FROM PARTNERSHIP TO FRIENDSHIPS: FLOWS AND FLAWS IN THE MEDITERRANEAN REGION ANDREA GALLINA, Roskilde University Federico Caffè Centre NAPLES, 8-9 JUNE 2006

The EU policy in the Mediterranean Mediterranean Policy Global Mediterranean Policy Renewed Mediterranean Policy (RMP) The Euro- Mediterranean Partnership (EMP) The new European Neighbourhood Policy POST- COLONIALISM COOPERATIONCO-DEVELOPMENTPARTNERSHIP “Rings of solidarity” NIGHBOURHOOD “Rings of friends” Amoroso, 2006

Development Aid through EMP and ENP  The EMP aid was funded through the MEDA Program a development funds of 5.3 billion ( ) (of which 86% channeled bilaterally), i.e. 750 euros per year, supported by an extra EIB 6.4 billions in loans. This equals to 9 euros per capita  For the ENP sets an amount of 14.9 billion euros, i.e. 2.1 billion per year [to be shared among the ten MPs and the seven new neighbor countries]. This equals to 5 euros per capita (and if an estimates of other 2 bn per year allocated through FEMIP is added, then is about 10 euros per capita…)

The ENP is changing the cooperation framework  Bilateralism over multilateralism  The concept of Wider Europe disappears  Friendship over Partnership (“all but institutions”)  Conditionality in aid (to get a stake...)  Confusion created over how to link the different countries  Post enlargement strategy  Security over solidarity

The Southern and Eastern Mediterranean is today still a periphery  The Euro-Mediterranean is a paradigmatic example of North-South relationship: manufactured goods vs raw material  Specialization patterns in the SEM is charaterized by low value added production in manufactures and agriculture  Weak industrial production system (95% MFEs), lack of an industrial burgeoisie/dominance of a commercial one

Mosaic, region or meso- region? Non oil: Tunisia, Morocco, Algeria, Turkey Oil: Egypt, Syria, Lebanon, Jordan Libya Gulf countries EU

Figure I - Evolution of GDP per capita, MEDA, New EU members and EU 1, US dollars, current prices, USD MEDANew EU members 10EU 15 THE EURO-MEDITERRANEAN LOGOS: A WIDENING AND DEEPENING GAP Measured in PPP the gap is less wide but not reduced

Figure II - Economic Step between EU 25 and MPCs, GDP per capita current $, 2004.

The GAP is not only widening but also deepening  HDI increased but still in the lower brackets (between Lebanon 81 and Morocco 141)  New poverty pockets in the urban areas  Dramatically high youth unemployment

FLOWS ASYMMETRIES: TRADE, FDI...  Trade with EU is asymmetrical (50% for MPs; 5% for EU)  The trade balance is highly dependent on internal (bad harvest) and external shocks (raw materials, oil prices)  FDIs are erratic, linked to privatization, declining share on world market  The region has the lowest return from investments  The main driver for FDI, i.e. Regional markets, is abandoned within the ENP...

COMPARING FLOWS IN THE MED Millions $ ODA Net total donorsFDIWorkers' Remittances

Trade Deficits (in US$ Billion)

MPs and NMS (New Member States) shares of EU imports (oil products excluded) (extra EU-15)

LESSONS LEARNED FROM THE RECENT REFORMS IN THE MED  Firstly, the assumption of an existing causal relationship between economic and political liberalization has proven to be incorrect  Secondly, the assumption that economic liberalization would lead to an increase in foreign investments has also proven to be incorrect. The specialization model in the region (agriculture or gas and oil) is not an attractive factor for foreign investors.  Thirdly, in the case of trade, the assumption that tariff dismantling has a positive effect on growth has also proven to be incorrect. This is true only if other conditions are present simultaneously such the level of capital accumulation, the level of education of the labor force, a developed institutional setting, the presence of a competitive industry.

THE MAIN “FLAW”...LABOUR FLOWS...  The MPs represent a traditional area of major emigration (from 5.8 to 8.2 million in EU depending on who counts, and 16 mill in total, i.e. about 10% of the population), and now also transit.  Especially of semi-skilled and unskilled migrant workers (Fargues, 2005, p. 19).  Given the demographic structure and the weaknesses of the economic reforms in the MPs, migration flows are only expected to grow.  The proportion of the population under fifteen will shrink in the next years; consequently the proportion of the population of working age will grow more quickly than the total population.  Over the next ten years, optimist estimates calculated that the MPs will need to create about 35 millions jobs just to maintain the present hardly tolerable ratio of unemployment and under-employment.

AND REMITTANCES...  According to the study by Page and Adams on a panel of 74 countries, a 10% increase of the migrant population would lead to a decline of 1.9% of people living under the international poverty line. Similarly, the study found that a 10% increase in the share of remittances in a country GDP will contribute to a decline of 1.6% of the population living under the international poverty line of $1 per day (Page and Adams, 2003, pp ).

CAPITAL-RICH UNDERDEVELOPMENT  In the region workers’ remittances are two to three times higher than FDIs flows and peaking at $15 billions they were about four times larger than total overseas development aid in  While the role of remittances for human capital development (through households’ investments in education and health) and poverty alleviation is undisputed, as well as their equilibrating effects for the balance of payment, their multiplier effect for the local economies are limited (Gallina, 2006; Glytsos, 1993).  Therefore, in the MPs there is a situation of capital-rich underdevelopment, i.e. an enormous amount of savings that cannot be used because the infrastructural and structural deficiencies in the region.

FROM ENP TOWARDS A MEDITERRANEAN MESO-REGION Two preconditions to be reestablished:  Solidarity over Security  Co-operation over competition Areas of intervention to reduce the asymmetries  Support PMI and MIF  Increase value in the traditional activities (Mediterranean model)  Migrants as agent of development (remittances mobilization)  Integration of southern markets for attracting FDIs