Hostname: page-component-77c89778f8-rkxrd Total loading time: 0 Render date: 2024-07-20T07:28:10.983Z Has data issue: false hasContentIssue false
  • English
  • Français

The Future of Economic Integration within the Arab World

Published online by Cambridge University Press:  29 January 2009

Hossein Askari  and
John Thomas Cummings
Hossein Askari
Affiliation:
University of Texas at Austin
John Thomas Cummings
Affiliation:
University of Texas at Austin
Get access Rights & Permissions [Opens in a new window]

Extract

As our main guidelines in judging the probability of success in the formation of an economic union, we have used past trade patterns to indicate complementarities between the prospective partners, oil revenue projections to estimate the degree of future expansion of both demand and supply, and the principles of mutual self-interest and universal gain to argue for the likelihood of cooperation of all members. The essential participants in a Middle East Economic Community (MEEC), on these bases, would have to include most of the countries now producing food and other commodities in sufficient quantities for export to the partners, and enough of the major oil producers to provide the capital resources the community will need to accelerate its development during the next decade. At a minimum this would involve the Fertile Crescent, Egypt, Kuwait, and Saudi Arabia. The arguments put forward to indicate the interest of the last two countries in unification apply also to the other oil producers considered here—Libya and the smaller Gulf states. The need in the Middle East for enhanced food-producing capabilities recommends inclusion of the Sudan, though the latter suffers from internal political problems that might limit its participation in an essentially Arab enterprise.

We have not considered the possible participation of other neighboring states in a Middle East Economic Community—Cyprus, Iran, Turkey, or even, after a settlement with the Palestinians, Israel—in order not to further complicate the discussion. While none of these countries might be interested in full MEEC membership in the foreseeable future, each might find considerable advantage in some sort of a link, possibly like Turkey's current associate standing in the European Community. Possible Iranian interest would have the same basis as that of the Arab oil exporters, promising investment opportunities in non-oil countries and a larger market in the long-run for new Iranian industries. On the other hand, Turkey is more like Egypt or Lebanon. It has already seen a considerable jump in its exports to the major Arab countries, from about $71 million in 1972 to $168 million, close to an eighth of all its exports, in 1975.

Although Iran's imports from the potential community members account for less than 1.5 percent of its total imports, 10 percent of the value of its non-petroleum exports are destined for these Arab States. Almost 16 percent of its food exports and over 11 percent of its manufactured exports constitute the major categories of Iran's exports to this market.

Cyprus, whose economy has suffered serious setbacks after the 1974 crisis, has, paradoxically had an extremely healthy growth of exports to these Middle Eastern states. By 1975, the total value of Cypriot exports to these countries was nearly 270 percent of its 1973 export figures to the same market. The principal factor behind this remarkable expansion of trade was due to the civil strife in Lebanon which disrupted its exports of vegetable and food products to these countries. Cyprus immediately filled the gap left by the Lebanese civil war; it remains to be seen, however, how strong and permanent the Cypriot foothold is in this market, since the end of the disturbances in Lebanon.

Turkey imports 10 percent of its total imports from these countries and exports nearly 12 percent of its total exports to them. There is, however, a great difference in the composition of imports and exports. Eighty-eight percent of Turkish exports to these countries are varied. In terms of its total exports to this market, Turkey exports 36 percent in food products, 39 percent in non-fuel crude materials, and 15 percent in basic manufactures.

The truly unique set of economic circumstances taking shape in the Middle East offer the region a chance for rapid development that could even exceed that of post-war Japan or Stalinist Russia. Such massive capital inflows that the oil-producers are now and will continue to enjoy for several years have never previously been seen in such a short period by any people. The Arabs will add this ingredient to economic structures which have already undergone considerable modernization in the past two generations. Transportation networks, educational and public health systems, and administrative bureaucracies, among other infrastructure elements, throughout the area are fairly well developed, thanks in no small part to past oil-related revenues.

These oil revenues will bring their recipients sufficient wealth to provide adequately for their descendants, economic union or not. But, the degree to which their descendants live by their own economic activities, provided for by today's investments, and the extent that oil benefits will fuel regional development depend upon whether, when, and how much economic integration occurs.

Both oil and non-oil states could reap considerable benefits from an economic union, and given their mutual needs for each other, they all would enter serious negotiations from individual positions of strength. To no small extent, the success of an Arab union may be as much dependent on the progress of an Arab-Israeli peace settlement. But, the advantages of integration to the core states of the Arab world, we maintain, are clear, and the degree to which these advantages can be realized depends upon how early in the upsurge of oil revenues economic union advances to an operative level. Some important early steps have been the Economic Unity Agreement and the establishment of the Kuwait Fund, the Arab Fund, the Abu Dhabi Fund, and the Inter-Arab Investment Guarantee Corporation. Most of these proposals have not achieved their full potential, and more genuine commitment is needed.

