Qatar will not Negotiate with Arab States during Blockade

Qatar will not Negotiate with Arab States during Blockade unless they reverse their measures,” Qatar Foreign Affairs minister was reported as saying by the Saudi owned and Dubai based TV channel Al Arabiya on June 19, 2017.  This was presumably in response to the non-equivocal statement of the UAE’s minister of FA who confirmed that his country together with Saudi Arabia, Bahrain and Egypt are standing firm on their decision of 2 weeks ago to isolate Qatar from the rest of the GCC countries and that this isolation could last years.
Meanwhile, the Financial Times’ Gideon Rachman warned its readership that the Qatar crisis could . . . .

Qatar will not Negotiate with Arab States during Blockade unless they reverse their measures,” Qatar Foreign Affairs minister was reported as saying by the Saudi owned and Dubai based TV channel Al Arabiya on June 19, 2017.  This was presumably in response to the non-equivocal statement of the UAE’s minister of FA who confirmed that his country together with Saudi Arabia, Bahrain and Egypt are standing firm on their decision of 2 weeks ago to isolate Qatar from the rest of the GCC countries and that this isolation could last years.

Meanwhile, the Financial Times‘ Gideon Rachman warned its readership that the Qatar crisis could have global implications before adding that the Gulf States have been untouched by Middle Eastern turmoil but that is changing.  Elaborating further, the author sustains that for the past six years, there have been two Arab worlds.  “The world of violence and tragedy; and the world of glitz and globalisation.  Syria, Iraq, Libya and, to a lesser extent, Egypt — have been engulfed by conflict.  But Qatar, Abu Dhabi and Dubai have prospered as global hubs for travel, leisure, business and finance.”  And that “The booming Gulf metropolises seemed untouched by the violence in the rest of the Middle East.  They even profited indirectly, as safe havens in a region in turmoil.”

All that is fine or at least up until the author wonders whether the glitzy world of the Gulf could collapse in the same way it rapidly climbed to the shining lights of the world of fame and fortune.

In the meantime, there seems to be a wall as advanced by Gideon Rachman that is rammed down by this sudden irruption of the Qatar crisis of a blockade by its neighbours.

To well understand the underlying culture, it is worth remembering that since time immemorial, there has always been some sort of divide between the nomads and sedentarized populations of the Arab World.  It is no surprise that all Arab countries of today having recently gone through historical phases of Ottoman domination and rule, European domination and rule followed by independence through a well-publicized panarbism and self-rule via differing forms of governance.  Hence countries belonging to one or the other group have settled into on one hand monarchies, sultanates, emirates and on the other republics.  These latter are as well known to all in a very derelict situations but the other up until this Qatar crisis have with the advent of oil shone in their multi-faceted exploits of surging into the international limelight.  The latest exploit of individual countries are countless but most importantly is the Gulf wide exploit of the rail project development that should span traffic from Kuwait to Oman, along the western shore of the Arab-Persian Gulf.  This project as well as many others all in and / or around Qatar such as the Expo 2020 in Dubai as well as the Qatar 2022 World Cup will no doubt bear some consequences of this crisis.  Referring to the map of the Gulf above, could the proposed Alternative extension linking Qatar to the rest of the GCC pay the price of such regional skirmish.

Impact of non-conventional Finance in Algeria  

The purpose of this contribution is to analyze the operationality of the adopted unconventional financing by the Council of Ministers of June 14, 2017. This is done by a critical review of the impact of non-conventional Finance in Algeria that appears to be not a suitable response at this conjecture. This method of finance is by the way applicable to a structured competitive market economy, with idle production factors, i.e. underemployed equipment and skilled labour whereas Algeria suffers from structural rigidities with a dieback productive fabric and a total dependence on the volatile price of oil, hence the risk of printing more money, with a consequent inflationary process.

The purpose of this contribution is to analyze the operationality of the adopted unconventional financing by the Council of Ministers of June 14, 2017.  This is done by a critical review of the impact of non-conventional Finance in Algeria that appears to be not a suitable response at this conjecture. This method of finance is by the way applicable to a structured competitive market economy, with idle production factors, i.e. underemployed equipment and skilled labour whereas Algeria suffers from structural rigidities with a dieback productive fabric and a total dependence on the volatile price of oil, hence the risk of printing more money, with a consequent inflationary process. 

