Libya had "barely any mineral resources "before the discovery of oil

Also Libya's agriculture cannot be compared

either

in

terms of the size

of cultivable land or in the terms of yeild per unit of land. Her popula¬

tion was always ^very small and the standard of skills and

technical

know-how lagged behind that of the others. Thus we notice

this isolation of

Libya in most of the studies made on the question

of possible integra¬

tion. '

If the relatively developed industries in the other Maghreb

countries

have free access to the Libyan market it will be impossible for

Libya to

develop its own industries. Therefore special arrangements should have

to be made to protect the Libyan industries in their infancy. This question will be elaborated upon at a later stage.

Regarding the three other Maghreb countries, the study of the

ECA

Industrial Coordination Mission to Algeria, Libya,

Morocco

and Tunisia

laid emphasis on resource endowment and suggested the location of

industries where the resources are abundant. Algeria, for instance, be¬

cause of its favourable conditions, especially in the field of

natural

resources

(oil

^and natural

gas)

^was suggested several times as

the best

economic location for several industries. Indeed, from the point of

view of economic optimum, and from the standpoint of maximising

returns

and minimizing costs, the locations which the

Mission recommended for

the different economic projects were the right ones.

But, in the sphere of economic integration

the principle of optimum

location of industries should be modified to take into account the problem

of equitable or semi-equitable distribution of gains between,the member

countries. If economic integration is a means to a higher rate of

economic development of all the countries of the _group, small or large, relatively developed or less developed,than every country

should have

^a

share in the industrial development. To be sure, the principle of

optimalisation is indispensableotherwise the resources of the integrated,

area would suffer a great waste if not allocated and located according to

this principle. On the other hand, any economic integration effort will

not be successful unless based on fair distribution of benefits and costs between the members.

IDEP/ET/2340

Page 77.

A further factor influencing the choice of location is the

historical factor of certain industries which ^are in existence. This

is certainly a justified approach. If we have to economize on the

Maghreb resources and avoid excess capacities, as we demonstrated

before,

and if we are to benefit from the experience already gained in the pro¬

duction and marketing of certain commodities,

together

with the

skills

acquired, these existing industries should be considered as suitable

areas of cooperation between the Maghreb countries. But here again one should be careful. Sometimes historical accident can be responsible for the establishment of certain industries in specific locations, but a country such as Libya would not easily accept this fact simply because

the Italians were less enterprising than the French, and the country ^was

left without significant industrial enterprises.

This theme of choosing the "integration industries" according to the existing industrial map of the Maghreb ^was pronounced by the CPCP report prepared by Giri, and most of the industries suggested to be agreed

upon by the .Maghreb Governments were distributed _among the three tradi¬

tional Maghreb states. We find that Algeria has a relatively larger

share of existing industries, the reason being that the French used to

consider Algeria as an integrated part of the mainland of France and not just a colony or a protectorate like the other two territories, and thus

more industrial enterprises ^wire established there than in Tunisia and Morocco. The latter two would oppose a

100rfo

application of the de factor

industries in the _area.

The Giri report has also been legitimately influenced by the factor

of resource endowment, and favoured Algeria with many important industries, and in this way it was similar to the ECA Mission Report especially in respect of the new Maghreb industries which the report proposed. But the Giri Report was much more aware of Libya's special situation, and therefore we find the following industries allocated to her.

(These

industries can be financed from Libyan capital resources

obtaining from the oil revenue, and can utilize the petroleum products themselves as the basic inputs for the suggested

industries);

1. An ammcniac factory with a capacity between 1,000 and 1,500 tons per day

(1).

2. A production unit to extract and treat pottassium salts

to produce from 200,000

to300,000

tons per year

(2)

3. A petro-chemical industry with one million tons capacity

per year

(3).

4. A unit to electrolize aluminium with a capacity of 100,000

tons per yqar.

How to distribute the benefits of integration

According to'our analysis, economic integration is a means to help

the Maghreb

(as

well as the

African)

countries to develop their national economies, in other words to help them industrialize. It follows that

any attempt to give each member country less than their fair share in

the industrialization process would f?.il, and would be refused as an unrea¬

listic approach. One can divide the means for distributing the gains in

the Mahreh integrated area into two broad categories, means to distribute

the short—run gains, and means to distribute the long-run gains we mean those which take the form of fiscal gains or fiscal compensations for

revenue losses, while by long-run gains ^{we mean} economic development and industrialization gains.

vl)

Por Ammoniac there is already a project presented by a foreign firm, but the Libyan government with capital funds available can start the project either as a completely public enterprise or as a mixed economy enterprise, i.e. with the participation of private capital.

(2)

The potassium resources are on the borders between Libya and Tunisia so here cooperation between the two countries would be fruitful.

(3)

The petro-chemical and aluminium industries need advanced techniques hence Libya should seek the aid and participation

of the specialized industries.

Page 79»

Short-run "benefits

It is suggested that the less developed country in an integrated

area

(Lihya

^{in our}

case)

should he compensated for loss of revenue

gained from import tax on goods originally imported from a third country, and which are now imported free of tax from a partner country.

