FOM Newsletter February 2004
Morocco Week in Review 
February 7, 2004

US Administration Requests Congress to Appropriate US$ 53.8 million in 2005 Financial Cooperation with Morocco
Anti-AIDS NGOs unite in network
Morocco Moves to Enrich Edible Oil with Vitamins A and D
Morocco, US reach compromise in free trade talks
Morocco hosts World Bank round table on managing-for-results
Morocco, a leading country in managing-for-results development, Wolfensohn says
Morocco gets South Korea-World Bank us$ 240,000 donation
New Family Code: protecting women, children and families
Family Code: Morocco Marks Last Stage in Exceptional Legislative and Political Process
Spirit of Fez, US outreach road-show for sacred music festival Morocco-USA
Foreign investment receipts, private loans more than tripled in 2003
Moroccan expats remittances rise by 7.4% in 2003
Locust situation in Morocco is under control
Number of tourists visiting Morocco up by 6% in 2003
Belgian group 'Atelier' to build sea resort in southern Morocco
Family of May Terrorist Attacks Victims Set up Association
Morocco produced 930,000 tons of fisheries worth US$ 600 m in 2003
Morocco's Trade Deficit Worsened by 18.7% in 2003
MENA labor crisis underscores new social contract, political reform

US Administration Requests Congress to Appropriate US$ 53.8 million in 2005 Financial Cooperation with Morocco
WASHINGTON, Feb.03

The US administration has requested the congress to appropriate US$ 53.8 million in financial cooperation with Morocco for the
2005 fiscal year budget. The 2005 appropriation bill transmitted Monday to the congress allocates US$ 20 million for the Economic Support Fund designed to finance micro-finance programs for poorest categories in urban areas, housing projects and basic health services in rural areas. The 2005 budget also includes an amount of US$ 6 million in assistance for development, US$ 20 million in military assistance and another US$ 1.8 million in assistance to military training. The military assistance program will serve to reinforce Morocco's northern costs surveillance capacity.

The US administration is also asking the congress to allocate another US$ 6 million to help Morocco monitor its borders in support of the Kingdom's efforts to face illegal migration and drug trafficking. US Assistant secretary of state for the Middle East and North Africa, William Burns, announced during his visit to Morocco end of last October, that his country will earmark Morocco US $60 million in aid, including US $40 million of non-military aid and US $20 million of military aid. MAP 2004 http://www.map.co.ma/mapeng/eng.htm
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Anti-AIDS NGOs unite in network
Morocco, Health, 1/31/2004

A group of Moroccan anti-AIDS non-governmental organizations have decided to unite in a network to improve the efficiency of their action, the anti-Aids pan-African organization (OPALS Maroc) said Thursday in a release. The NGOs held Monday a constitutive assembly of their network designed to exchange experiences and provide human and material resources to halt the propagation of the disease.
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Morocco Moves to Enrich Edible Oil with Vitamins A and D
3 RABAT, Feb.06

The Moroccan government and the professional association of edible oil manufacturers (APFHMTR) signed on Thursday a framework agreement providing for the enrichment of edible oil with Vitamin A and D3. The health ministry has set the quantities of vitamin A and D3 to be supplemented to oil at 30IU (international units) of vitamin A per gram and 3IU/G of Vitamin D3.

The move, part of the Kingdom's comprehensive and integrated strategy to reduce diseases induced by deficiencies in micronutrients, seeks to reduce Vitamin A-avitaminosis (diseases caused by deficiency in Vit. A), cut the prevalence of Iron deficiency-induced anaemia (sideroprivic) and ensure a permanent supply of Vitamin D. It targets most vulnerable populations, mainly children and pregnant and breast-feeding women.

The strategy also includes food education and the enrichment of other widely-consumed foods. The edible oil manufacturers is paying for the costs resulting from the added substances.

Before the enriched edible oil is put on sale in the coming weeks, the health ministry will stage a media campaign to highlight the importance of eating rich and enriched products which will be marketed with a special label as it is done with Iodine-supplemented salt. © MAP 2004 http://www.map.co.ma/mapeng/news/economy/eco_001.htm
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Morocco, US reach compromise in free trade talks: Two sides find compromise over controversial textile, farming sectors paving way for free trade agreement.
RABAT

Morocco and the United States have reached a compromise over the controversial textile and farming sectors, clearing the way for a free trade agreement between the two countries, the Aujourd'hui le Maroc newspaper announced on Thursday. "A compromise has been found on textiles," Hassan Chami, the head of the Moroccan employers' association, told the daily. "The Moroccan representatives also demanded an exception for the Moroccan farming sector and the American side eventually accepted," added Chami, who is chairman of the General Confederation of Moroccan Businesses (CGEM).

