Trade and Investment Facilitation: Opportunities and Obstacles'

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Trade and Investment Facilitation Opportunities
and Obstacles.

• Samir Radwan
• Economic Research Forum
• Asia Middle-East Dialogue (AMED)
• Bangkok, 3-4 July 2006

Assisted by Yasmine Fahim ,Christine Shenouda
and Omneya Ramadan
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1- Inter- and intra-regional trade

• Weak intra-regional trade in the Middle East
  (5.6)
• Weak inter-regional trade from the Middle East to
  Asia (3.1)
• Middle East exports represent only 2.8 of total
  world exports

Weak trade flows
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Most important traded commodities between Asia
and MENA
Asian countries included China, Hong Kong,
Indonesia, Japan, Korea, Malaysia, Philippines,
Singapore, Thailand, India, and Bangladesh.

• The major exported commodity from GAFTA to Asian
  countries is oil, while manufactured commodities
  represent the most imported.

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Enhanced Trade Reform Index, 2005

Lower Middle Income Countries
The value of 100 indicates the economy which has
the best policy (lowest NTBs, lowest time to
export, lowest time to import), 0 indicates the
economy which has the worst policy the world
average value is 50.
1 Regional averages are unweighted.
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2- Foreign Direct Investments Flows

• FDI inflows to Asian countries are more than 10
  times those to Arab countries
• Both have been witnessing a positive trend, with
  Arab FDI growing at very incremental rates

Limited investment flows to MENA
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Foreign Direct Investment Obstacles

• Asian countries, overall, rank higher than Arab
  countries on Doing Business Index.
• A common problem in Arab countries is starting a
  business, while in Asian countries it is dealing
  with licenses

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Best perfor-mance Under-performer
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Enhanced Business Reform Index, 2005
Lower Middle Income Countries
As with the trade reform index, the business and
regulatory reform index (both the abbreviated and
the enhanced version) was constructed by
initially evaluating each sub-indicator based on
a worldwide cumulative frequency distribution of
that area, with a maximum value of 100 (best
policies), a minimum value of 0 (worst policies),
and a worldwide mean of 50. Thus, a score of
100 reflects the economy which, on average, had
the best policies for closing a business
(relative to the world) across the range of
measures of ease of closing a business, 0
reflects the economy which on average had the
worst policies for closing a business, and the
world average value was 50.


1 Regional averages are unweighted.
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Inward FDI Potential

• 2 Arab countries and 5 Asian countries are among
  the top 25 inward FDI potential economies

The Index covers 140 economies. based on 12
economic and policy variables. It is a three-year
moving average, using data for the three previous
years, including the year in question.
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Outward FDI

• Although GCC countries are expected to be among
  the leading investors, only Bahrain is in the top
  20 list.

The Index covers 132 economies. based on 12
economic and policy variables. It is a three-year
moving average, using data for the three previous
years, including the year in question.
Source UNCTAD, World Investment Report 2005
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Agreements between MENA countries GAFTA
By 1 January 2005, 15 countries had completed the
accelerated removal of their tariff barriers,
namely Bahrain, Egypt, Iraq, Jordan, Kuwait,
Lebanon, Libya, Morocco, Oman, Palestine, Qatar,
Saudi Arabia, Syria, Tunisia, and the United Arab
Emirates. For the two other countries involved in
GAFTA, Sudan and Yemen, given that they are
considered as Less Least Developing Countries,
they have been allowed more time.

• Goal
• Initially, it was planned to reduce the tariffs
  by 10 on a yearly basis to reach a free trade
  area in 10 years (ending in 31/12/2007), however,
  a decision based on the recommendation of the
  Arab Summit in Amman 2001 has accelerated the
  implementation period to reach zero-percent
  tariffs on 01/01/2005.

Many problems still threaten the GAFTA
effectiveness. These include particularly the
negative list that is too large and rules of
origin (ROOs) for goods that are too loosely
defined.
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Agreements between MENA countries Aghadir
This agreement is a crucial step towards the
envisaged creation of a Euro-Mediterranean free
trade area. It has been signed by the four Arab
countries considered (2004) and aims at allowing
its members to benefit from the cumulation of
regional Rules of Origin (ROOs), stipulated in
their respective agreements with the EU. It is
further expected to cover other Arab countries,
mainly Algeria, Lebanon and Syria.

• Goals
• Total elimination of customs tariffs by 1.1.2006
• Harmonisation of laws in economic matters,
  Invigoration of trade exchanges, promotion of the
  industrial sector, promotion of economic
  activities and employment, improvement of
  productivity and living standards
• Co-ordination of sectoral and global economic
  policies, especially in the fields of foreign
  trade, agriculture, finance, taxes, services and
  customs
• Adoption of the Pan-Euro-Med Rules Of Origins

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Aghadir cont

• However
• The agreement has not entered into force as some
  of the members did not ratify the agreement. Two
  countries ratified the agreement in 2004, namely
  Egypt and Tunisia. Morocco ratified it in early
  2005 whereas Jordan did not yet ratify the
  agreement.
• Morocco and Tunisia being strongly
  Europe-oriented, will face difficulties in
  shifting their concentration to Jordan and Egypt.
• Being involved in several agreements is likely to
  minimize the positive effect of Aghadir.
• Does not introduce deeper features regarding
  movement of labor and liberalization of services.

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Cooperation Agreements with Asia

• As example of the existing bilateral agreements,
  we can mention

Agreements between Egypt and Malaysia
Agreements Signed Between Egypt and Thailand
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Agreements signed between Egypt and Singapore
Agreements between Egypt and Indonesia
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• Agreements Signed Between Egypt and the
  Philippines

There is a multiplicity of trade agreements,
which carries the risk of overlapping, what
Bhagwati calls Spaghetti Bowl
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conclusion

• The present low flow of trade and investment
  points to a great potential for future
  Asian-Middle East cooperation