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575190Wp0box353768b01pub WORLD BANK MIDDLE EAST AND NORTH AFRICA REGION WORLD BANK MIDDLE EAST AND NORTH AFRICA REGION Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized ECONOMIC INTEGRATION Public Disclosure Authorized IN THE MAGHREB Economic Integration in the Maghreb WORLD BANK MIDDLE EAST AND NORTH AFRICA REGION OCTOBER 2010 Economic Integration in the Maghreb Office of the Chief Economist Middle East and North Africa Region The World Bank ©2010 The International bank of Reconstruction and Development/The World Bank 1818H Street, NW Washington DC 20433 Telephone: 202 473 1000 Internet www.worldbank.org E-mail [email protected] All rights reserved. This volume is a product of the Social and Economic Development Group of the Middle East and North Africa Region of the World Bank. The findings, interpretations, and conclusions expressed herein are those of the author (s) and do not necessarily reflect the views of the Board of Executive Directors of the World Bank or the govern- ments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, de- nominations, and other information shown on any map in this work do not imply any judgment on the part of the World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Rights and Permissions The material in this work is copyrighted. Copying and/or transmitting portions or all of this work without permis- sion may be a violation of applicable law. The World Bank encourages dissemination of its work and will normally grant permission promptly. For permission to photocopy or reprint any part of this work, please send a request with complete information to the Copyright Clearance Center, Inc, 222 Rosewood Drive, Danvers, MA 09123, USA, telephone 978–750–8400, fax 978–750–4470, www.copyright.com. All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, World Bank, 1818H Street, NW, Washington, DC 20433, USA, fax 202–522–2422, e-mail pubrights@ worldbank.org. Cover photograph: © World Bank/Dana Smilie. A FREE PUBLICATION Acknowledgements iv Contents Foreword v Acronyms and Abbreviations vii Executive Summary 1 1. Introduction 2 2. Participation in Integration Agreements 5 3. Integration through Trade, Capital, and Labor Flows 7 4. Financial Integration 13 5. Integration through Physical Infrastructure 15 6. Constraints to Integration in the Maghreb 18 Conclusion 21 Boxes Box 1 Potential Gains of Trade Integration in the Maghreb 3 Box 2 The Main Characteristics of the Financial System in the Maghreb 14 Tables Table 1 Importance of Trade in the Maghreb (% of GDP) 8 Table 2 Maghreb Trade with the EU (2008) 9 Table 3 Distribution of Services Trade by Category (% total trade in services) 10 Table 4 International Migrants by Development Group and Arab World Sub-regions 12 Table 5 Logistics Performance Index 2010 20 Figures Figure 1 Total Trade (% GDP) 8 Figure 2 Share of Intra-Maghreb Trade 9 Figure 3 Participation in Intra-Maghreb Trade 9 CONTENTS Figure 4 Concentration and Diversification Indices of Export Products in MENA 10 Figure 5 FDI and Remittances (% GDP) 11 Figure 6 Trends in Remittances (% GDP) 11 Figure 7 Applied Tariff Rates for Maghreb Countries (2006) 19 Figure 8 Ease of Doing Business Ranking 19 Figure 9 Logistics Performance Index 19 Annexes Annex 1 Trade Agreements in the MENA Region 25 Annex 2 Statistical Tables 26 Acknowledgements This report was prepared by Mustapha Rouis and Komlan Kounetsron under the guidance of Farrukh Iqbal, Acting Chief Economist, and Shamshad Akhtar, Vice President, Middle East and North Africa Region. The authors are grateful to Jean- Pierre Chauffour, Sid’Ahmed Ould Cheikhna, Ndiame Diop, Abdelmoula Ghzala, Bernard M. Hoekman, Lili Mottaghi, and Khalid El Massnaoui from the World Bank for their comments on earlier versions. Isabelle Chaal Dabi and Liliane Vert (World Bank) provided valuable administrative assistance, and Amanda Green (Consultant) edited the report. iv Though the Middle East and North Africa (MENA) region has weath- Foreword ered the recent global financial and economic crisis relatively well, it still faces daunting medium-term challenges. These include high unemployment (especially among young people), vulnerability to oil and food price shocks and water scarcity and inefficiencies of public sectors. Integration of the region into the global economy has been slow. Of particular concern is the stagnation in the region’s share of global non-oil exports, an indication of missed opportunities for di- versification and growth. Integration within the region, while rising, is also on the low side when compared with other middle- and high- income regional blocs. Over the last year or so, there has been and the adoption of low common