Mideast better placed to ride out financial crisis

While the rest of the world is scrambling to put together banking bailouts and economic stimulus packages, business leaders in the Middle East remain confident that their governments already have the plans and resources in place to carry the regional economy through the global recession.

Sharif Al Diwani, Head of the Middle East and Arab Business Council of the World Economic Forum (WEF), says: "The thing that comes across consistently is that there is no major concern about the threats, relative to the rest of the world, that this region faces because it still possesses a great deal of reserves." He was speaking in an interview with Gulf News.

"[There is] not too much of a panic as far as the economic conditions are concerned, no grand schemes of rescue or anything of the sort.

There is always this underlying confidence that the government will step in whenever it's necessary [in the Gulf region]," he added.

Al Diwani has an usually good insight into the business mood in the Middle East.

Ahead of the World Economic Forum on the Middle East, scheduled to be held in Jordan from May 15 to 17, he has been canvassing top business leaders who belong to the Middle East and Arab Business Council, about their priorities for the summit. Al Diwani points out that, for now, the big problem in the Gulf countries is that the banks are not easily ending. But he describes this as a "crisis of confidence" rather than any fundamental economic difficulty in the region.

However, the result is that small and medium companies, among others, are struggling to get the credit they need to stay in business.

"In the region, if there is something I would look at seriously, it's rescue packages for small and medium businesses, because they could be the ones who would be most severely affected by a lack of access to credit and they are the biggest employers." But, for now, government interventions to boost confidence in the banking system - like the guaranteeing of customer deposits and providing capital support for banks - are not delivering the hoped for results, and the summit will look at what more can be done.

Across the Middle East, the global downturn has been felt in different ways. Countries like Lebanon, Morocco and Egypt, among others, are under significant pressure because of a drop in revenue from tourism and remittances and tight credit and investment markets.

North African countries with oil and gas wealth, like Libya and Algeria, are in a much better position to ride out the economic downturn. But, while more than half the summit will be spent looking at the impact of the global economic crisis on the Middle East, quite a bit of time will also be spent finding new areas of economic growth in the region, to help it through the global slowdown. And, as the global economy is rebuilt, it must be made ready to meet the challenges of the future, like global warming. "The big challenge today is not to rebuild the economy as it was before.

I think we're really saying [that] with whatever we do to stimulate the economy, we steer it towards a green or post-carbon orientation," said Andre Schneider, managing director of the World Economic Forum. The biggest opportunity for growth in the region is in goods and services for middle and low-cost sectors, said Al Diwani, explaining that during boom times, these markets had been overlooked as money was poured into projects for high-end users.

"Low-cost housing is an incredibly promising growth area," he said. Big players in the regional construction industry, like Emaar and Damac from the UAE, will be working with international experts to see how the market for low-cost housing in the region can be opened for investment. Property rights and land titles are among the issues that must be tackled.

Another growth opportunity for companies in the Middle East is investment in technology and research and development, by boosting ties between companies and research institutions.

WAM