WORLD BANK MIDDLE EAST AND NORTH AFRICA REGION OCTOBER 2010

Economic Integration
in the GCC

Office of the Chief Economist

Middle East and North Africa Region
The World Bank
Acknowledgements iv Contents
Foreword v

Acronyms and Abbreviations vii

Executive Summary 1

1. Introduction 2
Main Characteristics of the Gulf Economies 2
The Gulf Cooperation Council 4

2. Integration through Commodity and Services Trade 8

Commodity Trade 8
Services Trade 9

3. Financial and Monetary Integration 12

4. Integration through Infrastructure 15

5. Global Integration Trends 17

External Trade Policies 17
Collective Trade Agreements 18
Integration with the Arab World 19
Membership in WTO 19
Relations with the European Union 20

6. Issues and Challenges to Further Integration 21

Conclusion 24

References 26

Tables

Table 1 Trade Indicators in GCC Countries 3

Table 2 Logistics Performance Index, 2010 4
Table 3 GCC Tariff Rates and Exemptions, 2010 (%) 7
Table 4 Trade Policy Ranking, 2005 10
Table 5 Status of GCC Regional Trade Agreements 19
 CONTE NTS

Figures

Figure 1 Rankings on the Ease of Doing Business 3

Figure 2 Logistics Performance Index 3
Figure 3 Concentration and Diversification Indices of Export Products
in MENA 5
Figure 4 Growth of GCC Intraregional Trade 9
Figure 5 Destination of GCC Non-oil Trade 9
Figure 6 Services Trade Restrictiveness Indices (STRI) 11
Figure 7 Trade Tariff Restrictiveness Index (average MFN applied tariff) 18
Figure 8 Applied Tariff Rates for GCC Countries 18

Annexes

Annex 1 Trade Agreements in the MENA Region 27

Annex 2 Statistical Tables 28

Acknowledgements

This report was prepared by a team consisting of Mustapha Rouis (TaskTeam Leader),
Ali Al-Abdulrazzaq and Kevin Carey under the guidance of Farrukh Iqbal, Acting
Chief Economist, and Shamshad Akhtar, Vice President, Middle East and North Af-
rica Region. The authors are grateful to Jean-Pierre Chauffour and Bernard M. Hoek-
man from the World Bank for their comments on earlier versions. Isabelle Chaal
Dabi and Liliane Vert (World Bank) provided valuable administrative assistance and

iv Amanda Green (Consultant) edited the report.

ASEAN Association of Southeast Asian Nations Acronyms and
AWI Arab World Initiative
CU
EMU
Customs Union
European Monetary Union
Abbreviations
EU European Union
FATS Foreign Affiliates Trade in Services
FDI Foreign direct investment
FTA Free Trade Agreement
GATS General Agreement on Trade in Services
GAFTA Greater Arab Free Trade Area
GCAC GCC Commercial Arbitration Centre
GCC Gulf Cooperation Council
GDP Gross domestic product
GIC Gulf Investment Corporation
IMF International Monetary Fund
LPI Logistic Performance Index
MENA Middle East and North Africa
MERCOSUR Mercado Común Sur (Argentina, Brazil, and Uruguay)
MFN Most Favored Nation
NAFTA North American Free Trade Agreement
NTBs Non-Trade Barriers
PAFTA Pan-Arab Free Trade Area
RTA Regional Trade Agreement
SEA Single European Act
TIFA Trade and Investment Framework Agreement
TTRI Tariff-only Trade Restrictiveness Index
UAE United Arab Emirates
UEA United Economic Agreement
UNCTAD United Nations Conference on Trade and Development
VAT Value-Added Tax
WB World Bank
WTO World Trade Organization

vii
This study discusses the status of economic integration of the six Gulf
Executive
Cooperation Council (GCC) countries among themselves, with the larg-
er Middle East and North Africa (MENA) region and globally. It also as- Summary
sesses the main challenges to further integration. The GCC is the most
advanced example of subregional integration in the MENA region, and
its objectives are among the most ambitious in the developing world. It
has evolved well beyond a focus on free trade in goods to embrace high
levels of cross-national labor and capital mobility, and the progressive
opening of many sectors within each economy to all member states.

The GCC is much more integrated with the
rest of the world than with MENA because
of the role of oil and gas in trade patterns.
But integration via labor markets is sig-
nificant in MENA, especially for Mashreq
countries and Egypt. Foreign direct invest-
ment (FDI) linkages from the GCC to the
rest of MENA are also important. Never-
theless, because GCC integration occurs
against the backdrop of fairly similar cir-
cumstances in the member countries, the
mechanisms and drivers of integration are
somewhat different than in other regional
blocs, where membership is more varied.
The following are among key characteris-
tics of integration among the GCC states.
First, GCC countries are all highly depen-
dent on hydrocarbons, which remain a
core prerogative of national—not regional—
policy. Second, sovereignty is still shared
cautiously, so supranational institutions
are being built up slowly; key decisions
emerge from opaque intergovernmental
processes rather than from empowered
regional institutions. Third, public sec-
tors in each country are closely linked to
the sharing of benefits from hydrocarbon
wealth among nationals. This complicates
the political economy of economic reform
strategies such as privatization and subsidy
reduction, which in turn limits the scope
for regional integration in areas where the
public sector is dominant. Fourth, GCC
countries compete with each other in sec-
tors that might otherwise offer scope for
regional initiatives, such as finance, trans-
port, and downstream energy.
Besides ongoing integration mechanisms,
particularly in infrastructure, addressing
common challenges should impart fur-
ther momentum to the GCC. These in-
clude: labor market strategy, where there
is scope to revisit the open immigration
policy at the regional level; the financial
sector, given the regional spillovers from
country-level debt distress episodes; fiscal
policy, given the countries’ objective of
diversifying revenue sources; and service
sector liberalization, which would expand
the size of markets and promote the effi-
cient allocation of resources for the GCC
as a whole. However, a more empowered
regional secretariat will be necessary to
push this agenda forward. 1
 Chapter 1 Introduction
Main Characteristics of the Gulf Economies

The Gulf Cooperation Council consists of the following six Arab countries: Kuwait, Bahrain,
Oman, Qatar, Saudi Arabia, and the United Arab Emirates (UAE). These countries
share historical and cultural ties and aspire to develop a more diversified economic
bloc over time. In 2007, they had a population of about 36 million (10 percent of
MENA) and a GDP of about US$ 826 billion (half that of all MENA).

The GCC countries are high-income, hydrocarbon-based economies. Per-capita GDP in 2007
ranged from about US$ 15,000 in Oman to US$ 62,000 in Qatar. The total nominal
GDP of the GCC economies has more than doubled since 2001, adding the equivalent
of an economy the size of Sweden. The GCC countries have accumulated large fiscal
and current account surpluses in recent years. Public expenditure, derived primarily
from oil revenue, has increased significantly, with a focus on developing the physical
and social infrastructure required for private sector development. Other common
structural features of the GCC economies include a heavy reliance on foreign labor,
a young and rapidly growing labor force, and a large public sector.

The social and political backgrounds of GCC countries exhibit many similarities. All GCC
countries are traditional monarchies, with the state playing a visible role in economic
activity. Kuwait and Bahrain have relatively open political systems, including a writ-
ten constitution, a parliamentary electoral system, and a free press. Though the for-
mal structures of the other four members are less well developed, these countries
have made progress in strengthening political pluralism and participation in recent
years. One unusual aspect of the Gulf is the dichotomy between political develop-
ment, where institutions remain quite traditional, and economic ambitions, which can
be benchmarked against the most sophisticated economies in the world. Increased
political participation in some of the Gulf states has led to a balancing act between
the customary consensus-building approach to decision making and a desire for more
vigorous policy debates on key issues.

Similar economic policies among GCC countries largely reflect their common circumstances.
These commonalities include open economies with free trade and capital movements
and an exchange rate pegged to the US dollar, either directly or indirectly. The de-
gree of trade openness varies, as indicated by the ratio of total exports and imports to
GDP, which ranges from 73 percent in Kuwait to 158 percent in the UAE (Table 1). In
each of these economies, the state maintains an important role in economic activities.

2 The increased global focus on business environment indicators has successfully promoted re-
form and helped economic integration in a number of areas. On ease of doing business
 I NTRODUCTION CHAPTER 1

TABLE 1 Trade Indicators in GCC Countries

Openness (Total Trade/GDP) Hydrocarbon Exports
Country (%) (as % of GDP)
Bahrain 136 72
Kuwait 73 93
Oman 98 65
Qatar 90 90
Saudi Arabia 85 85
UAE 158 35
Source: World Bank, World Development Indicators (2007–09)

and logistics performance, GCC countries

FIGURE 2 Logistics Performance Index*
compare well against global leaders (Figures
4.5
1 and 2, Table 2). In particular, Saudi Arabia
4.0
and Bahrain perform well on the business- 3.5
enabling environment and the UAE excels in 3.0
logistics. The overall trend toward improving 2.5
2.0
Doing Business indicators partly reflects the fact
1.5
that GCC countries compete with each other 1.0
in this respect. Deeper economic integration 0.5
0
Singapore

UAE

High Income

Bahrain

Kuwait

Saudi Arabia

Qatar

Oman

MNA
FIGURE 1 Rankings for Ease of Doing Business*
Source: Global Development Finance and World Development Indicators data,
70 World Bank, April 2010.
60 * The Logistics Performance Index is the weighted average of a country’s
scores on six dimensions: customs, infrastructure, international shipments,
50
logistics competence, tracking and tracing, and timeliness. Scores range
40 from one to five, with one indicating the lowest performance. Indices are not
30 available for Mauritania and Morocco.
20
10 will require strong political commitment and
0
institutional changes.
Oman

Kuwait

Qatar

Bahrain

S. Arabia

UAE

GCC av.

