Time to integrate

The secretary-general of the Council for Arab Economic Unity, Ahmed Guweili, speaks to Aziza Sami of the challenges facing Arab economies in a globalising world
As economic integration becomes crucial for countries seeking to secure a place in the global market, Arab states face a dilemma. In order to solicit trade and investment, they have sought free trade arrangements with the advanced economies of the EU and the US. Meanwhile, the Arab Free Trade Area (AFTA), established under the statutes of a 1981 Agreement for the Facilitating and Promoting of Trade between Arab countries, has, despite its political importance, not been given equal priority.
Now, for the first time, the Arab League summit held in Amman, Jordan, has given prominence to economic issues, alongside the usual political concerns. The discussions aimed at injecting momentum into several initiatives already undertaken to liberalise trade between the Arab countries. There is a fear, however, that the summit's recommendations should fall into a state of suspended animation, as has been the case with other Arab decisions.
The debate rages on, as well, on whether economic progress can be attained without a resolution of the Arab-Israeli conflict.
Ahmed Guweili, professor of agricultural economics and a widely respected public figure, was Egypt's former minister of supply and external trade. He currently heads the Council for Arab Economic Unity, which, in coordination with the Arab League, is the highest autonomous body overseeing Arab economic cooperation.
Was the Arab League summit you attended in Amman any different from previous summits, which have proven ineffectual except for the passing of recommendations?
The fact that there was a summit does not mean that the Arab world will change. We must put things in their proper perspective. This will be a periodic summit, quite like a company board meeting to take decisions on different matters. This is the way the world conducts its affairs, like the G8, for instance, when it convenes its economic summit. They come out with differences and with agreements. Our public opinion has not yet been prepared for that.
The Amman summit has passed a resolution to convene an economic summit in Cairo in November. What will its objectives be?
The summit will be very important in outlining a strategy for Arab cooperation for the next two decades. We will use it to promote the Arab region as a lucrative destination for foreign direct investment and to promote trade. It will not only be a governmental affair, but a partnership between the Arab and international private sectors and international agencies. The summit, we hope, will directly further the economic development of the Arab region.
What are the steps that, if accomplished by this economic summit, would make it a success?
If it creates a healthy relationship between Arab businesses, as well as a healthy relationship between them and the foreign private sector. The same goes for Arab and non-Arab financial institutions. The challenge is how to place the Arab countries in the right position to enable them to attract international players.
The Amman summit made several recommendations for the "speedy removal" of tariff barriers between Arab countries. Is such an aim not too ambitious?
The Arab Free Trade Area (AFTA), which started in January 1998, called for the eradication of tariffs over a 10-year period so as to attain zero tariffs by the year 2007. This will succeed, but only if we do not have negative lists, administrative constraints, or an agricultural calendar (demanding exemptions from tariffs reductions).
Unfortunately, AFTA has been dogged by a long list of 2,960 commodities for which exemption from tariff reductions is demanded, technical barriers to trade and bureaucracy and so forth.
This is why the summit made a resolution for the reduction of negative lists and commodities covered by the agricultural calendar. The implementation of these resolutions will require a very strong political will and an upgrading of administrative systems. What is important is not the decision at the top, but how it is perceived at the lower administrative levels.
Another Amman resolution called for tariff barrier removal between the Arab countries by 2005. Is this possible, given that while oil producing Gulf states already have minimal tariffs, others, such as Egypt and Syria, remain heavily dependent on taxation and customs for their budget replenishment?
The reduction of all tariffs by 2005 would be a welcome step, but it is not a compulsory directive. Some countries have already removed tariffs amongst themselves, such as Egypt, Libya and Iraq. Others will follow suit.
AFTA comprises only 14 countries; eight Arab countries are still not members. Most of these are the least developed economies of the area, such as Yemen, Djibouti, Somalia, Mauritania and Sudan. If they join AFTA, they will lose their revenue (accrued from) tariffs, which is a main source of their state budgets. If the reduction is huge, they will be harmed, and so a mechanism must be devised for their compensation.
Several Arab countries are seeking free trade arrangements with the EU and the US. Is this likely to detract from the momentum given to AFTA?
