UAE prepares initiative to spur Arab economy

The UAE has prepared an initiative to stimulate Arab economies and achieve overall development through reforms, stronger cooperation, an increase in mutual investments and a farming strategy.

The government described the plan as the “initiative of the 21st century” and said it would be presented to the Arab finance ministers, who will hold a conference in Abu Dhabi on September 7 to discuss financial and economic matters.

“The initiative is intended to expand inter-Arab economic links with the aim of attaining overall socio-economic development,” said Younus Khoury, undersecretary of the UAE ministry of finance.

“It is a comprehensive strategy, a draft of which has already been sent to Arab governments…the initiative is the first of its kind on pan-Arab levels and it includes specific criteria for the required development,” Khouri was quoted as saying by the semi-official Arabic language daily 'Al Ittihad'.

He said the initiative, which will be the main topic of discussions by the Arab finance ministers in Abu Dhabi, also covers challenges facing Arab food and water security and projects to achieve farm self- sufficiency.“Other topics covered by this initiative include means to tackle Arab foreign debt, encourage inter-Arab investment and how to clear obstacles facing the implementation of the Arab free trade zone….a key issue in the initiative is to devise an Arab investment map and means to combat poverty in the region.”

Khoury said the initiative also takes into consideration the repercussions of the 2008 global fiscal crisis and the current political unrest in the Arab region.

Official data showed Arab economies have sharply fluctuated over the past years because of the global crisis, unstable oil prices and lack of reforms.

In 2009, the combined Arab GDP slowed down to one of its lowest growth rates of 1.8 per cent but was expected to have rebounded by 3.8 per cent in 2010 because of higher oil prices and growth in some reform-oriented members. Despite the recovery in 2010, it was the first time in nearly 10 years that growth in the combined Arab GDP was below the average growth in other developing nations, according to the Cairo-based Arab League.

Foreign direct investment in the Arab world has also been affected by the global financial turmoil and is expected to be hurt by the current unrest in the region.FDI flow into 18 Arab nations that provided investment data plunged by nearly 23 per cent to $64.3 billion in 2010 from around $83.9 billion in 2009, said the Kuwaiti-based Inter-Arab Investment Guarantee Corporation (IAIGC).

“Although it is difficult to determine the exact effects of the current unrest in the region on FID inflow, preliminary estimates show that direct investment in the Arab countries is expected to decline by between 10 and 15 per cent this year,” said IAIGC, a key Arab League organisation.

“This is because the current situation has thrown the region into a state of uncertainty in the short term although many world companies still view the investment climate in rich Arab region, mainly Gulf nations, as attractive.”

The report showed the decline in FDI flow into the Arab World last year affected many regional states but added Saudi Arabia was the main victim as investment into the kingdom dived by nearly 41 per cent to $21.6 billion from $35 billion in 2009.

It attributed the decline to the shelving of some giant hydrocarbon projects in Saudi Arabia, mainly those which had been planned as joint ventures with foreign partners, including Dow Chemical and Conoco Philips.Besides slow economy in some members and ensuing poverty, most regional nations are suffering from chronic gaps in farm production mainly because of low investment, flawed agricultural policies and persistent tensions. As a result, Arab nations have reeled under a cumulative food deficit of more than $150 billion over the past 10 years.

Early this year, officials spoke of a massive plan to tackle the farming shortage in the region, involving investment of $65 billion in the next 20 years.

The Khartoum-based Arab Organisation for Agricultural Development (AOAD), an affiliate of the 21-nation Arab League, has completed the “Emergency Programme for Arab Food Security” which it said has been prompted by the deteriorating farm shortage in the region and soaring food prices.The strategy includes three phases, the first of which is a five-year plan during 2010-2015.

The second stage will cover the 2010-2020 period and the third one stretches until 2030, when most farm products will nearly double.Preparatory measures for the implementation of the first stage began in the first half of 2010 and it could be officially launched in 2011. The first farming season in this five year plan is scheduled to begin in early 2012 once it is ratified.

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