Transnational analyses
Politecnico di Milano
Dep. BEST
Piazza Leonardo da Vinci, 32
20133 Milan (MI)
Italy
South Mediterrenean
Countries
Italy, Slovenia,
Lybia, and Egypt
ESPON - ET2050
Prof. Roberto Camagni (roberto.camagni@polimi.it);
Prof. Roberta Capello (roberta.capello@polimi.it);
Prof. Ugo Fratesi (ugo.fratesi@polimi.it);
Dr. Andrea Caragliu (andrea.caragliu@polimi.it)
Politecnico di Milano Research Unit
Table of contents
1.
2.
Introduction .................................................................................................................................. 4
Italy .............................................................................................................................................. 6
2.1 Geography ............................................................................................................................. 7
2.2 Demography .......................................................................................................................... 7
2.3 Political situation ................................................................................................................. 12
2.4 Economic outlook................................................................................................................ 13
2.4.1 Public finance ............................................................................................................... 14
2.4.2 Industrial composition.................................................................................................. 15
2.4.3 International trade ........................................................................................................ 16
2.5 Internal divisions ................................................................................................................. 18
3. Slovenia...................................................................................................................................... 18
3.1 Geography ........................................................................................................................... 18
3.2 Demography ........................................................................................................................ 19
3.3 Political situation ................................................................................................................. 21
3.4 Economic outlook................................................................................................................ 22
3.4.1 Public finance ............................................................................................................... 23
3.4.2 Industrial composition.................................................................................................. 23
3.4.3 International trade ........................................................................................................ 24
3.5 Internal divisions ................................................................................................................. 26
4. Lybia .......................................................................................................................................... 28
4.1 Geography ........................................................................................................................... 28
4.2 Demography ........................................................................................................................ 28
4.3 Political situation ................................................................................................................. 30
4.4 Economic outlook................................................................................................................ 31
4.4.1 Public finance ............................................................................................................... 32
4.4.2 Industrial composition.................................................................................................. 33
4.4.3 International trade ........................................................................................................ 35
4.5 Internal divisions ................................................................................................................. 37
5. Egypt .......................................................................................................................................... 38
5.1 Geography ........................................................................................................................... 38
5.2 Demography ........................................................................................................................ 39
5.3 Political situation ................................................................................................................. 43
5.4 Economic outlook................................................................................................................ 44
5.4.1 Public finance ............................................................................................................... 45
5.4.2 Industrial composition.................................................................................................. 47
5.4.3 International trade ........................................................................................................ 49
5.5 Internal divisions ................................................................................................................. 50
6. Conclusions ................................................................................................................................ 50
References .......................................................................................................................................... 51
Appendix 1. Trade statistics for the four countries. ........................................................................... 54
Appendix 2. Estimated average temperature changes, 1880-2008. ................................................... 54
Appendix 3. Satellite image of Egypt. ............................................................................................... 55
2
Transnational analyses
South Mediterrenean Countries
Italy, Slovenia,
Lybia, and Egypt
Regional level: NUTS0
Source: Politecnico di Milano,
2012
© EuroGeographics Association
for administrative boundaries
Slovenia
Italy
Italy
Italy
Libyan Arab Jamahiriya
Politecnico di Milano,
Project ET2050, 2012
This map does not
necessarily reflect the
opinion of the ESPON
Monitoring Committee
Egypt
1. Introduction
This trans-national analysis focuses on four countries, namely Egypt, Italy, Lybia and Slovenia.
These countries are characterised by a markedly different historical, economic, social, and
prospective profile. Each of them faces different challenges with different assets. As such, they will
be analysed from a different perspective, with the aim to highlight the strengths and weaknesses of
each country, the potential threats caused by internal imbalances, and with a particular focus on
spatial perspectives.
The extent to which these countries differ can be demonstrated with a few fundamental figures.
Table 1 shows economic, social, and urbanisation data for the four countries here analysed.
Table 1. Main statistics for the four countries analyzed.
Source§
Country
Italy
Slovenia
Libya
Egypt
WB
Population
60,483,521
2,052,821
6,355,112 81,121,077
UN
% of population living in urban areas in 2010
68.4%
49.5%
77.9%
43.4%
WB
2010 GDP (in constant million 2000 USD)
$1,125,077
$26,083
$49,384*
$160,259
WB
Per capita 2010 GDP in PPP
$18,601
$12,706
$7,885*
$1,976
IMF
Unemployment rate in 2010
7.81%
5.89%
N.A.
9.52%
WB
World Bank Gini Index in 2010
0.36
0.31
0.36*
0.32
UNDP
Human Development Index in 2010
0.874
0.884
0.644
0.760
WB
Balance of payments in 2010
-3.51%
0.49%
37.78%
-6.88%
EW
Investment (% of GDP) in 2010
20.19%
23.12%
34.88%
18.89%
EW
Gross National Savings (% of GDP) in 2010
16.69 %
22.23 %
50.91%
16.91%
OC
Net FDI recipient
Yes
Yes
No
Yes
WB
2010 current account balance (% of GDP)1
-3.5%
-1.2%
16%*
-2%
Notes: §: WB = World Bank; UN = United Nations; UNDP = United Nations Development Programme; IMF:
International Monetary Fund; EW: Economy Watch (http://www.economywatch.com); OC: Own Calculations.
*: 2009 datum.
Per capita 2010 GDP in Purchasing Power Parity PPP) measured in constant 2000 USD.
Balance of payments measured as net trade in goods and services (BoP, current US$).
% of population living in urban areas in 2010 from the UN World Urbanization Prospects - 2009 Revision Population
Data base.
Net FDI recipient: Yes if Country investment is higher than Country Gross Savings, no otherwise.
N.A.: not available.
Table 1 highlights that these countries are characterised by remarkable differences. In terms of pure
population, Italy and Egypt stand out with a total number of inhabitants of, respectively, sixty and
eighty million people. Slovenia and Libya are instead relatively smaller, inhabited respectively by
two and six million people. In terms of urbanisation rates, Italy and Libya host two thirds to three
quarters of their population in urban areas; however, this datum for Libya clearly reflects the barren
nature of this Country (in 2010, less than one per cent of the Country’s surface was arable,
according to World Bank data2). At the same time, Egypt (also with a vast share of national soil
made up of desert land: arable land covers just 3 per cent of the Country’s total soil) and Slovenia
host less than half of their population in cities.
The capability to produce wealth of the four countries is similarly uneven; whereas Italy and
Slovenia reach European standards, with a per capita production consistently higher than 10,000€,
Egypt and Libya have an average per capita GDP equal to less than 10,000€. Libya scores however
relatively better in this respect, because of the relevant share of national income accruing from the
exploitation of natural resources, mostly oil and natural gas.
1
Current account balance is the sum of net exports of goods, services, net income, and net current transfers. Source:
IMF (2011a).
2
Source: World Development Indicators (http://databank.worldbank.org/).
This difference in GDP terms is also reflected in differences in development levels. When
comparing the four countries with one of the most respected indices of development beyond pure
income levels, viz. the Human Development Index (henceforth, HDI) first developed by the UNDP
in 1990,3 Slovenia and Italy occupy respectively the 21st and 24th place in the world classification,
whilst Libya and Egypt score definitely lower, respectively at the 64th and 113th place. These
relative positions cannot be explained simply with differences in income levels: in fact, the UNDP
calculates a richer version of its HDI, net of the income effect. Figure 1 shows that relative
positions do not vary.
Figure 1. General and non-income HDI and average years of schooling.
1.000
14
0.900
12
0.800
10
0.700
HDI
8
0.500
6
0.400
0.300
Mean years of schooling
0.600
4
0.200
2
0.100
0.000
0
Slovenia
Italy
Human Development Index (HDI)
Libya
Nonincome HDI
Egypt
Mean years of schooling
Source of raw data: UNDP (2011).
The same Figure also shows with the dashed line the average years of schooling cumulated by
citizens of the four countries. The three series clearly correlate, and in particular strikingly linked
are the data on the HDI and the average level of schooling in the four countries (Pearson’s R square
for these two series equals 0.94, significant at all relevant levels). Differences in human capital
might therefore represent a major cause of the non-negligible differences in terms of human
development among these countries.
Financially, three out of four (namely, Slovenia, Italy, and Egypt) of these Countries maintain, and
are likely to keep doing so, a moderate current account deficit, according to IMF calculations
(Figure 2). Libya enjoyed instead a remarkable current account surplus in the last two years before
the fall of Colonel Qhaddafi, but the current political situation does not allow safe inference on
future trends, which will likely depend on the effectiveness of the new ruling coalition in managing
the Country’s large stock of natural resources and in redistributing the ensuing income.
With notable exceptions, such as Mc Gillibray (1991), who claims that “the UNDP's index is yet another redundant
composite intercountry development indicator” (Mc Gillivray, 1991, p. 1467).
3
5
-5
0
5
10
15
Figure 2. Current account balance (% of GDP) for the four countries analysed, 2009-2016.
2008
2010
2012
Country
2014
Egypt
Libya
2016
Italy
Slovenia
Source: IMF (2011b); data from 2011 onwards are based on IMF staff estimates.
The following paragraphs are made up as follows. Chapters are organized by country (in the order
Italy, Slovenia, Libya, and Egypt). Each country chapter comprises a Section on the geography, the
demography, the political situation, the economic outlook, and the internal divisions of the country
analysed. Finally, Section 6 concludes.
2. Italy
Italy is one of the founding members of the European Union, formerly European Economic
Community. The treaty of Rome, signed on 25 March 1957, has been one of the major landmarks of
the building of the EU. The country hosts a diversified and rich economy, with a strong
manufacturing sector, a rich and high-quality agricultural sector, and some notable advanced
services industries. However, the country has recently lost some ground with respect to similarly
large EU countries. Data from the most updated version of the Penn World Table (Heston et al.,
2011) show that since 1992, this Country experienced a relative growth of the gap with respect to
the richest Country in the world (the United States), sliding from a per capita production equal to
82% of the US production, to a current value of 67%. All other countries in this transnational
analysis show instead signs of convergence of per capita GDP levels (Figure 3).
6
Figure 3. Per capita GDP with respect to the USA, 1950-2009.
90
80
Per capita GDP w.r.t. the USA
70
60
50
40
30
20
10
19
50
19
52
19
54
19
56
19
58
19
60
19
62
19
64
19
66
19
68
19
70
19
72
19
74
19
76
19
78
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
0
Italy
Slovenia
Libya
Egypt
Source of raw data: Heston et al. (2011).
In this Section, some highlights concerning different aspects of this economy are presented.
2.1
Geography
Italy is a peninsula located in the Southern tip of the European Union. Its east coast faces several
candidate countries (namely Croatia, Macedonia, Montenegro, and beyond Greece, Turkey).
Including islands, Italy has a coastline of 7,600 kilometres on the Adriatic, Ionian, Tyrrhenian and
Ligurian Sea. Its Southern islands of Pantelleria and Lampedusa are only 70 (to Cape Mustafà4) and
167 kilometers (to Ras Kaboudja5) far from the northern coast of Tunisia, respectively. This makes
Italy an attractive destination for often non-authorised immigration from countries under political
distress. Recent official data from the Ministry of Interior show that up to the first five months of
2011, Italy received a total number of 42,807 illegal immigrants, which must be confronted with the
figure of 4,406 recorded for the whole 2010 period.6 Out of these 42,807, 24,356 are Tunisian
citizens.
