KIME Mideast Studies
Korea Institute of the Mideast Economies
World Economic Order and Economic Cooperation in the Middle East: Study on Seeking after the Economic Cooperation between Korea and the Middle East in the 21 Century
The globalization in the international trade has been extended rapidly all over the world, demolishing geographical borders of the countries since 1990s. Rising above ideology and the border among countries, undiscriminative free trade is spreading under the influence of WTO system. The International labor market has been also greatly varied owing to the changing pattern of international division of labor. The international labor migration had proceeded from the low wage countries to the high wage countries before 1990s. The threatening power of the trade unions in the capitalist world is capable of overturning capitalist societies of wage-workers into societies of partners. For this reason, recently multinational companies seek another way to escape tariff barriers and to invest directly in the low wage countries in the form of joint-venture. This way is the second-best policy to raise the productivity and the revenues. Moreover, the world economic system faces new tripola system consisting of US, EU and Japan after the Gulf War. Because of this, new era which is co-existing with globalization and regionalism , and the mixed society between open market and trade barrier appeared in the world.
As you see, the Middle East has variety of races, languages, religions and geographies. It also contains more than 20 countries which are connected with three continents of Asia, Africa and Europe. In addition, the Middle East coexists with Christianity, Islam and Judaism as a cradle of religion. The Middle East also has large oil resources which is a major driving force in the modern industry.
Korea has emerged as one of the most successful NICs (Newly Industrializing Countries) and an inspiration to other developing countries. It has pursued consistently an Outward-Looking Foreign Trade Policy since 1962 and became the 12th largest trading country in the world. Korea also became the 29th member of OECD, the second Asian Country on October 11, 1996.
Korea's remarkable economic success is often cited as a model of sound economic planning, efficient resources allocation, and effective cooperation between the government and business enterprises. Now Korea witnesses radical changes of both domestic and world economic situations. Therefore, Korea must find a way to solve various problems besetting its economy, which range from high cost of wage and lagging technological innovation. On the international side, Korea faces uncertainties stemming from globalization and international environmental changes. Thus Korea's economic cooperation with resources rich countries is inevitably needed. The way how Korean human resources can harmonize with the natural resources of the Middle East will be the most important factor to cooperate two regions together as a favourable partner.
To examine the economic cooperation between Korea and the Middle East, my paper deals with the process of economic cooperation in the Middle East, economic cooperation organization in the Middle East, Middle East Regional Cooperation Program (MERC) and MENA (Middle East/North Africa) Economic Summit that are related with the Activities of the Economic Cooperation in the Middle East. Lastly I review the economic cooperation between Korea and the Middle East.
In this respect, this paper deals with the economic cooperatin of Korea and the Middle East under the new world economic order; Korean economy in the challenging and globalization era; and retrospect and prospect of economic cooperation between Korea and Middle East.
1. Changes of World Economic Order after the Gulf War
The present stage of world order after the end of the cold War displays no simple pattern. The United States is no longer hegemonic over the capitalist economy in the manner that it achieved in the 1940s, 1950s, and 1960s. But in some fields, particularly the military and the cultural, its dominance is greater in the 1990s than it has ever been. The collapse of Communism and the disintegration of alternative development strategies in the Third World has reunited the global political economy around the ideological principles of the United States. Meanwhile regionalism is in part a response to this situation. The United States, the European Union, and Japan might use the undoubted economic dominance that they enjoy in their regions to establish a political and security framework and a set of economic institutions which promote prosperity and development through trade, investment and aid. If such regionalist projects embrace open regionalism, they would still be compatible with the pursuit of policies at the global level through the G7 to stabilize the world economy and maintain economic growth(Andrew Gamble and Anthony Payne, 1996; 260-261).
Any way, the Gulf War may have marked the return of American unipower system, but it also demonstrated the need for the United States to exert its leadership as part of a coalition. The Gulf War was but one example of the types of threats the world will confront in the future. These issues will pose problems for the traditional pattern of U.S. hegemonic leadership, because they require collective leadership and policy coordination(Yoichi Funabashi, 1992; 68).
Although the Middle East crisis is a reminder that can't forget security issues, it is clear that the relative importance of security matters is dealing as compared with economic issues. The status of countries will be determined in the future much more by their economic capacities than by their military prowess. That dramatically enhances the role of Japan and an economically united Europe and sharply reduces the role of the Soviet Union. The other transformation is the change in the underlying economic capabilities that the payments at the time of the Gulf crisis also reflect. By the end of this decade, and maybe sooner, a truly Tripolar World Economic Structure will emerge, with sharing of burdens and responsibilities among a Unified Europe (EU), Japan, and the United States. America will no longer dominate. A United Europe will become the world's largest market and biggest creditor nation and a leader in many key technology. The Big Three of economics, therefore, will displace the Big Two of nuclear power(Challenge, 1990; 17). The most important thing is the appearance of the Bloc Economy that the Big Three ever had. European countries formed a single EU market, United States is now forming NAFTA with Canada and Mexico, and Japan, even though hard to organize it, is planning East Asia or Pacific Economic Community to cope with regional protectionism of the world trade. In the future, Regional Economy will play a great role in the world trade with the Big Three.
