tepav The Economic Policy Research Foundation of Turkey What s the problem with economic integration in the MED? Güven Sak Washington DC, 11 June 2013
Connectivity in the Mediterranean Slide 2 Jenin Industrial Park in the West Bank An institutional dialogue, problem solving and confidence building mechanism among Palestinian, Israeli and Turkish business communities TEPAV executes and coordinates the activities of the Ankara Forum on behalf of TOBB Technical reports, network coordination and negotiations An industrial estate in Jenin (from Gaza to Jenin) Conducive environment not in all Palestine but in an island within Palestine. Private peace initiative from the outset.
Connectivity in the Mediterranean Slide 3
Connectivity in the Mediterranean Slide 4 Framework Economic integration is low in the MED Three MEDs: Southern, Eastern, Northern South MED is well integrated with North but not among itself? Why low level of integration? Political disputes limiting economic activity Why important? Market based policy framework is important Zero problems policy Connectivity is important No south to south transport corridors Role for transatlantic cooperation? Focus on the policy dialogue Focus on democratization More inclusive G20 Agenda South to South transport corridors
Connectivity in the Mediterranean Slide 5 A successful regional integration case: Customs Union Agreement between Turkey and the EU Share in exports of the region and level of industrialization (1996) 35% 30% Country s share in total manufacturing exports of the region Bubble size: country s manufacturing exports (1996) Russia 25% 20% 15% Turkey Israel 10% Saudi Arabia Greece Romania 5% 0% Bulgaria Egypt Algeria Azerbaijan 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Share of manufacturing in Country s total exports (%) Source: UN COMTRADE, TEPAV Calculations c
Connectivity in the Mediterranean Slide 6 Turkey has become the largest manufacturer in the region after the CU agreement Share in exports of the region and level of industrialization (2010) 35% 30% Country s share in total manufacturing exports of the region Bubble size: country s manufacturing exports (2010) Turkey 25% Russia 20% Israel 15% 10% UAE Romania Egypt Greece Bulgaria Serbia Moldova Armenia Georgia 5% Qatar Kazakhstan Tunisia Jordan Malta 0% 0% Azerbaijan 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Share of manufacturing in Country s total exports (%) Source: UN COMTRADE, TEPAV Calculations
Connectivity in the Mediterranean Slide 7 South Mediterranean s economic development is more important than ever for Turkey 100% Share of geographic regions in Turkey s exports 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 30,4% 25,9% 28,3% 27,9% 27,1% 28,1% 26,6% 13,2% 17,8% 23,7% 26,1% 26,6% 25,7% 35,3% 56,4% 56,3% 48,0% 46,0% 46,3% 46,2% 38,2% 2000 2007 2008 2009 2010 2011 2012 Others MENA EU-27 Source: Turkstat and TEPAV Calculations
% of total MED GDP Intra-regional disparity in the Mediterranean Connectivity in the Mediterranean Slide 8 GDP per capita in the Med countries (2011, current USD) 41.141 26.389 31.296 20.852 22.055 29.289 33.115 2.803 10.311 10.609 2.999 3.112 4.232 5.694 12.778 Syria Lebanon Turkey Cyprus Israel Malta Greece Spain Italy France Morocco Egypt Tunisia Algeria Libya 13,6 79 7,4 Source: World Economic Outlook Database
Connectivity in the Mediterranean Slide 9 Intra-south trade has remained small relative to the rest of the region and other trading blocks Share of intraregion import in total processed industrial supplies (BEC 22) import of the region, % 2000 2010 65.1 59.2 19.4 17.5 20.0 21.1 2.1 4.5 3.8 3.5 S. Med. E. Med S. Med: Morocco, Algeria, Tunisia, Libya, Egypt E. Med: Israel, Lebanon, Syria, Turkey, Cyprus N. Med: France, Greece, Italy, Spain, Malta N. Med. ASEAN EU-15 Source: BACI database,tepav calculations
Connectivity in the Mediterranean Slide 10 South is more connected with the North; intra-south trade is rising, though still low Share of intraregion import and import from North Mediterranean in total processed industrial supplies (BEC 22) import of the South Mediterranean, % South North 40.03 37.41 33.08 28.33 0.34 2.90 3.35 4.55 1998 2002 2006 2010 Source: BACI database,tepav calculations
Connectivity in the Mediterranean Slide 11 Is it possible to increase connectivity solely through FTAs? Regional agreements Bilateral agreements
Connectivity in the Mediterranean Slide 12 Med has become a main transcontinental transit route
Connectivity in the Mediterranean Slide 13 North Mediterranean has a well developed maritime transport infrastructure Major ports in the North Mediterranean
Connectivity in the Mediterranean Slide 14 Lack of maritime transport infrastructure impedes regional economic integration in the South Hubs that mainly serve intercontinental traffic Almost no major ports in the South
Connectivity in the Mediterranean Slide 15 Land connectivity is also weak in the South Railways Virtually none in Libya No connection over Sinai Operation and compatibility problems in Morocco, Algeria and Tunisia
Connectivity in the Mediterranean Slide 16 South Mediterranean countries rank low in logistics performance indicators Mediterranean countries rank in the Logistics Performance Index 136 125 96 92 70 42 23 20 12 56 50 41 35 27 Greece Malta Italy Spain France Libya Algeria Lebanon Syria Egypt Morocco Tunisia Cyprus Turkey Source: World Bank, Logistics Performance Index
Connectivity in the Mediterranean Slide 17 How to overcome transport bottlenecks? Cross-country cooperation in Infrastructure Border crossings and customs Road standards Legal regulations National project and investment program design Transport corridor approach Corridor management agencies Joint investment funds Policy reform for Public private partnerships Inter-agency partnerships within governments
Connectivity in the Mediterranean Slide 18 Innovative approaches: 2010 Afghan Pakistan Transit Trade Agreement (one way corridor from Afghanistan to India)
Samsun Mersin- Haifa Aqaba Trade Corridor New transport corridor emerging after Syria civil war Long-run opportunity to improve Aqaba port & create an alternative to potential instability in Suez Connectivity in the Mediterranean Slide 19
Connectivity in the Mediterranean Slide 20 Conclusions Regional integration has a way to go in the MED Bilateral FTAs not much of a help Impediments to trade and investment are obvious Political problems between countries/sw Asia type No policy reforms/need for zero problems policy No major transport corridors Role for US policy in the region:transatlantic nature Inclusive governance Market based policy reforms Connectivity enhancing transport infrastructure