EU15

NAFTA

GCC countries have a common structural depen-

Source: Doing Business 2010, World Bank and International Finance
dence on expatriate labor, which poses a long-term
Corporation.
* Doing Business 2010 ranks 183 countries on ease of doing business, challenge. The share of expatriates in the popu-
taking the simple average of percentile rankings for each of ten topics: lation runs as high as 80–90 percent for Qatar
starting a business, dealing with construction permits, employing workers, and the UAE, with somewhat lower shares in
registering property, getting credit, protecting investors, paying taxes, trading

3
across borders, enforcing contracts, and closing a business. No score is the other countries. All GCC countries have
available for Libya. open immigration policies for temporary work.
 CHAPTE R 1 I NTRODUCTION

TABLE 2 Logistics Performance Index, 2010

International Logistics Tracking &

LPI Global Rank Customs Infrastructure Shipments Competence Tracing Timeliness
Bahrain 3.37 32 3.05 3.36 3.05 3.36 3.63 3.85
Kuwait 3.28 36 3.03 3.33 3.12 3.11 3.44 3.7
Oman 2.84 59 2.36 2.25 3.24 2.68 2.9 3.45
Qatar 2.95 55 2.25 2.75 2.92 2.57 3.09 4.09
Saudi Arabia 3.22 40 2.91 3.27 2.8 3.33 3.32 3.78
UAE 3.63 24 3.49 3.81 3.48 3.53 3.58 3.94
Source: Arvis et. al. 2010; http://info.worldbank.org/etools/tradesurvey/mode1b.asp#ranking.

This openness to foreign labor co-exists uneas-
ily with high levels of unemployment among
nationals in several GCC states.
Diversification away from the hydrocarbon sector
remains a common objective for all GCC members.
Overall exports from GCC countries remain
concentrated in a few commodities, largely oil
and gas, though there has been some diversifi-
cation in recent years. GCC countries, like oth-
er MENA countries, showed improvement on
the concentration and diversification of exports
between 1995 and 2007 (Figure 3). Manufac-
tured goods in the UAE (22.5 percent of total
exports) represent more than twice the shares
in each of the other countries Kuwait has the
lowest share, at 5 percent (Annex Table A1.5).
eration and integration as an integral part of
its agenda.1 The Unified Economic Agreement
(UEA), ratified in November of the same year,
foresaw a gradual convergence toward an in-
tegrated economic bloc marked by harmo-
nized legal, social, and economic systems and
coordinated external commercial policies and
trade relations. It also called for coordinating
industrial policies and promoting joint projects
to coordinate value chains of production and
link transportation networks.2
The GCC’s organizational structure emphasizes
national governments (as opposed to supranational
bodies) as the primary actors in the integration pro-
cess. According to its Articles of Establishment,3
the GCC encompasses three main bodies:

„„The Supreme Council, which comprises the

The Gulf Cooperation Council heads of the Gulf States, meets twice an-
nually to provide policy directions and ap-
The GCC was founded in May 1981, primarily mo- points the Secretary General of the GCC
tivated by the desire to enhance external security. In Secretariat. Resolutions in the Council are
addition, the GCC identified economic coop- passed with a unanimous vote for substan-

1 For further historical background see Al-Abdulrazzaq and Srinivasan (2007) and Dar et al. (2001)
2 Although commonly compared to the European Union, the respective starting dates of the two institutions—1957 versus 1981—

4 should be borne in mind in assessing the progress of integrating mechanisms.

3 See Article 6.
 I NTRODUCTION CHAPTER 1

FIGURE 3 Concentration and Diversification Indices of Export Products in MENA

Libya Kuwait
Bahrain Bahrain
Yemen Qatar
Saudi Arabia Algeria
Iran Libya
Kuwait Yemen
Algeria Saudi Arabia
Oman Iran
Qatar Morocco
UAE Oman
Lebanon Egypt
Syria UAE
Egypt Jordan
Tunisia Syria
Jordan Tunisia
Morocco Lebanon
0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0 0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0
1995 2007

Source: Table A1.6.

tial matters and a majority vote for proce-
dural issues. Agreements signed between
the member states are classified as manda-
tory or non-mandatory.
„„The Ministerial Council of the Foreign Min-
isters of the Gulf States (or other delegat-
ed Ministers) holds quarterly meetings to
propose policies and prepare recommen-
dations. At the ministerial level, a number
of committees (Financial and Economic
Cooperation, Education, Health, and La-
bor and Social Affairs councils) have been
established, with the duty of preparing
studies and submitting recommendations
to the Supreme Council.
„„The GCC Secretariat is the administrative
and executive body, which is responsible
for preparing the meetings of the Supreme
and Ministerial Councils, as well as back-
ground materials and requested studies. It
also prepares studies and reports and mon-
itors implementation of past decisions.
According to its establishment law, the
Secretariat is an independent body with
a budget shared equally among member
states. In this sense, the Secretariat’s role
is parallel to that of the European Com-
mission within the European Union (EU)
Structure (which also includes the Coun-
cil of Ministers, the European Parliament,
and the European Court of Justice).4

4 Compared to the European Commission, and reflecting its capacity and financial autonomy limitations, the GCC Secretariat
has maintained a low-key role in furthering the integration agenda. The Secretariat, with a staff of about 500, often relies on
external technical support from the EU. 5
 CHAPTE R 1 I NTRODUCTION
The GCC also has a number of specialized
agencies in charge of designing and imple-
menting technical standards, undertaking com-
mercial arbitration, and registering patents.
These agencies are headed by representatives
of the member states, and have their own per-
manent technical staff. Among these agencies
are the Standardization and Metrology Or-
ganization for GCC in Riyadh, the Technical
Telecommunications Bureau in Bahrain, and
the Regional Committee for Electrical Energy
Systems registered in Qatar.
During the first 20 years of its establishment, the
GCC focused on coordinating policies in specified
spheres. Throughout this time, the institutional
mechanisms remained fairly stable, albeit with
a growing amount of technical work underly-
ing the activities of the major bodies. By 1983,
the countries had implemented the exemption
of most domestic products from customs du-
ties and simplified customs procedures and
travel among GCC states. Retail and whole-
sale trade were opened up to any GCC na-
tional by 1990. The agreement through which
the GCC was founded had also aimed for the
free movement of labor and capital along with
full national treatment in any GCC country
regarding ownership and economic activity.
However, with some exceptions (such as do-
mestic trade), progress has been slow due to
the scale of technical work required to opera-
tionalize these commitments.
GCC integration efforts picked up in the early 2000s
after a slow start. The member states signed an
Economic Agreement in December 2001, which
brought a renewed focus on trade, investment,
and other economic issues. Regional security
5 Under typical customs unions, the rules of origin are abolished due to the adoption of common external tariffs. In the case of
6 GCC, this procedure still is followed pending more complete harmonization of external tariffs.
6 Currently, goods produced in the region’s Free Trade Zones do not meet these criteria.
threats, the worldwide proliferation of regional
trading agreements, and the rising forces of glo-
balization have contributed to the momentum
behind integration efforts in recent years.
A Customs Union Agreement was signed in 2003.
The agreement aimed to remove restrictions
on internal trade and establish common (and
low) external tariffs. For goods of GCC origin,
defined as having a minimum of 40 percent
local value added and 51 percent local invest-
ment, tariffs are waived.5,6 Goods that do not
meet the rules of origin criteria continue to
face tariffs similar to those applied to goods
from outside the subregion. The member
states have agreed to eliminate the use of tar-
iff escalation for industry protection, switching
instead to exemptions for imports of interme-
diate inputs and equipment for domestic pro-
duction and export industries (Table 3).
The GCC declared common market status in 2008.
The GCC Common Market aims to create a
single environment where citizens of member
countries enjoy equal rights and privileges, in-
cluding the rights to move, settle, work, receive
social protection, retirement, health, education
and social services, and engage in various eco-
nomic activities and services. It also calls for
unrestricted rights of ownership of property
and equity, movement of capital, and similar
tax treatment.
The planned establishment of the GCC single cur-
rency in 2010 has been postponed. Initiated at the
GCC Economic Summit in 2001, plans for a
common currency were put on hold pending
further studies and harmonization measures.
This delay followed the decision of two mem-
 I NTRODUCTION CHAPTER 1

TABLE 3 GCC Tariff Rates and Exemptions, 2010 (%)

Bahrain Kuwait Oman Qatar Saudi Arabia UAE
Average MFN Rate 5.3 4.9 5.6 5.3 5.0 5.1
Special items
Tobacco 120 100 100 100 100 100
Alcohol 125 Banned 100 100 Banned 50
Pork n.a. Banned n.a. Banned Banned n.a.
Cars 20 5 10 5 12 5
Exemptions
Food & medicine Yes Yes Yes Yes Yes Yes
Industry inputs Yes Yes Yes Yes Yes Yes
Source: World Bank Staff calculations.

bers (Oman and the UAE) to opt out, and, Nevertheless, the four remaining member
more recently, concerns about other members’ countries have established a GCC Monetary
readiness in the wake of the financial crisis in Council in Riyadh to continue the technical
Europe and mounting pressures on the euro. steps toward establishing a monetary union.

7
 Chapter 2 Integration through Commodity
and Services Trade
Commodity Trade

Intraregional GCC trade flows remain relatively small despite strong growth in recent years.
The average nominal value of intraregional trade increased by about 30 percent per
annum during the period 2004–2008, as compared to 6 percent during 2000–2003
(Figure 4). However, the share of intraregional trade in non-oil trade remained rela-
tively unchanged at less than 10 percent, with the UAE taking the lead as a source of
regional trade (Figure 5). This figure compares unfavorably with other trading blocs
such as ASEAN (23 percent), NAFTA (41 percent), and EU-15 (57 percent)7, reflect-
ing weak complementarities among GCC member states and the relatively liberal
trade regimes that had historically characterized the GCC economies.

Intraregional nontariff barriers are low. The GCC countries have progressively lowered
nontariff barriers, both as part of integration efforts and in response to commitments
under the World Trade Organization (WTO). Significant progress has been made in es-
tablishing unified GCC technical standards (currently covering some 3,000 products)
and harmonizing and reducing customs administrative procedures and clearance re-
quirements.8 Some of the remaining nontariff barriers include preferential policies and
practices related to public procurement requirements and subsidies to manufacturing
industries, as well as continued customs border controls, which could result in tangible
costs related to road transportation regulations and other ad hoc requirements.