2. Middle Eastern Economic Order after the Israel-PLO Peace Talk
The Middle East has been faced with its new era in accordance with the Peace Talk of the Middle East. Israel and Palestinians that have maintained hostilely relation over 45 years signed the bilateral Palestinian autonomy plan on Sept. 13, 1993. Iraq's status was weakened in the Middle East due to the peace talk between Israel and PLO. The US could secure the hegemony that enabled her to manage the other Arab states in a better position. Except Iraq after the peace talk between Egypt and Israel in 1978, the Middle East had no real country that could act as a spokesman of Palestinians. The background of Iraq's survival was Iraq's will to be a spokesman of the Arabs against Arab-Israeli conflict. This situation provided to Iraq an opportunity that could be supported by Jordan, Yemen, Libya and PLO during the Gulf War of 1991. On the contrary, the neighbour Arab countries, especially Egypt and GCC countries with the western allies turned away their face from PLO. PLO had suffered severely from economic difficulty with UN's economic sanctions against Iraq. This situation, however, was changed with the peace talk between Israel and PLO. In Palestinian issues, Egypt and Iraq are no longer direct partner to solve it, because PLO, an apple of discord of the Middle East, joined hands with Israel and got out of the reconciliation table directly. Iraq and Egypt had lost their specified duty as a spokesman of the Arabs and now are in the face of a new era for transformation that they can remain the leading nation among the Arabs(Seong Min Hong, 1994; 19-21).
In accordance with the Israel-PLO peace talk, economic order in the Middle East brought out various changes. After the Gulf War, PLO had been suffered from economic difficulties due to the UN' s economic sanctions against Iraq. PLO that is a key factor of the conflict in the Middle East selected Israel herself and turned her back to Iraq. Furthermore Israel is expecting to find new friends in the neighbour Arab countries.
These caused increased Iraq's isolation in the Middle East and the other side Israeli status rose. Iraq has been suffered from severe financial embarrassment aftermath economic sanctions. This prolonged situation caused that Iraq is eager to close her hand with US and try to solve the economic difficulties including economic rehabilitation. US was pressed with time table at the time of the Gulf war, however, Iraq is pressed with time table now. As for time affairs in the Middle East, US is in a better position rather than Iraq as time flies. Current issues of the Middle East is the removal of economic sanctions against Iraq in the international oil market. But its removal depends on US attitude that act as a UN's spokesman. US, therefore, takes advantage of any current available means in the negotiations with Iraq.
Certainly Iraqi situation on September 3, 1996 brought out the changes in the Middle Eastern economic order. Iraq was waiting the expectation to remove UN's economic sanctions after the Gulf War. Really UN agreed to remove it on May 29, 1996. Finally the removal act was approved by UN on July 18, 1996. Under the hopeful conditions, US attacked Iraq on September 3, 1996 on account of Iraqi repressing to Kurds. This situation was different from the impacts of the last Gulf War. All the Arab countries including Egypt and GCC countries supported Iraq under banner of the non-intervention in the domestic affairs. Besides, Iran and Turkey joined in this trend. Iraq was regained its proud and the Arabs began to unite around Iraq. Thus the economic order of the Middle East is proceeding unclearly till now. Adding this situations, Palestinians and Israelis clashed in Jerusalem on September, 1996. The peace process in the Middle East was threatened by the worst fighting between Palestinians and Israelis in 30 years. At first the summit was to be held in Cairo. But Egyptian president Hosni Mubarak refused to be host unless Netanyahu agreed in advance to some substantive concessions. Washington meetings that Arafat, Netanyahu and king Hussein of Jordan had attended with Clinton was a scriptless meeting. Therefore the issues how to sole this situation is the greatest concerns and tasks in the new economic order in the Middle East.
1. Challenging of Korean Economy in the World Economic System
The most challenging task that the Korean economy faces today is how to overcome the protectionism and economic regionalism that is now prevalent in the world economy. In this regard, the new Korean government puts much emphasis on establishing a basic orientation for foreign trade policies to correspond to ever changing international conditions. In the case of the Korean economy, which has a high degree of dependency on foreign transactions, it is almost impossible to separate domestic policy and foreign trade policy because these policies are so closely interrelated. Therefore, the direction that the international economic order takes, which is strongly influenced by the three economic superpowers, the U.S., Japan, and the European Union, will have a great deal of influence on the Korean Economy(The IPE program, 1995; 51).
Prof. Cae-One Kim urges that Korea's interest in the tripolar economic system led by the US, Japan and EU as follows. First of all, this system playes a major role in almost all areas of the world and Korean economy: from trade and capital movement, to finance and technology cooperation. Therefore, it is obvious that Korea's relationship within this system will have a great impact on its economic development. In Korea's experience, each economic bloc shows some different and unique characteristics in its relationship with Korea. For example, the U.S. is Korea's biggest trade partner, especially in export, but Japan is the country from which Korea imports the most. The EU, despite its important role in international trade, accounts for a very small portion of Korea's Trade. On the other hand, the U.S. and EU play a major role in the areas of capital and financial cooperation, and Japan in the area of technology cooperation(ibid.; 53-54). We can see at Table 2-1. that Korean trade has a high degree of dependency on the exports to U.S. and the imports to Japan.
