Research Brief
Aid in North Africa After the ‘Arab Spring’

Donor political interests have heavily influenced aid flows to North Africa in the past. This has reduced the effectiveness of aid which, with the exception of Tunisia, has not been associated with sustained economic growth. The Arab Spring provides an opportunity to reappraise aid flows to the region and in my paper 'The Political Economy of Aid Flows to North Africa' I argue that future flows have to support the democratization process, generate pro-poor growth, support social safety nets, and address the pressing issues of widening inequalities and unemployment.

The North Africa region—Algeria, Egypt, Libya, Morocco, and Tunisia—has for many decades been the world’s largest recipient of foreign aid in per capita terms. Taken along with its neighbouring sub-region, namely, the Middle East to form MENA (Middle East and North Africa), the region is the third largest global recipient of aid in absolute terms, after Southern and Central Africa and Asia. However, aid to the MENA region is highly variable and much of the variation is driven by responses to conflicts within the region from bilateral donors. In addition to conflict, geopolitics more generally plays an important role in the aid allocation process to MENA. This is reflected in the fact that the share of bilateral aid to the region is comparatively high, and the largest single donor to the region is the USA, accounting for on average 38 per cent of total bilateral aid between 1980 and 2006. Donor interest, in the form of geopolitical and commercial considerations, are important in the aid relationship in MENA because the region itself is considered to be so geopolitically and commercially important by Western powers—conflict ridden, the centre of the Arab-Israeli conflict, the birth place of Al-Qaeda, and the source of much of the world’s oil supplies.

To what extent has donor interest determined aid flows the region?

The paper concludes that donor interest has played a major role in the aid allocation process and that this may have had a detrimental effect on aid effectiveness as well as resulting in excessive amounts of aid flows to the region in light of its predominately middle-income status outside the Gulf Cooperation Council(GCC)countries. As a result donors in the past have propped up repressive and autocratic regimes, such as the Mubarak regime in Egypt, and the Ben Ali regime in Tunisia.

Looking at the case studies from Egypt, Morocco and Tunisia from the point of view of aid effectiveness we can find that that despite strong growth in North Africa in recent years, with the exception of Tunisia, growth has been largely extensive rather than intensive. Furthermore, it has failed to address the region’s pressing unemployment problem, and has been triggered by factors other than aid flows. As a result, the region continues to face pressing socioeconomic problems, particularly high levels of unemployment and widening inequalities. This has contributed to the wave of political unrest in 2011.

How aid flows can help support the ongoing political transition in the region?

The Arab Spring provides an opportune moment to reappraise aid to North Africa. It is clear that if future aid flows are to promote genuine political and economic development in the region they need to be decoupled from the past tendency to support pro-Western regimes regardless of their record on political and socioeconomic development. Future aid flows need to focus on three critical areas:

1. There is an urgent need to promote new employment opportunities especially for the youth. This will entail not only creating a better business environment for the private sector but also unravelling the cosy relationship which existed in the past between incumbent regimes and the business elites, so as to create a more inclusive and competitive system for the region’s potential entrepreneurs.
2. Given the recent prediction that global food prices are set to double in the next twenty years and given the reliance of the region on global food markets and the role played by rising food prices in triggering the Arab Spring, aid donors need to look at creative ways in which they can enhance the region’s food security.
3. There is need for the aid community to help foster the development of genuine democracy and accountability in the region, with aid programmes designed to enhance civil society, the role of elected legislatures and press freedom. During 2005-09 only a small share of aid to North Africa was allocated to ‘governance and civil society’ compared to the much larger share allocated to this sector in sub-Saharan Africa. Hence, there is clearly scope to refocus the sectoral allocation of aid to North Africa to support the development of democracy and civil society. Furthermore, it is essential that the governments of North Africa, as well as their donors, ensure that adequate social safety nets are in place and that a rapid shrinking of the state in terms of welfare provision does not occur in the name of economic liberalization.

Not only is there a need to refocus aid programmes in North Africa, but in the immediate aftermath of the Arab Spring, increased funding is needed to help smooth the political transition. North African economies, particularly Tunisia and Egypt, have been hit by high inflation, unemployment, loss of tourism revenues, declining exports and foreign investment, and declining growth in the aftermath of the political uprisings.  It is important that both donors and the new regimes of North Africa do not see foreign aid either as the main cause of past disappointing performance or as a future panacea for the region’s socioeconomic and political difficulties. Although North Africa has the highest level of aid per capita, aid flows as a percentage of GDP and as a percentage of government expenditure are low. In the past, for example, migrant labour remittance flows have often made a much greater contribution to these economies than aid. Hence, opening up Western economies to both trade and migrant labour flows from North Africa are likely to be more important than aid flows particularly in dealing with the region’s pressing unemployment problem.