Intraregional trade among GCC countries could benefit from further enhancements in regional
infrastructure and reduced border controls. The establishment of dedicated trade corridors
and regional railway links, among other activities, would support trade facilitation.
Reaching an agreement on the removal of border controls would, together with the
ratification of a tariff revenue-sharing mechanism among member states (as discussed
in Section 2D), contribute to further trade facilitation.

Larger gains in GCC intraregional trade would require enhanced complementarities driven by deep-
er economic reforms. Further elimination of trade barriers and the subsequent enlargement
of markets would help to attract investment and promote growth in the tradable sector,

7 These figures are for 2006. See COMTRADE, World Integrated Trade Solution, 2008. The figure for China,
Japan and the Republic of Korea is 21 percent.
8 While the customs union stipulated for the removal of tariff and nontariff barriers, it allowed for a transition

period to phase out protectionist policies such as tariff protection on industrial products, protection of local

8 agents, and excise taxes for some goods. Some of these measures continue today, including border controls and
agency laws.
 I N T E G R AT I O N T H R O U G H C O M M O D I T Y A N D S E R V I C E S T R A D E C H A P T E R 2

broader economic and export base and expand-

FIGURE 4 Growth of GCC Intraregional Trade
ing complementarities among GCC countries
60
will require structural reforms such as privatiza-
50
tion of public enterprises, improved government
40
30
regulatory capacity, liberalization of service sec-
20 tors and of FDI (particularly in backbone servic-
10 es), relaxation of rules governing labor mobility,
0 and enhanced access to credit.
–10
–20
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008

Services Trade9
Total Imports – Imports Exports Total Inter-regional
World from GCC to GCC Trade
The GCC has made progress in easing intrare-
Source: Comtrade gional restrictions in service sectors. The Common
Market Agreement has been implemented in
thereby contributing directly to growing com- a gradual manner. Currently, GCC nationals
plementarities over time. However, achieving a can move freely among member countries.

FIGURE 5 Destination of GCC Non-oil Trade

2001 2007

10% 9%
2% 1%
0%
0%

88% 90%

Mashreq Maghreb GCC Rest of the world Mashreq Maghreb GCC Rest of the world

Source: Comtrade

9 Data on trade flows in services in the GCC are scarce. In general, measuring trade in services is more problematic than trade
in goods, largely because of the diverse nature of the activities covered. Under the General Agreement on Trade in Services
(GATS), traded services comprise four modes of delivery: (1) cross-border, (2) consumption abroad, (3) supply via commercial
presence, and (4) supply via presence of natural persons. Data corresponding to these modes could be found in the Balance of
Payments and Foreign Affiliates Trade in Services statistics. In GCC countries, however, the quality of trade statistics remains
inadequate both in the extent of coverage and in the distinction between flows to the region and to the rest of the world. One use-
ful source of data on the magnitude of trade in services is System of National Accounts data on selected sectors such as finance,
hotels, and retail sales, but these figures remain highly indicative. 9
 C H A P T E R 2 I N T E G R AT I O N T H R O U G H C O M M O D I T Y A N D S E R V I C E S T R A D E

TABLE 4 Trade Policy Ranking, 2005

NTB Coverage Average Time Average Time Enhanced Trade
Average Tariff Index (% of index NTB for Exports for Imports Policy Index,
Country Tariff (1–100) tariff lines) (1–100) (days) (days) 2005 (1–100)
Bahrain 5 89 0.5 40 14 15 91
Kuwait 4.6 91 2.1 26 20 20 79
Oman 5.5 73 0 88 22 26 61
Qatar 4.9 89 1 32 21 20 76
Saudi Arabia 5 89 1.2 30 17 18 85
UAE 5 89 9 9 94
MENA 13.4 47 1.1 48 23 26 58
World 10.1 50 2.7 50 25 27 50
Source: World Bank (2006)

GCC members recently approved a waiver
of visa requirements for expatriates with val-
id professional visas in other Gulf countries.
Member states have progressively expanded
the list of direct investment activities in which
GCC nationals can participate; current areas
include retail and wholesale trade, recruitment
offices, car rental, and most cultural activities.
Furthermore, the specification of liberalized
sectors has shifted from permitted sectors to
those not permitted. This negative list includes
religious services, foreign manpower supply,
certain commercial agencies, and certain social
services (specifically elderly and handicapped
care)10. Nevertheless, the specific regulatory
measures needed for active cross-border par-
ticipation in all other sectors are still being es-
tablished on a case-by-case basis. In 2005, the
number of business licenses granted to citizens
of other GCC countries reached 13,356—near-
ly double the number in 1998. Furthermore,
restrictions on stock ownership and property
possession by GCC citizens have been signifi-
cantly reduced during the last two years, lead-
ing to a surge in intraregional capital flows.
Despite the potential gains, service sector liberaliza-
tion involves a number of technical and political
challenges. Though eased in recent years, restric-
tions on non-GCC foreign ownership and pur-
chase of financial and physical assets continue,
with rules varying from one country to another.
The UAE and Bahrain have adopted the most
liberal regimes with regard to foreign entry. A
recent report by the World Bank, which exam-
ined five major service sectors, found the over-
all restrictiveness of services trade policies for
the GCC countries to be high by regional and
international standards (Figure 6).11
Services are diverse in their mode of entry, level of
tradability, and market contestability. Furthering
GCC trade in services would require enhanc-
ing competition and ensuring efficient markets.
In addition, there would need to be agreement
on an amended definition of the rule of origin

10 10

11
Variations among the member states continue to exist, but there is little transparency on the negative list.
The UAE was not included in this study.
 I N T E G R AT I O N T H R O U G H C O M M O D I T Y A N D S E R V I C E S T R A D E C H A P T E R 2

where necessary. Creating a competitive in-

FIGURE 6* Services Trade Restrictiveness Indices (STRI)
vestment climate takes time, as it requires the
Qatar 62 development of human capital and technol-
Kuwait 53 ogy, and reforms to enable the development
Bahrain 47
of strong backbone services. This was true in
Oman 45
the case of global service sector liberalization,
Saudi Arabia 42
where the introduction of common external
Egypt 42
Tunisia 41
trade policies was not matched by similar
Lebanon 39 trends in FDI rules and access to service sec-
Jordan 37 tors. This was largely a result of the heteroge-
Yemen 29 neity of the service sectors and varying needs
Morocco 22 for maintaining standards and regulations.
W P Some regulatory and structural changes, such
as privatization, antimonopoly practices, and
Source: Borchert et al. (2010).
Note: W = world average of 102 countries; P = PAFTA average. assurances for equitable service access, involve
* Figure 6 is based on preliminary survey data collected as part of an lengthy and complicated processes.
ongoing World Bank research project. Data cover 102 countries, 11 of
which are part of PAFTA. The survey addresses five key sectors: financial Continued public ownership in some service sec-
services (banking and insurance), telecommunications, retail distribution,
transportation, and professional services. Specifically, the survey covers tors represents a hurdle for increased trade po-
cross-border trade in services (mode 1 in WTO parlance) in financial, tential. Privatization in the Gulf has moved
transportation, and professional services sectors; commercial presence or cautiously, reflecting in part the lack of bud-
FDI (mode 3) in each service sector; and the presence of service supplying
individuals (mode 4) in professional services.
getary constraints and concerns over possible
implications such as downsizing national la-
bor, continued government subsidies, and
for the service sector, particularly given the weaknesses in capacity to regulate the quality
presence of a large expatriate labor force in and behavior of privatized firms. As a result,
most productive sectors. Relevant reform mea- much of the privatization in the Gulf has re-
sures could fall under four broad categories: sulted in the government retaining a share of
ownership, imposing stringent rules for na-
„„Easing entry and licensing restrictions for tional labor quotas, and/or restricting private
both domestic and foreign firms; access to the service sector concerned. For
„„Promoting competition to allow increased example, rather than opening its telecommu-
efficiency; nications market to big foreign operators, the
„„Harmonizing and strengthening regula- UAE decided in 2005 to curb the thirty-year
tory practices and standards; and monopoly of the Emirates Telecommunica-
„„Lowering restrictions on mobility of for- tions Corporation by establishing the Emirates
eign workers that reside in the Gulf. Company for Integrated Telecommunications,
effectively creating a duopoly structure. In the
Stronger competition laws and regulations will be past, most privatization efforts in the Gulf fo-
essential for successful liberalization. Before liber- cused on manufacturing, finance, and mobile
alization can be achieved, it will be necessary phone services. More recently, some countries
to create a competitive private presence, where
absent, and to improve regulatory capacity
have expanded privatization efforts to include
air and land transport and power generation. 11
 Chapter 3 Financial and Monetary
Integration
The GCC’s financial sector is dominated by banking, with relatively high
concentration among domestic players. In all six countries, the largest five
banks are domestic and account for 50 to 80 percent of total bank-
ing sector assets. Islamic banks have become an important source
of intermediation, controlling on average 24 percent of the region’s
banking system assets. Nonbank financial institutions have limited
presence in the GCC, though they have witnessed rapid growth in
recent years. Most mutual investment funds are bank-owned.12

Debt securities markets are overshadowed by bank credit and, to a lesser extent, equities. Bond
markets remain shallow, and investment in secondary bond markets has not de-
veloped, particularly as governments have drawn down outstanding debt in recent
years. GCC markets generally lack institutional investors whose long-term horizons
would provide a natural base for domestic debt market development. With the ad-
vent of Islamic financing, however, GCC banks have boosted the use of sukuk (Is-
lamic bonds). Stock market capitalization ranges from 12 percent of GDP in Oman
to 106 percent in Kuwait and averages between 40 and 80 percent in other countries.
Across the GCC, bank assets (which amount to more than 100 percent of GDP in all
GCC countries) exceed stock market capitalization. The same applies to the capital of
nonbank financial institutions—insurance, capital markets, pension funds, and finance
companies—which are also limited in size and inflexible.

