21 September 1994

Doc. 7157

1403-19/9/94-2-E

CONTRIBUTION

of the Committee on Economic Affairs and Development

to the debate of the Assembly

on co-operation in the Mediterranean basin

by Mr PAVLIDIS,

Greece, Group of the European People's Party


Sustainable development in the Mediterranean

I. Introduction

1.       The purpose of the present draft report is to provide a picture of the current economic challenges facing the Mediterranean region, and to point to ways in which they can be tackled. It builds largely on the conclusions reached at the March 1993 Assembly Colloquy "The Mediterranean: Environment and Sustainable Development" held in Valletta, Malta, and will, naturally enough, focus on economic aspects raised on that occasion, while leaving remaining ones to other Assembly committees concerned. The Assembly's debate on Mediterranean co-operation will be held in the autumn of 1994, and this opinion of the Committee on Economic Affairs and Development will be one of several committee contributions to it, under the overall responsibility of the Committee on the Environment, Regional Planning and Local Authorities.

2.       This opinion also takes into account the results of the Symposium held by the Council of Europe's North-South Centre in January 1994 on the theme "Transmediterranean Interdependence and Partnership". Finally, it is inspired by the Third Conference on Mediterranean Regions held in Taormina, Sicily, in April 1993, although that event will mainly be covered in the report by the Assembly's Committee on the Environment, Regional Planning and Local Authorities.

3.       Whilst numerous Assembly reports, conferences and other initiatives taken over the years have dealt with the Mediterranean issues, the colloquy held in Valletta reflected a growing concern by the Parliamentary Assembly with the increasing urgency of this theme. Outstanding experts and political representatives participated at the colloquy, which yielded a very rich result.

4.       Its main conclusion ─ one might indeed call it the "Message of Malta" ─ was that a true partnership is urgently needed among all the countries and regions bordering the Mediterranean, so that they may together master the region's many critical problems and realise its great, but so far largely untapped, potential.

II. The Mediterranean ─ a focal point in the world

5.       The Mediterranean derives its name from the ancient belief that it indeed formed the centre of the world. This still holds true in many respects. The Mediterranean has always been a geopolitical arena of the first order. Its strategic importance is explained by its unique geographical position. It links three continents: Europe, Asia and Africa. For Europe, the Mediterranean is not only the gateway to the Middle and Far East, but it has for centuries been a source of cultural enrichment.

6.       The Mediterranean is a region where the North and the South meet, where at least three of the world's major religions co-exist and will continue to do so ─ and where the demographic, migratory and environmental problems very much reflect those of the world at large. Nearly twenty countries surround the Mediterranean. Some are poor, such as Egypt, with a yearly per capita income of only $610, while others are among the wealthier in the world, especially along its northern rim.

7.       In addition to the North-South division, the Mediterranean countries also differ widely in size, economic structure and resource endowment. They have, furthermore, followed different growth and development strategies over the past thirty or so years. Some have changed policies quite drastically, particularly in the fields of trade, agriculture and industrialisation.

8.       Even though the countries in question show disparate economic, political and cultural characteristics, groups among them at the same time share similar problems and prospects due to geographical proximity and a common heritage. Today economic and political, more than historical, ties link many of the non-European Mediterranean countries to Europe.

III. Economic characteristics

9.       The Strait of Otranto between Italy and Albania marks a striking income gap. The contrast with southern and eastern Mediterranean countries remains substantial and is even growing in the western half of the basin owing to the progress achieved in Italy and the Iberian peninsula and the difficulties prevailing in North Africa.

10.       Southern Europe. As members of the European Union, Italy, Greece, Portugal and Spain are among the wealthiest and most developed countries in the world. Together with the Mediterranean part of France they share a certain, partly undefinable, kinship distinguishing them from more northern European countries, possibly linked to the relatively late arrival of capitalism and industrialisation. Other European countries in the Mediterranean region are joining this group from the economic development point of view, such as Turkey, Malta and Cyprus.

11.       The above countries experienced relatively high economic growth in the decades after the war: 6% to 7% during the 1960s and 4,5% to 6% during the 1970s. Agriculture underwent significant development, and the portion of the labour force employed in agriculture fell sharply. The most visible result of the changes have been in the change of production. Specialisation has become apparent, serving on the one hand to keep food prices low and, on the other, to develop profitable crops (fruits and vegetables) and meat production for local markets. Trade with the rest of the European Union is generally in surplus for agricultural products and in deficit for industrial products. Spain and Italy in particular have succeeded in establishing a more diversified structure in their exports, and have greatly increased the proportion of high technology goods sold abroad.

