Already, the region is one of the most fragmented in the world in terms of production and trade. There are only two significant long-lived economic alliances: the Greater Arab Free Trade Area (GAFTA) and the GCC. GAFTA, signed in 1997, now includes 18 countries (Algeria, Bahrain, Egypt, Iraq, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, the Palestinian territories, Qatar, Saudi Arabia, Sudan, Syria, Tunisia, the UAE, and Yemen). It was intended to catch up with other regional blocs, but has not yet done so — likely because of weak implementation mechanisms and a lack of trade complementarity among Arab states.
The GCC is a better model. Founded in 1981 by states with a common geography and other shared cultural features, it has focused on important, attainable projects, and brought them to completion. For example, it launched its own economic common market in 2008. In 2012, the bloc will finish a $2 billion project known as the GCC Interconnection Grid. The result will be a regional power network that can trade electricity, thereby ending the inefficiency of six national grids serving just 44 million people. Equally important has been the GCC’s decision to allow labor mobility among its members. An agreement signed at the end of 2001 enables GCC passport holders to live and work throughout the six-member group. The result has been a small but noticeable movement of skilled labor among these countries.
Of course, the GCC has had challenges, as all integration schemes do. In 2009, Oman and the UAE opted to bow out of the bid for a monetary union, citing the need to put their economies in order first. But governments can learn from GCC successes. They can start by choosing projects wherein shared effort is a necessity rather than an aspiration. MENA countries may not yet have much to sell to one another, but they do share trade routes and infrastructure. As these develop, and as excluded groups join the workforce, the volume of cross-border commerce will rise.
Stable Policies, Stable Outcomes
There is an understandable temptation during crises to seek easy answers or to revert to old practices. Neither option is available in the Middle East today. Rather, what exists is promise and potential. Middle East countries have young, aspiring populations, of whom many are well educated. The middle class wants to be more productive. Millions of young women are ready to enter the workforce. Capable, global companies are willing to launch projects of national importance to train young workers.
For these elements to cohere, governments need to provide stable policies. They will have to remain on the long-term course that they began before the Arab Spring. The reforms of that time led to faster growth. Now, similar economic reforms and measures designed to harness the resources of youth, women, and the middle class can further transform the Middle East.
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- Joe Saddi is chairman of the board of Booz & Company and the firm’s managing director for the Middle East.
- Karim Sabbagh is a senior partner with Booz & Company and the leader of the firm’s communications, media, and technology practice in the Middle East. He is also chairman of the Ideation Center, Booz & Company’s think tank in the Middle East.
- Richard Shediac is a senior partner with Booz & Company and the leader of the firm’s public sector practice in the Middle East. He is also a member of Booz & Company’s board of directors.
- Also contributing to this article was Mounira Jamjoom, senior research specialist at the Booz & Company Ideation Center.
- For another version of this article, with citations to background references, see Mounira Jamjoom, Karim Sabbagh, Joe Saddi, and Richard Shediac, “The Road to Growth in the Middle East,” Booz & Company Ideation Center white paper, 2012.