University of Bristol

Department of Social Policy & Social Planning MSc course in Development Administration & Planning Code: M21X Name: Jos-Mara Tabern Abad Essay Title: What are the dynamics of North-South relations? discuss with reference to the Maghreb, the limitations of regional co-operation as an answer to the imbalance of North-South relations. Module Title: Regional Development Lecturers: Kwabena Donkor Autumn Term 1.994

The Arab World is very likely the Third World region where member countries are joined with the strongest historical and cultural ties. However, even though today's global economy is based on regions headed by industrialised countries (like the Asia-Pacific Economic Co-operation APEC forum, and NAFTA), one of the regions still fragmented therefore suffering from a crisis of identity1 - is the Arab North Africa. The artificiality of its political fragmentation was brought about by Western colonialism, and it continues to exist because persistent interference by external forces and the pressure of certain internal vested interests associated with these forces. For most Arab economists, this outward-oriented pattern of economic relationships, rather than inwards within the region, has resulted in dependency on the Western industrialized world2. European governments identify the deteriorating balances in the Mediterranean region3 and its stability as essential to their own interests, committing themselves to promoting sustainable development in the area, despite the growing pressures from northern Europe to divert economic resources toward Eastern Europe. Altough the EC was emulated in the creation of the Maghreb Permanent Consultative Commitee4 in 1964 and of the Arab Maghreb Union AMU by Morocco, Algeria, Tunisia, Mauritania and Libya in 1989, this arrangements have few achievements to show pertaining to the economic regional integration. Supra-regional membership to the main Arab economic organisations, like the Arab Economic Council, Arab Common Market and Islamic Development Bank have produced few results5. OAPEC is the only significant cooperation body6. After the Gulf War, domestic policies have overshadowed further advances7 on the economic agenda of AMU reinforcing its security dimension. Regarding North-South relations, the documents instituting the EEC contain provisions concerning Algeria, Tunisia, and Morocco, constituting the historical foundation for

relations between the Treaty of Rome signatories and the Maghreb8. In 1972 the EC proposed a global policy for the Mediterranean Region, envisaging a free-trade area along with a programme for technical and financial assistance. It also developed a plan for labour emigration and environmental protection. The most delicate question would be that of liberalisation of agricultural exchanges sufficient to reach the coverage required by the GATT9. In 1992, the Lisbon Summit issued a 'Declaration on Relations with the Maghreb Countries' emphasizing partnership based on permanent political dialogue; relations between the sides should be 'based on toleration and co-existence between cultures and religions', implying that future membership is not an issue; it spells out that respect for freedoms and democratic values means regular free elections; it calls for commitment to the Resolutions of the UN Security Council, but not those of the General Assembly therefore leaving unsolved the question of the Western Sahara. Other items deal with free trade, though excluding agricultural products; financial aid; and the single category of economic, technical and cultural co-operation10. We will see that none of the parties have fulfilled their commitments, as proven by the slowness in integration, the annullation of the Algerian general elections and the trade barriers imposed by the EU. Given the breadth of this subject, I will focus on a number of specific issues as 1) The socio-economic facts of the Region, 2) The aims and objectives of the countries with regard to Regional co-operation, 3) The main shortcomings and limitations and 4) The potential possibilities, which I view as central to the arguments explaining AMU's (specially heartland Algeria, Morocco and Tunisia) dual approach: its aim is to decrease dependence on Europe but the co-operation of foreign investors is needed to put projects into practice11.

-Socio-economic facts: The Colonial and Post-independence eras.

Arab lands did not produce systems on the periphery of the world market resembling to those emerged in Europe. However, they participate in the development of the modern world through the international division of labour12. The European drive for colonisation disrupted the intra-regional ties13 and diverted Maghreb's emphasis in the relations that were to follow towards an intensive and extensive relationship with France, Spain and Italy. The Maghreb suffered those forms of foreign occupation that are Protectorate14 and settler colonialism; it followed, after independence, the reformist path of decolonisation, based on reforms of colonial economic, political and educational

institutions, africanisation of the civil service, some indigenisation of business, and usually negotiated agreements on nationalisation of the key sectors. The main thrust of reform in these countries was to expand trade within the dualist economy and increase cash crops and mineral/oil exports to the former metropolises15, in an evironment of arbitrary forms of government16 and poor international relations.

