Abstract
The labor market provides the strongest economic link between the GCC and the other countries in the MENA region; in contrast to sizable flow of workers’ remittances (Chart 2), interregional trade and investment flows are less significant.14 The GCC countries have significant natural resources and surplus of capital but scare labor resources. Most other MENA countries are labor rich but have limited natural resources and capital. In principle, such large disparities in resource base between the two groups of countries would offer significant potentials for economic integration and gains from trade. In practice, however, the degree of economic integration between the MENA countries has been modest because of differences in policies and the relative openness of the economies.15 More specifically, the inward-looking policies pursued in the past by many labor-abundant MENA countries inhibited the development of competitive export industries at the time when the GCC countries with their open trading systems were establishing trade links with countries outside the region. For these reasons, economic integration within the MENA region took hold not through the more traditional trade links, but rather through labor movements, which were actively encouraged by the labor surplus countries and made possible by the open employment policies of the GCC countries.
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