Algeria-Morocco Business Dialogue: Cooperation in the Automobile Industry

On October 21, the EastWest Institute (EWI), together with its partners at the German Chambers of Commerce in Algiers and Casablanca, held a webinar entitled “The Automobile Industry: Challenges and Opportunities”—the third in a series of virtual meetings as part of EWI’s ongoing Algeria-Morocco Business Dialogue. The webinar brought together six business leaders, three each from Algeria and Morocco, to take part in a cross-border business dialogue aiming to promote greater economic connectivity between the two countries in the automobile sector.

Automobile Industry

In recent years, the governments in both Algiers and Rabat have promised and pushed to establish a more prominent export-focused automobile industry. Under former President Abdulaziz Bouteflika, Algeria sought to found a local car industry in order to reduce imports. So far, these ambitions have largely failed to materialize, with Volkswagen and Kia both shutting down plants recently. Contrastingly, in Morocco, over the past decade the government has successfully signed several free-trade agreements with the U.S. and the EU, helping establish a healthy export-driven auto industry worth 6.19 billion USD. Despite varying successes in the automobile industry, these shared ambitions should precipitate both countries to seek opportunities to collaborate and trade more frequently. However, automotive and transport related trade between the two countries remains small to almost non-existent.

According to the latest figures from the Observatory of Economic Complexity (2018), Morocco exported only 51,200 USD worth of transport and automotive related goods, including spare parts, to Algeria; less than 0.5 percent of the country’s total exports in this industry. This, almost insignificant, sum is all the more surprising when contrasted with the fact that in the same year, Algeria imported goods worth 5.09 billion USD. These figures are unfortunately consistent with the trade policies of each country towards the other, with both Algiers and Rabat focusing their attention towards the European markets. Nevertheless, the space for complementarity between both countries in the industry remains evident.

Local Experience and Solutions

During the webinar, participants shared testimonies of their experiences attempting to conduct trade across the border in the neighboring country, providing some insight as to why the above figures are so low. For instance, one of the Moroccan participants explained that in order to send a shipment to Algeria, the whole process can take up to three months. Upon sending a request, the initial domiciliation period can take up to a month, as funds are frozen before being shipped, which then takes up to an additional two months for their arrival. Other Moroccan participants attested to this, stating that the biggest impediment to trade in Algeria was significant delays in transit. True to the objectives of the project however, the Algerian participants were quick to offer solutions to such problems by suggesting their Moroccan counterparts should opt to use a pro-forma invoice that enables them to decide how their products are shipped step by step.

In other testimonies, participants discussed previous experiences in conducting business with counterparts across the border in third countries, such as Tunisia, because of the difficulties in doing business directly. It was stressed, however, that this business practice is far from ideal. The practicality of such a method is only applicable when shipping large quantities, as the transport costs incurred during the transaction are then passed on to the consumer, which in turn makes them less competitive in the respective market. With this in mind, the following recommendations, gathered from industry professionals on the ground in both countries, are intended to address structural obstacles that prevent the automobile industry from fulfilling its potential in the region.

Recommendations

Develop a Regional Brand Strategy: Business leaders should collaborate in jointly formulating a “Maghrebi” or “Arab” brand. Both countries currently focus their attention on European markets, overlooking the potential on their own doorsteps. A long-term strategy and vision is required to overcome this economic tunnel vision, especially given that both local automotive industries specialize in manufacturing spare parts for European automobile giants.

Leave Politics for Politicians, Continue Economic Cooperation: The political problems between Algiers and Rabat are well documented. Nevertheless, local business leaders should seek and continue to collaborate with one another in order to demonstrate to political leaders in both capitals that there are more benefits to cooperation than in maintaining the current status quo. Participants at the webinar agreed they should work hand-in-hand to develop commercial relations across the border, thereby encouraging politicians to lift the current bureaucratic hurdles preventing greater economic gains.

Organize Trade Shows: A major part of continuing economic cooperation between both countries could be the organization of more country or trade-specific fairs and exhibitions. Both countries host their own trade fairs, which admittedly have little or no representation from the neighboring country. Addressing this issue would represent a big step in addressing the lack of cooperation between business leaders in both countries and could also take the form of a two-pronged approach whereby the aforementioned brands of each country and the region are built over a period of time to increase the flow of trade between the two countries and outside the region.

Encourage Educational and Training Exchanges: There are multiple means by which the automobile sectors in each country can benefit from training and knowledge exchanges. Webinar participants noted the industrial specialties of each country and how they stand to benefit from collaborating and sharing knowledge. Online webinars are an option to address this issue during the ongoing coronavirus pandemic. Equally, business trips and seminars between similar or complementary organizations offer a more practical solution when the global situation is more conducive to international travel.

About the Algeria-Morocco Business Dialogue

Despite its vast potential, the Maghreb region is often cited as being one of the least economically integrated regions in the world. The Algeria-Morocco Business Dialogue project seeks to bring together Algerian and Moroccan business leaders from multiple business sectors with the aim of overcoming obstacles to bilateral trade between the two neighbors.

The dialogues center on topics vital to successful entrepreneurship in Algeria and Morocco such as food security, agriculture, healthcare, the impact of digitalization and new technologies and energy—with a particular focus on how to attract quality investment, ensure environmental protection and empower businesswomen.

COVID-19 has unfortunately had a detrimental effect on the overall operation and schedule of the project. Each meeting was envisioned as a two-day conference such as the first event on the agricultural industry, which took place as a two-day delegation to Berlin to attend the city’s Green Week—one of the world’s largest international agriculture trade affairs. Nevertheless, EWI has moved the project online in order to maintain the good momentum of the project generated in Berlin. Although this means the discussions between participants are less interactive, they proved no less intensive nor productive as the following policy recommendations attest.