Astana Economic Forum Session 1 on the Global Economy Intervention by PM Siniora Ladies and Gentlemen, It is a pleasure to be here with you at this prestigious event, the Astana Economic Forum, which has become an important global forum for the discussio
Ladies and Gentlemen,
It is a pleasure to be here with you at this prestigious event, the Astana Economic Forum, which has become an important global forum for the discussion of world economic and financial affairs.
The topic of our session cannot be more relevant, as it is clear that the global economy is witnessing a secular rather than a cyclical downturn. The global financial crisis that started in the Sub-prime US market in 2007 and is still unfolding with repercussions in Europe have revealed the size of the global imbalances that have built over the last decades. Growth was fueled by financial leverage in the industrial world that was in turn mostly funded by Emerging markets. The crisis temporarily shifted the center of gravity further to Emerging Markets, especially the BRIC countries which carried global growth in the period 2008-2013. The response to the crisis which brought industrial markets interest rates to around zero fueled further growth in Emerging Markets which attracted massive inflows of capital seeking higher yields. But with this policy, known as tapering, ending, it has reversed the process and revealed the vulnerability of these countries that were thought to be the next global superpowers.
A look at the global economic scene would reveal that the world seems to have almost consumed its engines of growth and unless new sources are found, the world risks lingering in a low growth environment for a long period.
In the US a tepid recovery reflects that consumers are still highly leveraged and that it will take a while before the US goes back to the high growth rates of the mid-nineties. China, the second largest economy is slowing fast and concerns are rising on how the economy would land from the double digit growth rates of the last decade without any scars on its financial sector or on social stability. Other Asian countries heavily depend on Chinese growth and would therefore slowdown as China does. Europe has passed the test of its unity, after austerity programs in the south to deal with the sovereign debt crisis, increased the voices of Euro-sceptics and separatists. But while those voices have receded, it is clear that growth will be subdued for a very long time due to structural problems in the South. Meanwhile, Russia and Eastern Europe seem to have reaped the advantages of liberalization and realized the low-hanging fruit of adopting the market-based economy, but rising income levels have also reduced demographic growth which has capped their growth potential. In addition, the European slowdown and the rising geopolitical risk have capped further this potential in the long-run. Latin America is also slowing due to both the new monetary policy cycle in the US and lower potential growth in Brazil. Africa, which has shown some potential lately, is coming from a very low base, and therefore lacks the spending power.
Only one region is left, that in my view can hold the key to unleashing strong growth opportunities which can be to the benefit of the whole world: the Middle East. The region, home of both the largest oil reserves in the world and the highest proportion of youth to the overall population has great potential. It does not lack the natural resources, the demographic forces, or the spending power.
The region is also in need for all kinds of products and investments: its overall infrastructure needs significant upgrading to meet the challenges of a fast rising population. Its youth is eager to adapt the latest in technology, and has indeed proven to be extremely proactive as proven by the use of the social media during the Arab Spring movement which have altered the direction of the region. Its youth are in need of an education that is more in line with the region’s needs, and its longer-living wealthier seniors need and demands the best in health care and services.
One should not look at the Middle East just through the resources prism. The pent-up regional demand for infrastructure, technology, health, education and many others can turn it into a global engine of growth.
But its lacks one crucial thing: political stability.
Over the last six decades, the region has witnessed eight Israeli wars, three Gulf wars, civil wars in Lebanon, Yemen, Algeria, Sudan and recently Iraq, Libya and Syria. No region in the world has suffered what the Middle East and the Arab world have gone through. Imagine the resources that have been wasted because of all these wars and conflicts, not just to the Arabs, but also to the world. And despite all these harsh conditions, the region is still standing, growing at reasonably good rates, and its youth demanding more say in their domestic affairs but alsoa greater role in the world.
Ladies and Gentlemen,
One should not look at the Middle East like as a region of challenges. But rather as a region of opportunities: a region rich in resources, in people, in culture and heritage, but also with substantial pent-up demand for progress and developments.
But the key is to find just, comprehensible and lasting solution to the pertinent problems in the region: Arabs are not asking the West for a Marshall Plan as they do not lack the resources. They are not asking for free trade and integration agreements like those given to other regions and countries which have often also been given in the past financial assistance combined with a path that showed the hope of a better tomorrow, a tunnel that showed the light at the end of it and that enabled crucial reforms to be implemented. In this regard, look at the case of Turkey to understand how just the promise of joining the EU allowed its political class to implement crucial economic reforms that has placed it in few years as the fastest growing economy in Europe and one of the top 20 largest economies in the world.
Arabs are not asking for the financial assistance, but they are asking to be assisted through a path that shows them a future of prosperity, and that is only possible through a path that shows them a future of peace. Arabs are asking for the political will and actions to end the conflicts that have been bleeding their resources: A just end to the Arab Israeli conflict that gives Palestinians their right for a place on earth to call home, normal and healthy relations with Iran that are based on mutual respect, and support for the democratic transition in Syria that would end the conflict that now risks destabilizing the entire region by feeding further the fanatics and the forces of extremism.
The New Middle East should be one where the civil state is the guarantor of minorities’ rights, where all citizens regardless of religion sect or ethnicity are equal in rights and obligations, where no autocrat hold the society hostage of fear of extremism, and where extremism is defeated by the will of the vast segment of society that reject it and fight it through democracy but also through growth and development and education.
Investing in peace in the Middle East is not just the cheapest way for the world to fight global terrorism, but is also an investment with high potential economic returns. Where else can you find a region of over 300 million that is to a large extent unexplored?
Ladies and Gentlemen,
And since we are in Astana, it is also important to say that it is high time for the Middle East to re-align its global position and look for closer cooperation with its Eastern neighbors, where the future sources of growth lay at large.
Our interests are aligned. Invest in hope and moderation, and you will get much more than that. Help us help you. Help us make peace possible and take opportunities. Help us make opportunities possible and take peace. The two way benefits cannot be clearer. And the cost of inaction cannot be higher: it will be conflicts that feed lack of opportunities that feed extremism that feed global terrorism that feed a further waste of energy and resources. Just imagine what would happen if 10% of the global cost of maintaining security is invested in health and education. Imagine with a peaceful Middle East how much more of that cost can be diverted to investing in our future, our common future.
I thank you for your attention, and wish you the best in this Forum.