Private sector poised to bolster investments

Arab countries suffered huge losses of nearly $2.5 trillion (Dh9.18 trillion) as a result of the global economic crisis, according to a report submitted to the Arab Economic Summit held in Kuwait earlier this week.

Needless to say, it is an astronomic figure.

For comparison purposes, the rescue plan for the US economy, the world's largest, was allocated $700 billion, which means that the losses of Arab countries are more than three times the amount allocated for the plan, and two times the amount allocated for both the US and European plans.

These losses exceed the accumulated GDP of all Arab countries together, which comprises all Arab production of commodities and services, including oil, gas, industrial production, agriculture, services and trade.

The losses affected public and private sector investments in almost all Arab countries. They were as high as the losses of the US and European countries, and exceeded the losses of Japan, China and India.

Some of these are book losses. Share prices in global markets would rebound and compensate for part of the losses if investors have kept the shares. But if they have sold them, they would become real losses.

The major part of these losses, such as deposits at Lehman Brothers, for example, are actual losses since the leading banking institution filed for bankruptcy at the onset of the crisis.

Rich Arab countries will be able to cope, and perhaps make up for them later. But for poor Arab countries, this is a real disaster, especially for the private sector which holds the biggest portion of foreign investments in these countries.

The important question that arises in such circumstances is about the lessons that Arab countries have to learn from this tough experience.

These losses came at the cost of development programmes, according to the Kuwaiti foreign minister, who said that 60 per cent of announced projects have either been cancelled or postponed.

Before the crisis, many analysts considered investment in the US and the west in general ideal by all standards, because of the laws and regulations there, and the stability and profitability of these investments.

This may be true, if investors select safe investment channels, which comply with investment logic and have a revenue that reflects the nature of the investment.

It would ha ve been real had they not chased financial products that multiply in an unjustifiable way or engaged in high-risk and costly speculations.

If half of the losses were invested in Arab countries, this would put an end to unemployment, which threatens the stability of these countries.

Furthermore, many important projects could have been implemented, such as schools, hospitals, and road and telecommunication projects, which facilitate commercial exchange and increase development.

Despite the repercussions of the crisis, post-crisis situations must be an opportunity to learn lessons, and especially to benefit from the foreign investment experiment of Arab countries.

The crisis created many new attractive investment zones that allow good revenues and enjoy flexible laws.

As for investment in Arab countries, the issue has gained exceptional importance, since the private sector in particular can help in local and foreign investment diversification.

The private sector can also help enhance economic confidence by contributing to updating investment laws, providing investor facilities, enhancing transparency and disclosure in their economic systems.

Meanwhile, less developed Arab countries can develop their investment regulations and provide the necessary guarantees to attract capital, without shoving the endless inter-Arab political disputes into economic cooperation.

Dr Mohammad Al Asoomi is a UAE economic expert.