Questions & Answers : Strengthening MENA’s Trade and Investments with China and India: A contribution to an ongoing debate in MENA on the costs of accelerating economic ties with China and India

What are the key trade and investment trends linking MENA with China and India at this time?

 

China and India’s spectacular economic rise over the last two decades has accelerated their trade and investment flows with the Middle East and North Africa (MENA), particularly with the oil-producing countries.  And while these flows are still small, China and India’s presence in the region is on the rise and include expanding economic, financial and diplomatic ties.  

 

What are the key findings of the report?

 

The main findings indicate that the region as a whole has benefited from the rise of China and India in terms of better terms of trade, significant increases in oil and gas exports, and cheaper imports. However, producers of industrial goods have been negatively—and in a few cases severely—affected by competition with the two Asian countries in both third and domestic markets. China and India are also investing more in MENA, particularly in oil-producing countries. But they are contributing very little to job creation or to the transfer and diffusion of technology. These trends are likely to continue in the future.

 

How is the rapid growth in China and India impacting MENA economies?

 

Faster growth in the two Asian countries – and the associated higher demand for energy - will increase revenues from oil and the difficult choices associated with their management. For the labor-abundant, nonoil-producing countries, competition with China and India will increase. But the lack of competitive manufacturing industries and services, the insufficient attention given in the past to building technological capabilities and promoting openness and entrepreneurship are constraining their ability to respond to competition.

 

How can MENA countries better respond to this inevitable international competition?

 

Countries in the MENA region need to accelerate productivity to tackle unemployment, especially among youth. This may require a wider implementation of broader institutional changes such as that which China and India have experienced.  A pragmatic reform agenda is of critical importance to MENA economies as well as their institutions.  This is the type of change that can accelerate productivity, trade, and investment in the region.