GCC financial markets vary in regulatory regimes and in the level of openness to foreign par-
ticipation. Rules and regulations differ with regard to reserve requirements, open for-
eign exchange positions, payment of dividends and remittance of profits, controls on
lending to nonresidents, and foreign borrowing by individual banks. Although some
restrictions were relaxed within the GCC, many apply regardless of the source of the
inflows, thereby hampering regional as well as global integration.

There is evidence, however, of increased financial sector integration in the GCC. Motivated
by the need to improve efficiency, GCC countries have taken important steps to-

12 12 See Al-Hassan, Khamis, and Oulidi (2010).

 FI N A N C I A L A N D M O N E TA R Y I N T E G R AT I O N C H A P T E R 3
ward implementing best practices in financial
regulation and corporate governance, which
have in turn helped to strengthen convergence
across GCC financial systems. These efforts
include moves by the central banks to imple-
ment Basel II standards13 and establish sepa-
rate regulatory authorities for capital market
regulation. Five of the stock exchanges in the
Gulf (Bahrain, Kuwait, Qatar, Dubai, and Abu
Dhabi) are currently cross-listing some of their
stocks on other exchanges. A recent Interna-
tional Monetary Fund (IMF) study examined
the extent of financial integration in the Gulf
using capital flow data, interest rates, and equi-
ty prices.14 The study concluded that the avail-
able evidence, while limited, pointed to some
improvement in regional financial integration.
In particular, Bahrain and Kuwait were found
to direct a large share of their investments to-
ward the GCC.
The establishment of a monetary union has been an
important objective since 2003. GCC countries al-
ready possessed many of the necessary criteria
for currency union—namely similarities in size,
sources of foreign exchange and trade struc-
ture, and inflation performance. In addition,
their national currencies were de facto pegged
to the US dollar. The adoption of a single cur-
rency—set originally for 2010, but now post-
poned to an unspecified date—was expected to
reinforce the positive effects of the common
market by lowering foreign exchange transac-
tion costs and increasing pricing transparency,
competition, and trade. A set of five conver-
gence criteria (inflation, interest rates, reserves,
fiscal balance, and public debt) similar to those
established for the European Monetary Union
13 The second phase of the Basel Accords, initially published in 2004, attempts to create an international standard for regulations
on the amount of capital that banks need to set aside to guard against financial and operational risks.
14 Espinoza (2009).
15 Khan (2008).
have been agreed in principle, although they
have not been set as preconditions for en-
try.15 In pursuit of monetary union, the GCC
is expected to continue to harmonize taxation
and spending practices and policies as well as
payment systems. In general, GCC harmoni-
zation measures are likely to be less challeng-
ing than those adopted by the EU given that
the planned single currency will continue to
be pegged to the US dollar, as is currently the
case with the national currencies.
There is little impetus at the GCC level for coordi-
nation of financial sector strategies. The financial
sector is viewed instead as a potential source
of competitive advantage, and several countries
have sought to develop themselves as regional
financial centers. Bahrain had a head start as
a financial center, especially after the flight
of offshore banking from Beirut in the 1970s.
Since then, Dubai and Doha have successfully
attracted regional operations of international
banks and financial institutions, albeit to en-
clave regulatory structures with little spillover
to the domestic financial sector. Saudi Arabia
is creating the King Abdullah Financial City in
Riyadh, and will have an advantage as the head-
quarters of the Gulf Monetary Council. While
rising competition in this field has helped to lib-
eralize and promote growth, it might also have
hindered efforts to harmonize and coordinate
policies in certain areas, including standards for
Islamic finance and payment systems.
Some financial sector weaknesses have been revealed
in the last two years in the aftermath of the global
financial crisis. Notably, these include the debt
distress in some Saudi holding companies,
13
 C H A P T E R 3 FI N A N C I A L A N D M O N E TA R Y I N T E G R AT I O N
the Dubai World debt restructuring, and the
strains on Kuwaiti investment companies. So
far, GCC countries have approached these
situations on a case-by-case basis. Criteria for
treatment of local and foreign creditors and
approaches to secured and unsecured credi-
tors have not been well specified. This lack of
clarity is perhaps inevitable in the negotiation
of debt restructuring, but the protracted nature
14
of these negotiations may impede regional fi-
nancial market development. In principle, the
GCC could provide the regional institutions to
help coordinate and share information in these
respects, but there is little evidence that this
is happening. Furthermore, the Gulf Monetary
Council has only just been set up and the UAE
is not a member, so its immediate potential for
this role is limited.
Integration through Chapter 4
Infrastructure
Developing integrated intraregional infrastructure will help to increase trade
volumes. Among various categories of physical infrastructure, the most
relevant to regional integration are those needed to facilitate the move-
ment of goods and individuals (such as roads, railways, and ports). Oth-
er important, but specialized, infrastructure categories include those for
easing the exchange of natural gas, water, electricity, and telecommuni-
cations (such as pipelines, power grids, and fiber optic lines).

Overall, transport systems are well developed in the GCC countries, with good road networks
and modern facilities for air, sea, and land transport. Occasional strains in relations be-
tween the member countries have caused interruptions in land-based transport. Cur-
rent efforts to coordinate infrastructure development are taking place in the power,
gas, and railway sectors. However, border disputes have arisen in the planning of
bilateral infrastructure projects (bridges and pipelines) in the coastal waters between
Bahrain, Qatar, Saudi Arabia, and the UAE. This illustrates the continuing presence
of national political prerogatives in the GCC integration process.

An extensive road network links most GCC countries to their neighbors and to neighboring Arab
countries. No dedicated travel corridors exist yet, however, and there are some varia-
tions in national specifications for freight-moving vehicles. Some progress has been
made in unifying fees, traffic controls, highway safety rules, and vehicle specifications.

Rail is not currently a major mode of transport in the GCC. Railway lines exist in Saudi
Arabia, predominantly for freight, and several lines are not interconnected. Indi-
vidual GCC countries are considering urban light rail or subway systems. A planned
GCC rail network is undergoing a feasibility study, and various country initiatives
are underway to expand national rail networks. Saudi Arabia is proceeding with in-
tegration of its own rail network—the critical ingredient being the new “Landbridge”
between Jeddah and Riyadh, with interconnection to existing lines between Riyadh
and the Gulf coast.

The air transport industry in the GCC region has experienced unprecedented growth during the

15
past eight years. Arab carriers based in GCC countries have become major players in
long-haul aviation, with a particular focus on capturing a larger share of the air transport
 C H A P T E R 4 I N T E G R AT I O N T H R O U G H I N FR A S T R U C T U R E
market between Europe and the United States
on the one hand and Asia on the other. This has
provided an important new source of connectiv-
ity to the region, which previously relied on Eu-
ropean hubs for most intercontinental service.
All GCC members except Saudi Arabia have
signed some form of open skies agreement.
GCC countries have nearly completed the intercon-
nection of electricity grids, which will allow electric-
ity exchange among all six member states. The goal
of this interconnection is to share the reserve
capacity of member countries, improve the re-
liability of electricity supply, and reduce the
need for investment in new generation capac-
ity. Feasibility studies have been undertaken to
assess the feasibility of interconnecting Yemen
with Saudi Arabia.
The GCC has significant potential for cross-border
gas pipelines given that the countries’ industrial
16
strategies focus on energy-intensive industry and the
desire to switch to gas-powered electricity generation
in order to free up oil for export. Qatar has the
richest natural gas reserves in the region, with
25,513 bcm of ready-to-export gas. Although
most of Qatar’s gas is currently exported by
liquefaction, the Dolphin pipeline is used to
move gas to the UAE and Oman. This has
proven important to both countries, as their
own gas resources are complex and expen-
sive to exploit. There has been some thought
of constructing a larger pipeline system that
would include Bahrain and Kuwait, but the
countries have proven cautious in promoting
a regional market for gas, as East Asia and Eu-
rope have been seen as offering better prices
and greater diversification. Still, the develop-
ment of sale gas in Europe and North Amer-
ica, and its consequent effects on demand
from these regions, could increase interest in a
GCC-level gas market.
Global Integration Trends Chapter 5
External Trade Policies

The GCC’s external tariffs are low. Historically, GCC economies have maintained low
external tariff barriers as a result of their narrow production base and sizable oil
wealth. The signing of the Customs Union Agreement in 2003 helped to further re-
duce overall external tariffs, as the agreement called for establishing a common exter-
nal tariff of 5 percent on most imported merchandise and 0 percent on essential goods
(estimated to represent about one-fifth of total imports). As a result, the average Most
Favored Nation (MFN) applied tariff rate dropped from 8.2 percent in 2000–2004
to 5.9 percent in 2006–2009 (Figure 7). With the steady erosion of customs revenue
due to external free trade agreements, GCC countries are planning to shift to a value-
added tax to replace customs revenue, diversify tax bases, and ensure harmonization
of trade in the common market.

There are variations in the external trade regimes of GCC member states. The applied tariff
rates of GCC countries vary according to differences in protective and preferential
tariffs (Figure 8). In general, trade regimes with third countries could fall under three
categories: (i) free trade, (ii) MFN status, or (iii) tariff preferences. As all the GCC
countries are members of the WTO, MFN treatment is provided on a multilateral
basis and is thus outside the scope of the organization. There are some differences in
tariff preferences offered to other countries (or to certain country products), though
data on these arrangements and the magnitude of preferences given under the bilti-
lateral deals are not well documented. Little is known about the GCC’s current efforts
to compile such information and unify preferences16.

The Gulf countries have adopted two broad strategies for liberalizing FDI. One approach is
to initiate broad reforms of national rules and bureaucracies, and the other is to cre-
ate discrete enclaves—or zones—with independent, liberalized regulations and well-
established infrastructure. The second approach has seen its fullest application in the
UAE, where it is an important element of the diversification strategies of emirates
other than Abu Dhabi. However, significant FDI flows to the GCC are driven by en-
ergy sector investments and are better seen as reflecting bilateral and project-specific
arrangements between a foreign investor and a domestic partner (such as the national
oil company). Oman is the best example of a country where broad reforms were
combined with the promotion of downstream energy sector FDI.

