Oct 02 2011
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Saudi Arabia needs more pump-priming laws on jobs
Commenting on the mixed forecasts by various analysts on the GCC investment outlook in 2012 that the region's economy will be driven by reform steps undertaken by respective governments as well as their future plans for the next phase on account of the performance of the region's financial markets and the investment movement apart from global fluctuations, Omar Al-Juraifani said "it is hard for us to predict the points of weakness of markets and know exactly when they experience a recession or even how to avoid its consequential damages by 100 percent. However, we can identify market indexes so as to be well prepared for a possible recession-while keeping in mind that financial laws and legislation are one of the most important indicators, simply because if laws are lenient the volume of liquidity will be affected leading to an increase in expenditures that can lead to inflation and then a high risk of recession. "
Analysts believe that the year 2012 will be challenging, and thus it is hard to predict whether GCC countries will enjoy a stable or volatile economy faced with a new crisis, thus requiring further reform steps while making the best use of successful international experiences in this regard.
However, Al-Juraifani said the year 2012 will be stable for GCC countries which are projected to see a slow growth due to lack of demand for energy in Europe and China. This will not reflect on the growth of local companies due to government spending on infrastructure projects, especially in the Kingdom of Saudi Arabia.
"I believe that Saudi Arabia needs to enhance its legislative investment infrastructure with more laws, utilize government expenditure in employing more citizens and not to export the nation's resources abroad so as to achieve the best possible outcomes," Al-Juraifani said.
With 2011 just around the corner, analysts' reports show that the region's economy is passing through imbalanced rapid growth phases like almost what it was before 2008, when the Saudi stock market's main index, the Tadawul All Share Index (TASI) reached nearly 18 000 points, while today it touches between 6000 and 7000 points, bringing back to mind the phases that preceded the previous crisis which were marked by stability, slow growth and recession.
According to these reports, the Arab region is projected to face a new financial crisis whose signs are represented in an increase in the value of assets of lands and high unemployment rates, especially after the eruption of revolutions in some Arab countries.
Making a review of global financial crises shows that these crises are characterized by several common factors. For example the lending and borrowing laws were the key reason behind the property mortgage crisis in the US, and so was the case in Sweden which faced a similar crisis in 1985 due to its improper lending policy, as well as the 2007 financial crisis in Britain where borrowers were unable to pay off their dues - causing a huge crash to Britain's financial institutions.
The case now is no different from the 1929 stock market crash in the Wall Street - the main cause of which was loans - when people rushed to borrow money to invest in buying stocks which led to the stock price bubble that raised the market value of stocks. The same scenario happened in most GCC countries in 2006-2007, as well as the crisis experienced by Japan due to the asset price bubble in the period of 1886-1990.
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