*Morocco built its regime on the spousal of liberal economic values catered to the interests of the commercial and business classes needed to bolster the Monarchy17. Its regional policy was expansionist, claiming Mauritania, Western Sahara and parts of Algeria. In 1960, within the disintegrating UAS, Morocco led the Casablanca group radical in foreign policy, authoritarian in domestic18, giving priority to political unity-, as opposed to the moderate Monrovia Group which put economic associations first. Wars flared. This policy embittered relations between neighbours, causing serious incidents

within OAU, which failed to meet20 in Tripoli in 1982. Finally in 1969 Morocco signed a treaty of friendship with Algeria and recognised Mauritania21.

In Algeria, decolonisation was induced by a nationalist war22 which cost one million lives. The revolutionary socialist-populist content of the state's development ideology23 soon put herself at the vanguard of the non-aligned movement, leading the proposal for the NIEO in the 1967 Algiers Charter and 1973 Conference24 .

The socialist-dirigiste stance adopted in Tunisia responded to the ethos of the ruler's groups of supporters25. The economy did not respond to the planned investmentindebtedness endeavors. The failure of the attempt aimed at the social interaction necessary for its development, the Tunisian economy has again been taken into the hands of the middle class26.

In 1969 the Libyan Arab Republic announced the adoption of Arab socialism determined to follow the Nasserist line27. Colonel Khadaffi has unilaterally announced union with Tunisia and Morocco28.

In the 1990s the combined markets of the medium-sized AMU economies amount to 68 million people, enough to attract both regional and foreign investors to exploit the economies of scale. Five million Maghrebis live in Europe29. Libya has three billion tonnes of petrol reserves; Morocco is the world's third largest producer of phosphates and Tunisia the fifth; Algeria has impressive gas reserves; Mauritania produced 12m tonnes of iron ore in 1989. Trade among states has barely increased beyond 1.5% of

their total exchanges since independence30. Approximately 75% of the Maghreb's trade is with EU countries, and more than 50% of this is concentrated in southern Europe31 whereas European trade with the region has dropped from 2% of its total in 1977 to 1% thirteen years later32.

Aims & objectives: Development strategies

Like most of the countries of the Third World, Arab States adopted national planning as a means to hasten economic development. The 1960s witnessed planning efforts in many countries, while the 1970s brought attempts with planning co-ordination33. Mohamed al-Imam advised to move towards co-ordination among planners rather than co-ordinating plans: None of this happened: when refering to Arab economic cooperation one should differentiate between measures adopted 'de jure', and the actual steps taken towards their implementation34. The complementarity of the hydrocarbonexporting countries and the other was likely to encourage integration, at least on the part of the latter group. However such a step presupposes the acceptance of the concept of integration with its implied submergence of national planning into supraregional planning35 and the creation of growth poles as the Algiers-Oran corridor, the area south of Casablanca and the Tangiers offshore banking centre36.

Algeria's effort to conquer economic independence as a key to political independence led to the construction of a strong industrial basis, financed by oil revenues. Throughout the 1970s, plans emphasized the capital-intensive petroleum, steel, chemical and engineering industries, which were allocated 43,5% of total investment.

Good intentions were expressed regarding agriculture and housing, but in effect they were neglected. Whereas in 1960 agriculture accounted for 20% of GDP, by 1979 this had fallen to 7.5%, when the contribution of industry reached 55,5%. Later plans gave more attention to housing, health and education, and this bore some fruit. But industry took again 38.6% of total investment37. The price paid for forced industrialisation is heavy: a slow increase in individual income and consumption; a soaring food import bill, a consequence of the collapse of the agricultural sector; poor management and reduced capacity utilisation in big state-controlled complexes unable to extend the expected backward and forward linkage effects; bureaucratic controls and political rigidity led to quasi-stagnation of industrial production in the early 1980s38.

