[Congressional Record Volume 140, Number 38 (Tuesday, April 12, 1994)]
[Senate]
[Page S]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]
[Congressional Record: April 12, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]
COOPERATION IN THE MIDDLE EAST
Mr. PELL. Mr. President, the recent massacre at Hebron has injected a
hard dose of reality into the Middle East peace process. Despite the
euphoria that surrounded the signing of the Declaration of Principles
between Israel and the PLO last September, it is evident that old
divisions remain and there will be continued episodes of violence.
Meanwhile, beyond the Israeli-Palestinian conflict, the deteriorating
economic situation in many Middle Eastern countries has led to growing
despair and disturbing manifestations of political extremism.
All of us hope that the Israeli and Palestinian leadership will
return to the peace table; indeed, with the help of the United States,
they appear to be moving in that direction. But even if they succeed in
implementing the Declaration of Principles, there are still many issues
to be dealt with in order to bring true peace and stability to the
region.
One of those issues, of course, is economic development. In this
connection, I would like to call to the attention of my colleagues an
article by Mr. M. Shafik Gabr that appeared in Business Monthly
entitled ``The Time Is Now: Regional Cooperation in the Middle East.''
Mr. Gabr, the executive vice president of the American Chamber of
Commerce in Egypt, calls for an intraregional trade and economic
cooperation structure in the Middle East which would lead to greater
prosperity and cooperation in the region through expanded trade links.
I think Mr. Gabr's article makes an important contribution to
understanding a difficult and complex issue, and I commend the article
to my colleagues. I ask unanimous consent that it be entered into the
Record at this point.
There being no objection, the article was ordered to be printed in
the Record, as follows:
The Time Is Now--Regional Cooperation in the Middle East
(By Mr. Shafik Gabr)
The historical events the world is now witnessing will
dramatically change the landscape and character of the Middle
East. It remains to be seen, however, whether these changes
will be positive and dynamic or negative and static.
For decades, the Middle East has suffered from wars,
instability, and mistrust, depriving its people of achieving
their true potential. Today, one can say with confidence that
stability and comprehensive peace are no longer distant
dreams. Comprehensive peace is not merely the absence of
conflicts, but also a concept that emphasizes the economic
empowerment of the people through political stability. Now is
the perfect opportunity to build on the dramatic
breakthroughs in the peace process, and vigorously advance
the cause of economic cooperation, which is a common interest
and a common purpose among nations of the Middle East.
need for immediate progress so that political peace pays economic
dividends--irtec
A proposal would be the establishment of an intra-regional
trade and economic cooperation (IRTEC) structure in the
Middle East, with the main goal of bringing economic
betterment to the people of the region. Establishing such an
economic structure in the Middle East does not mean that this
region should become self-sufficient and isolate itself from
world markets. On the contrary, the region should be fully
integrated into the world economy, but from the vantage point
of strength from within first.
global
The present economic trend in the world is one of intra-
regional trade and economic cooperation, with varying degrees
from one region to the next. The European Community (EC) is
well on its way toward economic union. While this process has
faced many obstacles, the determination of the EC to move
toward its ultimate goal has prevailed. The United States,
Canada, and Mexico have successfully negotiated and ratified
the North American Free Trade Agreement (NAFTA) for
implementation in January 1994. In the Pacific Rim, Asian
nations have increased trade among themselves and are
considering numerous plans for advancing the cause of intra-
regional cooperation.
middle east region
Unfortunately, this current global trend has not yet spread
to our region, Intra-regional trade among the nations of the
Middle East during the late 80s amounted to a meager 10
percent of their total exports. In comparison, intra-
regional trade of EC countries during the same period was
66 percent of their total exports; and for developing
countries it was 33 percent of their total exports.
