Trade, regional integration vital to Mena’s post-Covid economic recovery
November 22 2020 12:33 AM

The dual economic shocks of the Covid-19 pandemic and lower oil prices have clearly affected all aspects of Middle East and North Africa (Mena)’s economies, which are projected to contract by 5.2% this year.
A rare ‘once-in-a-century’ event, the pandemic led to the imposition of lockdowns and social distancing measures around the world, in a synchronised movement that produced the largest economic shock since World War II.
Therefore, trade and integration — within the Mena region and with the rest of the world — will be critical to lowering poverty, empowering the poor, and igniting economic growth in the post-Covid era, according to the World Bank’s latest regional economic update.
Mena’s integration — both within the region and with the rest of the world — was underperforming before the pandemic, according to World Bank. This is due to economic reasons, mostly outside the GCC region, such as poor logistics’ performance, inefficient customs, high infrastructure costs, the inadequacy of legal frameworks for investments, and disparate regulations that add up to high trade costs and have become non-tariff impediments to trade.
Challenges with logistics and the business environment impede Mena’s integration in regional and global value chains, experts say. Despite improvements in recent years, the Mena region underperforms in access to credit, which is lower than anywhere else in the world.
Trading across borders is expensive and time-consuming: It costs, on average, $442 and 53 hours to comply with border requirements for exporting, which is three times more expensive and four times longer than averages in high-income economies. Some of the North African countries are also one of the most restrictive regions regarding trade in services.
The report proposes a new trade integration framework that goes beyond reducing tariffs. Some of the suggestions it makes indicate that trade liberalisation must be comprehensive and benefit all sectors, including agriculture and services.
Without improving the overall business environment and without encouraging the role of the private sector, the region will not reap the benefits of trade liberalisation.
In terms of implementation, the World Bank says a better balance between political and economic objectives will be needed to ensure that trade agreements do not fail. Simultaneous, behind-the-border reforms — within the Mena region and in collaboration with Europe and Africa — necessitate clear rules and effective implementation mechanisms.
Meanwhile, the International Monetary Fund (IMF) noted that lack of diversification among oil-exporting countries and the reliance of oil importers on sectors like tourism, as well as their dependence on remittances, are likely to curb growth.
Oil-exporting countries have been hit the hardest. Oil prices are around 40% below pre-crisis levels, slashing their main source of revenue and reflecting their limited success in diversifying their economies.
“The Covid-19 crisis represents the fastest-moving economic shock of its depth in recent history,” the Washington-based IMF said in a recent report.
IMF expects economies in the region to shrink by 4.1% this year, a contraction 1.3 percentage points larger than it forecast in April.
“The management of the crisis, the priority to save lives, had an impact on economic activity that was compounded by the shock of oil prices, but I would say, relatively speaking ... the outcome in 2020 is acceptable,” Jihad Azour, director of the Middle East and Central Asia Department at the IMF said.

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