There is nothing wrong with making associations which will advance our economies, such as the Euromed initiative, or a Free Trade Agreement (FTA) with the US. Several Arab countries are seeking these arrangements and several others are members of the Common Market for Eastern and Southern Africa (COMESA). Egypt and the Arab countries are also members of the recently established Sahel, or Sahara Common market. We are also looking for partnership with the Indian Ocean group. Moreover, there are negotiations between Egypt and Turkey (for an FTA). We are looking for markets, FDIs and economic unions, not only trade.
These advanced economies can provide the Arab countries with FDIs, technology and a market for certain commodities. But perhaps your question is: is it trade diversion, or trade creation? If we leave things as they are, it could divert trade between the Arab countries to the advanced economies. But there are several (devices) which could turn these agreements from trade diversion to creation -- what we call cumulative rules of origin.
Once fully realised, what would be the biggest market for AFTA?
The AFTA region itself. We are importing a great deal from the EU and the US. But these are very advanced markets. The competition is so strong today that the Arab countries will not be able to secure a big market share there. They will have to create a complementary relationship amongst themselves, by producing commodities that are in demand (by other Arab countries).
Recommendations were also made in Amman to lift the sanctions against Iraq.
Nothing happened on that; it was stopped. We, as the Council for Arab Economic Unity, condemn the sanctions. But nothing was achieved on the Iraqi case; it was stopped.
So what was the summit's position on Iraq?
This is a long, complicated story, and I have nothing to do with it. The Council for Arab Economic Unity is for lifting the sanctions imposed on Iraq, and has always been. The council passed a resolution 10 years ago asking the international community to allow Iraq and its people to lead a decent life by lifting these sanctions. But this was a resolution from the council, not the summit.
How was the council's resolution followed up?
The resolution was sent to the UN, to the Arab League and to many countries and concerned bodies.
Since your council exercises no leverage, was the resolution simply a verbal admonishment?
Do the Arab countries have leverage? This is the general condition of the Arabs. Is there anything they can do?
How can the Palestinian economy be supported under the current siege imposed by Israel, as well as obstructions to the mobility of labour and goods in the occupied territories?
We have undertaken several steps in this respect, such as allowing Palestinian exports to enter the Arab countries tariff-free, with a Palestinian certificate of origin. Arab countries have also submitted a complaint to the World Trade Organisation (WTO) against Israel, saying that it impedes the free flow of trade. We are also supporting the Palestinians in the area of establishing small enterprises.
In addition, there are the funds of Al-Aqsa and Al-Intifada and one billion euros pledged by Iraq, all of which were discussed intensively at the summit, which called for speeding up the mechanism to make these funds available to the Palestinians.
Have any of these funds actually reached the Palestinians?
Some countries give directly without going through funds. Iraq sends medicine and food aid directly. Many other countries, including Egypt, do that as well. All of this is not taken into consideration and people continue to look to the Al-Aqsa and Al-Intifada funds.
I have heard that around 60 per cent of these sums have already been disbursed.
Is the aim here to provide blankets and food to the Palestinians -- give a lifeline for subsistence?
No, no. The target is for the Arab countries to support their infrastructure -- their hospitals, schools, roads and such things.
Have you been able to help them pass their "exports" through Israeli barriers?
We are trying very hard. It has not happened yet because of Israel's closure, not any refusal on the part of the Arabs. The closure of the Gaza Strip and the West Bank does not allow for medicine or food to get to the Palestinians. At the same time, no goods can be exported.
Are the combined negotiating efforts of the Arab countries not sufficient to overcome this closure?
Many countries, such as Egypt and Jordan, as well as the Palestinians themselves have held lots of summits before asking the US to assist in relaxing the closure.
What is your assessment of a Middle East-North Africa (MENA) region that incorporates the Arab countries and Israel in an economically integrated entity?
I see very slow progress in the economic development of the region because of the instability in the Middle East. We cannot even talk of the success of an Arab common market, let alone MENA. We need peace and stability to attain that and, above all, peace with Israel.
You have expressed your view that development should not be put on hold due to Middle East tensions. Now, you say these tensions overshadow any prospect for development. How do you reconcile these views?
