The World Economic Forum Blog: Day 1

How can Arab economies better leverage regional and global trade to restart growth and drive economic and social development?

A final session at the end of the day focused on trade as a mechanism for driving growth. A lot of panelists have discussed boosting entrepreneurship and improving education as engines for job creation, but when it comes to economic growth, panelists generally agreed that international trade crucially needs to improve.

Uri Dadush, Director, International Economics Program, Carnegie Endowment for International Peace, put his finger on the point:

"One of the big disapointments in the region has been its trade perfomarnce. GDP growth has not been that bad, but it had not generally been helped by trade. We are one of the least integrated regions in the world in terms of trade, and least diversified in our exports."

He pointed to two primary factors driving this:
1) The weakness of the domestic business environment reduces incentives for foreign investment
2) The trade agreements that have been negotiated by the U.S. and E.U. don't support the MENA region. The US and EU should have individual trade agreements with Egypt and Tunisia, he said.

Francisco J. Sánchez, US Under Secretary of Commerce for International Trade, affirmed that the U.S. wants to be more engaged with the region, yet urged, "There's a lot of money right here in the the Middle East; it would be useful to see more of it invested in infrastructure. There is need for more transparnecy, more open government, and creating an inclusive society."

Salem Ben Nasser Al Ismaily of Oman said, "We can't blame US," pointing out that Oman had the first Arab World trade agreement with the US in 1883. He also urged societies to support women and non-Muslims in positions of power in Arab World societies.

Nemat Shafik, Deputy Managing Director, International Monetary Fund (IMF), addressed the role of the IMF in boosting trade: "We lend with reluctance; we'd rather a country could solve their problems by themselves. Yet countries may need a fiscal cushion to reduce tariffs to boost trade. Progress for the world involves improvement on multilateral trade agreement.

She pointed to the problem: "There are about 100 trade agreements in the Middle East, but very little trade. They're not delivering economic transformation."

The reasons? Tariffs are around 12%, some of the highest in the world, and the regulatory environment is a problem. Another obstacle to progress is all of the elections in 2012, she said. And the troubles in the U.S. and European economies.

Dadush attested that it's only going to get worse: "We are dealing with a very large crisis in Europe that threatens to repeat the Lehman crisis in 2008. If that happens, the effect on emerging markets will be severe. There's a misperception that emerging markets decoupled in 2009, and that they will decouple again. Imagine oil going down by $40 a barrel for longer then 6 months, and credit markets tightening," he illustrated.

Shafik attested that the IMF is very focused on having the Eurozone not go through a recession. If that doesn't work, she said, we have to support the countries that we can support.

Sanchez asserted that the U.S. would work to boost trade with the region, pointing out that "95% of the world's consumer live outside  the U.S. American companies will have to think globally. We will continue to encourage American companies to look here. Trade agreements are not just about tariffs."

Dadush again pushed for an Arab World Marshall Plan: "We should have a union like the E.U., with zero barriers. We should work together to create a good business climate, to enhance trade, and we stand ready to work with our partners here to make that a reality."

While platitudes may have reigned, the call to action remains.

A member of the crowd rightly pointed out at the end that often in this region, grand plans don't work on the ground. While the call at WEF for an Arab World Marshall Plan has echoed throughout the sessions, in reality it may be more effective for trade agreements between individual countries to develop outside of a singular framework.

Either way, it's clear that new trade agreements must be recrafted after the Arab Spring to drive economic growth.

How can improvements in transparency and accountability be achieved across sectors?
In an afternoon panel called "Trust through Accountability," panelists called for enhanced freedom of the media in order to increase transparency in society, and grearter inclusion of youth opinion in policymaking.

Jamal Dajani, VP MENA of Internews, focused on the ways that media can push for more transparency in society, by boosting local coverage. Local, independent stations need to be supported; he pointed out (quotes paraphrased):

"When it comes to reporting on the issues, we have a lot of influence from external media outlets, when we should have better local news stations. Why do people in a local setting watch a regional channel like Al Jazeera? Credibility is a key problem. Now people are watching citizen videos to get the news. This will persist until we move towards 100% freedom of expression, and put law in place to protect journalists."

