Arab common market: The state of economic affairs in the Arab states, part 3
Regional, Economics, 6/19/1999

Arab economists agree that the Arab states have not succeeded in realizing their economic integration but disagree on the principal reasons for this failure. Despite the lack of agreement, there is concentration on the following factors:

-The preliminary steps to integration do not suit the actual status of Arab economies. These steps include exchange, joint ventures, integrated planning, non-regional, sector coordination. Although those steps are numerous, no success has been scored in building Arab economic integration.

-The underdeveloped production base and its similitude in the Arab states prevents the realization of Arab integration.

-Vassalage and linkage to the international market

-The absence of political movement toward achieving Arab economic integration.

-Interest groups that see benefit in Arab disarray.

There is no doubt that some of these factors account for the failure of Arab economic integration. Yet, they as a whole reveal the flaws in Arab economies and in the manner of their management, reflecting thereby the absence of integration. In-depth analysis, however, puts us before the following facts:

1- Arab economic integration has never been a real goal for any Arab state, rather it was a slogan that changes according to political ends. Arab economies are managed against the background of maintaining political and military security, which has led to:

-Absence of consensus politics in order to preserve military and political security with the result that no political institutions have come up.

-Absence of economic democracy because the economy is controlled by the state and is managed by its decisions that serve political and security ends. The average of government expenditures in the Arab countries combined ranges between 36 and 50 percent of the Gross National Product. In some countries it is above 60%. Financial and economic resources are directed to serve political and military security. Hence, resources are not distributed in compliance with the well-known economic mechanism. First comes meeting the need of political and security which are sometimes exaggerated, and what remains goes to economic development.

-Spending on security and defense are above 30% of the overall government expenditures in 10 Arab states in the period 1989-1994. In the other countries the expenses are above 20% which is roughly 12% of the Gross National Product in the Arab states.

2- External factors: The industrialized countries have taken advantage of Arab economic disarray. They are on one hand the principal source for defense equipment and arms of various types and on the other hand they have found the Arab states a consumer market without any rivalry for their commodities of manufactured goods, foodstuffs and services.

For this purpose, the industries did all they could to keep this status per se and to benefit from it. Agreements were signed between Mashreq and Maghreb Arab states on one hand and the European Union on the other. Contracts were long-term and there were barter agreements signed with the former Soviet Union. Then came agreements on technical and economic cooperation and last came association agreements signed with the EU in the context of the European - Mediterranean Partnership.

Moreover, there are attempts by some foreign countries to impose certain conditions on the Middle East market and institute a certain framework. Despite the fact that the status of Arab economies has provided the opportunity for external forces to exploit Arab resources, these forces have generated economic interests. In order to protect and maintain these interests those forces have endeavored to keep this status ongoing and sought to aggravate it through pursuing the policy of creating crises on the level of the Arab world.

3. Ambitions: Those ambitions are a number of smaller goals that combine to form one strategic goal which one has to endeavor to achieve. If the Arab ambition is to reach a perfect Arab economic integration, the Arabs have to work for those smaller goals in order to achieve the strategic goal which is Arab economic integration.

a. developing material and human forces of production. Basically this process has as its assimilation and development of modern technology through increasing spending on scientific research, and on professional training and formation; increasing expenses on modernizing production inputs and using state-of-the-art technniques in production and management.

b. Developing in-country institutions that allow for political feedback and consensus to preserve the political stability needed for prolonged economic development. This development cannot be achieved without tools and organizations that allow for effective access to communication that serves the dissemination of needed information for correct decision making, a central function for the functioning of any effective economy as it seeks the appropriate allocation of resources for development.

c. Developing economic institutions that can be promoted through the exercise of economic freedom of work and investment; through decisions taken by individuals and private sector organizations; and through lifting the heavy hand of direct government control of the economic activities.

It can be said that the process of internal development of Arab economies would promote those economies to promote economic relations with the Arab states pushing these relations up from the level of cooperation to integration, as the mere development of production forces will naturally lead to developing relations to serve their own development and then economic interests will emerge and will impose themselves on the Arab economic area.

Consequently the creation of Arab economic integration institutions becomes an objective necessity.

Previous Stories:
  EU approves in principle project to boost Arab exports to Europe   (5/19/1999)
  International Monetary Fund opens bureau in Cairo   (5/17/1999)
  Arab common market: Low inter-trade reveals problem, part 2   (5/12/1999)
  Arab common market: The possibility of realization, Part 1   (5/10/1999)

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