in key corridors and improving trade facilitation and logistics services inside the Arab region, including Customs and border agencies; (2) banking & finance, to immediately promote banking sector competition, encourage further access to credit and intra-Arab investment, and facilitate capital movement among Arab countries, including through improved information sharing and credit reporting infrastructure, and upgraded payment and securities settlement systems; and (3) information & communication, in order to enhance the competitive potentials of technology enterprises, develop legislative frameworks related to this sector, and encourage the private sector to attract investment.

- **Trade facilitation & transport** .  Many opportunities for trade among Arab countries are lost because of inefficient trade facilitation processes and procedures, and to a lesser extent because of underdeveloped transport infrastructure. It has been estimated that facilitation and transport impediments impose greater losses in trade among Arab countries than formal trade tariffs and quota restrictions (Hoekman and Zarrouk 2009). In most MENA countries, trade facilitation services are under-developed. Customs brokerage and freight forwarding services are not evolving in pace with traders demands. Coordination between border agencies within countries is still in its early stages. Even the idea of “one-stop border agencies” is still largely limited to concentration of customs procedures in a single location rather than a similar concentration of all border agencies in the same location. Transit regimes are often outdated.<sup>22</sup> Many of the trade facilitation barriers could be reduced by technically straightforward regional solutions that are often politically and strategically difficult to implement, especially on a unilateral basis. Concluding a reciprocal or preferential regional or plurilateral agreement on trade facilitation and transport services within PAFTA could therefore help achieve a superior outcome.  A comprehensive regional agreement on trade facilitation and transport services would improve the freedom of transit, streamline fees and formalities connected with importation and exportation, and strengthen the administration of trade regulations. It could in particular help (i) modernize Customs and related services; (ii) update regulation and competitiveness of logistics and transport services; (iii) upgrade transport infrastructure; and (iv) establish corridor management systems to facilitate trade in key corridors.

- **Banking & finance** . Banking sectors in the MENA region are among the biggest and deepest in the developing world. But competition among banks in the region is lower relative to other regions and has not improved in recent years (Anzoategui, Peria, and Rocha 2010). Most banking sectors in MENA operate under monopolistic competition. And GCC economies tend to be less competitive than non-oil producing countries (Murjan and Ruza 2002). The lower levels of competition are explained by the region’s worse credit

> 22 World Bank (2010). Regional Cross-Border Trade Facilitation and Infrastructure Study for Mashreq Countries, World Bank, mimeo. A similar study is currently being conducted for Maghreb countries.

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