Oil windfall to pose more challenges to ME
Sharma El Sheikh, May 20, 2008
Oil and gas prices will continue to rise, providing unique investment opportunities in the Middle East, but major challenges lie ahead for the region, experts at a World Economic Forum (WEF) discussion said.
The region’s greatest challenges are likely to be in managing expectations, lowering trade and investment barriers and educating the next generation to handle the wealth that is now being produced, a discussion on the region’s economic resilience concluded.
“It is high time to break down the barriers and to take the region to a new level,” noted Yasser El Mallawany, chairman and chief executive officer of Egypt’s EFG-Hermes Holding.
He added that, in much of the region, politics continues to overshadow economic decisions.
Dubai was singled out as a major regional success story that, with no oil or gas resources of its own, has managed to achieve success by opening up and building an economy based on ideas and service.
The most likely candidate to be the region’s financial centre was seen as Saudi Arabia because of its concentration of capital.
To become a financial centre, Saudi Arabia must open up to foreign investors and needs to invest in targeted education and training to make sure that the next generation has the skills to fill the jobs that will be created.
A recurring theme was that the whole region needs to invest in vocational training to make sure that the next generation can find jobs and to ensure that qualified staff are available for a variety of lower echelon jobs that require practical skills.
While rising oil prices are a windfall to producing countries, a number of countries in the region are not producers, and it was pointed out that these governments need to pay special attention to the needs of their populations. Jordan was singled out as a leader in that respect.
Major concerns were expressed at the disappearance of the middle class because of the widening economic gap. The inability of regional markets to work together was also raised.
"Mena is not one market. It is 18 different markets," said Mazen S. Darwazeh, chairman of Mena, Hikma Pharmaceuticals, Jordan.
The fact that every Arab country has its own financial system and procedures makes doing business in the region prohibitively expensive compared to unified markets such as the EU or the US.
The lack of a unified currency emerged as another nagging problem that unnecessarily complicates business. At the very least, the region needs to revalue its own currencies to avoid artificial subsidies and to operate at a more realistic exchange rate.
By far the most pressing concern was seen as the speed of change. “It’s not ‘big eats small’ anymore,” said a participant listening to the discussions. “It’s ‘fast eats slow’.”
More than 1,500 participants, including 12 heads of state/government, ministers, leading business figures, leaders from civil society and the media from over 60 countries took part in this year’s World Economic Forum on the Middle East.-TradeArabia News Service