In Theory: GCC must help Yemen overcome trade jitters

The talks being held between the GCC states and Yemen, especially with respect to Yemen joining certain GCC joint institutions and adopting the necessary conditions for its integration in the Gulf common market, are facing obstacles arising from the major discrepancy between the six Gulf economies on the one hand and the modest and closed Yemeni economy on the other.

In this context, there are two significant trends. The first is an emotional trend that calls for speeding up the process while the other is a rational but slow trend. The former ignores history and does not attempt to benefit from the aborted Arab experiences that have cost the Arab states so much money and effort.

The slow, rational trend does realise the extent of such a discrepancy and is well aware that Yemen is in great need of considerable aid and comprehensive reforms to be able to integrate into the overall Gulf economic system.

Last month, Yemen refused to set up a free-trade zone with the GCC and scrap customs tariffs. They are concerned about the domination of cheaper and high quality Gulf goods in its domestic markets, demanding compensation for the loss of customs duties that constitute major revenue for the budget.

True beginning

In general, the free-trade zone is considered the true beginning of economic integration without which no talk about a common market is possible. What is required is overcoming this obstacle to put the Yemeni locomotive on the right track before taking any other step.

Helping Yemen overcome such concerns is possible and essential as some GCC states expressed similar fears in the mid-1980s, i.e., when the free-trade zone was established between the six countries.

In this context, it is possible to provide temporary aid to support the country's budget and encourage Yemeni exports to the GCC. This would constitute a vital outlet for Yemeni products.

There is no doubt that economic blocs and common markets do have positive returns for all the parties that join them. Nevertheless, they require concessions to be made by all the parties concerned.

To ensure the success of Portugal joining the European Union, the EU states pumped about $40 billion to develop the Portuguese economy to put it on par with them. The same was done by unified Europe with Greece and it will do the same with the new ten member states that joined in May. A total of 24 billion euros will be pumped into these economies, including 8.2 billion into Poland.

Realisation

In turn, the new members are set to launch extensive reforms and will change many laws and regulations to conform with EU rules. Aid cannot be written off haphazardly as there are common interests to be considered.

The Gulf and Yemeni sides must realise this fact. Gulf aid and investment can flow into Yemen once the country has the laws and legislative infrastructure that is compatible with that in Gulf counterparts.

In addition, Yemen must embark on a new campaign of reforms that go beyond the old and bureaucratic economic concepts as well as the restrictions imposed upon the flow of trade and capital.

Joining the Gulf common market by Yemen and possibly Iraq is something that can take place if permitted by local and regional conditions.

This move, however, needs the financial support of GCC states and radical reforms of Yemeni and Iraqi economies.

The high customs tariffs and state control of the major sectors in both the countries are not compatible with the highly co-ordinated Gulf markets.

With wisdom, thought-ful moves and consideration of regional sentiments, the necessary ground can be paved for Yemen to join the Gulf market. The steps taken so far are in the right direction.

The writer is a UAE economic expert