12.       At the same time, while industrialisation was rapid especially in urban areas, it was not enough to provide jobs for the sizable manpower released from the agricultural sector due to mechanisation and larger holdings. Urban economic activity continues to be largely based on small artisan units, often family-run, a large private service sector and an often considerable public administration. This development has been accompanied by a strong expansion of the informal economy.

13.       Non-European countries around the Mediterranean. The non-European countries around the Mediterranean are today experiencing the same profound transformation of their economies and societies as did their northern counterparts some decades ago. One main difference lies in the accelerating population, which has doubled or even tripled in some cases within a quarter of a century. Urbanisation has been very rapid. Agriculture is no longer the chief activity, and industrialisation has taken hold. The development of modern infrastructure and services has sometimes been impressive, and education has made spectacular advances. Economic growth, more or less stable for large parts of nearly two decades, has led to an improvement in average incomes, leading to increased consumption of manufactured goods and modern services. Ways of life have been transformed when the old social structures are being challenged, for instance as concerns the role of the family and of women in society.

14.        In a number of countries along the south and east of the Mediterranean, however, agricultural production has not risen in proportion to the needs of growing populations, leading to high food dependence. Furthermore, consumption and investment have in many of these countries come to depend heavily on transfer revenues from abroad. Here development has not yet succeeded in integrating the majority of the population into the economic mainstream.

15.       Although the state has been a major agent of economic development and social change in these countries, it has not always managed to remodel the economy and society in the desired fashion, nor has it secured control of the processes of change itself, as the situation in for instance Algeria bears witness to. The state may have intervened heavily in investment and production, but this does not of and by itself guarantee a favourable climate for new domestic enterprises or for foreign direct investment.

16.       The population pressure often hampers economic development, which is also affected by sudden variations in the prices of food, energy and raw materials, to which should be added the high indebtedness of most countries in the region. Any determined policy of structural adjustment, however necessary, on the other hand risks raising social tension.

17.       While it is for the Assembly's Committee on Migration, Refugees and Demography to deal with the demographic issue in greater detail, your Rapporteur cannot totally refrain from mentioning it, for it has a vast impact on economic development. By far the greatest potential resource ─ and the greatest threat ─ for all the North African states are their rapidly growing population.

18.       The result of this "demographic explosion" is that more than half of the population in, for example, Morocco are under twenty years of age. (During the 1960s the population growth rate of the countries on the southern and eastern rims of the Mediterranean was, in aggregate, 3,3 times that of north-western Europe, while in the 1990s it is anticipated to be seventeen times greater.) The United Nations for its part estimates that by the year 2025 the combined population of Morocco, Algeria and Tunisia will have risen from the present 60 million to 130 million.

19.       The migratory movements, flowing mainly from the south of the Mediterranean basin to its northern shores, is another characteristic of the region, with particular importance for the future economic, and even political, relations among Mediterranean countries. Although this problem is mainly due to the serious economic difficulties faced by the countries of origin, the internal political situation of the countries in question (in particular the lack of democracy) and the growing movement of fundamentalism which produces social unrest, uncertainty and the violation of human rights in many cases, it nevertheless provides additional arguments for the people concerned to seek economic refuge in Europe.

20.       Seen over the whole region, Mediterranean-rim states outside the European Union are projected to increase their population by around 58 million between 1990 and 2000, compared with a growth of only 5,5 million for all the countries belonging to the European Union and EFTA combined. With a doubling of the population occurring in about twenty-five years in these countries, the implications for individual nations are daunting. Egypt will approach the 100 million level by the year 2020, and Algeria and Morocco are likely by that time to have larger populations than France, Italy or the United Kingdom.

21.       Education and employment. A major problem faced by governments of the countries concerned is how to provide adequate education for all the young people and how to create sufficient job opportunities afterwards. Unemployment rates are already very high. The literacy rate has also risen, as has the number of those with a university degree (often from abroad, particularly Europe).

22.       Urban drift and migration. The complications arising from rapid population growth and demand for education and employment are compounded by the added factor of large-scale migration to cities. One major reason for the latter were radical, often politically-inspired changes in traditional agriculture, combined with a neglect of agriculture in favour of head-over-heel industrialisation. Excessive urbanisation has led to an acute lack of housing. Unplanned and uncontrolled shanty towns has sprung up around most cities, with ensuing health hazards and a volatile political climate.

23.       North African governments have responded to these problems in various ways. Attempts have been made to clear squatter settlements, and replace them with low-cost housing. Governments have also encouraged the migration of workers to other countries, especially in Europe.

24.       The environmental implications of this kind of population growth are considerable. Egypt, for instance, is 96% desert, while only 4% can be irrigated. Meanwhile, urbanisation leads to the destruction of 1,5% of the fertile land of the Nile valley each year.

