For the countries of the Southern Mediterranean, migration is a necessity which can be considered part of the employment strategy that arose from the failure of the industrialization policies of the 70s. Among the structural factors contributing to migration, we find the employment rigidities in the public sector and the low level of demand coming from the private sector, which is still limited in size outside the agricultural and informal sectors. The negative macroeconomic trends affecting the area in the 80s and 90s certainly did not help things, although the situation has changed with the oil hike of the last three years.

  Structural adjustment policies have exarcebated the problem, and thus migration has become an active leverage to guarantee the success of economic policies, to the point of being inserted in the international agreements. This is visible in the fact that the balance of payments is affected by the ups and downs of migrants’ remittances, which today constitute the largest source of revenues in many emerging economies. For those being examined, inflows due to immigrants sending money back home have doubled, from $8.2 billion in 1995 to $20 billion in 2006. Contribution to GDP jumped from 11.3% to 23% in Lebanon, the country with the largest diaspora in the region, from 5 to8% in Morocco, and from 4% to 5% in Tunisia. In no country in the Med area, Algeria excluded, has the incidence of remittances grown smaller. Even Egypt, which can count on the Suez Canal’s hefty rent and has oil reserves, migrant remittances have climbed back to 5% of GDP.

  In comparison to exporting commodities, whose value has nevertheless been inflated by the rise in prices of oil and raw materials, exporting brain and brawn to other countries is more economically effective.  In Morocco and Egypt the economic transfers of migrants match 40% of total exports, a much larger share than the one accounted for by the raw material and energy sectors of the economy, which are considered key industries in those countries. In the case of Lebanon, remittances are three times exports. More balanced is the Tunisian situation, where remittances don’t go beyond 13%, while the percentage has diminished in Algeria, a country endowed with oil and gas rents. For the south bank of the Mediterranean, migrating for political, rather than for economic, reasons appears a thing of the past. New economic and political conditions have transformed migration patterns, which today are more complex, but also more structured, and supported by formal and informal networks in countries of destination.

  If outmigration is a pillar of economic policy in the countries of origin, contributing to macroeconomic adjustment, migrants also alleviate the pressure on domestic labor markets and compensate for the trade deficit which is at the root of their macroeconomic imbalances. Attention is thus turned to foreign currency remittances, which can have an adverse effect, if they are destined to consumption rather than investment. International cooperation should balance the needs of demand with supply capacity in order to counter illegal immigration, and also consider establishing formal commitments in order to make sure than returning migrants can contribute to the fledgling private sector. Countries of origin must take decisive steps to stem out illegal migration, and not limit themselves to simply control the phenomenon. Its root causes are the wide gaps in global income distribution, and the associated lack of growth in social welfare and domestic employment. Short-term measures won’t do the job. There must be a national vision which is integrated in the economic future of the Mediterranean: reduction of inequalities, virtuous policies, strengthening of investment, and support of private initiative.

by Sergio Alessandrini ,
Full Professor of Political Economics at Modena and Reggio University and
Associate Professor of Corporate Finance in the Università Bocconi Accounting Department