The economic revival of the Arabs starts in a small Moroccan border town

To regain their previous status, the Arabs must rediscover the two things that first made them rich, writes Faisal Al Yafai

Night work at the world's oldest leather tannery in Fez, Morocco. The Arab world must return to the principles that first made it rich, writes Faisal Al Yafai (Nicole Hill / The National)
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Barely a few hundred metres separate the beach in the Algerian town of Marsa Ben Mhidi from the corniche in the next door Moroccan town of Saida. But that distance is a chasm, for the border has been closed for 21 years.

The sea, of course, recognises no such arbitrary border. The coast from Morocco sweeps east in a continuous curve into Algeria. Swim out just a little way from the Marsa Ben Mhidi coast and the strutting young men of Morocco are visible.

The border between the two has been shut since 1994. It is the longest closed border in the Middle East. If and when an Arab economic revival comes, it will have to start in the sleepy border towns of Morocco and Algeria.

The economies of the Arab world face a difficult moment. The aftermath of the Arab Spring in the eastern Mediterranean and the legacy of the invasion of Iraq have created a perfect storm of chaos that threatens the most successful and stable region of the Middle East.

But even beyond the security threat, even before the Arab Spring, the economies of the Arab world were not sufficiently integrated. Protectionism, closed borders and the difficulty of people moving have created barriers to trade in a region that practically invented modern international commerce.

Many of the current woes of the region have sprung from, and can be fixed by, policies and economics. But to do that, the Arabs must rediscover what first made them rich: free trade and free movement.

Arab businessmen like to point out that Ibn Battuta would, today, have immense difficulty journeying from Morocco across North Africa.

Opening up the borders of the region to people and lowering the tariffs that stifle trade would be a welcome first step in recreating a genuinely open, borderless Arab market – indeed, it is an essential step. And the test case for that is Morocco and Algeria.

Morocco and Algeria are the two largest countries in the Maghreb (all of North Africa except Egypt). Yet they barely trade with one another – the total amount hovers around US$1bn (Dh3.6bn).

Nor do they really trade with their neighbours. A report from the African Development Bank a few years ago estimated that only 5 per cent of Morocco's trade was with its neighbours. In Tunisia, the number was even worse, just 3 per cent – a smaller number but, considering that Libya and Algeria border Tunisia, a vast missed opportunity. The stifling of trade between the two biggest countries is symptomatic of a wider stifling of intra-Arab business.

True, there has been some positive movement. In 2013, the Arab Maghreb Union announced the creation of a new investment bank to finance infrastructure projects. But the US$100m pledged, while welcome, is tiny – the combined GDP of the AMU is over half a trillion dollars. Infrastructure financing should be in the order of several percentage points of GDP.

In place of trade comes smuggling. Goods (often subsidised) are cheaper in Algeria than in Morocco, and the smugglers all along the border do relentless trade.

But it is the knowledge that cannot be smuggled. Moroccans have benefited from their proximity to Europe and from the large expatriate population in the Gulf states. Taken together, it has given Moroccans expertise in business that their Algerian counterparts, long closed to the world, cannot match. Opening the borders would allow a genuine cross-pollination of ideas, benefiting both countries.

What happens between Morocco and Algeria would occur, on a greater scale, if borders were opened across the region.

Those countries with large populations, such as Egypt and Yemen, would soon fill labour shortages in regions like the Gulf. Goods that arrived in Basra, in Iraq, could easily make their way across the Levant to Aqaba on the Red Sea or Latakia on the Mediterranean. (It is an oft-quoted, and broadly true, statement that it is more expensive to move goods between two Arab ports than between the Middle East and Europe.)

Free movement must be accompanied by free trade. The business environment across the Arab world is dire.

A few years ago, a paper published by the University of Oxford estimated it would cost 20 times the average income to start a business in Syria and Yemen – two countries where, for different reasons, the state has comprehensively failed. No wonder, then, that so few new companies are created outside of the cities of the Gulf.

Unable to move easily between countries, stifled in creating businesses and hamstrung by red tape, it is hardly surprising that the creative talent of the Arabs has not been adequately developed.

And it is doubly a shame because the greatest benefits to the economies of the Arab world don't need to come from trade with the outside world, but from trade between Arab countries.

Morocco and Algeria are perfect examples of this failure: both trade more with European countries than with each other.

Beyond security, so much of the reasons for economic stagnation are political. The Arabs could start trading with each other again. The only thing stopping them is themselves.

On Twitter: @FaisalAlYafai