The Foundation of the non-conventional funding

The Council of Ministers held unconventional financing which is a recipe of anticipating the growing demand in investment and consumption but in the case of structural rigidities and not boosting the productive fabric, it could end up speeding up the inflationary process.

Unconventional financing has been used but in a structured market economy with potential for possible added value in the case of growing businesses or companies in restructuring, used when traditional financing does not enable an enterprise to fully develop, or when funding is simply not available.

In fact, when a company has assets and/or generates a cash flow, non-conventional financing options open to it, in addition to the traditional financing.

Central banks have used these methods which may take the form of easing of certain standards of conventional monetary policy and massive injections of liquidity into the financial system in circumstances which justify, including with the occurrence of a risk of deflation, a stock or bond market crash, bankruptcy of a large credit institution and crisis of confidence in the financial sector.

This is how for instance, the Bank of England launched in July 2012 the Funding for Lending Scheme (FSL) to encourage banks and loan companies to lend more to households and non-financial private corporations. This method has helped credit institutions to refinance loans in the long term by providing in return a wider range of collateral facilities.

This program has also inspired the Long-term Target Refinancing Operation (TLTRO) of the European Central Bank.  Specifically, the non-conventional measures are temporary monetary policy measures whose goal is the restoration of the transmission of the monetary policy and ultimately channels support to bank credit and liquidity in the monetary market.

In any case, the non-conventional measures fall into three categories.

  • First, quantitative easing (QE) measures are those measures by which the Central Bank offers an unlimited amount of money to commercial banks.
  • Saturation of demand for money of these must lead them to spend surplus balances, that is, they grant more Bank loans to households and businesses again.
  • Second, measures of orientation of the future rate expectations are for the Central Bank to engage in the future path of rates contributing to lower interest rates in medium and long term and so to bring them closer to the rate of the Central Bank.  These take the form of explicit commitments to maintaining a very low level or zero rate for a significant period of time.
  • Third, the easing of the credit tend to bypass the blocking of credit channel caused either by the phenomenon of ‘door to liquidity’, or tensions on some key segments of the financial markets.

The Central Bank then acts as a “last resort” by directly funding the economy.

De facto a relaxation of the eligibility criteria will lead banks to less hesitation in their risk-taking, and so to grant more loans to companies of medium or small size.

Keynesian theory cannot be applied to the Algerian economy

Political ‘strategies’ of Keynesian stimulus are based on the importance of the role of the State as regulator and not as state-manager of the economy.

As far as Keynes is concerned, the State is able to stimulate demand when it is insufficient through monetary injection by anticipating the revival of aggregate demand in investment and consumption.  The use of factors of production is according to Keynes due to the fact that entrepreneurs have pessimistic expectations whilst underestimating the actual demand; the salary is not only a cost, but an important determinant of demand.

Investment cannot “start” if business expectations are not positive. It’s a matter of consumers’ confidence; to implement the means of distribution of wealth allowing economic agents who have the average propensity to consume the highest (i.e. all ‘disadvantaged’ social categories) to spend and therefore kick-start the economic machine; lower interest rates to stimulate consumption and investment credit and finally to embark on a policy of major public works will cause a multiplier and accelerator of investment income.

The recovery of consumption will bring in investment increase so employment will be improved and this thanks to the income multiplier. The State intervenes transiently in time of crisis so located as part of short-term actions applying the elasticity available factors of production, equipment, and work quality.

Also the Keynesian, short-term and based on assumptions reasoning of a closed economy, has resisted any long-term vision of the economy, unlike the conventional theories of Adam Smith (morality), of David Ricardo, Karl Marx and Joseph Schumpeter who internalizes the dynamics of institutions and dynamics of social groups.

However with the current crisis we, taking into account the interdependence of economies, need a dynamic model for the medium and long term, the new ecological challenge and this unbearable duality between North and South, for a shared responsibility; governance of many leaders of the Third World being most questionable.

