Home Economy Brown eyes Gulf funds to fight meltdown

Brown eyes Gulf funds to fight meltdown


Dubai : British Prime Minister Gordon Brown has asked Saudi Arabia, Qatar and the United Arab Emirates (UAE) to contribute to his proposed expanded International Monetary Fund (IMF) in return for international recognition of these countries’ increasing economic weight at this month’s Group of 20 summit in Washington.

“During his most recent tour in the region, Brown told leaders of the Gulf states that the UK will urge other countries to recognize the increasing weight of the Gulf as a step towards reforming international financial bodies,” Jon Wilks, regional Arabic spokesman of the British government, told the state-run Emirates News Agency (WAM) in an interview Wednesday.

Brown visited Saudi Arabia, Qatar and the UAE Nov 1-4, during the course of which he asked leaders of these countries to contribute to his proposed expanded IMF package designed to bail the world out of the current financial crisis.

Under his proposal, Brown wants to add billions of dollars to the $250 billion that the IMF has at its disposal, drawn from currency reserves of countries, to bail out those nations that are under pressure because of the financial crisis.

According to Wilks, Brown urged the Gulf states to be prepared to provide reserves to IMF upon request in return of recognition of their increasing economic weight which could be having voting rights in most international financial institutions.

“If the Gulf states decide to provide more support to those institutions, the UK is ready to give them that recognition and will initiate talks with leaders of the world in support of that,” Wilks said.

The spokesman also said that Brown would provide a political plan to resolve the Middle East conflict in the months to come.

“The first part of Brown’s plan is based on building effective talks between Israelis and Palestinians while the second part will be based on opening up to Syria as well as on supporting its indirect talks with Israel,” Wilks said.

Brown also told the UAE leaders that Britain did not recognise the Iranian occupation of three UAE islands on the mouth of the Strait of Hormuz, according to Wilks.

He, however, added that the British leader’s talks with the Gulf leaders “did not take the form of financial commitments in return of UK’s political promises”.

“Rather, it was a dialogue on opportunities that are available for countries in the region if they decide to make more significant contributions to the international financial institutions,” he said.

Wilks said, of the $250 billion it has, the IMF has allocated $20 billion to Hungary to fight the crisis and is also ready to help 10 more countries.

But for this, he said, the IMF will need more financial support as a precaution aimed at building confidence in the international institutions.

He added that the Gulf states’ response to Brown’s offer was “effective and constructive”.

“They recognise the role they are required to play to avoid a global financial crisis that could very well drive the world into a long economic depression expected to affect all countries and create political problems similar to those in the wake of the Great Depression of 1929,” Wilks said.

Brown and his Gulf counterparts did not discuss details like the amount expected from the region.

Rather, Wilks said, talks were focused on Brown’s proposal to build extra reserves for IMF and other international institutions in return of recognizing the Gulf’s increasing economic weight.

Britain will present the proposal to the world leaders at the G20 financial summit to be held this month in Washington to discuss the ways to face financial crisis.

The Brown carrot to the Gulf came even as number of Western leaders and economic policymakers have started visiting the region seeking aid to tide over the crisis sparked by the credit crunch in the West.

US Deputy Secretary of Treasury Robert Kimmit, who came on a whirlwind five-country tour of the Gulf, said his country was looking for investments from sovereign wealth funds of the region.

US Secretary of Treasury Henry Paulson, in an interview to the Oxford Business Group (OBG) for ‘The Report: Abu Dhabi-2008′, said the Gulf nations, flooded with surging oil revenues, have a historic opportunity to make investments in foreign countries.

German Foreign Affairs Minister Frank Walter Steinmeier, who was also on a visit to the UAE last week, while admitting that the G8 group of industrial nations could not solve the current crisis on its own, called on Gulf countries and emerging economies to become more involved in reforming markets.

Countries of the region were also among the first to take remedial measures as the crisis reached Gulf shores.

Central banks cut interest rates and poured liquidity into the region’s banking systems to restore the investor confidence, a fact acknowledged by Brown while he was in the UAE.

At the crucial G20 summit in Washington Nov 15, Saudi Arabia, which is the only member from the region in that group, will convey the Gulf nations’ views on the crisis to the rest of the world.