Arab nations have a way out of economic crisis: It’s called ‘Will’
“Arab nations continue to be heavily reliant on oil, which can have a severe impact on the economic and political growth of the region,” said Dr Nasser Saidi, former Lebanese Minister of Economy and Trade, during a session titled ‘The State of the Arab World Economy in 2019’ at the Arab Strategy Forum (ASF) 2018, moderated by Nadine Hani of Al Arabiya news channel.
Dr. Saidi, as well as Dr. Mahmoud Mohieldin, Senior Vice President for the 2030 Development Agenda, United Nations Relations and Partnerships at the World Bank Group, pointed out several factors that currently influence oil prices.
GCC states now face competition from countries such as the United States that supply oil to Asia and other markets. In addition, the rise of renewable energy, such as solar and wind power, is leading to a further decrease in the demand for oil. In this context, economic diversification is the way forward, both speakers emphasized. Financial tightening alone is not enough to tackle the situation. The need of the hour is to review financial policies.
Dr. Saidi started the session by remarking on the turbulence in the region and the general consensus among economists that the world is entering a phase of slow economic growth, even a possible economic recession in 2019. The economic war between the US and China can have a severe impact on the world, as the two countries are currently the drivers of the global economy. A general increase in world debt to the tune of $247 trillion and Brexit were also mentioned as contributors to the situation.
Dr. Mohieldin noted that the world is entering an era of complete uncertainty, with the former major economic powers now losing their autonomy even as other countries are trying to gain a foothold. He also emphasized the need to review the current systems, as the oil market has changed since 2013, and partners outside the Organisation of the Petroleum Exporting Countries (OPEC) are playing a major role now.
Dr. Mohieldin highlighted the high unemployment rates in the region and the need to provide more employment opportunities, especially for women. “We have a tendency to blame the comprehensive geopolitical situation for crises, but the negotiations happening in Stockholm look promising despite economic setbacks,” he said.
“The three things we need to invest in our human capital, infrastructure and risk reduction. We have beautiful strategies in place, but to implement them properly, we need will and perseverance.”
Dr. Saidi spoke about smart cities that are coming up, such as NEOM in Jordan, Madinat Al Hareer in Kuwait and the new administrative capital in Egypt. He explained that while building such cities does offer short- and medium-term benefits, such as job creation, long-term connectivity needs to be examined more closely. “It would be difficult to duplicate the Dubai smart city model, as it has been a pioneering venture,” he added. While connecting cities to the local economy is truly appreciable, global connectivity is also important.
Dr. Saidi suggested that Arab economies should consider linking with emerging economies, such as China and India, as these economies currently hold 50% stakes on the global scene. “We also need to increase trade and trade transparency between Arab nations,” he added while stressing the need to bring about a major shift in the education system with a focus on growing a digital economy. With regard to involving the private sector, Dr. Saidi remarked that it is important to attract both local and global private investment.