By Aroonim Bhuyan, IANS,
Dubai : The financial crisis will catapult India, China and the Gulf nations to a decisive leadership position in the global financial system, according to some leading economists of the Gulf.
Speakers at a seminar organised jointly by the Dubai Press Club, the Dubai School of Government and ABN Amro Bank here were of the opinion that the crisis would slowly but surely take the economic leadership of the world away from the world.
Countries of the Gulf Cooperation Council (GCC) have continued to do well despite the global meltdown, and the big advantage they enjoy is the immense liquidity at their disposal, according to a statement summarising the proceedings of the seminar.
Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates (UAE) form the GCC.
“Since these countries will continue to pump in money to the western markets thirsty for liquidity, their role is becoming really crucial,” Mohamed El Hedi Lahouel, associate dean of academic affairs, Dubai School of Government, said addressing the seminar.
“They will do more to stabilise the global economy than most other countries. We have to see the recent visits of Western leaders to the region seeking assistance in this context,” he added.
Over the last week, several leaders and economic policymakers from the West have been visiting the region seeking the GCC states’ help in solving the ongoing crisis.
US Deputy Secretary of the Treasury Department 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.
Then, over the weekend, British Prime Minister Gordon Brown came on a tour of Saudi Arabia, Qatar and the UAE, seeking contributions for his proposal for an expanded International Monetary Fund (IMF) to bail out countries under pressure from the crisis.
Citing these visits, Lahouel said: “I therefore would like to rule out the possibility of a depression as happened in 1929. The situation is drastically different.”
As for the implications of the crisis to the Gulf nations, he said some planned expenditures stood to suffer as these were budgeted keeping a $100-a-barrel oil prices in mind.
“The drop in prices will definitely have an impact here,” he said, but added that unemployment would not be a problem in the region.
“Since much of the labour force in the region is imported, a possible unemployment scenario will hardly touch the population of GCC countries. At worst, it will affect those countries that export maximum labour force into the GCC countries,” he said.
Agreeing with Lahouel’s assessment that the situation was vastly different from the times of the Great Depression, Didier Duret, global chief investment officer of ABN Amro Pvt Banking, said the system now enjoyed much more flexibility in terms of interest rates, foreign exchange and the process associated with it, and strong coordination between nations and central banks.
“The existence of countries with large surplus funds and sovereign wealth funds is also a significant factor. I am sure the negative impact of the meltdown could be stemmed to a considerable extent through sound policy and careful implementation,” he said.
Duret, however, called on investors to keep their focus on the US where the crisis originated out of a credit crunch.
Francois Moute, chairman of Neuflize Pvt Assets, said the crisis was a culmination of the policy former US president Ronald Reagan had put in place 27 years ago.
According to him, oil prices will rise only when western economies start to stabilise and emerging Asian economies like China and India revive their high growth rates.
But he added: “The western world is slowly but surely losing its leadership of the world. Countries in Asia, such as China and the GCC states, have begun moving to the centre as far economic leadership of the world is concerned.”