commodities in a member country which has more
advantages
in importing raw materials and intermediate goods
in order
to achieve any of the following purposes s preventing
the
other countries from producing these products, or increasing
the capacity of that country to cover the needs
stemming from
the increase in the exchange of goods between the Maghreb countries, or establishing a new industry
to supply the
whole Maghreb market benefiting establishing a new industry
to supply the whole Maghreb market benefiting from the sup¬
pression of barriers of trade between the Maghreb countries.
Many systems
(ï)
were suggested to avoid theseundesirable shifts
in trade and production ; one solution is to deprive the goods re¬
exported and the concealed re-exports from free-entry in the other
member's market, or to cancel preferential treatment.
(2)
Anothersolution is to make tariffs uniform in.rall cases where varying tariffs
on raw materials and semi-manufactures could lead to shifts of pro¬
duction to the countries with low tariffs.
The commonwealth has protected itself against this problem by
stipulating that in the case of each commodity that claims the advantage
(ï)
See solutions suggested for these^problems in î Marcel Colomb"Problèmes de l'origine dans une zone preferentielle du Maghreb,
dans 1'Hypothèse d'une Redaction Partielle Lineare des Barrières
au Echanges", Comité Permanent Consultatif du Maghreb, Secretariat.
(2)
Ibid.IDÉP/ET/2340
Page 91•
of the preference system it must "be proved that a certain percentage of the value of the commodity, ranging from
25$
to75$,
has been produced in the Commonwealth,(ï)
The investments' codes and fiscal and social policies
A considerable part of the conventional integration economics
was devoted to the necessity of the unification or harmonization
of certain policies. Among these policies are monetary, fiscal,
investment and other social policies of different kinds. This
unification of those areas of policy becomes indispensable if we are in the context of a relatively higher degree of economic integration such as a common market, an economic union or the so-called complete economic integration.
Indeed, if it can be agreed upon,
(2)
the harmonization orthe unification of such policies can be useful and can help to solve many problems. But this argument may be valid in those
oonvsntional types of economic integration and between developed
countries such as the EEC countires. The unification of such policies is insisted upon mainly to pave the way for a "perfect"
competition between the similar industries in the common market or the economic union of a group of industrially developed countries
whose industrial base has been built a century or two ago. In
such circumstances, the unifica,tion of these policies would serve the purpose of creating equal conditions for the competing in¬
dustries in the integrated area without allowing the national legislator to favour its industries at the expense of the other member industries. This "perfect" competition would help achievin industrial efficiency and thus optimum allocation of resources in the area.
(ï)
For other ways, see i K. H. Khalil "Economic Integration inAfrica"
IDEP/ET/LXVII/971-4?
chapter 4, p.2 et seq. and foot¬note.
(2)
See Bella Balassa, Theory of Economic integration.It appears to the author of this paper that these are not the
conditions in the Maghreb countries or in any other underdeveloped sub-region in Africa. What we have in the Maghreb is the lack of
industrial enterprise, and whatever industry the area
has, suffers
from excess capacity, because of the narrowness and ineffectiveness
of the national market. To put it differently, agricultural or
primary producing and exporting economies want to use economic integra¬
tion to industrialize. The "integration industries" suggested in this
paper and in the other reports mentioned above, already in existence,
or now, will enjoy a certain degree of protection against the industries
of the outside world, at least in the initial stages of their develop¬
ment. One of the basic ideas behind most of these industries is that the Maghreb individual markets do not offer the optimum size for such industries and hence the fusion of their markets is to create optimum
or semi-optimum conditions for these industries by enlarging the market.
In such conditions the question of competition is ruled out, at least
at this stage of development.
It remains that the Maghreb countries should take the necessary measures and a variety of incentives and techniques to realize efficienc
for their "integration industries".
The CPCM, however, issued two reports in this field : the first
on "comparison of different elements relating to Maghreb Investment
Codes"
(1)
and the second dealing with the effects of social and fiscal legislation of the four Maghreb countries on the cost of production especially in the industrialsector.(2)
Although the two documents areinformative, it seems that their use for practical purposes is limited
at least in this phase of the Maghreb integration and development.
(1)
Originally in French by Mokhtar Anegay, CPCM,"Tunis, October,1968
"Comparaison des divers elements des codes des investissements Maghrébins".
(2)
Ben Amor(Abdelmalek),
Effet de legislations sociales et fiscalesde quatre pays du Maghreb sur le cout de leur productions respec¬
tives notamment dans le domains industriel, CPCM, Secretariat, Tunis, Août,
1968.
IDEP/ET/2340
Page 93.
All the Maghreh investment codes try to create a
favourable
in¬vestment atmosphere for private capital either local or
foreign. They
offer many kinds of fiscal incentvies and economic and
legal facilities,
hut foreign capital, public or private, is
relevant and unless there
are political ties between the donor and the
receiving country, foreign
capital cannot be attracted by these measures.Even here, private
foreign capital would undertake the easy,quick-yeilding investments
which are very often not decisive in the economic development
of the
under-developed economy. It becomes more so if profits are
transferred
abroad - as is usually the case - depriving the under-developed economy
of an essential source for financing economic development.
Tunisia and Morocco, however, lay a special emphasis on
the role
of private enterprise, and they have some
foreign capital invested in
their economies. Although Algeria and Libya try to encourage private capital, foreign or local, the situation in these
last two countries
is different. Algeria depends to a great extent on a strong and growing public sector. Public investment therefore occupies an important place
in the national plan and is relied upon to achieve the plan objectives.