The growing internationalization of economies at the present time is a major limiting factor on the model. Thus, in the light of the Algerian experience, the Keynesian model is hardly transposable. For this country in 2016, 97 / 98% of foreign exchange earnings came directly and indirectly from hydrocarbon, 83% of the productive fabric is made up of small trade/services enterprise, the industrial sector less than 5% of GDP with more of 95% made up of little innovative SMIs and SMEs.

So there exist on one hand incompressible but necessary imports for the public and the productive segments, 70% of public and private – enterprise integration rate below 15%, working with imported inputs.

In case of not stimulating the productive sector between 2017 and 2020, by sticking to our own internal financing, we would necessarily deplete the foreign exchange reserves. As foreign exchange reserves sustain the value of the Dinar (DZD) already officially rated at more than DZD120 an Euro and over DZD190 per Euro on the parallel market, the amount of reserves of $10 to $20 billion will necessarily mean an official rating of over DZD200 per Euro, possibly leading towards to an inflationary process with necessarily raising of interest rates.

Because between 2000 and 2016, we have seen bad programming, overestimation of costs and long delays in the execution of vital projects, with very important budget overruns including the appearance of gaps between the budget planning and sectoral priorities, the lack of effective interventions due to fragmentation of the budget as a result of the separation between the investment budget and the operating budget potentially significant contingent liabilities, long delays and extra costs for the execution of the projects.

This testifies on the weakness of the enforcement capacity of the State agencies that neither the line ministries, nor the Department of Finance have sufficient technical capacity to oversee the quality of these studies, limiting itself to financial control, technical or physical follow-up exercised by entities or at best by insufficient and unknown enforcement.

Many weaknesses are rooted in the urgency that accompanies the preparation of projects including the myriad of specific requests that the projects are supposed to respond to with overlaps of responsibilities between the various authorities and stakeholders (from dozens of ministerial committees and commissions of local authorities) that witch economists refer to as transaction costs and this because of a non-optimal institutional organization.

Therefore, we would have 4 impacts of inefficiency in public spending:

  1. on the value of imports because the swelling is the essentially to public spending.
  2. on the inflationary process that is originally for part of inflation and very incidentally wages that are less than 25% reported to gross domestic product;
  3. on the balance of payments of the fact that the doubling of the value of services between 2002 and 2016 of $10 to $11 billion a year mainly concerns the infrastructure/oil (foreign aid) post referring to the devaluation of knowledge;
  4. on the global and sectoral growth rate. Here also the numbers need to be replaced into their true contexts because hydrocarbons irrigate the whole economy and nonhydrocarbon segment of more than 80% with a total of 5 to 6% of non-oil growth rate as invoked by officials ( on average between 2000 and 2016), remaining only real businesses real participation of less than 10% of the total of the Gross Domestic Product (GDP) as shown for several years (about 3% of the total) nonhydrocarbon export.

Non-conventional financing and the inflationary

Generally, public spending has its own limits as shown in the recent global crisis, and the fundamental strategic problem which arises in Algeria lies in the urgency of a renewed good governance as based on a Rule of Law and the Democratisation of decisions, development of a competitive national or international enterprise as founded on the development of knowledge. How can we forget that during the national conference on economic and social development on November 4, 2014 in the presence of the Prime Minister at the time and members of the Government, reproduced in October / November 2014 in the national and international press, I had proposed to deepen structural reforms and put in place a broad social front against the fall in the prices of oil under the title “Prof. Mebtoul advocates the creation of an independent Committee to safeguard against the effects of the crisis”.

Were we listened to since then?

Ministry of Finance in Algiers

The monetary expense encouraged by infrastructure building is only one way that has little impact for sustainable development.  There is urgency to pose real problems to the deepening of the comprehensive reform for a true development of non-hydrocarbon and the passage from a rentier to a non-oil economy.

And only internal reforms would allow change and reach sustainable growth in non-hydrocarbon condition of value-added job creation, ending gradually this volatile growth and subject to external shocks, monetary expenditures without worrying about the impacts and the importance of foreign exchange reserves, is not synonymous with development because function, the price of oil.

However, paradoxically, the advanced or the acceleration of reforms in Algeria is inversely proportional to the price of oil, being held back when prices rise making it for Algeria to wonder whether oil was a blessing or a curse?

ademmebtoul@gmail.com

The challenges for the new Government of Algeria

TEBBOUNE faces a productive fabric weakness and foreign exchange reserves declining, dire imports restrictions, and exports awkward regulations.

