Better integration of North African economies can have a vital impact on their overall development, claims a new report from the African Development Bank (AFDB).
Entitled 'Unlocking North Africa’s potential through regional integration,' the report looks at the key challenges for regional integration in North Africa's six Arab countries: Tunisia, Morocco, Algeria, Egypt, Libya and Mauritania.
Among its recommendations are that these nations, which have widely different natural and human resources, attempt closer integration to create new opportunities for growth, employment and improved living standards.
It points to Tunisia, Morocco and Egypt, which have large private sectors and diversified production bases, contrasting them with Libya and Algeria, which
have a surplus of capital and large markets for goods and services as well as job opportunities for migrants.
Despite the potential, regional integration remains extremely limited, the AFDB says.
The level of intra-regional trade in North Africa is the lowest of any region in the world, the report claims. It calculates the economic cost of this lack of integration at around 2 to 3 per cent of total GDP.
Security concerns and a lack of political will are named as the greatest obstacles to regional integration, with the report citing the example of the Algeria-Morocco border, closed since 1994.
The AFDB claims the closure has effectively split North Africa into two distinct parts, limiting trade and investment initiatives.
Political support for change in North Africa has also been sporadic, it says, with countries having a poor history in implementing various bilateral agreements.
Further proof of the difficulties comes in the lack of a single institution to unite North Africa's six countries.
The Arab Maghreb Union (AMU) includes all nations except Egypt, which belongs to the Common Market for the Eastern and Southern Africa (COMESA). By contrast, the Community of Sahel-Saharan states (CEN-SAD) includes all countries except Algeria.
Though AMU and CEN-SAD have developed long-term programmes to encourage economic integration, these are little reflected in national policies and no significant progress has been made in ratifying regional agreements.
The region's political uprisings, which resulted in the toppling of half the governments of the six nations, is having a complicated effect on the drive for North African integration, says the report.
More open political systems might strengthen economic collaboration among countries and encourage integreations as the best approach for increased development, AFDB says.
But there is also a chance that some countries may adopt more inward-looking economic policies, perhaps introducting protectionism and greater financial controls to cope with the new demands of their citizens.
Overall, however, the bank sounded a positive note.
"Despite these challenges, in the wake of the Arab Spring, the emerging political landscape in North Africa promises to give new impetus to regional integration efforts," said Jacob Kolster, AFDB Regional Department Director for North Africa.
Among the report's proposals are for countries to strengthen their financial infrastructure, harmonise regulatory policies, and remove market impediments to cross-border activities.
Improvements in road networks and ports are encouraged, as well as reduction in trade barriers between the six North African nations.
The IT sector is also touted as having great potential, with the AFDB pointing to the region's trained personnel and the presence of multinationals with advanced technology.
“The potential is huge,” says Emanuele Santi, economist at AFDB and coordinator of the report.
"The new political context in North African countries and the crisis in Europe, which compel countries to diversify markets, offer a golden opportunity to refocus on the regional integration agenda as an engine of growth for all countries."