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Geopolitical Tensions Top Bahrain Summit’s Economic Agenda

Jeddah Islamic Port (General Ports Authority)
Jeddah Islamic Port (General Ports Authority)
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Geopolitical Tensions Top Bahrain Summit’s Economic Agenda

Jeddah Islamic Port (General Ports Authority)
Jeddah Islamic Port (General Ports Authority)

Geopolitical challenges and tensions in the Middle East cast a shadow over the Arab Summit that will be held in Bahrain on Thursday. However, these challenges can encourage Arab countries to move towards reaching a declaration of a common Arab market, amid the continued disruption of global supply chains and the emergence of the food security crisis.

The establishment of the Arab Common Market is likely to reduce the risks of dependence on global supply chains, which are suffering from successive disruptions that have already affected the growth rates of some economies, including Arab countries.

This advantage was clearly evident in the electrical interconnection agreements between Saudi Arabia and Egypt, as well as the integrated industrial partnership for sustainable economic development between Egypt, Bahrain, Jordan, the Emirates and Morocco.

Economic challenges

Economic growth rates represent an important challenge for Arab countries. Some states saw a decline in the employment rate and an increase in debt, as a result of the direct consequences of external factors on their economies, such as the Israeli war in Gaza, the Russian-Ukrainian war, and the repercussions of the outbreak of the Covid-19 pandemic.

These factors forced some countries to devalue their currencies against the dollar, which led to a decline in the purchasing value of consumers in parts of the Arab world, in parallel with an increase in inflation rates, which subsequently put pressure on Arab economies.

All these factors have led the International Labor Organization (ILO) to expect unemployment rates in the Arab region to remain high at levels of 9.8 percent during the current year.

Economic integration and the Arab market

The Arab countries have taken important steps towards economic integration, since the launch of the Arab Free Trade Area, which aims to increase levels of intra-trade and remove customs tariffs, leading to the Arab Customs Union, and then the Arab Common Market.

While supporting regional integration requires providing investment incentives and the transfer of intra-Arab capital, Arab countries have recently sought to integrate trade in services within intra-trade liberalization negotiations, in view of the strategic importance of the services sector and its contribution of about 48 percent of the gross domestic product.

In this context, the upcoming summit in Bahrain will discuss an important item on its agenda, which focuses on progress achieved in completing the requirements of the Greater Arab Free Trade Area and the establishment of the Arab Customs Union.

“The economic, social and development fields are the cornerstone of Arab action”, said Arab League Secretary-General Ahmed Aboul Gheit during the meeting of the Economic and Social Council within the preparations for the 33rd session of the League of Arab States Council meeting at the summit level.

In recent press statements, the Secretary General of the Union of Arab Chambers, Dr. Khaled Hanafi, expected intra-Arab trade to grow by 4 percent to 18 percent during 2025, explaining that the volume of trade among Arab countries is estimated at about $700 billion dollars.

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IMF and Arab Monetary Fund Sign MoU to Enhance Cooperation

The MoU was signed by IMF Managing Director Dr. Kristalina Georgieva and AMF Director General Dr. Fahad Alturki - SPA
The MoU was signed by IMF Managing Director Dr. Kristalina Georgieva and AMF Director General Dr. Fahad Alturki - SPA
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IMF and Arab Monetary Fund Sign MoU to Enhance Cooperation

The MoU was signed by IMF Managing Director Dr. Kristalina Georgieva and AMF Director General Dr. Fahad Alturki - SPA
The MoU was signed by IMF Managing Director Dr. Kristalina Georgieva and AMF Director General Dr. Fahad Alturki - SPA

The International Monetary Fund (IMF) and the Arab Monetary Fund (AMF) signed a memorandum of understanding (MoU) on the sidelines of the AlUla Conference on Emerging Market Economies (EME) to enhance cooperation between the two institutions.

The MoU was signed by IMF Managing Director Dr. Kristalina Georgieva and AMF Director General Dr. Fahad Alturki, SPA reported.

The agreement aims to strengthen coordination in economic and financial policy areas, including surveillance and lending activities, data and analytical exchange, capacity building, and the provision of technical assistance, in support of regional financial and economic stability.

Both sides affirmed that the MoU represents an important step toward deepening their strategic partnership and strengthening the regional financial safety net, serving member countries and enhancing their ability to address economic challenges.

Business

Saudi Chambers Federation Announces First Saudi-Kuwaiti Business Council

File photo of the Saudi flag/AAWSAT
File photo of the Saudi flag/AAWSAT
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Saudi Chambers Federation Announces First Saudi-Kuwaiti Business Council

File photo of the Saudi flag/AAWSAT
File photo of the Saudi flag/AAWSAT

The Federation of Saudi Chambers announced the formation of the first joint Saudi-Kuwaiti Business Council for its inaugural term (1447–1451 AH) and the election of Salman bin Hassan Al-Oqayel as its chairman.

