Arab Bankers Consider Mideast Resistance to Privatization

By Adas, Jane | Washington Report on Middle East Affairs, August 31, 1999 | Go to article overview

Arab Bankers Consider Mideast Resistance to Privatization


Adas, Jane, Washington Report on Middle East Affairs


ARAB BANKERS CONSIDER MIDEAST RESISTANCE TO PRIVATIZATION

The issue is not whether, or even when, the countries of the Middle East and North Africa (MENA) should pursue a policy of privatization, but how to do it. Such was the unanimous opinion of the participants at a conference on "Privatization in the Arab World: Progress and Outlook for the Next Millennium" presented by the Arab Bankers Association of North America (ABANA) held at the Grand Hyatt in New York City on May 18, and sponsored by SBC Communications Inc.

Antranig R. Sarkissian, vice president of Citibank and president of ABANA, pointed out that privatization is relatively new in the Arab world, having begun in 1986 in Tunisia. Most of the countries in the area have been operating under development strategies of the past that entailed giant state-owned enterprises. He listed the benefits of privatization as increasing competition, efficiency, and transparency, attracting foreign investment capital, and aiding debt reduction.

John Page, the World Bank's chief economist for the MENA region and principal author of The East Asian Miracle: Economic Growth and Public Policy (1994), painted a bleak picture of the current state of privatization in the Arab world. Relative to the rest of the world, MENA is the lowest in private participation in infrastructure projects. According to Page, since 1985 the Arab economies have been the slowest in the developing world and the only area where trade has not grown. Resistance to privatization stems in part from fear of increased unemployment. But Page asserted that privatization is a means of dealing with the problem by encouraging more rapid economic growth in order to absorb the newly unemployed. This can be achieved through greater participation in globalization. "Despite the East Asia crisis," he said, "those economies that are more integrated in the world economy grow faster." Accordingly, privatization should begin in the areas of trade-related infrastructure, such as ports, air transport, and telecommunications.

Two panel discussions addressed privatization efforts in North Africa and in the Gulf region, chaired respectively by Mona Aboelnaga and Dr. Paul Jabber, members of the board of directors of ABANA. Mohamed-Rachid Kechiche, Tunisia's secretary of state for state holding companies and privatization, said his government gradually but forcefully implemented a structural adjustment program that entailed liberalization of interest rates and privatization of the Tunisian stock exchange and government companies, resulting in GDP growth.

Sid-Ahmed Taleb, a board member of the Algerian National Council of Privatization, said that in 1962, after Algeria's eight-year war of independence, the country built its economy with state-owned enterprises. After undertaking a structural adjustment program advocated by the World Bank in 1997, two-thirds of privatized companies have been sold to their employees. He did not mention what effect years of Civil disturbances have had on the Algerian economy. …

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