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Arab countries are facing, as most other developing countries, anumber of economic challenges inherited from the 12th century and which may beexacerbated in the 21st century. Among these challenges are globalisation,water crises and sustainable development, technological change, and economicconsequences of the peace process.
Globalisation, as a growing international integration of marketsfor goods, services and capital, can be driven by vaious forces. First is theunprecedented increase in the international trade flow of about fifteen-foldduring the last four decades (as opposed to a six-fold increase of theworldâ??s population). Developing countries increased their share of globaltrade to 30 percent in 1995, compared with 24 percent in 1985. One of theimportant features of global trade is the increasing share of intra-firm trade,encouraged by foreign direct investment (FDI). Multinational world tradeamounted to US$5.3 trillion in 1992, compared to world exports of US$4.6trillion (UNCTAD, 1998).
Second is the force of liberalising financial markets and thegradual integration of those markets in developing countries with a globalfinancial system. This force has accelerated after many developing countriesagreed to remove restrictions on payments for account transactions, andabandoned control on cross-border financial flow in general, and foreign inflowin particular. This has been reflected in an increases in the number ofdeveloping countries trading under current-account convertibility to 70 percentin 1997, compared with 37 percent in 1985.
Third, the role of private FDI has been mounting and now outweighs that ofofficial FDI. FDI plays an effective role in the diffusion of know-how andcapital, and in the redefinition of the labour division on a global scale.Private capital flow, raised to almost 2 percent in developing countries, isstill modest. Although this share has increased to 38 percent of the worldâ??stotal, two-thirds of these flows went to just eight countries (World Bank,1996).
Fourth, technological advances in general, andin information technology in particular, have been contributing enormously tointegrae markets all over the world. Electronic commerce has been deepeningeconomic interdependence. Goods and raw materials are no longer the onlyobjects of trade. Crossing borders, among others, services, culture, media,entertainment, as well as electronic commerce has granted a new reality, whichhardly can be resisted. Globalisation cannot be halted, and the economic reachof nation-states is being challenged. Governments have little choice but toaccept the very fact that they must coordinate their efforts as never before.Technology and interdependence are making the distinction between industrialand domestic policies irrelevant.
Last, but not least, globalisation is influenced as well by the projectedincrease in the international trade flow, 6 percent per annum, due tomultilateral trade agreements, e.g., the Uruguay Round, and other regionaltrade arrangements. The Uruguay Round enhanced globalisation by liberalisingtrade in goods and services. Liberalisation is ensured by means of a number ofmultilateral agreements, such as those on tariffs and trade, agriculture,textiles and clothing, rules of origin, trade-related aspects of intellectualproperty rights, trade in services, etc. The members of the World TradeOrganization (WTO), which was initiated by the Uruguay Round, numbered 134 on 10 February, 1999, of whichnine are Arab countries.
The second challenge facing Arab countries is the water crisis and sustainabledevelopment. The population of the Arab region is about 3 percent of theworldâ??s total, whereas its share of the renewable water resources is only 1percent (Rogers and Lydon, 1994). Per capita water reached 3300 m3 in 1960,declined to 1250 m3 in 1995, and is expected to decline further to 667 m3 in2025 (World Bank, 1993).
The water crisis in Arab countries is caused mainly by mismanagement. Forinstance, the intensive natural water used for irrigation in the Nile, Euphrates and Tigris river valleys will deteriorate the quality ofwater. Moreover, the water wasted in the agricultural sector in most Arabcountries is a phenomena. Whereas this sector consumes about 88 percent of thewater used in the Arab world, the percentage wasted is about 66 percent. Thisis mainly due to the use of traditional irrigation methods. The other uses ofwater, 7 percent, is for domestic purposes, for which the waste reaches 40-60percent of the distributed water (Bel Haj, 1998).