Morocco and Tunisia to benefit from relocation of global value chains

The pandemic is an opportunity for economic integration between North Africa and Europe

photo_camera PHOTO/ATALAYAR - Poster of the event on investment in the Arab world organized by Casa Árabe this Thursday

Now that the worst of the pandemic has passed for Europe, some of the changes it will bring are beginning to be seen. One of the economic effects that many analysts are already predicting is the shortening of global value chains. One of the regions that can benefit from the relocation of production from Asia to places closer to European territory is North Africa, which will boost economic integration between the two shores of the Mediterranean, according to the conclusions of three specialists convened by Casa Árabe for a virtual session on the future of investments in Arab countries, which was held this Thursday. 

Despite these positive effects in the region, the bill that the coronavirus will leave for North Africa and the Middle East will be very high. "Most of the investments in the area were made by oil producing countries and now they have reduced them as a consequence of the pandemic", said Carlos Conde, director of the Middle East and North Africa division of the OECD during his speech at the session. 

Participantes

Although the expansion of the pandemic in Arab countries has been less than expected so far, its economic consequences are being very important as a result of the confluence of multiple crises and their impact on the main sources of resources for these countries: oil revenues, investments, remittances and tourism. If the OECD foresees a fall in investments at a global level of 30% for this year, in the Arab countries this fall could reach 45%, according to the United Nations, reaching even greater figures in countries such as Tunisia, where they will be reduced by 82.3% according to the IMF.

The supply and trade chains between the two sides of the Mediterranean have also been affected as a result of the COVID-19. "We have noticed a slowdown in imports from North Africa to Spain of cars and textiles and meat exports to countries such as Saudi Arabia and Jordan have been strengthened. It remains to be seen whether these trends will be consolidated over time," explained Luis Moreno of the Ministry of Industry. 

The changes in trend do not mean that the situation caused by the pandemic will be very difficult to correct in the short term. In 2020 there has been a drop in investment, something that was already happening before the expansion of COVID-19. "On a positive note, I think this time is an opportunity to accelerate digitalization. In Morocco, Tunisia and Egypt, huge steps in innovation have been made in these three months. It is still a very urban phenomenon, but it is a field in which organizations can invest to help reconstruction," said Roger Albinaya, Director of the Department of Mediterranean Regional Policies and Development at the European Institute of the Mediterranean and Professor of Economics. 

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The digitization of the economy also presents a great opportunity to diversify economic activities in these countries, a pending issue for many nations in the region. "The time has come to strengthen consumption and the service sector," explained Albinaya. Another problem that will need to be addressed is the informality of employment, which in Lebanon reaches 75% and in Morocco 63%, and the lack of inclusion of women in the labour market.

Despite the challenges ahead, the COVID-19 crisis has shown certain strengths in these countries. Administrations have acted very quickly by closing borders and trying to prevent contagion from spreading unchecked. This swift action has contained the number of deaths and infections and many countries are now beginning to de-escalate. In order to save the tourist season, Tunisia reopened its borders on 27 June and Egypt has done the same on 1 July.

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