The private sector to the rescue of regional integration in North Africa

Who said the private sector is not interested in regional integration?

In fact, evidence shows that the actors in this sector feel increasingly concerned by economic, political and social issues related to the integration process, especially in the North African region who is witnessing currently complex political transitions arising fromthe Arab Spring, stagnant economies, porous borders and the increase of security risks. The combination of all these factors leads to negative impacts on growth, exports, investment and employment. This is why the private sector is mobilizing to give new impetus to regional integration, now perceived as a fundamental strategic objective, given the socioeconomic and political challenges it represents for the future of the entire region.
In fact, regional integration continues to represent for the countries of North Africa an opportunity to be seized as well as a challenge to be overcome; and herein lies the dilemma for the region's leaders who struggle to achieve, in a sustainable way, the objectives of the integration process in which their countries have been committed since the beginning of the nineties. The objectives of this integration are mainly: building a common market, the convergence of macroeconomic policies, the harmonized implementation of sectoral policies and the strengthening of good neighborly relations, peace and security in the region.
The Arab Maghreb Union (UMA), an integration process that should be enabled
Let us consider the example of the Arab Maghreb Union (UMA), a regional body that includes Algeria, Libya, Morocco, Mauritania and Tunisia, and which recently celebrated its 25 years of existence. Despite the wishes and expectations of the peoples of the region, as well as efforts deployed by successive governments in its member countries, UMA still seems a distant goal, an almost shooting target, as its effective operationalization is continuously hindered by multiple political, geopolitical and administrative barriers. Among practical difficulties that hamper real progress in this regard: the complexity of procedures, the double tariff barriers, the low openness to foreign investment regimes, the slow reform of taxation systems and poor infrastructure.
Though representing a market of about 90,000 million inhabitants, the UMA has a very low level of trade exchange as shown in this indicator people keep quoting: intra‐Maghreb trade represents only 3% of the global trade in these countries, which represents the lowest integration rate in the world. According to official figures, none of the five countries has one of its Maghreb neighbors as a major trading partner!

Furthermore, since the establishment of the UMA in 1989, thirty seven agreements were signed, but those who have been implemented are rare. Since 2005, several summits have targeted the reactivation of the UMA ideal, but it is only at the 5th Conference on Maghreb economic integration, held on January 8th 2013 in Nouakchott, that the Maghreb Bank for Investment and Foreign Trade (BMICE) was to become operational.

This lack of integration involves a high cost that is not difficult to calculate and has led today to a rather gloomy economic environment, fragmented economies and a largely underexploited growth potential. However, a deeper integration of the Maghreb countries, coupled with open regionalism could lead to an increase in gross domestic product by 50 percent in ten years. It could also create, for each country, between 2% and 3% of additional GDP per year, as recently affirmed by Christine Lagarde, Managing Director of the International Monetary Fund (IMF), based on studies performed by the latter.

The courageous bet of the private sector on regional integration

This potential creates optimism and calls for action, especially since the poor progress of the integration process in North Africa is being increasingly criticized by all political and economic actors, mainly since the beginning of the Arab Spring in 2011. The private sector is one of these actors and seems to become more and more "entrepreneurial", since it is largely perceived as a key driver of regional economic integration, capable of accelerating growth and meeting the challenge of innovation, unemployment’s reductionand promotion of trade.

So, are we about to witness the emergence of a new actor which ‐tired of waiting that the politicians of the region boost regional integration‐ decided to revive the process in its own way? Is the Maghreb private sector strong enough to lead this process? The answer is yes, because the private sector is about to expand the extent of its initiatives and prerogatives in the region. It is in this context that some recent initiatives of the North African private sector have taken place, including:
‐ A roundtable held in Tunisia in February 2013 by the Maghreb Economic Forum on “The Maghreb integration: a driver of job creation?” which underlined that there was no objective grounds for the Maghreb to remain disunited, since it is characterized by many greater unifying factors than differentiating ones. The meeting also identified the main integrating assets and avenues for action that exist in many areas such as energy, transport and interconnection of financial systems; and which provide real opportunities for the acceleration of sectoral cooperation that could lead to an increasing networking of Maghreb economies.

‐ A roundtable held in partnership with the United Nations Economic Commission for Africa in October 2013 on "Financial integration and functional cooperation in North Africa: the role of the private actors”. On this occasion, participants agreed that financial integration was one of the structural parameters of the regional market project as it can boost trade exchanges and promote intra‐North African investment. The roundtable recommended, among other actions, the creation of a regional fund to support SMEs and the setting of an information exchange platform on the region, in partnership with employers' organizations. Another recommendation to the Maghreb Banks Union and the Maghreb Employers Union focuses on the need to form a lobby to influence decision‐makers in order to help them formulate and implement adequate policies for the promotion and acceleration of financial integration.

‐ The third Maghreb Entrepreneurs Forum held in Marrakesh ( 17‐18 February 2014 ) with the participation of ECA, the theme and the goal of which were actually to "boost UMA’s economic integration through a private sector initiative". The Forum reaffirmed the commitment of the Maghreb employers to become more involved in the debate on regional integration and concretely contribute in actions intended to promote it. The Forum took note of the signature of a Memorandum of understanding between the Maghreb Employers Union and the Maghreb Banks Union in order to carry on this action together, and adopted a roadmap about the "Maghreb Initiative on Trade and Investment."

During the discussions, the ASEAN model has often been cited as a model to inspire UMA countries. As explained by David Laborde, Researcher at the International Food Policy Research Institute, unlike the European Union, the integration process at the ASEAN level started from the bottom and was a bottom up process . There, he said, the private sector is ahead of governments who are trying to catch up and meet its needs.

Is this model suitable for our region?

At all events, an urgent and well‐structured upgrading of the integration process in North Africa has become a must. This is rather a condition to win the challenge of the structural transformation needed for the region, if this latter wants to build a powerful economic bloc, similar to the growth poles in Europe, America and Asia. The private sector is well tooled to be one of the pillars of this ambitious project and play its de facto and de jure right, but the central question is how to ensure convergence over time between the determination of the private sector and the will of politicians in the region ?