IV. Prospects for economic development

25.       The potential for economic growth around the Mediterranean is as considerable as is the damage to such prospects that could so easily be caused by tension and conflict. The Mediterranean of antiquity was the perhaps wealthiest region in the world. Today, with the new peace agreement between Israel and the PLO and the promises for trade and exchanges that flow from it, that dream could again be realised.

26.       However, the prospects for sustainable economic development of the Mediterranean region are jeopardised by a number of circumstances some of which may at first sight seem less related to economics. Thus, political instability and the absence of a democracy in a number of countries frighten existing or potential investors and dim prospects for economic growth. In many North African countries fundamentalism and armed extremism present a major threat to the existing political order. In Algeria they have largely paralysed society politically, socially and economically.

27.       Structural reform is particularly necessary in many countries along the southern and eastern rim of the Mediterranean, but even the more developed countries to the north will not be able to avoid it either. (In fact, it is a worldwide process affecting even the most developed OECD countries.) Structural reform takes many expressions, such as trade liberalisation, reduction of public sector expenditure and the public control of the economy.

28.       Although the business sector, including services, is likely to be stimulated by privatisation and trade liberalisation, they form only a limited part of the economy in the poorer countries along the Mediterranean. In Morocco and Algeria, for example, up to 40% of the economic activity is estimated to lie outside the official economy. The manufacturing sector is generally less than 15% of GDP, except in Morocco, which means that privatisation will have only a moderate effect on the overall economy, at least in the short term.

29.       One consequence of the colonial period was to create a dual agricultural system in northern Africa. The traditional sector (about four-fifths of the land) is largely devoted to peasant agriculture production of cereals on holdings of five to ten hectares. Export crops, such as citrus and olive oil, are grown in the modern sector with land holdings of more than fifty hectares, generating up to 80% of export revenues.

30.       There is fear that water demand for urban and industrial use will eventually starve agriculture of this precious resource, with uncertain consequences for already endangered food security, for instance in Egypt. In general, the sector suffers from unpredictable climatic conditions, unequal land distribution and inadequate use of inputs, such as fertilisers.

31.       In general, however, North Africa is relatively well endowed with natural resources. Algeria and Libya are major oil producers, while Morocco, Tunisia and Algeria have much arable and pastoral land. Morocco is the world's largest phosphate exporter, while Tunisia exports moderate quantities of both phosphate and oil.

32.       The North African countries nonetheless face serious economic problems. All the countries except Libya suffer from significant and growing foreign debt. They also have to engage in economic reform essential in order to reduce the role of the public sector in the economy, and to broaden the range of products for export. Oil exporters are at the mercy of price changes in world markets. At the same time, agricultural (for example olive oil and wine) and industrial exporters suffer from tariff and non-tariff barriers in the industrialised world, including Europe.

33.       Diversification of production, including services such as tourism, is therefore greatly needed. This, however, presupposes a trained and educated workforce, and this again requires a new emphasis on education and the realisation of the "human potential". This concept is very much taken up by for example the UNDP, and indeed formed the core theme at the Parliamentary Assembly's April 1993 Colloquy "Human Development and Freedom in the Developing World".

34.       In today's world economy an open-minded, enlightened and flexible workforce can only develop and be maintained in an equally open, democratic society respectful of human rights. If the countries around the Mediterranean are to become as dynamic as, say, those around the Pacific Ocean ─ to which the next century is already predicted to "belong" in terms of wealth ─ then democracy and respect of each other's differences are absolute requirements. To those who may be tempted by totalitarian and absolute answers, one might say that they could well achieve power, but never attain happiness and prosperity for their peoples.

35.       Europe: the dominating trade partner. Most of the non-European Mediterranean countries are highly dependent on Europe's markets. In most of the countries, more than 50% of the exports goes to the European Union. The European Union yearly imports goods worth about $25 thousand million from these countries, and exports for more than $30 thousand million. The European Union trade surplus is manifest across the range of products, exceptions being certain agricultural commodities, leather goods, steel and fertilisers.

