The MENA region fell one place in terms of overall connectedness in trade, capital, people and information in 2021 from 2019, coming in fourth out of a total of seven world regions, according to DHL and NYU Stern’s recently published Global Connectedness Index 2022 (pdf). This came as countries were continuing to recover from the covid-19 pandemic and its impacts on trade flows and supply chains.

IN CONTEXT- The report does not clarify why the MENA region slid back a spot, but the general analysis looks at international flows along the four broad-based pillars of trade, capital, information, and people. Trade flows represent the figures around exports and imports of goods and services, while capital flows are calculated based on FDI and portfolio flows. Information flows are proxied by the minutes of international calls and the scale of international collaboration on research. Finally, people flows are represented by statistics on migration, numbers of foreign students, and tourism.

On the bright side: The region climbed one spot in terms of size of flows relative to economic size, coming in third in the global index’s depth measure. The region also retained a strong second place in trade and people flows, while capital and information flows continued to be relatively weak — coming in fourth in both categories.

Hydrocarbon-rich GCC economies buoyed the region’s ranking: High-performing GCC economies, which benefited from rising oil prices on the back of the war in Ukraine, played a strong role in global trade and capital flows, according to the report. Their reliance on foreign workers also meant that they scored high on the index’s people flow measure.

The UAE was the region’s strongest performer,coming in sixth in the ranking of most connected countries worldwide in 2021,retaining its position from the last ranking in 2019. The country came in third in terms of depth of global connectedness. The oil-rich state also featured on the list of the top 10 most overperforming countries in terms of structural predictors — which include GDP, geographical location, and population size, among others — of global connectedness.

Contrary to predictions, covid didn’t kill globalization: “Globalization has proven far more resilient than many expected through the covid-19 pandemic,” the report says. There was also evidence that despite visible US-China decoupling, that trend has not yet resulted in the development of rival trading blocs.

The report also rebuts another common prediction — that globalization is giving way to regionalization, orthe rise of trade within regions instead of between them.There was no evidence of a shift from globalization to regionalization, or from long distance global flows to short distance intra-regional flows, in 2021, the report said. In fact, “trade flows stretched out over longer distances during the covid-19 pandemic,” according to the report.

MENA had the second-lowest intra-regional flows of any region. Flows within the region represented 24% of the region’s total flows. Only South and Central Asia scored lower, with 17% of total flows taking place within the region.

This could change soon: Steps towards the normalization of ties between Israel and countries in the region could open new avenues for intra-regional exchange, the report notes, name-checking the UAE-Israel 2022 trade agreement. Israel is also developing diplomatic and economic ties with Egypt, Bahrain, Sudan, and Morocco.

Who was MENA’s biggest trade partner? India was the region’s largest partner, partaking in 9% of the region’s total flows. South Asia as a whole receives substantial commodity exports from the GCC and contributes foreign workers to the region.

The region still needs to tap the potential it has in trade with the EU: France is currently MENA’s largest partner in Europe, the report said.MENA countries on the Mediterranean basin have excellent potential for trade and exchange with Europe — a much larger market than South Asia — but these are largely untapped, it added.

Lebanon’s global ranking shot up five places, but for all the wrong reasons. Paradoxically, the rapid rise occurred on the back of a collapse in the domestic economy. A series of shocks and bad policy decisions led to the country’s GDP at market exchange to fall to about a third of its pre-crisis level, the report explains. While this meant that the economy was doing considerably worse, it also meant that the relative contribution of trade and capital flows to the economy were much higher than before as those activities were tied to foreign actors and accordingly less affected by a collapse in the domestic economy than other sectors.

The report reached a two-fold conclusion from the current situation in Lebanon: Despite indicating that the globalization index may at times suggest overperformance, the play out of events in Lebanon also highlights the importance of global connectedness as a factor of stability that could help economies weather domestic crises.

Not doing great in the rankings: Egypt saw significant falls in the latest ranking, tumbling seven places overall and 15 places in trade flows. Meanwhile, Algeria and Iraq were among the list of 10 worst-performing economies in terms of structural factors.

Iran ranked as the world’s worst-performing economy based on structural factors, despite recent gains in breadth and information flows. This means that Iran’s connectedness is far lower than what would be expected given the country’s income level, geographical location, population size, and other structural factors — all of which suggest that Iran’s economy should be much better connected globally.

SOUND SMART- Despite being well positioned economically and geographically to partake heavily in global exchanges, a sanctions regime imposed on the country by the US and the EU has effectively isolated the country from the global economy.

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