Friday,26 May, 2017
Current issue | Issue 1338, (30 March - 5 April 2017)
Friday,26 May, 2017
Issue 1338, (30 March - 5 April 2017)

Ahram Weekly

Integration step by step

Does the economic integration of the MENA region have a future, asks Al-Ahram Weekly after a recent conference in Jordan

Integration step by step
Integration step by step

For over 50 years attempts at the economic integration of the Middle East and North Africa (MENA) region have been largely in vain. Despite ambitious regional trade agreements, inter-Arab trade still ranges at only around 10 per cent of Arab trade with the world at large compared to around 60 per cent of inter-regional trade within the European Union (EU).

Last week the annual conference of the Economic Research Forum (ERF), a regional think tank, revisited the concept in the Jordanian capital Amman. Entitled “Regional Cooperation, Peace and Development: Issues and Lessons for the MENA Region,” the conference examined why greater regional economic cooperation could be good for development and how best to nurture regional initiatives.

It asked the reasons behind the present modest economic cooperation in the MENA region and what it had cost.

Former Egyptian finance minister Ahmed Galal jointly wrote a book with Bernard Hoekman, an economics professor at the European University Institute in Italy, in 2004 that looked at the issue. Entitled “Arab Integration between Dream and Reality”, it “concluded that it was more dream than reality”, Galal said.

More than 10 years after the book’s publication, Galal told journalists on the sidelines of last week’s conference that “today there is less possibility for integration than ever.” He attributed this to the political problems in the region, with Syria, Libya, Yemen and Iraq all at risk of falling apart. These countries have enough domestic problems keeping them busy without thinking about regional integration, he said.

However, Ibrahim Al-Badawi, managing director of the ERF, looks at the issue from a different perspective. He thinks that the region should capitalise on its problems in order to unite because there is a need for a regional project for peace and development.

Other experts agree, saying that what first brought the European countries together in what is today the EU “was an ambitious project to bring together the steel and coal industries of countries that were belligerents in war,” Andre Sapir of the Solvay Brussels School of Economics and Management told conference participants.

Professor of economics at Khartoum University Fadia Hassan agrees. She believes that the Arab countries need to integrate more to give them a competitive edge, because they cannot compete effectively alone. In times of conflict they should work harder to help each other out, she told Al-Ahram Weekly.

Several factors had kept the region from uniting in the past, Galal said. Economically, industrial structures are similar amongst the Arab countries, meaning that they do not easily complement each other. “Historically, most attempts to integrate involved negatives to protect local industries,” he pointed out.

Moreover, politically when countries integrate they tend to give up some of their sovereignty. “There are not many countries in our part of the world that are willing to do that,” he said.

The latter issue was where the main problem lay, Hassan said. “The Arabs lack political will and commitment. To date they have only come up with slogans. What they need is an action plan,” she said.

The conference speakers suggested ways around these obstacles. Sapir stressed that integration must be a step-by-step process and commitment would come from success. He said the region should not be put off by recent changes in the wider world, such as the exiting of Britain from the EU.

“EU integration was a very slow and bumpy process. Brexit is one of those bumps, but that does not mean that the EU is about to disintegrate,” he said. “It is built on good foundation, so any difficulties will be dealt with.”

Raed Safadi, director of the Economic Research and Policy Unit at the Dubai Department of Economic Development, suggested a bottom-up rather than a top-down approach to regional integration. He recommended that countries choose any policy area that does not touch on sovereignty, that has potentially high payoffs, and where adjustment costs are either low or can be easily identified and compensated.

This could include trade facilitation procedures or financial services, the improvement of which would be beneficial for the countries themselves. In these areas, countries could create an area of reform that showcases potential benefits and that creates positive externalities that go beyond borders, he said.

Another area could be regional projects. Safadi gave the example of the railways project in the Gulf Cooperation Council (GCC) countries. At first, these countries had wanted to create a GCC Rail Authority, but that had not materialised. Then they decided that each country would build its own railway within certain specifications and eventually these would link up, he said. There was thus no need for a supranational body.

He also pointed to the role of the private sector, and how if kept away from politics it would be able to take off. One way to build trust, he suggested, was to exchange staff amongst the various customs authorities to enable them to see for themselves that standards did not differ.

Cooperation is not completely lacking in the region, but it may not be at the desired level, Abdel-Latif Al-Hamad, chairman of the Arab Fund for Economic and Social Development in Kuwait, told journalists on the sidelines of the conference.

To reach the levels of integration seen in Europe, he said, a long period was needed. But he pointed to the potential of the region, saying that “the labour market in the region is like no other.”

“There is a level of cooperation not captured by traditional measurements,” added Ibrahim Saif, the Jordanian minister of energy and mineral resources. He pointed out that a lot was happening in the area of energy at a regional level, such as the interconnectivity of electricity grids and cross-border gas pipelines. This model could extend to other public services such as health, education, and water and sanitation.

“While the regional situation is disturbing, countries such as Egypt and Jordan can take the initiative to extend these services in the war-stricken areas,” he said.

Hoekman agreed. “We should not be too negative about the potential for cooperation,” he said. He supported specific cross-border sub-regional types of economic project where it was clear who had a stake in their execution.

“That is the way forward, not the solution, but it is one way of creating a positive dynamism towards regional cooperation,” he said.

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