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The importance and urgency of establishing an Arab common market

More than 40 years have elapsed since the conclusion of the agreement to establish an Arab common market. It has not actually been put it into effect, despite the fact that the integration of the Arab economy has seen certain fundamental awareness on the two levels of theory and practice.

However, such developments were diffident and receded shortly thereafter into the grouping of holding companies and joint dual non-comprehensive work, constituting an attempt to shrink from every mode of integration.

The Arab states presently appear to be playing the role of producers of raw materials for the benefit of progressive capitalist countries and, on the other side, acting as a market for the sale of commodities produced by said countries. However, every increase in the gross national product (GNP) resulting from increased exports would mean a further subordination of the economies of Arab countries, binding the GNP to the world markets because of the weaknesses of the domain of productivity when certain Arab states depend mainly on the production of oil and others produce nothing more than a few agricultural commodities

Exports of Arab countries boomed after 1973 to reach by 1981 the figure of $214 billion, compared to $28.6 billion in 1971. This was largely attributable to the increased exports of oil from Saudi Arabia, Kuwait, the United Arab Emirates and others.

Inter-Arab trade has demonstrated wide variations between the various Arab states. For example, trade between 1990 and 1994 in Jordan, Sudan and Lebanon with other Arab states illustrated a high percentage of global exports, with 18 percent for Lebanon, 26 percent for Jordan and 40 percent for Sudan. Such inter-Arab dealings receded in 1994 by 5.1 percent, but the drop in 1993 was only 0.6 percent.

Furthermore, the volume of Arab investments outside their borders reached of $670 billion by 1994, while such investments within the region did not reach more than $13 billion.

On the strength of available data on inter-Arab investments during the year 2000, we find that Tunis received $669.4 million, Lebanon $350 million, Sudan $330.5 million and the United Arab Emirates $196 million.

It is then valid to say that the Arab region is receiving altogether less than 1 percent of global world investments. While Arab investments outside the region have reached $2.4 trillion, mostly in foreign banks and securities, in addition to share ownership in properties and real estate, underlying various risks, like the possibility of diminished rates of currency exchange on investment and lower value of investment itself as a result of inflationary influences. There is also the possibility of these investments being frozen in the event of the eruption of a critical situation in inter-economic relations.

The Arab region is experiencing an increase in its imports to meet demands on local markets. This confirms the hypothesis of depending on world markets and the urgent need for markets on the local level, thus negatively affecting the integrated economic growth and reinforcing the spirit of individualism to arrive finally at subordinating the whole region.

The call nowadays to revive the Arab common market agreement is, more and more,

taking on the form of an urgent request, since it is not a matter of choice, but rather a question of destiny if we are to be active in the new alignment of world economies and not remain on the sidelines of such a global field. It would not be possible to attain this objective unless we eliminate all legislative barriers and realize that the whole area is being effected by various regional forces and the changing nature of world economies.

The challenge that faces the Arab region basically requires the setting up of a long term

investment strategy to achieve a solid reconciliation between the interests of each Arab state possessing excess funds and others in need of capitalization.

As certain Arab states have started to adjust their legislation to conform with the requirements of the European Union and the world regime, it is imperative that all Arab states should be working towards a common economic Arab policy to ensure their integration and safeguard their resources against exploitation by world powers.

We can see in the conclusion of the Unified Arab Capital Investment Agreement the creation of an Arab organization for security of investments and the immediate execution of terms thereof, together with the agreement of free Arab trade zones, should be put in full effect prior to 2007. Steps toward the realization of an Arab common market should also be in full effect by the year 2010 at the latest. This common market should aim at reconciling customs duties imposed by concerned states on imported goods and other restrictions and measures adopted by concerned states to control imports - including monetary and administrative limitations imposed on imports, the liberation of commercial dealings between member states from duties and restrictions levied on foreign products and the reduction of duties on certain goods - of mutual exchanges in the face of foreign competition. It should also aim at providing funding facilities necessary for production and exchange of Arab products and settlement of payments emanating from such exchanges. It should also observe the particular conditions of growth of each member state, especially those experiencing lesser rates of growth.

The Arab common market, with all its positive peculiarities in deriving benefits from experienced labor and the specialization of each Arab state in one or more sectors of agriculture, industry, tourism and services, should permit the realization of Arab food and industrial security while taking into account the available resources of each member state.

However, it should always require that the Arab determination to maintain the integration of their economies is preserved, avoiding the limitation of regional influences, stopping the enforcement of customs restrictions, eliminating other monetary or administrative obstacles facing imports, activating and reinforcing decisions toward integration, and placing rules for details of origin of Arab commodities to facilitate their movement among the concerned Arab states. This common Arab market should avoid the creation of repetitive projects and concentrate on the production of goods best suited to the particular capacities of member states so as to avoid similarity of production and unfair competition between similar products, as has occurred during the past few years to the detriment of inter-Arab trade development.

With this perspective in view and within such a framework, we can thereafter communicate and deal with world trade from the platform of active, positive integration and not from the stand point of the diffident subordinate. This market should be constructed in line with these basic strategic points of consideration:

Creating a common Arab outlook for integration of production and marketing by way of building the necessary networks for sectors of production and marketing between Arab states, working on the move from traditional methods to the modern technology of production, and bulwarking free Arab trade through coordination of economic policies, diversification in productive methods, increasing added value based on technology. There is also a need to transform the Arab society from a community of consumers to producers in order to materialize Arab economic integration capable of dealing efficiently with the trends of globalism.

It should be added that about 850 inter-Arab and joint projects with foreigners were

implemented during the past years in various sectors of the economy, with capital investments approximating $36 billion, and in spite of substantial achievements, they continued to face drawbacks and other difficulties limiting their performance.

We must say that common Arab projects are still in their preliminary stages and require more time to impose their effects on the integration of Arab economies, with the hope that they succeed in surpassing negative influences, like duplication of Arab common projects vis-a-vis similar regional projects, and the absence of essential coordination between them, particularly at the level of investment and production, to bulwark the economies of Arab countries. In all, these negative aspects reduce the effectiveness of integration in the overall Arab economy, putting it at a distance from expectations other than the direct interests of parties.

There is no doubt that such an ambitious outlook should draw the full support of Arab governments in order to reinforce the power of negotiation of Arab countries in their contacts with the outer world and foster the realization of the earnestly sought after Arab dream.

Hassan F. Beidas is the Arab bureau managing director for Commerce and Real Estate, a real estate development and construction company. He completed his BS in Mechanical Engineering at the University of Southern California and a Masters in Engineering Management at George Washington University.

Beirut,04 26 2004
Hassan Beidas
The Daily Star
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