Economic integration

Gulf States must deepen their economic integration

Last week’s GCC summit in Riyadh forged the necessary consensus among the six member states to jointly tackle Iran’s nuclear ambitions and its malicious activities in Yemen, Iraq, Syria and Lebanon. Together, the Gulf states want their deep concerns about this crucial danger to be reflected in any revised international nuclear deal with Iran, and have reaffirmed that “any danger that threatens one of them threatens all of them.” .

The United Arab Emirates, Qatar, Kuwait, Bahrain and Oman have also united around the Saudi leadership, endorsing King Salman’s vision for unity, solidarity and stability in the Gulf region; agree to implement the circular carbon economy approach launched by Saudi Arabia during its G20 presidency; and align their national visions of economic diversification with the ultimate goal of the Gulf Economic Union, which Crown Prince Mohammed bin Salman alluded to in his opening remarks.

In this context, the renewed commitment to collective security in the face of the common danger must now allow the Gulf countries to resume the long-awaited mission, especially as their economies are recovering from the devastating impact of the pandemic of COVID-19. The IMF expects the GCC’s average growth to reach 4.2 percent in 2022 from its current level of 2.5 percent, and its foreign exchange reserves to increase to $ 350 billion over the three coming years.

Of course, the economic profile of the GCC has always been conducive to further economic integration. Its six member states share geography, history, culture and political systems. Their combined GDP of around $ 2 trillion per year for a population of around 55 million is one of the largest in the world. The Gulf region has 22 percent of the world’s natural gas reserves and 34 percent of its crude oil reserves, half of which is in Saudi Arabia.

The Kingdom is the center of gravity of the Gulf region due to its size, stature, resources and geopolitical role – constituting 43% of its GDP, 62% of its population and 80% of its landmass. . Like other GCC countries, it is undergoing massive economic diversification and social liberalization under the Vision 2030 program. Being the largest and wealthiest Arab nation, it naturally sees a pragmatic interest in greater unity, harmony and integration in the Gulf.

However, as often happens in regional organizations where intergovernmental cooperation centered on political sovereignty sets the pace and direction of the integration process, the small GCC states were unwilling to accept the Saudi plea for more economic integration. deepened beyond the customs union and the common market. The UAE’s opposition to fiscal and monetary union and Oman’s resistance to Gulf union are two examples.

Saudi Arabia must therefore be more conciliatory with the legitimate interests and legitimate aspirations of its Gulf counterparts. Likewise, the other Gulf States must give the necessary confidence to the Kingdom for its leadership role in the Gulf worlds, Arab and Muslim, and as the only Arab member of the G20. The need for such a mutually beneficial understanding has become even more important in light of current efforts at economic diversification, especially as Saudi Vision 2030 also seeks to be a catalyst for regional economic prosperity.

To advance the integration agenda, the Economic Affairs and Development Commission established at the GCC secretariat in Riyadh in 2016 can chart a concrete course of action – by first completing the customs union and common market processes. The first has helped eliminate intraregional tariffs, unify external tariffs, and relax capital controls and restrictions on trade in goods and services. The latter has facilitated labor mobility in the Gulf, enabling GCC citizens to cross borders, work in the public and private sectors, own property, invest and set up businesses.

Nevertheless, intraregional trade and investment flows remain well below real potential. GCC states continue to differ on the agreed mechanism for collecting and distributing tariff revenue and on the application of a common external tariff regime. Non-tariff barriers persist and capital controls have eased to a limited extent. Large infrastructure projects such as the unified gas pipeline distribution network and an integrated regional rail system have also not progressed.

Going forward, first of all, efforts at economic diversification, rather than stoking new tensions like between Saudi Arabia and the United Arab Emirates this year, must enable the private sector to respond adequately to the incentives. market and expand beyond national borders. Capital controls still need to be relaxed to allow cross-border investment.

Second, the removal of remaining trade barriers, streamlining of cumbersome rules and regulations, and reorganization of transmission and transport networks are essential steps to increase the volume of intra-GCC trade, investment flows and mobility of the economy. workforce.

Third, the JGC needs to strengthen the organizational structure of its Secretariat and increase its autonomy and resources. Reforms should focus on granting greater flexibility in decision-making and better execution of decisions, as well as stronger arbitration and control mechanisms.

Fourth, while fiscal and monetary union is a logical step forward, economic union must remain the end point. Running after the mirage of political union makes no sense. Supranational structures such as the EU have lost their credibility amid endemic crises such as Brexit and the influx of refugees, spurring ultranationalist politics.

Finally, the GCC can strive to expand its development agenda beyond the Gulf by co-opting other Arab nations and undertaking reconstruction projects in devastated Arab lands. Asia’s two thriving regional blocs – the Association of Southeast Asian Nations and the Shanghai Cooperation Organization – provide valuable lessons; both have extended their external influence by offering memberships or partnerships to interested countries. They also share the consensus and informal decision-making style of the GCC and its underlying social and political rationale.

Ishtiaq Ahmad is a former journalist who later served as Vice Chancellor of Sargodha University in Pakistan and Quaid-e-Azam Fellow at the University of Oxford.

Disclaimer: The opinions expressed by the authors of this section are their own and do not necessarily reflect the views of Arab News

Copyright: Arab News © 2021 All rights reserved. Provided by SyndiGate Media Inc. (Syndigate.info).


Source link