Today at Bruegel—one of the leading European think tanks—we exchanged views on the way forward for the Middle East and North Africa (MENA) countries one year after the Arab Spring. Jean Pisani-Ferry (Director, Bruegel) chaired a
discussion focused on EU-MENA integration to jump start growth and job creation in the MENA region. André Sapir (Senior Fellow, Bruegel) shared with us his long time experience with both the MENA region and the process of EU integration and enlargement. Edward Bannerman (member of Vice President Ashton’s cabinet) and Elena Peresso (member of Commissioner De Gucht’s cabinet) reflected on the current European approach to foster greater regional integration with and within the MENA countries. Here are our 5 takeaways:
The Arab awakening has created more opportunities for open societies and inclusive growth, but while medium-term economic and social outlook is promising, near-term growth prospects are weaker than a year ago, particularly for non-oil-exporters—Egypt, Jordan, Tunisia, and Morocco. Furthermore, the eurozone crisis is hitting MENA hard. Financing needs have increased sharply. And they are urgent. The international community must ensure the promise of the Arab awakening is not compromised by lack of financing.
Economic integration is a key pathway for Arab countries to grow sustainably, and to provide jobs and livelihoods for their citizens. Economic integration through increased trade and foreign direct investment (FDI) is a key means—perhaps the only means available in the short to medium term to policy makers—to put the MENA countries on a higher path of sustainable economic growth and in a position to decisively tackle the region’s massive unemployment, especially youth unemployment.
The Deep and Comprehensive Free Trade Agreements (DCFTAs) proposed by the European Commission as part of its ‘three Ms' framework’ (money, market access, and mobility) offer a meaningful vehicle for engagement with the new Arab democracies. Yet, to be credible, the DCFTAs need to provide genuine advances, in particular new market access and opportunities (agriculture), more labor mobility (under the movement of persons in services negotiations), and more technical assistance and capacity building in the areas of regulatory convergence (norms and standards). The agriculture agreement between the EU and Morocco recently approved by the European parliament is an encouraging first step.
This new engagement of the EU in the MENA region is largely in sync with that of the World Bank. Regional integration (together with gender and competitive private sector) is a key cross-cutting theme of the new engagement of the World Bank in the MENA region to strengthen economic governance, accelerate sustainable economic growth, create jobs, and ensure economic and social inclusion. The need for deepening economic integration in the MENA region is also at the heart of the diagnostic and recommendations the World Bank is developing in partnership with the Islamic Development bank under the aegis of the Marseille Center for Mediterranean Integration in a report on trade and FDI for the Deauville Partnership.
The success of the Arab political awakening will greatly depend on whether it is soon accompanied by an Arab economic awakening. Overall, MENA faces a lack of competitiveness across the board in the critical areas of innovation, business sophistication, financial development, education, and labor market flexibility. There is a large, unfinished domestic reform agenda in all countries, and there is no magic bullet to deliver immediate results in terms of growth and employment. Success will largely depend on whether the international community can help the new Arab democracies achieve results in five critical areas: producing committed, credible, and capable governments; maintaining macroeconomic stability; harnessing the world economy; allowing markets to allocate resources; and nurturing high rates of saving and investment.
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