There have been prior attempts to encourage economic
cooperation among some countries of the region. During the
80s three regional economic blocs were formed in the Arab
World; the Arab Cooperation Council (ACC), which was
dismantled following the Iraqi invasion of Kuwait; the
Maghreb Economic Union (MEU), which it seen by many as an
open channel through which member countries maintain a
dialogue to resolve their political differences; and the Gulf
Cooperation Council (GCC), which has had limited success in
furthering economic cooperation by establishing a customs
union. While in principle this customs union was a positive
step toward free trade, in reality it did not benefit the GCC
states much, since their economies remain dominated by oil.
There is a tremendous potential for economic development
and growth in the Middle East. All the ingredients required
for that growth and cooperation exist, such as skilled human
resources; a solid investment base with a combined GDP of
$400 billion; a relatively modern infrastructure; a modestly
diversified industrial base, ranging from labor intensive and
low cost in Egypt, to hi-tech in Israel; proximity to Europe,
Asia, and Africa; and the potential size of the Middle East
market--given that its population is as large as the
European, North American, or South American markets.
obstacles to irtec
One must recognize the national and regional challenges
facing the prospect of Middle East intra-regional trade.
On the national level, while each nation has a distinct
economic situation, there are common problems confronting
them all. These include large and inefficient public sectors;
tight government control of monetary systems; complex
bureaucracies; and government intervention in and distortion
of the marketplace. These negative aspects are the remaining
legacies of the Import-Substitution (Inward-Looking) policies
widely subscribed to by nations of the region during the 50s
and 60s.
On the regional level, obstacles to intra-regional trade
and economic cooperation include political, ideological,
economic and sometimes even personal reasons. These include:
competition for scarce natural resources, most importantly
water; the existence of trade barriers and quotas: the
practice of boycotting other members in the region; uneven
growth and distribution of wealth; territorial disputes; and
a lack of trust coupled with deep suspicions of others'
motives. These obstacles will make difficult any attempt to
develop a structure for regional cooperation.
meeting the challenge of creating irtec
Following are three propositions that will promote intra-
regional trade and economic cooperation. But first one must
emphasize the need for a common denominator, without which
these propositions would not work. That denominator is
enhancing and reinforcing a stable political environment in
the region through greater democratization, trust, and
realistic expectations, since if expectations are not
realized the peace will be a static one, at best.
The propositions are: 1. Developing a Middle Eastern
Financial Institution and reforming the banking sector:
A Middle Eastern Financial Institution modeled on the
principles of the Asian Development Bank must be created. The
priorities of such an institution would be to identify and
finance regional projects and trade, in addition to
emphasizing and promoting economic cooperation. A second
crucial issue in the financial realm is reforming the banking
sector, so that 90 percent of the region's wealth does not
end up elsewhere.
2. The creation of a Middle Eastern Economic Commission
(MEEC):
This proposal is the key to this process. The MEEC will be
the mechanism for promoting intra-regional trade and economic
cooperation and also for solving disputes rapidly and
peacefully with a win/win philosophy. The commission should
consist of both government and business representatives of
countries that are at peace.
This commission should also concentrate on:
Developing the region's infrastructure: It is essential to
develop the administrative and legal structures of the region
as much as the actual physical infrastructure. Infrastructure
linkages among the nations at peace are crucial, and the MEEC
can help to create these.
Assisting government in reforming their economic
structures: An intra-regional structure will operate much
more efficiently if the internal economic structures of the
nations are not encumbered by distortions in the marketplace,
large budget deficits, high inflation, and bureaucratic
burdens. The commission must assist governments to liberalize
their economies and adopt productive free market policies.
The transfer of labor, investment, technology, and energy
on the basis of comparative advantage: The commission must
work with all the peace partners so that the deregulated
movement of labor, investment, technology, and energy becomes
reality, allowing the principles of comparative advantage and
highest rate of return to take precedence for the benefit of
all.
Bureaucratic Burdens, Trade Barriers, and Most Favored
Nation (MFN) Status: On trade, Egypt should move first to MFN
status. Egypt has taken great strides in liberalizing its
trade policy by removing quotas, non-tariff barriers and
reducing its custom levels as per the IMF/World Bank
guidelines.
