
Regional competitiveness is now assumed to be the prime mover of regional economic growth, particularly in regions with collective trade objectives and integration plans. To that extent, the programs of AFTIAS (Aid for Trade Initiative for Arab States) have been important in the Middle East and North Africa region for moving forward regional competitiveness in support of trade integration. It explains how AFTIAS is making competitive advances in trade in the region and the importance of regional organization collaboration with sub-regional organizations. Focusing on this, AFTIAS aims to promote an integrated economic environment in which countries can work towards common development goals.
Regional competitiveness refers to the ability of a region to attract investment, and talent, and its ability to create an attractive environment that makes it possible for businesses to prosper. Regional competitiveness in the MENA region is therefore very crucial because it would provide a basis for the restoration of economic stability while enhancing long-term growth. There are many factors driving competitiveness, including infrastructure, technology adoption, human capital development, and innovation. The competitiveness dimension accounts for the MENA region falling behind regional peers lately. That would be due to political instability, incoherent regulatory frameworks, and a poor investment base relating to infrastructure.
Regional competitiveness has emerged as a priority in the cases of Saudi Arabia through ambitious economic diversification under the auspices of Vision 2030. Such programs to enhance workforce skill development, technological competency, and entrepreneurship are now critical to achievement. AFTIAS complements these efforts through financing projects focused on the growth of regional industries, as well as through technical assistance to upgrade local capacities. A stark link exists between regional competitiveness and economic growth: more competitive regions attract more FDI and hold better market positions globally.
Trade integration refers to the removal of tariffs and other regulations that result in hindrances to trade, which creates a seamless market for goods and services in a region. The taking away of intraregional barriers to trade and regulation differences allows improved access by a region to international markets and raises the level of economic output in the MENA region dramatically. At present, intra-MENA trade accounts for less than 10% of the region’s total trade, according to the International Monetary Fund. This is significantly lower than the share in other regions such as Southeast Asia whose share is higher than 25%. Clearly, the integration of trade in the MENA region has yet to be tapped.
AFTIAS plays an important role in bridging this gap by collaborating with regional organizations in order to implement reform towards reduced border trade barriers and harmonized border regulations. For example, one of the outcomes was harmony concerning trade policies between GCC countries and Egypt through which trade volumes were increased by significant margins. The integration of AFTIAS provides for regional economic development with higher productivity and better job creation, promoting a higher living standard.
In keeping with AFTIAS’s overall aim of promoting economic development in the Arab region, it has shown thematic emphasis in its work on regional competitiveness. This is through capacity building, where AFTIAS commits itself to offer technical assistance and training to local government and firms. For instance, AFTIAS has been able to train local exporters on international trade standards in Egypt. This has increased their manifold access to the global market. Directly this allowed Egypt to shift up the ranks of the Doing Business Index by the World Bank.
Encouraging private sector participation is another important step. We has asked the private sector to play a much more significant role in improving regional competitiveness. In this effort, AFTIAS has involved private sectors in discussions of bottlenecks in their trade and regulatory issues.
Finally, policy gaps were an important strategic focus for AFTIAS. Coordination with regional organizations and sub-regional organizations allows for harmonization of trade regulations while setting common standards. It makes the trade environment predictable; this in turn attracts FDI and further spurs cross-border investments.
Countries in the MENA region are involved with various regional organizations and sub-regional organizations that play a considerable role in promoting trade integration. Organizations in this region, including the Arab League and the Gulf Cooperation Council (GCC), have promoted this process for years by lowering the barriers between them and strengthening economic cooperation. The region still faces several challenges in achieving full trade integration.
Among the most impactful initiatives undertaken by AFTIAS has been its collaboration with the Union for the Mediterranean. This latter aims to reduce trade restrictions throughout the southern and eastern Mediterranean. With such processes as simplifying customs procedures, digitalizing trade documentation, and other potential avenues in this scope, AFTIAS reduced costs on trade while opening up markets to all member countries. The ability to integrate modern technologies into the trading process is significant for the integration of trade and better competitiveness of the economies in the MENA region.
One good example of regional integration in MENA is the one between Morocco and Tunisia. AFTIAS served as the framework for the ridding of NTBs and for the harmonization of the product standards that raised bilateral trade by 15% within two years. Leveling down some of the regulatory disparities helped the countries overcome some of these issues, and therefore enhance their trade relationships that have amplified their general competitiveness.
Despite this significant milestone toward improving regional competitiveness and trade integration, a great deal more remains to be overcome. The region is dramatically stamped by political instability, which undoubtedly affects the capacity of these nations to ensure consistent trade policies and attract investments. Coordination lack between various regional organizations and sub-regional organizations also stands in the way of fully implementing these trade agreements.
One area of concern is the region’s old infrastructure, acting as the greatest impediment towards trade integration. The traffic flows experienced in this region, inefficiencies at ports, and poor logistics capabilities make it difficult for businesses to trade across borders. Closing these infrastructure gaps is key to competition strengthening within the region.
AFTIAS commits to making and integrating the MENA region more competitive in the future. Improvement of innovation and digital trade is AFTIAS’s top priority because it will boost regional competitiveness. AFTIAS calls upon its member states to adopt e-commerce and digital payments as the benefits will in turn reduce trade costs and make access easier for SMEs into those markets.
Other than this, AFTIAS also aims at bolstering public-private partnerships (PPP) to nurture critical infrastructures that spur trade integration. PPPs are capable of augmenting financing gaps in infrastructure projects that contribute immensely to trade integration.
In a nutshell, regional competitiveness and trade integration form the core pillars for economic development in the MENA region, in which AFTIAS has hugely played its part. AFTIAS has proposed regulatory disparities and further strengthened capacity building and private sector engagement while trying to move the steps toward the development of a much more integrated and competitive economic environment within the Arab world. However, there are many challenges such as political instability, low infrastructure, and limited cooperation among regional organizations and sub-regional organizations.