Washington, DC — One of the great frustrations among those of us who follow the Arab Maghreb Union (AMU) is the need to convince local governments to stimulate entrepreneurship, this in a region that pioneered mercantilism and international trade. While there are many historical caveats for their "risk averse" perspective, the bottom line is that too often there has been little incentive for the private sectors unless they have had some cozy relationships with their governments.
Today, the Arab uprisings are forcing governments to become more attuned to their citizens, and economic demands are front and center on their agenda. Promoting entrepreneurship has become the stuff of multiple conferences and foreign assistance programs. While this is a start, much more must be done with existing medium and large companies to jump start sustainable growth. Without mechanisms to speed job creation, all AMU governments will face diminished public support and the consequences of not delivering on promises made. So a regional investment body that can facilitate long-delayed projects with cross-border benefits makes sense.
Last week, at the meeting of Arab Maghreb Union (AMU) Finance Ministers in Nouakchott, an agreement was signed to launch a regional investment bank to finance infrastructure projects. The initial capitalization is $100 million, $20 million from each member, a small amount compared to the significant needs in the region. Yet it shows some forward thinking about stimulating greater regional economic growth.
While Algeria sits atop more than $200 billion in foreign reserves and is able to access financing for any of its domestic projects, the other members of the AMU - Libya, Mauritania, Morocco, and Tunisia, face significant challenges in raising capital for large projects. A regional investment fund makes sense, especially if it can drive other changes in the financial infrastructure, legal regimes, and related services that will result in a robust financial industry across North Africa.
In a landmark study in 2008 on the potential benefits of economic integration in North Africa, the Peterson Institute for International Economics focused on Maghreb Banks and Financial Markets as a key sector that would benefit from greater cooperation and coordination. However, the long-standing contest for leadership between Morocco and Algeria, driven in part by the Western Sahara conflict, stymied those who clearly see the benefits of working across borders and who continue to meet and seek a common platform for progress.
Which leads to the questions: Why now? What projects? Is there an overarching vision that will drive the process?
Well, the first is relatively easy to answer. Although the bank was first proposed in 1991, it stalled on the fallout between members that froze the AMU summits. Now, every government realizes that business as usual won't get it done and more than cosmetic band-aids or short-term subsidies are needed.
What projects it will be financing is less clear although the Mauritanian Central Bank Governor mentioned highways, new technologies, and energy. "The bank is intended to finance infrastructure programmes in the energy sector." Among obvious candidates are the renewable energy sector, highways and railways across North Africa and along the Atlantic Coast to West Africa, and the rapid expansion of broadband capacity and energy grids. According to published reports, the bank will begin operations by the end of the first quarter of this year and will work in partnership with private sectors across the Maghreb.
Now about the vision thing... Well, the pieces are in place and the expertise is certainly in abundance as thousands of Maghrebis are already working in financial sectors from New York to Dubai, to Singapore testify. They want to come home, join their peers, and make a difference. This will happen when governments take actions individually and jointly that clearly demonstrate a commitment to much more robust and transparent growth policies. While the creation of this investment bank is a smart step in the right direction, the question of sufficient political will that accepts the risks tied to prudent actions is still unanswered.
Jean R. AbiNader is Executive Director of the Moroccan American Trade and Investment Center.