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Arab finance ministers grapple with reform issues - IMF officials at beirut conference stress time for change is at hand

Preachers of privatization, liberalization no longer feel their words are wasted, as Arab ministers gather to discuss regional economies

Privatization, economic liberalization and political reforms have become the subjects of hot debates in almost every economic conference in the Arab world.

Preachers of such recipes now feel their words are no longer falling on deaf ears, especially after the failure of socialist-oriented economies in some Arab states to achieve prosperity for their peoples.

Surprisingly, many of the Arab states that resisted such calls have become cautiously receptive to these ideas after the Sept. 11, 2001, terrorist attacks in the United States. Many, including the oil-rich states, are recording deficits in their annual budgets. Most, if not all, the Arab states are simply spending more money than they are earning. Bearing all this in mind, high-ranking officials from the International Monetary Fund (IMF), the World Bank and the United Nations urged 16 Arab finance ministers meeting in Beirut to get their act together.

One of those who gave an in-depth analysis of the political and economic situation in the Middle East in the aftermath of the Sept. 11 events in the United States was Ghassan Salameh, the special adviser to the UN secretary-general in Iraq.

"The first challenge facing us is the clarity of the vision. This vision will not be clear if we don't take into account the radical changes that took place around us," Salameh told participants in the Fiscal Reforms in the Arab Countries and the Near East conference at the Phoenicia Inter-Continental Hotel.

Alluding to the United States, Salameh said that "someone has decided that we (the Arabs) have failed to run our affairs in accordance with our interest." He added that the US stepped in to speed up political and economic changes in the region which the Americans think are crucial. "The spread of so-called terrorism, social backwardness and religious extremism are among the various reasons the US wants to make changes in this part of the world."

He stressed that under these false justifications, the Americans took the liberty of breaching the sovereignty of other countries and branding some groups as terrorist organizations.

Salameh added that the US is pushing the Arabs to implement political and economic reforms without even taking into account the special characteristics of the society."We don't need reforms just to appease some powers and avoid their wrath. What we want are reforms that suit our needs and are based on our heritage and culture."

But IMF officials at the conference felt that the time for change in the Middle East has become imminent."Fiscal reforms are important because of their role in bringing about higher growth, creating more jobs and improving standards of living. These are the fundamental objectives of people and policymakers everywhere, and this region is no exception," said IMF Deputy Director Agustin Carstens.

Carsten's remarks went beyond casual advice: "The economic performance of the Arab world and of the broader region in the last three decades has fallen significantly below its potential." He added this gap must be bridged if the region is to grow at levels sufficient to meet the needs of a rapidly expanding labor force.

To the delight of Finance Minister Fouad Siniora, Carstens heaped praise on Beirut."I believe that Beirut is an ideal venue for this conference. Two obvious reasons are the attractiveness of this beautiful city and the excellent organizational skills of the Lebanese authorities," Carstens said.

The IMF official even urged the Arab states to follow the economic model of Lebanon."I believe Lebanon has important lessons to share with the region and with international institutions. A clear example is the VAT, which in just two years, has reached tax efficiency levels rivaling those of industrial countries."

On his part, Siniora did not hesitate to share Lebanon's experience in introducing economic reforms."We have achieved some economic growth since the beginning of the 1990s through reforms and other types of restructuring," Siniora said.

The minister noted that despite economic growth in many parts of the region, the Arab states are still suffering from a rise in public debts and deficits. Siniora proposed trimming the size of the state, giving the private sector a bigger role to achieve growth and ending excessive government intervention in some state owned companies: "The public sectors in the Arab states have become a big burden on the economy."

Siniora said it's wrong to assume economic reforms are the result of external pressures. Other speakers lashed out at some of the outdated economic policies of some Arab states.

Jassem Manaai, the president of the Arab Monetary Fund, was forthcoming in his views about economic reforms."The political instability which plagued some of the Arab states has prompted governments to spend huge amounts of money on defense and security. "This spending consumes 7 percent of the total GDP of the region," Manaai said.

Beirut,05 24 2004
Osama Habib
The Daily Star
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