Arab banks need to increase capital, update technology and improve management skills if they are to compete in an era of global banking, while effective Arab capital markets will not develop unless the region’s governments are more energetic about changing investment laws.
These were the dominant themes of a recent two-day financial conference in Beirut, where a series of speakers from leading Arab banks and government institutions reiterated the need for the banking industry to reshape itself at a time where world trade agreements will mean that once-sheltered markets must become increasingly exposed to the cold wind of global competition. ‘The lifting of restrictions (worldwide) has led to movement of capital and this requires better commercial and investment banking,’ said Hamad al-Sayyari, the governor of the Saudi Arabian Monetary Agency (SAMA – central bank).
Some of the speeches held a note of frustration, for many of the issues covered by the conference are not new. ‘Countries that were behind us are now ahead of us. Is it our destiny that we keep on talking and talking like a record?’ Arab Banking Corporation’s chief executive Ahmed Abdellatif asked the conference rhetorically.
However, participants noted some encouraging signs that the region is moving into new financial territory. The Equate petrochemical project in Kuwait has demonstrated that regional banks can come together to structure financing for major projects, noted Ghazi Abdul-Jawad of Gulf International Bank. Egypt’s privatisation programme is moving ahead after years of stalling. Fund manager Scott Delman of investment firm Foreign & Colonial argued that many Middle Eastern stocks are cheap compared to those in other developing markets and that investor interest in the region should grow as economic liberalisation continues. ‘If one looks at how far the region has come over the course of the past few years, it is truly extraordinary,’ Delman told the conference.
The other aspect of the conference was a determined effort by the Lebanese government and businessmen to promote the country as an investment destination in the wake of an offensive by Israel against Hezbollah guerrillas in the south. ‘Lebanon was exposed to (Israeli) aggression for 17 days, but this attack has left us stronger than before,’ Prime Minister Rafiq Hariri said in a keynote speech to an audience including many executives from banks and investment companies in the Gulf. ‘The investor wants a country which is stable. Lebanon is stable. This is a country which faces problems and overcomes them.’
Second Arab Capital Markets Conference, Beirut, 24-26June, organised by Al-Iktissad Wa’l Aamal magazine