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The changing Mediterranean: the quest for growth and the Gulf factor

    • Naples
    • 5 July 2013

          Discussions at this 2-day event got underway with the observation that the Mediterranean Sea clearly connects Europe not just with North Africa, but also the Middle East, the Anatolian Peninsula, and the Persian Gulf. All these axes present opportunities for growth through greater interdependence, in spite of the current difficulties being experienced by European economies and the political uncertainty holding back those on the southern shores of the Mediterranean. There are also strong elements of productive, demographic and financial complementarity which it was felt have not been exploited to any sufficient degree, or have thus far remained hostage to geopolitical considerations. In order for these opportunities to be seized, those in attendance called for a combination of government intervention (so as to at least ensure a conducive regulatory framework and an initial stimulus for massive investment) and private initiatives (that can usefully apply “lessons learned” and also take advantage of the greater modern ease in communications and the exchange of knowledge).

          The participants acknowledged that, without question, the as-yet largely incomplete transitions in a number of Arab countries will continue to create uncertainty and will require a considerable period of time for the emergence of social and institutional conditions conducive to more sound and sustainable growth. Also imperative is a pragmatic search for a development model which, while respecting certain fundamental criteria of good governance, is nevertheless adapted to local circumstances. It was in any case emphasized that political and institutional systems should be as inclusive as possible in order to broaden the base of consensus and facilitate difficult trade-offs. This is one of the crucial lessons to have come out of events from 2011 to the present, with Egypt being only the latest case in point.

          Also stressed was the importance of international trade as a component of growth and innovation, such that measures aimed at fostering an openness to trade can contribute decisively to improving standards of living (or at least medium-term prospects), and thus indirectly to increasing the political and strategic stability of the entire region. The role of international financial institutions is also crucial, both in propping up the income of those countries in greatest difficulty, and steering economic policy in the direction of the most vital reforms.

          The development of energy resources and links requires appropriate infrastructure and hence vast investment. In this regard, although it was conceded private investment is indispensable, a contribution from government was also seen as necessary to provide certain buffers against business risk and – given recent experience – to launch complex long-term projects. With this in mind, it was felt it would be worthwhile considering the establishment of a new regional development bank.

          The financial resources for such large-scale operations could – it was suggested – actually be made available, especially if Gulf and European countries were willing to increase their level of mutual integration with the Mediterranean basin as a logical focal point, thus helping to forge significant collaborative partnerships. There is however an undeniable risk that political and social conditions in the Arab world, together with a certain degree of introversion on the part of European countries, could instead end up fragmenting the region and creating new barriers to trade.

          Fairly similar considerations were also deemed to apply to the field of information and communications technologies, with great potential for expansion of existing networks in the face of a strong persistent rise in overall demand. In this case too, based on the experience of recent years, certain Gulf countries were regarded as having the potential to act as catalysts for innovation processes and market growth, with a close interaction between governments and businesses. While no model is universally applicable as-is without modifications, certain key ingredients were nevertheless viewed as essential, starting with good professional training programs (to transform the many diaspora communities throughout the wider Mediterranean into a valuable resource for all), access to credit (including for small and medium-sized enterprises), and a state apparatus that interacts efficiently with the private sector.

          One dynamic seen as relevant to all the sectors considered during the seminar was that of the balance that must exist between social change and institutional reliability. Indeed, while change is inevitable, it can only be kept within the course of peaceful and constitutional limits if institutions are responsive to citizens’ needs. Under such conditions, a certain degree of political experimentation can be a positive indicator of innovative capacity on the part of industry or a natural cycle of generational turnover, instead of spelling dangerous instability for a country’s economy or even the entire region.

          Finally, an ad-hoc session of the seminar was devoted to discussing recent events in Egypt, which do not at this stage lend themselves to any comprehensive analysis given the difficulty of predicting how they might unfold. What was seen as emerging clearly from the situation, however, was confirmation that social transitions can progress through various stages quite rapidly, even though the related institutional and cultural framework might require more time to become stabilized. There was a broad consensus among those present as to the urgent priority, in the interim, of offering better economic prospects for large swathes of the population that are currently disappointed by the efforts of leaders and only partly interested in ideological questions and matters of principle.

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