It is said that the relatively developed country would obtain

revenue from the income tax and the excise duties charged on the

/ v

output of the enterprises that establish themselves in its

territory^/

Another measure is that if labour is to move freely across the borders of the countries constituting the integration scheme,

The "tax unique" applied in the Central African Economic and Customs Union is given as an example to solve this problem.

According to the system, the country which exports one of its pro¬

ducts to the regional market levies on it a tax equivalent to ^a consumption tax; the basic materials used for this product are exempted from any tax or duty in the country of manufacture.

In turn, while the regional partner country on which the goods

are exported does not levy any duty or tax on it, it can count

on the producing country's transferring to it the proceeds of the

tax levied, and the transfer is in proportion to the share of the production which the importing country consumes.

(See

K.E. Khalil,

Economic Integration in Africa,

IDEP/ET/lXVII/971,

chapter 7;

B.F. Massell, The distribution of gains in ^a common market i the

East African Case,

(Santa

Monica, Calif., Rand

Corporation 1964,

p.17 et seq.; Anguiie and David, l'Afrique ^sans frontières

(Monaco,

Paul Bory,

1965),

P.37 et seq.

It will be recalled that these "static" or short term benefits have been the subject.of a long controversy between ^a number of

economic integration writers. Unfortunately they have hit the wrong

tree, as industrialization is the issue and not financial compensation

for the lost customs' revenue.

(See

A.J. Brown ; "Customs Union versus economic separatism in developing countries, Yorkshire Bulletin of Economic and Social Fe-searoh, May ^and November,

1961;

D.P. Ghai "Territorial Distribution

of the Benefits and Costs of tte East African Common Market" in Leys &

Robson

(ed.)

Federation in East Africa ; Opportunities and

Problems,

Oxford University Press,

19655

W.T. Newlvn, "Gains and losses in the

East African Common Market", Yorkshire Bulletin, November

1965$

a. Hazlewood "The East African Common Market s Importance and Effectsj

Bulletin of the Oxford University Institute of Economic and Statistics

Feb. 1966 & May 1966. See also C. Robson, Economic Integration in Africa, op. cit. p.

130-148.

prises in the partner country to the home country

would provide the latter

with some benefits.

Applying these types of compensation on Libya,

it

seems

that they

are not attractive to the Libyans. First, they are not decisive in

helping

the process of economic development5 secondly the Libyans

already

have

their capital funds, and their problem is how to use these

to industrialize.

Libya also has no surplus labour, skilled or

non-skilled to emigrate to the

other three countries. Thus these short-run or static benefits which en¬

gaged many economists in the conventional tradition are not

welcomed by the

members of _any economic community, especially by the less developed

members.

The second type of benefits may be more effective and more convincing.

(b)

The "Economic Development" benefits or the long-run

benefits

Itfet^akTrlbSFBtressed again and again that each member country should have

a fair share in the industrialization process. It is clear that all the

measures suggested here would contribute to the industrialization of the

weaker partner as well as the other partners. They would particularly

countervail the back-wash effects which the economic forces impose on the

least developed country.

There are, first, the trade measures. The less-developed country,

Libya, should be allowed to maintain, for a suitable period of time, barriers

to import, especially with regard to the insufficiently competitive items

which it is already producing and. it should be allowed to protect its

existing and planned infant industries. Also in order to promote industrial

activities in Libya, the other countries should grant its exports preferential

access to their markets without asking for the same treatment.

(ï)

Lihya should also he allowed., according to a general investment policy

for the Maghreb, to use more fiscal incentives and aids than the other three countries in order to attract investments to her territory. Among these

measures are tax incentives, the availability of free or low—rent industrial

estates or premises, and the granting of substantial financial aids in the

form of straight production or transport subsidies.

(2)

oN>*^\•rp,t\itfi r

(ï)

See K.H. Khalil, op.cit.

Page 81.

3. Some other investment policy issues

A general investment policy for the whole area should he

drawn in order to create the most favourable conditions for the

success of the industrialization approach to integrate the Maghreb.

Priorities should be established so that resources are channelled towards those sectors which have a key importance for uhe develop¬

ment process.

(1)

We have seen that in the Maghreb there are mineral resources on the borders of two or more countries and there are already factories

to process them on the individual country's territory. These, and similar, areas which can be discovered are suitable for cooperation

whether the activity is industrial, agricultural, or

infrestructurai,

or whether it is a project comprising all these activities. Another

example from the Maghreb is the tramsmission of electric lines, which

can be repaired and joined between Algeria and Tunisia on the one

hand, and Algeria and Morocco on the other hand. We have already pointed out that the joining of these lines and the benefiting from

the cheap natural gas in Algeria u,s a fuel to generate electricity

would achieve a considerable economy in this field for the three

countries.

In the previous chapter where certain industries were suggested

as "integration industries" we noticed that they followed a strategy

based on the fructification of the already existing industries-, and

on the undertaking of new activities based on the availability of

resources. Certainly, the expansion of the existing industries in

(1)

Examples of these industries are : iron and steel, chemicals

(petro-chemicals,

fertilizers and other heavy organic compound

chemical

products),

pulp and paper, heavy equipment, fuels,

energy and infrastructure in general.

Dans le document Economic integration in the Maghreb (Page 77-83)