North Africa's export economies and structural fragility: the limits of development through European value chains

Shamel Azmeh and Abeer Elshennawy

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: Over recent decades, three North African economies – Tunisia, Morocco and Egypt – have been regional pioneers in adopting integration in global value chains as a path to economic development and transformation. Reflecting their geographical proximity to Europe, preferential access to the EU market, and large wage gap between them and European economies, each have emerged as important locations for labour-intensive activities in European value chains in the garments, electronics and automotive sectors. Reflecting the range of incentives offered, the coastal areas in the three economies witnessed a relatively large influx of foreign and domestic investment. As a result, the three economies experienced important economic transformation processes with an increase in their manufacturing sectors, manufacturing jobs and manufactured exports. Notwithstanding this relative success, the reliance on low-cost labour as a source of competitive advantage, in addition to these economies and their firms’ weak position in European value chains, has limited the wider economic and social benefits of this growth and also left these countries in a structurally fragile position vis-à-vis shifts in the European market. This fragility was illustrated in recent years following the global economic crisis and the European debt crisis on one hand, and the protest movements of the Arab Spring on the other. In recent years, the exhaustion of this low-cost platform model has driven a divergence in the three economies with Morocco succeeding in upgrading its position in a number of European value chains while Egypt and Tunisia have been forced to maintain competitiveness though successive currency devaluations.

JEL-codes: J01 L81 N0 R14 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2020-12-01
New Economics Papers: this item is included in nep-ara, nep-int and nep-isf
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