In the light of the enjoyment of the Arab world with large natural, financial and human resources, both in terms of diversity and quantity, and geographical unity in an area characterized by its middle strategic position between East and West that It has a common history and one language, which can become a great economic power that plays an important role in the global economy by establishing an economic integration among them.
Economic integration means that a country provides the other elements that it lacks to promote economic production between them. The relationship in this framework may be equal, as in the case of alliances and economic blocs that arise among developed countries, such as the case of Western European countries; or unequal, in the case of integration between developed and developing countries, which would push economic integration relations forward, whether they are institutional or agreements or trade relations and joint investments.
The process of exchange is voluntary between two or more countries, which share some common denominators, including geographical proximity; the highest is the religious and national affiliation, whereby states remove barriers to trade exchange and the movement of production elements among them, including labor and capital.
The issue of Arab economic integration has been a distinct place in the interest of the the Arab nation since the end of the Second World War. It began with the establishment of the League of Arab States in 1944 with the membership of the seven independent states including: Egypt, Iraq, Jordan, Syria, Lebanon, Saudi Arabia and Yemen and followed by the accession of the rest of the Arab countries. The League’s charter included the cooperation of the participating countries in close cooperation in economic affairs, reflecting the importance of Arab regional cooperation prior to its achievement at the global level, and the elements of Arab economic integration:
• Natural resources: The Arab world has large and varied economic resources at the agricultural and industrial levels. The Arab world extends over an area of about 14 million km2, and within this large area, the climate, terrain and soil types vary and there are many water sources to reach about 370 billion m 3, of which only 175 billion cubic meters are currently used.
As a result, there are numerous agricultural crops and diverse and mineral resources and energy sources from oil to gas and renewable energy sources such as wind and heat.
The Arab nation can achieve, due to the abundance and diversity of these resources, economic integration, which helps to provide the necessary funds to discover available resources and invest them, and not invest, or to achieve qualitative and quantitative investment appropriate for the invested resources.
• The strategic location of the Arab world, which occupies a middle position between three continents: Asia, Africa and Europe, and also overlooks most of the world’s seas and oceans. The topography of the Arab world is geographically characterized by the presence of seas and waterfalls allowing to generating enormous electrical energies.
• The availability of human resources in the Arab world. The statistics indicate that the total population of the Arab nation is approximately 370 million. This number is sufficient for the development of the Arab region in a self-sufficient manner, and the availability of this number fulfills an important condition of successful investment to provide the minimum of manpower.
• Large capital, due to oil revenues, and these funds have not yet contributed to the development of the Arab region, as most of them tend to invest in the developed countries in the United States noting that the US «Rand» institution issued a report, estimated Arab deposits in US banks alone about $700 billion and the Arab investment in the United States is estimated to be about 680 billion dollars. The report states that the proportion of Arab funds invested in America accounts for about 12.8% of the total Arab funds invested in the world, while Europe accounts for 34.6% of the total Arab funds invested in Exterior in 1988.
According to RAND estimates, Arab funds in Europe will reach $ 1844 billion and Arab funds invested in the Far East will reach $ 822 billion. According to the Union of Arab Banks, there are currently 4550 banks and branches in the Arab world, with a total of about 350 billion dollars.
Another report estimated the value of Arab deposits and investments in Europe and America in early 1988 at 350 billion dollars, of which about 200 billion dollars are Arab government deposits and investments, and about 150 billion dollars are Arab deposits and investments for Arab individuals and companies.
Economists pointed out that the Arab financial assets abroad exceed $ 670 billion, of which 200 billion dollars for citizens of Arab countries with fiscal deficit, and the Arab debt of 200 billion dollars, which means that the Arab world credit to the global banking system about 470 billion dollars.
On the Arab investments in foreign countries compared to Arab countries, the Arab Investment Guarantee Corporation said in its annual report that investment projects in the Arab countries amounted to 2,170 projects until the end of 1988 with a paid up capital of $ 19.7 billion, Arab countries contributed $ 9.9 billion, that is with a percentage of % 50.2 of its capital and the rest are foreign countries. The report says that these investments can not be compared to the size of Arab investments in capitalist countries, but the Arab countries allocate of one project for western countries to reach half the Arab investments in all the Arab countries,
Economic and political experts pointed out that 50.9% of the Arab funds invested in Arab countries are employed in small projects of 2135 projects with capital of less than 50 million dollars and 15.9% of them are employed in 22 projects with capital ranging from 50 to 100 million dollars and 23% 2% in 13 projects with capital exceeding $ 100 million.