36.       The different levels of economic development in the Mediterranean region should logically speaking ─ together with differing production emphases and resource endowments ─ provide a stimulus to trade and cross-investment. There exist, however, a number of problems:

      ─ po       or infrastructure in transport and communications also hampers exchanges;─

      ─la       ck of access to markets: the areas where the southern countries are the most competitive, such as agricultural products or textiles, are also among the most protected sectors in the European Union. Trade barriers also hamper European and extra-European manufacturing investment, which would otherwise have been eager to take advantage of abundant and low-cost labour. The countries in the south are themselves often too limited in terms of market size and purchasing power to be of interest to foreign investors;─

      ─tr       ade among the countries south of the Mediterranean is very limited compared to its potential, in part due to the fact that many of the products offered for export are the same. This need not by itself inhibit trade among countries, but it does in this region. 37

37.       The Arab Maghreb Union ─ established in 1989 between Algeria, Libya, Morocco, Mauritania and Tunisia ─ aims at the free movement of people, goods and services as well as deeper political, economic and social co-operation. However, the prospects for the AMU to achieve anything like the European Union's "1992" programme of an internal market are compromised by the political instability in some of these countries, and by often strained political relations among them.

38.       If we look more closely at the countries forming the Arab Maghreb Union, we find that they are rather far removed from forming a coherent economic area. On the one hand they are well endowed with natural resources. They possess 3,5% of world oil reserves, 3,8% of world natural gas reserves and 75% of known phosphate reserves. There are ample deposits of lead, zinc, copper, cobalt and manganese.

39.       However, the wealth is very unevenly distributed among the 60 million inhabitants of the area. Libya has an annual per capita income of $US 5310, contrasted with Mauritania's $US 500. Furthermore, trade between the countries of the Maghreb Union amounted to only 2% of total AMU foreign trade. The main trading partner is the European Union, accounting for 70% of total Maghreb trade. Similarly, the European Union's trade with northern Africa is only 2% of its total.

40.       Generally speaking, market access to the richer countries of Europe is vital for the development of the poorer regions around the Mediterranean, but it would of course be greatly helped if they diversified their exports away from areas where importing countries already produce surpluses. The recently concluded GATT Uruguay Round marks definitive progress towards more open trade and should be developed further.

V. Particular problem areas

41.       The combination of rapid population growth and economic development can carry a heavy environmental cost, especially in a region as ecologically fragile as the Mediterranean. Among the areas where continued deterioration will have profound effects also on long-term economic development are:

      ─de       forestation: the combined effect of clearing, overgrazing and excessive use of wood as fuel and building material has caused extensive devastation of forests. It is feared that the present wooded area will be reduced by a quarter by the year 2000, and possibly by half in the year 2025;─

      ─so       il erosion: around half the land in the Mediterranean region is prone to erosion because of a lack of sufficient plant cover. An overall average of some fifteen tonnes/hectare of soil are lost each year. Some Mediterranean regions are losing 1% of their "agricultural land capital" each year;─

      ─ur       banisation: here pressure is considerable. The additional population foreseen in the cities south and east of the Mediterranean basin in 2025 is expected to be equal to the current population of the cities along the northern rim. By 2025 the urban population is expected to increase by a factor of twenty in Libya, nine in Egypt, eight in Algeria and six in Morocco, Tunisia and Turkey. The implications for the amount of arable land available are considerable. In Egypt the crop land per capita is shrinking at 2% per annum. A further significant drop in food self-sufficiency in the Mediterranean region (which is already down from 60% to 30% over the last forty years) appears unavoidable;─

      ─ wa       ter resources: these need to be much better protected. Water consumption in the coastal regions is expected to be as much as 3,5 times higher in 2025 than today. In many areas excessive pumping is already leading to a considerable lowering of the ground water table, causing an infiltration of sea water;─

      ─co       astal areas: these must be better preserved. They constitute a scarce resource, in demand for often conflicting needs such as industry, tourism, harbour facilities, fishing, seawater desalination, or sewage treatment facilities. But they are also the habitat of many plants and animals that need to be preserved. All North African states suffer from marine pollution from ships and oil terminals and tankers. There is also a problem of industrial waste and sewage around manufacturing and processing sites, most of which are located at the coast.VI

VI. Concluding remarks

42.       The stability and prosperity of the Mediterranean region as a whole are essential to those of Europe. The unsatisfactory economic relations and the difference in wealth between the northern and southern rim of the Mediterranean have given rise to a call for a "new Mediterranean policy" on the part of individual countries, but also of various European institutions such as the Council of Europe.

43.       A conference on security and co-operation in the Mediterranean has been suggested. The proposal was supported by the first Inter-Parliamentary Union Conference devoted to the Mediterranean, held in Malaga in June 1992. The CSCM would have as its objective to establish cooperation among all the countries bordering the Mediterranean, in such fields as security, human rights, economic affairs, population and migration questions, the environment and culture.

