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1 The role of the private sector in the Maghreb Karim Ben Kahla Ecole supérieure de commerce de Tunis Konrad Adenauer Stiftung December 2007.

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Presentation on theme: "1 The role of the private sector in the Maghreb Karim Ben Kahla Ecole supérieure de commerce de Tunis Konrad Adenauer Stiftung December 2007."— Presentation transcript:

1 1 The role of the private sector in the Maghreb Karim Ben Kahla Ecole supérieure de commerce de Tunis Konrad Adenauer Stiftung December 2007

2 2 The private sector in the Maghreb is facing challenges and threats but is still underdeveloped. Why are things changing (?) too slow??

3 3 The role of the private sector (1): low entrepreneurial density Number of « SME » Per 1000 inhabitants Algeria ,3 Morocco ,2 Tunisia ,40 Turkey ,6 Czech Republic ,2

4 4 The role of the private sector (2): relative stagnation of the pinvestment to GDP The role of the private sector (2): relative stagnation of the private investment to GDP 1980’s1990’s Morocco private investment to GDP 12,110,1 Tunisia private investment to GDP 13,614,9

5 5 The role of the private sector (3): indicator for The role of the private sector (3): indicator for Lobby power of the manufacturing sector (Nabli, 2007) ( the more concentrated the manufacturing sector, in terms of a few export categories, the more manufacturers could be expected to band together with a common interest to influence the government’s policies) Algeria0,01 Morocco0,36 Tunisia0,48 Libya0,00 MENA0,13 High-Income OECD0,51

6 6 The role of the private sector (4): financing companies (some problems and limits of “poor” companies) AlgeriaTunisiaMoroccoEgyptJordan Stock market capitalizati on/GDP 0,22% (en 2003) 10,3%54,8%81,8%292,5% Share of domestic credit directed to the private sector, 2003 (Nabli, 2007) 11,5%69,0%55,1%61,5%71,7% (123,0 for High income OECD) NPL30% (2006) 21% (2006) 15,7% (2005) 25%

7 7 The role of the private sector (5): other inhibiting factors 1.Weight of the informal sector and anti-competing practices 2.Lack of skills and brain drain (enhance quality and not only quantity of high education, graduated unemployment problem) 3.Low manufacturing productivity and productions with low added value 4.Low diversification of products and markets (exp: dependence on Europe for exports, on oil, textile) 5.ICT fracture

8 8 AlgeriaTunisiaMoroccoLebanonTurkey Numbers microcom puters (1000 px) Numbers Net surfers (1000px)

9 9 Why? First response: poor legal frame for doing business

10 10 Why? second response: Bad governance indicators (the experts opinion) Quality of public administration Public sector accountability Overall governance Algeria44,142,342,5 Morocco57,847,951,1 Tunisia58,437,144,3 MENA47,335,139,4 OECD79,697,590,2

11 11 Why? Third response: the choices of industrial policy (at the beginning) The “Makhzen” in Morocco, the “Moudjahidine” and the army in Algeria, the “ottoman bureaucrats” in Tunisia Vertical industrial policy ((sector or firm specific) produces rent seeking (distortions) and corruption opportunities) Import substitution Protecting infant industry and public enterprise The social (and political) function of the public enterprise is privileged State capture of the banking and insurance sectors Price controls Tight (but often bad) planning

12 12 : Hesitations about privatizations Why? Third response: the industrial policy: Hesitations about privatizations Period Number/total envisaged ReceiptsRemarks Algeria / 731 EPE 800 millions USD - 25% of the entities bought by foreigners -the employees profit from 10% of the capital, on a purely gracious basis Tunisia /310(?)1893 millions USD (2,483 MilliardsDT (TT: 3,052 milliards DT)) - 74,34% (1846 MDT) of foreign investments Moroc co / millions USD (76,7 milliards de dirhams) - foreigners = 77.7% cash - workers: 0,7% of the cash (reduction of 15% on the price) - stock exchange capitalization multiplied by 23

13 13 Why? Third response: the industrial policy: the delay of the “mise à niveau” Mise à niveau industrieAlgeria418 / Morocco363 / 7737 Tunisia3470 / 5458

14 14 Beyond the industrial policy: Core attributes of social contract in MENA ( Nabli, 2007, p 144) 1.The preference of states over markets in managing national economies 2.A reliance on state planning in determining economic priorities 3.A penchant for redistribution and equity in economic and social policy 4.An encompassing vision of the role of the state in the provision of welfare and social services 5.A vision of the political arena as an expression of the organic unity of the nation rather than as a site of political contestation or the aggregation of conflicting preferences 6.The emergence of centralized, hierarchical, and tightly regulated corporatist structures of interest groups

