MENA Regional Integration

Calvin MorrisProfessor Bassem Snaije

IEPMay 2, 2011

GCC Region19816 countries: Saudia

Arabia, the UAE, Qatar, Bahrain, Kuwait, and Oman

Population: 36 million people

Nominal GDP from USD 422bn in 2000 to USD 1.021 trillion in 2010

Main Characteristics of GCC Economies High-income, hyrdocarbon-based economies Have a common structural dependence on expatriate labor, which

poses long-term challenges

Sovereignty is still shared cautiously

The social and political backgrounds of GCC countries exhibit many similarities

Similar economic policies among GCC countries largely reflect their common circumstatnces.

Regional Integration Strategies GCC integration strategies: 1) Commodity Trade2) Services Trade3) Developing infrastructure 4) Nearly completed interconnection of

electricity grids5) Labor mobility

Strides in the direction of integrationRemoval of intra-regional tarriffs under the

Pan-Arab Free Trade Area (PAFTA)The adoption of low common tariffs by the

Gulf Cooperaton Council (GCC)

GCC Actors: all talk and no walk? « If one were to draw a balance sheet

concerning the accomplishments of the GCC, the outcome of the assessment would be meagre at best »

« While things look good on paper and appear to be moving in the right direction; implementation at all levels has lagged considerably behind the stated intentions of the GCC leaders » -Christian Koch, director of international studies, Gulf Research Centre

GCC Advancements/Stagnations

Development of a customs unit in 2004Development of a single currency (Khaleeji)Forging ahead with the $30bn GCC rail networt

÷Stalling of a single currency (postponed

deadline)Collective GCC security pactYemen’s bid to join is facing resistenceSpace for future cooperation: Qatar’s hosting of

the 2022 World Cup

GCC Main ExportsIntra-regional trade is made complicated by

the fact that the region’s economies are so similar (oil based).

2008: bloc exports: $21bn in goods15.9 percent to EU; 12.1 per cent to Japan;

Whereas: 2.1 per of GCC trade with UAE underscores the small extent to which intraregional trade occurs.

Harmonization effectsLabor and immigration laws;Taxes and public service charges in areas

where cross-border elasticites are significant;Foreign Investment laws and incentives

granted to foreign investors;Commerical laws governing ownership of

companies and properties;Shipping and movement of cargo;Aviation and air transport;Banking and finance.

What would the reality of a more stream-lined GCC mean?

…Emerging Business class?Context: The new millennium has witnessed a

quantum increase in the number of listings, trading volumes, market capitalization and secondary offerings in the GCC stock exchanges (Dubai’s of IPO conglomerate in 1997). -Khalid

As GCC states scale up infrastructure spending, attract FDI and international money managers and diversify their economies beyond oil and gas, the evolution of domestic capital markets becomes mission critical.

Improved Business Climate – Liberalization and Privatization Project based investments ed by SWFsProject-based investments have recently been

increasing, especially in Egypt, Lebanon, Syria, and Tunisia centered on: telecommunications, infrastructure, real estate, tourism, and banking ($9 billion tourism project by Dubai Holding)

Sources 2008 MENA Economic Developments and Prospects. The World

Bank Group. Farahat, M. 2006. “Arab Cooperation in the Area of Electricity

Interconnection; Achievements, Obstacles, and Future Aspirations.” Discussion paper for the 8th Arab Energy Conference, Amman, May 14–17, 2006.

Galal, A., and B. Hoekman. 2003. Arab Economic Integration: Between Hope and Reality. Cairo: Egyptian Center for Economic Studies; Washington, DC: Brookings Institution Press.

MEED’s 2020 Synopsis: MEED Special Edition (31 December 2010).