Mohamed Ibrahim Hafez is a researcher at the Centre for Policy, Citizenship and Society at Nottingham Trent University and a former policy advisor at the General Authority for Investment and Free Zones in Egypt.
In an era marked by unpredictability, the Middle East and North Africa (MENA) region stands at an important crossroads. Global trade structures are undergoing a dramatic transformation, with value chains fragmenting and geopolitical tensions bringing sharply into focus longstanding vulnerabilities in MENA economies. Against this backdrop, enhancing economic ties between neighbours presents great opportunities. Thanks to its abundant hydrocarbon resources, MENA is deeply interconnected with the global economy, exporting 34% of its gross domestic product (GDP) compared with a global average of 25.5%, according to data compiled by McKinsey. Yet despite shared language, culture and geographical proximity, Mena remains one of the least economically integrated regions in the world. Intraregional trade constitutes only 2.9% of the region’s GDP, significantly lower than the global average of 7.9% and far below the EU’s 22%.
At last year’s World Economic Forum, Ahmed Galal Ismail, CEO of Emirati retail conglomerate Majid Al Futtaim, argued that aligning MENA’s intraregional trade with the global average could unlock an additional $2.5tn in GDP, opening new prospects for private sector regionalisation. These figures indicate that previous free trade initiatives and economic cooperation mechanisms were inefficient to unlock MENA’s full potential. However, its number of special economic zones (SEZs) has surged from 47 in 2009 to more than 200 this year, according to data tracked by the OECD and Adrianople Group. This raises the prospect of using SEZs to create new linkages and regional production networks that would spark intra-regional trade.
Algeria took bold strides in 2022 to amend its investment law and create a legislative framework for SEZs. However, today it remains the sole country in the Mena region without any type of SEZ. In February, it took a big step towards changing this by announcing the implementation of a strategic vision to integrate its oil-based economy with neighbouring nations through the joint development of cross-border infrastructure and the establishment of five transnational SEZs with Tunisia, Libya, Mauritania, Mali and Niger. Since the inception of its Vision 2030 reform agenda, Saudi Arabia has launched four SEZs and is pushing forward with its NEOM mega-project which the government has also classified as a SEZ and which benefits from special investment regulations. The latter, which is poised to cover 26,500 sq km, will span Saudi’s borders with Egypt and Jordan, creating a new path for two-way economic linkages. In addition, after three decades of closed borders between Saudi Arabia and Iraq, the two nations have embarked on a collaborative effort to boost bilateral trade. In 2020 they reopened the Arar land crossing, which laid the groundwork for their joint announcement last November of plans to launch a cross-border economic zone which will include a free trade zone, opening new trade gateways for both economies.
While some countries are individually or bilaterally leveraging SEZs for economic co-operation, a MENA-wide SEZ policy should be developed to maximise and quantify the impact of SEZs in forming regional value chains in the region. A collective effort towards regionalisation, including via SEZs, could help Mena leveraging its collective supply chain strengths, and foster a more resilient and predictable economy…