Bassil deems Arab growth rate unacceptable

BEIRUT: It is unacceptable to have low average growth rates ranging between 3.2 percent and 3.8 percent in 2015-2016 in Arab countries, said Francois Bassil, president of the Association of Banks in Lebanon. “Arab countries are incapable of creating new job opportunities for their youths because of their low average growth rates and this is not acceptable anymore,” he said during the opening of the Arab economic forum held Tuesday at the Phoenicia Hotel in the presence of Prime Minister Tammam Salam.

The forum was organized by Al Iktissad Wal Aamal Group in collaboration with the Central Bank of Lebanon, the Association of Banks in Lebanon and the International Finance Corporation, a member of the World Bank Group.

The forum, which was dedicated this year to the memory of the late Said Khoury, is aimed at discussing the future of investments in the Arab world.

Bassil said this low growth rate triggered a huge gap between the different social classes in the Arab world in addition to a lack of proper distribution of national income. “This is expected to further deteriorate the living conditions of some segments in Arab societies,” he said. “It will also probably create more tendencies for extremism, hence threatening the political stability in these countries,” he added.

Bassil emphasized the need to hold presidential election in Lebanon in a bid to facilitate the functioning of the different governmental institutions. He added that the Lebanese banking sector was cooperating with financial and monetary authorities to continuously work on curbing the debt-to-GDP ratio.

Meanwhile, Mohammad Choucair, president of the Beirut Chamber of Commerce, Industry and Agriculture, said the Lebanese private sector remained successful despite the difficult political and security situation that has prevailed in the region in the past few years.

He said that the private sector is also looking forward to a few projects in which Lebanon will be actively involved including the reconstruction of Syria. “We are also looking forward to improving our infrastructure following the ratification of the private-public partnership law,” he said.

Choucair’s comments were echoed by Salam, who said that the private sector proved to be successful despite all the political challenges that have delayed necessary reforms in the country. “Political bickering has delayed the exploration of oil and gas and the improvement of internet services in addition to approving on a budget for instance,” he said.

The forum’s opening ceremony was followed by a session dubbed “the future of Arab economies: between declining oil prices and political turmoil.”

Freddie Baz, board member at Bank Audi, was among the speakers. He said that oil importing Arab countries need to create 92 million job opportunities by the year 2030 at a cost of $4.4 trillion in a bid to have a high employment to population ratio.

“The cost of creating such a high number of job opportunities for oil importing Arab countries stands at $220 billion yearly and the gross fixed capital formation of these countries as percentage of GDP must exceed 50 percent to reach this goal which is impossible under the current economic conditions,” Baz added.

GFCF refers to the net increase in physical assets (investment minus disposals) within the measurement period. As for the employment to population ratio, it is a statistical ratio that measures the proportion of the country’s working-age population that is employed.

Baz said that Gulf countries needed up to $660 billion in investments to reach an employment to population ratio of 47 percent from 26 percent today. “As for Mashreq and North African countries they need $190 billion and $220 billion respectively,” he said.

Baz underlined the importance of improving the education and health sector in Arab countries in addition to activating financial markets alongside improving their job markets.

His remarks were echoed by economist Kamal Hamdan, who emphasized the government’s role in creating jobs.

He said that most of the private sector in the Arab world is made of micro businesses that employ less than five workers.

“These do not create enough job opportunities and the government must play an effective role in this process,” he added.

Hamdan said that Arab countries must work hard on creating successful industry sector which is considered to be an added value for their economies.

“The problem with Arab countries today is that they import in order to consume rather than investing the imported input into the industrial sector and creating job opportunities for the youths,” he added.

Likewise, Tamer al-Aani, manager of economic and strategic relations at the League of Arab States, said that unemployment in the Arab world reached 17 percent while the growth rate in 2013 did not exceed 2 percent, making it impossible to create job opportunities.

“Moreover, foreign direct investments in 2013 did not exceed $45 billion in Arab countries which is equivalent to 3/10 of global investments only,” he said. “Also, Arab exports do not exceed 10 percent of global exports,” he added.

Aani emphasized the need to launch the Arab customs union to encourage inter-Arab trade.

The Arab customs union was announced at the Arab League’s 2009 Arab Economic and Social Development Summit in Kuwait in order to achieve a functional customs union by 2015 and an Arab common market by 2020 in addition to increasing inter-Arab trade and integration.

“Inter-Arab trade stands at only 8 percent of the gross national income in the Arab world,” Economist Marwan Eskandar said.

He added that investments in the Arab world are too small compared to the amounts paid by these countries on the purchase of weapons.

“Saudi Arabia, for instance, bought weapons for around $80 billion last year while the [remaining] GCC countries spent $25 billion [combined] for the same purpose,” he said.

“Do Arabs spend the same amounts for investments?” he asked.

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