Abu Dhabi: The Middle East will experience limited recovery and growth from the global financial downturn, former US President George W. Bush's financial market adviser told Gulf News in an exclusive interview.

"The growth that the region will experience is from the constant demand for oil. But input cost for that field is rising, which means that the cost of extraction will increase and that is one of the reasons why recovery will be limited," Dr Philippa Malmgren, president of the Canonbury Group and a leading global policy expert, said.

The interview was conducted on the sidelines of Insead's first International Alumni Association (IAA) event on the school's Abu Dhabi campus yesterday. Insead is a leading international business school that is based in France.

As part of the event, Malmgren gave a lecture entitled ‘Global macroeconomic and geopolitical trends and their effect on investments' where she outlined the relationship between global political and policy environments and their ability to influence prices in financial markets and the global economy.

She also shared her views about the various trends that were emerging from the Middle East.

"Increased demand for Islamic banking in the region is a reflection of the organic growth that is occurring in these emerging markets," she said.

"It also appeals to western investors and companies because it helps provide a method of entry into the GCC. However, this system of banking can't replace the system that is in place in the West."

Bankruptcy laws

Another issue raised was the absence of bankruptcy laws in the UAE and their repercussions.

"All enterprises carry with them a certain level of risk… and failure is a part of that equation. Governments should permit business owners to fail, otherwise that will restrict their growth," Malmgren said.

"I would advise the UAE government to have clear rules and a mechanism for moving assets into the hands of a player who can do something with them."

Malmgren said recent discussions by the Federal Government about amending the current Company Ownership Law would have a positive effect on the UAE's domestic economy.

The current law states that companies created outside the designated free zones must have an Emirati partner who has a 51 per cent stake in the company.

If that is amended then all business owners would be given an opportunity to have complete control over their enterprises, regardless of where they are set up.

"It will be a good idea if the UAE's federal government makes the company ownership law 100 per cent across the board," Malmgren said.

"That will help encourage people to start businesses in the country and it will encourage investors because there will be one less barrier to entry in the UAE."