Maghreb integration: between economic complementarity and political rivalry

By Ahmed EL Jechtimi

Morocco World News

Rabat,  July 22, 2013

Attempts at creating a strong economic bloc in the Maghreb can be traced back to the creation of the Arab Maghreb Union (AMU) in 1989 by the five countries of the region. The AMU was designed to achieve a customs union by 1995, as well as a common economic market by 2000. Yet, none of these major goals was materialized due to different political reasons.

The AMU was expected to help the countries of the region to better face the challenges of economic development and to create a large open market. It was also meant to enable the countries of the region to negotiate with the EU in a better position than it would have been if they had to negotiate bilaterally.

Each year the Five Maghreban countries celebrate the anniversary of the AMU without taking concrete steps to reinvigorating their integration. The fact that the last summit of the five countries’ heads of states took place in 1994 is indicative of a stalemate in regional cooperation.

Numerous unfavorable political conditions, internal conflicts and rivalry between the countries of the region resulted in AMU’s falling short of achieving its objectives to establish economic integration between the countries in the region and intra-Maghreb trade remained at a low level not exceeding 3% of total Maghreb trade [1].

Despite their economic complementarities and their shared historical, linguistic and human ties, the Maghreb region remains one of the least integrated in the world partly due to the closed borders between Morocco and Algeria since 1994.

Apart from the exchange of visits at the high level between Morocco and Algeria, no considerable development was witnessed in Maghreb integration save the creation in January 2013 of the Arab Maghreb Union Investment Bank with a capital of 100 million dollars which will help finance infrastructure projects in the region[2].

Trade between Maghreb countries does not exceed 1.3% of their total foreign trade, one of the lowest regional rates in the world[3]. A report by the World Bank[4] considers high tariff barriers to be among the main constraints to economic integration in the region.  The document goes on to say that tariffs in the Maghreb countries are almost double the world average[5]. To this adds the lack of adequate transport infrastructure, notes the report, adding that Morocco is the sole country in the region to have an open skies policy. At the level of railway and motorways, the closed borders between Morocco and Algeria have undermined cross-border transit and in consequence led to the flourishing of contraband.

The lack of regional integration in the Maghreb also led to excessive reliance of the five North African countries on Europe. In the case of Morocco’s and Tunisia’s exports, the European Union receives 75% and 60% respectively[6].

Several analysts estimate the non-Maghreb to cost 2.5 points of GDP growth[7]  of each state, which deprives the region of 220,000 job opportunities annually[8]. This will further undermine the efforts of the region’s government to absorb the increasing demand on employment, which can be met according to the World Bank by creating 8 million job opportunities between 2010 and 2020[9], a goal that seems hard to achieve given the status-quo in Maghreb cooperation. The lack of integration in the region is also detrimental to attracting FDIs, which are necessary for job creation.

Prospects for economic Integration in the Maghreb

The complementarity between the economies of Maghreb countries, the spillovers of the effects of the economic and financial crisis from Europe, as well as the similar socio-economic ambitions of the populations of the region are all factors in favor of a deep economic integration in the Maghreb. However, Algeria’s hostile stance regarding Morocco’s territorial integrity through its generous support for the Polisario separatist militia have hindered all efforts towards integration leading to a deep lack of confidence and consequently the non-achievement of the economic potential of the region.

The idea of prioritizing economic cooperation, following the example of the European Union in the 1950s, is increasingly gaining ground among analysts as a way-out to achieve the long-sought-for integration between the five Maghreban countries and overcome political hindrances to cooperation.

In this regard, following the example of France and Germany, a possible scenario for paving the way towards an effective cooperation in the Maghreb would go through a genuine partnership between Morocco and Algeria, the largest countries in the region with over three-quarters of the Maghreb’s population and two-thirds of its GDP[10]. Morocco has half the world’s reserves of phosphates[11] while Algeria is rich in gas and oil along with sulphor and ammonia, which are all key to making fertilizers.

Several economists suggest that a genuine Maghreb economic integration can start by establishing a partnership between Morocco’s state-owned phosphates company (OCP) and Algeria’s oil company Sonatrach. This would enable the Maghreb to be the world leader in fertilizer production key to achieving food security. This would lead to lay the basis for a strong economic cooperation that would help attract foreign direct investments and create jobs.

A close economic cooperation between Morocco and Algeria would serve as a catalyst for deep economic integration in the whole region. Economic integration that surpasses political obstacles would also create a climate propitious for cooperation and diplomacy, which would, in turn, lead to a drastic reduction in military expenditures by Morocco and Algeria. Such a reduction would yield an additional GDP growth estimated at 2% to 3%[12].

There are other priority areas for integration such as energy, trade, finance, which all would boost cooperation in other economic areas with a view to create economies of scale and strong competition.

Economic integration in the Maghreb hinges upon the economic players in the region, especially in Morocco and Algeria. The beginning of economic integration in Europe is an example to follow in the Maghreb. First of all, the term Arab should be dropped in favor of another appellation, such as “the Greater Maghreb,” which reflects the ethnic and linguistic diversity of the region. On the other hand, economic elites and the private sector are called upon to capitalize on common projects that would yield mutual benefits. This would put more pressure on politicians to take concrete steps towards an economic integration in the Maghreb that would help to address the common challenges of reducing unemployment and boosting growth.