He called for two actions: 1) training more niche journalists, and 2) getting media to focus on very local issues to push greater government and societal transparency.

Richard Boucher, Deputy Secretary-General, OECD, did not mince words when it comes tothe decisions that politicians must make:

"The regulatory system is key. The way the rules are made determines who wins and who loses. In places you have rules that protect privilege, and allows for corruption." Noting how the system is set up to encourage long-term jobs rather than quick iteration, he pointed out, "It's hard in these countries to support someone in a job who works only for a couple of years."

He again called upon politicians to make change. "We can't just keep giving people jobs in the government and paying for long retirement packages as people grow older. Greek public employees are goin to suffer. It's a failure of politics not economics. It's a failures of politicians to make this heard decisions."

A member of the crowd asked whehter governments should have advisory boards of youth, in order to take their opinion into account and not fail them.

Ahmad El Zubi, a Global Shaper from Jordan, who is 27 years old, spoke for youth, saying, "Youth don't currently have a good channel for being heard. They can only complain. Yet they're not going to overthrow a regime and bring their own regime. So they need the government not just to listen, but to act on what has been said."

Salam Fayyad, Prime Minister of the Palestinian Authority, pointed out that "Governments have not failed the youth only, the have failed citizens. A government for the new era will admit that it has failed."

Booz & Co. announced 10 imperatives for nurturing startups in the Arab World (will be posted later)

Habib Haddad, CEO of Wamda, pointed out that "The Arab World has been good at a top down approach. We need to create a bottom-up approach. When it comes to the problems facing us, there is perhaps a lot of uninformed optimism coming from the bottom up, and yet this is met with a lot of informed pessimism from the top. Civil society, government, and the private sector need to work together to create new models."

Haddad also pointed out that while technology has lowered the cost of entry to the market when it comes to starting up a new venture, we need to have four elements working together to support entrepreneurs: mentorship, finance, incubators, and environmental elements like the press. (And at Wamda we're trying to address all four).

The New Economic Context

In the session on "The New Economic Context," Børge Brende, Managing Director, Government Relations and Constituents Engagement, World Economic Forum, moderated a session discussing on economic transition in the region and the globe.

Some key quotes:

Mahmoud Jibril, Chairman, Executive Office, National Transitional Council
(NTC) of Libya, said, in response to how he feels now and what it will take to build LIbya:

"I am relieved and reborn again. What it takes to rebuild Libya is not easy, it's a mission impossible. The first step is to restore stability and order, and to initiate a reconciliation process. The second task: is to replace oil with another source of national income. We have consumed about 62% of our reserves. Libya has a very limited opportunity. We should use it to build an alternative economy as fast as possible."

Awn Al-Khasawneh, the new Prime Minister of Jordan, reflected on political reform in Jordan:

"Political reform is very important, but we want to create laws that will effect both political and economic change. We are trying to assemble the best brains in the country to address economic reform. It is not instantaneous."

Elizabeth Littlefield: President, Overseas Private Investment Corporation (OPIC), addressed the role of the U.S. in assisting development in the region.

"Development has to be not just about poverty alleviation, but about prosperity attainment. And fortunately now, countries are more interested in partnerships than aid. $80% of money coming to emerging markets form the U.S. is foreign direct investment, not aid."

Maurice Lévy, CEO, Publicis Groupe made a suggestions:

"I have called for an Arab Marshall plan that works for the development of the economies of the Arab World. This will be the only formula that will work."

In response to the question of whether the U.S. had a role in an Arab World Marshall Plan, Littlefield said,

"The U.S. is operating under budget constraints. The rightul redirection of our influence is on the impact businesses can have. Secretary Clinton announced that OPIC would provide $2 billion of private investment in the region. We will incentivize investors to invest where thy wouldn't otherwise. Obama promised another billion dollars that will lead the way for investment in SMEs. Our focus will be on commercial ties."

Jibril also added: "The problem in the Arab World is not money, it's the management of money. We should address the flow of money between countries. "


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