tariffs an increasing momentum on the part of by the Gulf Cooperation Council (GCC) the region and the World Bank Group to which coupled with improvements in focus on a set of initiatives to promote infrastructure, especially roads and tele- more cooperation within the region. communications is generating benefits. These initiatives include a host of analyt- But much remains to be done, espe- ical pieces to examine the current state cially in reducing nontariff barriers to of regional collaborative arrangements trade, harmonizing policies and proce- with emphasis on assessing and explor- dures, and facilitating cross-border trade ing ways of fostering greater trade inte- through development of infrastructure gration, labor mobility and migration links and trade facilitation. Fortunately, prospects, prospects for energy integra- trade in services has recently emerged tion and resource sharing and infrastruc- on the agenda of national and regional ture development to reduce nontariff authorities—this is an area of substantial barriers. potential welfare gain for the region. The region has been able to make some Recognizing the problems, the World inroads, albeit at different degrees in Bank has been working closely with the each of the geographical groupings, to MENA region to develop and imple- support the integration of the Arab world ment regional activities—investment into the global economy. To start off the projects, institution-building, harmoni- removal of intra-regional tariffs under zation of policies and procedures—that the Pan-Arab Free Trade Area (PAFTA) are likely to enhance economic growth v FOREWORD and address common challenges across the re- Kuwait, Oman, Qatar, Saudi Arabia, and the gion. As part of this endeavor, the Office of United Arab Emirates), the Maghreb (Algeria, the Chief Economist, MENA Region, has pre- Libya, Mauritania, Morocco, and Tunisia), pared a series of reports to assess the achieve- and the Mashreq (Iraq, Jordan, Lebanon, Syria, ments of the region with respect to integration. and West Bank and Gaza). Egypt is sometimes The first report, 2008“ Economic Developments classified in the literature as a Mashreq coun- and Prospects,” looks at the role of integration try though with ties with North Africa given its in global competitiveness for the region as location. a whole and special reports have been pre- pared to take stock of the regional cooperative Shamshad Akhtar frameworks, their issues and prospects. These Vice President reports examine economic integration among Middle East and North Africa Region three sub-regions: the Gulf countries (Bahrain, The World Bank vi AMF Arab Monetary Fund AMU Arab Maghreb Union Acronyms and ASEAN Association of Southeast Asian Nations BMICE The Maghreb Bank for Investment and Foreign Trade Abbreviations CEN-SAD Community of Sahel-Saharan States COMESA Common Market for Eastern and Southern Africa EU European Union FDI Foreign direct investment GAFTA Greater Arab Free Trade Agreement GCC Gulf Cooperation Council GDP Gross domestic product GSM Global system for mobile communication IMF International Monetary Fund MENA Middle East and North Africa MERCOSUR Mercado Común Sur (Argentina, Brazil, and Uruguay) MFN Most Favored Nation NAFTA North American Free Trade Agreement NPLs Nonperforming loans NTMS Nontariff measures OECD Organization for Economic Cooperation and Development OTRI Overall Trade Restrictiveness Index PAFTA Pan-Arab Free Trade Area STRI Services Trade Restrictiveness Index TRAINS Trade Analysis and Information System TTRI Tariff-only Trade Restrictiveness Index UNCTAD United Nations Conference on Trade and Development WDI World Development Indicators WTO World Trade Organization vii This report reviews the status of Maghreb countries’ economic inte- gration with the world, with the Arab world, and within the Maghreb Executive itself.1 It focuses on trade in goods and services, labor and capital Summary flows, financial integration and cross-border infrastructure integra- tion. It discusses the potential benefits of and key constraints to great- er integration. Maghreb countries’ trade with the Arab The focus on trade liberalization with the world and with the rest of the world is European Union (EU) provides an oppor- relatively small, with exports concen- tunity for individual Maghreb countries to trated in a few commodities. There are lock in policies that would eventually help wide country variations, however, with them harmonize policies within their own Morocco and Tunisia exhibiting higher region. The same argument can be made trade volume and export diversification. regarding accession to the World Trade Organization (WTO).
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