The major actors are the three economic super powers. Their arbitrary and unilateral foreign economic policies sometimes cause confusion in the world economy and have a significant impact on Korea's foreign trade. Because Korea is heavily dependent on the U.S. and Japanese markets, their mutual relations and game plans are inevitably major concerns for Korea and other small economics(ibid.; 54-55).
Table 2-1. Major Trading Partners of ROK (% of total trade)
Source: EIU, 1994, EIU Country Profile; South Korea and North Korea 1994-95, P. 44.
2. Korean Economy in the Era of Challenge and Globalization
1) Korean Economy: Past and Present
The 1960s and 1970s marked Korea's great leap toward a semideveloped state, and the 1970s and 1980s saw the transition from semidevelopment to economic maturity in Korea. Can Korea continue to grow rapidly and follow Japan into the ranks of non-western advanced countries? Both Korean and foreign experts have tried to answer this question. Generally, foreigners tend to be more optimistic than Koreans about the future of the Korean economy(Byung-nak Song, 1990; 231). Dr. Cho Soon also argues that Korea can be optimistic about the abundant growth potential of the country. The many good scientists educated abroad can enhance the level of science and technology. There are many good, experienced administrators who can establish order and discipline. And above all, there are people who still work very hard. the Korean people are now, as ever before, demonstrating exuberant energy in their pursuit of economic gain. As long as these motives are guiding economic life, a significant slowdown in economic activity is unthinkable, and the growth of the economy is assured(Cho Soon, 1994; 196-197). Korea has attained the rapid economic growth except 1980 since 1960s. Table 3-1. shows Korea's major economic indicators over the past five decades.
Table 3-1. Korea's Major Economic Indicators over the Past Five Decades
Source: The Korea Economic Weekly, August 21, 1995.
Globalization characterizes today's world economy to the extent that private firms are increasingly carrying out their business on a global scale. Intensifying competition in international markets, globalization no longer confines the economic activities of private firms within national boundaries. Consequently, globalization highlights two trends in the international division of labor: in one, the performance of firms within an industry is increasingly identified with the performance of the nation; in the other, there is a strong interaction effect between the investment strategies and technological sophistication of the firms and changing trade patterns(Honggue Lee, 1996; 4-5). As you see Table 3-2. Korean Firms' Overseas Investment has increased and extended with the open-door policy. The area of foreign investment has broadened steadily all over the world. But it still leaves a problem that Korea's Foreign investment is concentrated with South East Asia and America.
Table 3-2 Korean Firms' Overseas Investment
Source: The Korea Economic Weekly, December 11, 1995.
In short, Korea has achieved its high rate of growth by adopting an export-led growth strategy, which has allowed the country to make fullest possible use of its substantial endowment of human resources and to compensate for the shortage of poorly endowed natural resources. The export-led growth strategy was implemented by an energetic government in collaboration(Cho Soon, 1994; 178). In Korea the stage of extensive growth is over, the country needs a much more liberal approach with respect to international trade and investment. Korea is now exposed to international competition, and the only good way to survive in it is to complete with other countries, playing by international rules of the game.
From the international perspective, all Asian newly industrializing economies, including Korea, are in transition. Korea's competitive advantage in labor-intensive manufactured goods is being eroded by rising wage rates, a diminishing rate of improvement in productivity, and increasing difficulties in achieving technological breakthrough. The technical gap with advanced countries is not being narrowed, while the gap with later-developing countries-notably, the countries of the Association of Southeast Asian Nations-is being closed. There is no room for complacency, and the best to confront the future is to take risks by internationalization(ibid.; 190).
In the rapidly changing world economic order, institutional reforms are indispensable to response the challenges of the new world economic circumstances such as WTO and OECD. The old institutions in the early stage of economic development do not function effectively to meet the challenges ahead. Along with it, the training of international specialists is indispensable. Korea pursues an open economy and efforts in search of internationalization. When we can accommodate globalization into our indigenous culture, Korea will take a step forward in re-taking off and entering into the international society.
2) The Motives and Success of Korean Industrialization
Korea has completed three decade of rapid industrialization based on the export of manufactures, a course to which it was impelled in the 1960s by the meagreness of its natural resources. Above all, the motives of Korea's rapid economic growth stemmed from the will of which Korean government that was eager for industrialization. It was embodied by Saemaul Movement in the early 1960s. Now Korea has moved from a stage where its advantage lay in cheap manual labour to one where that advantage lies rather in relatively cheap skilled labour and line management. Its exports are no longer dominated by textiles and clothing, but include ships, motor vehicles, integrated circuits and consumer electronics. Table 3-3 shows recent Korea's industrialized export products.
Table 3-3. Ranking of Korea's 10 Major Export Commodity Groups ($ million, %)
Source: The Korea Economic Weekly, March 11, 1996.
Korea now seeks increasingly to develop its own technology and to sell under its own brand names. Its growing wealth is shared more equally than in many other rapidly developing countries, its farming is firmly based on the owner occupation of small holdings and it has coped impressively with its dependence on energy imports. The fall in export volume experienced in 1989 illustrates the difficulties to the transition Korea is making to knowledge-based, high-productivity export sector. Exports remained too sensitive to price considerations to weather the combined effects of a rising currency and soaring wages(EIU, 1995; 14).
