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Banking conference calls for regional reform (Daily Star)

Despite growing investment, more must be done. New laws, stronger judiciaries and better investment practises are needed - but the same recommendations have been issued before

Calls for economic integration, across-the-board reforms and new investment laws to meet the so-called "new challenges" have become a familiar cliche at business conferences in Arab countries.

Tuesday was no exception. Speakers in a two-day conference in Beirut, titled "Banking Expansion Across Borders in the Service of Investments," identified the problems facing Arab banks and even made proposals, such as allowing Arab banks to help lead reform efforts.

But the comments remained ink on paper. Most of the speakers, some of whom are the heads of large banks and companies, said massive Arab assets must be invested wisely in the Middle East instead of sitting in a Western bank collecting very low returns.

Joseph Torbey, the president of the Union of Arab Banks, an association of over 200 regional banks, simplified the problem.

"Inter-Arab investments represent only 0.5 percent of the Gross Domestic Product of these states" Torbey told the conference. "In addition, foreign direct investments in Arab countries are not more than 0.7 percent of global FDI and 2.8 percent of investments in other developing countries."

Total investment inflows into Arab states rose to $3.7 billion in 2003 from $1.43 billion in 1995.

But conference participants said more reforms are needed despite growing investment levels.

Torbey repeated the demands of bankers and investors, saying: "We must have stable and dynamic investment laws, and we must strengthen the judiciary systems."

Arab governments, he said, must combat bureaucracy and administrative corruption, and implement economic reforms.

Torbey's remarks have been echoed by regional economists and analysts.

According to Torbey, Arab banks' combined assets exceed $780 billion, while Arab countries' combined GDP is only $708 billion.

Furthermore, total Arab assets abroad are over $1 trillion.

Torbey said Arab states will prosper more if economic integration is truly implemented.

Other speakers at the conference also called for a greater role for Arab banks in driving regional reform.

Hassan Salem al-Amri, the CEO of Al-Tawfic Investment Funds, said political and economic turmoil hurts investments: "The Arab-Israeli conflict and the spread of terrorism in some Arab states have destabilized the political situation."

Moreover, he said the lack of adequate infrastructure - roads, communications and health and education services - has also hurt the economy.

As far as recommendations, Amri said: "We should encourage commercial banks and investment firms to contribute more to the development of Arab economies."

He also encouraged mergers among Arab banks and companies to stand up to powerful blocs from abroad.

Lebanese Finance Minister Fouad Siniora said business conferences are on the rise in Beirut.

"But what make this conference more interesting is that the banks are playing a dominant role," he said.

According to the minister, Arab banks' huge assets should finance investment projects in the region.

"However, the Arab banks cannot take the center stage in the economies of the region if markets remained closed in some of the countries."

One of the participants attending the conference did not appear to follow the speeches with interest.

"I have heard the same talk in the almost every conference I attended," he said.

"Why don't they do something about it?"

Beirut 18-10-2004
Osama Habib
The Daily Star

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