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Abudavud Basem
Donetsk national university of economics and trade named after M. Tugan-Baranovsky, Krivoy Rog, Ukraine
ECONOMIC INTEGRATION AS A BASIS FOR
COOPERATION OF MIDDLE EAST COUNTRIES
The
modern world is living in an era of global integration processes, affecting all
spheres of life (politics, economics, education and other). International
economic integration is one of the most important determinants of national
economic development, manifested in the expansion and acceleration of
international financial flows, which in turn contributes to a more efficient
use of investment capital in all areas of the world economy and the
international geographical division of labor, allows countries to significantly
cut the costs of production and, consequently, to reduce the price of
consumable goods. The integration process involves a constant search for the
states flexibility, and compelling long-term reason to the reorientation of
neutral or good-neighborly relations in the highly partnerships.
Any
region needs a framework in which intra-regional issues - political, security
or economic - can be addressed on a regular basis. Most have several
overlapping regional organizations. It can be identified three reasons why
countries seek greater regional integration: to make economic welfare gains; to
increase the region’s collective political bargaining power in extra-regional
issues; to achieve other non-economic national goals, such as meeting security
concerns and preventing future conflict.
A
Middle East region is defined by several characteristics, the most basic being
geography and culture. However, these two aspects say little about the extent
of, or potential for welfare-enhancing economic interaction, which are also
determined by economic and political factors. The more similar the economic and
political systems of countries and the more similar their political goals, the
easier it has proved to promote effective regional economic integration among
them. The returns from economic integration also reflect the relative resource
endowments of the participating countries, including human capital, albeit not
in a unique or unambiguous manner. [1]
Limited integration
has stifled the Middle East region’s ability to tap into its significant
potential for economic growth and job creation. The region is among the least
integrated in the world economy. Although home to 5.5 percent of the world’s
population and 3.9 percent of the world’s gross domestic product (GDP), the region’s
share of nonoil world trade is only 1.8 percent. By contrast, countries that
have opted for a liberal trade and investment regime-most notably in East Asia
- have experienced a significant increase in trade, employment, and per capita
income. If petroleum and gas are taken into consideration, the Middle East
countries are far more integrated in the world economy, with total exports
accounting for 6.2 percent of total world trade. Exports of oil and gas
represent about three-quarters of total exports. [2]
Deep economic
integration could help policy makers address the critical development
challenges that have been brought to the forefront by the Arab Spring. The
Middle East faces a number of serious economic management challenges, including
high youth unemployment, global commodity market shocks, weak governance, and
inefficient public sectors. The Arab Spring has unleashed a torrent of protests
across the region, giving voice to popular frustrations with exclusive,
ineffective, and inefficient policy choices. This movement has brought to the
forefront the need for policy makers to refocus their development strategies on
inclusive growth, job creation, and good governance. The region’s leaders are
sensitive to the calls for reform and are accelerating measures to stimulate
job growth, make the economic growth process more inclusive, and foster popular
participation in the development process.
Middle East states
have attempted to enhance intraregional trade by themselves. In 1998, Arab
countries signed on to create a Greater Arab Free Trade Agreement (GAFTA) that
would eliminate tariffs, by 10% annually, on regional manufactured and
agricultural goods over a ten-year period. However, intraregional Arab trade
remains disappointingly low, with little progress being made. [3] Hence the
region needs to move beyond shallow integration and into deeper integration to
maximize welfare gains and surpass initial government scepticism to change. [4]
In addition to the economic arguments for low levels of economic integration,
others point out the political obstacles to modern pan-Arabism that include a
lack of mutual trust among Arab leaders, vested domestic political groups’
interests in regulated decision-making or rentier-state behaviour, and crony
capitalist support for statist, inward policies.
Despite
complementarity in the output mix, nothing is preventing different countries in
Middle East from further integrating into these multinational value chains.
Economic integration can have positive market, efficiency, and long-term
welfare effects. The extension of domestic markets provides opportunities for
greater economies of scale and, through improvements in connectivity, helps
strengthen access to markets. Economic integration can provide opportunities to
expand economic activity through joint action to overcome policy and
institutional barriers to the flow of goods, services, capital, and labor. If
the reduction of interregional barriers leads partner countries to expand
output and exports of internationally competitive products, the price of
productive inputs or final goods in the importing country will fall and benefit
consumers, input purchasers, and employees in the exporting country.
Literature:
1. Nasser M. Suleiman (2013) Economic integration
tendencies in the Middle East available at
http://www.al-bab.com/arab/econ/suleiman.htm;
2. World Bank.
(2013) Regional Economic Integration in the Middle East and North Africa
available at https://openknowledge.worldbank.org/bitstream/handle/10986
/12220/NonAsciiFileN ame0.pdf?sequence=1;