Economic Integration in the GCC

Section A - Short Answer Questions - Answer any FOUR

The GCC has made good progress on regional integration since its establishment in 1981. Looking at the economic integration of the GCC member countries, it is easy to see that there is room for progress. Researchers frequently use the gravity model as an indicator of the potential for successful integration, and success is usually measured in terms of increased intraregional trade flows in goods and services. The gravity model uses GDP, GDP per capita, population, distance between countries, bordering countries, and language similarities as variables. Although the results are generally strong for this region, there have been disappointing de facto results. GCC intraregional trade as a percentage of GDP only increased from 5% to 7% from 1982 to 2000, while the average for other RTAs during that period increased to above 30%. Nechi (2011) points out that intraregional trade has not been consistent or

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(4 x 2.5 marks = 10 marks)

Section B - Medium Answer Questions - Answer any THREE

(3x 3 marks = 9 marks)

Section C - Long Answer Questions - Answer any ONE

1 x 6 marks = 6 marks)

substantial, although the picture looks better for intraregional trade when oil exports are excluded. However, intra- GCC imports are still very low, and are the least significant for the two largest economies, Saudi Arabia and the UAE (97), although they have the most intra-GCC exports (Sahib and Kari 2012, 224-225). The Middle East and North Africa (MENA) region has historically had the lowest share of intraregional trade as a percentage of total trade compared to similarly developed areas. Intraregional trade is highest within sub-national groups, such as the Arab Common Market, Arab Magreb Union, and GCC, reflecting the religious fractures in the region and political- military alliances. Openness and growth to non-GCC markets has grown faster than for intra-GCC markets, and all GCC countries are still highly dependent on developed countries for exporting commodities and importing consumer goods.

Integration efforts have gained considerable momentum following the ratification of the Unified economic agreement in 2001, the signing of the customs union agreement in 2003, and the adoption of the common market agreement in 2008. Under the customs union agreement, member countries have eliminated intraregional tariffs, unified external tariffs, and eased trade restrictions, bringing about a notable increase in the value of goods traded among member states.

Citation

World Bank. 2010.Economic Integration in the GCC. Washington, DC. World Bank. https://openknowledge.worldbank.org/handle/10986/27898 License: CC BY 3.0 IGO.

Question:

10. What is economic integration? Discuss rational / need of integration in Gulf.