Land reform was initiated to redistribute land for the formation of co-operatives39. Rural development was not only inspired by the desire to increase food output, but for trying to stem the rural exodus40. Finally, the 'trickle-down' effects of the technological revolution never materialized41.

Tunisia planned on modernisation of agriculture and industrialisation extending with various sectors, in line with linkages allowed by the Tunisian market42. Tunisia's record of development expressed in growth rates has so far ranged from poor to moderate. The social and political development of the country has been more pronounced, manifest in the fields of education, formation of cadres, building up and Tunisisation of the civil service; and the provision of a development-oriented, and politically determined leadership43. Libya implemented its consecutive development plans of which it can be said that altough the first efforts were not steadfast, the last one corrected many of the

shortcomings of earlier plans. Its 'cultural revolution' created an atmosphere of insecurity, some disregard for profesionalism, and excessive centralisation44.

In contrast to the profound changes that show the aforementioned economies, continuity is the hallmark of that of Morocco, which made strenuous efforts on its Plans to develop a capital-intensive industry based on phosphates, with exports in view rather than import substitution45, showed the poorer record of growth46. The kingdom renounced development of the industrial sector, thus initiating growth without development in its economy.

Morocco had been 'internationalised' economically, with a dual economy: a small but efficient modern sector owned and operated by Europeans and a large but less efficient traditional sector owned by nationals47, the new bourgeoisie who have a weak propensity towards productive investment. The political system -a strong monarchy, a powerful oligarchy and a strong army- has provided 'tension with stalemate, and the recognised need for action with a pervasive lack of initiative'48.

Main Problems. Shortcomings and limitations

Commentators have consistently pointed to the economic sources of discontent, as the combined effects of debt, demographic growth and unemployement have damaged the well-beign of Maghrebians49.

None of the states could break completely with the export-oriented economies. The

high illiteracy rates inherited by the new regimes and virtually no middle-level technicians50, the flight of private investment capital and settlers from farms and factories, made not just state planning, but state financing the only solution to the collapse of economic structures51. In the 1970s budgetary deficits were one cause of high rates of inflation52. Governments accelerated the drive towards export-led growth at the expense of extensive overseas borrowing53. When the IMF stepped in to provide Morocco with an extended fund facility, the management of the budget deficit was of more concern than the alleviation of poverty. Tunisia and Algeria initially resisted intervention but plans to cut basic subsidies had to be revoked in the face of social unrest54. During the 1980s Maghrebi states began paying out more to their foreign creditors than they received in new loans55, while EU's position on Balance of Payments Support was ambivalent: it had asserted both that it will avoid any open conflict with IFIs and that its approach differs significantly form theirs56.

The enormous tasks of creation of employement, education and improvement of the level of living of the mass of the population continue aggravated by demographic increase, the strongest threat to political and social stability in the Maghreb. With the rapid growth of the region's population at a rate of 2.5-3% per annum, population will double in thirty years About 50% of the population is under 15 years, below the lowest legal working age in most states57.

Capital-intensive development projects neglected the creation of employement; the numbers of urban unemployed began swelled dramatically by the 1970s. In 1973 the Algerian workforce in France represented 1/3 of the active labourforce at home58. ILO

has estimated that 600,000 jobs will have to be created each year until the year 2000 to keep up with demand. Another source of anxiety is the growing strenght of bureaucrats, a body of men who have turned into a 'new class' with their own interests and entrenched positions59, reaching a critical level which separates two states60. The coming generations manifest anxiety with respect to their future, challenging the economic and social options of the authorities61. The essentially reactive character of Islamist movements is against economic disappointment and the governments' failure to adress people's needs after the policies of 'official' Islam, left devoid of cultural and spiritual content62.