Additional geographical risks include landslides, mudflows, avalanches, earthquakes, volcanic
eruptions, and flooding. Since the late Middle Age, the country experienced extended periods of
development, involving soil exploitation for manufacturing and ship-making purposes in the
Southern part; sea basins, in the meanwhile, experienced massive fishing, which ultimately caused
the depletion of the fish stock. Recent industrial development also caused, along with similarly
advanced countries, the pollution of rivers and sea basins. All these risks must be tackled in the next
decades, in order to rejuvenate the process of economic development and simultaneously make it
sustainable and inclusive.
2.2
Demography
Italy currently faces two major demographic trends. On the one hand, population is rapidly ageing.
2011 estimates show that the crude death rate (9.84 per 1,000 inhabitants) is higher than the crude
4
Source: http://www.europassistance.it/Pantelleria.aspx.
Source: http://www.isoladilampedusa.it/.
6
Source: http://www.lettera43.it/attualita/18378/immigrazione-nel-2011-sbarcati-42807-profughi.htm
5
7
birth rate (9.18 per 1,000 inhabitants).7 The number of people outside the labour force with respect
to the working age population is rather large, and growing; in fact, by this token Italy is the second
oldest country in the world, slightly better off than Japan (Table 2). This indicator, along with other
similar indices, is undergoing an increase process which will last for most of the forthcoming
decades, unless present conditions radically change (Figure 4).
Table 2. Top ten countries by old-age dependency ratio in 2010.
Country Ratio of the population aged 65 years or over to the population aged 20-64
Japan
38
Italy
34
Germany
33
Sweden
31
Greece
30
Austria
29
Belgium
29
Finland
29
France
29
Latvia
29
Source of raw data: UN Population Division, World Population
(http://esa.un.org/unpd/wpp/Sorting-Tables/tab-sorting_ageing.htm.)
Prospects,
the
2010
Revision
the
2010
Revision
0
20
40
60
Figure 4. Old-age dependency ratio in the four countries analyzed, 1950-2100 (forecasts).
1950
2000
2050
2100
Year
Egypt
Libya
World
Italy
Slovenia
Source of raw data: UN Population Division,
(http://esa.un.org/unpd/wpp/unpp/panel_indicators.htm.)
World
Population
Prospects,
On the other hand, since the 1970s, along with its economic development, Italy became a net
immigration recipient. Latest figures indicate a net immigration rate of 4.86 immigrants per 1,000
inhabitants,8 Currently, this is by far the highest figure among the four countries analyzed in this
report (Figure 5). Not only that: in the period 2005-2010, United Nations (2010) states that Italy is
the 22nd Country in the world by Net Migration Rate, but the second when considering only large
countries.
7
8
Source: https://www.cia.gov/library/publications/the-world-factbook/geos/it.html.
Source: https://www.cia.gov/library/publications/the-world-factbook/geos/it.html.
8
-10
-5
0
5
10
Figure 5. Net migration rate in the four countries analyzed, 1950-2100 (forecasts).
1950
2000
2050
2100
year_2
Egypt
Libya
Italy
Slovenia
Source of raw data: UN Population Division,
(http://esa.un.org/unpd/wpp/unpp/panel_indicators.htm.)
World
Population
Prospects,
the
2010
Revision
Since population ages, and immigration is mainly made up of people in the working age,
immigration is acting in the opposite sense with respect to natural population trends in the Country.
Average scenario forecasts released on December 28, 2011 by Italy’s National Statistical Institute
(“Previsioni della Popolazione per gli anni 2011-2065”9) suggest that the total share of foreignborn dwellers will increase from 7.54% in 2011 to 22.97% in 2065.
Both population aging and immigration trends call for a profound analysis of the redistributive
effects they are likely to exert on the long-run economic performance of the Country. Besides,
internal regional imbalances are probably going to be fostered, rather than reduced, by such trends.
Internally, the distribution of the Country’s population shows a massive concentration of the center
of gravity in the largest urban areas.10 The ISTAT series “Territorio e processi di inurbamento”11
shows that since the Country’s unification process in 1861 a growing number of people decided to
locate in large centres, until the beginning of the 1970s. Since then, this urbanization process
inverted, with a minor very recent increase to be found in the last few years (Figure 6).
Country-wise, population growth between the two latest censuses (1991 and 2001) for which data
are currently available took place – as expected – mainly in central, urbanized, and plain areas.
Figure 7 shows that population growth is highly concentrated in such areas, with large clusters of
population growth not necessarily reflecting administrative borders of NUTS 2 (Italian “Regioni”)
and NUTS 3 (Italian “Province”) regions. This statement is confirmed by the inspection of Moran’s
I index (Figure 8), which equals 0.40 (significant at all conventional levels).12
9
Data available online at http://demo.istat.it/uniprev2011/index.html?lingua=ita.
According to the National Statistical Institute (ISTAT), this definition includes Torino, Milano, Genova,
Venezia,Verona, Trieste, Bologna, Firenze, Roma, Napoli, Bari, Palermo, Messina, Catania, and Cagliari.
11
Retrieved online on Jan. 13, 2012 at the URL http://seriestoriche.istat.it.
12
This index uses the values of a variable, and the values of its spatial lag (viz. the weighted sum of the values of that
variable in proximate spatial units) in order to verify whether the variable’s spatial distribution is randomly spread or
10
9
15
10
5
2
4
6
8
% over Italy's pop.
10
20
12
Figure 6. Urbanisation in large urban areas in Italy, 1861-2009.
1850
1900
1950
2000
Year
Inh. of large urban areas (mil.)
% over Italy's pop.
Notes: The 1891 and 1941 census have not been carried out, the former because of financial problems, the latter
because of WWII.
The 2011 census is still ongoing as this Report is being written. Recent figures, related to the 2009 year, are based on
registry records.
At the provincial level, the use of ESPON regional classifications of agglomerated, urban, and rural
regions allows the identification of major trends in the Italian urban growth.13 While on average
between 1991 and 2001 population grew by 0.25 per cent, rural provinces lost on average slightly
less than one percentage point of their populations. Urban provinces gained instead slightly less the
national average population increase; finally, the highest increase (higher than one percentage
point) is to be found for agglomerated provinces. All differences recorded have been subject to
standard single sample t-tests for mean differences and have been found to be significant at all
conventional levels.
This information is at odds with the abovementioned relative increase in the share of population
living in large urban agglomerations, which can be observed between the last two censuses.
Therefore, a sprawl process involved large urban agglomerations in Italy in the last decades, with
growth taking place mainly outside large municipalities, but connected to the creation of jobs in the
core areas.
concentrated along a certain pattern. Its value ranges from -1 to +1, the latter assuming maximum spatial concentration.
The result of our calculation is based on a rook contiguity matrix of order 1.
13
This classification was first devised in Bangs and Thomé (2004).
10
Figure 7. Population growth in Italian municipalities, 1991-2001.
Population growth
1991-2001 % change
-40.10 - -17.30
-17.29 - -8.90
-8.89 - -3.10
-3.09 - -1.00
-0.99 - 0.00
0.01 - 13.90
13.91 - 24.20
24.21 - 47.60
47.61 - 144.40
© Politecnico di Milano, ESPON ET2050 Project 2012
Source of raw data: ISTAT (2001), authors’ elaboration.
11
-20
0
20
40
60
Figure 8. Moran’s I scatterplot for the growth of population in Italian municipalities between 1991 and 2001.
-50
0
50
Pop. growth
100
150
Source of raw data: ISTAT (2001), authors’ calculations.
2.3
Political situation
Italy has been facing a major process of internal restructuring in the last two decades. In 1992, a
wave of trials involved the after WWII political leaders (the period of the so called “Mani
Pulite/Clean hands”) resulting in a reshuffling of the political elite which wiped out the major
ruling parties of the period, including the Christian Democratic Party, the Socialist Party, and the
Communist Party. As a result, the last two decades have been dominated by two major forces: the
Forza Italia/Popolo delle Libertà right wing alliance, led by the Media Tycoon Silvio Berlusconi,
and the left-wing, formerly Communist party labelled as “Partito Democratico”.
In the summer 2011, however, a major world financial crisis affected the Italian Public Debt, with a
consequent rise in the perceived sovereign risk, rising from 2 per cent around the beginning of
Fiscal Year 2011 to 5.3 per cent at its end (Figure 9). This pressure caused the end of the ruling
majority government led by Silvio Berlusconi and the appointment of Mr. Mario Monti, formerly
EU competition commissioner, as prime minister. As this report is being written, sovereign risk is
experiencing a slow but remarkable decline. On February 23, 2012 the spread between Italian and
German 10 years bonds is equal to 3.64 per cent. This reduction, although welcome, must be
followed by further efforts to reduce the divide between perceived sovereign risk in the Euro area;
in fact, given an outstanding amount of debt equal to € 1,897,900,000,14 this implies an yearly
overload on public accounts of 70 billion Euros more than Germany just for interest payment.
Political elections are due in Spring 2013; in the meanwhile, Mr. Monti’s government is bound to
reassure financial markets about Italy’s solvability15 as well as proceed with the economic reforms
needed to re-boost Italy’s otherwise sluggish economic performance.
14
Data referring to December 2011. Source: Italian Treasury (retrieved online on Feb 23, 2012 at the URL
http://www.dt.tesoro.it/it/debito_pubblico/_link_rapidi/debito_pubblico.html).
15
“[The president of the Italian Republic] hopes (Mario Monti) can quickly assemble technocrats like himself who will
reassure the markets that Italy is serious about healing its finances and reviving its economy” (CNBC, 2011).
12
Figure 9. 10 years returns spread between Germany’s Bund and Italy’s BTP, fiscal year 2010.
Source:
Bloomberg
(.ITGERSP:IND).
Data
retrieved
http://www.bloomberg.com/apps/quote?ticker=.ITGERSP:IND
2.4
on
Jan.
9,
2011.
On
the
web:
Economic outlook
This Country presents a rather contradictory economic situation. On the one hand, it enjoys a long
tradition of satisfactory economic performance, and still produces 2.4 per cent of the World’s GDP
(IMF 2011a, p. 171). Using data from Angus Addison’s Groningen Growth and Development
Centre,16 it appears that from 1950 to 2008, Italy’s per capita GDP grew on average 3.04 per cent
on an yearly basis. However, this figure climbs to 3.78 per cent if the sample is restricted to the
period 1950-1992. Figure 2 shows that Italy’s productivity growth gradually flattened out after a
period of sustained growth following the destructions of WWII. Actually, a simple ten yearswindow moving average extrapolation (dashed line in Figure 10) shows that the last two decade
suggest that the long-run equilibrium productivity growth for this Country may reach an asymptote
in the next 20 years.
This section focuses on the major challenges Italy will likely face in the next decades, with the
particular goal of highlighting all the elements potentially relevant for scenario construction. It
therefore comprises three main subsections, the first dealing with Italy’s public finance (2.4.1), the
second describing the Country’s industrial composition (2.4.2), and finally the third dealing with
international trade patterns from and to Italy (2.4.3).
16
Available at http://www.ggdc.net/maddison/.
13
7.5
8
8.5
9
9.5
10
Figure 10. Log per capita GDP and 10 years –window moving average estimate of log per capita GDP in Italy,
1861-2008.