The challenges for the new Government of Algeria will be such that it will probably be before budgetary tensions between 2017 and 2020 with the current outflow of hard currencies (goods and services – legal transfer of funds) of approximately $60 billion by end of 2017, and very limited revenues to account for.  Except for blind restrictions which are likely to lead to great social tensions by a push of the inflationary process, the amount of foreign exchange reserves only $109 billion in February 2017, whereas the importance of the renewed governance, shared sacrifice, and an urgent reorientation of the entire socio-economic policy adapting to the new global changes.

1 – On June 9th, 2017 morning, the price of Brent is $47.65 and the WIT at $45.42.  Pondering in retrospect on the negative experience of the war economics of the years 1991/1993, leading the country right to the IMF, a discourse of truth is needed for as much as realism is concerned but away from bureaucratic injunctions of the past.

In 2017 rather than in the 1970s, the economic situation is made up of 83% of small business / enterprises, the industrial sector representing less than 5% of the Gross Domestic Product, (97% of small innovative SMI/SMEs); the informal sphere holding more than 50% of the economic life and 97% of Dollar revenues are directly and indirectly hydrocarbons related.  And above all, the lack of vision of adaptation is noticeable while the world is at the dawn of the fourth economic revolution of 2017/2030 with major geostrategic upheavals including Africa and the Middle East (1).

Taking data from the ‘Office National des Statistiques’ (ONS) for the first four months of 2017, imports of goods will roughly be about $46/47 billion.  According to data from the IMF for 2017 outflow of hard currencies on services would be of $10.5 billion, against $9.9 billion for 2016 and between $3.5 and 4 billion of legal transfers of capital (this amount is bound to increase with the rule of 49 / 51% according to the IMF to $7/8 billion by 2019/2020) and giving us single reference document at the level of the balance of payments, and not trade balance, an extrapolated outflow of about $60 billion.

However, currency entries would vary between $30/32 billion, if the average price of 2017 were between $50/52 a barrel.  Impact of the fall in the price of hydrocarbons, presumably being of long term, disturbing forecasts growth for Algeria by the IMF and the World Bank (WB) dated June 5th, 2017 for the years 2017 and 2018, are below the rate of population growth.  This would bring the official unemployment of 11% in 2016 to more than 13% in 2018. So the WB brought back its growth projections for Algeria in 2017 to 1.8% against 2.9% as projected in its report last January and for 2018, real GDP growth is expected to be even lower at 1% down from 1.6% compared to the 2.6% as anticipated in January.

According to Jean François Dauphin, the head of mission of the IMF, Algeria has the capacity to diversify its economy through ambitious structural reforms that would allow it to move out of its dependence on hydrocarbons. And, one of the tasks facing the new Government Tebboune would be to put these reforms into the works, through a pedagogical format, requiring a return to confidence without which no development is possible, in the direction of the population on rail.

The most important, for the Government will be to cope with the economic and social situation which will have to face an exceptional crisis with the long-lasting low prices of hydrocarbons and deepen a comprehensive reform, reconcile economic efficiency and bring some necessary social cohesion to which I am deeply attached.  We can hypothesize that it is the State which is lagging behind society that produces rules that allow functioning.  An economic model that is not represented by political, economic and social forces would have no chance of being operationally carried through.

It will be to first identify the different stakeholders in the process of economic reforms, whether favourable or unfavourable, be they national or foreign. In a second step, it will be to proceed with the analysis of the strategies that they are implementing to support reforms, block them or, in default, slow them down, in assessing the means put at the service of these strategies.  This is a good chance for Algeria, where it will manage all structural reforms between 2017 and 2020 perhaps difficult in the short term but hopefully fruitful in the medium term by 2019/2020 .

Summarising, in 2017, a blind import restriction may paralyze the economic machine, 70% of the needs of public and private companies are indeed from overseas with a rate of integration exceeding not 15% and eventually lead to social tensions. There is above all a matter of lowering costs, especially in services, improve on management and fight off corruption so as not to penalize the disfavoured and by the same prevent a dumbing down of the middle classes.

