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The Political Economy of Trafficking and Trade in the Sahara: Instability and Opportunities

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The Political Economy of Trafficking and Trade in the Sahara: Instability and Opportunities The Political Economy of Trafficking and Trade in the Sahara: Instability and Opportunities Mark Shaw and Tuesday Reitano Sahara Knowledge Exchange World Bank December 2014 This paper is part of the Sahara Knowledge Exchange. The Fragility, Conflict and Violence Group is undertaking this exchange to better understand the linkages between security, governance, and development in the Sahara and explore how a stronger focus on development can improve regional stability. It brings together World Bank staff working in the Africa and Middle East and North Africa (MENA) regions with, inter alia, experts from academia, think tanks, and development agencies. This process includes a number of papers and events that we hope will inform the Bank’s engagement with its partners in this volatile and important region. 1 Table of Contents Abbreviations ......................................................................................................................... 3 Executive Summary ................................................................................................................ 4 Old and new trends .......................................................................................................................... 4 When protection is a commodity ..................................................................................................... 5 Policy responses ............................................................................................................................... 5 Introduction ........................................................................................................................... 7 Structure of Trade and Trafficking in the Sahara ................................................................... 10 The evolution of trade .................................................................................................................... 10 Current patterns of trade and trafficking in the Sahara ................................................................... 12 The northern rim: “As a country we are wealthy but to smuggle is to survive” ................................ 13 The southern rim: People and passage ........................................................................................... 19 Migration and resilience ................................................................................................................. 22 The Saharan heartland ................................................................................................................... 24 The Economies of Protection ................................................................................................ 27 Protection economies and the impact on governance .................................................................... 30 The case of Mali ................................................................................................................................. 30 The case of Libya ................................................................................................................................ 32 Crime and terror: the resourcing of extremism ............................................................................... 32 Policy Implications ................................................................................................................ 33 References ........................................................................................................................... 38 2 Abbreviations AQIM al-Qaeda in the Islamic Maghreb DDR disarmament, demobilization, and reintegration EU European Union GDP gross domestic product LSCI UNCTAD’s Liner Shipping Index MUJAO Movement for Unity and Jihad in West Africa ODA overseas development assistance SALW small arms and light weapons UN United Nations 3 Executive Summary In the last two decades, a number of countries in the Sahara region have undergone fundamental changes to their political and economic profile, which in turn have impacted the region’s stability and development. The pace of this evolution appears to be accelerating, as trends such as globalization and the spread of ideological movements impact and engage local dynamics. The region’s economies—and particularly those of the oil-rich states—remain largely undiversified, and the structural conditions of those states have done little to promote equal distribution of wealth or multisectoral growth. The conditions that have driven conflict or political instability are still in place, but newly fledged governments have few tools to contain conflict or pressure from localized interests. Zones of fragility are expanding, and increasing numbers of nonstate actors are challenging long-standing norms of governance and state consolidation, and in several cases the geographic borders of states themselves. This is set to continue and will both impact trafficking and trade in the wider region and be shaped by these phenomena. In the context of this study, the term “trade” is used to describe economic exchange activities recognized as legal by parties or countries. The term “trafficking” represents those activities involved in moving what are generally recognized to be illegal commodities (drugs or guns or people against their will). “Smuggling” denotes the movement of commodities that are not themselves illegal (food, fuel, cigarettes, or people who consent), but their sourcing or the activity of moving them across borders contravenes the law of at least one government, such as in relation to the payment of tax or customs duties. This latter category of smuggling overlaps significantly with a substantial and growing informal (or grey) economy that exists in the region. Old and new trends Understanding how patterns of licit and illicit trade impact political developments in the Sahara have become critical to creating conditions for security, development, and economic growth. Several developments have had an important impact in forming emerging licit and illicit trade patterns and the interaction between them: • Although long-standing, interregional trade driven by a thriving informal economy with significant levels of cross-border smuggling based around subsidized price differentials for commodities between oil-producing states and their neighbors has flourished as a result of greater political instability and conflict. This applies in particular to trade from North African states to communities along their southern borders. • The result of the increasing dominance of sea-borne trade, and the subsequent development of West African port infrastructure as a staging post for wider regional trade, is that goods in the southern Sahara can be supplied without traversing the Sahara from the north. • The introduction of high-value illicit goods (most notably cocaine) as a transit trade through West Africa in the early 1990s comingled with the already established west-east trafficking in hashish to 4 create highly lucrative drug corridors. However, this takes place in a context where state control has eroded, arms are freely available, and security must be bought. While each of the factors above has shaped the emerging nature of trade and trafficking, the issue of wider insecurity in the region has a profound impact. When protection is a commodity As a consequence of both the growth in illicit trafficking in drugs and the erosion of state capacity to project itself into its borderlands, sophisticated protection economies have developed along the high- value trafficking routes. Not unique to the Sahara, protection economies emerge in the absence of effectively functioning state institutions, when protection itself becomes a commodity. But protection can be expensive and its costs increase when applied to high-value commodities such as drugs. The increased costs of protecting trans-Sahara trade, combined with the lower costs of meeting the needs of communities on the Sahara’s borders, have contributed to crowding out the legitimate economy, and there is evidence that it has dampened the capacity for informal trade beyond immediate neighboring borders, particular in the north where subsidies still ensure the possibility of a profit. It is now almost exclusively the trafficking of illicit goods—drugs, arms, and migrants—that traverse the Sahara itself, from north to south or east to west. Thus, the fight against illicit trafficking and fragility in the Sahara are closely interwoven. Gains are being distorted, diverted, and lost by the strength of the illicit economy. If peace building and state consolidation are to be achieved, then the problem of illicit trafficking needs to be reframed from beyond a security lens, and instead focus on understanding and breaking down the economic and political incentives that enable illicit trafficking and the informal economy. The various groups enriched by illicit trafficking or able to control a protection economy have different characteristics and engage with state institutions at differing levels. Yet in all cases, those accumulating resources controlling or protecting regional illicit flows have little or no incentive to support the consolidation of good governance or state control. Close examination shows that these groups are more likely to challenge or undermine the stability and legitimacy of the state, or to seek opportunities presented by democratic transitions to use illicit resources to gain further influence. In some key regions, the protection economy has come to dominate legitimate markets
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