Stirrings of movement toward such commitment were seen at the June 1975 meeting of the Arab Economic Unity Council. Rather than issuing still another call for immediate integration with more rhetorical value than economic content, the participants pledged a five-year effort to coordinate the policies of their governments with the aim of initiating a Middle East Economic Community in 1981. Of course, progress remains to be seen, but considerable political realism appeared to be shown at the 1975 AEUC meeting, recognizing the need for a step-by-step approach to integration, not only over the first five years, but also in the twenty-year period beginning in 1981 that was seen as necessary for complete implementation of the economic community.

The challenge to integrate facing the Arabs is not as drastic as the economic equivalent of life or death, but the way in which it is met is likely to determine whether they emerge from the next quarter century as the major world economic power that their numbers, history, and fortunate endowment of natural resources seem to make possible.

Type
Research Article
Information
International Journal of Middle East Studies , Volume 8 , Issue 3 , July 1977 , pp. 289 - 315
Copyright
Copyright © Cambridge University Press 1977

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

1 Musrey, Alfred G., An Arab Common Market (New York: Frederick A. Praeger, Publishers, 1969).Google Scholar This work contains a detailed analysis of trade among the Arab States since the end of World War II.

2 By equal shares of benefit we do not mean equal absolute amounts but equal percentages of Gross National Product.

3 Rosenstein-Rodan, P. N., “Problems of Industrialization of Eastern and South-Eastern Europe,” Economic Journal, 53 (06–09 1943), 202–211.CrossRefGoogle Scholar

4 That is, industries that cannot currently compete on the world market, but for which the case is made that with some protection, they will become eventually sufficiently efficient to compete on the world market.

5 Which, of course, might seem very risky to the individual capitalist, particularly in a developing country. If the investors are not private, but, for example, member governments of the common market, then risk is primarily a function of the current and future status of the general relations between the union's constituent states.

6 The contrast is not only between the rich (Abu Dhabi) and poor (Jordan) but between extremes of reasonably well-developed industrial, agricultural and commercial sectors and states with little in one or more of these areas that merits designation.

7 Because more recent data are still sparse, these growth rates are drawn from periods which generally exclude the higher rates of inflation which have been felt in the Middle East as well as the world as a whole since 1970. Thus, though these figures make no allowance for inflation and to this extent exaggerate real growth, they at least are not masquerading very rapid price increases.

8 Again, such aggregate figures do not allow for price effects here of shifts, intersectorally, in factor prices. For example, increases in industrial relative to agricultural wages would show up as a sectoral gain for industry if both sectors were growing at the same rate in real terms. However, given the lack of more sophisticated data, the figures can at least offer some approximate idea of sectoral-shifts.

9 Both total Lebanese agricultural output and exports have shown a strong upward secular trend in real terms in recent years. Thus, this relative decline may be due at least in part to differences in the way factor costs are changing in the various major sectors.

10 Even this federation was smaller than when it was first proposed, since when no satisfactory formula for their inclusion could be devised, Bahrain and Qatar opted for separate independence.

11 And the larger nation (s) can be satisfied that a coalition of its smaller partners cannot get their way merely by majority voting. For example, the European Economic Community has required unanimity in most major decisions to obtain consensus in these areas during its formative period.

12 Jordan, Kuwait, Morocco, Syria, Egypt, Iraq, Yemen, and Sudan. Morocco, however, never ratified the agreement.

13 It has not, for example, made any serious attempts to coordinate development efforts in the region, as has the sorely-beset East African Economic Community.

14 Another potential concern in this regard would be future relations between the Arab countries and Iran, which is sounding out its non-Arab neighbors on the possibility of embarking on some form of economic integration.

15 The Republic of Nauru enjoys a per capita G.D.P. similar to that of Abu Dhabi. Its revenues come from extensive phosphate deposits on the small island which will be depleted in less than 20 years. For some time now the government has been using a large part of the phosphate revenues to build an investment portfolio which will permit Nauru to maintain its high living standards when the phosphates are gone.

16 Much of the increased purchasing power in the Middle East was spent within the region, despite the predilection among the oil states for massive purchases of capital goods from the industrialized countries. For example, from 1972 to 1975, Egyptian exports to its larger neighbors climbed more than 125 percent to about $129 million, and even Syria's gain was nearly 50 percent, to more than $103 million. More spectacular were the regional export surges in Jordan and Lebanon. In the former they went from $25 million in 1972 to $51.4 million in 1975 and to more than $40 million in the first half of 1976. Lebanese sales to its prospective partners climbed more than 175 percent over 1972 levels to about $525 million in 1974, and in 1975, when the country was racked by civil war, they continued to grow to about $650 million.