I would recommend meditating the Venezuelan experience, one of the largest oil reserves in the world or the Romanian ex-Communist camp experience that with a zero foreign debt has left an economy in ruins. For my part, I am convinced that Algeria has significant potential to confront this multidimensional crisis which it is facing.  For this, there is an urgent need for a political will for change represented by social forces for the development of economic, social and political freedoms.

In the recent history of Algeria, the issue of reform – be it economic or political gave rise, because of the worth that they represent, to the development of conflicting strategies that work to the defence and promotion of these or, instead, their blocking and, failing that, to their perversion or their slowdown.

  • – Conference of the Professor Abderrahmane Mebtoul at the invitation of the European Parliament (2013) -“the Maghreb the geostrategic challenges” – Dr. Camille Sari (2 volumes 1080 pages – edition L’Harmattan Paris 2015).
  • – Conférence at the ‘Direction Générale Sûreté Nationale Ecole Supérieure de Police,’ Algiers may 2015 “Global changes, fall of the oil prices and its impact on macroeconomic and macro-sociaux balance.”
  • – On the same theme, May 2016 at ‘l’Ecole Supérieure d’Administration de la 2ème Région Militaire’ – Oran, Algeria.
  • – interview on 28/12/2016 by American Herald Tribune: “Assessment of the Algerian economy its prospects: destabilisation of Algeria having geostrategic repercussions on African and Mediterranean space.”

General Elections in the United Kingdom and the GCC

This article of Jameel Ahmad, Vice President of Corporate Development and Market Research at FXTM and BA (Hons) degree in Business Studies with Accountancy and Finance from the University of the West of England published on AMEinfo of May 31st, 2017 is pertinently about the General Elections in the United Kingdom and the GCC. It was the UK Prime Minister who called for these elections for next Thursday, in fact three years earlier than scheduled.
The reasons were to obviously strengthen the hands of the eventual winner who will be deemed to negotiate the Brexit with the European Union.

This article of Jameel Ahmad, Vice President of Corporate Development and Market Research at FXTM and BA (Hons) degree in Business Studies with Accountancy and Finance from the University of the West of England published on AMEinfo of May 31st, 2017  is pertinently about the General Elections in the United Kingdom and the GCC.  It was the UK Prime Minister who called for these elections for next Thursday, in fact three years earlier than scheduled.
The reasons were to obviously strengthen the hands of the eventual winner who will be deemed to negotiate the Brexit with the European Union.
These elections might however affect all countries, starting of course with those of the EU but also those of the GCC; object of this article of Jameel Ahmad. 
GD93WH London, UK. 13th July, 2016. Theresa May addressing the worlds press on her first day as prime minister in Downing Street. Credit: Eye Ubiquitous/Alamy Live News

Could the upcoming UK election represent a risk to GCC markets?

With the OPEC meeting now in the past, investor attention has shifted towards the United Kingdom and the upcoming General Election scheduled for 8 June. Although the market currently appears calm ahead of the event, this event it does represent a risk for emerging assets and this will include those markets in the UAE and GCC region.

With investors currently positioning in favour of Theresa May being declared victorious next week, there is a risk that investors are heavily under-pricing any other potential outcomes at present. The largest risks to emerging market assets are generally when potential outcomes are heavily underpriced, and recent history from the EU Referendum last June is a kind reminder of what can happen when investors are caught on the wrong side of the trade. If recent history does indeed repeat itself then investors are more likely than not going to divert into “risk-off” mode, where riskier assets like the stock markets and emerging assets suffer from low attraction and safe-haven assets like Gold and the Japanese Yen surge from buying demand.

Politics to continue influencing the Pound’s direction

After suffering its heaviest week of losses so far in 2017, the British Pound is attempting to consolidate around 1.28 against the US Dollar. I personally think that politics will continue to influence the direction of the British Pound and I believe that there is further momentum for the currency to fall with the UK General Election being a little over a week away. In general, the markets do not like uncertainty and this is the recurring theme for the UK at present with another election around the corner and ongoing Brexit uncertainty continuing to dominate news headlines.

