JEDDAH - “Coordinated action to bring about rapid growth” is the way forward for the GCC region, the first-ever Wharton Global Alumni Forum held in Dubai recently said.
“Growth is not an option,” concluded the experts, “staying the course and doubling the speed of economic growth through diversification” should be the thumb-rule.
The final panel discussion on the “The Impact of the Financial Crisis on the Middle East” at the forum served as an effective recap of the two-day event, reiterating the need to create job opportunities for the 5 million plus Arab youth who will join the workforce in less than a decade.
The panel was unanimous in the observation that the lesson from the crisis was the need to have “balance” and that “fundamentals count.”
Al-Abdullah added that the recovery of the commodity-led GCC region will be faster than the US or Europe, principally led by the high growth rates of China and India.
Professor Richard Marston, James R. F. Guy professor of Finance at The Wharton School, presented a stark and harsh picture of the current crisis, highlighting that the concept of other economies decoupling from the US has been “shown to be a silly idea.” He said the world has seen serious deterioration in wealth.
Marston said the real estate sector will be slower in emerging from the crisis, saying “if we have to wait for the housing sector to recover, it will be a long recession.” The equity markets, the panel observed, could recover in three years while the housing sector might take a further two years.
Hussein Ali Al-Abdullah, executive director, Qatar Investment Authority, observed that in these volatile times, the best solution is “inaction” at least for the next 6 months to one year. He said that the global economic revival will take at least four years adding that the fall-out of the crisis is marked by increasing debt ratios and default rates.
Sheikh Mohammed Essa Al-Khalifa, chief executive, Bahrain Economic Development Board, presented a more optimistic viewpoint, saying that in the 300 year-history of capitalism, the world has seen at least 30 cycles of booms and busts. “It is a cycle and the economy will come back.” He attributed three reasons for the volatility in the Middle East markets - “fall in oil prices, declining asset prices and reduced access to global credit.” Explaining that the crisis in the GCC region is “not structural,” he said the surpluses of the Gulf economies will drive its recovery.
Ghassan Barrage, senior executive adviser, Booz & Company, Saudi Arabia, underscored the need to create job opportunities for the estimated 5 million Arab youth who will join the workforce in less than a decade, and recommended that GCC economies stay the course with a focus on doubling the speed of economic growth. He also urged to invest further in knowledge-based industries, with a simultaneous focus on capability building, making the economic agenda the ‘national agenda’ and bringing in performance management systems.
Ken Costa, chairman, Lazard International, observed that unusual means are needed to manage the crisis with the critical priority to be accorded for “restoration of confidence. He said that the GCC region came into the crisis on a much stronger note, and coordinated initiatives are now needed to restore confidence in the banking sector for economic growth.