Magazine article Washington Report on Middle East Affairs

Mei and World Bank Examine Mideast Privatization

Magazine article Washington Report on Middle East Affairs

Mei and World Bank Examine Mideast Privatization

Article excerpt


"Privatization and Liberalization in the Middle East and North Africa" was the title of a half-day conference hosted by the Middle East Institute and the World Bank on Dec. 11, 1997, at the World Bank in Washington, DC.

MEI president Roscoe Suddarth began with opening remarks on the general state of privatization and liberalization in the Middle East. Although it is not perfect, he said, the Gulf Cooperation Council countries all have stock exchanges except for the United Arab Emirates, which does have a strong privatization program in place. In addition, Egypt's bourse is doing well, Saudi Arabia has privatized its ports, with the electricity grid to follow soon, and Egypt, Jordan and Lebanon will be privatizing their telecommunications systems in the near future, Ambassador Suddarth reported.

Vice president Kemal Dervis of the World Bank spoke next, noting that in contrast to the economic stagnation in the Middle East from the early 1980s to the early 1990s, since 1995 a recovery has begun, led by the private sector. He noted, however, that the East Asian crisis has had ripple effects around the world, including the Middle East.

The lesson, Dervis said, is that the role of government needs to be strengthened in order to regulate financial markets in a professional and not politically motivated way. He said the East Asian crisis will allow countries in the Middle East and North Africa to learn from Asia's mistakes.

Keynote speaker Masood Ahmed of the World Bank expanded upon effects of the East Asian financial crisis on Middle Eastem countries. Ironically, he said, after the 1995 Mexico bailout, the World Bank pointed to East Asia as having the fundamentals to weather economic downturns.

Comparing economies in East Asia and the Middle East, Ahmed said there are lessons that can be learned to avoid a recurrence of such problems. Excessive private-sector borrowing occurred in East Asia for investments, especially in real estate, which often were not sound. The resulting loan defaults created a crisis of confidence in the region. Ahmed stressed the importance of regulating the financial sector, with the core problem in East Asia being weak and distressed financial institutions.

Another problem in East Asia, according to Ahmed, has been the link between banks and private-sector corporations, with weaknesses exacerbated by lax supervision and regulation. Ahmed said that in the Middle East and North Africa connections between banks and private enterprises will be under closer scrutiny now.

The first panel, entitled "The Prospects for Economic Liberalization" was moderated by Ambassador Paul Hare, vice president of the Middle East Institute, who noted that liberalization signals the retreat of the patron state.

Panelist John Page of the World Bank began his presentation with the revelation that 10 to 15 percent of the total labor force in the Middle East and North Africa is out of work at any given time. At the same time, he said, opportunities for higher education have increased in the region. Noting that the economic history of the region has been very checkered over the past three decades, he said the past several years have seen the beginnings of a sustained turnaround, with growth rates of 3 to 4 percent per year expected within the next 5 to 10 years. Jordan and Tunisia can expect to go far higher, Page said, with growth rates of 6 to 7 percent per year quite possible.

Page related a recent resurgence in investment in the region to aggressive efforts by many Middle Eastern and North African nations to provide access to primary and secondary education for their young people. As a result, those under 40 are very competitive in the modem employment market, while older individuals are largely unable to compete in today's business world because of high illiteracy rates and their lack of technical skills.

This demonstrates that true economic liberalization is dependent upon quality education for all sectors of the population in the Middle East and North Africa, Page pointed out. …

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