The expert in the National Planning Institute Dr. Mustafa Ahmed Mustafa pointed out that the total surplus Arab oil revenues invested in Western Europe and the United States until the end of 1985 about $ 600 billion, while the volume of Arab investments in the Arab world does not exceed $ 12 billion, or one to fifty.
The number of industrial and non-industrial projects between Saudi Arabia and Arab and foreign countries until the end of January 1990 amounted to 1462 projects with a total investment of 59.7 billion Saudi riyals. According to a survey issued by the Saudi Ministry of Industry and Electricity and published by Saudi Journal, Asharq Al-Awsat, that the number of projects with Arab countries amounted 430 projects with a total investment of 11.8 billion Saudi riyals and with the United States of America 186 projects with investment of 12.3 billion Saudi riyals, which is more than the total value of joint ventures between Saudi Arabia and the Arab countries.
Dr. Hoda Tawfiq Azzam pointed out that 13% of the Gulf foreign investments in the US market, 4% in the British market, 20% in other European countries, 18% in the OECD countries, especially Japan and the financial centers in South East Asia and the rest disputed among the offshore centers by 11%, the developing countries 13%, and the International Monetary Fund and the World Bank. The total foreign investments of the public and private sectors of the GCC countries are $ 432 billion.
The Dubai Chamber of Commerce said in a report that the volume of trade cooperation between the Gulf Cooperation Council countries and the European Union amounted to 25.8 billion dollars in 1988.
There are Arab economic researches that provide approximate figures that the amount of Arab funds invested in America exceeds one trillion dollars, while other bodies estimate the volume of Gulf funds migrating abroad about 1.4 trillion dollars, of which 750 billion Saudi dollars, about 450 billion dollars, which invests in the United States and $ 255 billion in Europe. The Arab Organization for Investment Guarantee in Kuwait said in a report in late 2004, before the doubling of oil money by the rise in oil prices that the volume of Arab wealth abroad amounted to about 1.4 trillion dollars, which is calculated the proceeds of that money to benefit the countries that invest.
• The expansion of the Arab market, which extends from the Gulf to the ocean, where all the economic criteria that make it a model market are available. This market includes more than 370 million consumers, which allows for large projects and increasing production and thus raising the standard of living of the individual in the Arab world.
• Increasing the share of Arab countries in crude oil and natural gas
It holds about 1.73% of the world’s crude oil reserves. It produces about 5.38% of the world’s oil production, which is one of the most important exports of the Arab countries. It also owns about 7.39% of the world’s natural gas reserves.
In addition to the above, the Arab countries speak one language, and most of them embrace Islam. These elements can play an important role in activating Arab economic integration.
Economic integration
Economic merger is the highest stage of economic integration, in which economic policies are coordinated and a kind of division of labor is established between the countries concerned. In general, economic integration begins with joint trade agreements or customs reductions on products of both countries or countries that share this relationship such as the economic cooperation among the GCC countries.
• Trade and economic relations between the GCC and Western countries are greater than between them and the countries of the Middle East and North Africa. This is due to limited Arab production and therefore the need of oil and non-oil countries in the region to exchange more with outside the region.
• Investments in non-oil Arab countries remain mostly Gulf investments, and thus the reality of integration remains important and insufficient. The majority of Gulf investments go out of the region due to stability in America and Europe and not available here.
The GCC countries aim to diversify their economies – reducing dependence on fuel to finance the state and services – but not enough to raise the level of the Arab economy.
• Joint GCC investment projects are necessary, but in which sector? In agriculture, there are limited opportunities because of the factors of land, weather and water noting that there is an excellent agricultural production but expensive. The main opportunities are technological production, where money is available and expertise is also available. It is also possible to import some foreign expertise from Asia and elsewhere and thus creating a kind of vital technological area similar to Silicon Valley in California. And there is a possibility to enhance tourism in all countries, including Saudi Arabia, the condition of visa facilitation, nature and quality as well as the development of the necessary infrastructure, there are many missed opportunities in the region, but the new awareness today gives more hope in the future.
