Prof. Oweiss, which considerations can be done in regard the current economic crisis?
The present situation is the result of various different crises, not just a single one. The current crisis has global ramifications since local economies are interlinked in the globalization context. In order to have a more comprehensive point of view, we should start from the United States case to move farther into a wider global scenario.
Where should we identify the causes of this situation?
I believe that the main cause lies in the U.S. fiscal and monetary policy. The world found himself in such an harsh time due to the lack of regulations in the market. The absence of any regulatory mechanism has left most of the financial institutions without any control. The United States, under Bush Administration, decided to reduce revenues by cutting taxes, while expenses kept escalating. This led to an enormous public debt, estimated to be around the astronomical amount of $14tr. The US economy is so wide that, given the vast magnitude of the debt, anytime Washington borrows this has a massive impact on the total loan available to the rest of the world. The other negative aspect of the US fiscal policy is the public expense on war, as the country spends 371 dollars per minute on it. The Bush Administration must be blamed for flooding the national economy with financial instruments that were not backed by collateral mesures. The final result was that speculators had a field day and the mortgage market was seriously undermined.
Which are the main effects of the crisis on G.C.C Countries?
One of the evident relapses of the crisis on the G.C.C Countries ( Gulf Cooperation Council), namely Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates, is that the price of oil will constantly drop as the demand decreases with the slowing down of the ‘industrial wheel’. Furthermore, the coming depression and its impending harsh times will definitely cause a rise in unemployment. With the postponing of real estate ventures, the effect of the financial crisis on the G.C.C. Countries will become quite visible. In terms of relationships between Arab and Western countries, I don’t think there will be a lost of value, but surely there will be a lost of confidence. The West is trying to tap on some of the monetary resources of the region while the Arabs are thinking very seriously about the meaning of this process, since they are not responsible for the crisis. No matter how many sovereign firms and how much money the Arabic countries have, they are not capable to fill the huge crack that happened in the US and global economy.
So, if the solution is not going to come from the Us, Japan and Europe resources, and neither from the sovereign capital of the Arab countries, how will the economic order recover from the crisis?
No country in the world is safe from this crisis. Of course there are some differences in its impact; some countries could be a little bit more worst off than others, so the range of the lotto it’s quite wide. In the Middle East, a country as Lebanon has been immune from the crisis only thanks to the traditional banking sector, which strictly follows the banking regulation and therefore never assures loans without assets and collaterals. The bank in Lebanon did not buy shares from those huge American Companies which later collapsed, so it hasn’t been attacked on this side. However, the lack in industrial production as a result of the depression will be sooner or later affecting Lebanon too, especially if we consider the price of oil. Since Lebanon main resources are oil and natural gas, when the prices go down the whole region will suffer from it.
Which country within the Arabic region is going to suffer the most?
Kuwait probably, since it has been a great investor in those Us banks that later collapsed. Dubai is an other country whose growth slowed down. Oman, on the other side, will not face such a huge crisis because it has been thoughtful about the future and has enough resources to keep up.
How is this recession going to affect those countries which are already struggling in a difficult situation, like Iraq?
The impact on employment is a serious matter worldwide, but in the Arabic region it will have a far reaching effect. Unemployment in western countries means that immigrants will be the first to loose their jobs. As a consequence their native countries are going to face a dramatic reduction of the incomes produced abroad which are fundamental for their economies. A country such as Pakistan could, literally speaking, be committed to the point of declaring bankruptcy if the remittances of the Pakistani workers abroad turn to an end. The poorest countries are the ones forced to suffer from this particular consequence of the crisis.
And more specifically, what about Qatar?
Qatar is safe so far, because it has enough financial resources to cover any expenses and we still have reasons to think that the crisis won’t affect the employment situation of the Qatari population.