Korea's remarkable economic success of the last quarter century is often cited as a model of sound economic planning, efficient resources allocation, and effective cooperation between government and business. The rapid development was led by export-oriented industrial expansion and was achieved in spite of poor natural resource endowments. Korean economic growth characterizes many factors, including investment and rapid capital growth, expansion of industrial productivity, and the development of human resources and labour productivity. Other contributing factor is the favourable worldwide conditions prevailing during the 1960s. It contains Korea's political stability, the commitment of government for economic development - by the launching of the First Five-Year Economic Development Plan, 1962-66 -, the outward-looking strategy of industrialization, the vitality and entrepreneurship of leaders, the grassroots support and participation in rural transformation, and the close government-business interplay in Korean Economic development. In the course of Korea's economic development, education by the Confucian cultural basis played great role to enhance the quality of the labor(Seong Min Hong, 1992; 22-23).
Korea has emerged as on of the most successful NICs (Newly Industrializing Countries) and an inspiration to other developing countries. The success of this approach is clearly shown by the fact that from 1962 to 1989 Korea's Gross National Product grew, in real terms, by an average annual rate of 8.5 percent, reaching $210 billion in the latter year, compared with $2.3 billion at the start of the First Five-Year Development Plan. During the same period, per capita GNP increased from $87 to $4,968 in the current prices. During the past two-and a-half decades, there has been a marked quality change in the nation's industrial structure in response to fast-paced economic development1). Korea also witnesses radical changes of the world economic environment and domestic situations. Therefore Korea must find way to solve various problems besetting its economy, which range from mounting inflationary pressure, high cost of wage and services to lagging technological innovation, and expanding economic infrastructures(ibid.; 23-24). On the international side, Korea faces uncertainties stemming from such international environment as WTO and OECD.
3) The Foreign Trade Policy and Liberalization of Korea
Since 1962 the Korean government has consistently pursued an Outward-Looking Foreign Trade Policy, and, as a result, trade volume expanded more than 258 times between 1962 and 1989, with her export-import volume totaling $123.8 billion in 1989, which raised Korea to the rank of the 12th largest trading country in the world. As a consequence, the ratio of foreign trade to GNP rose nearly threefold from 20.9% in 1962 to 74.5% in 1989. During the same period, the Korea's export growth rate averaged 31.0% annually, and its import growth rate was 20.1%(ibid.; 24-25). 1989 saw the beginning of a short transitional period, in which Korea adapted to the loss of markets for labour-intensive manufactures. Although a current-account surplus of $5.1bn was earned and foreign debt was further reduced, exports succumbed to the twin pressures of currency appreciation and high wage increases.
In 1982, for the first time since World War Ⅱ, Korea registered a trade surplus with respect to the United States that amounted to about $0.3 billion. It caused the United States to request a more substantial import liberalization from government that was conducive for Ministry of Finance and Mistry of Trade and industry undertaking the Five-Year Tariff Programme (1984-88) and Long-Term Import Liberalization Schedule (1984-88), respectively. The rapidly rising trade surplus caused the direct and fierce intervention of U.S. government. The Korean government decided to solve the current-account surplus problem by completely liberalizing the imports of manufactures, for example, by increasing the number of AA items and lowering the rates of tariff as scheduled, making special concessional tariff cuts, eliminating the Surveillance List, and revising Special Laws that used to restrict imports even for items on the list of automatic approval. The external pressures on Korea to open up its domestic market completely provide a new growth potential if the government gives positive responses to these pressures. In the absence of systematic responses, there is the danger of chaotic destruction of Korea's service and agricultural sectors(Wontack Hong, 1994; 458-465).
1. The Organization of Economic Cooperation in the Middle East
At present, the Middle East has four economic cooperation organizations. Three of them consisting GCC, ACC and AMU is Arab cooperation bloc and the other, ECO is non-Arab economic bloc as follows. Firstly the Gulf Cooperation Council (GCC) was established in 1981 and its members are Saudi Arabia, Kuwait, UAE, Bahrain, Oman and Qatar. Secondly Arab Cooperation Council (ACC) was established in 1989 and its members are Jordan, Iraq, Egypt and Yemen. Thirdly Arab Maghreb Union (AMU) was established in 1989 and its members are Morocco, Libya, Algeria, Tunisia and Moritania. lastly non Arab bloc, Economic Cooperation Organization (ECO) started, at first, in the name of Regional Cooperation for Development (RCD) that is composed of Turkey, Pakistan and Iran in 1964. RCD is the first organization of economic cooperation in the Middle East. But its activities never had been realized and dissolved in 1979. To reopen its activities, the foreign ministers meeting at Teheran agreed to change the name ECO instead of RCD in 1985. Now ECO's member countries are Turkey, Iran, Pakistan and some Islamic countries such as Azerbaijan, Uzbec, Trukmen from CIS (Seong Min Hong, 1992; 368-422).
