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Arab Economic Union: A Dream or Reality?


Political integration among Arab countries has for long time been a dear hope of nationalists,  nasserists and many Arabs. While the economic integration among Arab countries seems to be more realistic, but it is still challenged with the political paradox of power and cooperation. There are different views of economists, politicians, and businessmen, ranging between, pessimists, realists, and dreamers.

The integration of the economies of Arab countries has been a dream for about 50 years. Many efforts have been made in this regard, in the form of negotiations, meetings, conferences, researches, and even agreements. But what counts is the outcome, which is very modest, if not a failure, when compared to other realized experiences, such as the European Union (EU) which began at almost the same time as the Arabs started dreaming.

Efforts and Institutions

According to the Protocols of the League of Arab States, which is the largest Arab organization, the economic integration has been one of the key objectives since its formation in 1945. The Alexandria Protocol and Pact of the League both address economic integration efforts. In addition, the Economic Council is one of the major subsidiary councils under the secretariat of the League. The Arab League has founded a diverse group of bodies to encourage economic integration, with the establishment of an Arab common market generally seen as the culmination of these efforts. The League of Arab States has embarked upon a number of initiatives since its founding to increase inter-Arab trade and create a more uniform economic system throughout the region. Several organizations founded by the League serve as the foundation for this economic system that has never been realized.

The age-old nagging questions are: Why then, over fifty years later, are inter-Arab trade levels still extremely low, and despite talk to the contrary, the formation of a successful common market still in the distant future? Did Arabs miss the targets or were they shooting at the wrong ones?

The Council of Arab Economic Unity was established in 1957 by a resolution of the Arab Economic Council of the League of Arab States.  The Council documents the efforts towards the Arab economic integration. While the council was established in 1957, it did not meet until 1964. The council has a regional focus and its main goal is the achievement of economic integration through the framework of economic and social development. In 1964, an agreement within the council established the Arab Common Market. The Arab Common Market was originally between Jordan, Egypt, Iraq, and Syria; Yemen, Mauritania, and Libya joined later. The member-states of the Arab Common Market facilitate the international movement of capital, goods, and people.

Between the Dream and Reality
The Example of the Arab Monetary Fund

Another major institution established to promote economic integration is the Arab Monetary Fund. Established by an agreement signed in Rabat in 1976, the Arab Monetary Fund is composed of all of the members of the Arab League, with the exception of the Comoros.

The Dream:
The Fund’s main objectives are supposed to be the promotion of stability of exchange rates among Arab currencies and currency convertibility, the correction of disequilibria in the balance of payments of member states (by issuing loans), the establishment of policies of monetary cooperation, and the coordination of member-states’ policies with regard to international financial and economic problems. Most important, perhaps, is the organizations final goal – to promote the use of a common currency, the Arab Dinar, with a goal of economic integration among its members. The Arab Accounting Dinar (AAD) is the accounting unit of the Arab Monetary Fund and is equal to three IMF Special Drawing Rights.

The Reality:
Throughout the 25 years of its establishment, the Fund has failed to accomplish any of its main objectives. As stated by a comment from the conference audience, it is merely a modest educational institute offering some scientific courses and other peripheral activities that are not much help to its main goals.

In fact, despite the existence of numerous such organizations, the Arab common market has not become a successful economic organization and Arab economic integration remains a dream and an excuse for Arab meetings and conferences that generally achieve nothing. Indeed, many leaders throughout the Arab world continue to discuss the founding of a common market as if one did not already exist, because for all intensive purposes, it does not.

Many of the Arab economists tackled the reasons for this failure in their research, how ever it is called; the Arab economic unity, Arab economic integration, Arab common market, Arab free trade agreement, or whatever title the hope was given the outcome was a failure.  There are different economic and political factors that hinder Arab economic integration in comparison to other regions that have overcome similar problems. The failure is due to the lack of basic political and economic conditions that are necessary for Arab economic integration to be realized. One missing necessary condition is the lack of ‘political will’. Political leaders of Arab countries are centered on the existence of their political power and authority and are not willing to give up any of their authorities in favor of Arab economic integration. Other missing political conditions included regional authoritative power of Arab organizations, such as the League of Arab States and its subsidiaries, and lack of democracy at large. The battle over regional leadership is another hindrance for Arab integration. Such a battle is not only at the level of the leaders, but also among the public of Arab societies via an ideological discrepancy encouraged by nationalism. What is often presented as a regional geographical advantage for Arab countries is not complemented with a good transportation network for example. It is easier to go from Egypt to Europe than it is to go to a neighboring country like Sudan or an Arab country like Mauritania.

The Future
In spite of the poor record of Arab achievements at large, and regarding economic integration specifically, there is still ‘some’ hope that will only be realized if Arabs stop dreaming and actually start working. Multi-dimensional development in the national and regional levels is a must to achieve the missing prosperity of the Arabs.  There are some opportunities and potential that can be capitalized on. There are also ‘some’ incentives that can encourage such a hope existing, and being realized, if the Arab’s political will goes beyond securing existing rulers and works towards developments that reach the roots of societies and empower all citizens. Because the human factor is the key tool and development is the key objective, an ideological and cultural development and reform is also a must in the course of advancing this region.

Said Samir
Intra-Regional Exports as a Percentage of total Exports
Regional Block 1970 1975 1980 1985 1990 1995 1998
Arab Countries 5.2 4.9 4.5 7.8 9.4 6.7 8.2
Andean Pact 1.7 3.6 3.5 3.1 4 11.3 11.4
Asian 19.2 21.3 22.4 20.7 20.7 26.4 22.2
Mercousur 9 12 6 9 20 25
APEC 58 58 68 68 72 70
NAFTA 36 34.6 33.6 43.9 41.4 46.2 51
EU 56.5 57.7 60.8 59.2 65.9 62.4 56.8

Source: IMF records