Food security is an important issue: traditional Maghrebi exporters experienced the same decline of the role of agriculture in foreign trade, with the exception of Morocco63. In the 1960s agriculture accounted for 20% of Algerian exports and 35% of Tunisia's. In the 80s it accounted for 1% and 7% respectively64; the expected rate of growth of agriculture was the lowest of any sector, below the rate of natural increase of the population65. Algeria nowadays imports more than 50% of its total food requirements. Export-led growth aggravated structural imbalances within domestic economies. Food imports contribute to the growing foreign trade deficit in Morocco and Tunisia66, whose mismanaged land reforms led to an increasing dependence on imported cereals. Euromediterranean countries have become surplus producers of many agricultural products that until recently were exported by the Maghreb countries. With the closure of their traditional markets abroad these countries face serious crisis in their exports. During the 1980s the Maghreb countries, had the biggest cereal deficits among Arab countries.

As for the self managed socialist industrial sector, the performance in terms of returns is not as satisfactory as in the private sector67. As late as the mid-1980s, when there was every sign of over-capacity in the world production of petrochemicals and iron, thousands of millions of dollars were allocated to the manufacture of such products. Libya, Algeria and Morocco purchased 10.5% of total arms sold to the Third World during 1977/80.

Potential possibilities

The period of independent states has given way to a period of maturing nation-states with no clear direction forward. The need to restructure and liberalize economies finds its sources in the development patterns of the 1960s and in the oft-cited economic crisis of the mid-1970s when reforms revealed the ambivalent attitudes of the Maghreb's leaders towards the private sector. Tunisia and Morocco are countries where a limited state commitment to industrialisation does not prevent an efficient industrial policy. Mineral resources are the basis for an export sector developed through public

investment. The manufacturing sector is largely private and the share of export in manufacture value added is significant in the framework of the international division of labour68. No other Arab country has gone as far as Algeria in providing the objective conditions for such a process of development to get started and to gain momentum. Libya, with its small population and immense oil resources, opted for its 'transformation' plans for capital-intensive industrial and agricultural projects.

The new policy is characterised by an increase in public budget allocations in favour of

agriculture. The structure of investment shows a concentration on irrigation, which receives more than one third of all funds going to the agricultural sector. The modernisation of cultivation methods and equipment is another aspect of the new policy. Algeria has created an industrial sector which is capable of satisfying agricultural needs, whereas Morocco has to spend more than 22% of its total agricultural imports on the acquisition of materiel on foreign markets. But certainly the most innovative aspect of the new policy concerns agricultural prices, after decades of prices at a lower level than that of world markets69. In Morocco, the largest capitalist firms specialising in export crops have won the largest share of state investments, and will continue to play a vital role in the new strategy.

There are feasible alternatives to the foreign-based multinational corporations for the proper utilisation of the region's wealth. Jointly owned regional enterprises could assist in the revival of the mineral sector, facilitate the achievement of african control, encourage the development of indigenous personnel, and achieve major economies of scale and managing, financing, marketing and risk sharing. Such enterprises could be viable and sustainable if carefully designed with respect to financial autonomy, internal incentive structures and commercial orientation. Financial and personnel constraints make the establishment of such enterprises complex and difficult, but by no means impossible71.

Since 1982 an initiative has been developed to extend the Algerian gas pipeline to Tunisia and Western Libya en route to Italy; its extension to Spain will benefit Morocco. Algeria and Libya have set up six joint-venture projects in energy and vehicle

manufacturing; banks have been created between Algeria, Libya and Tunisia. Morocco and Algeria accept each other's currencies in banking and commercial transactions72. Recent newspapers talk about trans-Maghreb highways and railroad.

Maghreb countries maintain controls over current economic transactions but follow a liberal policy with respect to a large proportion of import items. In the case of Algeria and Lybia, the public sector has a monopoly over the importation of several commodities. Since the mid-1980s there has been an unprecedented growth in the 'informal' sector. The opening of the borders between Maghreb states has facilitated the circulation and distribution of goods on the black market, accounting for as much as 50% of Algerian and Moroccan trade. The existence of such activity outside the tax net has had a prejudicial effect on attempts to control inflation73. We may conclude that the most decisive factors governing inter-Arab trade were geographical adjacency and oil74.