Since these economic blocs have a political characteristics, economic cooperaton is greatly influenced by the political impacts. For example, ACC countries such as Jordan and Yemen, supported Iraq at the Gulf War. Egypt is the only country among ACC countries, which lined up the side of multinational army on account of political interest. Libya, as a AMU country and Iran, as a non-Arab state also supported Iraq at that time against the west. This situation shows the disruption of the Arab countries in the Middle East. After the Gulf War, this tendency has changed flexibly with the Arab-Israeli peace talk in this region. Now the economic cooperaton bloc in the Middle East is a political body rather than economic body. Therefore economic cooperation within the Middle East is very flexible with the political situations.
Though ACC and AMU hardly operate in the Arab region, these four economic blocs have to search for a new line of economic cooperation. In the process of economic cooperation, US' s influence acts greatly as a main partner. The situation like US' s attack to Iraq and PLO-Israeli clash are hard to set up the line of the Middle Eastern economic Order. The four economic blocs in the Middle East will act according to the national interest. Now it is difficult to predict their ongoing cooperation issues. New economic order of the Middle East, however, will develop in the form of a comprehensive cooperation including non-Arab countries in coincide with the political and economic interest.
2. The Process of Economic Cooperation in the Middle East
The important thing in the Middle East is a peace settlement including Arab-Israeli peace. Although the Middle East has her own dynamics and characteristics, the region is extremely vulnerable to political situations by the Arab-Israeli conflict. For example, the Arab-Israeli conflict was manipulated by Iraqi Saddam Husein during the Gulf War. Hence the Arab-Israeli conflict is a principal barrier to economic development in the region. This barrier prevents the capitalist countries from investing in the Middle East.
The Gulf War, and the response to it, were historic watersheds in intra-Arab, the Gulf, and international politics. They coincided with, and were made possible by, an even greater historic watershed, namely the end of the cold war and the collapse of the socialist bloc. As with other historic events, the Gulf War and its aftermath led to much talk about New World Order. Yet the outlines of this new order are not clear. But it is quite clear that the challenge to Gulf security is different from that of the past. The Middle East faces a new challenge to develope her economy and keep friendly relation with Arab and non-Arab countries (Seong Min Hong, 1994 20-25).
At the outset of the Middle East peace, a non-governmental effort initiated since the beginning of 1991. The Initiative starts from the premise that issues of diplomacy, security, economics, and civil society need to be addressed simultaneously. At the heart of the Initiative is the Core Working Group made up of more than 35 Egyptian, Iranian, Iraqi, Israeli, Jordanian, Kuwaiti, Lebanese, Omani, Palestinian, Saudi, Syrian, Turkish, and Yemeni participants. Among its members are retired generals and ambassadors, human rights activists, heads of institutes, security experts, parliamentarians, and business executives. Members participate in Initiative activities as private individuals, but many are in close touch with their governments.
Core Working Groups participants decided to establish four Substantive Working Groups and to publish a quarterly Bulletin of Regional Cooperation in the Middle East. These Working Groups are: (1) Security; (2) Civil Society; (3) Conflict Resolution; and (4) Media. Participants in each Group include Core Working Group members, additional regional members, and some Western specialists(http://www.searchforcommonground.org/ipcmemai.htm).
After the Gulf War, many experts predicted new order of GCC Axis. This order, however, is not clear till now. If the new order of US-EU-GCC Axis is embodied by the west, Iraq, Libya and other radical Arab countries will stimulate neighbour Arab countries with the issue of Arab unity. Moreover Iran, non-Arab country will support Iraq to persue joint interest among the OPEC member countries, and its impact will bring out more complex problems. Iraq, Iran and Libya are the radical countries urging high-price policy inside OPEC. These countries will cooperate economically as far as oil concerned. Even though the former USSR lost her power, these countries will ask for cooperation USSR. It is a reason that new GCC Axis's order was not realized easily in the Middle East. Table 2-1. shows the economic zone of the Middle East and merchandise trade of 1992.
Table 2-1. Middle East Economic Zone
Note: Levant includes Egypt. Maghreb includes Libya.
Source: Patrick Clawson, 1994. Journal of International Affairs, Summer.
3. Activities of the Economic Cooperation in the Middle East
1) Middle East Regional Cooperation Program (MERC)
The Middle East Regional Cooperation Program (MERC) was created in 1979 to promote cooperation between Israeli, Egyptian and American scientists. The MERC Program was established as a result of the Camp David Peace Accords to promote cooperation between Israel and Egypt. MERC has since expanded to include activities with Egypt, Jordan, Morocco, the Palestinian Authority, Lebanon, and Tunisia. The dual goals of the MERC Program are peace process and development in the Middle East region through cooperation. Since 1989, projects have expanded to include other Arab nations. The U.S. Agency for International Development allocates $7 million to fund the program (http://www.us-israel.org/jsource/US-Israel/merc.html).
MERC has no set priorities, but focuses on projects in human and animal health, marine technology, water management, pest control, sustainable development and agriculture. Any project of joint interest to Israel and an Arab country (Egypt, Morocco, Tunisia, the Palestinian Authority) is eligible, but the emphasis is on solving economic and social development problems, and developing or advancing shared economic and social development opportunities2).
