The time for Arab economic integration is long overdue, argues AIU Secretary-General Gamal Bayoumi* At the 19th Arab summit, held recently in Riyadh in response to an Egyptian-Kuwaiti initiative, a decision was taken to hold a special Arab summit dedicated to economic matters. The decision reflects the urgent need for the summit to take charge of regional economic cooperation. As things stand, the Arab summit is the highest authority in the Arab world. It is therefore the only institution capable of pushing forward Arab institutional cooperation. For some time, Arab leaders have been so busy with politics, they couldn't focus on economic matters. At the Arab summit in Tunisia in 2004, the Arab Investors Union (AIU) called for an Arab economic summit to be held, suggesting that the Social and Economic Council (SEC) should meet once a month instead of twice a year. We also proposed that the SEC be held on the level of ministers rather than ministerial aides, calling attention to the fact that Arab ministers allocate no more than 10 hours of their time to the cause of cooperation per year. Of course a good beginning is a full-fledged free trade zone. But there is only so much free trade can accomplish. Inter-Arab trade is but 12 per cent of total Arab trade. The ratio is higher for some countries. Jordan, for example, conducts 40 per cent of its trade with Arab states. But we must look to other areas than trade to improve our cooperation and increase Arab development. Seventy per cent of Arab imports come from outside the region, in particular, machinery, transport vehicles, food, and 70 per cent of Arab exports -- oil and oil products -- go abroad. So trade is not the answer; development is. At present, most major Arab countries lack the motivation to move ahead with regional integration, and smaller Arab countries have little say in the matter. Fiddling with regulations such as cancelling customs duties doesn't ensure economic growth. All it does is divert trade, a process that is often costly. Free trade agreements alone cannot boost cooperation and investment. Such agreements may open markets, or even entice competitiveness, but free trade will not lead to integration, will not boost production, and will not boost competitiveness. For that, we need macro-economic policies and collective action. Trade is not the sharpest tool in our box. We have many other things going for us. For example, the total of foreign direct investment from one Arab country to another is immense. In 2005, Arab investors added $37 billion to assets in other Arab countries, a six-fold increase from 2004. Five Arab countries -- the UAE, Egypt, Saudi Arabia, Lebanon, and Morocco -- attracted 73 per cent of Arab investment in that year. The same goes for labour. About 14 million Arab citizens work in other countries in the region. Their activities boost demand for transport, communications, banks, etc. As a result, inter-Arab trade in services is healthier than inter-Arab trade in goods, and it's not even liberalised. Labour movement means that money is flowing home from one Arab country to another. Gulf states, Libya, and Jordan offer many jobs to expatriate Arab workers. Saudi Arabia is a major source of workers' remittances in this region and across the world. Egypt, by contrast, is a major recipient of remittances, which total a massive $5 billion a year. Besides, there is immense cooperation in megaprojects already going on. Several Arab joint projects have done well, including gas and oil pipelines and electrical grids. And there is more to be done. The Arab region needs a cohesive system to promote its common economic interests. We can start moving in that direction by rallying the support of major Arab countries, especially those who are qualified to meet international and regional standards. What is vital is the political will. No Arab summit, however motivated, can possibly provide all the answers to the question of regional integration, but here is a two-track plan to move the region closer to integration. The first track is a long-term one. It focuses on determining the goals and strategy of collective Arab work. For example, we need to introduce a basket of reform measures touching on the liberalisation of trade, quality of services, industrial integration, and development of infrastructure. Within this track, we should start thinking of ways to integrate our main economic resources (oil money in Libya and the Gulf, manpower in North Africa, available land for development in the south). And we should start investing seriously in education, scientific research, transportation, energy, water desalination, space technology, genetic engineering, and the peaceful use of nuclear energy. The second track is for the short- and medium-term. On that track, we should eliminate existing bottlenecks and create a momentum for cooperation. For example, we should think of ways to make international trade agreements, be they inter-Arab, Mediterranean, European, African, or with America, to bring us closer to Arab integration. Cooperation with other economic groups should enhance, rather than weaken, our quest for regional cohesiveness. And we should find a practical way to free the movement of individuals in the Arab world. Liberalising trade and investment is not enough to bring the region together. We should start freeing the movement of citizens, investors, and businessmen. Also, we need to formulate a unified Arab work contract in order to protect the rights of 14 million Arab expatriate workers in the region. At the same time we should remove the remaining impediments to the formation of an Arab free trade zone. To begin this long and important process, a well-planned and thought-out Arab summit on the economy is indispensable. Let our preparations begin in earnest. * The writer is secretary-general of the Arab Investors' Union.