The free trade agreement - the first between the US and a north African country - is designed to eliminate tariffs and other barriers to trade in manufactured goods, agriculture, services and investment between the two nations. Rabat and Washington had originally hoped to thrash out a deal by the end of 2003. But the signature of a final agreement has been delayed until April or May because of differences over key sectors.
Moroccan entrepreneurs have voiced serious misgivings about the impact of US competition on their country's vital textile and farming sectors. And trade unions staged a protest in Rabat in January against the threat they said the planned pact posed to cultural diversity and access to health care in the kingdom.

"Agriculture plays a major role in the Moroccan economy, accounting for up to 18 percent of gross domestic product and nearly 40 percent of jobs, according to figures from the US embassy in Rabat. "The US already exports to Morocco around 91 million dollars in farm produce
- mostly wheat and corn - according to 2001 figures and is pushing Rabat to lower its tariffs to further exports.

Precise details of the compromises reached at the latest round of negotiations were not immediately available on Monday. But Aujourd'hui le Maroc quoted Michael Koplovsky, economic advisor to the US embassy in Rabat, as saying Washington had agreed to allow "maximum access to US markets for Moroccan textile products which comply with US laws and regulations". And Chami said the two sides had finally managed to steer a route between their two different farm subsidy systems - the Moroccan approach of subsidising farm prices and the US one of subsidising production. He did not go into details.

The United States exports an average 475 million dollars' worth of products to Morocco each year, mostly aircraft, corn, and machinery, according to official US statistics. US exports to Morocco are currently subject to an average tariff of more than 20 percent, while Moroccan exports to the US are subject to an average tariff of four percent, according to the US Trade Department. As well as causing concern in Morocco, the prospect of a US-Morocco trade deal has also raised hackles in the European Union, which is jostling with the US for geostrategic and economic influence in north Africa.

Moroccan newspapers speculated last year that the Rabat government was pursuing free trade with the US for both economic and political reasons, while Washington was seeking to foster a closer alliance with the Islamic country to shore up support for its policy towards Iraq.
Playing Brussels off against Washington could prove to be a costly game for Morocco, which in March 2000 signed an association accord with the 15-nation EU designed to progressively introduce free trade between them by 2012. Two thirds of Morocco's foreign trade is with the EU, totaling 12 billion euros (12.7 billion dollars at the time) in 2001, while the US ranked sixth in the same year, with only around 750 million euros in trade.
http://www.middle-east-online.com/english/morocco/?id=8781
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Morocco hosts World Bank round table on managing-for-results
Morocco, Economics, 2/5/2004

The World Bank (WB) and the African Development Bank (ADB/based in Abidjan) will hold in the southern Moroccan city of Marrakesh starting on Thursday the second round table on the "managing-for-results" approach. Nearly 200 participants from aid organizations and developing countries will meet in a roundtable to assess progress, focus on the challenges countries face in managing for results, and attempt to increase the political commitment of the international community to support the global results agenda. Finance and development ministers of several countries will participate in the round table along with over a hundred experts and officials in development banks.

Two years ago, at the Monterrey conference on development, the heads of the World Bank and other international organizations called for a greater focus on results as a way of improving the effectiveness of their efforts. The World Bank explains that idea is that the entire development of country-assistance strategy should contribute to country results. For every activity supported by the strategy, country and Bank staff should be thinking about results as soon as they begin planning and they should work toward those results during implementation. At the end of the project or program, they should evaluate whether expected results were achieved and draw lessons for the future.

