Trade and regional integration: analysis of the effectiveness in the GCC

Abstract

PurposeThe purpose of this paper is to analyze the effectiveness of the GCC integration.Design/methodology/approachBoth descriptive and comparative analyses are used. In order to measure the effectiveness, indicators like trends of trade, FDI inflows, joint venture project activities and technology diffusion are considered.FindingsThe analyses revealed that the Gulf Cooperation Council (GCC) regularly reviews the collective process of all the proposals to be executed. It also conducts an in‐depth analysis of all issues concerning the GCC states and their societies. The analyses also showed increasing trends in exports and imports, and high‐tech manufacturing after implementing customs union. In the same fashion, the number of joint venture projects, total capital investment and capital investment per project increase dramatically after executing customs union. The analysis further shows that the investment in large‐scale joint venture projects increases during the same period. The paper finds a sharp increase in FDI during the period between 2001 and 2004; within this period, the customs union has been implemented. This increased FDI is mainly due to the fact that the GCC attains enlarged domestic market size and stable economic growth after the GCC integration. The GCC integration also contributes to improve the push and pull factors of FDI that have further attracted increased FDI. The paper shows that the GCC countries have adapted and deployed new technology considerably quickly during the period 1999 to 2005 compared with the 1990s.Practical implicationsThe study noticed improvements in all indicators as well as the push and pull factors that enhance effectiveness of the GCC integration. To attain more effective regional integration, a periodic review of all the issues concerning the GCC states and their societies in light of the advancement taking place in the Arab world and international arenas is vital.Originality/valueThe study finds that the effectiveness of the GCC integration is progressive. The integrators that measure effectiveness such as trends of trade, FDI inflows, joint venture project activities and technology diffusion show increasing trends.