My view is that even following the dip lower from the 2017 highs above 1.30 is that the financial markets are still underpricing the risk of an unexpected outcome to the election next week. Investors in general stacked their cards heavily in favour of Theresa May being declared the winner following the unexpected calling of a snap election, but opinion polls are currently showing that the race to win the election is going to be close. I can’t help but think that recent history could be repeating itself with the markets currently underpricing the risk of an outcome that could differ to what the markets expect, which is a Conservative victory on 8 June.

USD JPY – a game of politics vs economics

The British Pound is not alone in being underpinned to political risk, with politics vs. economics being the name of the game when it comes to trading the USDJPY. I believe that politics will continue to dictate the direction of this pair as we head into the second half of 2017, and I am actually favouring towards the Japanese Yen covering further ground against its counterparts on the back of safe-haven buying.

A lack of optimism around the likelihood that President Trump will be able to push forward with his legislative reforms will put the spotlight firmly on Washington, and I think that this will result in further pressure on the USD. Any further market uncertainty in the United States will eventually lead to investors being lured back into the safe-haven appeal of the Yen.

EUR USD – facing near-term selling pressure

The likelihood that the ECB will repeat its dovish rhetoric during its Central Bank meeting in June is encouraging traders to enter selling positions on the Eurodollar after the pair reached new 2017 milestone highs above 1.12 last week. Despite economic data around Europe continuing to improve confidence that the economy has turned a corner, the market is swaying towards the belief that the ECB will repeat in June that the economy still requires ECB stimulus and this could result in the Eurodollar slipping further towards 1.10.

The Dead Sea might come alive with the WEF

In our article World Economic Forum 2015 at the Dead Sea, Jordan  we have tried to bring to our friends’ attention that the Dead Sea might come alive with the WEF as the international gathering of world heads of states, academia, businesses and / or communities.  It did make life a little easier by bringing friends as well as antagonists together so as to debate and / or share in the debates of ideas.
We come back again this time for yet another summit next week of the WEF Middle East & North Africa 2017.  It starts on May 19 and finishes on May 21st, 2017 as previously to be held in Dead Sea, Jordan. It is understood that it will have a platform where a lot of important topics are going to be discussed in a variety of domain such as business, economics, entrepreneurship, governance, politics, demography, public and private sectors and of course growth.
1000+ participants are expected making it the most outstanding event on contemporary economics and finance topics at a time where we are witnessing a historic turning point in the process of dissemination of economic ideas and adjustments in the world of economics are dramatically accelerating.
In Davos last January, Middle East business leaders have joined forces with the WEF to launch a strategy to boost private-sector investment and accelerate the pace of economic reform in the region.  Would we expect some sort of account rendering on this plan.
This plan aimed to reduce the high levels of unemployment among Arab youth that is amongst many things perceived as a major driver of continued instability of the MENA countries.
In any case here is the WEF’s statement published on May 16, 2017 on this forthcoming event. It is written by Malik Faraoun, Lead, Middle East and North Africa, World Economic Forum

The Middle East and North Africa: a region on the brink of historic change

This article is part of the World Economic Forum on the Middle East and North Africa 2017

In a couple of days, Jordan will host the 2017 World Economic Forum on the Middle East and North Africa at the Dead Sea. It will bring together over 1,000 global leaders – from government, business and civil society. The aim: to unlock a set of opportunities for a profound transformation of the region and to pave the way for a new narrative of shared peace and prosperity. Its theme of “generational transformation” heralds the emergence of a framework that supports social cohesion and responds to everyone’s aspirations for today and tomorrow.

The region is split by two narratives: on one side, a positive view, which paints a picture of a blossoming digital and technology scene, accompanied by a renewed drive for reforms (aptly exemplified by the Saudi Arabia Vision 2030). On the other side, the region remains plagued by the largest humanitarian crisis of our times, in particular the war in Syria.

