Mr. Chairman, Distinguished guests, Ladies, Gentlemen
I am grateful to the Organizers for the invitation to address this fifth MENA Development Forum. I am sure the last couple of days have seen a very constructive dialogue, and an exchange of great ideas.
My contribution this afternoon will focus on the future perspective of the region. The region is undoubtedly diverse. However, to try to generalize about the region is hazardous at best. However, the region does face common challenges, some of which are characteristic of emerging economies and developing countries; others are somewhat specific to the region.
Ladies and Gentlemen :
Allow me now to begin with a quick note from the past. Back in the 1980s and 90s, economists and experts have offered a very bleak perspective for the economies of the MENA region. These countries were seen as having little or no chance of reforming themselves unless, of course, urgent and deep rooted transformation in the political and economic landscapes took place.
These analyses were largely based on the economic performances, and the political realities of a region caught in a spiraling trend of violent conflicts for more than a decade. But these conclusions should have taken into account some parameters that have very much contributed to poor economic performances. These are:
- The economic and financial impact of the two Gulf Wars.
- The strains of external boycotts and the crippling economic effects of civil strife in some parts of the region.
- The immediate and the future economic and political implications of a down turn in the price of oil.
Today, the MENA region is enjoying accelerated growth and lucrative markets, and many countries are responding constructively to infrastructure needs. The region’s trade and current accounts surpluses appear to strengthen, year in year out despite a substantial growth of imports. Fiscal surpluses coupled with swollen reserves have allowed, in particular, an early reduction of government debts and Substantial investments programmed over the medium- term prefigure a broad based economic recovery and a sustainable enhancement of the populations’ welfare.
The progress made in reversing the unemployment rates should also be noted. Now more than ever, many countries are embarking on bold moves to bring a bout a state of equilibrium. We commend Morocco for its 20-year human development program, and Algeria’s successful “ten-initiative Plan” which aims at reducing unemployment from the heights of 30 % of a few years ago to less than 10% by 2008. We also continue to monitor some stern measures taken by several countries in the region with the aim of increasing the workforce of their nationals.
While much has been achieved, one should remain realistic and recognize that much work lies ahead.
Let us now turn to the future:
In looking at the future, we take note of these strategies, which are traditionally monitored by the Breton Woods institutions and more recently by a host of think tanks. In examining these monitoring reports, we are looking for signs that the economies are moving towards greater openness to globalizing economies; we are also looking for signs of modernization and sustained high economic growth.
While very much dictated by local dynamics, the reforms are likely to be substantially influenced, by international agreements. Most countries have joined or are about to join the World Trade Organization (WTO). The Mediterranean countries have signed agreements with the European Union, which will in time create a Euro Mediterranean common market. Some countries have signed Agreements with the United States in the framework of the Middle East Initiative and finally the General Arab Free Trade Area (GAFTA) has been declared effective.
Only time will tell if these agreements are simple corrections, or signs of a fundamental transformation of the economic systems in the region.
Let us turn our attention now to the price of oil. There are several factors which, collectively, may explain the market situation. The performance of the world economy, led by the US and China, was the driving force behind a strong demand growth for oil, particularly in 2005. Equally important is the anticipation that the upsurge in world demand will outstrip supply growth in non-OPEC countries over the medium term. The tightness in the downstream sector resulting from high demand for sweet crudes has made also an impact on the prices. Lastly, all these factors act as a driving force behind rising activity of non-commercials exacerbating the current bullish bias with further pressure on prices and market volatility.
Luckily, the price spike has had little impact on global economic growth. The world economy has shown remarkable resilience to high energy and commodity prices .
Oil supply, ladies and gentlemen, is not at risk. Members of the Organization of the Petroleum Exporting Countries (OPEC) do have the resources and the capability to meet the rising demand, as they have successfully done in the past. OPEC possesses around four-fifths of the world’s proven crude oil reserves, but, currently, accounts for only about two-fifths of global output. The implication is clear: there is enough oil to service the global economy for decades to come and perhaps well into the second half of this century.
As a result of the producers increased revenues, many countries in the region have embarked on structural reforms, particularly in their education systems and corporate governance. This drive towards reform has made it all possible for the labor force to accommodate modernizing economies.
As oil is by the far the main source of income for the majority of the Arab countries, we should not lose sight of the fact that some countries have now come to realize the imperative of diversifying their economies, without which reform will likely to stall.
The countries of the MENA region, whether individually or collectively, have the means to achieve their national and their regional goals. In addition to its natural resources, the region has excess capital, due in large part to record prices in 2005.
We firmly believe that the relative financial ease of the region will help accelerate reforms, not hinder them. It is important to note, too, that strategies for reforms must be comprehensive, specific and driven by national interests.
Indeed, externally imposed reforms are doomed to failure, and should be resisted. Any national economic or political road map needs to reflect the vision and ambition of each country’s people. It is imperative, therefore, that all parties be actively involved in shaping the future strategy of the nation.
Mr. Chairman,
Let me conclude by offering a last word on reform. The OPEC Fund adopts a policy of non-interference and we have no illusion that the key to any successful reform rests solely on ownership. If we attempt to formulate a structural reform, we must be cognizant of the national contexts, people’s aspirations, their culture and national capabilities and, more importantly, perhaps, national accountability.
I should also like to point out that the role of the development institutions can not be more than facilitators. When it comes to the Arab world, the OPEC Fund sees an urgent need to improve the environment for investment. We are inclined to think that the region is in need of further progress in trade liberalization, and in reform of the regulatory and judicial regimes. The governments have a role to play by protecting social spending on basic health and education services, which, if efficiently implemented, be a sound investment in human growth.
At OPEC Fund, we believe that engaging in constructive dialogue with countries in the MENA region is the right approach to tackle economic and political challenges that could conspire against any serious attempt for reform and global integration. We strive to promote such a spirit of cooperation, and that is what we aim to advocate in two major conferences we are organizing in Vienna in early May. We will bring together some twenty Heads of Development Institutions most involved in the MENA region to take note of what is happening in the Arab world, and to debate their views of the reforms and their programs in their support.
Thank you!