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arab spring


T


he familiar hubbub emanating from the busy cafés and eateries at the Dubai International Financial Centre


(DIFC) during a typical lunch hour, somewhat belied the fact that a little earlier, in a conference centre just down the corridor, some of the region’s most respected economists had used words such as “challenging”, “dangerous” and “contagion” to describe the current global economic landscape at a time of dramatic upheaval across much of the Arab world.


Those attending the official launch


of the International Monetary Fund’s (IMF) latest Regional Economic Outlook were left in little doubt of the onset of major political and social change. But one word that particularly resonated was “transition”, with so many countries in the MENA region either fervently seeking regime change, or having already achieved it.


Speaking after the event, Dr. Nasser Saidi, the DIFC’s chief economist, suggested that those member states of the Gulf Cooperation Council (GCC) presently unaffected by the uprisings could offer stable financial support to those nations in transition and, in so doing, could partially offset the impact upon them of a likely downturn in Europe. “At a time in which Europe is facing


a slowdown, the North African countries of the Mediterranean, for whom Europe is a major trade partner, are going to have even more difficulty in their transitions. Indeed, transition itself already presents economic difficulties, so if Europe enters recession, then the impact on them is going to be more severe. “If we can create and strengthen links with the GCC that will be to the benefit of creating stability and ensuring a relatively smooth transition. GCC countries can become engines of growth.” Saidi believes that, in time, the GCC should be expanded and nations such as Egypt and Yemen, both very much in the midst of upheaval, should be invited to


join, along with Jordan and Morocco. “In time, in the same way Europe turned to greater economic integration, where you had the likes of Germany and France driving that, you have to think about who will be the drivers of Arab economic integration and, in my mind, it is the GCC.” Masood Ahmed, director of the


IMF’s Middle East and Central Asia Department, also sees a close synergy developing between the oil exporters of the GCC and the emerging and resource poor nations in the region with investment, remittances from expatriate workers in the Gulf and even from direct budgetary financing. “Both Saudi Arabia


and the UAE have provided financing to Egypt, as has Qatar too. All these countries have begun to engage and I believe the pattern of these links, both in terms of official financing and even more in cross-border investment, is only going to grow in coming decades.” The region’s oil importing nations,


Saidi stressed that the oil importers


need to find more than $150 billion in financing requirements between now and 2013 and he couldn’t see where that was going to come from. For countries undergoing revolution


or regime change, generating significant amounts of capital can take years. Saidi referred to research undertaken by the World Bank to explain how it can take four or five years for a country to move out of the transitory stage and, while it does so, output and investment both decline markedly. How the political change comes about also makes a big difference to a country’s future prospects.


“saidi believes Libya, an oil exporter and the focus of by far the bloodiest and most destructive revolution in the region to date, faces severe challenges as the presence of natural resources and significant social inequality can cause additional problems.”


“Countries in which you get peaceful


which include the likes of Egypt, Tunisia and Syria (each at various points of transition or potential revolution), will be hoping the GCC can step up and offer genuine assistance. According to the IMF’s Regional Economic Outlook, the MENA region’s oil importers will see their GDP growth slump from 4.5 per cent in 2010 to just 1.4 per cent this year, with a prediction of a very modest 2.6 per cent in 2012. The IMF report highlights that, due


to the political uprisings in several of the oil importing nations, tourism and capital inflows have taken a big hit this year, while high commodity prices have eroded external reserves. For the oil importing countries as a whole, fiscal deficits are expected to widen by 1.5 per cent of GDP in 2011-12.


transitions tend to recover faster and the recovery tends to be permanent. And you have a greater restoration of civil rights, property rights, economic rights and therefore investment picks up. So peaceful transitions tend to lead to substantial increases in the chances of economic recovery. “On the other hand, if you have violent transitions, the outcomes are much less protection of property rights, much less protection of civil rights. And therefore recovery does not take place as quickly as otherwise and it is not necessarily sustained.” Saidi believes Libya, an oil exporter


and the focus of by far the bloodiest and most destructive revolution in the region to date, faces severe challenges as the presence of natural resources and significant social inequality can cause additional problems.


GULF BUsiNEss / 67


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