There are also three concurrent trends shaping the region, and which will form the focus of the meeting. These are:

  1. To seize the innovation and entrepreneurship opportunities that are powered by the digital revolution. More technological change is expected over the next decade than in the past 50 years,according to Klaus Schwab, Founder of the World Economic Forum. It means the region could leapfrog 20th-century technologies and move straight to the advanced technologies of the 21st century. This year, for the first time, the World Economic Forum and the International Finance Corporation have joined forces to highlight the foremost 100 Arab-world start-ups. At the meeting in Jordan, these companies will be applying their innovative worldviews to artificial intelligence, advanced robotics, augmented reality and the internet of things.
  2. To work with government and business leaders to create actionable solutions to accelerate economic reforms and build inclusive economies. In the coming decade, 75 million jobs need to be created in the Middle East and North Africa. As IMF Managing Director Christine Lagarde has stated, growth is too slow and benefiting too few of the global economy. This is even more relevant for the Middle East and North Africa. Thus policy-makers need to design economic frameworks that at the same time create value and are accessible to all. Once economies are transforming in an inclusive manner, we shall create jobs for the millions Arab youth entering the labour market every year. A profound economic transformation calls for a massive leap in human-capital development, new strategies for entrepreneurship and industry diversification, and creative ways for to bridge the infrastructure gap.Responding to the imperative of building inclusive economies, the meeting will advance theNew Vision for Arab Employment initiative, which aims at investing in the continuous learning, re-skilling, up-skilling and job readiness of one million of the region’s youth. It will also accelerate delivery of economic policy reforms and host the launch the region’s hub of the Sustainable Development Investment Partnership for infrastructure to address market failures in infrastructure.
  3. Last (and just as crucial) is to support humanitarian efforts and diplomatic dialogue towards de-escalating conflicts and achieving a vision for shared stability. The prosperity of the Middle East and North Africa is inarguably related to success in limiting the conflict spill-over, rebuilding post-conflict and fragile states, and enhancing humanitarian action. Building on its impartiality and convening power, the World Economic Forum will continue to provide a platform for diplomatic dialogue to further breakthroughs for the future of the region. In this regard, the programme of the meeting will include high-level dialogues on the future of Syria and Iraq with key international and regional stakeholders. On the humanitarian front, the meeting will call for innovative models to enhance the delivery of emergency aid bringing together more synergies between the private sector, host governments, the refugee population and humanitarian players.

For these reasons, the 2017 World Economic From on Middle East and North Africa is expected to be a key milestone for the future of the region and an opportunity to “enable a generational transformation”. It aims to be forward-looking, ambitious and truly inclusive.

The WEF recommends further reading :

Green and Climate Resilient Development

Green development through sustainability as the main parameter could nowadays be generally said to be adopted by all countries so as to advance their green and climate resilient development in support of Agenda 2030 and the United Nations Framework Convention on Climate Change (UNFCCC) as established in the COP21 of Paris in December 2015 and ratified a year afterwards in the COP22 of Marrakesh.
EcoMENA’s Salman Zafar produced this fantastic article today.  It is mainly about how to financially attain and sustain green development as defined by the above understandings of the last 2 COPs mentioned above.
We reproduce this article with our compliments to the publisher and our thanks to the author for our keen purposes of spreading further these wise words out into our own circles of friends and sympathisers.

Green Finance: Powering Sustainable Tomorrow

Image courtesy EcoMENA

Green finance provides linkage between the financial industry, protection of the environment and economic growth. Simply speaking, green finance refers to use of financial products and services, such as loans, insurance, stocks, private equity and bonds in green (or eco-friendly) projects. Green finance, which has grown by leaps and bounds in recent years, provides public well-being and social equity while reducing environmental risks and improving ecological integrity. For example, global interest in green energy finance is increasing at a rapid pace – in 2015, investments in green energy reached an all-time high figure of US$ 348.5 billion, which underscores the significance of green finance.

Potential and Promise

Environmental sustainability, climate change mitigation, resource conservation and sustainable development play a vital role in access to green finance. During the past few years, green finance (also known as climate finance) has gained increasing relevance mainly due to the urgency of financing climate change mitigation and adaptation efforts, and scale of sustainable development projects around the world.

The impetus has been provided by three major agreements adopted in 2015 – Paris Agreement on climate change, a new set of 17 sustainable development goals (SDGs) and the ‘financing for development’ package. The implementation of these agreements is strongly dependent on finance, and realizing its importance the G20 nations established Green Finance Study Group (GFSG) in February 2016, co-chaired by China and the UK, with UNEP serving as secretariat.

