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Capital Flight from North African Countries

Léonce Ndikumana and James K. Boyce
Political Economy
Research Institute
University of Massachusetts, Amherst
October 2012

Capital Flight from North African Countries

Léonce Ndikumana and James K. Boyce
Political Economy
Research Institute
University of Massachusetts, Amherst
October 2012

North African countries have traditionally outperformed their sister nations south of the Sahara in terms of economic growth, enabling them to reach the middleincome status and drive down poverty to much lower levels. North Africa has enjoyed relatively stable growth rates, averaging over 3 percent per annum over the 2005-2011 period. Per capita income in the region ranges from $2780 in Egypt to about $10,000 in Libya, compared to an average of $1445 for Sub-Saharan Africa (SSA). The 2010 Human Development Report profiled North African countries as success stories in non-income human development, especially education and health.
Rodríguez and Samman (2010) called it the ‘North African Miracle’.

Since the end of 2010, however, it has become evident that this apparently positive economic record concealed structural and institutional deficiencies that eventually brought down the strong regimes. The North African ‘economic model’ proved to be unsustainable, mainly because of pervasive inequities in the distribution of wealth and power. Revolutions ensued.

Glowing reports on economic performance also hid the problem of illicit capital outflows that fueled the accumulation of private wealth by political elites and their business associates. As their regimes collapsed, the media began to be flooded by reports of large amounts of assets held abroad by Tunisia’s Ben Ali, Libya’s Qaddafi, Egypt’s Mubarak and their families. Qaddafi’s wealth reportedly includes assets in the United States (estimated at $37 billion), United Kingdom (£12 billion), The Netherlands ($2.1 billion), Austria ($1.8 billion), Sweden ($1.6 billion), and Switzerland ($416 million).1 No doubt more is yet to be discovered.

North African rulers built their illicit wealth largely from the appropriation of public assets, through opaque privatization processes, erection of private monopolies in key sectors of the economy, and outright embezzlement of government funds, possibly including externally borrowed loans and overseas development assistance. Thus, it is understandable that post-revolution governments should ask questions about the legitimacy of the debts inherited from former regimes. The new Government of Tunisia is demanding an audit of the debts incurred under the regime of Zine El Abidine Ben Ali.2 If this is accomplished successfully, other countries in the region may follow suit.

This report provides estimates of the total amount of capital flight from four North African countries for which we have adequate data – Algeria, Egypt, Morocco and Tunisia – from 1970 to 2010.3 Despite evidence that Libya, too, has experienced large-scale capital flight, we could not include it in our sample due to lack of data on debt. This report extends our previous work on capital flight that has focused on SSA countries (Ndikumana and Boyce 2011a, 2011b, 2010, 2003, 1998 ; Boyce and Ndikumana 2001), and contributes to the growing literature that documents massive illicit financial flows from developing countries in general and African continent in particular (Henry 2012 ; UNDP 2011, Kar and Curcio 2011 ; Kar 2010 ; Kar
and Cartwright-Smith 2010).

Our results indicate that over the 40 years, the four countries together lost more than $450 billion (in constant 2010 dollars) through capital flight. The largest amount is from Algeria ($267 billion), followed by Morocco ($88 billion), Egypt ($60 billion) and Tunisia ($39 billion). The time-series evidence shows that capital flight is not a new phenomenon, but has been a systematic problem through the successive regimes that ruled these countries. The Tunisian case is something of an exception, in that the Ben Ali regime (1987-2010) accounts for over 87 percent of the Tunisia’s
cumulative capital flight recorded over the four-decade period. This report underscores the economic significance of North African capital flight, and why this issue warrants urgent attention from national stakeholders and the global community.

Publié le 1er novembre 2012

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