1850
1900
1950
2000
Year
Log per capita GDP
10Y-window moving average log per capita GDP
Source of raw data: Maddison (2008), authors’ calculations.
2.4.1 Public finance
Italy faces a major economic challenge in the forthcoming years. The burden of public debt is
already presenting its toll and clearly represents a consistent hurdle for future economic
transformations. Recent figures about tax rates in the Country suggest that, in the absence of high
GDP growth rates, and with the aim to reduce public debt, Italian citizens will hypothetically need
to pay their whole salary in taxes up to June 19th of each year.17
One of the pillars of the Maastricht Treaty, viz. the ratio of gross government debt over GDP
(which must be below 60% or rapidly converging), has been actually never been met since the
inception of the Euro (Figure 11). However, a major characteristic of Italy’ current public finance
situation is the net difference between primary and secondary public deficit. While the former has
been steadily accumulating surpluses, with the only notable exception of 2009, the latter reflects the
consistent sums the Italian government pays to refinance its debt. In fact, around 5 per cent of each
year’s GDP is spent to pay interest on the outstanding public debt (Figure 12). Thus, even with a
large primary surplus, the Country reaches secondary deficits which harm public finance’s stability
and future growth patterns. However, Italy is clearly undertaking major steps to reform its public
accounts in many ways. Primary surpluses guarantee the debt’s short-term stability. At the same
time, the debt maturity is increasing, signalling the relative trust the Italian debt enjoys from
institutional and private investors (Diamond, 1991). Relative optimism on the perspectives of
Italy’s public finance is in fact shared by several specialised media (e.g. The Economist, 2011).
17
Calculations by the economic supplement of the newspaper Corriere Della Sera, data retrieved on Jan.9, 2012 at the
URL http://www.corriere.it/economia/12_gennaio_08/fisco-sette-giorni-lavoro-pagare-tasse-fracaro-vavolo_be5ebd5e3a40-11e1-b6d5-d3e076de4b02.shtml
14
90
100
110
120
Figure 11. Italy’s general government gross debt as a percentage of GDP, 1988-2016 (IMF est.)
1990
1995
2000
2005
2010
2015
Year
Source of raw data: IMF (2011b).
-.05
0
.05
Figure 12. Primary and secondary public deficit/surplus for Italy, 2000-2009.
2000
2002
2004
2006
2008
Year
Primary surplus/deficit
Secondary deficit
Interest
Break-even line
Source of raw data: EUROSTAT, gov_dd_edpt1
2.4.2 Industrial composition
15
2010
Recent globalisation waves highlighted the possible weaknesses stemming from a rather low
average size of Italian enterprises.18 Of all EU27 countries, only Portugal has a lower average firm
size.19 In a hyper-competitive world economy, firm size is increasingly associated with more
bargaining power, economies of scale, and better access to credit and productivity-enhancing
technologies (Scherer, 1973; Shepherd, 1972). As such, the small average size of local companies
may reduce the average competitiveness of the Italian economic system.
The Country can nevertheless face such challenges with confidence. It still has one of the most
advanced and diversified economies of the world. A rich and dense transport infrastructure network
has been recently updated with fast trains connecting the major cities in the North and in the Center
of the Country. Its key geographic position between the core economic regions of the EU, North
Africa, and the Balkans grants accessibility to crucial trade routes.
2.4.3 International trade
Italy is an open Country. It maintains consistent trade relations with most world countries. OECD
STAN Bilateral Trade data20 show that Italy trades mainly with EU27 partners. Nevertheless, the
total share of goods imported from, or exported to, the EU27 countries, has been steadily declining
in the last 15 years (Figure 13), with imports declining faster than exports.21. For the terms of trade,
it seems like Italy did not experience tangible effects from the inception of the common currency.
.5
.55
.6
.65
Figure 13. Percentage of Italy’s trade with EU27’s partners, 1995-2010.
1995
2000
2005
2010
year
Import from the EU27
Export to the EU27
Source of raw data: OECD STAN data base, authors’ elaborations.
18
For further details on recent trends in the industrial organization of Italian companies, see among many relevant
references Alderman (2011).
19
Source: EUROSTAT raw data, reference year 2009, authors’ elaborations on the series “Business demography
indicators presented by size class) [bd_9b_sz_cl_r2]”. Retrieved on Jan. 10, 2012.
20
Raw data available at http://stats.oecd.org/Index.aspx?DataSetCode=BTDIXE; calculations by the authors.
21
Results obtained regressing the percentage of imports and exports from and to EU27 partners over a time trend,
available upon request from the authors.
16
Correspondingly, and in line with most large European countries, Italy experienced a fast growth of
imports from and exports to Asian booming countries. In 2010, imports from and exports to China
were respectively four and two times larger than in 1995; over the same period, both imports from
and exports to India doubled in percentage relevance. Italian trade is therefore experiencing a
massive shift of balance from EU partners towards BRIC countries, with, however, the former still
representing the core of trade activity.
Table 3 shows the top 10 countries in terms of the percentage of trade to and from Italy in 2010.
Table 4 shows instead the top 10 Italian industries in terms of imports and exports. Italy exports
mainly medium to high-tech products, with a relevant role of machinery and electrical equipment,
automobiles, pharmaceuticals and chemicals. On the other hand, it also imports machinery and
automobiles, but also raw materials and minerals and oil.
Table 3. Main trade partners for Italy, 2010 data.
Top 10 countries by % of exports % of exports Top 10 countries by % of imports % of imports
Germany
12.92% Germany
19.09%
France
11.51% France
13.88%
United States
United Kingdom
6.00%
6.07%
Spain
Netherlands
5.75%
5.50%
United Kingdom
United
States
5.30%
4.85%
Switzerland
Belgium and Luxembourg
4.75%
4.78%
Belgium and Luxembourg
Switzerland
2.68%
4.46%
China
Spain
2.54%
3.93%
Poland
Russian Federation
2.50%
2.60%
Netherlands
Austria
2.46%
2.33%
Northern African Countries22
Northern African Countries
3.16%
3.49%
Source of raw data: OECD STAN data base, authors’ elaborations.
Table 4. Top 10 industries by percentage of exports and imports.
Top 10 industries by % of
Top 10 industries by % of
% of exports
exports
imports
% of imports
Nuclear reactors, boilers,
machinery and mechanical
appliances
19.57%
Mineral fuels, mineral oils,
bituminous substances, mineral
waxes
18.45%
Automobiles and vehicles
7.25%
Machinery and electrical
equipment
9.79%
Machinery and electrical
equipment
6.58%
Automobiles and vehicles
8.59%
Mineral fuels, mineral oils,
bituminous substances, mineral
waxes
Plastic materials
Manufactured iron and steel
Pharmaceuticals
Furniture
Iron and steel
Apparel and clothing accessories
4.64%
4.23%
4.00%
3.66%
2.91%
2.82%
2.51%
Nuclear reactors, boilers,
machinery and mechanical
appliances
Iron and steel
Plastic materials
Pharmaceuticals
Chemicals
Optical instruments
Gems, pearls and jewerly
metals
Source of raw data: ISTAT, authors’ elaboration.
22
Including Algeria, Egypt, Libya, Morocco, and Tunisia.
17
8.36%
3.98%
3.90%
3.84%
3.18%
2.37%
1.92%
2.5
Internal divisions
Italy’s Southern and Northern regions have been traditionally characterized by a major GDP gap.23
While far from reducing, internal regional divisions have at least remained unchanged in recent
decades. At market prices, GDP per inhabitant in the Southern part of the Country is about 37 per
cent of the regions in the Central and Northern part of the Country;24 this represents an increase of 2
per cent in the last fifteen years. However, absolute GDP levels calculated in constant 2000 Euros
are consistently produced for three quarters in the central and northern areas, and 23 per cent in the
southernmost portion, with no convergence trend to be detected; this may be in turn due to the
relevant internal migration flows, which still push each year about 50,000 people (an average-size
city for Italian standards) to move from regions in the South to regions in the Center-North of the
Country.
Regional differences heavily affect also the labour market. In 2008, Italy was the Country with the
highest dispersion of regional unemployment rates across the whole EU27.25 Uneven access to
employment opportunities is particularly affecting Southern regions, where apparently high
entrepreneurship rates can be justified with the absence of available employment alternatives. This
may represent a further asset for the future economic performance of Italy. A third economic boom,
following the initial industrialisation process involving North-Western regions, with the second one
characterising the district-based economies of North-Eastern and Central regions, may be slowly
taking off. This is in particular made evident by recent figures released by the National Statistical
Institute, which provide evidence of a faster and more robust growth of new enterprises in Southern
regions, even before the current financial crisis reduced employment rates.26
3. Slovenia
Slovenia joined the EU in 2005. It is a relatively small Country, with a small access to the Adriatic
Sea and good economic conditions with respect to most New Member States. Economic growth in
this Country has been steady in the last two decades, allowing a relatively rapid convergence
process with respect to the average EU27 level. The Country’s financial and economic stability
makes it one of the most successful stories of accession countries in the recent 2005-2007 waves of
EU enlargement.
3.1
Geography
Slovenia currently constitutes the south-eastern border to the EU27 to the former Yugoslavia (and
in particular to Croatia27). The Country is mostly mountainous, with around 90 per cent of the
surface of the country at least 200 meters above sea level. Slovenia borders with Austria, whose
orographic structure it closely resembles, Italy to the South-West, Hungary to the North-East, and
Croatia. South of the Italian border Slovenia also has a short access to the Adriatic Sea; the whole
coastline is about 47 kilometres long.
23
An excellent history of the evolution of such gaps in the second half of the 20 th Century can be found in Ginsborg
(2003). Putnam et al. (1993) presents instead a classical review of the cultural and social differences between Northern
and Southern areas, which are often believed to be a cause to regional imbalances.
24
Source of raw data: National Statistical Institute’s Regional Economic Accounts, retrieved on Jan. 9, 2012 at the URL
http://www.istat.it/it/archivio/12718.
25
Source:
EUROSTAT,
data
retrieved
on
Jan.
9,
2012
at
the
URL
http://epp.eurostat.ec.europa.eu/statistics_explained/index.php/Regional_labour_market_disparities#Differences_in_dis
persion_rates.
26
Figures available on ISTAT (2011b).
27
With talks concerning Croatia’s accession to the EU in 2013, Slovenia may lose this role and become fully
surrounded by EU countries.
18
Figure 14 shows that, according to EUROSTAT official data, more than three fifths of the Country
are covered with forests, with about 14 per cent of the soil destined to permanent grassland. These
figures portray a Country at a stage of passage from a rural to an industrial system.
Geographic risks are relatively limited. In fact, Slovenia faces low risk of natural disasters.
However, potential threats for areas close to the Italian border are given by seismic risk.
Figure 14. Land use in Slovenia, 2010.
8.39%
12.68%
14.10%
1.33%
23.82%
62.85%
Arable land
Permanent grassland
Land under permanent crops
Utilized agricultural area (UAA)
Wooded area
Other area
Source of raw data: EUROSTAT, authors’ elaborations.