Competition for scarce natural resources, especially water:
This perhaps is the most crucial issue facing the Middle East
today, after peace negotiations. Unless a system to share and
manage water resources in a fair and beneficial manner is
developed, the next conflict in our region might be just
around the corner. The commission must work with all parties
to the peace process to establish a mechanism to quickly
resolve short-term disputes over water rights, otherwise this
issue could become a major threat to regional stability.
3. Establishing a Middle Eastern Business Development
Center (MEBDC):
The MEBDC would be a non-governmental, not-for-profit
organization. This center would be composed of businessmen
and professionals from countries at peace. The MEBDC could
start with branches in Egypt, Israel, Jordan, Turkey and
Palestine. It would bring interaction between businessmen of
the region, and emphasize opportunities for medium and small
businesses, which are the backbones of all the economies in
the region.
The MEBDC would have three components: Information
Component--developing data banks necessary for trade and
investment cooperation; Investment Advisory Services--bring
together investors and entrepreneurs from different nations
in joint ventures, and providing commercial arbitration
services; and a Research Component--sponsoring economic,
environmental, and scientific studies as well as holding
seminars and workshops to promote sound economic
development in the Middle East.
All the above components will promote entrepreneurship. And
one must not forget that individual investors and risk-takers
are the backbone and job creators of major economies, like
that of the United States, Egypt and Israel; Cornerstones to
Peace and Prosperity: Having made these three propositions,
the catalyst and engine of growth for IRTEC are Egypt and
Israel, with U.S. engagement, political support and economic
assistance. For Egypt and Israel to succeed they must develop
confidence-building measures in the economic field between
themselves and other peace partners.
The economic reforms these two countries have implemented
in the past few years have produced some positive results; in
Egypt, the exchange rate was unified, with a stable
conversion rate, inflation was brought down from over 30
percent to about 10 percent, the budget deficit was reduced
approximately from 30 percent to only 3 percent, and the
Central Bank's reserves are up to $15 billion from $1.2
billion in 1990. Israel's galloping inflation rates of the
mid 80s were reduced, and some reforms to its banking sector
were introduced.
Yet Egypt and Israel still need more internal economic
reforms to remove impediments to their ability to execute
their leadership roles. In Egypt's case, it is important to
speed up the pace of privatization; to have the economic
macro-reform gains trickle down to the micro level and
benefit the ordinary citizen; and to reduce the complex
bureaucracies.
As for Israel, its foreign trade and investment policies
must be liberalized, especially the protectionist elements of
its agricultural policies; there should be more openness and
less censorship; monetary policy must be liberalized and
reformed; and inflation should be reduced.
As Egypt and Israel continue their economic reforms, they
must draw other nations of the region into the peace process,
including Iran, Iraq, Syria, Yemen, and Libya. One must keep
in mind that IRTEC's structure would not be a static or zero-
sum concept, but that the size of the pie (market) will
increase, and it will be a win/win situation.
Lastly, two specific areas of immediate promise in this
respect are tourism and infrastructure development. In the
past few years tourism has become one of the largest and most
profitable industries in the world. The Middle East is rich
in its history, culture, and natural wonders. A regional
tourism industry can be built to benefit everyone on two
fronts. On the one hand, this industry will tremendously
increase interaction among the people of the region and
create jobs within an entire service industry. On the other,
the potential revenue is enormous and could help finance the
creation of an intra-regional trade and economic cooperation
structure.
The second area of immediate promise exists in linking and
developing the infrastructure of the region. Communications
systems must be modified to become compatible. Roads and
railways linking the region must be improved, along with a
new network of roads to link the major urban and industrial
centers.
The task ahead is complex. No one should underestimate the
difficulties that will be faced in trying to reform the
character of the Middle East. But the potential economic and
political rewards for the people are tremendous.
The positive developments in the Peace Process offer us the
unique opportunity to envision a peaceful and prosperous
Middle East in which the fruits of trust can be harvested
tomorrow by planting the seeds of economic cooperation today.
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