Bureaucracy is Arab economic integration's worst enemy, reports Sherine Nasr Why Arab countries have not yet succeeded in establishing a free trade area (FTA) of their own has been among the region's most fervently debated issues for more than half a century, and yet no conclusions have been reached. "Only 17 Arab countries have been able to implement zero-tariff customs while the rest are still reluctant to take the initiative," said Gamal Bayoumi, head of the Arab Investors' Union and former top negotiator of the Egypt-European Union Association Agreement. The year 2008 was the deadline to implement zero tariffs on inter-Arab trade as an important step towards economic integration. Bayoumi made his comments while addressing a three-day conference in Cairo this week to discuss the impact of free trade on industrial development in the Arab region. "While the political will is always present, bureaucracy and interest groups in every country have been hindering progress on various fronts," Bayoumi added. In order to understand the complexities involved, it is useful to study the case of Egypt and Jordan. These two countries have a zero-tariff agreement which has been in force for several years now. "But this is only on paper. In practice, we find it very hard to export to Jordan or any other Arab country," said Abdel-Wahab Ghourieb, chairman of El-Wahab Group, a private-sector vehicle assembly company. Ghourieb added that while the rules are in place, government employees in the two countries know very well how to annul them by implementing other domestic rules instead. The issue of the rule of origin provides another vivid example of how endless discrepancies among Arab countries really are. According to Bayoumi, a committee of Arab experts was entrusted with the task of studying internationally applied models of the rule of origin in a number of economic blocs such as the EU, in an attempt to benefit from their experience while tailoring the rules of origin to the Arab region. Bayoumi believes that one of the most important elements of economic integration is to agree on the various aspects governing the rule of origin and to provide standard specifications to commodities and services produced and exchanged within the Arab region. "Although the initiative started in 2000, the different interpretation of these rules and specifications in each of these countries is a crisis in itself," Bayoumi explained. Moreover, discrepancies in the taxes and customs systems in the Arab region cannot be overlooked. So, while no custom tariffs are imposed in the Gulf countries, these tariffs are exaggerated in countries such as Egypt, Tunisia and Algeria. "At present, Arab countries are abiding by the simplest form of trade exchange based on the principles of the World Trade Organisation," Bayoumi added. According to Ghourieb, this may be one reason why businessmen often find it more convenient to deal with European countries than with Arab states. "It is always good to have clear-cut rules that are implemented indiscriminately at all times," he said. So while the major outlines for Arab economic unity have long been set, they do not give businesses any solid ground to take off. One major element behind some countries' reluctance to abide by agreements is the absence of a referral mechanism in case of violations. That is why high-ranking officials have been concerned with establishing an arbitrary court to ensure the implementation of penalties once needed. "Because we are Arabs, it does not mean that we will come to terms at all times. Disputes will occur and there has to be a legal means to settle them. Countries that will ratify agreements then not abide by them also have to be punished," said Bayoumi. The principle of compensating ailing economies is another vital yet absent mechanism. "Not all Arab countries stand on equal footing with regards to regional competition. Some economies are still lagging behind and the principle to compensate them should be activated," Bayoumi added. Meanwhile, according to Mohamed El-Nessor of Economic Sector at the Arab League's Trade, Investment and Finance Department, the path to Arab economic integration is a long and tedious one. This is particularly the case in light of the current international reality, whereby gigantic multinationals have the upper hand in many industries, while the number of bilateral and multilateral economic agreements and gatherings are on the rise. "As a region, we still import more than 92 per cent of our needs from abroad," said El-Nessor. The Arab FTA presents 96 per cent of the Arab population, accounting for some 324 million people. "This is a good indication of the volume of the market and the potentials it could create," said El-Nessor. Although Arab inter-trade has increased from $26 billion in 1998 to $143 billion in 2009, the volume of trade is still considered marginal, compared to market potentials and the volume of trade with the rest of the world. "The private sector has an important role to play, however, it has not yet been able to get its act together in order to achieve tangible results," El-Nessor said.