The World Bank is working on an agenda on managing for results that focuses on three areas: helping countries strengthen their ability to manage for results, improving the Bank's own focus on results, and working with other development agencies to encourage a common approach. The event is preceded by a series of seminars on means to support development efforts, experiences in this field and approaches of development agencies. The first edition of the this round table was held in Washington in 2002.
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Morocco, a leading country in managing-for-results development, Wolfensohn says
Morocco, Economics, 2/6/2004

Head of the World Bank, James Wolfensohn, on Thursday termed Morocco as a leading country in the field of managing-for-results development.
Wolfensohn is currently taking part to the second round table on the "managing-for-results" approach, organized in Marrakesh this Feb.4- 5 by the WB and the African Development Bank (ADB).You have led the way for you have good professionals who work in the orientation of this conference, he told MAP news agency. The executive also lauded "the good atmosphere prevailing among participants."

Finance and development ministers of several countries are also taking part in the encounter along with over a hundred experts and officials in development banks. Two years ago, at the Monterrey conference on development, the heads of the World Bank and other international organizations called for a greater focus on results as a way of improving the effectiveness of their efforts.

The World Bank explains that the idea is that the entire development of country-assistance strategy should contribute to country results. For every activity supported by the strategy, country and Bank staff should be thinking about results as soon as they begin planning and they should work toward those results during implementation. At the end of the project or program, they should evaluate whether expected results were achieved and draw lessons for the future. The first edition of the this round table was held in Washington in 2002.
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Morocco gets South Korea-World Bank us$ 240,000 donation
Economics, 2/6/2004

South Korea and Morocco signed this Thursday a memorandum of understanding providing for a donation of US$ 240,000 to support the Kingdom's e-government drive. The Korean computerization agency (NCA) will bring to Morocco its expertise in the field of e-government and electronic governance. The donation is equally supplied by South Korea and the World Bank. Moroccan minister of industry, commerce and telecom, Rachid Talbi Alami, said the funds will help develop the e-health initiative that will start in five months and finance industrial information. The Korean agency, which has already financed the setting in place of the Moroccan industrial information network, will sign with Morocco a broader cooperation agreement next April. http://www.arabicnews.com/ansub/Daily/Day/040206/2004020623.html
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New Family Code: protecting women, children and families
Morocco, Politics, 2/5/2004

Provisions in the new family Code, formerly known as the Mudawana, which was first announced by king Mohammed VI on October 10, and unanimously adopted by both parliament chambers, come to uphold equality between men and women in terms of family responsibility and protect the rights of children and the family cell.

The new code places the family under the joint responsibility of the husband and the wife instead of the husband only and suppresses the stipulation submitting women to the guardianship of a male member of the family. It also establishes equality between men and women with respect to the minimum age for marriage, which is now set at 18 years for both instead of 15 years for women and 18 for men, under the old legislation.

Repudiation and divorce will become a prerogative that can be exercised as much by the husband as by the wife while under the old legislation they were left to the discretion of the husband only, and were often exercised in an arbitrary way. The new law adopts the principle of divorce by mutual consent and under judicial supervision. Another provision drops an obsolete tribal tradition favoring male heirs in the sharing of inherited land, making it possible for the grandchildren on the daughter's side to inherit from their grandfather, just like the grandchildren on the son's side. The girl just like the boy, shall have the possibility to freely choose her custodian at the age of 15. This article suppresses the bias in favor of the boy, who can currently choose his custodian at the age of 12, whereas the girl must wait until she is 15.

Polygamy, another sensitive issue in Islamic societies, is allowed, but subject to the judge's authorization and to stringent legal conditions. The judge must make sure that there is no presumption of iniquity. He must be convinced of the husband's ability to treat the second wife and her children on an equal footing with the first, and also ensure that they enjoy similar living conditions. The woman now has the right to condition her acceptance of marriage upon a pledge by her husband-to-be to refrain from taking other wives.

As a further protection of the family cell, the Family Law provides for the public prosecutor to be a party to every legal action involving the enforcement of Family Law stipulations. It also calls for taking arrangements to deal with emergency cases during week-ends and holidays. The creation of family courts and the establishment of a family mutual assistance fund are other arrangements that shall contribute to effective enforcement of the Family Law.

The new legislation protects women's rights by making repudiation conditional upon the court's prior authorization and enhances the chances for reconciliation, both through the family and the judge. It also requires that all monies owed to the wife and children be paid in full by the husband before divorce can be duly registered. Verbal repudiation by the husband is no longer valid, as divorce is now subject to a court ruling. Under current legislation, repudiation has been an exclusive and unrestricted right of the husband.