Among successful experiences of economic integration and success:
One of the most important experiences of regional economic integration in our modern world is the European Union, which began with the coal and steel agreement of the 1950s of the 20th century , in post-World War II arrangements and the reconstruction of war-ravaged Europe. Economic integration at the time was one of the most important instruments used to remove the hostilities between the various warring parties in Western Europe.
The similarity of economic structures, its policies and regulations of the participating countries plays an important role for the success of integration. A successful economic integration experiment can not be achieved between capitalist countries that adopt free market economy mechanisms and socialist countries that adopt market-oriented policies.
There must be a minimum level of economic strength among the integrated countries, since the difference in the strength of economic structures between the integrated countries may transform the integrative relationship into the exploitation of the strongest to the weakest.
one of the most striking weakness of economic integration is the Arab political will and the weakness of the charter of the Arab League, which was not given the active role of participating in Arab economic integration, as in the experience of the European Union, which reached to put forward the idea of integral unity among the countries of the Union after the removal of restrictions of borders and currency among them in 1990s.
The failure to achieve Arab economic integration, or at least a successful, stable and effective experience of regional economic integration among the Arab countries, comes despite the fact that the factors that combine the Arab countries to ensure such success are far greater than those of the Europeans.
The obstacles of Arab economic integration:
The reasons for the failure of economic integration attempts can be summarized in three main groups: economic, political and organizational:
1. Economic reasons: The dominance of the first type or pattern of production on the Arab economies and the small share of the manufacturing industry or the final industries that depend on the added value of the product and the differences in the prices of production requirements among the Arab countries that are members of the agreements led the members to protect their high-cost industries through Administrative restrictions, lack of attention to the land, air and sea transport networks between the Arab countries, the different economic systems and policies, and the level of income varies between countries.
2 – Political reasons: fear of infringement on national sovereignty, and the crisis of political trust between some Arab countries.
3. The regulatory reasons: The lack of texts of agreements between the Arab countries to be accurate in determining the objective and drawing the means, the lack of data and statistics on the various economic activities in the Arab countries, and leaving every country free to conclude agreements with other countries even if it conflicts with the interests of the agreements of the other Arab countries or the Arab League Charter, and the duplication of tasks carried out by the organs and organizations that supervise on the joint Arab action.
To revive Arab economic integration we need to:
Renewed calls for the revival of Arab economic integration through the establishment of the Arab common market, as it represents an Arab bloc to meet the new global changes that Arab countries to find a distinct place beside the global blocs, and the following are some proposals to revive this project:
1- Intensifying the official Arab interest in the project of linking the Arab countries with railway networks and the serious move of the Arab transport ministers towards pushing towards building networks that have many economic and social benefits for the countries of the Arab world.
The importance of the role of transport andcommunication in the economic growth of the region since the Arab region is one of the very few regions that do not have such a link between their countries, or even at least between the two countries. For example, trains are one of the most important means of transport between European countries. The sea is no longer a barrier to the development of this type of link between its countries noting that the tunnel linking between the Britain and France under the English Channel (La Manche ) constitutes a vital link for the transport sector between the British island and the European continent.
2. Optimal use of resources owned by the Arab World and distribution of investments in industrial projects among Arab countries according to the competitive advantage of each country.
3 – Expansion and flexibility in investment laws to facilitate the movement of capital, and employment within the Arab world, which means more production and increase income and raise the standard of living for members of society in the Arab world.
4 – Increase the volume of intra-Arab trade between Arab countries and Arab market expansion in the face of Arab products.
In order to resolve the obstacles facing Arab integration:
Coordination between the economic policies applied by each Arab country separately and the economic policies aimed at achieving the objectives of Arab economic blocs, and coordination between any small Arab economic bloc and the comprehensive economic bloc so that there is no conflict between them.
And work to increase the volume of intra-Arab trade and give preference to the Arab markets in the marketing of Arab products.
And to ensure the existence of every Arab state within the Arab economic blocs, and the interest in providing the Arab institutions to ensure the implementation of the programs of Arab economic cooperation to reach the effective economic bloc, and work to provide the integrated dimension among the Arab economies and attempts to reduce competitiveness among the Arab economies.
Shatha Khalil
Economic unity
Rawabet Center for Research and Strategic Studies