Microsoft Word Hoekman Sekkat Arab ri042010

Figure 3: Restrictiveness of services trade policies, 2008 
JOR
EGY
YEM
TUN
SAU
OMN
MAR
QAT
KEN
SEN
TZA
NGA
ZAF
GHA
IDN
CHN
KHM
MNG
PHL
THA
MYS
POL
UKR
CZE
RUS
HUN
VEN
CHL
TTO
ECU
BRA ARG
COL
PER
MEX
LTU
JPN
GRC
AUT
NLD
ITA
KOR
ESP
GBR
PRT
BEL
FRA
CAN
DNK
FIN
NZL
IRL
SWE
AUS
DEU
USA
PAK
IND
LKA
10
20
30
40
50
60
R
e
st
ri
ct
iv
en
es
s o
f 
s
e
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s
e
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e 
p
o
lic
y
7
8
9
10
1 1
Log of GD P p er cap ita PPP, 200 6
GDP per capita,PPP (co nstant 2005 international USD)
Source: 
Gootiz and Mattoo (2008). 
 
Figure 4. Restrictiveness of Services Policies in Selected Arab countries 
0
20
40
60
80
High OE CD
Uppe r middle
High non OEC D
Lowe r middle
Low income
0
20
40
60
80
MA R
JO R
S AU
O MN
Y EM
E GY
Q AT
TUN
Financial
Telecom
Re tailing
Tran spo rtation
Pro fessio nal
Source: Gootiiz and Mattoo (2008). 
While much of what is needed in terms of reforms to reduce such restrictiveness 
could be pursued through unilateral action, an Arab integration-based effort to liberalize 

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services may help to overcome constraints to reform. Economists often stress the 
potential role of PTAs as a mechanism to “lock-in” a reform path through pre-
commitment to specific targets or outcomes. An important policy question then is how an 
Arab cooperation strategy may help to address the major political economy constraints 
that impede national (unilateral) reform.
One of these constraints is related to the large role the State continues to play in 
many Arab economies. Greater participation by the private sector will require 
privatization and abolition of entry and exit restrictions for (new) firms. Government 
policies and procedures are also the cause of high transactions costs at the border (red 
tape) and high operating costs – e.g., finance and intermediation services. Thus, a major 
factor determining the relevance of any integration strategy will be to what extent it is 
used by governments to pre-commit to actions aimed at reducing the role of the State. An 
implication is that the focus of analysis must be on 
government services 
as well as other, 
privately supplied services (Hoekman and Messerlin, 2001). Two interest groups play a 
major role in this connection—government employees in general, and more specifically, 
those responsible for enforcement of regulatory policies and procedures at the border 
(Customs) and for specific service industries (sectoral regulators).
Cross country experience suggests the latter group can be a serious constraint to 
the adoption of more pro-competitive policies. Sectoral ministries or regulators that 
oversee service industries often may be concerned with supporting domestic incumbents 
and maintaining the status quo, having little incentive to actively encourage new entry 
and greater competition—be it from domestic or foreign suppliers. The PAFTA and the 
GCC have not yet taken serious, concrete steps to harness the PTAs to pursue service 
sector reforms aimed at increasing the contestability of markets. As discussed below, this 
is an area where there is significant potential to enhance the welfare gains from Arab 
integration. A precondition for harnessing these gains will often be liberalization of intra-
regional labor mobility.