BEIRUT: The MENA region lags behind the rest of the world in terms of regional economic integration due to a lack of cooperation, political instability and an unsteady security situation, the Turkish Finance Minister told The Daily Star on the sidelines of an economic forum in Beirut.
However, an improvement in the political and security situation and the easing of sanctions on Iran could help MENA countries draw on untapped potential, Minister Mehmet Semsik said.
Semsik was participating in the “New Levant Economic Initiative,” a two-day regional conference co-sponsored by the World Bank and the Levant Business Union.
“Trade integration in Europe is over 70 percent. When it comes to the MENA region, it is only 8 percent if you exclude energy resources,” Semsik said.
The liberalization of trade and services should accompany improved political ties to benefit from complementarities between MENA countries, Semsik added.
“The six countries that founded the EU had 50 percent in complementarities and the same applies for Levant countries,” he explained.
According to the conference’s executive summary, Turkey and Egypt are poised to form substantial growth poles for a more open economic space in the region.
“Egypt provides an important connection to Arab markets ... at the same time, Turkey provides a large and geographically close potential for Arab countries’ goods and services ... Egypt and Iraq are well placed to attract capital investment from Turkey due to competitive labor costs” the executive summary read.
The liberalization of trade shouldn’t be considered as a zero sum game but rather a positive sum game, Semsik said
Trade flows among MENA countries have increased substantially over the past decade.
Regional trade flows among Egypt, Jordan, Lebanon, Syria, Iraq and Turkey have increased seven-fold from a three-year average of $4.2 billion in 2000-02 to $29.7 billion in 2008-10, according to the Turkish minister. Turkey had the largest increase in intra-group trade both in terms of value by 13-fold and the number of products by six-fold.
“Our participation in this conference is a clear indication of our commitment toward deeper regional dialogue and economic integration,” he said.
In terms of value increase, Lebanese-Turkish trade ranked second, growing by about 11-fold, and could be boosted further once Lebanon ratifies a free trade agreement signed by both countries in 2011, Semsik said. Turkey ratified the agreement in 2013.
Cooperation between Turkey and Lebanon extends to the banking sector. In 2011, Turkey granted a banking license to Lebanon’s largest lender Bank Audi that established a subsidiary by the name of Odeabank. Today, Odeabank is among the top 15 Turkish banks in terms of assets.
“We are very pleased with Bank Audi’s success and we believe its presence will serve as a bridge between the Lebanese and Turkish business community even in third party countries where Lebanese and Turkish businessmen are establishing joint ventures,” Semsik said.
The MENA region accounts today for roughly a third of Turkish exports compared to 10 percent a decade ago, Semsik said. Turkey, which has FTA agreements with Jordan, Syria and Iraq, is also looking to draw Foreign Direct investments from oil-rich Gulf countries.
“The Gulf parks its surpluses in the West and the West invests those in emerging markets and one of the leading emerging markets is Turkey. So why not directly invest in emerging markets?” Semsik asked.
More than 70 percent of the $140 billion that Turkey has attracted over the past decade come from Europe, Semsik added.
Turkey will also be looking to boost trade with Iran once international economic sanctions are lifted, according to Semsik.