The Good and the Bad

Equally positive has been the increasing interest in the region from major economies. The rise and aggressive stance of China in particular have been a catalyst to this trend and reaction from the West and so they have awakened the likes of European nations, the United States and even Japan that are all trying to further their influence in the region. At stake is really access to natural resources. But apart from an aggressive and methodical China, the Western powers are also facing growing competition from the likes of Brazil, Russia, India and Turkey. BRIC nations (Brazil, Russia, India and China) plus Turkey clearly collectively feel like a brick falling on the comfortable hands of the traditional partners of the Maghreb and by extension Africa and the Mid-East. Western nations have been multiplying their contacts with the Maghreb and in the coming years, we expect and hope more direct investments will take shape. In this issue, we took the case of Turkey and looked at how it is penetrating North Africa markets. We also looked at Japan in this issue and concluded that its engagement strategy in the Mid-East-Africa zone has yet to be defined. As such we picked the provocative title of “The Irrelevance of Japan in Africa Middle East” to summarize the Japanese influence in the region.

Returning to North Africa proper, although we anticipate further interest and potential growth in FDI, for that to happen, the Maghreb needs a different direction and serious reforms have to be undertaken. And that’s where we see the bad news. The Maghreb suffers from at least three ills that continue to slow any economic progress. Bureaucratic obstacles continue to dominate day-to-day life. Whether it is a citizen looking to renew a national identification card or an entrepreneur seeking to start a business, the administrative hurdles are so big that attempts to make progress often collapse and fail to succeed. Opening, managing and closing a business require major efforts at substantial cost and are a direct source of corruption. The second obstacle linked to the first is a banking system that virtually does not exist in many regions but starting to make good inroads in Morocco. Without a function credit system, there is no economy and that’s where we are today. Finally for all of that work, there has to be also a functional justice system. Courts and tribunals should be seen as places where the right judgments and decisions are made. Sadly again, none of this is happening.

What does all that mean? It means North Africa is not a competitive region. According to the UN’s Doing Business, with the exception of Tunisia’s 55th position in the global rank of ‘Doing Business’, everyone else is ranked above 100th, with Mauritania being the worst offender. Simply put: North Africa is not competitive and that’s why the region boasts among the highest unemployment rates in the world. All of those factors are linked and we are stuck because a lack of leadership and political will to move things forward.

In 2011, we do expect some progress but those changes will be incremental. The projected economic growth as measured in GDP will remain positive, and certainly better than OECD’s, but not enough to absorb unemployment and create a sustained economy. What does the region need to do? The answer is not rocket science: as long as the authorities and governments are entrenched in their unwillingness to dismantle bad bureaucracies, punish those fueling bribery, and prevent business and job creation, we will go nowhere. Until the governments decide on a serious reform program, forget about progress.

Until then, best wishes to our readers and enjoy the year-end break.

Best regards,

Arezki Daoud