Abu-Ghazaleh Speaks about the Global Financial Crisis at the Royal Cultural Center

The financial crisis that hit the illusory or parallel market has now started to impact the real economy, which is the most serious stage - Abu-Ghazaleh


AMMAN --- MARCH 10, 2009 --- The Royal Cultural Center in cooperation with the Talal Abu-
Ghazaleh Business Forum at the Talal Abu-Ghazaleh College of Business held today a workshop entitled
?Global Financial Crisis and its Consequences on the Region? at the Royal Cultural Center.

In his speech, Mr. Abu-Ghazaleh addressed three key points; the financial crisis, the consequences and the
solutions.

In respect of the crisis itself, Mr. Abu-Ghazaleh described it as ?a turning point in the global
financial system and world economy that will last for at least ten years.?

?The financial crisis that hit the illusory or parallel market has now started to impact the real economy, which is the most serious stage,? he said.

However, Abu-Ghazaleh expects that the economy will move from recession to depression in the United States of America and the Western countries with variable degrees; never the less, the effect on the Arab region will be of a lesser degree.

As to its causes, Mr. Abu-Ghazaleh attributed the crisis to the financial derivatives which the Bank of International Settlements estimated to be about five hundred trillion dollars.

On the second key point, Mr. Abu-Ghazaleh discussed the consequences of the crisis referring to the forthcoming great geo-economic changes, including the emergence of interlaced giant economic blocs such as BRIC group which includes Brazil, Russia, India and China.

He also pointed out to the reports on the shift of wealth towards the East; ?I am expecting changes in the composition of the Group of Seven (G7) to include different memberships and countries such as China and India.?

He added that it is likely that we will see a radical change in the economic policies and eventually in the US politics in particular and the world politics in general.

As for oil, Mr. Abu-Ghazaleh believes that the decline in its prices is temporary; and that it was a result of the shock in capital markets. He expected oil prices to rise again to more than a hundred dollars per barrel before the end of this year.

Mr. Abu-Ghazaleh emphasized the need to reform the World Order along with all its financial, economic, and monetary and trade institutions, noting that the USA and the world will tend to place more legislative and regulatory control on the economy, particularly on financial institutions, to ensure greater transparency and accountability, and to shift from the absolute free capital economy to a controlled, monitored and responsible capitalist system.

?I agree with international reports that saw in this shift an opportunity for countries such as Egypt, Iran, Turkey and Venezuela to become influential economic powers and join the group of super powers if they manage to put in order their conditions during this critical transitional phase,? he noted.

On the third key point, Mr. Abu-Ghazaleh addressed the solutions required to tackle the crisis, indicating that ? on top of such solutions should be the development of control systems over financial and lending institutions, financial transparency, financial accountability (or what President Obama referred to as ?age of responsibility?); putting an end to the argument that "the free-market economy regulates itself"; in addition to the development of international accounting standards to regulate the financial markets, including the financial derivatives.?

Mr. Abu-Ghazaleh urged all countries to take advantage of this stage and rationalize their expenditures and called for the establishment of joint national councils between the public and private sectors with sector-oriented committees to submit proposals on how to deal with such transformations.

?We should not wait for the recommendations of the G20, the World Bank or the World Trade Organization; but rather, to immediately take the initiative and embark on national steps because the international trend is inclining toward national rather than interstate remedies,? he pointed out.

Mr. Abu-Ghazaleh forewarned that all world nations will re-adopt protectionism and that we have to be prepared for this situation and take, too.

In respect of protectionist steps appropriate for us, Mr. Abu-Ghazaleh recommended similar trends to Mr. Obama?s plan that stimulates the economy by focusing on investment in the infrastructure, particularly in the information technology and communications, education, health and creativity.

Mr. Abu-Ghazaleh also advised nations to shift their interest from borrowing agreements to technical cooperation agreements in order to benefit from technology transfer rather than money, because technology would be more nationally feasible and beneficial, as well as more logical, under the present global financial conditions.

He further advised that ?our endeavor should be to attract capitals for investment purpose in productive projects rather than for financing.?