23 June 2009

BEIRUT: Direct foreign investments to the Arab world increased 20 percent in 2008 compared to the previous year, the general director of the Arab investment and export credit guarantee corporation, Fahad al-Ibrahim, said on Monday. Ibrahim showed optimism regarding the investment atmosphere in the Arab region, saying that the opportunities available for Arab governments to attract foreign investments have not been affected by the global financial crisis.

According to financial statements related to 17 Arab countries, he said, the flow of foreign direct investments during 2008 increased to $89 billion, compared to $74 billion in 2007.

"There was an increase in the share of the Arab countries from the total flow of foreign direct investment in the world from 3.9 percent in 2007 to 5.3 percent in 2008, compared to 0.4 percent only in 2000," he said.

He added that intra-Arab countries investments during 2008 increased by 64 percent to reach $34 billion compared to $21 billion in 2007, which contributed to the increase in the total flow of investments to the Arab world.

His remarks came during the Arab world investment forum held at Movenpick Hotel in Beirut to discuss the challenges facing investment opportunities in the Arab region following the global financial crisis.

Ibrahim strongly agreed with Former Finance Minister Jihad Azour on the fact that Arab countries should take advantage of the world's absorption in pulling itself together from the global financial crisis, in order to take actions that would allow them to immune themselves in the future.

"This crisis opened the door to investments in the Arab region which contains a lot of opportunities while investors did not use to pay a lot of attention to these opportunities," he said.

However, Ibrahim added, reforms are still needed to overcome flaws prevailing in the Arab economies.

"For example we need to have a single entity in the Arab world where foreign investors can come and finish all of the procedures required to invest in our countries just like what happens in Europe," he added.

Azour believes that the Arab region was less affected by the global crisis but unfortunately Arab authorities did not admit that they were affected in order to maintain confidence. Therefore, he said, they did not take the necessary measures that would alleviate the negative repercussions of the global crisis, and help Arab economies adapt to the new global economic order.

"Any economy should change its tools and mechanisms in the midst of such a global financial crisis in an effort to get out of it with less damage. However, this unfortunately was not the case with our Arab governments," said Azour.

Azour said that the Gulf countries were affected by the decrease in asset valuation because of the downfall of the stock market which had an impact on economic growth.  He added that some groups were considered the biggest bodies in the Gulf countries but now are much affected by the crisis. "It is wrong to say that the Gulf countries are not affected by the crisis and that providing liquidity to the banking sector is enough," he said.

"Even those countries that have huge credit capacities were affected in the implementation of big megaprojects in the first quarter of 2009. As a result, we witnessed stagnation in the investment sector due to scarcity of financing sources," he added.

Azour believes that some of the Levant countries have been affected more than others, and he mentioned Egypt as an example, saying that it was mostly affected because it depended more than others on foreign direct investments, which reached $14 billion in 2008. Meanwhile, he added, Lebanon was not impacted much because of its continuous preoccupation in its political problems.

He recommended a series of measures to be taken by Arab governments including the development of financial markets, which are "suffering because of their unique dependence on equities, which does not give institutions the possibility to be financed by other sources."

"Saudi Arabia developed the bond sector which gives it another source of financing when the stock markets are facing problems. This makes it able to maintain a good level of investment," he said.

"Governments can create equity funds which can be financed by a venture capital of funds in order to help small and medium enterprises in maintaining their productivity level and competitiveness," he added.

Azour believes there is a need for Arab corporations to complement the development of systems that ensure good governance and transparency, and also improve the laws that regulate the work of these companies.

 

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