Working Paper on:

The Vision of the Arab Contractors Union on Arab Economic Integration and Its Future Prospects (The Construction Sector as a Model)
Submitted to the Council of Arab Economic Unity

Introduction:

Economic integration among countries has become a prominent global trend to the extent that our era is often referred to as the “Age of Economic Blocs.” These integration efforts are no longer limited to peoples sharing a common identity, but have extended to encompass different nations. Prime examples include the European Common Market, NAFTA (United States, Canada, and Mexico), and ASEAN (Southeast Asian Nations).

Economic integration refers to one country providing another with the elements it lacks, through a continuous coordination process aimed at enhancing joint economic production. This includes eliminating barriers to trade and the movement of production elements such as labor and capital. Global economic integration has led to high levels of collaboration, whose benefits have positively impacted all member states, allowing them to keep pace with the global economic changes in the era of globalization and free trade.

The Arab world is well-positioned for optimal economic integration due to several inherent factors: shared language, history, civilization, mutual interests, social customs, geographic proximity, diverse natural resources, mineral and human wealth, capital availability, and, importantly, religious unity—since most of the Arab population adheres to Islam.

At the same time, Arab countries face significant challenges, the most serious being globalization, trade liberalization, the internationalization of production, and the growing dominance of massive economic blocs. Therefore, Arab economic integration has become more essential than ever, as it is a strategic necessity for strengthening Arab economies, improving the standard of living for Arab citizens, and enhancing Arab competitiveness in global markets.

Given this context, Arab economic integration has been a priority since the establishment of the Arab League in 1945. The League’s charter stressed close cooperation among member states in economic affairs, highlighting a regional focus even before global economic integration efforts took shape.

However, despite the strong foundation for Arab integration, progress has been slow and complicated. Aspirations often clash with practical implementation. Although the idea of economic integration emerged with the founding of the Arab League, it has largely remained theoretical. The process has been sluggish, and tangible results are modest at best. This is due to the complex political, economic, and social factors involved—particularly concerns around sovereignty and internal affairs.

Economic integration requires some level of sovereignty concession among participating countries, which many nations are wary of. Even in the seemingly successful European Union, the United Kingdom chose to exit after nearly 50 years, citing the economic burden, legal restrictions, and disparities in member states’ economic performance. This triggered waves of separatism in countries like the Netherlands and Spain, challenging the EU’s unity.

In the Arab context, many countries still grapple with political instability, security issues, and internal challenges inherited from colonial legacies. This makes regional cooperation difficult, as political and security priorities often outweigh economic considerations. Furthermore, many integration decisions lack binding force and institutional mechanisms for implementation, resulting in disconnects between decision-makers and executors.

Nevertheless, the future of Arab economic integration is not bleak. There are still opportunities and favorable conditions for achieving this long-held Arab ambition. What’s needed is decisive political will from Arab governments, along with clearly defined, realistic goals and methods that reflect the true potential and capabilities of Arab economies.

Arab Integration in the Construction Sector

In general, Arab economic integration aims to unify and coordinate the resources and capabilities of Arab countries to maximize economic benefits, creating a shared space for the free movement of people, labor, goods, and capital. This requires structured programs to harness wealth and develop various sectors—particularly the construction sector.

The term “various sectors” includes all economic fields in the Arab world, with construction being central.

One of the core objectives of the Arab Contractors Union, as stated in its revised bylaws (March 14, 2019) aligned with the unified bylaws approved by the Council of Arab Economic Unity, is outlined in Article 5:

“To develop and coordinate its members’ areas of work, strengthen relationships among them, and contribute to achieving economic integration through its tasks, competencies, and expertise within the framework of the Arab Economic Unity Agreement and the goals of the Council of Arab Economic Unity.”

Since the Union’s members are engaged in construction contracting, its role is to strengthen professional ties among contractors across Arab states and elevate Arab construction to high standards.

This paper, therefore, presents the Arab Contractors Union’s vision on Arab economic integration specifically in the field of construction.

I. Why is the Construction Sector Best Suited to Lead Arab Economic Integration?

The construction sector—including contracting, building materials, and engineering consultancy—is critical globally due to its essential role in building infrastructure, providing employment, absorbing massive capital investments, and supporting national economies. It stimulates growth, activates other economic sectors, helps form fixed capital, and increases GDP.

In the Arab world, construction is the second-largest source of national income after oil, with hundreds of billions of dollars invested annually. It employs about 30% of the Arab workforce.

According to World Bank estimates, 70% of development investments in Arab countries are directed toward construction. This places the sector third globally in terms of investment size—after the U.S. and Japan.

Following the drop in oil prices and decline in export revenues, the construction sector has become even more crucial for Arab industrial development, economic diversification, and building sustainable development infrastructure—particularly in communications and renewable energy.

It will also play a major role in reconstruction in war-affected Arab nations, facilitating the movement of expertise, capital, labor, and materials, which necessitates coordination through pan-Arab infrastructure projects—roads, railways, airports, and communications. This will automatically support economic integration across other sectors.

All of the above illustrates why the construction sector is a prime candidate to lead Arab economic integration efforts.

II. Key Enablers of Integration in the Construction Sector

The Arab world spans a vast territory with diverse climates, soils, and water resources, leading to varied raw materials, minerals, and energy sources (oil, gas, renewables). This abundance can fuel major developmental projects.

The region’s strategic location and large population create a broad market for construction products across countries.

The scale of capital, human resources, and wide-ranging technical, engineering, and administrative expertise (thanks to academic institutions and vocational training) supports integration efforts. Advanced communications and networks further facilitate collaboration.

Additionally, shared language, religion, customs, and culture provide a critical foundation for meaningful economic cooperation.

III. Benefits of Arab Integration in the Construction Sector

• Drives comprehensive and sustainable development.
• Boosts economic growth and ensures its continuity.
• Enhances Arab national security through local execution of sensitive infrastructure.
• Strengthens Arab self-reliance and reduces debt dependency.
• Promotes knowledge and skills transfer, creates employment, and raises living standards.
• Activates interconnections between economic sectors, thanks to construction’s cross-sectoral nature.
• Encourages joint Arab industrial ventures and reduces reliance on foreign firms and imports.
• Reduces construction costs via economies of scale and access to shared resources.
• Improves planning and training to meet the real needs of Arab construction markets.
• Strengthens the Arab Free Trade Area and related trade agreements.
• Encourages cooperation in discovery and utilization of natural resources.
• Establishes joint Arab centers for training and innovation in construction technologies.

IV. Challenges Facing Arab Integration in Construction

1. Political instability and security concerns, particularly post-Arab Spring.
2. Outdated construction-related laws and policies.
3. Inadequate labor and residency regulations.
4. Corruption and bureaucracy.
5. Labor mobility restrictions.
6. Limited financing and credit access.
7. Lack of comprehensive databases on current and future projects.
8. Complex procedures and overlapping authorities in project licensing.
9. Insufficient and inconsistent regulatory information across countries.
10. Poor transportation infrastructure between Arab states.
11. Dominance of foreign firms in major Arab construction projects.
12. Dependence on imported equipment and expertise.
13. Price disparities in building materials leading to protectionist policies.
14. Income disparities and inconsistent labor regulations hindering workforce movement.
15. Lack of regular, accessible data on materials and labor costs.
16. Vague and non-binding cooperation agreements.
17. Weak R&D and limited engineering knowledge exchange.
18. Underdeveloped production and lack of coordination in building materials industries.