16Details on trade policy variations among GCC countries are given in Office of the US Trade Representative.
2009. 17
 C H A P T E R 5 G L O B A L I N T E G R AT I O N T R E N D S

Collective Trade Agreements

FIGURE 7 Trade Tariff Restrictiveness Index (average
MFN applied tariff)
The GCC’s efforts to conduct collective trade ne-
19.1
gotiations remain constrained (Table 5). Until
recently, most member countries engaged
in external trade negotiations on a unilateral 11.9 11.1 11.5
basis through, for instance, Free Trade Agree- 8.2
ments (FTA) and Trade and Investment 5.9
3.9 4.1
Framework Agreements (TIFA). In 2005,
following the signing of a free trade agree-
ment between the United States and Bahrain, GCC EU15 MENA Low Income
GCC member states agreed to coordinate all 2000–2004 2006–2009
future external trade negotiations through the
Source: World Trade Indicators, World Bank (2006–2009).
Secretariat. The GCC is currently engaged in Note: The TTRI reflects the equivalent uniform tariff schedule that would
free trade negotiations with the United States, keep domestic import levels constant.
European Union, Australia, New Zealand,
India, Korea, and Japan, among others (An-
nex 1).17 FIGURE 8 Applied Tariff Rates for GCC Countries
14
The pace of advance in collective trade agreements
12
reflects limited progress on broader institutional ar-
10
rangements. GCC negotiations are currently
8
led by senior bureaucrats from GCC mem-
6
ber countries, which can make it difficult
4
to bundle common interests and positions.
2
This weakness is reflected in the limited en- 0
forcement of collective decisions on external
Oman

Bahrain

GCC Avg.

Qatar

S. Arabia

UAE

trade relations, due either to a lack of politi-
cal will or to weak administrative capacity.
The implementation of multilateral policies
is also constrained by continued asymmetries
in the trade (and industrial) policies of GCC
member states. In essence, the slow progress
reflects variations in resources and develop-
ment strategies among member states, as well
as difficulties in reaching compromises on
strategic economic issues. The slow progress
could also be viewed as a result of gaps in the
GCC structure and in collective policies in ar-
Kuwait
TTRI MFN applied tariff
Source: World Trade Indicators, World Bank (2006–2009).
Note: The MFN applied tariff is the simple average of the MFN applied tariff
rates (ad valorem and ad valorem equivalents of specific tariffs).
eas like the environment, industry, and com-
petition, together with the absence of effective
enforcement mechanisms. Collective negotia-
tion of trade agreements, in addition to ensur-
ing consistency with the terms of the customs

17In mid-2009, the GCC signed a free trade agreement with the European Free Trade Association (Iceland, Liechtenstein,

18 Norway, and Switzerland). In addition to multilateral trade negotiations, the GCC has taken an active role in some international
conventions and agreements, particularly those related to environmental issues.

TABLE 5 Status of GCC Regional Trade Agreements
Country WTO United States
Bahrain 1995 FTA signed in 2004; became
effective in 2006
Kuwait 1995 TIFA signed in 2004
Oman 2000 FTA signed in 2006
Qatar 1996 TIFA signed in 2004;
negotiations on FTA suspended
Saudi Arabia 2005 TIFA signed in 2003
UAE 1996 TIFA signed in 2004;
negotiations on FTA suspended
union, could help increase bargaining power
and improve trade terms. Given the lack of a
clear and effective mechanism to reach inter-
nal consensus, however, it could risk slowing
down negotiations and watering down final
agreements.
Integration with the Arab World
The GCC states are active members of PAFTA,
which was established in 1997 under the auspices
of the Arab League and went into effect in 2005.
The current membership of PAFTA includes
18 of 22 Arab countries. The main provisions
are the progressive removal of tariff and non-
tariff barriers on intra-PAFTA trade in manu-
factured goods. Signatories of PAFTA have
recently launched efforts to extend integration
to encompass trade and investment in services,
and to strengthen efforts to reduce nontariff
trade restrictions. PAFTA has removed tar-
iffs among its members, and trade has conse-
quently increased among GCC members and
other members of PAFTA. However, nontariff
barriers remain pervasive and form major ob-
G L O B A L I N T E G R AT I O N T R E N D S C H A P T E R 5
EU Others
EU and GCC signed an Qatar, UAE, Bahrain, and Kuwait have started
economic cooperation bilateral negotiations with Singapore
agreement in 1988;
formal negotiations on GCC undertook multilateral trade negotiations
FTA began in 1990 and with China, Australia, MERCOSUR, Japan,
are continuing as of Jordan, Turkey, New Zealand, and India
mid-2010
All GCC countries are members of GAFTA
stacles to greater trade integration between the
GCC and other members of PAFTA.
Discussions continue regarding the full entry of Ye-
men into the GCC. Yemen enjoys special privi-
leges with the GCC and is a member of eight
specialized GCC councils related to health,
labor and social affairs, education, sports, stan-
dards, and industrialization. But Yemen is not
yet a full member of the GCC, and no clear
or formal accession plans are in place. The
GCC’s cautious approach toward integrating
Yemen reflects disparities in political and eco-
nomic backgrounds. Though Yemen shares
similar cultural and religious systems with the
GCC countries, it differs with regard to politi-
cal regime, resource endowments, institutional
details, and regulatory environment.
Membership in WTO
All GCC countries are members of the WTO. Saudi
Arabia was the most recent GCC member to
join the WTO in 2005. Because various GCC
members joined the WTO at different times, 19
 C H A P T E R 5 G L O B A L I N T E G R AT I O N T R E N D S
trade reform commitments vary from one
country to another. Saudi Arabia and Oman,
both large net importers of services, have
undertaken the most comprehensive commit-
ments under the GATS, covering 37 and 31
(out of 55) sectors, respectively. Bahrain is a
net service exporter and has undertaken mod-
est commitments under the GATS.
GCC countries have made progress toward a unified
anti-dumping policy. One of the main objectives
of a customs union is to harmonize policies on
remedies, rules of origin, tariff and nontariff
barriers, customs valuation, and other issues
that have generally been designed in accor-
dance with corresponding WTO standards.
Until recently, member countries exhibited
variations in anti-dumping and anti-trust poli-
cies. In 2007, the GCC established a technical
office to follow up on injurious trade practices,
with the objective of unifying efforts and en-
hancing the bloc’s negotiating position. The
technical office ensures consistency with WTO
agreements on anti-dumping, subsidies, and
countervailing measures and safeguards.18
Some important trading partners of the GCC are not
WTO members. These include Yemen, Lebanon,
and Iran as well as Libya and Algeria. This dif-
ference in WTO status complicates trade ne-
gotiations with these countries (for example,
within the PAFTA framework), as the common
template and disciplines that would come from
mutual WTO membership are not available.
18 In following up on the claims and investigations addressed to GCC states, the technical office found that ten anti-dumping
protectionist duties and two protectionist duties against the increase of imports imposed on the exports of some GCC states.
19 Recent news reports have quoted GCC officials as saying that a free trade agreement with the EU could be reached before
20 the end of 2010.
20 Luciani and Neugart (2005) and Hertog (2007).
Relations with the European Union
Efforts to integrate with the EU have moved slow-
ly. The first major milestone of EU-GCC en-
gagement came under the 1989 Cooperation
Agreement, which set the stage for coopera-
tion in various fields and for negotiations on
a free trade agreement, which continues to be
unrealized. In 2003/2004, the EU declared its
intention to link EU-GCC cooperation with its
broader (and more ambitiously pursued) Eu-
ro-med dialogue, but this has not been imple-
mented vigorously.19
Slow progress on the EU-GCC free trade agreement
is caused by disagreement over political reforms and
some of the industrial and sectoral policies in the
Gulf. Political reforms at issue include human
rights, foreign labor, and civil society partner-
ships. Concerns over industrial and sector
policy center on the provision of low-priced
domestic gas or refinery products to the pet-
rochemical industry. In recent years, progress
has been made in resolving contentious issues
such as rules of origin, gas price subsidies in
the GCC, and access for GCC petrochemicals
and aluminum exports to the EU.20 Current
negotiations are focused on access restrictions
in a number of services sectors in some coun-
tries—notably banking, telecommunications,
and ports, and on government procurement
policies.
Issues and Challenges to Further Chapter 6
Integration
Despite progress in removing restrictions on trade and on the movement of
factors of production, some issues remain unresolved.21 The implementa-
tion of a standard customs union model has been undermined by
the absence of an agreed mechanism to collect and distribute tariff
revenues. GCC members continue to undertake border and customs
inspections of other GCC members.22 Member states also continue to
apply, though at a diminishing rate, some restrictive procedures and
standards which hinder free trade. Trade restrictions vary from the
requirement that national transportation carriers be used for some
products to standard bureaucratic delays in customs clearance. The
procedures and documentation requirements for customs clearance,
valuation, and import licensing also vary. Although there has been
significant progress in the harmonization of product standards and
technical regulations, these remain incomplete. Given the prominent
role of the state in all GCC countries, they have not yet established
common procurement and competition policies that would allow the
creation of a level playing field for economic competition and cor-
rection of potential market failures. One reason for this is the link
between industrial strategies and the state’s role in service provision
on the one hand and explicit or implicit subsidies on the other. Illus-
trations include the proliferation of plans for aluminum smelters and
continued large subsidies for electricity consumption.