3.2
Demography
Slovenia faces demographic challenges similar to Italy’s, with perhaps a more serious problem
represented by population ageing, in line with other New Member States. Figure 15 shows the
population pyramids calculated for 1950 and 2010, and the analogous graphs plotted on the basis of
population projections by the UN Population Division for 2050 and 2100. Increasing population
aging is forecasted to last up to at least half this Century, with a subsequent stabilisation and a more
equal distribution of age classes around the end of the Century. This will pose sustainability
challenges for the Country’s financial resources, and will likely involve, in line with most EU
countries, a revision of current pension schemes. Recent revisions have however already took place,
with – in January 2000 – the enforcement of the the Pension and Disability Insurance Act, ZPIZ128). This reform creates a three pillar system, which can be summarised as in Figure 16, and is
based on:
28
This reform sets out to reach the following aims:
 The pension base must gradually fall;
19
 A core of compulsory pensions, which provide a minimum common denominator for all
workers;
 An additional set of supplementary pensions, based on individual contributions for those
who are willing to increase future pension incomes;
 A final chance to further act on the pension market via life insurances.
Figure 15. Population pyramids for Slovenia, 1950-2100.
Source: UN Population Division (2010).29
 The required age for retirement must gradually rise;
 The number of years for the calculation of the pension base must also gradually increase;
 The ratio between the highest and the lowest pension cannot exceed 1 over 4;
 A change in the adjustment of pensions.
29
Graphs retrieved online on Feb. 3, 2012 at the URL http://esa.un.org/unpd/wpp/population-pyramids/populationpyramids_absolute.htm.
20
Figure 16. Pension system in Slovenia after the Pension and Disability Insurance Act.
Source: .kapitalska-druzba.si.
The challenges from an ageing population in an era of increasing constraints on public accounts
should be taken into account when creating scenarios on future development patterns for this
Country.
3.3
Political situation
Slovenia has enjoyed remarkable political stability even when it still belonged to the former
Yugoslavia. When this Country fell apart after the collapse of the Iron curtain, “(…) Slovenia was in
a privileged position relative to the other members of the federation. It was the wealthiest and most
Western- oriented member of SFR Yugoslavia, generating 18 percent of the federation’s social
product and 20 percent of the industrial production with only 8 percent of population. Its
unemployment rate, at 3.2 percent, was about one fifth that of SFR Yugoslavia as a whole, and
productivity was at least twice the national average” (Mrak et al., 1999, p. 116).
Since 1991, when the first two independent countries (Croatia and Slovenia) emerged from the
collapse of SFR Yugoslavia, Slovenia walked a long path towards political stability. Its political
structure is based on a parliamentary system, with an incomplete bicameralism (Mrak et al., 1999),
and power being shared between a directly elected president, a prime minister, and the parliament.
These remarkable achievements in a very limited time are also coupled with the fact that Slovenia is
the only former Communist state that has never carried out lustration (Kotar, 2008). This fact,
however, attracted only recently some relevant debate, and mostly on the academic side. In fact, the
political and military elite in Slovenia earned much more trust among citizens, even during the
Communist era, and gradually slipped out of service (both in the political as well as in the secret
service and political police service).
The most recent political elections, held in 2008, assigned about 30 per cent of total parliament
seats each to the Social Democrats (Socialni demokrati, SD) and the Slovenian Democratic Party
(Slovenska demokratska stranka, SDS) (Figure 17).
21
Figure 17. Results of the 21 September 2008 Slovenian National Assembly election.
5.64%
5.64%
5.85%
Social Democrats (Socialni demokrati, SD)
32.97%
Slovenian Democratic Party (Slovenska demokratska
stranka, SDS)
Zares – new politics (Zares – nova politika)
8.07%
Democratic Party of Pensioners of Slovenia
(Demokraticna stranka upokojencev Slovenije, DeSUS)
Slovenian National Party (Slovenska nacionalna stranka,
SNS)
Slovenian People's Party and Youth Party of Slovenia
(Slovenska ljudska stranka in Stranka mladih Slovenije,
SLS+SMS)
10.14%
Liberal Democracy of Slovenia (Liberalna demokracija
Slovenije, LDS)
31.68%
Source: volitve.gov.si
3.4
Economic outlook
The Country experienced a process of very fast convergence to European standards of economic
wealth since the fall of the Iron Curtain. Figure 18 shows that Slovenia as a whole currently earns
about 75 per cent of the EU’s average GDP, up from a level of 55 in the mid 1990s.
40
50
60
70
80
90
Figure 18. Per capita GDP in Slovenia and Slovenian NUTS2 regions as a percentage of the average EU level,
1995-2009.
1995
2000
2005
2010
year
Slovenia
Zahodna Slovenija
Vzhodna Slovenija
Source of raw data: EUROSTAT, authors’ elaborations.
Inside the Country, this result comes from a relatively lower level of GDP in Eastern Slovenia (the
regions where the cities of Maribor, Celje and Velenje are located); on the contrary, the Western
region and in particular the area surrounding Ljubljana enjoy a per capita GDP which is only
slightly lower than the EU average. Given the results of the previous decades and the most plausible
22
forecasts about future growth, it is highly likely that Slovenia will indeed catch up with average EU
levels within the next ten to twenty years. In fact a recent official EU assessment agrees that
Slovenia “has achieved a high degree of sustainable convergence” (EC, 2006, p. 50).
3.4.1 Public finance
Slovenia has only recently experienced some troublesome period in its public financial situation,
mainly caused by the current financial crisis. In fact, the process of reduction of the outstanding
debt required as a major accession condition before the 2005 EU enlargement has only recently
been reversed (Figure 19). The accumulation of public debt has been pushed by the need for fiscal
easing in order to sustain local employment and demand. However, recent figures show that despite
this relatively more generous spending behaviour, Slovenia still remains within the Maastricht
treaty criteria, with a Debt/GDP ratio well below the requested 60 per cent. The Country officially
states that “the aim must be macro-economic stability as well as sustainable and stable national
economic development” (Republic of Slovenia, 1999, p. 2).
20
25
30
35
Figure 19. Debt/GDP ratio in Slovenia, 2002-2010.
2002
2004
2006
Year
2008
2010
Source: OECD.30
Production-wise, “Slovenia has a tradition of a broadly balanced current account, principally
reflecting equilibrium between the deficit in trade in goods on one side and a surplus in trade in
services together with a positive balance of current transfers on the other side” (EC, 2006, p. 50).
The sustainability of the trade model for this Country will be further analysed in Section 3.4.3
below.
3.4.2 Industrial composition
Slovenia is a modern economy. The Country belongs to several international organizations
including the OECD, and has been experiencing a balanced but rapid growth since the fall of the
Iron Curtain.
Table 5 shows the shares of Slovenian value added by NACE 2 digits industries. Currently, slightly
more than 2 per cent of the Country’s GDP is produced in the primary industry, while
manufacturing still has a total share of 29 per cent of the Country’s value added. In stark contrast
with other European economies, this share has been growing in the second half of the last decade.
30
Data retrieved online on Feb. 3, 2012 at the URL http://stats.oecd.org/Index.aspx?DataSetCode=GOV_DEBT.
23
Table 5. Value added (shares of total Country’s GDP) by industries in Slovenia, 2006-2009.
Year
2006
2007
2008
2009
Agriculture and fishing
2.5%
Mining, quarrying and energy supply
3.9%
Food, beverages and tobacco
3.1%
Textiles and clothing
2.8%
Fuels, Chemicals, Rubber and Plastic Products
5.0%
Electrical and optical equipment
2.8%
Transport equipment
1.4%
Other manufacturing
12.6%
Total manufacturing
27.7%
Construction
6.3%
Wholesale and retail trade
10.9%
Hotels and restaurants
2.1%
Transport and communication
7.4%
Financial services
4.1%
Other market services
15.7%
Non-market services
19.4%
Total services
59.7%
Source of raw data: EUROSTAT, authors’ calculations.
2.3%
3.9%
3.1%
2.7%
5.2%
2.9%
1.4%
13.0%
28.4%
6.3%
10.9%
2.1%
7.3%
4.0%
16.1%
18.7%
59.0%
2.3%
4.0%
3.1%
2.7%
5.3%
3.0%
1.4%
13.3%
28.7%
6.3%
10.8%
2.0%
7.1%
3.9%
16.4%
18.3%
58.6%
2.2%
4.0%
3.0%
2.6%
5.4%
3.1%
1.4%
13.5%
28.9%
6.3%
10.8%
1.9%
7.0%
3.8%
16.9%
18.1%
58.5%
Relocation of productive plants from other EU countries has in fact taken place in the last 15 years;
however, interestingly the reverse process also took place, with Slovenian companies off-shoring
their production to look for cheaper labour.31
One additional trend emerges from the data on the shares of advanced services in this Country.
Slovenian value added in financial services, real estate, renting and business activities has been
slowly but steadily increasing in the years 2006-2009, driven mainly by the non-financial
component.
The Slovenian economy is therefore gradually evolving from a predominantly rural and agriculturebased system towards a modern set of industries with a remarkable specialization in manufacturing
and a non-negligible share of advanced industries induced by the secondary sector.
Recent, pre-financial crisis economic planning documents underlined the interest of Slovenian
policymakers and stakeholders in the development of the Green Economy. “(…) many parts of
government and society in Slovenia appear to be interested in taking a strong role in terms of
shaping the future. This is seen in the work of the Government Office for Climate Change, which is
now studying the long-term transition to a low-carbon economy” (European Environment Agency,
2011, p. 19).
3.4.3 International trade
Slovenia could be considered a prototypical –borrowing the economics jargon – small, open
country. According to data from the Heston et al. (2011), Slovenia ranked 31st in the worldwide
ranking, and 10th in the EU27’s, of countries in decreasing order of trade openness.32 In 2009, the
sum of Slovenia’s import and export flows was higher than the Country’s GDP.
“In central Europe, the case of Slovenia is to some extent atypical for an area where inward relocations seem to
prevail, since outward transfers of production to neighbouring countries and sometimes China are reportedly
predominant, mainly in labour-intensive, low value-added sectors” (Pedersini, 2006).
32
Trade openness is usually measured as (Imports+Exports)/GDP. The Heston et al. (2011) data calculate this figures in
constant 2005 USD.
31
24
Traditionally, and because of its geographical position, Slovenia trades mostly with EU and Balkan
countries. Table 6 shows that among its 10 most important trade partners, most are indeed from the
EU (7 out of 10 partners as export markets, column 2; and 8 out of 10 partners as import countries,
column 4).
Table 6. Top 10 countries by value of goods imported to, or exported from, Egypt, average 2000-2006.
Average imported goods
Average goods exported
Country
Country
from Slovenia 1992-2006
to Slovenia 1992-2006
Rest of EU27
7195.10
Rest of EU27
9047.07
Germany
2566.17
Germany
2465.67
Italy
1409.23
Italy
2137.96
Austria
933.45
Austria
1229.45
Croatia
856.51
France
1110.01
France
829.51
Croatia
569.14
Bosnia and Herzegovina
418.69
Hungary
370.11
US
353.40
Netherlands
313.56
Poland
279.55
Spain
290.59
Czech Republic
238.48
Czech Republic
290.47
UK
227.57
US
268.25
Source of raw data: Barbieri et al. (2008), authors’ calculations. Data in current millions USD.
