10 January 2013

North Africa: Is a 'Private Sector Awakening' Possible in the Maghreb?'

opinion

IMF Managing Director Christine Lagarde made the case for greater private sector involvement in the Maghreb, from external and internal sources. She noted that if the Arab Awakening is to satisfy the aspirations of the people of the region, there must be a concurrent "strong and sustained economic growth. Inclusive growth that is generous in sharing its fruits. Growth that produced enough jobs to satisfy the yearnings of the younger generation."

While conceptually, there is little to argue with in her speech, the challenges faced on the economic side in fact parallel those on the political - transparency, capacity-building, ending cronyism, enhancing market-based education and training, and tolerance of diversity. Mme Lagarde defined the "private sector awakening" as "unleashing the productive potential of the Maghrebian people and creating an environment that supports innovation, entrepreneurship, creativity, and jobs." This is very similar in scope to the mission of the North African Partnership for Economic Opportunity (NAPEO), run out of the Aspen Institute, which promotes a range of public-private partnerships focused on economic growth through greater entrepreneurship and innovation.

From her vantage point, foreign direct investment (FDI) is a major spur to economic growth and should be welcomed by the Maghreb countries as critical to their efforts for advancement. Although the Maghreb is beset by a range of political and security challenges, not the least of which is the lack of an open border between Morocco and Algeria and the unresolved status of the Western Sahara, Mme. Lagarde believes that FDI can enhance conditions for progress in many sectors. She listed a number of factors that make investment in the Maghreb a good business proposition: location next to the EU and the Middle East, a young workforce, and recognition that their education and training capacities must be upgraded in order to produce market ready workers.

She also mentioned that "the Maghreb should continue to take steps to restore or maintain economic stability...Staying the course on sound fiscal and monetary policies...is important." But Mme. Lagarde was not ready to hand out gold stars to the investment infrastructure. "The Maghreb is also taking steps to improve its investment climate and business environment. But this journey is far from complete. The regional still has some way to go in removing remaining roadblocks so that the private sector can expand, invest, innovate, and create jobs. It needs to break down all vestiges of privilege and cozy connections and provide a level planning field for all."

She notes that the governments can better promote foreign and domestic investment through sensible and impartial regulations, better quality infrastructure, fair and predictable tax and customs administration, widespread access to credit, and a strong, independent, and impartial judiciary.

These steps have been the mantra of multilateral institutions for more than a decade, and today there are many indications that governments are seriously considering adopting many if not all of these provisions. Morocco's 2011 Constitution, for example, includes several sections that reiterate the need for an impartial and fair commercial system that is credible, reliable, and transparent, as well as an independent judiciary. Mauritania has recently implemented an investment law that proposes a range of incentives for prospective investors. Tunisia continues to work both bilaterally and regionally to enhance intraregional trade and investment. So much is afoot but few sustainable results to date as implementation of coherent investment regimes have yet to bear fruit.

In her closing remarks, Mme. Lagarde made reference to the value of greater regional integration. "The whole region would benefit from becoming more open to itself--by knocking down barriers to trade and opening wide the doors of mutual gain. A Maghreb that allows a free flow of goods and services offers limitless possibilities of a market of over [sic] 80 million people." She went on to note that countries with weak agricultural sectors, such as "Algeria, Libya, or Mauritania--would benefit enormously from the knowledge and know-how that come with investment from Moroccan or Tunisian agro-business companies' investment."

By tying a "private sector awakening" to the "Arab Awakening," Mme. Lagarde draws attention to the inexplicable link between political and economic reform. Poll results throughout the region clearing identify the correlation that citizens make between democracy and economic benefits. Everyone wants a piece of the pie and wise leaders must work to make the pie larger to satisfy the aspirations of the people and provide resources for expanding economic activity. While more foreign and domestic investment is critical, it will not be effective without supporting eco-systems that enable those investments to work for the greater benefit of Arab societies.

Jean R. AbiNader is Executive Director of the Moroccan American Trade and Investment Center.

MATIC - In Nouakchott, Mauritania on January 9

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