According to Sustainable Energy for All, a global initiative launched by the UN Secretary-General Ban-Ki Moon, annual global investments in energy will need to increase from roughly US$400 billion at present to US$1-1.25 trillion, out of which US$40-100 billion annually is needed to achieve universal access to electricity. On the other hand, around US$5-7 trillion a year is needed to implement the SDGs globally. Such a massive investment is a big handicap for developing countries as they will face an annual investment gap of US$2.5 trillion in infrastructure, clean energy, water, sanitation, and agriculture projects. Green finance is expected to fill this gap by aligning financial systems with the financing needs of a sustainable or low-carbon economy.

Bonding with Green

An emerging way to raise debt capital for green projects is through green bonds. Green bonds are fixed income, liquid financial instruments dedicated exclusively to climate change mitigation and adaption projects, and other environment-friendly activities. The prime beneficiaries of green bonds are renewable energy, energy efficiency, clean transport, forest management, water management, sustainable land use and other low-carbon projects.

A record US$41 billion worth of green bonds was issued in 2015 which is estimated to rise to US$80 billion by the end of 2016. Notably, the World Bank issued its first green bond in 2008, and has since issued about US$8.5 billion in green bonds in 18 currencies. In addition, the International Finance Corporation issued US$3.7 billion, including two US$1 billion green bond sales in 2013.

Green bonds enable fund raising for new and existing projects with environmental benefits

Green bonds have the potential to raise tens of billions of dollars required each year to finance the global transition to a green economy. According to International Energy Agency, around $53 trillion of energy investments are required till 2035 to put the world on a two-degree path, as agreed during the historic Paris Climate Conference COP21. The main drivers of green bonds for investors includes positive environmental impact of investments, greater visibility in fight against climate change and a strong urge for ‘responsible investment’.

Key Bottlenecks

Many developing countries experience hurdles in raising capital for green investment due lack of awareness and to inadequate technical capacities of financial institutions. Many banks, for instance, are not familiar with the earnings and risk structure of green investments, which makes them reluctant to grant the necessary loans or to offer suitable financing products. With rising popularity of green finance, it is expected that financial institutions will quickly adapt to funding requirements of environment-friendly projects.

Ernst & Young on Fraud and Corruption in 2017

Fraud and Corruption in the MENA . . .

In a report of Ernst & Young on fraud and corruption in 2017 it is said in its Executive summary that “Today’s businesses are operating in an uncertain economic environment. Popular discontent with globalization, political instability and slower growth in emerging markets is placing pressure on companies as they seek alternative ways to meet ambitious revenue targets.”

It is also advocating that “Restoring confidence through enforcement as “Bribery and corruption remains a challenge and business conduct is under greater scrutiny from both regulators and the public than ever before. The majority of our respondents support the strong stance taken by regulators, particularly respondents in emerging markets.”

The report, titled ‘Human instinct or machine logic – which do you trust most in the fight against fraud and corruption?’ is the synthesis of a survey of 4,100 employees of large businesses in 41 countries across EMEIA.

It was already highlighted back in 2015 in similar report of EY that generally “The cost of unethical behaviour has never been higher” than that of that year.

Although sporadic progress were acknowledged to have taken place in the struggle against bribery and corruption in most countries of Europe, the Middle East, India and Africa (EMEIA), almost half of the surveyed by EY of the MENA region reported their concern and still feeling that it is a rampant problem in their own country. In other words good morality is definitely not there in business.

Whistle-blowing when things get eventually out of hand might be a way out but how to do would be crutial as to how.  Hotlines are now considered an important part of a company’s compliance program in the MENA and only few respondents were aware of such a channel in their company, whilst half would not allow themselves as if to salvage their career first and foremost.

In our view and in so far as the North African half of the MENA region is concerned, we would like to think that it is widely acknowledged that the domestic business informal sphere of these countries’ account for no less than 50% of their respective economies.  Can we therefore assume that a sizable portion of that informal sphere being carried out outside any radar coverage is of doubtful nature, meaning possibly tainted with burrs for most close to the ground and lots of well-known politico-economic blunders for the different leaderships.  These were found at 57% of MENA’s respondents not believing that business management do not emphasize enough high ethcal standards.