21 There are several regional economic integration models, including, in order of depth, free trade areas, cus-
toms unions, common markets, economic unions, and full political union.
22 The retention of border controls could be an important element of a planned GCC-wide value-added tax. 21
 C H A P T E R 6 I S S U E S A N D C H A L L E N G E S T O FU R T H E R I N T E G R AT I O N
Improvements in the organizational structure of the
GCC could assist integration efforts. The GCC’s
current structure is heavily biased toward the
intergovernmental model that features com-
monly in the integration arrangements of de-
veloping countries. This model is reflected
by the absence of a central executive body
with enforcement powers and by the pres-
ence of a weak dispute settlement mechanism.
Policy decisions in the Supreme Coun-
cil require unanimous approval. Although
unanimity alone is not a unique feature
of GCC decision making, it is important
to note that technical support to the GCC
decision-making process can be strained
and, as a result, decisions are difficult to reach
and follow-up is challenging.
Reflecting the aforementioned weaknesses, important
common policies, laws, and strategies are lacking.
Missing elements are related to public goods
such the environment and clarity of social pro-
tection mechanisms (which are often provided
on an ad hoc basis by local charities), and poli-
cies related to competition, foreign investment,
and private sector development. To achieve
harmonization, member states have worked in-
dividually to bring their policies and laws closer
to each other. In particular, the harmonization
efforts of the Gulf States need to continue in:
„„Labor and immigration laws;
„„Taxes and public service charges in areas
where cross-border elasticities are signifi-
cant;
„„Foreign investment laws and incentives
granted to foreign investors;
„„Commercial laws governing ownership of
companies and properties;
„„Shipping and movement of cargo;
„„Aviation and air transport; and
22 „„Banking and finance.
The GCC faces political hurdles to coordination and
cooperation. While similar cultures and security
interests ease these obstacles, relinquishing sov-
ereignty remains a serious concern. Delays in
the proposed GCC monetary union and in mul-
tilateral accords with the EU serve as two clear
examples of this challenge. To start, harmoniza-
tion efforts could focus on areas that face the
least political resistance. Strong complementa-
rities and common borders may facilitate the
adoption of domestic regulatory reforms that
are important in promoting trade, including the
harmonization of customs procedures, sanitary
and technical standards, public procurement,
and investment rules. By deepening regional
cooperation across a broad spectrum of issues,
the GCC can help cement crucial political and
security alliances, which can in turn strengthen
incentives for liberalization.
A clear regional policy on reducing structural dispar-
ities and fostering balanced development is needed. In
the past, intraregional assistance was provided
on a bilateral basis, most notably to Oman and
Bahrain. Adopting a regional policy, including
the establishment of funds administered at the
GCC level, will be an important step toward
building consensus in other economic and
trade areas, and toward future enlargement
initiatives. The GCC needs to adopt explicit
policies that deal with: (i) strengthening weak-
er members and compensating them for losses
that may occur as a result of collective global
integration efforts and enlarging membership,
and (ii) providing additional support to help
poorer members improve living standards
in order to increase social cohesion between
rich and poor member states. One channel
for more balanced development, which has
received little attention, is the coexistence of
high unemployment among nationals with a
high demand for expatriate labor. Unlike in
 I S S U E S A N D C H A L L E N G E S T O FU R T H E R I N T E G R AT I O N C H A P T E R 6
the EU, there is no sizable movement of na-
tionals within the GCC to alleviate local job
market pressures.
Increased transparency and public accountability
will help to accelerate integration. There is a con-
siderable lack of public awareness about the
nature of trade and integration barriers, and
about current efforts to address these hurdles.
This weakens reform incentives in GCC mem-
ber states and reduces pressures to enlarge
membership. In addition to fundamental
changes in the political culture at the individ-
ual country level, greater transparency would
require improved technical capacity and stron-
ger organizational structures. At the level of
GCC organization, improved effectiveness
will require greater financial and operational
autonomy of the Secretariat supplemented
with effective governing system that includes
additional evaluation bodies and the channel-
ing of resources to regional think-tanks and
chambers of commerce to participate in the
monitoring process.
23
 Conclusion The GCC has made good progress on regional integration since its establish-
ment in 1981. Integration efforts have gained considerable momen-
tum 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 restric-
tions, bringing about a notable increase in the value of goods traded
among member states.

The GCC has eased intraregional restric-
tions in the services sector. Progress in this
area has been particularly strong since
the establishment of the GCC Common
Market, which called for unrestricted
rights of ownership of property and eq-
uity, movement of capital, and similar
tax treatment. Cross-border investments
and trade in services have increased, as
evidenced by the rising level of cross-
country property ownership, business li-
censes, and stock ownership, along with
bottom-up integration mechanisms such
as ground and air travel. As this form of
integration deepens, more single-market
enforcement issues will arise, placing
an increasing demand on the regional
mechanisms of the GCC.
Despite important progress, the share of intra-
regional trade among member states remains
low compared to regional trade agreements
in the Western hemisphere and in Asia. The
low share reflects the continued presence
of trade barriers, weak complementari-
trade barriers—particularly border con-
trols and preferential procurement and
industrial policies—and streamlining the
cumbersome rules and regulations re-
lated to trade would boost the volume of
trade between member states in the short
run, and attract more investment and
promote further growth in the long run.
The lack of complementarities needs to be
addressed through deeper economic reforms
to enhance economic competitiveness—econo-
my-wide and, in particular, in sectors that
have trading potential. Relevant measures
include privatizing public enterprises,
improving the efficiency of government
regulatory functions, removing restric-
tions on FDI (particularly in backbone
services), and relaxing rules governing
labor mobility. The continuing lack of
harmonization in laws and regulations—
particularly those related to public goods
such as the environment, social protec-
tion, competition, foreign investment,
and private sector development—adds to

24 ties, and the narrow economic bases of

member states. Removing the remaining
the cost burden and acts as a barrier to
the entry of new capital.
 CONCLUSION

To move ahead with the integration agenda, the ing more flexibility in the decision-making
GCC needs to strengthen the organizational struc- process and better enforcement of decisions,
ture of the GCC Secretariat, and boost its autonomy together with stronger arbitration and moni-
and resources. Reforms should focus on allow- toring mechanisms.

25
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Washington DC: Carnegie Endowment for International Peace.
Dar, Humayon A., and John R. Presley. 2001.“The Gulf Co-operation Council: A Slow
Path to Integration?” The World Economy 24 (9): 1161–1178.
Hertog, Steffen. 2007. “EU-GCC Relations in the Era of the Second Oil Boom.” Cen-
ter for Applied Policy Research Working Paper (December).
Hoekman, B., and Khalid Sekkat. 2010. “Arab Economic Integration: Missing Links.”
Centre for Economic Policy Research Discussion Paper No. 7807 (May).
Institute of International Finance. 2006. “Comparative Survey of Corporate Gover-
nance in the Gulf Cooperation Council – An Investor Perspective.” Jointly con-
ducted and published by Hawkamah, the Institute for Corporate Governance,
and the Institute of International Finance (November).
Jadresic, Esteban. 2002.“On a Common Currency for the GCC Countries.” IMF Policy
Paper EDP/02/12 (December).
Khan, Mohsin S. 2008. “The GCC Monetary Union—Choice of Exchange Rate Re-
gime.” Middle East and Central Asia Department, IMF (August).
Luciani, Giacomo, and Felix Neugart. 2005. “The EU and the GCC. A New Partner-
ship.” Bertelsmann Stiftung and Center for Applied Policy Research, in coopera-
tion with the Robert Schuman Centre for Advanced Studies (February).
Miller, Kaia. 2006. “Building National and Regional Competitiveness in the GCC and Ye-
men: Opportunities for Partnership.” Presented at the Yemen Consultative Group
Meeting, London, November 2006. Aslan Global, Inc.
Office of the United States Trade Representative. 2009. “2009 National Trade Esti-
mate Report on Foreign Trade Barriers.” Washington, DC
World Bank, 2006. “MENA Economic Developments and Prospects – 2006.” Washington,
DC

26
Trade Agreements in Annex 1
the MENA Region

United States EFTA European Union Turkey

Afghanistan,
Azerbaijan,
Kazakhstan,
Kyrgyz Republic,
Pakistan,
Tajikistan,
Syria Iran Turkmenistan,
WBG Uzbekistan
Lebanon Iraq
GCC ECO

AMU Kuwait
Tunisia Jordan
Agadir Bahrain Sudan
Egypt Qatar
Morocco Saudi Arabia
Algeria
Oman
Mauritania Libya
Yemen
Djibouti GAFTA MENA
Burundi, Comoros,
D. R. Congo, Eritrea,
Ethiopia, Kenya,
Madagascar, Malawi,
Mauritus, Rwanda,
Seychelles, Sudan, Singapore
Swaziland, Uganda,
AMU: Arab Maghreb Union (5) Zambia, Zimbabwe COMESA
GCC: Gulf Cooperation Council (6)
GAFTA: Great Arab Free Trade Agreement (18)
ECO: Economic Cooperation Organization (10)
COMESA: Common Market for Eastern and Southern Africa (19) Regional Agreements
EFTA: European Free Trade Association (4), includes Iceland, Switzerland, Norway, and Liechtenstein Bilateral Agreements
Agadir: Agadir Agreement for the Establishment of a Free Trade Zone between Arabic Mediterranean Nations (4)

Source: World Bank. 2008. MENA Economic Developments and Prospects.

