Bursting with potential, the region's economies fail to deliver wealth

Well placed and with abundant labour, the North African nations could be models of success. Sean O'Grady reports
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The Independent Online

The International Monetary Fund has a name for this part of the world: "Menap": Middle East, North Africa and Pakistan. Its population is about 450 million, more than seven times that of the UK. But its economy is not much bigger than ours.

Oil or not, Menap has been a serial economic underperformer, although some of the stats some of the time point in the other direction. If bald economic indicators could feed or house families, the crowds would be on the streets of Benghazi and Tripoli to praise Gaddafi for delivering enviable macroeconomic aggregates.

Even by the standards of oil exporters, Libya's economy at a national level has performed well. Its public finances are as healthy as ours are busted – a 10 per cent surplus on the budget rather than deficit. Libya's economy will grow by 6.2 per cent this year, inflation will be 3.5 per cent and it will have a 20 per cent trade surplus; all superior to the UK.

The other economies are growing rapidly too: Bahrain by 4.5 per cent; Morocco 4.3 per cent; Tunisia 4.8 per cent; Egypt 5.5 per cent. In Britain we will struggle to hit 2 per cent. The figures show the potential of the region.

The problem is that such growth is unable to keep pace with the aspirations of a rapidly expanding, young population, and everyone – from the bosses at the IMF to the average unemployed graduate lobbing rocks in Rabat – knows it. These nations could do so much better. With abundant labour, situated at the crossroads of Asia and Europe, and from a low cost base, they could export and grow as fast as China or Indonesia. Or, more to the point, Turkey, the country that shows what can be achieved, a beacon of progress although cruelly locked out of the EU (2011 marks the 50th anniversary of Turkey's application to join; accession talks are continuing).

An enlarged European economic "space" embracing Europe's former colonies to the south and east would be a truly dynamic powerhouse.

Yet for now the Menap region enjoys the remarkable non-distinction of being one of the few places in the world where the graduate unemployment rate is actually higher than for less well qualified young people; while these economies can generate unskilled jobs in tourism or government, they are unable to absorb those they train for more demanding trades and professions. Egypt's government borrows a lot – 7.6 per cent of GDP, a figure that would be much higher were it not for US military aid.

The IMF says that liberalised economies, opened up to international trade and investment, could raise growth by a full percentage point – and that could easily make the difference between persistently rising living standards and creeping poverty.

There's a new vulnerability and urgency to the task – spiralling food prices hit Menap nations with few crops of their own and many mouths to feed. Egypt has gained from a cotton boom, but not enough to compensate for the soaring cost of food and oil. Morocco is especially exposed to food inflation.

Talking about money at a time like this may seem in poor taste, but remember that this whole wave of unrest began with Mohammed Bouazizi, a 26-year-old fruit and veg stall-holder in Tunisia, who had been prevented from trying to scrape a living by a zealous market inspector. He traded illegally because he couldn't get a job. He killed himself and sparked the fire that has consumed regime after regime.

In microcosm, it was a perfect representation of the root economic problem: a large number of young people, an underdeveloped market economy tied down by petty officialdom, part of an overblown, overmighty state that has arrogated economic power as steadily as political might.

The new powers will have to abandon old statist, nationalistic ways if they want to lift their millions out of poverty, just as China and India have done. Half a century after they were liberated from their colonial masters and now throwing their domestic oppressors off their backs, they have the opportunity to become prosperous as well as free.

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