Regional integration is key to economic growth. Top business leaders and trade officials explain why

Against a backdrop of global fragmentation, inflationary pressure and geopolitical unrest, many countries are pursuing efforts to deepen regional economic integration.

Regional integration was a major topic of the World Economic Forum’s Growth Summit 2023, which took place at the Forum’s headquarters in Geneva, Switzerland, between 2-3 May.

In a session titled Regional Trade and Cooperation in a Fragmenting World, top business and trade officials discussed how best to foster regional trade and explored how regional cooperation can bolster the global economy.

For panellists, the message was clear: to avoid a lost decade, economies must preserve and expand international trade.

Saudi Arabia benefits from a “unified, overarching industrial strategy,” said Bandar Alkhorayef, the Minister of Industry and Mineral Resources of Saudi Arabia. The strategy, Alkhorayef noted, is based on cooperation with Gulf Cooperation Council (GCC) members.

“It’s important to ensure the global community has the right policies and the right direction to be able to build long-term investments that are integrated with different industries on one hand, but also geographic locations on the other,” Alkhorayef added.

Razia Khan, Chief Economist and Head of Research for the Middle East and Africa at Standard Chartered Bank, also highlighted the rapid pace of change in the Middle East, and particularly the Gulf.

“The real story for many Middle Eastern economies is really around the diversification effort,” she said.

This kind of diversification “will hopefully allow the region to be that much more resilient during future hydrocarbon price volatility,” Khan said, adding: “We see [diversificaiton] in terms of the effort to build intra-regional infrastructure.”

Khan warned that the fate of Africa, however, is divergent from the Middle East: “Of any developing region, Africa had the least amount of intra-region trade.”

Khan said: “The question we need to be asking ourselves is how, in a world where financing is going to be that much more difficult to come by, where there are big concerns about the more vulnerable economies and external debt positions of those economies, where everyone is thinking how do you mobilise long-term financing for infrastructure — how do you build on the trade gains that can really help prosperity in this region?”

For Khan, the answer could lie in an agreement that has already been struck: the African Continental Free Trade Area (AfCFTA). “For Africa, the political willingness to realise those trade gains promised by the AfCFTA — it’s early days, there’s a lot of work to be done, many challenges still — could be a significant driver of growth,” she said.

Tipu Munshi, the Minister of Commerce of Bangladesh, said his country — expected to grow by 6% in 2023 and 2024 — has benefited from global and regional interconnectivity, too.

“That gives hope that we are seeing a very strong emergence of economic stability in many parts of the globe through regional collaborations and cooperation,” Munshi said.

India is experiencing similar success and views its future in terms of how it can most benefit from the expansion of trade, explained Chandrajit Banerjee, the Director General of the Confederation of Indian Industry.

“Eight of India’s ten largest trading partners are from the region,” Banerjee stated. “Trade will be one of the biggest engines for growth.”

“We talk about regional trade, we talk about global trade, we need to also look at the future of jobs and we have come out with a fantastic report about the future of jobs,” he said, adding: “We are looking at the future of jobs and how we can upscale people.”

For Europe and its neighbours, the outlook — clouded by the war in Ukraine — is perhaps more challenging, experts say.

Hatice Zeynep Bodur Okyay, President and CEO of Istanbul-based Kale Group, said the lessons of the past few years, from COVID-19 to the war in Ukraine, showed that “we need to discuss more among governments and businesses.”

Okyay highlighted how the private sector is vulnerable to geopolitical shifts, but said concrete agreements and action at the state level to ensure trade persists when supply chains are disrupted can help. For her, it is up to businesses to “adapt” to the challenging environment, but governments should lend a hand where possible.

As the fight against climate change escalates and economies continue to navigate the so-called polycrisis era, many experts maintain that keeping the global economy whole and intact is vital. In fact, the International Monetary Fund has warned that global fragmentation could cost the global economy up to 7% of its GDP.

Regional integration, experts note, will be key to improving economic resilience without harming growth — and could preserve and expand the international trade that powers the global economy.

The session ‘Regional Trade and Cooperation in a Fragmenting World’ was moderated by Børge Brende, President of the World Economic Forum, and hosted the following participants:

Tipu Munshi, Minister of Commerce, Ministry of Commerce of Bangladesh

Razia Khan, Head, Research; Chief Economist, Africa and Middle East, Standard Chartered Bank

Hatice Zeynep Bodur Okyay, President; Chief Executive Officer, Kale Holding A.Ş.

Chandrajit Banerjee, Director-General, Confederation of Indian Industry (CII)

Bandar Alkhorayef, Minister of Industry and Mineral Resources, Ministry of Industry and Mineral Resources of Saudi Arabia

Watch the full session here: