CAIRO: As leaders of the G20 met in Washington on Friday, Egyptian officials and Arab business leaders gathered in Cairo, calling for more united action to battle a dire and deepening economic crisis.
“We are all in one ship.and Arab economies should cooperate more closely in the face of this global financial crisis, Egyptian Prime Minister Ahmed Nazif told a news conference on Saturday.
“This is not new, we [Arab leaders] have said that more than once, but serious action was lagging behind. But for every cloud, there is a silver lining; and now is the time to put words into action, he added.
The 12th Arab Business Society Forum brought together Egyptian Cabinet leaders and prominent business figures from Egypt, Syria, Kuwait, Jordan, Bahrain, Algeria, Libya and Palestine to discuss the repercussions of the financial turmoil on the regional private sector and what needs to be done.
The two-day event, organized by the Egyptian Businessmen’s Association, was held ahead of the Arab Economic Summit that will take place in Kuwait next January.
Instead of the peppy talk that has been echoed in different conferences over the past months, Nazif sounded a tone of criticism to Arab economies for not collaborating more closely in recent years.
“Did we give our Arab world its share when we blended with the global economy? The answer is no. Compare size of Arab investment in the region to Arab investment in the world. Compare size of Arab-to-Arab trade with Arab trade across the globe. Will you be satisfied? Nazif said.
“If the global financial crisis had taken place with these two figures at much higher rates, I believe we [the region] would have been in a much better position, he added. “Arab economies should cooperate more closely.
“Even with slumping oil prices…even if they reach $50 dollars per barrel, Arab economies will generate revenues. What will we do with them? Will we buy derivatives again, or will they be invested in real opportunities? he continued. “I’m talking about real investments and not aid or grants.
The Egyptian prime minister was not the only one pointing out the inadequate regional economic cooperation. Hamdy El-Taba, head of Arab Businessmen Union, also found the size of Arab investment and trade within the region insufficient when compared to that with the rest of the world.
“Within the last two decades, size of accumulative Arab investments in the region reached some $104 billion, which compares to $2 trillion of Arab investments outside the region, he pointed out. “I hereby wonder what will happen to these billions of dollars in light of the global financial crisis and which projects and job opportunities could have been created if this money had been invested in the region.
El Taba added that Arab investments abroad are now under threat because large chunks of cash are invested in financial institutions wrecked by the global financial crisis.
On the other end of the globe, world leaders pledged rapid action on Saturday to rescue a weakening global economy from the worst financial crisis in over 70 years and agreed to give emerging nations more say in running financial affairs.
The Group of 20 leaders from major industrialized and developing countries set out plans to toughen oversight for major global banks, study limits on banker pay and try for a breakthrough by year end in global trade talks – all part of a roadmap to rebuild a financial system crippled by the credit crisis.
The financial crisis continues to wreak havoc on the world’s major economies, with official data showing the 15-nation euro-zone economy had shrunk by 0.2 percent for the second quarter in a row, meaning it is technically in a recession.
Signs for the US economy – deemed to have entered recession as well – worsened on Friday. Retail sales fell a record 2.8 percent in October, according to government data, the biggest decline since comparable numbers were first collected in 1992.
Back to the region, officials and economists both agree there will be repercussions. “The global economy is on the brink of recession, with largest economies – US and Europe – now in recession, Mahmoud Moieldin, Egypt’s minister of investment, told the conference on Saturday.
“The decoupling theory, in my opinion, is no longer valid.because the world’s economy is increasingly interconnected, he added.
In its twice-yearly World Economic Outlook released last October, the International Monetary Fund (IMF) slashed its 2009 forecast for world growth to 3 percent, which would be the slowest pace in seven years and warned that a recovery would be unusually slow. It said global growth this year would come in at 3.9 percent, which compares to 5 percent in 2007.
“Even though we [Arab countries] were not the cause of this crisis at all, we are amongst its [victims], and we have to deal with that, said Taher Helmy, co-founder of law firm Helmy, Hamza and Partners.
“Despite consensus that the US and Europe are now in recession, depth and duration of that recession are so far unknown. However, estimates indicate that the year 2009 will be worse than 2008, he added.
But a glimmer of optimism, as Helmy sees it, lies in Egypt’s economic reform that the current Cabinet has embarked upon since 2004. “In Egypt, ripple effects of this financial crisis will cause a slowdown in global trade and a decline in growth rates because we are incorporated into the global economy. But recent economic reforms implemented in Egypt over the last three years will cushion these effects.
He referred to reforms such as hitting a whopping $13 billion in foreign direct investment in fiscal year 2007/08, a stable exchange rate, $35 billion in foreign reserves, as well as the 7.2 percent growth recorded in the financial year that ended in June – the highest rate in more than 20 years.
“These reforms will give us a strong push that will help us get beyond the ongoing global financial crisis, he added.
Cabinet officials present at the conference seized the opportunity to promote Egypt as a promising destination to regional investments. They cited recent business reforms including reducing the paid-in minimum capital requirement to start a business by more than 80 percent, abolishing bar association fees, and automating tax registration.
“Today, corporates can register their enterprise in less than 72 hours, and the law allows full foreign ownership, Helmy said. “Egypt stands as a gateway to strategic export markets. We have agreements with the US, the EU, the COMESSA, as well as a free trade agreement with Turkey.
Minister Mohieldin also said that investment in Egypt is diversified and is not limited to one particular sector. There is potential in real estate, infrastructure development, industry, trade, agriculture, tourism, IT, and transportation, he said.
“Despite all that, Arab investment in Egypt is very poor. The figure does not represent more than 1 percent of total Arab investment outside the region, he pointed out, adding that Egypt could absorb at least five times of the size of Arab investments as they stand right now.
Prime Minister Nazif also stressed on importance of investing in infrastructure development because it was labor-extensive. Cabinet officials recently said the government plans to invest LE 15 billion on infrastructure projects in areas such as education, health and water treatment plans.
Minister of Finance Youssef Botrous Ghali added that the region’s economies need to act together and unite to combat the financial crisis.
“The only working solution is to cooperate with each other.. If we plan to pour in investments, then we do that together and we put them in one place, the region, he said.