MERC focuses on technical problems in the areas of agriculture, health, environment, economics, and engineering. Funds are provided for grants of up to $3 million over five years. Current grants range in size from $200,000 to $3 million. Awards are made based on review of technical merit and the contribution to peace and development in the region. In this regard, true collaboration and regional significance are key elements of all MERC projects. It is expected that approximately five to eight new grants will be awarded each year (http://www.info.usaid.gov/regions/ane/guide.htm).
Complete preproposals will be reviewed by a committee composed of USAID and State Department representatives from technical offices and Middle East regional bureaus using the following criteria: 1) Strength of collaboration, 2) Relevance to regional development, 3) Merit and feasibility of program approach and, 4) Innovation of approach.
2) MENA (Middle East/North Africa) Economic Summit
1. General background and objective
Since the signing of the Israeli-Palestinian peace accords in 1991, the Middle East Peace Process inched slowly from diplomatic encounter to diplomatic encounter, achieving only grudging progress on difficult to negotiate issues of authority, self-rule, and military presence. In August 1994, however, a courageous move by one of the most ardent supporters of peace in the region, King Hassan II of Morocco, created a dramatic break- through in the glacial progress of contact and concrete accomplishment. Responding to the initiative of Presidents Clinton and Yeltsin, he invited representatives of Middle East and North African countries, the United States, European and Asian countries to attend a three day conference in Casablanca, Morocco. This conference, which was convened by the World Economic Forum3) and the Council on Foreign Relations, was an opportunity to discuss a framework for regional economic cooperation and scientific exchange (Middle East/North Africa Economic Summit Executive Secretariat; http://www.mena.org/neweeb/general.html).
One year later (October 29-31, 1995), almost 2,000 representatives from sixty-three countries reconvened in Amman, Jordan, at the invitation of King Hussein of Jordan, for the second Middle East/North Africa Economic Summit. The hallmark of this second historic gathering of Arab and Israelis, also convened by the World Economic Forum, was a commitment to create sustainable institutions capable of transforming political rhetoric to economic realities. One of the achievements of the Amman Summit was the decision to move forward with the establishment of an Executive Secretariat4), based in Morocco, thereby contributing to the institutionalization of processes of regional economic cooperation. Specifically, participants charged the Executive Secretariat with "advancing the public-private partnership, promoting contacts, sharing data, and fostering private sector investment in the region," particularly in the context of the wide range of projects introduced at the Casablanca and the Amman summits. The office of the Executive Secretariat has now opened in Rabat and is in the process of finalizing programs in the areas of regional investment promotion, scientific and technology exchange, and supporting the role of business in regional economic cooperation(Middle East/North Africa Economic Summit, Amman Declaration; 1995)..
King Hassan II also invited business people from the region and from the developed world to attend the event and to begin the process of open discussion and discovery fundamental to the establishment of profitable economic relations on the eve of the 21st century. In response to the Monarch's call, over 3,000 senior political representatives and leading economic figures from 61 countries attended the Casablanca Summit (October 31 - November 2, 1994). For the first time in recent history, Arab and Israeli business people met and interacted in an open forum to discuss the mutual benefits of regional commercial and scientific exchange from October 31 to November 2, 1994. Participants agreed to meet in the coming year to continue building the institutional framework required to consolidate the extraordinary accomplishments of the Casablanca Summit. The goal of Middle East/North Africa Economic Summit specified at Amman Declaration5).
2. MENA Economic Summit
The first summit was presided by the Kingdom of Morocco. In August 1994, King Hassan II of Morocco, created a dramatic break- through in the glacial progress of contact and concrete accomplishment. He invited representatives of Middle East and North African countries, the United States, European and Asian countries to attend a three day conference in Casablanca, Morocco.. This conference, which was convened by the World Economic Forum and the Council on Foreign Relations, was an opportunity to discuss a framework for regional economic cooperation and scientific exchange.
King Hassan II also invited business people from the region and from the developed world to attend the event and to begin the process of open discussion and discovery fundamental to the establishment of profitable economic relations on the eve of the 21st century. In response to the Monarch's call, over 3,000 senior political representatives and leading economic figures from 61 countries attended the Casablanca Summit. from October 31 to November 2, 1994. Its main goal was to allow business people of the region to meet and to support the peace process in the Middle East.
The second Middle East/North Africa Economic Summit was held in Amman, Jordan under the patronage of His Majesty King Hussein bin Talal from October 29-31 1995. The Summit, cosponsored by the United States and the Russian Federation, with the support of the European Union, Canada, and Japan, brought together government and business leaders from the Middle East and North Africa, Europe, the Americas, and Asia. One of the achievements of the Amman Summit was the decision to move forward with the establishment of an Executive Secretariat, based in Morocco (http://www.mena.org).
The third MENA Economic Summit took place in Cairo from November 12 to 14, 1996. 63 nations are participating in the conference. This is in addition to some 850 international companies and 1500 businessmen and investors. The summit is aimed at enhancing the peace process by widening cooperation among the states of the region, including Israel. One of the basic aims of the conference is to create a huge market for profitable investment in the region. It also aims to open Arab markets to Israel. It is an attempt to free economic relations between the Arabs and Israel from political restrictions and is designed in essence to render powerless the Arab economic boycott of Israel (Hassan Tahsin, 1996; 1).