27
 Annex 2 Statistical Tables

TABLE A2.1 MENA Total Trade, 2007 (US$ millions)

TOTAL TRADE WITH THE WORLD

Total Exports Total Imports

(in US$ million) (in US$ million) Total Trade
MENA Region 752,054 482,435 1,234,489

By geographic sub-region

GCC Countries 458,055 279,455 737,509

Bahrain 6,878 11,511 18,389
Kuwait 57,799 21,248 79,047
Oman 22,137 15,952 38,088
Qatar 40,586 23,388 63,974
Saudi Arabia 220,359 89,540 309,899
United Arab Emirats 110,296 117,816 228,112

Maghreb 132,697 78,324 211,020

Algeria 54,859 27,629 82,488
Libya 45,674 11,561 57,234
Morocco 17,188 31,624 48,812
Tunisia 14,976 19,071 34,046
(Mauritania)* 1,316 1,430 2,746

Mashreq 50,562 43,192 93,754

Iraq 36,302 10,437 46,739
Jordan 4,437 13,406 17,843
Lebanon 2,642 11,990 14,632
Occ.Pal.Terr 64 3,141 3,206
Syrian Arab Republic 7,117 14,655 21,772

Other 110,741 81,465 192,206

Egypt 24,344 26,927 51,271
Djibouti 202 2,051 2,253
Iran 79,407 43,985 123,392

28 Yemen 6,788 8,502 15,290

Source: World Trade Integrated Solution.
*Mauritania is not part of the aggregates.
 S TAT I S T I C A L TA B L E S A N N E X 2

TOTAL TRADE WITHIN REGIONS TOTAL TRADE WITHIN SUB-REGIONS

Total Trade within
Total Exports Total Imports Total Exports Total Imports each Sub-Region
(in US$ million) (in US$ million) Total Trade (in US$ million) (in US$ million) (in US$ million)
65,314 57,107 122,421

49,015 26,076 75,091 26,559 19,516 46,076

1,465 1,106 2,571 1,189 1,012 2,201
1,811 3,150 4,961 1,186 2,244 3,430
3,989 5,020 9,009 3,341 4,748 8,089
2,247 3,682 5,929 2,015 3,283 5,298
21,245 6,889 28,134 13,046 3,786 16,832
18,259 6,228 24,487 5,783 4,443 10,225

3,981 7,644 11,626 2,808 3,142 5,950

1,239 927 2,166 709 280 988
744 749 1,494 744 749 1,494
568 4,328 4,896 198 1,091 1,288
1,431 1,639 3,070 1,157 1,022 2,179

4,444 14,531 18,975 1,380 1,380 2,760

288 1,976 2,264 233 233
1,285 4,708 5,993 276 510 787
1,197 1,731 2,928 274 281 556
40 2,386 2,427 31 45 76
1,635 3,729 5,364 565 543 1,109

7,873 8,857 16,730 194 162 356

4,671 4,752 9,423 135 49 183
148 715 863 7 28 35
2,807 1,236 4,042 29 9 39
247 2,154 2,401 23 77 99 29
 A N N E X 2 S TAT I S T I C A L TA B L E S

TABLE A2.2 MENA Total Trade, 2007 (% GDP)

TOTAL TRADE WITH THE WORLD

Total Exports (% GDP) Total Imports (% GDP) Total Trade (% GDP)

MENA Region 46.5 29.8 76.3

By geographic sub-region

GCC Countries 57.7 35.2 92.9

Bahrain 62.5 104.6 167.2
Kuwait 52.5 19.3 71.9
Oman 55.3 39.9 95.2
Qatar 57.2 32.9 90.1
Saudi Arabia 57.7 23.4 81.1
United Arab Emirats 61.3 65.5 126.7

Maghreb 42.3 24.9 67.2

Algeria 40.9 20.6 61.6
Libya 65.2 16.5 81.8
Morocco 22.9 42.2 65.1
Tunisia 42.8 54.5 97.3
(Mauritania)* 49.8 54.1 103.9

Mashreq 35.6 30.4 66.0

Iraq 58.6 16.8 75.4
Jordan 27.7 83.8 111.5
Lebanon 10.6 48.0 58.5
Occ.Pal.Terr — — —
Syrian Arab Republic 18.2 37.6 55.8

Other 30.1 22.1 52.3

Egypt 18.4 20.4 38.8
Djibouti 25.2 256.4 281.6
Iran, Islamic Republic of 36.8 20.4 57.1
Yemen 35.7 44.7 80.5
Source: Table A2.1.
*Mauritania is not part of the aggregates.

30
 S TAT I S T I C A L TA B L E S A N N E X 2

TOTAL TRADE WITHIN REGIONS TOTAL TRADE WITHIN SUB-REGIONS

Total Exports Total Imports Total Trade Total Exports Total Imports Total Trade
(% GDP) (% GDP) (% GDP) (% GDP) (% GDP) (% GDP)
4.0 3.5 7.6

6.2 3.3 9.5 3.3 2.5 5.8

13.3 10.1 23.4 10.8 9.2 20.0
1.6 2.9 4.5 1.1 2.0 3.1
10.0 12.6 22.5 8.4 11.9 20.2
3.2 5.2 8.4 2.8 4.6 7.5
5.6 1.8 7.4 3.4 1.0 4.4
10.1 3.5 13.6 3.2 2.5 5.7

1.3 2.4 3.7 0.9 1.0 1.9

0.9 0.7 1.6 0.5 0.2 0.7
1.1 1.1 2.1 1.1 — —
0.8 5.8 6.5 0.3 1.5 1.7
4.1 4.7 8.8 3.3 2.9 6.2

3.1 10.2 13.4 1.0 1.0 1.9

0.5 3.2 3.7 0.4 — —
8.0 29.4 37.5 1.7 3.2 4.9
4.8 6.9 11.7 1.1 1.1 2.2
— — — — — —
4.2 9.6 13.8 1.4 1.4 2.8

2.1 2.4 4.5 0.1 0.0 0.1

3.5 3.6 7.1 0.1 0.0 0.1
18.5 89.4 107.9 0.9 3.4 4.4
1.3 0.6 1.9 0.0 0.0 0.0
1.3 11.3 12.6 0.1 0.4 0.5

31
 A N N E X 2 S TAT I S T I C A L TA B L E S

TABLE A2.3 MENA Non-Oil Trade, 2007 (US$ millions)

TOTAL NON-FUEL TRADE WITH THE WORLD

Total Non-Fuel Exports Total Non-Fuel Imports Total Non-Fuel Trade

(in US$ million) (in US$ million) (in US$ million)
MENA Region 142,436 453,725 596,161

By geographic sub-region

GCC Countries 71,811 271,369 343,180

Bahrain 4,279 5,524 9,802
Kuwait 2,778 21,126 23,904
Oman 2,169 15,391 17,560
Qatar 3,993 23,263 27,255
Saudi Arabia 29,912 89,316 119,228
United Arab Emirats 28,680 116,750 145,429

Maghreb 33,422 69,211 102,633

Algeria 2,478 27,319 29,797
Libya 1,548 1,210 2,758
Morocco 16,736 25,274 42,009
Tunisia 12,661 16,618 29,279
(Mauritania)* 977 994 1,971

Mashreq 10,456 31,620 42,076

Iraq 664 215 879
Jordan 4,397 10,460 14,857
Lebanon 2,636 9,372 12,008
Occ.Pal.Terr 64 1,917 1,981
Syrian Arab Republic 2,695 9,870 12,565

Other 26,748 81,524 108,272

Egypt 14,339 22,953 37,292
Djibouti 175 782 957
Iran, Islamic Republic of 11,814 3,682 15,495
Yemen 420 6,678 7,098
Source: World Trade Integrated Solution.
*Mauritania is not part of the aggregates.

32
 S TAT I S T I C A L TA B L E S A N N E X 2

TOTAL NON-FUEL TRADE WITHIN REGIONS TOTAL NON-FUEL TRADE WITHIN SUB-REGIONS
Total Non-Fuel Total Non-Fuel Total Non-Fuel
Exports Imports Trade Total Exports Total Imports Total Trade
(in US$ million) (in US$ million) (in US$ million) (in US$ million) (in US$ million) (in US$ million)
52,960 38,217 91,177

40,124 24,904 65,028 21,182 18,514 39,696

1,457 1,064 2,521 1,181 973 2,154
1,801 3,066 4,868 1,179 2,161 3,340
3,444 4,617 8,061 2,800 4,345 7,144
1,215 3,576 4,791 1,001 3,178 4,179
14,166 6,834 21,000 9,320 3,743 13,064
18,041 5,747 23,788 5,701 4,114 9,815

2,276 3,776 6,051 1,516 1,660 3,176

211 909 1,121 177 278 455
117 741 858 — 830 —
562 1,476 2,038 192 391 584
1,385 650 2,035 1,146 161 1,307

4,207 6,615 10,822 1,158 1,158 2,317

66 22 88 16 — —
1,284 2,003 3,286 276 500 776
1,191 1,251 2,442 274 279 553
40 1,167 1,207 30 44 75
1,627 2,172 3,799 562 335 896

6,352 2,923 9,276 162.15 74.59 237

4,164 1,210 5,374 135 — 135
148 591 738 — 27 27
1,841 237 2,078 28 — 28
200 885 1,085 — 47 47

33
 A N N E X 2 S TAT I S T I C A L TA B L E S

TABLE A2.4 MENA Non-Oil Trade, 2007 (% GDP)

TOTAL NON-FUEL TRADE WITH THE WORLD
Total Non-Fuel Exports Total Non-Fuel Imports Total Non-Fuel Trade
(% GDP) (% GDP) (% GDP)
MENA Region 8.81 28.06 36.87

By geographic sub-region

GCC Countries 9.04 34.18 43.22

Bahrain 38.90 50.22 89.11
Kuwait 2.53 19.21 21.73
Oman 5.42 38.48 43.90
Qatar 5.62 32.76 38.39
Saudi Arabia 7.83 23.38 31.21
United Arab Emirats 15.93 64.86 80.79

Maghreb 10.64 22.04 32.69

Algeria 1.85 20.39 22.24
Libya 2.21 1.73 3.94
Morocco 22.31 33.70 56.01
Tunisia 36.17 47.48 83.65
(Mauritania)* 36.97 37.61 74.58

Mashreq 7.36 22.27 29.63

Iraq 1.07 0.35 1.42
Jordan 27.48 65.38 92.86
Lebanon 10.54 37.49 48.03
Occ.Pal.Terr — — —
Syrian Arab Republic 6.91 25.31 32.22

Other 7.27 22.17 29.44

Egypt 10.86 17.39 28.25
Djibouti 21.84 97.80 119.64
Iran, Islamic Republic of 5.47 1.70 7.17
Yemen 2.21 35.14 37.36
Source: Table A2.3.
*Mauritania is not part of the aggregates.

