CAPITAL MOBILITY IN NORTH AFRICA by alicejenny

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									Economic Commission for Africa
Office for North Africa




                      CAPITAL MOBILITY
                        IN NORTH AFRICA




       Twenty Third Meeting of the Intergovernmental Committee of Experts (ICE) - Rabat, Morocco 10-13 March 2008   1
Economic Commission for Africa
Office for North Africa




                      CAPITAL MOBILITY
                        IN NORTH AFRICA




       Twenty Third Meeting of the Intergovernmental Committee of Experts (ICE) - Rabat, Morocco 10-13 March 2008   2
  Economic Commission for Africa
  Office for North Africa


Introduction
• Importance of capital flows liberalization in the region
   – Addressing the development challenges of the region
     means looking at all components of economic growth,
     investment/FDI is one of these components
   – Moving towards regional integration is recognized as
     a necessary process in today’s increasingly
     globalized world, intra-regional flows of capital are a
     component of regional integration

• Challenges
   – Put in place a favorable environment for intra
     regional trade and investment and a minimum of
     harmonization
   – Understanding the reasons of low capital mobility
         Twenty Third Meeting of the Intergovernmental Committee of Experts (ICE) - Rabat, Morocco 10-13 March 2008   3
       Economic Commission for Africa
       Office for North Africa


                                     Capital flows evaluation
Low intraregional flows: US$900 million in
2005, less than 6% of total FDI in NA, 0,1%
of GDP, ¼ portfolio vs ¾ green
                                                                                     Part des Flux de Capitaux intra régionaux
                                                                                       en 2005 selon l'origine des Flux en %
Stock exchanges in Egypt and to a lesser
extend Morocco are major channels                                            14,00

                                                                             12,00

Major sectors                                                                10,00

        Energy                                                                8,00

        Banks                                                                 6,00

        Telecommunications                                                    4,00

        Construction and civil works                                          2,00

        Tourism                                                               0,00
                                                                                      Alg    Egy      Lib   Mar    Mau      Sou    Tun   Total
                                                                                                                                          AN

Data limitations and need of data                                                     Flux Entrants         Flux Sortants         Flux Totaux
harmonization and adaptation


              Twenty Third Meeting of the Intergovernmental Committee of Experts (ICE) - Rabat, Morocco 10-13 March 2008                         4
   Economic Commission for Africa
   Office for North Africa


Environment
• Fiscal exonerations in the 7 countries are different and
  depend on the fiscal classification
• Similar kind of advantages in all countries
• No preferences for the north African countries in the
  investment codes
• Some blocking elements in the investment codes
• weakness in infrastructure
• Public and corporate governance not yet generalized
• Inadequate employment/training relationship
• Persistence of red tape
• Resistance to the one desk concept
• A posteriori controls not yet fully accepted
          Twenty Third Meeting of the Intergovernmental Committee of Experts (ICE) - Rabat, Morocco 10-13 March 2008   5
  Economic Commission for Africa
  Office for North Africa


Financial system

• Different levels of financial systems development
• More banking activity than financial market
• The Stock exchanges in Egypt and Morocco are major
  channels: Capitalization in Egypt is twice more important
  than in Morocco and about 20 times more important than
  in Tunisia or in Sudan
• Rapid growth of stock exchanges in the region
• Importance of the role of Investment financing Banks
  (IFB)


         Twenty Third Meeting of the Intergovernmental Committee of Experts (ICE) - Rabat, Morocco 10-13 March 2008   6
  Economic Commission for Africa
  Office for North Africa


Advantages and risks of capital flows liberalization
Risks

• Intra-regional capital mobility is not an end in
  itself, it must serve clear and coherent
  development objectives

• If managed properly it can promote growth, if no
  capital mobility may increase risks of
  macroeconomic volatility




         Twenty Third Meeting of the Intergovernmental Committee of Experts (ICE) - Rabat, Morocco 10-13 March 2008   7
  Economic Commission for Africa
  Office for North Africa

Advantages and risks of capital flows liberalization
Advantages

• Main theoretical Arguments for Capital Mobility
  – Lifts the constraints on domestic investment
    imposed by low national savings
  – Provides access to Technological know-how
  – Allows countries to smooth consumption over
    time
  – Permits domestic residents to diversify risks
    through holding diversified international portfolios
• The composition of capital flows as well as domestic
  economic conditions are important in determining
  whether or not capital mobility has a positive impact
  on an economy

         Twenty Third Meeting of the Intergovernmental Committee of Experts (ICE) - Rabat, Morocco 10-13 March 2008   8
   Economic Commission for Africa
   Office for North Africa


Capital mobility experiences

• UEMOA: interesting achievements but results are not at
  the level of the expectations Causes: a difficult
  sociopolitical environment, the non-realization of the
  privatization programs, the weakness of the stock-
  exchange culture and the lack of harmonization of the
  assets tax system

• Turkey: opening to the international competition without
  having considered the lack of adequate financial
  structures engendered a financial crisis




          Twenty Third Meeting of the Intergovernmental Committee of Experts (ICE) - Rabat, Morocco 10-13 March 2008   9
    Economic Commission for Africa
    Office for North Africa




ECA Activities on the theme
• The theme of ERA Economic Report for Africa in 2007
  was FDI
• A number of meetings were organized by ECA and by
  SRO-NA
• One regional study and 5 country studies were prepared
  by SRO-NA
• A publication about capital mobility in North Africa in the
  final step
• A meeting of experts was organized by SRO-NA to
  review the publication draft and to add reflections