15 15 Why? fourth response: from economic to political, social and business contracts: some aspects and dilemmas (1) The dilemmas of the paternalist state/leader: –The powerful (but illegitimate) State (the more intervention, the more centralization and the less legitimacy) – Protection permits growth but over protection hinders growth (great states versus infant society, industry, etc. –The trap of economic and political leadership The endless reforms: –The urgency of reforms versus the slowness of trust construction –The “game” of reform: main actors adapt to reform rather than challenge it (sometimes they reorganize opportunities for continuing rent seeking) –The (practical, cultural and ideological) unwillingness and inability to form coalitions for real change (due mostly to the pervasiveness of information and interpretation)

16 16 Why? fourth response: from economic to political, social and business contracts: some aspects and dilemmas (2) The neutralizing exchange: exchange of economic (and sometimes social) protection against political complicity (and sometimes neutrality) “Soft” (capture of rent) and “hard” (capture of state) corruption: –The instrumentation of institutions: Trade unions (and other unions) are an instrument for organizing support for comprehensive reform –Large scale private sector (when it exists) is dominated by industries that benefit from status quo and that are capable of “state capture” of government regulation –State capture by other private interests The silences of the international “agreements” and contracts

17 17 Beyond the “simple” contracts: where and how? –Where must we (try to) exercise power: strategy (example: where ton invest?) –How must we (try to) exercise/control power: governance (example: how to prevent or resolve potential conflicts) Modernization and modernity challenges

18 18 Strategy (multilevel analysis) Modernization challenges (the technocratic and economic side of “choosing” contracts) Modernization challenges (the technocratic and economic side of “choosing” contracts) Where to contract? Where to contract? How to evolve from a reactive strategy ( attendant ) based on the costs and the revenues (lobby which resist the opening and the Maghreb) to a proactive strategy based on innovation and quality How to evolve from a reactive strategy ( attendant ) based on the costs and the revenues (lobby which resist the opening and the Maghreb) to a proactive strategy based on innovation and quality How to Integrate the collective (example maghrebean) dimension into the strategic individual reasoning and choices (to avoid the blindness or strategic myopia) How to Integrate the collective (example maghrebean) dimension into the strategic individual reasoning and choices (to avoid the blindness or strategic myopia)

19 19 Strategy (multilevel analysis) Modernity challenges (values for private and collective contract choice) Modernity challenges (values for private and collective contract choice) Opportunism: Confusion between opportunity and strategy (confused and anarchistic diversifications without any connection with the original competences and the basic trade of the company) Opportunism: Confusion between opportunity and strategy (confused and anarchistic diversifications without any connection with the original competences and the basic trade of the company) Fatalism: Confusion between calculated risks, rizk (that one already has or that is given by God)) and fatality Fatalism: Confusion between calculated risks, rizk (that one already has or that is given by God)) and fatality Mimetism and mimetic behaviors (implies very little diversified economies where imagination is broken down) Mimetism and mimetic behaviors (implies very little diversified economies where imagination is broken down) formalism and conformism attraction ("to protect oneself" by the imposed rules or the group rather than to express itself). formalism and conformism attraction ("to protect oneself" by the imposed rules or the group rather than to express itself). “one best way” attraction (imported) “one best way” attraction (imported)

20 20 Governance (multilevel analysis) modernization challenges ( the technocratic and economic side of contracting ) modernization challenges ( the technocratic and economic side of contracting ) What to do with minorities? What to do with minorities? Evolve from an exclusive and centralized governance to an inclusive and shared governance (opened or in network) Evolve from an exclusive and centralized governance to an inclusive and shared governance (opened or in network) Promote real dialogue (avoid the “dialogue of the deaf”) Promote real dialogue (avoid the “dialogue of the deaf”) Promote a maghrebean governance (divided or in networks) Promote a maghrebean governance (divided or in networks)

21 21 Governance ( multilevel analysis ) Modernity Challenges (values inherent to contracting) Modernity Challenges (values inherent to contracting) Promote meritocracy Promote meritocracy Escape clientelism Escape clientelism Build a communication based on empathy, explicit discourse and clearness (to avoid the blur and the over-interpretations) Build a communication based on empathy, explicit discourse and clearness (to avoid the blur and the over-interpretations) Build trust, debate and shared power (mistrust between the public and the private sector; the owner and his subordinates who entertain a seigniorial relation where the allegiance replaces competence, the injunction the debate, the clan is preferred to the network and where the company is under- institutionalized and its life cycle depends upon that of his leader )Build trust, debate and shared power (mistrust between the public and the private sector; the owner and his subordinates who entertain a seigniorial relation where the allegiance replaces competence, the injunction the debate, the clan is preferred to the network and where the company is under- institutionalized and its life cycle depends upon that of his leader )

22 22 Conclusion The role of the private sector in Maghreb could be much more important Limitations are due to legislation, governance and industrial policy Beyond these factors lies the social contract and there is a strong interaction between social, economic and business contracts These contracts refer to modernization and modernity challenges concerning two multilevel problems: were we choose to exercise power (strategy) and how we do that (governance)? Managerial and intellectual elites could/should interact to make evolve these contracts

23 23 Thank you for your attention Karim Ben Kahla


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