CONCLUSION

The Algerian experience has attracted much attention and given rise to extremely divergent appraisals. Libya's economic experience since independence is one of paradoxes and surprises. Morocco and Tunisia show free-market philosophies, and Mauritania is in complete disarray. The heavily centralized and authoritarian regimes that inherited the Maghreb states have remained broadly the same for the past 30 years. The uneven economic development reflects that attempts were made to diversify economies endowed with sufficient resources, but politics dominated economic

policies76. Economic restructuring has avoided tackling long-standing distributive imbalances within the domestic economy in favour of adressing macroeconomic concerns. Development and social stability go hand-in-hand. A fear of disaster hovers the EU should poverty bring about the collapse of existing governments. If the Maghreb is to become 'the Mexico of Europe' a new social contract -which might well be backed by regional integration- must be devised. 'A policy of constructive assistance from the EU rather than belated deterrence is the most cost-effective means of safeguarding the stability of both sides of the Mediterranean'77.

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ENDNOTES

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 37. 38. 39. 40. 41. 42. 43.

Spencer, C. (1993), p.6 Imady, M. (1984), p.172 Spencer, C. (1993), p.3 Imady, M. (1984), p.162 Tovias, A. (1994), p.281 Imady, M. (1984), p.168 Spencer, C. (1993), p.48 Shalaim, A. (1976), p.179 Ibid, p.181 Nugent, N. (1993), p.81 Spencer, C. (1993), p.47 Gran, P. (1979), p.188 Imady, M. (1984), p.161 Sayig, Y. (1978), n/a Prendergast, R. (1991) p.28 Spencer, C. (1993), p.14 Ibid, p.15 Tovias, A. (1994), p.232 Griffiths, I. (1993), p.76 Ibid, p.117 Ibid, p.115 Aguibou, Y. (1980), p.7 Spencer, C. (1993), p.13 Mazrui, A. (1980), p.4 Spencer, C. (1993), p.15 Shalaim, A. (1976), p.182 Sayig, Y. (1978), p.433 Griffiths, I. (1993), p.78 Spencer, C. (1993), p.3 Ibid, p.47 Ibid, p.51 Ibid, p.52 Makdisi, S. (1984), p.124 Ibid, p.91 Ibid, p.111 Spencer, C. (1993), p.39 Tovias, A. (1994), p.283 Ibid, p.124 Ibid, p.290 Ibid, p.291 Spencer, C. (1993), p.17 Shalaim, A. (1976), p.182 Sayig, Y. (1978), p.516

44. 45. 46. 47. 48. 49. 50. 51. 52. 53. 54. 55. 56. 57. 58. 59. 60. 61. 62. 63. 64. 65. 66. 67. 68. 69. 70. 71. 72. 73. 74. 75. 76. 77.

Ibid, p.452 Tovias, A. (1994), p.282 Sayig, Y. (1978), p.580 Ibid, p. Ibid, p. Spencer, C. (1993), p.8 Ibid, p.15 Ibid, p.16 Tovias, A. (1994), p.295 Spencer, C. (1993), p.18 Ibid, p. 19 Ibid, p. 18 Prendergast, R. (1991) p.1 Spencer, C. (1993), p.17 Sayig, Y. (1978), p.574 Ibid. Ibid, p.575 Ibid, p.659 Spencer, C. (1993), p.22 Ait-Amara, H. (1984), p.140 Ibid, p.139 Sayig, Y. (1978), p.573 Ibid, p.144 Pierce, A. (1982), p. Chatebus, M. (1984), p. 126 Ait-Amara, H. (1984), p.149 Ibid, p.152 Laszlo, E. (1984), p. xi Spencer, C. (1993), p.48 Makdisi, S. (1984), p.93 Ibid, p. El-Imam, M. (1984), p.172 Spencer, C. (1993), p.17 Spencer, C. (1993), p.60

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