A novelty introduced by the new law lies in the sharing, between husband and wife, of the property acquired during marriage. While confirming the principle of separate estate, the law makes it possible for the couple to agree, in a document other than the marriage contract, on how to manage and develop assets acquired during marriage. In case of disagreement, they shall refer to the judge, who shall use elements of evidence to assess each party's contribution to the household capital acquired during marriage.

Concerning for Moroccans residing abroad, marriage procedures are to be simplified as the marriage contract is to be drawn up in the presence of two Muslim witnesses and in accordance with the procedures in force in the country of residence. It is then registered with the proper Moroccan consular or judicial authorities. The new family Law also recognizes the legal validity of foreign divorce documents concerning Moroccans residing abroad, provided they are in keeping with the relevant general regulations in force in the Kingdom. Under the old legislation, Moroccans residing abroad would go by the procedures and conditions applicable to their fellow citizens in Morocco in order for the marriage contract to be valid. This results in countless disputes and litigations between husband and wife as well as with the authorities in the country concerned. In addition, provisions containing a reference to international agreements on children's rights ratified by Morocco, have been inserted.

As regards child custody, the law innovates by giving the woman the possibility to retain custody of her child, under certain conditions, even upon remarrying or moving out of the area where her husband lives. She may also regain custody if the reason (voluntary or otherwise) which caused her to lose this right disappears. Under the old legislation, the woman irrevocably loses child custody in such conditions.

The new law protects the child's right to acknowledgement of paternity in case the marriage has not been officially registered for reasons beyond control, by expanding the scope of the legal evidence to be submitted to the judge. In the past, there was no provision for recognition of children born out of wedlock. The only accepted proof to establish paternity has been the testimony of 12 witnesses, a complicated and archaic exercise.

The Family Code also includes provisions ensuring that the child gets suitable accommodation consistent with his or her living conditions prior to the parents' divorce. This requirement is separate from the other alimony obligations (nafaqa). The alimony used to consist of a paltry lump sum and did not specify how much should be allocated to the child's accommodation. The new law also enshrines the principle that Moroccan Jews shall be governed by the provisions of the Hebraic Moroccan Family Law.

The new Family Law uses a modern form of wording removing degrading or debasing terms for women. Thus, women become men's partners in rights and obligations, in accordance with the firm determination of His Majesty the King to ensure that women are treated fairly, to enhance the protection of children and to preserve the dignity of men.
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Family Code: Morocco Marks Last Stage in Exceptional Legislative and Political Process
RABAT, Feb.03

The audience granted this Tuesday by H.M King Mohammed VI to the two parliaments' speakers, who handed in the final version of the family code (Mudawana), marks the crowning of an exceptional legislative and political process that started when the sovereign opened the parliament's fall session on Oct.10 by spelling out major reform proposals to the law. Reforming the Mudawana has been a recurring issue in Morocco since the 1990s and triggered heated controversies that often exceeded the nature of the issue itself.

However, in his milestone speech of October 10, the sovereign ushered the issue into an eminently positive development. The sovereign cautioned against considering the amendments as a victory of one camp over the other but rather as a gain for the entire Moroccan people and one likely to improve the protection of families and, consequently, of the Moroccan society at large.

In addition, the sovereign was keen on submitting the project to the parliament, given the civil provisions it contains and in order to spur a debate. Indeed, a fruitful and positive debate followed not only inside the parliament but among all the active components of the Moroccan society. It was underlined that the text was indeed highly important in that it secures to women, children and families new guarantees while rigorously respecting the Sharia (Islamic law).

The text draws inspiration from the "tolerant aims of Islam, which advocates human dignity, equality and harmonious relations" and is based on "the cohesiveness of the Malikite rite and on Ijtihad (jurisprudence), thanks to which Islam is a suitable religion for all times and places. The aim is to draw up a modern Family Law which is consistent with the spirit of our glorious religion".

The royal initiative was broadly welcomed and praised beyond Moroccan borders, both within Islamic and non-Islamic countries. In Islamic countries, several observers underlined the example it sets for other Muslim societies to embark on social development without infringing Islamic teachings.  The Moroccan experience was also viewed by women movements as the path to follow in order to settle similar discrepancies in other Arab countries.

