The Mediterranean region: Still in search of a new economic model

DISCLAIMER: All opinions in this column reflect the views of the author(s), not of EURACTIV.COM Ltd.

A recent conference in Marseille, organised to sound ideas to support economic growth in the Mediterranean region, failed to identify recipes for success, writes Abdelmalek Alaoui.

Abdelmalek Alaoui is the executive president of the Moroccan think tank AMIE Center for Policy (www.amiecenter.org).

Last week, all the most influential economic and political policy-makers of the Mediterranean region met in Marseille for the Third MENA Economic Forum. The main aim of this prestigious business and political roundtable may have been to come up with new resolutions that would ensure growth in the region; however, the Forum also served as a platform to critically assess the current status of countries affected by the ‘Arab Spring’ three years ago.

From an economic stand-point, much of the discussion in Marseille revolved around “co-localisations”, especially during dialogues between French politicians and businessmen. Most prominently, the energetic Arnaud Montebourg, minister in charge of productive recovery in France, has made the co-localisation process one of his war horses alongside the promotion of the “made in France” label.

Unfortunately, apart from the minister, who brilliantly and explicitly defended the concept, no other participant in this forum was able to practically explain how the re-industrialisation of France, and by extension Europe, should incorporate collaborative production techniques between the North and South of the Mediterranean.

The objective of this model would be, on the one hand, to save jobs in the North while, on the other, to create employment in the South. The two simultaneous processes should ideally go hand in hand while ensuring that value addition is equally shared.

Moreover, no credible economist came forward to validate the “attractive” hypothesis claiming that it is possible to create shared value through collaborative production between capital-intensive and labour-intensive countries.

Apart from some vague and abstract work from think tanks specialising in international relations, ‘co-localisation’ is still a nascent concept that needs to be tested. However, it should be noted that the idea is very promising, and as such, deserves further studies.

Historical models generally brought forward by supporters of the co-localisation concept, ranging from the link between Mexican “maquiladoras” and the United States to the centre-periphery industrial relationship between Germany and the former Eastern Bloc, mostly depended on the massive leverage between the cheap labour cost and the subsidies granted in the host countries. They also rely on an absolute advantage in terms of geographical location and, therefore, allowing a market access (“Time to Market”) to compete against while preserving the industrial plants in the Northern Countries.

However, this relocation model (yes, relocation or better yet, offshoring!) that had positive results in the past is impossible to replicate in the current context for two main reasons. On the one hand, it is politically inadmissible to Western public opinions fired up by the successive crises since 2008.

On the other hand, a number of countries historically more “cooperative” – Tunisia, Libya and Egypt – cannot be part of this equation anymore because they lack two important attributes: security and stability. In this context, Morocco and Algeria are special cases: they are increasingly attractive because they have both demonstrated their resilience. However, the roots of their respective stability during the ‘Arab Spring’ are completely different: in the former, a substantial constitutional reform was initiated, whereas in the latter, the windfall oil was redistributed to the masses.

Apart from these, we note a cruel paradox in the countries facing instability for more than three years: while being shunned by foreign direct investors because of their instability, they are also under constant pressure because of growing social demands.

Faced with the ever-rising social demands, rulers in these countries have been constantly distributing money that they do not have, even if it means taking long term loans from their rich brothers of the Gulf region, as long as that money will buy a “peaceful and less stressful tomorrow”.

In view of this double-sided problem, Jean-Louis Reiffers, an expert and member of the Network of Mediterranean Economists (FEMISE) skillfully summarised the only two possible alternatives. On the one hand, he is convinced that the strategy adopted by rulers in these transitional Arab countries is the only available solution under the current scenario, whereby these rulers are waiting for the turmoil to quail and hope that the country will be able to rely once again on the traditional revenue streams such as tourism and migrants remittances.

But he also foresees a scenario where the inability of these governments to implement solid reforms, such as the removal of oil subsidies, the effective fight against corruption and bureaucracy, and the reform of the labour code, might create increased social tensions that may lead to cycles of long-lasting crises.

This would create a chain reaction affecting the Sahel region – also because some economic migrants see the North of Africa as convenient residences. Therefore, an extended economic crisis in the region would leave them more exposed to poverty levels and would only serve to further encourage their “European Dream”. The result of this phenomenon would be a horrible chain of events that will also negatively affect Europe.

So, is a Democratic “Leapfrog” possible? We all agree that the economic “leapfrog”, so dearly advanced by economists, has been a success in the region. However, can the concept be adopted in other areas? Can we reasonably expect a “democratic leapfrog” in the transitional Arab countries? Unfortunately, some concepts are only applicable to technology, telecommunication and infrastructural development. This is because democracy is a much slower process that needs a lot of learning and nurturing. Democracy is a journey – it cannot be a system installed from the scratch, like a 4G satellite.

In addition, there is no reason to hope that we will witness a renewal of the political class in these transitioning Arab countries. Expecting gender balance among the elites or a rejuvenation of the political class simply seems like wishful thinking. Perhaps the fundamental thing we can remember from the ‘Arab Spring’ is that this was a revolution that got rid of dictators – but it also left the masses depraved of leadership.

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