The Fourth MENA Economic Summit took place in Doha, Qatar from November 16 to 18, 1997. 2256 total number of participants are participating in the conference. This is in addition to 139 business sponsors and 1278 businessmen and 561 governments. The 1997 Summits have played an instrumental role in bringing the much needed business dimension into the reconciliation process by helping to launch the region on a path towards sustained economic development.
It is appropriate that the first MENA Summit in the Gulf region should take place in Qatar. Rich in Natural resources, Qatar has also demonstrated its commitment to developing as a vibrant business and investment centre. In addition to geographical proximity to Eastern and Western markets and a stable economic and political environment, the country has recently introduced new codes and laws to facilitate private sector investment. Qatar is positioning itself to be in the forefront of the regional economic development process and all financial indicators suggest that the country offers sound growth potential(http://www.mena97.org.qa).
3. MENA Bank
The Bank for Economic Cooperation and Development in the Middle East and North Africa (MENABANK) is an outgrowth of a historic joint proposal made in October 1994 by the four core parties to the Middle East peace process: Egypt, Israel, Jordan and the PLO. The prospective members make up a broad geographical cross-section of supporters of the Middle East peace process. Just over 75% of the shares have been spoken for by 19 regional and non-regional parties.
The Articles of Agreement are open for signature at the United Nations. Domestic ratification processes can be expected to take several months. Many of the prospective members have signed the Charter of the Bank and most of the prospective members are well advanced in their ratification procedures. Japan and the Netherlands have ratified the Charter of the Bank, becoming the first of the prospective members to do so (http;//menabank.org). Establishment, Status of MENA bank described Article 1. Article 2 and Article 3 specified Purposes and Cooperation with Other International Organizations6). Table 4-1 shows the capital subscription.
Table 4-1 Capital Subscription of MENA bank.
Sources: MENA Bank, 1998.
4. Mediterranean Development Forum (MDF)
Some agreements have been reached at Amman Summit in 1995. A Bank for Economic Cooperation and Development in the Middle East and North Africa will be established in Cairo. The establishment of a Regional Tourism Board, the Middle East-Mediterranean Travel and Tourism Association, to facilitate tourism and promote the region as a unique and attractive tourist destination. The establishment of a Regional Business Council to promote cooperation and trade among the private sectors of the countries of the region. The formal inauguration of the Economic Summit Executive Secretariat, which is located in Rabat and works to advance the public-private partnership, promoting contacts, sharing data, and fostering private sector investment in the region. The participants expressed their appreciation to the Moroccan Government for its contribution to this effort, and confirmed their support for its ongoing activities.
As a complement to the regional institutions called for at Casablanca, the Steering Group of the Multilateral Peace Negotiations has decided to establish REDWG Monitoring Committee Secretariat as a permanent regional economic institution to be based in Amman. All participating parties have agreed that this institution will promote and strengthen regional economic cooperation in the Middle East and North Africa. The regional parties strongly recommend that the Secretariat's activities will cover the range of sectors within the REDWG Monitoring Committee's work, ie infrastructure, tourism, trade, finance, and areas within the Copenhagen Plan of Action. The core parties in close consultation with the European Union and other members of the Monitoring Committee undertake to finalize the appropriate document on the structure and operational functions of this institution, which will be submitted to the next meeting of the REDWG plenary, with a view to the commencement of the institution's activities in the first half of 1996. This REDWG plenary will consider the matter, take appropriate action, and report to the upcoming meeting of the Multilateral Steering Group7).
This conference will launch the Mediterranean Development Forum (MDF), a broad partnership initiative devoted to harnessing the information revolution for improved policies to alleviate poverty and to achieve sustainable development in the Mediterranean region. The MDF will pursue its objectives by organizing an annual development fair for the region, working to disseminate knowledge, and encouraging the formation of skills among the development community in the region (The Mediterranean Development Forum,1997, http:www.mena.org).
The efforts of the Mediterranean Development Forum are based on the recognition that throughout the region, countries are confronting similar challenges and opportunities as their economies become more integrated with the global economy8). The core participating countries are the developing countries of the Mediterranean, with the geographical reference used in its broad sense. This would include the countries of the Arab League, Iran, and Turkey.
1. Retrospect & Prospects
Korea opened the way to the first investment in the Middle East by participating Samwhan Company's high way construction in Saudi Arabia in 1973. By the end of the 1980s, the construction sector became an important part of the economic cooperation with the Middle Eastern nations, and the amount of Middle Eastern trade was also increased largely. But Korea has highly depended on US, Europe and Japan as the main trading partner. The Middle East still remains on of the profitable constructing market. The Table 6-1. shows that the Middle Eastern contracts are reached 2,040 among the total number of 3,286 in 1995 and kept over 80 % in the total amount of the contracts. However, these trends has been changed according to the political situation of the Middle East. Korea has been heavily concentrating on the construction and commodity trading sectors.
Table 6-1. Korea's Construction Contract and its Trend (Unit: 1,000$)
Source: Haeoaegunsul. 1995-1996. THe International Contractors Association of Korea.