It was in the last meetings of the parliament's fall session that the text was eventually unanimously adopted: at the House of Representatives on January 16 and at the Chamber of Advisors on Jan.23. The MPs were thus given an opportunity to enrich the new draft law with new proposals meant to adapt some provisions and avoid any potential confusion or misinterpretation. In a move to further the project enforcement, the sovereign reiterated this Tuesday his resolve to ensure optimal implementation and to gather all the needed conditions for the implementation of the new family code.  Concrete steps started to put the law into practice with the dedication family section courts within Moroccan courts. © MAP 2004 http://www.map.co.ma/mapeng/news/spo_cult/cult_055.htm
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Spirit of Fez, US outreach road-show for sacred music festival Morocco-USA
Politics, 2/6/2004

The annual sacred musical festival of Fez will promote its spirit of cross-cultural exchanges, the respect of cultural plurality and peaceful co-existence during a month-long tour in 18 US cities to start on March 6. More than 30,000 people will get the chance to live an unprecedented experience of song and dance from the Christian, Jewish and Muslim traditions, with singer Francoise Atlan, the Women's Hadra Ensemble, and the Anointed Jackson Sisters gospel group. Some of the world's most revered artists from across the globe will be present to promote the "Spirit of Fez."

The event will premier at the prestigious Library of Congress, before the artists, including an Algerian vocalist accompanied by a Lebanese-American percussionist, an African-American gospel group from North Carolina, a Moroccan women's ensemble, an Israeli and a Palestinian musician, set out to engage and educate American audiences by sharing the music that they hold sacred.

The Festival of World Sacred Music held each June in the Moroccan spiritual capital city of Fez is designed to help people reach out across their differences to build bridges with diverse communities through the power of music and to produce evidence that in a world where globalization and politics are heightening tensions, which are rapidly destroying communities, art and culture are powerful catalysts for civic dialogue as they transcend geographic, cultural and social boundaries.
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Foreign investment receipts, private loans more than tripled in 2003
Morocco, Economics, 2/6/2004

Morocco's receipts of foreign investments and private loans more than tripled in 2003 reaching around 21.8 billion dirhams (around US$ 2.5 billion), against 6.8 billions in 2002, the exchange office said. They posted a 4.2% progress in comparison with the average figures of the
1998-2002 period, i.e. 15.33 billion DH, the office said.
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Moroccan expats remittances rise by 7.4% in 2003

Morocco, Economics, 2/6/2004

Remittances by Moroccans living abroad reached 34.06 billion DH (US$1=around 9 DH) by end of 2003, marking a 7.4% increase compared to 2002, when the amount of money transferred by expatriates was estimated at 31.71 billion DH. Compared to the average recorded in the 1998-2002 period, the amount of remittances increases by 31.2%.
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Locust situation in Morocco is under control
Morocco, Local, 2/5/2004

The locust situation in Morocco is under control, said on Tuesday the anti-locust central coordination body announcing that it will carry on the consolidation of prospecting and struggle means and the increase of its personnel to ward off any worsening of the situation.
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Number of tourists visiting Morocco up by 6% in 2003
RABAT, Feb.03

The number of tourists who visited Morocco in 2003 reached 4.55 millions in 2002, i.e. 6% than in 2002 (4.30 millions), according to the tourism department figures that included Moroccan expatriates coming to Morocco for holidays. Moroccan expatriates are numbered at some 2.33 millions of the total (+12%), followed by French tourists with 916,000 (+4%) and the Spanish with 231,000 (+16 pc). Meanwhile, tourists from Britain were estimated at 134,000 (a 9 pc drop) and Germans declined by 25 pc, the department said. The southern Atlantic city of Agadir is the first Moroccan destination with 3.41 million guest nights in rated hotels (+4%), followed by Marrakesh with 3.30 million guest nights (same as in 2002) and Casablanca with 906,000 (-8%). © MAP 2004 http://www.map.co.ma/mapeng/news/economy/eco_003.htm
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Belgian group 'Atelier' to build sea resort in southern Morocco
Morocco-Belgium, Business, 1/31/2004

