Increasing Arab states inter-trade, regional economic integration an absolute imperative
Regional, Analysis, 4/12/2001

With the increasing realization that trade is the best cementer of relations and the recognition that for a realistic economic integration between the Arab states to occur, there must be increased trade from it's current extreme lows representing some 8% of total Arab trade.

One of the difficulties facing less developed economies is how to increase trade when there are limited products to exchange as these countries tend to have duplicate industries that they try to protect from the neighbors they are trying to trade or integrate with.

This protectionism is at the root of the problem and it is easy to understand as each nation tries to protect the limited manufacturing and service jobs available as replacing those industries is usually difficult as opposed to well-developed economies where the destruction of lower level industries is substituted for by more capital intensive and productive industries (higher wage jobs). This leads us to see that the problem in developing economies is due in part to the lack of capital that would allow such substitution to an industry when a part of the industrial complex is destroyed by competition from another country.

Further complicating integration as a result of protectionism is that the industries in each of these countries remain to a large extent local, and does not grow large enough to take advantage of economies of scale, and to become world-class in quality of its products thus becoming a regional or international player with access to world capital markets.

The answer to these problems is twofold. One is creating local capital markets that are capable of supplying the needs of companies to grow and become regional companies instead of merely local. This solution we will not focus on now. Rather we will focus on the second solution which is more readily implemented by the so-called "high commissions" bodies of countries that want further integration and inter-trade. This solution entails the consolidation of a company or an industry in one country with the similar company or industry in a second country with the intent of creating world class companies. In plain terms, if Lebanon and Syria or Morocco and Egypt as an example wish to increase their trade and efficiency, they must be willing to allow an industry to get weak or dye in their own country for the benefit of strengthening another company or industry in the country. This can be done by officials encouraging consolidation, and by providing open access to the market of each other's products in those areas where consolidation is being sought. This dynamic does not need to be purely market driven, but can be guided by the countries involved to make sure that each country gets its fair share from this consolidation. This interventionist control can be speeded dramatically in willing and able hands.

Without this cycle of natural consolidation and destruction, industry in the Arab states will not grow to become world-class, or become diversified enough to produce the many products sought by the Arab markets, especially middle and high-end and technologically advanced products that requires intensive capital and high quality labor.

It is time to aggressively encourage companies to consolidate and pool resources so that an efficient and large market can develop for producers and consumers' benefit.

This would be the foundation of an expedited effort to increase inter-trade to create an economic block that can be a player on the world market in terms of having production and consumption power. Such success will become self fulfilling as it draws international companies to set up shop in the region further enhancing the dynamism and economic competitive position of the region.

There is little time to waste, and such an effort should be on the same level and frequency in contact as those currently applied to political matters. This effort will in reality have the side benefit of strengthening the political arm of the Arab states at the regional and international level as well.

While the current leaders are busy trying to reform local institutions and economies, at the internal level, there can be few, if any, higher priorities then increasing exports, a measure of the vitality and competitiveness of the country and its industries and services.

Looking at the level of trade between the Arab states, it can be described as pathetic, and due to the lack of powerful guiding institutions (such as the Arab League) to give the Arab citizens quality jobs and products that can compete on the world market. There is an enormous untapped potential that is waiting to explode with the proper management of these economic affairs. This requires leadership that is as intense about economics as it is about politics. A leadership that also understands that economic development at the local level and beyond a certain point can be inseparable from economic development at the regional level.

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