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When Ohtaka-sensei started writing Magi, I bet you she had the goal of giving her main characters very conflicting and sad background stories.
Out of the main Magi cast, no one has a more conflicted and painful existence like Ali Baba. Morgianna may have her past slavery, Aladdin may not know who he is but Ali Baba still has it worst. He struggles with being both the prince and the pauper.
It's all about fate. Two boys grow up under similar circumstances; one ends up leading an honest life while the other turns to evil actions. The authors of Freaknomics would have a field day with this story as would Malcolm Gladwell. Still. What makes for an outlandish real life scenario makes for a great way to cause internal strife for a main character.
This particular development in the plot actually works very well. Ali Baba is showing a more naive side by helping Cassim, the guy who took complete advantage of him. Normally you'd think twice, but the laws of shonen manga dictate the main character's required naivety. Very Naruto and Sasuke if you ask me. However, as I said it works because the Ali Baba we were introduced to was less like a main character than our good friend Aladdin.
The episode was expected in way. We've been seeing the origins of the main characters and Ali Baba's turn was next, but there's more to it. The Balbad arc is longer than just finding out about Ali Baba's past, and those who read the manga will know why.
Ali Baba's conflict runs greater than any guilt. His country is in trouble and he's the one who needs to step up and do something. So far Magi hasn't been all that exciting and in many ways this will be the first truly exhilarating arc that we see.
Magi is certainly improving. As I've mentioned, the manga is a slow starter and the anime is quickly getting through the material to the better stuff.