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Hubs and networks in the Mediterranean basin: A path to sustainable growth

Palermo, 18/03/2016 - 19/03/2016, Aspen Mediterranean Initiative
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The large trade and financial flows across the Mediterranean region and the Middle East are major opportunities for economic recovery. They are based mainly on the new energy networks (from both conventional and renewable sources) and the expansion of the Suez Canal, in addition to the persistent role of Gulf investors (particularly through sovereign wealth funds). There are certainly significant obstacles to growth, starting with volatile commodity prices linked to greater investor caution than in the recent past. And there are also the uncertainties of the political and security environment, which however do not necessarily block the dynamics of investments in certain sectors, such as energy.

The situation in Libya is having a serious impact on its neighbors, creating a new rift in South-South interconnections on the southern shore of the Mediterranean. This is likely to aggravate existing fragmentation in the region. Nevertheless, there is also great potential for integration, especially of energy and telecommunications, making it possible to surmount existing bottlenecks. We tend to see demographic pressures on the entire southern shore of the Mediterranean as a matter of serious concern in the context of migration flows; if growth processes are triggered however, demographics can actually create the basis for strong commercial interchange.

The benefits of the special regulations applied to the Suez Canal zone are of great interest to other countries. It remains to be seen whether the consequent commercial and financial advantages will spread through the rest of the national economy and the region in general. A model of sustainable development definitely requires that profits be widely distributed, driving economic growth, innovation, and – over time – real social progress. This applies to all the countries in the region that are rich in natural resources but with little economic dynamism. In this context, hub cities or special manufacturing zones can play an important role as drivers and connectors with the global economy.

In the current international situation, major investors are particularly selective in setting priorities for large infrastructure projects. It is therefore even more essential to create favorable business conditions with effective partnerships among governments, international organizations and guarantee funds, and private business. Despite widespread distrust at the most ambitious initiatives at thet macro-regional level, even specific projects can lead to synergies between local projects and large interconnections (energy, communications, retail chains, water and agro-food sector etc.).

Technological innovation is a great multiplier of growth and potential sustainable development, also in terms of the quality of life in major urban agglomerations that are undergoing tumultuous modernization processes. New technologies are making innovation easier and consumer use arrives sooner than ever. These phenomena are increasingly decentralized and in many ways more democratic. Use of new manufacturing production models (3D printing in particular) can also avoid the problems traditionally tied to pollution caused by invasive production and industrial facilities, limiting their negative impact.

To fully exploit this opportunity, local actors still need to access global networks of know-how and therefore adopt an open approach on the international level. In this sense, cultural openness and adoption of digital tools should go hand in hand and reinforce each other.

As regards funding sources for the modernization of the business environment, the banking sector is not always willing to invest in innovation. In this sense, a greater contribution of venture capital to promote the growth of innovative projects (from the level of startups) is important.

The various conflicts in the Middle East – to a certain extent interconnected – inevitably affect the business environment and create a climate of uncertainty, even in countries not directly hit by acute crises. Local and regional actors (both traditional and non-state), as well as external powers (influential if only because they exercise a kind of veto on possible negotiating outcomes), are all particularly entangled in the civil war in Syria. New regional balances have yet to clearly emerge around the epicenter of the Syrian crisis. Moreover, many governments now tend to see their neighbors’ instability as an opportunity to exploit to their advantage, either directly or by proxy, feeding a vicious cycle of conflict.

To put an end to the most acute crises (one of which is Libya) the combined efforts of many international actors are indispensable, both for immediate stabilization to respond to humanitarian needs and for the activation of gradual processes of inclusion and political reconstruction. A major challenge is the construction of more efficient and legitimate state structures, in virtually the entire Arab world. In the cases of Syria, Iraq, and Libya to a certain extent, this implies a number of very sensitive issues, from possible border changes to respect of minorities or groups with specific cultural identities (now politically mobilized and often armed). In a broader sense, internal adjustments to the new social and economic forces are underway in almost all states of the region – even those with more solid and developed institutions.

 

Even the models of governance that many deem valid for economic success, such as those of the Gulf monarchies, are hard to duplicate – given that those countries’ political and social stability is possible thanks to their considerable financial resources. Institutional settings are necessarily adapted to historical and local realities, but social and institutional capital are a crucial component of political and social stability as well as economic growth.

It is important to look carefully at the threat posed by ISIS. This group, with its now partially decentralized structure, adopts a globalized – rather than a truly traditional Arabic or Islamic – rhetoric, its messages seeking a global audience. In the face of behaviors and forms of communication openly celebrating violence, the dilemma is literally whether or not to tolerate radical intolerance in public discussion. This is a problem that the media need to handle with great caution and common sense.

In order to understand the reaction of Arab public opinion to these phenomena (and the relative success of ISIS in recruiting), we need to remember what Arabs are asking of their governments. Briefly, they are demanding tangible results in social and economic fields in exchange for political legitimacy. Partly due to events following the Arab spring, the very concept of democracy has acquired negative connotations for large sections of the Arab population. Today, we need to link democratic ideals closely to social justice; otherwise, we will lose further ground against the nihilistic rhetoric of radical movements.

ISIS has also unearthed an unresolved historical and ontological question, i.e. a specific religious view of politics (embodied by the Caliphate and the Islamic State) intertwined with an ongoing crisis in many parts of the world: the crisis in relations between political authorities, the economy and civil society (regarding both individual and collective rights and obligations). The ISIS challenge in the region would be ineffective if there were solid and fully legitimate government structures. We should keep in mind that the movement is riding a long wave of discontent, instability and state collapse.

In the face of these threats, there are shared objectives on which a common platform can be built: socio-economic development, energy security, and environmental sustainability. These need to be pursued cooperatively and on a large scale, synthesizing both universal values and concrete interests. Especially for countries such as Libya and Tunisia, Europe – and Italy in particular –– can play a constructive role as long as the specific differences between the countries of the southern shore are acknowledged. In doing so, we need to take advantage of our past experience in the realm of economic cooperation and diplomatic relations, applying “lessons learned” from both partial successes and mistakes.