Question

Based on your knowledge about regional economic collaboration, cultural issues, and political and economic situation in Middle East, suggest your ideas for fostering regional economic collaboration in the region. Which country should take a lead? What could be the areas/industries for economic collaboration? How the collaboration could be structured/modeled after (EU, ASEAN, APEC, NAFTA etc.) and why?

Answer 1

Before going to the actual answer, let me give a brief introduction about Middle East countries. The term Middle East was coined by the British Foreign service at the end of nineteenth century and later on it was used by a US naval officer in an article in 1902. The term was developed from British perspective, which denotes the countries located in the eastern part of Britain. The Middle East countries include some countries from Asia and some countries from North Africa. There are mainly sixteen countries in this category. They are: Bahrain, Egypt, Iran, Iraq, Israel, Jordan, Kuwait, Lebanon, Oman, The Palestinian Territories, Qatar, Saudi Arabia, Syria, United Arab Emirates and Yemen. Most of these countries share common characteristics as, most of them are Islamic countries, and they have similar cultural backgrounds like, most of these countries official language is Arabic. Another similarity is in economic backgrounds, like most of the countries have rich oil reserves. However, there is large disparity in per capita income levels among these countries. Top three richest economies in this region are Qatar, Kuwait and United Arab Emirates. Poorest countries in this region are Syria and Yemen.

In my opinion there can be one regional economic collaboration among these countries in this region. United Arab Emirates has to take initiative and lead to this collaboration. Because UAE is more developed compared to other countries and the economy of UAE is diversified. The best example for its diversity is that, more than 70% of UAE’s GDP consists production from non-oil sectors. Naturally, trade is the first and most important aspect of an economy, which is considered for any collaboration. Later on this relationship can be strengthened by investing jointly in different industries, services and infrastructural projects.

Difficulties in creating an economic co-operation/union

It is very difficult to form a collaboration in this region, because if we look at the history, these have been some attempts to form an economic union, in this region, but in vain. The major factors which are preventing the formation of strong economic co-operation in this region are:

Past animosities among the economies in the region.

Among the Middle East countries, very few countries are well developed. Rest of the countries did not succeed in their economic policies, for example, implementing import substitution policies. So, economic activities in most of these countries are not well diversified.

There are no proper infrastructure facilities in these countries, such as roadways, railways, airways and waterways. Dearth of proper markets and economic institutions.

Since their production activities are less diversified, they are having trade relations with regions which are far away from their region, like USA and parts of Europe, rather than diversifying their production activities and improve trade among themselves.

One another major hindrance is most of the countries in this region are non-democratic forms of government. Because of which there will lot of political instability in the countries. There will be frequent disputes among themselves. Some of the examples for these are, The Iran-Iraq war, the civil war of Lebanon, The Arab-Israeli war, The Palestinian problem, disputes between Syria and Turkey regarding water and border etc.

Experiences in the past

IN 1945, these was an attempt to form the Arab League, but it was a very loose federation. Later on after 1970s, some of the countries came forward to form The Islamic Development Bank, The Arab Monetary Fund for regional economic cooperation, but these also did not succeed.

Possibilities and opportunities

The countries can form a customs union among themselves that enables them to eliminate tariffs on imports among member countries. They can adopt common tariff for imports from rest of the world and distribute this revenue based on predefined agreements.

These countries can declare fee trade areas in this region, which will enlarge the markets of these countries.

Allowing free movement of labor also would be very helpful for the member countries, as it reduces the unemployment rate in the economy.

Another possibility of creating an economic cooperation can be, by selecting a target sector or industries and concentrate more on them. In my opinion the best sectors for these countries could be production of solar power, since most of the land is covered with sand.

Improving the human capital, especially in the information technology sector in this region.

The above mentioned ways can solve some of the problems of the economies in this Middle East region, like unemployment.

The membership in the union should not be like European Union, ASEAN, APEC, NAFTA etc., because in these unions there is less democracy and more bureaucracy. The cost of membership is also very high. There are many inefficient policies in these unions. So the upcoming economic cooperation in the Middle East must learn lessons from the existing unions and go forward.