Size of Economy, Cost of Transport and their impact on Trade in GCC countries: Evidence from qualitative and quantitative approaches

Ahmed Saddam and Fatimah Kari

Journal of Finance and Investment Analysis, 2012, vol. 1, issue 3, 8

Abstract: This paper addresses the intra-regional trade of the countries of the Gulf Cooperation Council (GCC), namely, the United Arab Emirates, Bahrain, Saudi Arabia, Oman, Qatar and Kuwait. We have found that the intra-regional trade is still at a modest level, where the trade intensity index showed negative signals except the UAE, and Saudi Arabia. In addition, the study used a basic gravity model, and added six foreign countries – Malaysia, Turkey, Iran, the UK, Australia and Brazil. It confirms that the size of GDP has a significant role in determining the foreign trade. Moreover, the variable of transportation cost rate is not a concern for Saudi's foreign trade despite the increase in its level, where Saudi Arabia as a hub economy tends to trade with countries like Turkey, the UK, and Brazil more than with its nearby countries, especially Oman, and Qatar. The study concludes that the unified economic policy of the GCC countries has not achieved its target in terms of increasing the level of non-oil industries. Furthermore, the transportation cost rate variable is not an important factor to determine the trade of GCC countries.

Date: 2012
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