Even in the case of the investment code, while trying
to
encourage private investment, legislation made it quite clear that these privateinvestments are subject to the national interest and once it has been
found that these investments are vital for the national economic and social development, the public sector can replace the private enterprises
in those areas.
The Libyan government controls the public funds accumulated from
the receipts of oil. These capital resources are valuable to the process of economic development and industrialization in Libya, and it is ex¬
pected that public enterprises or mixed economy enterprises would be
used for this purpose.
Thus two countries of the group will depend mainly on public
funds to implement the agreement on the "integration industries" and
to direct their investments to the areas agreed upon. It is clear that
Algeria and Libya -would not race great difficulties in this field»
while difficulties are expected in the case of Tunisia and Morocco,
where private enterprise is urged to take the lead. We have seen that private entrepreneurs may not direct their investment to the
areas agreed upon between the governments. We have also enumerated
some of the measures to induce private investment to the desired
activities. If this proves to be difficult, Tunisia and Morocco
have no other choice but to depend on public or mixed enterprise.
The point we want to make here is that the unification and harmony
of the investment codes in the four' countries of the Maghreb is not urgent... Every country, whether the leading role in its development is undertaken by the public, private-, or.mixed economy enterprise, can do
its best to induce private, foreign or local capital to take part in
its development. This would not have any effect on the other members'
economies. This problem would effect only what we term "integration
industries". If an "integration industry" is assigned to any country,
that country can undertake that industry either by public, private or mixed investments. Wo problem would arise so far as the investments are local, i.e. offered by the local entrepreneurs, private or public. But
a problem would arise if foreign capital is included. The other member countries would object tõ a substantial participation of foreign in¬
terests. As the integration industries are catering for the whole Maghreb and enjoying free access to the markets of the group, then a considerable participation of foreign capital would give privileges and advantages to countries outside the Maghreb and thus defeat the case for integration. This is clear if foreign participation is in the form
of equity capital. If foreign capital is badly needed, and there is a real shortage of Maghreb capital - which is doubtful - foreign capital
should take the form of loans and should constitute a small percentage
of total capital, otherwise a great part of the investment yields would be transferred abroad while it is badly needed to be ploughed back into the Maghreb economies, and hence speed up development.
IDEP/ET/2340
Page 95.
The problem of foreign capital is more pronounced if the "integra¬
tion industries" are undertaken jointly. These joint-projects can he
owned and controlled either by two, three or the
four
countries. Hereas well as in the previous case, a common agreement is needed on the
use or the non-use of foreign capital,
(i)
It would be useful, again, if some harmony could be established
between the taxation and fiscal systems, as well as between the social
measures which would affect the cost of production in the four Maghreb countries, but this intricate work is not decisive in this stage of
the Maghreb's development. The most desired industries are not com-petiti\re because they very often do not exist.
Fiscal policies are designed, except in the case of promoting in¬
vestment in the desired fields - to obtain revenue, and the extent to
which they are used depends on the conditions of the individual
countries. The working population in the Maghreb countries - and all
over Africa - suffer a low standard of living. Thus the issue is to
raise the standard of living in this big section of the population which
constitutes the majority of the underdeveloped people, not because of
humanitarian reasons so much as for the sake of the production process itself. Raising wages, using social security measures, health reform,
educational and training facilities, etc. would increase the producti¬
vity of the worker and hence accelerate the rate of development. The problem at this stage then is not to unify social legislations to avoid social privileges to the working population and thus increase
its ability to compete with other countries with more generous social legislation hut rather to compete in raising the standard of living of
the working population.
(ï)
See K.H. Khalil "Foreign capital and the underdeveloped countries"- Egypte Conteporaine.
The foregoing analysis has thrown some light on certain issues
considered, of importance in guiding the Maghreb policy for economic integration, especially in the apparently effective approach we have
been developing in this study, that of the Maghreb integration through
industrialization. The area of organization and the institutional
framework is an important aspect of the problem which will be discussed in the next ohapter. It would be also useful to look at the develop¬
ment of economic co-operation between the Maghreb countries.
ï
IDEP/ET/2340
Page 97
The Development of Economie Co-operation between the Maghreb countries After this outline of the approach to economic integration in
the Maghreb we think most effective we would like to look at the steps taken so far to materialize the economic community of the Maghreb, and
to see if it departs from the conventional approach or it is just an¬
other conventional scheme of integration.
Economic co-operation between the Maghreb countries will be dis¬
cussed here in three
sectionss-i)
economic co-operation before the proposed convention for integration,ii)
the proposed convention for integration,iii)
the institutional framework.I - Economic Co-operation before the proposed Convention
We will expose here, the general principles of co-operation which
have been led down by the Ministers of Economy of the Maghreb countries
in "Protocole of agreements", and then the arrangements in the fields
of Transport and trade.
a)
General principles of co-operationThe four maghreb countries agreed to hold a conference to be attended by the Ministers of Economy in Tunis
(September
29 to October1st
1964).
The Maghreb ministers examined, in this conference, the questions concerning the co-operation between their countries, and agreed to
establish a system of particular relations in the field of economic co¬
operation and trade relations.
They decided to create the "Permanent Consulative Committee"
to study the problems of the economic co-operation in the