Intra-Regional Trade and Factor Mobility

At first sight there appears to be tremendous scope for trade and commerce between the nations of the Middle East because, to a large extent, they complement each other with regard to their resources. Egypt, for example, with its plentiful manpower but lack of capital, is the natural centre for the supply of labour-intensive goods such as textiles or clothing for the whole region. Saudi Arabia, because of its abundant financial resources but labour shortages, is an obvious location for capital intensive industries, especially those requiring a plentiful supply of cheap energy, although the country’s technological deficiencies must first be overcome. In contrast Israel boasts a high level of technology and has a well trained workforce, but, like Egypt, has a great shortage of capital. It is therefore well suited to supply the whole region with technologically advanced goods, such as machine tools or electronic equipment. Iran, with its long craft tradition, could similarly be the main centre in the Middle East for the production of high-quality consumer products including furniture, clothing, and possibly footwear, particularly for the higher-income end of the market.1