Germany and Italy represent the largest trade partners for Slovenia, both on the sell as well as on
the buy side. Overall, the share of trade between Slovenia and the rest of the EU27’s countries
represents more than three quarters of the country’s total trade. In the last 15 years, the percentage
of exports from Slovenia to the rest of the Union slightly decreased but still represent more than 75
per cent of total country exports. During the same period, the share of imports from the EU grew to
80 per cent of total Slovenian imports (Figure 20).
.75
.8
.85
.9
Figure 20. % of total trade between Slovenia and the rest of the EU27, 1993-2006.
1990
1995
2000
2005
Year
% of exports from Slovenia to the EU
% of imports to Slovenia from EU
Source of raw data: Barbieri et al. (2008), authors’ calculations.
25
A crucial future challenge for Slovenia will likely be the stabilization of the current trade pattern,
ideally coupled with a further expansion of skills-intensive productions,. In order to guarantee the
Country’s competitiveness on international markets, this entails the increase in the Country’s
current R&D expenditure, and the adoption of more aggressive innovation strategies, in particular
in the private sector. In fact, a major threat to the Country’s mode of consumption may stem, much
like most EU regions outside the continental core, from the increasing competition (in particular in
terms of lower labour costs) from BRIC countries.
3.5
Internal divisions
Despite being a relatively small Country, Slovenia presents some relevant internal spatial
imbalances, mainly due to the rural/urban dichotomy. The benefits of the fast convergence against
the EU are not equally distributed across space, with a strong core-periphery pattern. In fact, Central
Slovenia’s (Osrednjeslovenska) GDP is currently above the EU27 average, whilst the Pomurska
region, bordering Hungary, is below half of the mean EU value and predominantly characterized by
agricultural activities. Figures 21 and 22 show respectively an histogram and a map of the
distribution of Slovenian regional (NUTS3) per capita GDP levels in 2008 as a percentage of the
EU average.
Figure 21. Histogram of per capita GDP as a percentage of the EU average in Slovenian NUTS3 regions, 2008.
120
Per capita GDP as a % of the EU average in 2008
100
80
60
40
20
0
Source of raw data: EUROSTAT, authors’ elaborations.
26
Figure 22. Map of per capita GDP as a percentage of the EU average in Slovenian NUTS3 regions, 2008.
Slovenia
Per capita GDP as % of EU average
48
49 - 55
56 - 57
58 - 61
62
63 - 66
67 - 71
72 - 78
79 - 104
Source of raw data: EUROSTAT, authors’ elaborations.
Spatial clustering does not seem to be particularly relevant in the Slovenian case. Moran’s I index
of spatial autocorrelation of GDP values calculated on the NUTS3 regions rejects the null
hypothesis of either positive, or negative, spatial autocorrelation. In the absence of major urban
centres attracting skilled labour and representing the focus of GDP production, regional
development in Slovenia seems to be driven mainly by geographical features, with rural areas
characterized on average by lower productivity levels.
The diffusion of rural activities in Slovenian regions, which still characterizes this Country, may
pose a challenge for the future spatial distribution of economic and social resources. This Country
managed in fact to retain a relevant share of its population in rural areas in recent years, even
considering the period of extreme urbanization during the decades following WWII (Figure 23).
Whether this structure remains sustainable in the long run depends heavily on the rural areas’
productivity levels, which should ideally converge to levels closer to urban industries, in order for
the incentives to urbanise not to further attract people in cities. This point may be interestingly
tackled in a scenario analysis.
20
30
40
50
60
70
Figure 23. Percentage of Slovenian population living in urban areas, 1950-2050.
1950
2000
Year
2050
Source: UN Population Division (2010), authors’ elaborations.
Note: data from 2015 on based on UN Population Division (2010) forecasts.
27
4. Lybia
Before the recent political upsurge and the fall of Qhaddafi, Libya had the highest HDI in Africa
and the fourth highest per capita GDP (in PPP) in Africa, behind Seychelles, Equatorial Guinea and
Gabon. Libya has the 10th-largest proven oil reserves of any country in the world and the 17thhighest petroleum production.
4.1
Geography
Libya faces the Mediterranean sea from its southern shore. Figure 24 shows the main transport
networks of the Country, and its main ports. In principle, the Country is one of the final gates to
Southern Europe, because of its strategic position for the trade routes between Sub-Saharan
countries and the EU.
Figure 24. Map of Libya with the main transport infrastructure.
Source: African Economic Outlook (2011a).
4.2
Demography
When the Country gained its independence from France and the UK, respectively, in 1951, it was
inhabited by slightly more than a million people. Currently it hosts more 6.5 million inhabitants
(Figure 25), with yearly growth rates reaching 6 per cent per year (with an average yearly growth
28
rate between 1950 and 2010 equal to 3.5 per cent).33 The capital city Tripoli alone accounts for
more than a million inhabitants as of 2009 (Source: CIA World Factbook34).
1000
2000
3000
4000
5000
6000
Figure 25. Libya population, 1950-2009.
1940
1960
1980
year
2000
2020
Source of raw data: Heston et al.(2011), authors’ elaborations.
Table 7 shows some highlights of indicators on the population of this Country.
Table 7. Demographic indicators for Libya, 2005-2025 (US Census Bureau forecasts).
Demographic Indicators for Libya
1995
2005
2011
2015
Population
Midyear population (in thousands)
Growth rate (percent)
Fertility
Total fertility rate (births per woman)
Crude birth rate (per 1,000 population)
Births (in thousands)
Mortality
Life expectancy at birth (years)
Infant mortality rate (per 1,000 births)
Under 5 mortality rate (per 1,000 births)
Crude death rate (per 1,000 population)
Deaths (in thousands)
Migration
Net migration rate (per 1,000 population)
Net number of migrants (in thousands)
Source of raw data: US census bureau (2012).
2025
4663
0.7
5778
2.3
6598
2.1
7132
1.8
8342
1.4
4.1
26
122
3.3
27
155
3
24
159
2.7
22
154
2.4
17
145
74
38
44
4
17
77
25
29
3
20
78
20
23
3
22
78
17
20
3
24
80
12
14
4
31
-16
-75
NA
NA
NA
NA
NA
NA
NA
NA
The impressive increase in population levels after WWII depend partly also on the process of
increasing immigration from bordering countries, and in particular from Sub-Saharan ones.
Currently, Libya hosts more than 10 per cent of its national population with a nationality other than
Libyan (United Nations Department of Economic and Social Affairs, 2005). At the same time,
Libyan citizens are more keen to flee from their Country the higher their education level. In the last
two decades, this process entailed a progressive loss of national human capital (brain drain), with a
Source of raw data: Heston et al.(2011), authors’ elaborations.
Datum retrieved online on Feb. 8, 2012 at the URL https://www.cia.gov/library/publications/the-worldfactbook/geos/ly.html.
33
34
29
total share of Libyan citizens assumed to live abroad of about 5 per cent of total population.35
However, an increasing share of Libyan citizens with lower levels of education, despite the wealth
of natural resources locally available (estimated at millions of Euros for every Libyan citizens,
according to Solomon, 2001), flees away in search for better living conditions.
Some think-tanks and political scientists believe the internal divisions of the Country due to its
tribal structure and the relevant internal unbalances may ultimately even lead to a split of the
Country (Solomon, 2011).
4.3
Political situation
After the anti-government riots of 17 February 2011 (the “day of rage”), Libya has experienced an
escalation of violence which led to the fall of Mu’ammar Qaddafi, with a progressive retreat of the
forces loyal to the old regime and the emergence of a Transitional National Council (henceforth,
TNC). Qaddafi died on October 20, 2011 after a fight in Sirte, one of the cities most loyal to its
regime.
This sudden violent event brought oil extraction to a almost total halt, causing a likely decline in
GDP measurable in double digits (African Economic Outlook, 2011). However, experts believe that
if the TNC will manage to gain stability, growth will rapidly recover, possibly by the end of 2012.
Given Libya’s large oil reserves, the impact of the February 2011 riots have been severe on energy
markets. Figure 26 shows daily crude oil prices (blue line) and the corresponding moving average36
(green line) in the last two years.
Figure 26. Crude oil prices (USD per brent), Jan. 1 2012-Jan. 25 2012.
Beginning of the riots leading to the fall of Mu'ammar Qaddafi
140
Europe Brent Spot Price FOB (Dollars per Barrel)
120
Average pre- and post-riots crude prices
Europe Brent Spot Price FOB (Dollars per Barrel)
Moving average
100
80
60
40
20
0
Jan Feb Mar Apr May Jun Jul 04, Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul 04, Aug Sep Oct Nov Dec Jan
04,
04, 04,
04, 04,
04, 2010 04,
04, 04,
04, 04,
04,
04, 04,
04, 04,
04, 2011 04,
04, 04,
04, 04,
04,
2010 2010 2010 2010 2010 2010
2010 2010 2010 2010 2010 2011 2011 2011 2011 2011 2011
2011 2011 2011 2011 2011 2012
Source: Energy Information Administration (2012).
Notes: Weekly, monthly, and annual prices are calculated by EIA from daily data by taking an unweighted average of
the daily closing spot prices for a given product over the specified time period. Release Date: Jan 25, 2012.
35
In relative terms, this result is way less worrying than figures available for Guyana, Jamaica, Saint Vincent and the
Grenadines, and Grenada, where more than four fifths of total population with tertiary educations is deemed to live
abroad. All figures are collected by Doquier et al. (2009), authors’ calculations.
36
The moving average smoothes out data by re-calculating average values over moving time windows. In the present
case the chosen interval length is 30 days, in order to obtain monthly averages.
30
The vertical dashed line identifies the beginning of the riots ultimately leading to the fall of
Qhaddafi. Finally, the red discontinuous line shows average prices for the periods before and after
the February 2011 riots. As the Figure clearly shows, since the riots broke out crude prices surged
from an average value of USD 81.70 to a mean value of USD 116.43. 37 Although riots begun as
prices were independently soaring, evidence suggests that the increase accelerated because of the
reduction of world production due to the riots.38
The TNC assured that within eight months after nominating a new government, elections for a
national assembly will be hold, with the final goal to draw up a constitution. Current Prime Minister
is, from Oct 31, 2011, Mr. Abdel Rahim el-Keeb, a Qaddafi critic.39 Mr. el-Keeb comes from a
brilliant career as an electrical engineer in the US academia first, and subsequently in other Islamic
countries. He faces major challenges, ranging from disarming a vast number of former rebels, to
reviving the Libyan economy. To date, it is difficult to foresee the close future of Libya’s politics,
but provided stability and a true democracy can be assured, the Country is endowed with the natural
resources and the skills needed to play a major role in Northern Africa’s economic and social
development. A major step towards this direction is the recent release of a press statement of
Libya’s interim government. This document, posted on the web site, explains a draft law “laying out
procedures for electing a planned constitutional assembly, taking a first step toward the
establishment of a new government after the overthrow of Col. Mu’ammar Qaddafi” (Kirkpatrick,
2012a).
4.4
Economic outlook
Libya’s economy heavily draws on its natural reserves. In particular, the Country hosts about 3 per
cent of total world oil reserves (the 8th largest figure in the world; see Figure 27) and the 22nd largest
natural gas reserve (Figure 28).
Figure 27. Top 10 countries by oil reserves, average 2006-2010 data.
300,000
World proven oil reserves by country, average 2006-2010.
Inside histograms: % of world reserves.
Data in million barrels.