The Belgian group 'Atelier' will sign a convention with Morocco to build a sea resort in the Atlantic city of Essaouira (southern Morocco), an official in the group said. Jean Pierre Reynders, acting administrator of 'Atelier' estimated at one billion Euros the tourism compound to be built on a 500 H-area. Technical studies will require a budget of 100 million Euro, he said. French and Dutch partners will be associated to the project that will comprise two golf courses, residential areas and hotels with a capacity of 6,000 beds. The project is scheduled to be completed by 2010.
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Family of May Terrorist Attacks Victims Set up Association
CASABLANCA, Jan.31

Families of victims who died or were injured in last May 16 spate of terrorist attacks in Casablanca have united in an association designed to deepen the spirit of citizenship and faith in the principles of the right to difference and rejection of all forms of terrorism and fanaticism. The association which held its constitutive assembly on Thursday in Casablanca is chaired by Cherif Mohamed Zerouki, who renewed, on behalf of all victims condemnation of the barbarous acts that shook Casablanca last May. Rafael Nino, president of the "Casa de Espana" club where most of the victims fell said the initiative is spurred by the will to unite against terrorism. Over 40 people died and scores of others were injured when a string of five quasi-simultaneous terrorist operations shook the Moroccan capital and financial city of Casablanca on May 16. © MAP 2004 http://www.map.co.ma/mapeng/eng.htm
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Morocco produced 930,000 tons of fisheries worth US$ 600 m in 2003
RABAT, 31 Jan.2004 (WAM)

Morocco's fisheries minister Taieb Rhafes announced on Friday that Morocco's fisheries production reached 930,000 tons in 2003 for a value of Dh 5.3 billion (US$ 600 million). The official told a press conference that production of shellfish and demersal fish species that live on or near the ocean bottom had grown by 74 per cent and 18 per cent respectively compared to 2002. ''Quantities processed by industrial plants reached 300,000 tons, with a finished production of 135,000 tons that yielded a turnover of US$ 318 million, including 17 per cent went for foreign markets,''he said as quaoted by Arab Maghreb news agency (MAP). The fresh-fish conditioning industry also posted a slight improvement of its activities in 2003 as the quantities of processed fish were estimated at 36,000 tons, marking a 3% per cent growth compared to 2002, and yielding an export turnover of US$ 164.7 million, up 11 per cent compared to 2002.
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Morocco's Trade Deficit Worsened by 18.7% in 2003
RABAT, Feb.06

Morocco's trade deficit soared to 25.26 billion dirhams (around US$ 3 billion) in 2003, i.e. 18.7% worse than in 2002, as a result of a 4% increase of imports and a 3.6% decrease of exports, according to temporary figures released by the exchange office. Morocco's foreign trade amounted at 218.87 billion dirhams (around US$ 25 billion) in 2003 (+1%), including 135.56 billion Dh (US$ 15.5 billion) of imports (+4%) and 83.30 billions (US$ 9.5 billion) of exports (-3.6%), the office says.

The same source said except for food, beverages and tobacco imports, which dropped by 23.6% compared to 2002, all other imported products experienced a rise in value. Finished consumption products hold the first rank with a 23.7% share in overall imports, followed by semi-finished products (22.8%), equipment goods (22.1%), energy and lubricants (15.5%) and animal, vegetal and mineral crude products (7.2%). Imports of finished food products rose by 2.9%, semi products by 8.4%, equipment goods by 14.1%, energy and lubricants by 4.3% and crude products by 9%.

Exports totaled 83.30 billion dirhams (around US$ 9.5 billion) in 2003, i.e. a 3 billion DH (US$ 344.8 Mln) decrease. Only phosphates and derived products exports remained relatively stable (73.60 billions in 2002 to 70.46 Bln in 2003) and their share in exports improved by 0.6 points to stand at 15.4%

Similarly, food exports declined by 9.7% to 16.41 Bln DH (US$ 1.8 Bln) and their share in overall exports did not exceed 19.7%, against 21% in 2002. Likewise, energy products exports experienced a 64.8% fall from 2.43 Bln DH (US$ 279.3 Mln) in 2002 to 853.5 Mln DH (US$ 98.3 Mln), mainly due to a decrease in refined oil products. Sales of finished consumption goods also regressed from 32.68 Bln DH (US$ (US$ 3.7 Bln) last year to 32.18 billion DH (US$ 3.6 Bln), i.e. a 1.5% decrease, mainly in cotton fabric (-55.4%). © MAP 2004 http://www.map.co.ma/mapeng/eng.htm
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MENA labor crisis underscores new social contract, political reform
WASHINGTON

