Searching for a new regional economic identity

Last week's Dubai Strategy Forum raised many interesting issues, but underpinning the whole event was a quest for a new regional economic identity.

Dubai Crown Prince General Sheikh Mohammed bin Rashid Al Maktoum set the ball rolling with his call for some kind of a network of cooperation in the region. This sounds a vague appeal for all good men to work together, but there is a lot more to this than meets the eye.

First, we need to examine what region is being identified? Do we concern ourselves with the six GCC countries? Or does this mean the wider Middle East? Do we include North Africa, or the whole of the Dark Continent, plus India and Pakistan?

Sheikh Mohammed's vision is of a region encompassing all these elements, with Dubai as its trading hub. It is worth considering the powerful geo-political and economic forces at work in each of these components of this very broad region with some two billion inhabitants.

The Gulf States are clearly becoming more united by the day. From the start of next year there will be a customs union, with a common external tariff and no internal duties payable on the movement of goods. The next step is a currency union, now targeted for 2010, but which some talk about moving forward to 2005

Indeed Kuwait has recently announced that its dinar currency will move from a currency basket to a US dollar pegged arrangement. This means that all six Gulf currencies are now pegged to the US dollar, which should make a common currency easy to implement. And GCC governments have already called on the European Union for assistance after its recent experience with the euro.

The unity of the wider Middle East depends on pan-Arab sentiment and what happens in the Palestinian territories and Iraq. This is clearly a far harder card to call. But if a peaceful settlement of both these disputes were to emerge, or to be imposed, then regional unity would take a big step forward.

Spreading regional identity into Africa is more hazardous. This vast, under populated continent has sizeable Arab populations, in Egypt, Sudan and as far west as Morocco. But aside from supplying expatriate labor to the GCC, for example, its economic links with the Middle East are poor, although Dubai has growing connections with South Africa.

Even more controversial is the inclusion of India and Pakistan, and presumably Bangladesh and Sri Lankan, into a new economic region. Again the expatriate links may be strong (Dubai has a predominately Indian population, for example), but the actual level of trade is very modest, albeit growing.

So where does that leave regional economic identity? Certainly the kind of political and economic forces that pull a region together are present. But this is a much looser regional economic identity than Latin America and certainly not like Europe, although the parallel with the EU and GCC and the creation of a European identity is there.

It could well be that the GCC emerges as a focus of unity for the entire region, and that economic integration between these states helps to forge a wider unity in the Middle East. It may be that in time other regional states look to joint the GCC and that this organization becomes a wider Middle East body.

But for that to happen there will need to be an independent secretariat, like the European Commission in Brussels, and that will be a very controversial move. However, the co-ordination of monetary policy necessary for a common currency will be testing in itself, and this is an important step in creating a new regional identity.