World proven crude oil reserves by country, average 2006 -2010
250,000
200,000
150,000
20%
100,000
13%
11%
9%
8%
50,000
7%
6%
3%
3%
3%
Libya
Kazakhstan
Nigeria
0
Saudi Arabia
Venezuela
Iran
Iraq
Kuwait
United Arab
Emirates
Russia
Source of raw data: OPEC (2011), authors’ elaborations.
As most countries rich in natural resources, Libya faces a twofold situation. On the one hand, it
enjoys higher than average GDP levels (see introduction in this Section). On the other, though, it
37
These figures are calculated as the average values in the periods 1/1/2010-2/16/2011 and 2/17/2011-1/25/2012.
Fitting a time series model on oil prices shows that a dummy variable taking on value one after the riots is estimated
to be positive and highly significant, after controlling for a time trend. In fact, the average impact on oil prices may be
estimated at about USD 23 per brent.
39
See Sheridan (2011).
38
31
must plan a smooth and efficient transition to a more diversified economy, in the event of the end of
the natural resources it sells, or a change of technological paradigm towards alternative sources.
50,000
World proven gas reserves by country, average 2006-2010.
World proven natural gas reserves by country (billion standard cubic meters)
45,000
Inside histograms: % of world reserves.
Data in billion standard cubic meters.
40,000
35,000
30,000
25,000
24%
20,000
15,000
16%
14%
10,000
5,000
4%
4%
3%
Saudi Arabia
United States
United Arab
Emirates
1%
1%
1%
1%
Uzbekistan
Canada
Libya
Azerbaijan
0
Russia
Iran
Qatar
Source of raw data: OPEC (2011), authors’ elaborations.
4.4.1 Public finance
Because of its peculiar productive system, Libya enjoys a remarkable public financial stability, with
large reserves and a very low debt/GDP ratio (Figure 28). In fact, the Country also consistently runs
budget balance surpluses, which ultimately brought Libya to the days before the political upsurge
with a stable public finance situation. The money market before the 2011 political uprise showed
relatively moderate interest rates, mostly in line with bordering countries (see for instance Section
5.4.1 below for Egypt’s money market; see Figure 29). Banks can borrow money from the Central
Bank of Libya for an interest of 4 per cent, but this figure will likely depend in the close future on
the political and economic stability that the new government will be able to provide to this Country.
Figure 28. Debt/GDP ratio and current account balance for Libya, 2005-2011.
Source: Colijn (2010), original figures from The Economist Intelligence Unit.
32
Figure 29. Money market in Libya.
Source: Colijn (2010), original figures from Reuters’ Ecowin..
One remarkable aspect of Libya’s public finances is that, most likely because of its large reserves of
natural resources and the increasing oil prices, Libya managed to reduce the negative effects of the
ongoing financial crisis.
4.4.2 Industrial composition
Figures 30 and 31 show that Libya’s economy heavily depends on the revenues from natural
resources.
Figure 30. Industrial composition of Libya’s GDP, 2005.
7
0.1 2.2
7.4
3.6
Agriculture, forestry, fishing & hunting
4
Mining and quarrying
Manufacturing
Electricity, gas and water
4
Construction
Wholesale and retail trade, hotels and restaurants
1.3
Transport, storage and communication
Finance, real estate and business services
General government services
4.7
Other services
65.7
Source of raw data: African Development Bank, authors’ elaboration.
In 2010, more than half its GDP was produced in the extraction sector (and in particular in the oil
drilling industry). This exposes Libya to the risks typical of a non-diversified economy, including
33
that of the volatility of commodities on international markets. However, recent trends preceding the
February 2011 riots showed a rising share of GDP produced in the manufacturing industry (6.3 per
cent of GDP in 2010), and a non negligible role played by specific service sectors such as the
financial industry. Besides, although still far from other FDI-attracting areas, Libya has increasingly
been attracting the attention of international investors ever since the mid 2000s (Figure 32).
Figure 31. Industrial composition of Libya’s GDP, 2010.
8.2
0.1 2.7
8.4
4.8
Agriculture, forestry, fishing & hunting
Mining and quarrying
Manufacturing
Electricity, gas and water
4.9
Construction
Wholesale and retail trade, hotels and restaurants
Transport, storage and communication
Finance, real estate and business services
General government services
54.4
8.7
Other services
1.5
6.3
Source of raw data: African Development Bank, authors’ elaboration.
-5
0
5
10
Figure 32. FDIs in the four selected countries in % of GDP, 1970-2010.
1970
1980
1990
year
2000
Egypt
Libya
Italy
Slovenia
Source of raw data: UNCTAD data base, authors’ elaborations.
34
2010
The role played by the State can be inferred from the large share of gross capital formation over
total Country investment. In fact, whereas in 2001 about 50 per cent of total investment in Libya
was run by public companies, this share has increased to slightly less than 75 per cent in 2009
(Table 8).
Table 8. Demand composition for Libya, 2001-2012.
Percentage of GDP
Contribution to real GDP
Percentage changes, volume
(current price)
growth
2001 2002 2008 2009 2009(e) 2010(e) 2011(p) 2012(p) 2009(e) 2010(e) 2011(p) 2012(p)
Gross capital formation 46.5 49.7 22.5 34.9
4.3
12.6 -18.5
Public
24.7 27.9 16.1 25.4
4.0
14
-18
Private
21.8 21.8 6.4 9.5
5.0
9
-20
Consumption
37.8 44.5 29.6 47
-1.2
5.7
-3.8
Public
17.1 14.1 11.8 17.5
4.8
-0.8
-2.9
Private
20.7 30.5 17.7 29.5
-4.0
9.2
-4.3
External sector
15.7 5.7 47.9 18.2
Exports
32.9 46.6 73.6 64
4.0
8.4 -31.3
Imports
-17.2 -40.8 -25.7 -45.8
-2.7
10.7 -12.6
Real GDP growth rate
Source: African Economic Outlook (2011a).
Raw data from the Central Bank of Libya; estimates (e) and prediction (p).
20
20
20
6.9
7.3
6.8
1.2
0.8
0.4
-0.8
0.9
-1.7
1.6
1.1
0.5
2.1
26.9
15.5
5
4
1
3.5
-0.2
3.6
-1.1
4
-5.2
7.4
-7.7
-5.5
-2.2
-2.3
-0.6
-1.7
-9
-15.3
6.3
-19
8.3
6.2
2.2
4.9
1.7
3.2
2.8
11.1
-8.4
16
In the last decade, while overall imports from the rest of the world declined, despite the end of the
trade embargo, exports rapidly increased once again mostly based on the intense exports of oil and
gas to western countries (see Section 4.4.3 below).
4.4.3 International trade
Since 2004, when the embargo for trade with Libya was lifted, trade of Western countries with
Libya resurged after decades of total stagnation (Wiesman, 2004). Figure 33 shows that, as soon as
the US embargo was lifted, trade between Libya (and in particular imports to the EU from this
Country) and countries of the EU27 soon increased (at yearly rates of 30 to 40 per cent).
0
10000
20000
30000
Figure 33. Trade Libya-EU27 in current million USD, 2000-2006.
2000
2002
2004
2006
Year
Imports of the EU from Libya
Exports of the EU to Libya
Source of raw data: Barbieri et al (2008), authors’ calculations.
35
Table 9 below shows instead the top ten trade partners for Libya, along with the sum of all imports
and exports to the European Union. EU countries in the top ten list are 7 and 6, respectively for
imports and exports. Along with these partners, Switzerland and the US should also be mentioned
as western countries. Only bordering Tunisia makes it to the top ten as both an import and an export
Country.
Table 9. Top 10 countries by value of goods imported to, or exported from, Libya, average 2004-2006.
Country
Average imported
goods from Libya
2004-2006
Average exported
goods to Libya
2004-2006
Country
European Union
23835.05
European Union
4529.64
Italy
11979.24
Italy
1949.54
Germany
4873.41
Germany
865.52
Spain
2937.11
Tunisia
514.45
France
1901.43
France
437.62
US
1544.13
Greece
252.94
Switzerland
1014.13
Brazil
217.30
Greece
720.07
US
204.60
Tunisia
524.88
Belgium
190.23
Netherlands
481.04
Netherlands
188.09
Portugal
470.22
Switzerland
176.01
Source of raw data: Barbieri et al. (2008), authors’ calculations. Data in current millions USD.
Since most trade between Libya and western countries is based on natural resources (viz. oil and
gas), trade flows are highly unbalanced (Figure 34). In fact, Tunisia is the only Country among the
top ten trade partners which exchanges with Libya on a more or less even basis. All other major
partners tend to import between 4 and 7 times as much as they manage to export to Libya.
Figure 34. Trade balance between Libya and selected partners, average 2004-2006.
700%
Trade balance: Imports from Libya-Exports to Libya)/Exports to Libya
600%
500%
400%
300%
200%
100%
0%
European Union
Italy
Germany
France
Source of raw data: Barbieri et al. (2008), authors’ calculations.
36
US
Switzerland
Tunisia
Netherlands
4.5
Internal divisions
The Country is traditionally divided into three main parts: Tripolitania, Fezzan and Cyrenaica.
Indeed, the notion of the Libyan state is a relatively recent acquisition. Under Ottoman and Italian
control (i.e. until WWII), the Country was organized into three provinces, then into three
governorates (muhafazah) and after World War II into twenty-five districts (baladiyah). Later on,
the Country’s internal structure has been re-organised into thirty-two (later on, twenty-two; see
Figure 35 and Table 10) districts (shabiyat) with three administrative regions.
The Country’s tribal structure, which had hitherto been kept hidden by Qhaddafi’s rule,
dramatically emerged in the recent political uprise of February 2011. In fact, the whole notion of
Libya as a unified state may be at risk without a central power ruling separate tribal territories.
“This immense country - the fourth largest in Africa, in area equivalent to 25 Irelands - had but one
million people on its independence day in 1951, when the United Nations merged together one
French and two British-administered territories to create Libya. Few among those one million had
any notion of nationhood - they largely hailed from nomadic and semi-nomadic tribes, some 20
tribes among them of various racial stock, typically with fierce allegiances to their own clans and
little else” (Solomon, 2011).
Figure 35. Districts of Libya.
Source: Wikipedia.
The spatial distribution of economic activities reflects the barren nature of inland Libya, and is
therefore highly uneven. As of the latest census (2006), 84 per cent of total population lives in
coastal areas.40 Even without the aforementioned political and tribal divides, this spatial unbalances
may pose a further challenge to the future development of the Libyan state.
This figure comes from the authors’ calculations, and is obtained by summing up population levels in the 13 coastal
districts in Figure 15, i.e. districts 1, 2, 3, 4, 5, 6, 8, 9, 10, 11, 12, 13, and 14.
40
37
Table 10. Districts (Sha’biyah) of Libya.
Sha'biyah
2006 population
Al Butnan
Derna
Gebel Acdar
Barca (Al Marj)
Bengasi
Al Wahat
Cufra
Sirte
Misurata
Al Murgub
Tripoli
Gefara
Ez Zauia
Al Nuqat al Khams
Gebel Garbi
Nalut
Giofra
Uadi esc-Sciati
Sebha
Uadi el-Agial
Ghat
Murzuq
159,536
163,351
203,156
185,848
670,797
177,047
50,104
141,378
550,938
432,202
1,065,405
453,198
290,993
287,662
304,159
93,224
52,342
78,532
134,162
76,858
23,518
78,621
Number in Figure 35
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
5. Egypt
Egypt is located in the crucial north-east corner of the African continent; in fact, this Country owns
a portion of land properly in the Asian continent, viz. the Sinai peninsula.