           Twenty Third Meeting of the Intergovernmental Committee of Experts (ICE) - Rabat, Morocco 10-13 March 2008   10
    Economic Commission for Africa
    Office for North Africa


Organisation of last meeting
• Casablanca (Morocco) 17-19 January 2008 in
  partnership with « Bourse de Casablanca »
•    WAEMU and Turkish experiences in the field of capital
    flows liberalization were presented
• 46 participants
   – 7 State members of SRO-NA: Algeria, Egypt, Libya,
     Morocco, Mauritania, Sudan and Tunisia
   – Organizations and agencies of UN system ,
     international and regional organizations
•   5 work sessions, a round table and a synthesis session



           Twenty Third Meeting of the Intergovernmental Committee of Experts (ICE) - Rabat, Morocco 10-13 March 2008   11
   Economic Commission for Africa
   Office for North Africa



Recommendations

1- Collection, publication and harmonization of data and analyses
2- Sequenced and careful programming of capital lows liberalization
3- Continuation of the re-energisation of stock markets and banking
   systems of the region
4- Intensification of the training of the specific labor force needed for
   the capital mobility development
5- Implementation of financial policies which take into account every
   country specific needs and harmonization of these policies at the
   regional level
6- Grant a particular place to SMEs in the national and regional
   liberalisation strategies




          Twenty Third Meeting of the Intergovernmental Committee of Experts (ICE) - Rabat, Morocco 10-13 March 2008   12
  Economic Commission for Africa
  Office for North Africa



Recommendations
     1- Collection, publication and harmonization of data and analyses

         •       Data bases, information systems (we’re not starting from
                 scratch: build on national initiatives and ECA-NA’s ORI)
         •       Networking/knowledge management
         •       Private sector human resources needs
         •       Sectors to be encouraged: growth and employment
         •       Potential
         •       Highlight barriers to intra-regional investments and propose
                 ways to remove them
         •       Better understand islamic banking and its implications
         •       Portals, web sites
         •       Watch tools and early warning systems




         Twenty Third Meeting of the Intergovernmental Committee of Experts (ICE) - Rabat, Morocco 10-13 March 2008   13
   Economic Commission for Africa
   Office for North Africa



Recommendations

2- Sequenced and careful programming of capital lows liberalization

          •   Monitoring and evaluation
          •   Involve and convince all stakeholders Watch systems
          •   More studies on the impact of existing intra-regional flows
          •   Explore and propose the conditions for liberalizing capital
              accounts for intra-regional flows




          Twenty Third Meeting of the Intergovernmental Committee of Experts (ICE) - Rabat, Morocco 10-13 March 2008   14
   Economic Commission for Africa
   Office for North Africa


Recommendations…
3- Continuation of the re-energisation of stock markets and banking
   systems of the region

          • Banks
              – Harmonize rules and legislations
              – Encourage investment banks (BFI)
              – Support and encourage UMAs trade and investment
                bank
          • Stock exchanges
              – Harmonize rules and legislations
              – Encourage bilateral cooperation, exchange of
                experiences
              – Encourage firms to raise capital in other countries




          Twenty Third Meeting of the Intergovernmental Committee of Experts (ICE) - Rabat, Morocco 10-13 March 2008   15
   Economic Commission for Africa
   Office for North Africa



Recommendations
4- Intensification of the training of the specific labor force needed for
    the capital mobility development

          • Responding to human resources needs of the private sector
          • Strengthening governments institutional and governance
            capabilities
          • Continuous training of all stakeholders (governments, private
            sector, especially SMEs, etc.)
          • There is technical expertise but need for NA-specific know-
            how, particularly in terms of management and risk analysis




          Twenty Third Meeting of the Intergovernmental Committee of Experts (ICE) - Rabat, Morocco 10-13 March 2008   16
   Economic Commission for Africa
   Office for North Africa



Recommendations…
5- Implementation of financial policies which take into account every
   country specific needs and harmonization of these policies at the
   regional level
        • No standard approach
        • Need for progressive approaches: quality>quantity
        • Cooperation and exchanges within NA and with others
          (Africa, GCC, EU)
        • Harmonization and convergence
        • There is a minimum common set of recommendations for all
          countries but we can start with sub-regional groups for some
          types of cooperation
        • Address the needs of special groups (SMEs, migrants)
        • Monitoring and evaluation tools
        • Accountability
        • Accelerate all aspects of regional integration, only way to
          benefit from globalization
        • Remove barriers, reduce processing time of requests
        • Provide judicial safeguards aimed at resolving conflicts that
          can arise from capital mobility
          Twenty Third Meeting of the Intergovernmental Committee of Experts (ICE) - Rabat, Morocco 10-13 March 2008   17
   Economic Commission for Africa
   Office for North Africa




Recommendations
6- Grant a particular place to SMEs in the national and regional
   liberalisation strategies of intra regional capital flows

          • Promote SME- oriented venture capital tools
          • Policies encouraging trans-border investments
          • Financial tools addressing the specific needs
          • Listing rules encouraging participation in stock exchanges
          • Studies for better understanding challenges and identifying
            solutions (follow-up UME’s study)
          • Capacity building and continuous training




          Twenty Third Meeting of the Intergovernmental Committee of Experts (ICE) - Rabat, Morocco 10-13 March 2008   18
Economic Commission for Africa
Office for North Africa




                                             Thank you
                                               Abdelilah Ouaqouaq
                                                ouaqouaq@un.org




       Twenty Third Meeting of the Intergovernmental Committee of Experts (ICE) - Rabat, Morocco 10-13 March 2008   19

								
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