Negotiating for peace is a long process. Even if peace is attained and an agreement is reached with Israel, it will take time to mature. So we cannot, in the meantime, neglect development. There are lots of young people in the region, a staggering unemployment rate reaching 11 per cent of the labour force.
My message is: do not neglect development. Peace will be coming, but it will be a long way to go.
The Arab economies are suffering low GDP, poor productivity, low income levels, a weak private sector and an entrenched bureaucracy. No significant changes are being made to face global challenges. Are these not ingredients for a time bomb?
This is a correct diagnosis. But it also makes you think of other channels by which to activate the Arab region. For the past 50 years we have been forging government agreements. Now, there is an emphasis on trade liberalisation. But if such liberalisation were to take place without a strong and diverse foundation for production, then trade will not be effective.
Trade is a necessary condition, but not a sufficient one. We have to complement it with a strong development plan that relies on the private sector. In the Arab countries, we have 27 trade unions in the commodity and service sectors, such as pharmaceuticals, fertilisers, banks and land transport. The council is relying very heavily on them and is trying to support them to increase their activities in trade and investment.
Do you think that Arab countries which are not making much progress will finally be forced to change by a shock from the outside world?
We have already been "shocked" by science and technology, the driving forces of the world today. The whole world, even the advanced countries are "shocked." The difference is that they are participating in this progress and we are not.
The IT and the Arab World conference recently held in Cairo raised its recommendations to the Amman summit for regional IT development. How will they be followed up?
A council of ministers of communications will be established. A resolution was passed to establish an IT association for the Arab countries. It is a big step.
A new round of WTO talks is to be held in November in Qatar. How are the Arab countries coordinating their positions together, as well as with other trading blocs, in preparation for these talks?
Eleven Arab countries are members of the WTO. We will be holding a meeting before the WTO's fourth ministerial meeting in November. Arab countries are going to coordinate their stand, amongst themselves as well as with other groups, like the Asians and the Africans.
The agricultural agenda caused much debate during the last ministerial round. Where do you think the interests of the Arab countries lie in this domain?
The agricultural agenda is a mixed one. Negotiations here are between the developed countries, producers and exporters of food items.
You find one group is highly subsidising agriculture, like the EU, and another is subsidising it to a lesser degree, such as the Cairnes group. And the conflict is between them. Egypt, for instance, is a net importer of food.
We are for free trade, but do not want to be harmed by lifting subsidies.
Arab countries tend to see investment as a source of economic development. History shows, on the other hand, that the investment drive was an outcome of advanced political, economic and social systems. What is your view?
We have to improve the economic environment needed to attract foreign investment. We need to have good economic laws and regulations, and at the same time, have incentives put in place. We need legal agreements, such as those related to intellectual property rights. This all makes for the healthy environment that will attract investors. We are looking, in fact, to encourage our own nationals to invest in the region. They are more important than foreign investors because they have a lot of money.
We are facing a grave problem related to the ability of businessmen to move (between the Arab countries). How can one talk of trade and investment between these countries when a businessman cannot obtain a speedy visa to travel to conclude a business deal or a project?
In your opinion, why has the dream of an Arab common market, born at the same time as the European one, stalled for 50 years?
This is an extremely unfair comparison. European countries started out with advanced economies, constituting around 25 per cent of the world's trade, with massive economic production. Belgium and Holland began since their trade complemented each other. Then, step by step, other countries joined in.
It is true that the idea of an Arab free trade area started out at the same time and that it was a gradual and very well-structured plan. But at the time, seven Arab countries still suffered colonial rule. Today, there is not a single advanced Arab country. Since 1948, Israel's existence has brought a war every few years. This did not happen to Europe. These were 15 advanced economies, at the top of the world. And, they did not have Israel.
Do you think that we Arabs possess the ability to negotiate on rational grounds that would enable us to attain economic progress?
If you have a fire in the room next to you, will you think rationally? Can you think of what to eat, where to sleep, or will you only think of jumping out the window? To think right, you must have stability. Is not the existence of Israel a fire? You must put the fire out first.
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