Rich in history, and home to one of the first civilisations to appear on Earth, the Country gained its
independence from the British empire after WWI; however, attempts of the UK to influence is
policy lasted until the years following WWII, in particular during the Suez crisis (see Section 5.1).
Currently the Country is slowly but steadily growing and experiencing a process of economic
development which may however come to a partial halt because of recent political turmoil, both
locally as well as in other Northern African countries.
5.1
Geography
The geographic position of Egypt is crucial: in fact, the Country owns the Suez canal, which
represents a major gate of trade from Asian countries to the EU. In fact, as much as 8 per cent of
total seaborne trade is deemed to pass through this canal (Stigset and Sulugiuc, 2011).
While not far from the EU, the Country enjoys a favourable proximity to the Middle East, which in
turn also exposes Egypt to political turmoil. Whereas current political relations with neighbouring
Israel are stable and oriented towards peaceful exchange, it has not been so quiet for decades. “For
the first thirty years of Israel's existence, Egypt was its archenemy. The two countries fought a war
per decade for four decades: 1948, 1956, 1967, and 1973. President Anwar Sadat's historic
decision of 1977 to achieve peace with Israel broke the cycle” (Eldar, 2003, p. 57).
38
Figure 36. Trade routes from India’s west coast to London, UK, via the Suez canal VS. the Cape of Good Hope.
Source: Internet.
Most of Country’s soil is barren (up to 97 per cent of total Country surface according to World
Bank estimates); the majority of arable land lies around the river Nile, which is the longest river
worldwide.41 Frequent, although regular, floods, while improving the soil’s quality, represent a
further cause of environmental concern. Lastly, increasing desertification due to rising average
temperatures42 poses a serious threat to Egypt’s soil quality.
5.2
Demography
Egypt experienced a steady positive rate of population growth in the last century. From WWII to
today, its total population almost quadrupled, and this constantly positive growth rate slowed down
only around the early 1990s (Figure 37).
20000
40000
60000
80000
Figure 37. Egypt population, 1950-2009.
1940
1960
1980
year
2000
2020
Source of raw data: Heston et al.(2011), authors’ elaborations.
41
In fact the river Nile is 6,650 km (4,130 miles) long, flowing through ten countries (Sudan, South Sudan, Burundi,
Rwanda, Democratic Republic of the Congo, Tanzania, Kenya, Ethiopia, Uganda and Egypt; Oloo, 2007).
42
See Figure 52 in Appendix 2 for evidence on climate change.
39
Over 40 per cent of Egypt’s population is aged 20 and under (Figure 38). The median age in Egypt
is only 24, with a meagre 5 per cent of the population being 65 and over. This massive labour force
represents a major strength for Egypt’s economy, although a relative lack of jobs pushes Egyptians
to emigrate (mostly to other Arab countries, and in particular the United Arab Emirates (henceforth,
UAE). In 1990 and 2000, the share of immigrant population in all OECD countries originating from
Egypt was stable and around 0.45 per cent of the total migrant stock.43
Figure 38. Population pyramid for Egypt, 2011.
100+
95-99
90-94
85-89
80-84
75-79
70-74
65-69
60-64
55-59
% Female Population
50-54
% Male Population
45-49
40-44
35-39
30-34
25-29
20-24
15-19
10-14
5-9
0-4
0.15
0.10
0.05
0.00
0.05
0.10
0.15
Source of raw data: US census bureau (2012), authors’ elaboration.
Other relevant population statistics show clear signs of improvement (Table 11). In particular, life
expectancy, which is currently well above 70 years, is expected to rise to 76 years within 2025;
infant mortality rates may decrease to 15 per 1,000 births over the same time period; and migration
patterns do not reach intensity comparable to those of other Northern African countries, which
should imply less problems related to brain drain processes.44
The geography of the Country clearly affects the spatial distribution of economic activity and
population concentrations. In fact, whereas overall population density equals 76.3 inhabitants per
square kilometers, this figure reaches 2,755.2 inhabitants per square kilometers if calculated per unit
of arable land; as above mentioned, 98 per cent of total Egypt population lives in just 3 per cent of
the total Country territory.
Arable land is, as above explained, concentrated over the land made arable by the river Nile. As
such, most of its inner territories on the Western border (facing Libya) and on the Eastern shores
(on the Red Sea and on the Sinai peninsula) are mostly uninhabited (Figure 39).
Raw data from Docquier et al. (2009), authors’ elaborations.
“Brain drain” can be defined as a large-scale emigration of selected groups of individuals with high human capital
and education levels. Although this literature usually identifies with a wide consensus potentially negative effects for
sending countries, it has been recently questioned (Gibson and McKenzie, 2011).
43
44
40
Table 11. Demographic indicators for Egypt, 2005-2025 (US Census Bureau forecasts).
Demographic Indicators for Egypt
2005
2011
2015
2025
Population
Midyear population (in thousands)
Growth rate (percent)
Fertility
Total fertility rate (births per woman)
Crude birth rate (per 1,000 population)
Births (in thousands)
Mortality
Life expectancy at birth (years)
Infant mortality rate (per 1,000 births)
Under 5 mortality rate (per 1,000 births)
Crude death rate (per 1,000 population)
Deaths (in thousands)
Migration
Net migration rate (per 1,000 population)
Net number of migrants (in thousands)
Source of raw data: US census bureau (2012).
72544
2.1
83688
1.9
88487
1.8
103742
1.4
3.2
27
1927
2.9
24
2027
2.8
23
2026
2.5
19
2006
71
32
39
5
364
73
24
29
5
402
74
22
26
5
422
76
15
18
5
516
-0
-17
NA
NA
NA
NA
NA
NA
Figure 39. Population density in Egypt governorates, 2006.
Source: Internet.
Egypt is a middle-level HDI Country. Relevant shares of the Country population are still illiterate,
or almost so, with a consistent gap between male and female population (Figure 40).45 As in most
similar cases, educated population concentrates in large urban agglomerations along the river Nile
and in particular along its northernmost bed. Figure 41 for instance, shows the location quotient of
45
A two-sample mean comparison t-tests shows that the average education level for the male population is higher than
that of the female component, with a 95 per cent significance level.
41
the illiterate population (with the average Egypt value normalized to 1), and clearly allows to
identify the former 6 October Governorate and the current Sharkia governorate as the two areas of
the Country with the highest illiteracy rates, according to the latest population census, carried out in
2006.46
Figure 40. Egypt population by educational level and sex, 2006.
40
35
30
% of total population
25
Male
20
Female
Total
15
10
5
0
Illiterate
Read& Write
Literacy Campaign
Below
Intermediate
Intermediate
Above
Intermediate
University
University and
above
Source of raw data: Egypt population census (2006).
Figure 41. Illiteracy rates in Egypt governates, Location Quotients (average Egypt=100), 2006 data.
© Politecnico di Milano, ESPON project ET2050, January 2012
Egypt governorates
Location quotient Illiteracy Rates (Egypt=1)
NA
0 - 0.66
0.67 - 0.76
0.77 - 1.00
1.01 - 1.15
Source of raw data: Egypt population census (2006), authors’ elaborations.
46
See Egypt population census (2006) for further details.
42
Migration flows also tend to replicate a generally diffused trend, with the male population migrating
mostly for work reasons and the female population following their spouses for family reunification
purposes (Figure 42). This trend is likely to remain quite stable in the next years and should be
taken into account when drawing inference on the possible migration flows from this Country to
Countries belonging to the EU.
Figure 42. Migration flows by reasons of emigration, 2006 data.
0.50
0.45
0.40
% of total migrants in 2006
0.35
0.30
Male
0.25
Female
0.20
0.15
0.10
0.05
0.00
Work
Study
Marriage
Divorced and widower
Accompanying
Other
Source of raw data: Egypt population census (2006), authors’ elaborations.
5.3
Political situation
Egypt gained its official independence in 1922, with the Unilateral Declaration of Egyptian
Independence. However, the British empire retained control of the Country’s foreign relations,
communications, the army and the Anglo-Egyptian Sudan (King, 1989). In 1952 King Farouk’s
reign was ended by the Egyptian Revolution, which first led Naguib, then Nasser, to power.
Nasser’s era lasted until 1970. During these 14 years Egypt moved decisive steps towards the
emergence of a more modern state, the slow but steady diffusion of literacy, and the continuous
population increase. However, this era is also marked by four conflicts with Israel. Sadat ended
these conflicts by signing the 1979 Israeli-Egypt peace treaty.
Recent events include the election in 1982 of Hosni Mubarak, who ruled the Country until 2011,
when political riots broke on Jan. 25, 2011, with mostly peaceful demonstrations aiming at
overthrowing Mubarak’s regime. Despite the arrest of the former President, political distress
continues as of the end of January, 2012 (Kirkpatrick, 2012b).
Currently, the party which at the most recent political elections gained the majority of the seats in
the National Parliament, the Muslim Brotherhood, is engaged in a power struggle with the Egyptian
army, which traditionally has gathered relevant political and economic power, by holding monopoly
over revenues from several crucial industries (Trager, 2011). Political stability and a wider
democratic participation to national and local affairs will likely represent a major challenge to
tackle for Egypt in the next decades. On the other hand, several think-tanks and media believe the
43
moderate wing within the ruling party would be made at ease, thereby fostering cooperative
behaviours, by enjoying more dialogue with the West (The Economist, 2012).
5.4
Economic outlook
Egypt’s economic structure has been highly centralized until the late 20th century. A couple of
decades ago, this Country has been urged by the International Monetary Fund to set up a scheme of
economic reforms in selected crucial industries. As a result, the Country enjoyed years of positive
economic growth, with a relatively slow, but steady process of convergence with respect to
forerunners (See Figure 3).
Despite the current negative worldwide economic situation, the IMF (IMF, 2011a) foresees
positive, although slightly so, growth rates for Egypt for the period 2011-2012. This forecast is in
line with similar predictions about other countries in the Northern African and Middle East regions,
with the sole exception of Libya, where recent political distress has been dire and prevents from
punctual predictions about future growth rates of the Country (Figure 43).
Figure 43. Middle East and North Africa: average % projected Real GDP Growth during 2011–12.
Source: IMF staff estimates, IMF (2011a).
Because of its relevant migrant stock, Egypt also benefits from massive inflows of remittances
(Figure 44). Recent figures suggest that in fact the relevance of these inflows may be making up to
more than 4 per cent of total Country GDP. This inflow has been steadily increasing in the last
decade, with most remittances coming from the US (32.9%), Kuwait (17.5%), the UAE (15.7%),
Saudi Arabia (4.1%), and Switzerland (4.1%.).47
47
Source: Di Bartolomeo et al. (2010).
44
2000
4000
6000
8000
10000
Figure 44. Remittances from Egypt emigrants, 2002-2010.
2002
2004
2006
Year
2008
2010
Source of raw data: Egypt Central Bank (2010 and previous editions), authors’ elaborations.
