal for the Maghreb, especially since agribusiness uses a lot of manpower. The extraordinary growth in the export of Tunisian olive oil, and the partnership between Tunisian and Spanish businesses in this sector, along with the revival of long abandoned vineyards in the region, demonstrate the benefits of creating links between private companies in the Maghreb and Europe in terms of the transfer of technology, markets and wealth.

Without opening its borders, how can this region make the most of its assets, protect its fishing and agricultural resources, manage its water resources and become less dependent on grain imports? Globalisation has created a world of uncertainty, with genetically modified organisms, climate change, the rising cost of energy, and pandemics. As a net importer of grain, the Maghreb is vulnerable to the rise in food prices. It must take advantage of the opportunities provided by globalisation while avoiding its negative effects, if it is to help its rural poor – any progress in the agricultural sector would reduce the economic gulf between the town and the countryside. Morocco and Tunisia export food to Europe and beyond, and in Algeria, private investment in this area is growing rapidly. But this contrasts sharply with a very low volume of agricultural trade within the region (unless we include cannabis). Most North African businessmen are desperate to build partnerships both within the region and internationally, but have huge obstacles to overcome.

If the countries of the Maghreb do not improve their relations, Morocco and Tunisia will continue to go their own way, exporting abroad, and many of the challenges facing the region will remain.  The region has a common history and culture, but it cannot benefit from this, in investment, production and employment, unless businesses are set up across the Maghreb, and in cooperation with multinationals already active in the region.

 

Said Temsamani

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