Labor markets are rarely considered in discussions of political reform in the Middle East. Yet the unprecedented labor crisis confronting the Middle East and North Africa (MENA) region underscores the urgent need for both a new social contract the basic laws and understandings that define the relationship between the state and labor and for political reform. Job creation is among the most pressing challenges facing Arab leaders; indeed, the ingredients for a massive social crisis are in place. MENA unemployment rates average 15 percent, and economic-growth rates are too low to meet current labor demand. More than one-third of Morocco's youths are unemployed, while in Syria youth unemployment is a staggering 73 percent.

Women in the Middle East are unemployed at twice the rate of men. Vast segments of the workforce are in the informal sector, with no access to the benefits of formal employment. Despite the region's grim employment picture today, MENA governments must create 100 million new jobs over the next 15 years. This will require overcoming deeply embedded obstacles to economic reform, including the reform of labor markets. Yet urgent economic changes will not be possible without political reforms that give MENA governments the institutional capacity and legitimacy they need to establish social contracts capable of generating growth and creating jobs. Such contracts would comprise policies that promote the role of the private sector, support trade, and increase foreign investment, but also integrate workers into the formal sector, protect their rights and ensure that workers participate in the benefits of economic growth.

Today MENA's labor markets reflect the populist social contracts that were established across the region in the post-independence period. These social compacts favor state intervention and economic planning over markets, and welfare over self-reliance. They include extensive provision of public services, and the management of labor through centralized, top-down trade union structures. They reflect a vision of the political arena as an expression of the "organic unity of the nation," with unity imposed through strict political controls. Over time, these arrangements have been termed an "authoritarian bargain" citizens tolerate constraints on political freedom in exchange for state guarantees of employment and welfare.
At first, MENA's social contracts produced impressive gains. From 1965-85 economic-growth rates in MENA were among the highest in the world. By the early 1980s, however, the MENA social contract was becoming increasingly untenable. High levels of social spending, combined with a lack of flexibility in labor markets, declining worker productivity, and public policies that were unfavorable to the private sector, trade and investment drove Middle East economies into crisis. Unemployment levels rose, and governments faced growing pressure for economic reform.
In the 1980s and 1990s, most MENA governments responded to the economic crisis by implementing selective economic reforms. They introduced market-oriented policies in some areas, but considered labor market reform and privatization which threatened to increase unemployment among organized public sector workers too politically risky. Despite some positive effects, these selective reforms have not improved economic performance, or created sufficient numbers of new jobs.

Addressing the region's economic problems will require MENA governments to push the reform process beyond its current limits. Yet this can be accomplished most effectively by updating, rather than abandoning, the idea of a social contract. Labor market reform in MENA is unlikely to succeed without a renewed commitment to the goals of poverty reduction, income equality, and income security that are embodied in existing social contracts. Economic reform will not be credible unless governments ensure that economic outcomes are socially acceptable among MENA's citizens.

MENA governments must also implement more far-reaching political reforms. In the 1980s and 1990s, governments tried to delay meaningful political liberalization, arguing that economic growth must come first. But without democratization, labor market reform is unlikely to achieve legitimacy among the workers whose support is essential for its success. Improved governance, transparency and accountability all part and parcel of democratization will reinforce efforts to implement a new social contract. These are essential if citizens are to make informed judgments about economic performance, as are credible elections permitting citizens to hold politicians accountable for their management.

Governments in the Middle East might well prefer the dysfunctional status quo to a vision that links the region's economic future to the reform of political institutions and practices. But the scale of MENA's economic problems exceeds the limits inherent in the narrow strategies of reform pursued to date. To make progress toward a social contract that protects workers, promotes employment, and creates the conditions for sustained economic growth, MENA governments must acknowledge that the renewal of political life is a prerequisite for successful economic reform.
Steven Heydemann is director of the Center for Democracy and the Third Sector at Georgetown University. This commentary is reprinted with permission of the Arab Reform Bulletin #6 (January 2004) www.ceip.org/ArabReform    ©2004, Carnegie Endowment for International Peace.
http://www.dailystar.com.lb/opinion/31_01_04_c.asp
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