5.4.1 Public finance
Egypt’s public finances are in general in a relatively good state. Despite the current financial crisis,
and the recent political distress, inflation remains relatively low below the 10 per cent threshold on
an yearly basis (Central Bank of Egypt, 2011). The Country runs on average a moderate primary
balance deficit, with a primary surplus in 2007; however, it spends on an yearly basis around 5 per
cent of its GDP in interest payments, with a consequent secondary deficit recently as high as 10 per
cent of total GDP (Figure 45).
-10
-8
-6
-4
-2
0
Figure 45. Egypt's primary and secondary balance surplus/deficit, 2002-2011.
2002
2004
2006
2008
2010
2012
Year
Primary balance
Overall balance
Source of raw data: Egypt’s Ministry of Finance as reported in African Development Bank (2011b).
45
The cost of money runs on average around 10 per cent for banks borrowing from Egypt’s Central
Bank. The discount rate has been steadily declining over the last two decades (continuous line in
Figure 32), without however dramatically affecting price levels. Figure 32 shows however that
recent political distress and the worldwide financial crisis prompted a reactive monetary policy
towards a relative rise in the discount rate (dashed line in Figure 4648). Whether this restrictive
fiscal policy will last in the next years depends on the revival of world demand growth and the end
of the current fiscal and financial crisis.
5
10
15
20
25
Figure 46. Egypt discount rate, 1990-2011.
01jan1990
01jan1995
01jan2000
time
01jan2005
Discount rate
01jan2010
Fitted values
Source of raw data: Egypt Central Bank (2012), authors’ elaborations.
Despite recent public expenditure increases due to the crisis and the political uprisings in 2011, the
Egyptian state authority maintains a relatively moderate debt/GDP ratio. Currently this figure is
lower than 80 per cent (Figure 47), with heavy cuts to the outstanding debt having taken place since
2005, when this ratio was still equal to 118 per cent. Positive future GDP growth rates assure, at
least in the short-medium term, increases in the denominator of this ratio, while fiscal discipline
will decide how virtuous the denominator will likely be.
48
The dashed line is the value predicted by a time series equation of the form DRt     t   t , where DR is the
2
discount rate operated by Egypt’s Central Bank, and t is the time index.
46
0
100
200
Debt/GDP
300
400
Figure 47. Debt/GDP ratio for Egypt, 1862-2011.
1850
1900
1950
2000
Year
Source of raw data: Reinhart and Rogoff (2009), authors’ elaborations.
5.4.2 Industrial composition
Although still a developing Country, Egypt hosts a relatively diversified economy, with almost 17
per cent of total GDP produced in manufacturing as of the latest available figures (Figure 48).
Advanced services such as the transport, storage and communication sector and the finance, real
estate and business services industry sum up to almost 20 per cent of total Country GDP. Industries
instead more closely related to the touristic attractions generate slightly less than 4 per cent of
Egypt’s wealth. This figure is expected to have decreased significantly in recent years, because of
the recent political distress in the Country; however, previous tourist flows could be restored in the
next years, provided the new government demonstrates political stability. Recent official estimates
from the Ministry of Tourism claim that the decrease in tourist flows may be up to one third of the
2010 levels.49
Agriculture produces 14 per cent of total GDP; however, it employs as much as 30 per cent of total
labour force (Figure 49). This industry is therefore characterised by a relatively low productivity
level, and is likely to benefit from a general restructuring of the Country’s economy in the next
years.
49
See Rianovosti (2012) for further details.
47
Figure 48. Egypt’s 2009 GDP by NACE 2 digits industry.
4
14
10
Agriculture, forestry, fishing & hunting
9.8
Mining and quarrying
14.4
Manufacturing
Electricity, gas and water
Construction
Wholesale and retail trade
Hotels and restaurants
Transport, storage and communication
9.5
Finance, real estate and business services
General government services
Other services
3.6
16.9
11.6
4.6
1.6
Source of raw data: African Development Bank (2011b), authors’ elaboration.
Figure 49. Egypt’s 2006 labour force by NACE 2 digits industry.
2.53
1.430.39
Agriculture and hunting
6.51
Mining and quarrying
Manufacturing
29.66
8.05
Electricty,Gas,Water
Water supply activities and sewage networks and
management
0.67
Construction
1.95
0.05
0.82
0.86
Total trade of the retail and repair of motor vehicles and
motorcycles
2.34
Transport and storage
The activities of food and accommodation services
Information and communication activities
7.41
0.21
The activities of financial intermediation, insurance
Real estate and leasing activities
13.04
Scientific and technical activities of specialized
Administrative activities and support services
11.17
1.08
0.54
11.29
Source of raw data: Egypt population census (2006), authors’ elaborations.
The activities of public administration and defence and
compulsory social security
5.4.3 International trade
A final set of conclusions may be drawn upon trade flows between Egypt and countries currently
belonging to the EU. In fact, mostly driven by historical ties between Egypt and the UK, trade
relations between Europe and Egypt have been intense. In absolute value, however, a truly
consistent increase has only been registered since the 1970s (Figure 50).
0
5000
10000
15000
Figure 50. Trade flows between Egypt and countries of the EU27, 1938-2006.
1940
1960
1980
Year
Egypt to the EU27
2000
2020
EU27 to Egypt
Source of raw data: Barbieri et al (2008), authors’ calculations.
Among the top 10 trade partners, Egypt boasts several EU countries. In absolute terms, the United
States are both the largest importer of goods from Egypt as well as the largest trader of goods to
Egypt. However, when taken simultaneously, countries of the EU27 are clearly the largest trade
partner for this Country. Table 12 shows that taken together, EU27 trades way more with Egypt
than the United States; in fact, Egypt ships on average 63 per cent of its annual exports to EU27
countries, and receives on average 54 per cent of its imports from the EU.50
Table 12. Top 10 countries by value of goods imported to, or exported from, Egypt, average 2000-2006.
Country
Average imported goods
from Egypt 2000-2006
Country
Average exported goods to
Egypt 2000-2006
EU27
5007.18
EU27
8873.60
US
1528.96
US
3293.53
Italy
1446.04
Germany
1776.52
UK
784.71
Italy
1550.26
Spain
692.95
France
1420.95
France
565.15
UK
902.28
Germany
514.36
Russia
729.50
Netherlands
307.08
Brazil
609.86
Turkey
207.12
Netherlands
577.09
Belgium
197.05
Argentina
515.59
Sudan
177.59
Ukraine
499.21
Source of raw data: Barbieri et al. (2008), authors’ calculations. Data in current millions USD.
50
Source of raw data: Barbieri et al., authors’ calculations.
5.5
Internal divisions
Current political distress implies that Egypt, as above mentioned in Section 5.3, faces a period of
serious political divisions. The new majority party in the Parliament, the Muslim Brotherhood,
which seated in the opposition banks for years, must tackle the resistance offered by Egypt’s Army,
which sued to be a stronghold of the Mubarak regime, while still maintain rights over the revenues
from relevant economic industries.
The Muslim Brotherhood is a long-standing political faction in the local political life. Worries about
the Party’s democratic calling have been variously stated in Western Countries think-thanks.
“Though its methods have changed at times, the Muslim Brotherood’s long-term goals have
remained consistent - namely the reformation of society in keeping with the Qur’an and Sunnah.
Jihad remains a central tenet in the Muslim Brotherood ideology, although it is now defined along
the lines of the “inner struggle,” conducive to the Brotherhood’s emphasis on non-violent change,
grass-roots activism and da’wa (proselytization). These views have put the Muslim Brotherood in
stark contrast with Salafi-Jihadis like those of al-Gama’a al-Islamiya (Egyptian Islamic Jihad EIJ) and al-Qaeda” (Black, 2011).
Spatial imbalances also affect the Country, with people located in rural areas gaining more difficult
access even to basic education and health infrastructure (UNDP, 1995). Inhabitants of large urban
agglomerations along the Nile, instead, benefit from on average better healthcare, a wider coverage
of schooling infrastructure, and a more sound public administration. The average inhabitant of
urban areas earns a salary which is 37 per cent higher than the average conational located in the
rural areas in Upper Egypt.51 Even wider divides affect Egypt’s regions in terms of educational
attainments.
These spatial imbalances have been tackled in the last decade by local authorities, working jointly
with international organisations; however, recent political distress brought the needed reforms to a
temporary halt. Much of Egypt’s future success will depend on the capability of the new ruling
party to reprise previous policies and speed up the process of economic and social reforms.
6. Conclusions
This Report analysed the main economic and social features of the Southern Mediterranean area,
with the inclusion of North-West Balkans. This implies a specific focus on Italy, Slovenia, Libya,
and Egypt.
These four countries represent markedly different objects of analysis.
On the one hand, Italy and Slovenia belong to the OECD, have GDP levels similar to the advanced
part of the EU27, and reached a relevant stage of development. As such, they currently face two
major problems:
1. Maintaining a good balance between increasingly conservative approaches to public
spending and regaining momentum in growth performance;
2. Fine-tuning of the national pension system, stressed by reduced spending capability and
ageing populations.
These two countries, therefore, may be more sensible to scenarios where the current public
spending patterns are subject to an even stronger pressure, for instance because of lower future
growth of countries belonging to the EU.
51
Source of raw data: UNDP (1995), authors’ calculations.
50
Libya and Egypt, instead, belong to the middle income group as defined by the World Bank. 52 They
experienced relevant growth rates in the last decades, pushed mainly by the large availability of
natural resources (in the case of Libya) and the vast number of young people in their working age
(as for Egypt). They are, however, currently experiencing a period of political turmoil, with the
recent fall of long-lasting regime and uncertainty about the identity and nature of future ruling
parties.
For both these countries, scenarios may be built on alternative ruling coalitions, in particular with
respect to their capacity to cooperate with Western economies, without giving up anybody’s way of
life.
For all examined countries, a major theme of analysis, with relevant scenario implications, may be
their long-run capability to invest in territorial quality. Environmental sustainability is in fact not
only an issue of collective wealth, but also of territorial competitiveness. In fact, relatively fertile
countries like Slovenia and Italy risk the rapid depletion of their natural capital, because of its overexploitation. At the same time, countries like Egypt and Libya, where the surface available to
economic exploitation is much smaller, must invest in maximizing the sustainability of their
environment use, in order to prevent from stealing from future generation’s wealth.
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53
Appendix 1. Trade statistics for the four countries.
0
50
100
150
200
Figure 51. Trade openness for Egypt, Italy, Libya, and Slovenia, 1950-2009.
1940
1960
1980
year
2000
Egypt
Libya
2020
Italy
Slovenia
Source of raw data: Heston et al.(2011), authors’ elaborations.
Appendix 2. Estimated average temperature changes, 1880-2008.
Figure 52. Estimated average temperature changes, 1880-2008.
GLOBAL Land-Ocean Temperature Index
Moving average temperature index
80
40
20
-20
-40
-60
Source: National Aeronautics and Space Administration (2011, authors’ elaborations).
54
2009
2006
2003
2000
1997
1994
1991
1988
1985
1982
1979
1976
1973
1970
1967
1964
1961
1958
1955
1952
1949
1946
1943
1940
1937
1934
1931
1928
1925
1922
1919
1916
1913
1910
1907
1904
1901
1898
1895
1892
1889
1886
1883
0
1880
GLOBAL Land-Ocean Temperature Index in 0.01 Celsius degrees.
Base period: 1951-1980.
60
Appendix 3. Satellite image of Egypt.
© Politecnico di Milano, ESPON project ET2050, January 2012
55