DAVOS, SWITZERLAND // Arab officials attending the World Economic Forum (WEF) are voicing stark warnings about the region's economy, emphasising the pressing dangers of youth unemployment and poor intra-regional investment. Amr Moussa, the secretary general of the Arab League, joined delegates from across the Middle East under snow-capped Swiss peaks in Davos to address the regional impact of a far-reaching global financial meltdown.
Officials estimate that US$2.5 trillion (Dh9.18 trillion) has already been wiped off the combined balance sheets of league members, while Arab stock markets shed about $600 billion of their capitalisation last year. Mr Moussa told The National he had an "interesting and constructive debate" with delegates from Saudi Arabia, Egypt and Bahrain during a closed-door session of the WEF. He said colleagues were working tirelessly to boost Arab economic co-operation and called on leaders meeting in the Alpine ski resort to address poverty when redesigning global finance systems.
"We have to bear in mind that the changes must go in the direction of Third World countries, poor countries, least-developed countries," Mr Moussa said. "Their interest must be borne in mind because the world is not only for the rich." Despite the economic optimism fuelled by soaring oil prices last year, the global housing and knock-on credit crises added to pre-existing regional woes brought about by high food and energy costs.
Rachid Mohamed Rachid, the Egyptian trade and industry minister, criticised the resistance of Arab leaders to relinquish authority and liberalise their economies, saying this has stunted intra-regional trade to little more than 10 per cent. Despite bold plans for a pan-Arab power grid, a pan-Arab rail network and setting up an Arab customs union, most joint Arab economic projects have either failed to materialise or fallen short of expectations.
"Without interdependence, the future does not look bright," said a report from Wednesday's meeting. "But if the borders become more open and there is economic co-ordination, the region can become integrated economically and give hope to its citizens." However, Mr Rachid noted a "good trend" of greater intra-regional investment from the UAE and other oil-rich Gulf countries in recent years that he hoped would lead to annual increases of 25 per cent to 50 per cent thanks to liberalised trade systems.
Official reports show that Arab investments with other members of the 22-nation league were less than 20 per cent of the amount invested by Arabs in the US in 2007. Mr Rachid said investment strategies for the Gulf's combined portfolios of sovereign wealth funds and other reserves, which lost an estimated $100bn last year, were expected to change in the aftermath of the financial crisis. "The risk profile will be changing now for these funds and big investors," he said. "They will see Europe and the US as more risky and regional investment as less risky than it used to be."
The economic gap between the Arab world's "haves" and "have-nots" has widened, especially between the oil-rich Arab nations, which have accumulated more than $2 trillion from oil revenues in the past six years, and poor Arab countries which endure miserable conditions. Qatar's per capita income of $72,300, the highest in the Arab world, contrasts starkly with the $900 in Yemen, the poorest Arab nation.
The Arab world has a total population of about 330 million people, with 61 per cent aged between 15 and 65. Delegates described the large number of young Arabs as a "potential time bomb" for a region that needs to create 100 million jobs by 2020 to avert massive unemployment and social unrest. "I don't think anybody has any clear, sound plan of how to achieve that," warned Mr Rachid. "We have to take unusual and extraordinary steps to dramatically improve the economic situation in our region."
With 30 per cent of the Arab world's adult population handicapped by illiteracy, officials agreed that improving schools and colleges, often criticised for poor standards and tired teaching techniques, was vital. "We strongly believe that we are in the middle of the resource-rich Arabian Gulf region, but that our most valuable resources are our people," said Sheikh Mohammed bin Khalifa, the chief executive of Bahrain's Economic Development Board.
"Investing in our people, investing in training, will allow us to meet this talent gap or challenge. Education for us is a key driver." Abdul Aziz al Ghurair, the Federal National Council Speaker, will join regional finance chiefs today in debating "The Gulf's New Economic Agenda" and examine how petrodollar reserves can bolster struggling economies. jreinl@thenational.ae
