Theme : Firms, Trade and Development

Place : Aix-en-Provence, France

Date : From 04 to 05 july 2011

The Euro-Mediterranean Forum of Economic Science Institutes (FEMISE) organized in collaboration with the DEFI (University of the Mediterranean, Aix-Marseille), the GDR-CNRS (economy of development and transition) and CARIS (University of Sussex, Brighton) a second workshop on “Firms, Trade and Development” in Aix en Provence on July 4^th and 5^th, 2011. The main objective of this workshop, which brought together many of the best experts in the field, was to examine the conditions under which international openness could produce a leap of competitiveness of firms in the Mediterranean countries.

This seminar, that contained six sessions in addition to a closing roundtable discussion, addressed both issues of corporate behaviour related to international trade and development issues. The heterogeneity of firms is fundamental in understanding the expected gains from international trade. This issue allows us to see how this phenomenon of increased trade presents both opportunities but also threats to these enterprises. Six questions were addressed during the seminar: (i) the role of the investment climate on entrepreneurial dynamics, (ii) the use of production factors and knowledge flows as means of increasing productivity, (iii) the conditions for the success of African exports and the role of the ‘learning’ by exporters and the corresponding spillover effects, (iv) the performance of exports and strategies of the enterprises of the Mediterranean countries, (vi) the qualifications and suitability of the promotion policies and export support. The seminar concluded with a panel discussion that attempted to draw strategic lessons of the work presented and, more generally, discussed the merits and limitations of the openness policy followed in the area.

Initially, issues such as the role of institutional factors on the dynamism of entrepreneurs, the lack of access to finance and the importance of the business environment, have been addressed. Drs Hanoteau and Vial first examined the impact of corruption on entrepreneurship in Indonesia, to explain the ways in which institutions can affect the behaviour of entrepreneurs. They reaffirm the importance of the development of the public policies aiming at developing the entreprenariat in a corrupted context and point out all the need for having institutions of good quality. A Good governance of the regulations and tax system should provide an incentive to engage in productive activities. Drs Chaffai, Landivar and Plane reminded in a common analysis on the financial constraints which weigh on the performances of the companies, that the difficulty of access to the financing is a current argument which could explain the missing link of SMEs in Morocco. A study of the textile sector, which represents 60% of sectoral employment in the country, highlights the links between financial constraints and the productivity of the enterprises. The difficulty of access to external financing is an obstacle to the growth and the cost of financing has a negative impact on technical efficiency. Finally, this session concludes on the link between business environment and the productivity of the firms: how the business environment in which firms operate impacts their performance? Which relationship is there between economic and institutional conditions and which is the impact on the growth? Drs. Augier, Dovis and Gasiorek through their study emphasized the role of the business environment and investment in understanding the differences in performance of the Moroccan firms.

The use of production factors and knowledge flows of firms have been addressed in several studies. The study on manufacturing firms in India highlights the powerful contribution of policy reforms in the services sector in the development of these firms. Those researches suggest a strong link between progress in the regulatory reforms of the services, and productivity in these manufacturing industries. Moreover, several evaluations and analysis addressed the issue of exports and knowledge promotion: O. Cadot assessed export promotion programs for Tunisia and k. Sekkat addressed issues related to the investment in the human capital through the training of the workers in Morocco. Training is a powerful tool, especially for SMEs, that should, for Khalid Sekkat, enable them to meet the challenge of globalization. Given the importance of these firms in the developing countries, and in Morocco, where thanks to the evolution of industrial policy those SMEs are becoming leaders in the innovations, the results of this study show the need to support government efforts to promote the training of workers, but also imply that these efforts should target SMEs in particular.

In the closing session of this second workshop on “Firms, trade and development”, and in light of recent events in the region our experts prescribe recommendations for the future research diary and its major orientations.

For Dr Safadi (OECD), the time has come to define an agenda that takes into account the events in the region. He recommends to take up the challenges of the Arab Spring in economic and social development, identify needs in terms of employment, and to identify opportunities and barriers to job creation in the area. He also notes the importance of the service sector. The research agenda should focus on services and their potentials to create jobs rapidly.

“The most advanced countries are aware of the role of services.”

A quick answer to the aspirations of these populations should be given to prevent that the situation worsens and priority should be given to the development of activities in sectors such as engineering, law (etc.), activities that generate employment quickly, not with a return on investment of ten to fifteen years as in industry. The backbone of a successful integration is constituted by financial sectors, transport and insurance. The summary of this session for Mr Safadi is to define the way to be followed, the most important point being the performance in services and job creation in a very short time.

To meet the expectations and create jobs we need economic efficiency closely linked to exports, that are largely conditioned to generate productivity gains over time depending on the mechanisms of internal organization, infrastructures, the governance or even environmental conditions. The prerequisites are for Patrick Plane(CERDI), a choice of productivity for global integration and the search of diversification.

For Dr Liacovone we must understand the needs but not to rush, the problem of research is to know how to generate reforms that move societies. Mr Lerderman adds to this effect, that research must be properly oriented and very rigorous because the stake is high and if we make a mistake, we will probably not get another chance.

The recommendations of Dr Sekkat for the Mediterranean and its development: taking into account the reality of these countries, ensuring that institutions give particular importance to the micro-markets business. Many opportunities are not raised, there is much work on competition and competitiveness and an agenda must be prepared on  risk-taking, the quality of the institutions and the incentives to set up.

“These challenges are to be placed very high in our agendas”

Prof. JL Reiffers concludes on the strategic questions and policies which are put forward today in the region. It is necessary for all to know the expectations of the populations of the countries of Arab spring. After opening a free trade area and privatized telecoms, Europe is working to bring the EU directives, although the report remains with a dilatation of the social space. But no one talks about the winners and losers and how policies can compensate or rehabilitate the losers. The European Union makes a trade surplus which must be compensated by migrants and tourism, but the transfer equation is undervalued: the relationship must continue, it is unbalanced and asymmetrical.

Regarding the South/South recommendations of integration, we should also be very careful, as we ask the Mediterranean countries to open up to trade and services while we enforce structural policies and we add standards. The undergoing trend is the opening to the services, for services’ factors obviously, but for societal services such as distribution it is more dangerous, especially for small business. When we see the effect it had on small businesses in Europe we could expect some difficulties. Our recommendations should be more moderate and credible, taking more account of reality.

“The territorial balances have to be maintained, we must compensate the losers and generate new comparative advantages”

If we cannot help the countries to define strategies in this sense, we maybe seem to favour nationalism and protectionism. We must offer intelligent recommendations to open their economies while defining the territorial balances and adapted structural policies with comparative advantages: to focus on the telecom services, transport but not the distribution. In order to avoid drifting towards a protectionist policy, recommendations should not be a repetition of those given two or three years regarding these issues.

To have access to the agenda  (Click Here)