jmtaberne msc essay regional development within dynamics of north-south relations
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University of Bristol
Department of Social Policy & Social Planning
MSc course in Development Administration & Planning
Code: M21X
Name: Jos-Mara Tabern Abad
EssayTitle: What are the dynamics of North-South relations? discuss with reference tothe Maghreb, the limitations of regional co-operation as an answer to the imbalance ofNorth-South relations.
Module Title: Regional Development
Lecturers: Kwabena Donkor
Autumn Term 1.994
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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
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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.
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-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
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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 investment-
indebtedness 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
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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 co-
operation one should differentiate between measures adopted 'de jure', and the actual
steps taken towards their implementation34. The complementarity of the hydrocarbon-
exporting 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 supra-
regional 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.
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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
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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
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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
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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. Euro-
mediterranean 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.
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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
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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
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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
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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. Spencer, C. (1993), p.62. Imady, M. (1984), p.1723. Spencer, C. (1993), p.34. Imady, M. (1984), p.1625. Tovias, A. (1994), p.2816. Imady, M. (1984), p.1687. Spencer, C. (1993), p.488. Shalaim, A. (1976), p.1799. Ibid, p.18110. Nugent, N. (1993), p.81
11. Spencer, C. (1993), p.4712. Gran, P. (1979), p.18813. Imady, M. (1984), p.16114. Sayig, Y. (1978), n/a15. Prendergast, R. (1991) p.2816. Spencer, C. (1993), p.1417. Ibid, p.1518. Tovias, A. (1994), p.23219. Griffiths, I. (1993), p.7620. Ibid, p.117
21. Ibid, p.11522. Aguibou, Y. (1980), p.723. Spencer, C. (1993), p.1324. Mazrui, A. (1980), p.425. Spencer, C. (1993), p.1526. Shalaim, A. (1976), p.18227. Sayig, Y. (1978), p.43328. Griffiths, I. (1993), p.7829. Spencer, C. (1993), p.330. Ibid, p.4731. Ibid, p.5132. Ibid, p.5233. Makdisi, S. (1984), p.12434. Ibid, p.9135. Ibid, p.11136. Spencer, C. (1993), p.3937. Tovias, A. (1994), p.28338. Ibid, p.12439. Ibid, p.29040. Ibid, p.29141. Spencer, C. (1993), p.17
42. Shalaim, A. (1976), p.18243. Sayig, Y. (1978), p.516
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44. Ibid, p.45245. Tovias, A. (1994), p.28246. Sayig, Y. (1978), p.58047. Ibid, p.48. Ibid, p.
49. Spencer, C. (1993), p.850. Ibid, p.1551. Ibid, p.1652. Tovias, A. (1994), p.29553. Spencer, C. (1993), p.1854. Ibid, p. 1955. Ibid, p. 1856. Prendergast, R. (1991) p.157. Spencer, C. (1993), p.1758. Sayig, Y. (1978), p.574
59. Ibid.60. Ibid, p.57561. Ibid, p.65962. Spencer, C. (1993), p.2263. Ait-Amara, H. (1984), p.14064. Ibid, p.13965. Sayig, Y. (1978), p.57366. Ibid, p.14467. Pierce, A. (1982), p.68. Chatebus, M. (1984), p. 126
69. Ait-Amara, H. (1984), p.14970. Ibid, p.15271. Laszlo, E. (1984), p. xi72. Spencer, C. (1993), p.4873. Makdisi, S. (1984), p.9374. Ibid, p.75. El-Imam, M. (1984), p.17276. Spencer, C. (1993), p.1777. Spencer, C. (1993), p.60
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