In this respect, this paper suggests that this is the time for developing a wider-ranged economic cooperation which combines the Korean technological manpower and the Middle Eastern natural resources. As a example of such kind of cooperation, Korean SSangyong Company and Saudi Aramco promised to establish a refinery factory at Onsan in Korea as a form of joint-venture in 1991. In the future, this kind of cooperation will be a desirable model of combining natural resources and technology and be helpful for both countries' economic development.
Nowadays, the most important matter in the Middle East is the political stability, including Arab-Israeli peace settlement. If it is achieved, the tour industry which connects all the Middle Eastern countries, such as Egypt, Jordan, Syria, Turkey and Israel will develope. Also it could bring the common management of water resources for the agricultural development which still remains as a controversial issue. In this contents, we should consider the economic cooperation within the general terms of the Middle Eastern nations including both the Arab and non-Arab countries like Israel, Turkey, and Iran. As we can see in the Table 6-2., the trading with non-Arab states has been increased, but it is also severly influenced by the political situations of this region.
Under the new world economic order, Korea is expected actively to share the responsibility for maintaining world economic stability and prosperity. In particular, Korea is expected to play an important role in preserving a global economic environment. For this goal, Korea should accelerate both domestic and international liberalization. At the same time, Korea as a pioneer country has an obligation to provide positive contributions for follower nations of the developing world through active economic cooperation. Korea's recent establishment of the Economic Development Cooperation Fund for the purpose of assisting developing nations is an important first step in this direction. For the time being, however, Korea has more to offer in the area of technical assistance through use of its abundant human resources. The most recent first-hand experiences of managing developmental efforts at both the macroeconomic and project level can be used in assisting follower nations. In this regard, Korea's technical assistance programs might very well be interlinked with programs at various multilateral institutions( Il Sakong, 1993; 210-211).
Table 6-2. Trends of Korea's Export/Import to non-Arab Middle Eastern Countries (Unit: $1,000, %)
Note: The customs basis. RI. is the ratio of increase.
Source: KOTIS, 1996.
The Middle East can be a new target for Korea's market diversification policy. Korea's past experiences provide an ample supply of knowledge and ideas on various approaches to contemporary economic and social developments for the less developed areas in this region. Korea will be benefited from helping the Middle East. Moreover, Korea's continued cooperation with them could extend collaboration to range of other issues. In particular, Korea will be able to contribute to facilitating the diffusion of development experiences by actively participating in it
To realize the effective economic cooperation, it is needed more specified studies about the Middle Eastern society. The term of Middle East contains about 20 countries consisting of Arab and non-Arab nations which have different cultural backgrounds. In the cases of Saudi Arabia and Iran share the same religion, Islam, but they take different stands in the religious dogma. Therefore, it is necessary to prepare a special multi plan which is focusing on special characteristics of the different nations, such as Arab vs. non-Arab; rich vs. poor; Islam vs. non-Islam; and large absorptive capacity vs. small absorptive capacity. In other words, the more specified Middle Eastern studies are required for the better understands of this region. Also, for the most effective economic cooperation we have to invest in training the specialists for each different nations and fields.
Various changes are taking place in the Middle East after the peace treaty. Among them, it is noticeable thing that Israeli changed their mind. Nowadays Israelis take more flexible stand than before against the establishment of Palestinian State. Accordingly, it seems that these situations greatly affect the economic cooperation between inter Arab and non-Arab. It also affects the economic cooperation that strengthens the economic bloc in the form of Arab unity in the Middle East.
By the reason of it, ‘Pan-Islamic economic cooperation' projects are spreading widely in the region. In short, Pan-Islamic economic bloc aims that the establishment of economic bloc, that is consisted of the developing countries beyond the Arab concept, reduce the political dispute and extend the geographical bound. These facts gives Turkey the opportunity as a mediator in the non-Arab economic cooperations. At the beginning of 1997, moreover, the change of the Middle Eastern economic order is accelerating and the pattern of economic bloc tends to divide it into two parts, i. e. Arab vs Israel or advanced countries vs Islamic countries.
In ancient times, the great role of businessman, the adventurer enabled contacts between the East and the West through Silk Road. The world cultural exchange has been led by the activities of businessman, the adventurer still now. Because of this reason, international businessmen can be called frontiers of cultural exchange in these days. The world is getting smaller and smaller, and becoming one international network society by those people. Waiting for the new age of land transportation ,such as using railroads, Koreans expect to meet the Middle Eastern people who acted as the middlemen between the East and the West during the age of Silk Road.
Unlikely Japanese case, Korea has insufficient capital. Especially Korean economy has been suffering from IMF incident since last December. Therefore Korea must find a different way from Japan that has much foreign exchanges. Stroking of good luck in the midst of misfortune, Korea has a highly skilled human resources and the Middle East has a plentiful natural resources. These two resources have to be combined by man made resources that needs a huge capital. The capital investment, however, is the greatest stumbling block to interfere the cooperation.
Korea find a way to combine human resources with capital in the Middle East. Relating to invest in the Middle East, Japan will be a good partner with Korea. Thus the economic cooperation between Korea and the Middle East must bring the focus on this point. The cooperation of joint-venture that can use the capital effectively is a favourable means. To combine with three resources effectively, Korea has to prepare a plan to enter into the Free Trade Zone in the Middle East.
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