Bridges Weekly Trade News Digest • Volume 13 • Number 2 • 21st January 2009
Arab Leaders Pledge Economic Cooperation
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Arab leaders have vowed to deepen regional economic ties and band together amid global economic turmoil, officials announced earlier this week after the region’s first high-level economic summit on social and economic development.
The meeting, held in Kuwait on 19 and 20 January, brought together 17 Arab heads of state, including Palestinian President Mahmoud Abbas. World Bank President Robert Zoellick and UN Secretary-General Ban Ki-Moon also participated in the gathering.
The conflict in Gaza overshadowed the discussions, and was a source of some disagreement, but the officials did agree on the necessity of deepening economic ties in the region and working jointly to combat the effects of the global economic crisis.
“Despite progress made by some Arab nations, the Arab world is still facing many challenges… especially poverty, unemployment, poor inter-Arab trade and migration of Arab capital and brains,” the leaders said in declaration that was presented on the final day of the meeting.
The economic crisis has already cost Arab states US$ 2.5 trillion since September, Kuwait’s minister of finance said, thanks to a combination of the steep fall-off in oil prices and investment losses in both sovereign wealth funds and on global stock markets.
The leaders also agreed to work to strengthen Arab funds and financial institutions “by boosting their resources and easing restrictions on providing loans.”
On trade, the leaders pledged to have an Arab customs union up and running by 2015, as a stepping stone to the creation of a full-fledged Arab common market in 2020.
The leaders had been expected to announce a pledge of up to US$ 2 billion for post-war reconstruction in Gaza, but the final declaration failed to give any details about the highly anticipated Arab Fund, Xinhua reported.
Leaders reportedly could not agree on whether the funds should be given to Hamas, which controls Gaza, or to Abbas, which lost control of Gaza in 2007 but is backed by the West.
“Arab affairs are still tense,” said Amr Moussa, the Secretary-General of the Arab League, Reuters reported. “Things are still not good in my opinion and that’s why the declaration was issued like that … Other things needed to be included and were not.”
Despite the tension over Gaza, Arab leaders agreed to increase cooperation on the peaceful use of nuclear energy, the construction of a trans-Arab railway line, and the expansion of electrical and natural gas networks in the region.
Calls for deeper integration
In an opening-day address to summit participants, World Bank President Zoellick offered assurances that the Bank was ready to come to the region’s aid as it weathers the economic crisis. But Zoellick also urged the Arab leaders to break down their barriers to trade, tackle high unemployment rates, and improve education systems.
“For too long, the Arab World has been poorly integrated into the global economy, other than through oil. Yet your countries – like all others – are feeling the impact of the global crisis,” Zoellick said.
But Zoellick warned that many institutional obstacles would have to be overcome before the region could begin to address its economic challenges.
“Private sector growth in the region is impeded by barriers to entry and lack of competition, caused by unequal, discretionary, and often preferential arrangements,” Zoellick said. “Improved public sector and corporate governance can help open the door to greater opportunity for more people who want to work and build.”
WTO Director-General Pascal Lamy echoed Zoellick’s call for deeper Arab integration into the global economy.
“Because international trade is so vital to your economies, the WTO must also be vital to you,” Lamy said in a message to summit participants. “A strong, coordinated and active Arab group in the WTO would no doubt help advance some of your economic priorities.”
Lamy noted that 12 Arab countries are already Members of the WTO, and that another six – Algeria, Iraq, Lebanon, Libya, Syria and Yemen – are in the process of applying to join the global trade body.
“The importance of international trade to the Arab region cannot be overestimated,” Lamy said in the message. “The Arab economy that is most dependent on imports is the United Arab Emirates, whose imports of goods and services constitute 86 per cent of its GDP. It is followed by countries such as Jordan, Mauritania and Bahrain, whose import to GDP ratio is in the 70 per cent range. I would be remiss if I were not to mention that these imports have been vital to the region’s food security.”
Trade levels remain low even among countries within the region, despite the creation of the Greater Arab Free Trade Area, which now counts 17 Arab countries as members, in 2005.
In an op-ed piece in the Lebanon Daily Star, Elias Ghantous, the former head of the General Union of Chambers of Commerce, Industry and Agriculture for Arab Countries, lamented the fact that inter-Arab trade represents only about 10 percent of the region’s total international trade flows. Among members of the Association of Southeast Asian Nations, that figure is 40 percent; within the EU, it stands at 70 percent.
Ghantous called on Arab leaders to liberalise services trade and to eliminate non-tariff barriers to trade – including high transportation costs and complex border-crossing procedures – in the region.
The officials agreed to hold a similar gathering in Egypt in two years’ time, although the summit is not intended to be convened on a regular basis.
ICTSD reporting. “Arab summit concludes with resolutions on Gaza, Arab development,” XINHUA, 20 January 2009; “Arab economic summit divided on Gaza,” REUTERS, 20 January 2009; “The Arab economic summit: a market approach to development,” THE DAILY STAR, 13 January 2009.
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