Integrating the Maghreb

RABAT – Tunisia’s “Jasmine Revolution” has thrown a spotlight on the consequences of stagnant economies and endemic youth unemployment for the region’s authoritarian Arab governments. Less noticed is a key factor contributing to this malaise: the inability of the Maghreb countries – Algeria, Libya, Mauritania, Morocco, and Tunisia – to increase their economic cooperation.

Indeed, the Arab Union estimates that the lack of regional integration costs each country two percentage points of annual GDP growth, while the African Economic Commission reckons that if a Maghreb Union existed, the five countries would each gain 5% of GDP. And the World Bank estimates that deeper integration, including liberalization of services and reform of investment rules would have increased per capita real GDP in 2005-2015 by 34% for Algeria, 27% for Morocco, and 24% for Tunisia.

These countries can no longer afford to wait. If they maintain the growth rates recorded over the past five years, it will take them more than two decades to reach the current per capita income of less wealthy OECD members Mexico and Turkey.

A dynamic single market would create investment opportunities for companies throughout the region. But today only 1.2-2% of the five Maghreb countries’ foreign trade is within the region. The key question is whether structural problems or institutional and political factors are hindering the development of intra-regional trade.