34
 S TAT I S T I C A L TA B L E S A N N E X 2

TOTAL NON-FUEL TRADE WITHIN REGIONS TOTAL TRADE WITHIN SUB-REGIONS

Total Non-Fuel Total Non-Fuel Total Non-Fuel Total Non-Fuel Total Non-Fuel Total Non-Fuel
Exports (% GDP) Imports (% GDP) Trade (% GDP) Exports (% GDP) Imports (% GDP) Trade (% GDP)
3.28 2.36 5.64 — — —

5.05 3.14 8.19 2.67 2.33 5.00

13.24 9.67 22.92 10.73 8.85 19.58
1.64 2.79 4.43 1.07 1.96 3.04
8.61 11.54 20.15 7.00 10.86 17.86
1.71 5.04 6.75 1.41 4.48 5.89
3.71 1.79 5.50 2.44 0.98 3.42
10.02 3.19 13.22 3.17 2.29 5.45

0.72 1.20 1.93 0.48 0.53 1.01

0.16 0.68 0.84 0.13 0.21 0.34
0.17 1.06 1.23
0.75 1.97 2.72 0.26 0.52 0.78
3.96 1.86 5.81 3.27 0.46 3.73

2.96 4.66 7.62 0.82 0.82 1.63

0.11 0.04 0.14 0.03
8.02 12.52 20.54 1.72 3.13 4.85
4.76 5.01 9.77 1.10 1.12 2.21
— — — — — —
4.17 5.57 9.74 1.44 0.86 2.30

1.73 0.79 2.52 0.04 0.02 0.06

3.15 0.92 4.07 0.10 — 0.10
18.45 73.84 92.29 — 3.42 3.42
0.85 0.11 0.96 0.01 — 0.01
1.05 4.66 5.71 — 0.25 0.25

35
 A N N E X 2 S TAT I S T I C A L TA B L E S

TABLE A2.5 A MENA Exports by Products, as % of total Exports of Products, 2007

Primary Primary Food, basic

commodities commodities, excluding tea,
Table 3 as % of (SITC 0 + 1 + 2 excluding fuels All food items Food, basic coffee, cocoa and Beverages
total exports of + 3 + 4 + 68 + (SITC 0 + 1 + 2 + 4 (SITC 0 + 1 + (SITC 0 + spices (SITC 0 + and tobacco
products 667+ 971) + 68 + 667 + 971) 22 + 4) 22 + 4) 22 + 4 less 07) (SITC 1)
MENA 86.3 5.5 2.4 2.3 2.1 0.2

GCC 87.4 4.5 1.1 1.0 0.9 0.1

Bahrain 90.2 11.1 0.5 0.4 0.4 0.1
Kuwait 94.9 0.5 0.2 0.2 0.2 0.0
Oman 90.4 3.6 2.4 2.2 2.2 0.2
Qatar 90.3 0.2 0.1 0.1 0.1 0.0
Saudi Arabia 89.4 1.3 0.9 0.8 0.8 0.1
UAE 77.5 13.7 2.2 1.9 1.7 0.3

Maghreb 81.9 5.7 3.6 3.5 3.5 0.1

Algeria 99.1 0.7 0.2 0.1 0.1 0.0
Libya 96.9 0.4 0.1 0.1 0.1 0.0
Morocco 34.9 31.0 19.1 18.9 18.6 0.1
Tunisia 28.3 11.7 9.8 9.2 8.9 0.6
Mauritania * 94.6 69.6 12.9 12.9 12.9 —

Mashreq 84.0 8.3 5.9 5.4 4.9 0.5

Iraq 99.7 0.1 0.1 0.1 0.1
Jordan 20.8 20.1 13.1 11.4 11.1 1.7
Lebanon 51.5 51.2 16.1 12.7 11.3 3.4
Syria 64.9 23.4 21.0 20.0 17.9 1.0

Other 87.5 9.0 5.8 5.6 5.2 0.2

Egypt 77.8 15.4 9.4 9.4 9.2 0.0
Djibouti 95.1 81.8 73.3 73.3 71.5 0.0
Iran 88.6 8.0 5.0 4.8 4.4 0.2
Yemen 96.7 6.2 5.3 4.8 4.5 0.4
Source: UNCTAD, Statistical Report 2009
*Mauritania is not part of the aggregates.

36
 S TAT I S T I C A L TA B L E S A N N E X 2

Ores, metals,
precious stones Pearls, precious
Agricultural raw and non- stones and non-
materials (SITC monetary gold Ores and metals Non-ferrous Other ores monetary gold
2 less 22, 27 (SITC 27 + 28 + (SITC 27 + metals and metals (SITC 667 +
and 28) 68 + 667 + 971) 28 + 68) (SITC 68) (SITC 27 + 28) 971) Fuels (SITC 3)
0.2 2.9 1.6 0.9 0.7 1.3 80.7

0.1 3.3 1.4 0.9 0.4 1.9 82.8

0.0 10.6 10.6 9.0 1.6 0.0 79.1
0.1 0.2 0.2 0.0 0.2 0.0 94.4
0.0 1.2 1.2 0.6 0.6 0.0 86.8
0.0 0.1 0.1 0.0 0.1 0.0 90.1
0.1 0.4 0.3 0.1 0.2 0.1 88.1
0.3 11.2 3.4 2.5 0.9 7.8 63.8

0.3 1.8 1.8 0.4 1.4 0.0 76.2

0.0 0.5 0.5 0.1 0.4 0.0 98.4
0.0 0.3 0.2 0.0 0.2 0.1 96.5
1.5 10.4 10.3 2.2 8.2 0.1 3.8
0.5 1.4 1.4 0.4 1.0 0.0 16.6
0.0 56.7 53.9 — 53.9 2.8 25.0

0.3 2.1 1.4 0.3 1.1 0.7 75.7

0.0 0.0 0.0 0.0 99.6
0.3 6.7 5.9 0.9 5.0 0.8 0.7
1.0 34.1 17.2 3.2 14.0 16.9 0.3
1.2 1.2 1.2 0.7 0.5 41.5

0.6 2.6 2.5 1.5 1.0 0.1 78.5

1.9 4.0 3.3 1.7 1.6 0.7 62.4
2.8 5.7 2.1 0.3 1.8 3.6 13.2
0.4 2.5 2.5 1.6 0.9 0.0 80.6
0.2 0.8 0.3 0.1 0.2 0.5 90.5

37
 A N N E X 2 S TAT I S T I C A L TA B L E S

TABLE A2.5 B MENA Exports by Products, as % of total Exports of Products, 2007

Table 3 as % of Manufactured Machinery Other manufactured
total exports of goods (SITC 5 to 8 Chemical products and transport goods (SITC 6 + 8 Iron and steel
products less 667 and 68) (SITC 5) equipment (SITC 7) less 667 and 68) (SITC 67)
MENA 13.7 4.3 4.0 5.5 0.7

GCC 12.6 4.6 4.5 3.6 0.5

Bahrain 9.8 4.5 1.9 3.4 0.1
Kuwait 5.1 2.6 1.7 0.7 0.0
Oman 9.6 3.3 3.5 2.8 0.6
Qatar 9.7 7.7 1.0 0.9 0.7
Saudi Arabia 10.6 6.1 2.4 2.1 0.5
UAE 22.5 2.0 11.4 9.0 0.5

Maghreb 18.1 3.7 4.5 9.9 0.8

Algeria 0.9 0.5 0.0 0.4 0.3
Libya 3.1 1.9 0.1 1.2 1.1
Morocco 65.1 14.8 16.7 33.7 1.4
Tunisia 71.7 9.7 19.7 42.3 1.4
Mauritania * 0.0 — — 0.0 —

Mashreq 16.0 4.0 2.9 9.1 0.2

Iraq 0.3 0.0 0.2 0.0
Jordan 79.2 26.4 17.7 35.1 1.2
Lebanon 48.5 13.1 4.7 30.7 1.1
Syria 35.1 5.4 5.0 24.8 0.3

Other 12.5 3.6 1.2 7.7 2.7

Egypt 22.2 5.5 0.4 16.3 5.5
Djibouti 4.9 1.0 1.2 2.8 0.0
Iran 11.4 3.6 1.2 6.6 2.4
Yemen 3.3 0.4 2.1 0.8 0.0
Source: UNCTAD, Statistical Report 2009

38
 S TAT I S T I C A L TA B L E S A N N E X 2

TABLE A2.6 Concentration and Diversification Indices of Export Products in MENA

1995 2007
Number of Concentration Diversification Number of Concentration Diversification
Exporters products Index Index products Index Index
MENA 152 0.51 0.71 196 0.49 0.69

GCC 174 0.69 0.78 214 0.62 0.76

Bahrain 138 0.48 0.77 150 0.78 0.82
Kuwait 135 0.94 0.83 187 0.66 0.82
Oman 189 0.77 0.71 210 0.58 0.68
Qatar 102 0.64 0.83 238 0.50 0.81
Saudi Arabia 220 0.74 0.86 242 0.76 0.78
UAE 258 0.56 0.69 258 0.42 0.64

Maghreb 123 0.42 0.69 165 0.44 0.71

Algeria 99 0.53 0.81 121 0.60 0.81
Libya 29 0.77 0.52 95 0.85 0.80
Morocco 169 0.18 0.75 203 0.15 0.68
Tunisia 193 0.22 0.66 240 0.18 0.56

Mashreq 177 0.28 0.64 203 0.29 0.57

Iraq
Jordan 221 0.21 0.64 231 0.17 0.59
Lebanon 180 0.10 0.59 190 0.37 0.54
Syria 131 0.54 0.69 188 0.32 0.57

Other 136 0.66 0.75 202 0.62 0.74

Egypt 164 0.25 0.66 238 0.31 0.67
Djibouti
Iran 175 0.83 0.82 238 0.75 0.75
Yemen 70 0.89 0.76 130 0.78 0.79
Sources: UN Comtrade statistics
Concentration index reflects the Herfindahl-Hirschmann index of the export product concentration of a country or a group of countries. It ranges between 0 to
1 where 1 represents total concentration. Diversification index reveals the extent of the differences between the structure of trade of the country or group of
countries and the world average. The index value ranges from 0 to 1.

39