Al-Oqayel said the council’s formation marks a pivotal milestone in economic relations between Saudi Arabia and Kuwait, reflecting a practical approach to enabling the business sectors in both countries to capitalize on promising investment opportunities and strengthen bilateral trade and investment partnerships, SPA reported.

He noted that trade between Saudi Arabia and Kuwait reached approximately SAR9.5 billion by the end of November 2025, including SAR8 billion in Saudi exports and SAR1.5 billion in Kuwaiti imports.

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Leading Harvard Trade Economist Says Saudi Arabia Holds Key to Success in Fragmented Global Economy

Professor Pol Antràs speaks during a panel discussion at the AlUla Conference for Emerging Market Economies (Asharq Al-Awsat).
Professor Pol Antràs speaks during a panel discussion at the AlUla Conference for Emerging Market Economies (Asharq Al-Awsat).
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Leading Harvard Trade Economist Says Saudi Arabia Holds Key to Success in Fragmented Global Economy

Professor Pol Antràs speaks during a panel discussion at the AlUla Conference for Emerging Market Economies (Asharq Al-Awsat).
Professor Pol Antràs speaks during a panel discussion at the AlUla Conference for Emerging Market Economies (Asharq Al-Awsat).

Harvard University economics professor Pol Antràs said Saudi Arabia represents an exceptional model in the shifting global trade landscape, differing fundamentally from traditional emerging-market frameworks. He also stressed that globalization has not ended but has instead re-formed into what he describes as fragmented integration.

Speaking to Asharq Al-Awsat on the sidelines of the AlUla Conference for Emerging Market Economies, Antràs said Saudi Arabia’s Vision-driven structural reforms position the Kingdom to benefit from the ongoing phase of fragmented integration, adding that the country’s strategic focus on logistics transformation and artificial intelligence constitutes a key engine for sustainable growth that extends beyond the volatility of global crises.

Antràs, the Robert G. Ory Professor of Economics at Harvard University, is one of the leading contemporary theorists of international trade. His research, which reshaped understanding of global value chains, focuses on how firms organize cross-border production and how regulation and technological change influence global trade flows and corporate decision-making.

He said conventional classifications of economies often obscure important structural differences, noting that the term emerging markets groups together countries with widely divergent industrial bases. Economies that depend heavily on manufacturing exports rely critically on market access and trade integration and therefore face stronger competitive pressures from Chinese exports that are increasingly shifting toward alternative markets.

Saudi Arabia, by contrast, exports extensively while facing limited direct competition from China in its primary export commodity, a situation that creates a strategic opportunity. The current environment allows the Kingdom to obtain imports from China at lower cost and access a broader range of goods that previously flowed largely toward the United States market.

Addressing how emerging economies should respond to dumping pressures and rising competition, Antràs said countries should minimize protectionist tendencies and instead position themselves as committed participants in the multilateral trading system, allowing foreign producers to access domestic markets while encouraging domestic firms to expand internationally.

He noted that although Chinese dumping presents concerns for countries with manufacturing sectors that compete directly with Chinese production, the risk is lower for Saudi Arabia because it does not maintain a large manufacturing base that overlaps directly with Chinese exports. Lower-cost imports could benefit Saudi consumers, while targeted policy tools such as credit programs, subsidies, and support for firms seeking to redesign and upgrade business models represent more effective responses than broad protectionist measures.

Globalization has not ended

Antràs said globalization continues but through more complex structures, with trade agreements increasingly negotiated through diverse arrangements rather than relying primarily on multilateral negotiations. Trade deals will continue to be concluded, but they are likely to become more complex, with uncertainty remaining a defining feature of the global trading environment.

Interest rates and artificial intelligence

According to Antràs, high global interest rates, combined with the additional risk premiums faced by emerging markets, are constraining investment, particularly in sectors that require export financing, capital expenditure, and continuous quality upgrading.

However, he noted that elevated interest rates partly reflect expectations of stronger long-term growth driven by artificial intelligence and broader technological transformation.

He also said if those growth expectations materialize, productivity gains could enable small and medium-sized enterprises to forecast demand more accurately and identify previously untapped markets, partially offsetting the negative effects of higher borrowing costs.

Employment concerns and the role of government

The Harvard professor warned that labor markets face a dual challenge stemming from intensified Chinese export competition and accelerating job automation driven by artificial intelligence, developments that could lead to significant disruptions, particularly among younger workers. He said governments must adopt proactive strategies requiring substantial fiscal resources to mitigate near-term labor-market shocks.

According to Antràs, productivity growth remains the central condition for success: if new technologies deliver the anticipated productivity gains, governments will gain the fiscal space needed to compensate affected groups and retrain the workforce, achieving a balance between addressing short-term disruptions and investing in long-term strategic gains.