Transcript Libya-Tunisia

Libya – Tunisia : A priviledged axis for economic
integration
Emanuele Santi (AfDB), Mohamed Chemingui (UN ESCWA)
Preferential Trade Agreements and Regional Integration in the Arab World,
Tunis , December 5th 2012
Outline of the presentation
Introduction
 Main Opportunities
 GEM Model simulations – Preliminary
Findings
 Policy recommendations

Overview

Geographic proximity

Language

Similarities and historical relations between the two populations

Complementarity (oil and capital rich vs energy and capital hungry private
sector)

The support and help provided by Tunisians to the Libyan refugees during
their revolution
Overview (cont): Key data

Libya is the 1st non European Export Market, 5th overall

Libya: fourth largest Arab investor in Tunisia. Over 30 Libyan companies
have invested in industry and services (e.g. tourism) in Tunisia generating
over 3.000 jobs

95,000 Tunisian workers in Libya prior to conflict

Over 1,000 Tunisian companies in Libya before the revolution, with
contracts and investments amounting to TND 3.5 billion

Growth differential in 2012/13: Libya 14% vs Tunisia 3%

The Libyan conflict led to estimated .7 GDP decline in 2011
Overview (cont): Linkages
Unemployment
Balance of Payment
GDP Growth
Opportunities: Trade
High complementarities persist
 Tunisian exports on the rise,
….yet illicit trade
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Yet much of it was re-export from Europe
High potential for sustained growth of agriculture
product, cement
Opportunities :Human Resources
and Labor

Libya can absorb around 300,000 new jobs (IOM/ADB study: 40%
returnees have gone back to Libya, 70% of Returnees want to go back):
-Skilled labor (25,4% unemployed)
-Unskilled labor

Tunisia’s specialized skills and Technical Cooperation (Urbanization:
Utilities, Architects, Ingeneers)

Services
- Health: 70% of Libyans come to Tunisia seeking for health care
-Education : Experience of technical cooperation with the GCC countries
-ICT: Technical cooperation experience in Africa and Tunisian companies
provide near shore services to the European countries
Opportunities: Investment

Libyan Investments and Aid to Tunisia (200 Million
USD grant + line of credit)
Tunisia Investments
150 Billion Euro Market by 2020

Towards a path of economic
integration
Deeper economic integration

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Phase 1: Reconstruction
Phase 2: Economic Transition
Phase 3: Deeper integration: towards a single
market/ common economic space
From trust building to reaching mutual benefits
Alternative scenarios for a deeper economic
integration with Libya

Various integration options might be envisaged as part of a stepping up of
the partnership between Tunisia and Libya.

Here, five scenarios are designed and evaluated in a cumulative way in an
endeavor to evaluate and define their intrinsic impact on the Tunisian
economy.

The scenarios carefully assess the impact of the elimination of Tunisia’s
tariffs and approximate the impact that similar measures by Libya will
have on Tunisia.

The third simulation just adds the implementation of a custom union
between both countries to the provisions of the second scenario.

The fourth simulation assumes a reduction in technical barriers to trade
on bilateral trade between Tunisia and Libya in addition to the provisions
of the three previous scenarios..

The last scenario assumes that a FTA between Libya and the EU will be
concluded and its likely implications for Tunisia.
The impacts of deepening economic integration
between Tunisia and Libya: a dynamic CGE model

For the specific purpose of this study, a regional-global dynamic CGE
model has been used rather than a country or bi-national model.

A modified version of the MIRAGE model has been used.

The model has been first calibrated using the latest global dataset: GTAP
version 8 to which a new SAM for Tunisia (built for the purpose of this
study) replaced the one in the initial database.

The SAM for Libya has been also built specially by the team and
integrated to the GTAP database.

The version used here considers four countries or regions: Tunisia, Libya,
USA, EU, and the Rest of the World.
The impacts

The model has been run for the period 2013-2015

Results are presented in average percentage change over the
period 2013-2015

Results are provided for the baseline scenario, where no
changes are expected to occur in terms of economic relation
between Tunisia and Libya, compared to the set of scenarios
for fostering economic integration between both countries
Results presented here reflects impacts on the Tunisian
economy only.

The impacts on GDP and
household’s income
The impacts on trade
Impacts on labor market
Summary of findings

Integration with Libya is expected to provide major economic
opportunities for Tunisia in terms of exports, investments, and reduction
of unemployment and poverty.

The results suggest that Tunisia could not expect major economic benefits
with a simple implementation of a free trade area.

In fact, when the very small tariffs are removed, almost no changes in
sectoral production and employment is expected to occur.

However, when integration will go beyond a simple removal of the
existing tariffs, the impacts become clearly positives in terms of
macroeconomic variables and employment.

The results confirm that both countries, and more specifically Tunisia, are
required to undertake additional reforms to make the process of
integration more beneficial.
Summary of findings (Cont.)

However, the magnitudes of the impacts are small compared with other
initiatives taken by Tunisia such as its integration with the EU.

Two major factors explain the small magnitudes of the gains.

First is related to the high weight of informal activities in both trade and
migration, which is not considered in the present paper for data
limitations

Second is the low level of initial protection imposed by both countries on
their bilateral trade.

The simulations confirm that both countries should go ahead with their
integration through a complete macroeconomic convergence that will
boost benefits ahead from the simple formation of the FTA or a custom
union.
Policy recommendations
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Develop a comprehensive roadmap integrating
removal of tariffs, implementation of customunion, improvement of the logistics for trade, and
macroeconomic and sectoral policies convergence
Review and develop of new systems for managed
migration
Tailored support to Tunisian companies (UTICA) to
improve their trade relationships with Libya
Improve Access to financing
Strengthening regulatory framework to ease
access to investors, right of establishment, etc,
Some caveats

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Libya is not the panacea to all Tunisian problems
Tunisia needs to improve logistics performance
(61st out of 150th LPI) to be “gateway” to Libya
Need to be realistic vs competition