44.       The already mentioned Third Conference of Mediterranean Regions, organised by the Standing Conference of Local and Regional Authorities of Europe in Taormina, Sicily, in April 1993, was important in the sense that it tried to facilitate direct co-operation between local and regional authorities around the Mediterranean. The conference emphasised the need to strengthen the position of the Mediterranean regions of the northern shore within the European Union and within the framework of east-west co-operation of greater Europe. It also sought to place exchanges between the two shores of the Mediterranean in the context of the North-South dialogue and co-operation. The objectives of cooperation should be, on the one hand, to restore the balance between the regions of the Mediterranean basin through appropriate economic development, improved communications and transport links, and the creation of research networks to pool economic and intellectual resources. The conference came out in strong support of the draft European convention on interterritorial co-operation approved by the Standing Conference in March 1993. The draft convention, it will be recalled, would recognise the right of local and regional authorities to maintain relations with each other also across national frontiers.

45.       It is also worth mentioning in this context the Parliamentary Assembly's European Public Campaign on North-South Interdependence and Solidarity, held in 1988. The central message of this campaign was that all nations depend on each other, and that this interdependence spans the whole range of economic, social, cultural and environmental relations. The campaign not only promoted better North-South relations, but it also led to the creation by the Council of Europe of the Lisbon-based so-called "North-South Centre", whose primary mission is to raise European public awareness of the growing interdependence between Europe and other parts of the world. The Rome Symposium on Transmediterranean Interdependence and Partnership, mentioned at the beginning of this report, was organised by the North-South Centre, and similar initiatives ought to follow. The idea of setting up a Transmediterranean component within the Centre, launched at the symposium, should also be pursued.

46.       In order to help resolve conflicts of economic and other interests, and to ensure economic growth and prosperity for all Mediterranean peoples, we should also place great emphasis on a more institutionalised and intensified dialogue, mainly between North and South. Although the previously mentioned North-South Centre in Lisbon can play an important role toward this end, there is also a need for better co-ordination among existing institutions specialising in different areas of Mediterranean economic co-operation, such as tourism, migration, natural resources, environment and technology. Such institutions should be strengthened, and the exchange of information among them improved. It is the personal wish of your Rapporteur that any new centre that might be created to cover areas not yet dealt with by an existing institute, should be located in a suitable Greek island, such as Rhodes.

47.       Like Italy, the Iberian peninsula is particularly affected by massive migration pressures from North Africa. The labour market in southern Europe can no longer take care of all the newcomers. Migration often provides the only escape from social and economic misery in the countries of origin. It is a cry of despair, and the direct consequence of population growth which has gone out of control.

48.       As this has been dealt with in greater detail by the Committee on Migration, Refugees and Demography, the Rapporteur confines himself to pointing to its considerable implications for economic development, both in the emigration and immigration countries. This was also highlighted within the committee, especially by its Spanish members.

49.       The hope for the region lies in enhanced co-operation among all the countries belonging to it. This presupposes peace, but also democracy and human rights. Strategies for sustainable development need to be drawn up at national and regional level. The United Nations "Agenda 21" ─ contained in the final document of the United Nations Conference "Development and Environment" held in Rio de Janeiro in the summer of 1992 ─ is of particular importance, especially the chapters dealing with an integrated approach to the planning and management of land resources, the protection of oceans, seas and coastal areas, and the rational management of living resources. The Mediterranean Action Plan, also known as the Blue Plan, sets out more detailed plans for the region, and was also very much highlighted at the Malta colloquy.

50.       The economic concerns in the various countries around the Mediterranean largely reflect the divide between North and South in the world at large. A renewed commitment is required on Europe's part that it remains committed to bridging this divide.

51.       In order to promote economic development in the region we should also take into consideration the particular features of its many large and small islands. These should be given special attention since their economic development, particularly as regards tourism, is closely related to the protection of the sea and to the preservation of their rich cultural heritage in architecture, town planning etc.

52.       As Mr Miguel Martínez, President of the Parliamentary Assembly, said in his opening address at the previously mentioned international Symposium on Transmediterranean Interdependence and Partnership in Rome, held last January: "There is nothing predestined about the division of the world into rich and poor, developed regions and underdeveloped. If the Mediterranean area is to recover its unity, all its component countries need to be involved in protecting security, peace and the environment, and in its economic and social development. All must apply themselves to extending the Mediterranean democratic area."

53.       Your Rapporteur fully supports this idea. Within the Council of Europe, the continent of Europe should develop dialogue and co-operation with the southern shore of the Mediterranean as a matter of urgency.

      Reporting Committee: Committee on the Environment, Regional Planning and Local Authorities (Doc. 7153).

      Reference to committee: Doc. 6894 and Reference No. 1891 of 3 September 1993.

      Contribution approved by the Committee on Economic Affairs and Development on 7 September 1994.