Crisis control

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Kouame is confident that the move towards a monetary union is a top GCC priority.

Claire Ferris-Lay meets Auguste Kouame, lead economist for the Middle East and North Africa at the World Bank, to discuss the effects of the economic crisis on the region.

It is, at first, very difficult to get Auguste Kouame to discuss anything remotely controversial. As the lead economist for the Middle East and North Africa (MENA) region at the World Bank, he would rather discuss how well Gulf countries are handling the global financial meltdown, than which countries he sees heading for a recession.

But listen carefully and Kouame does have some interesting, maybe even slightly controversial points to discuss. He is not, for example, an advocate of Gulf public sector investment in agriculture abroad, despite the alarmingly low levels of investment in the industry in recent years, and he thinks Gulf countries could do more to coordinate future stimulus packages to help them combat the economic crisis as they move towards a monetary union.

"Going forward I think they (Gulf countries) should coordinate more on their policies and responses," he says, picking up one of the many points he raised during his speech at the Dubai School of Government the previous evening. "If the policies are not well coordinated... it could generate some arbitrage; banks with more deposits are more protected in country A, and country B could suffer because you didn't respond to it.

"If you create a condition of financial arbitrage it may weaken some countries to the point that they may not gain credibility quickly enough to become a member of the monetary union," he warns.

Gulf countries have been working towards achieving a single currency since 1982, but a number of setbacks, including Oman's choice to opt out and Kuwait's decision to depeg its currency from the US dollar, has delayed the goal. Last month officials again said that the 2010 deadline was likely to be extended further due to the economic crisis. While analyst's opinions have been mixed, Kouame remains confident that the move towards a monetary union remains top priority for Gulf countries.

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READERS' COMMENTS

Gulf Public Investment in Agriculture
Posted by Marty Abuloc on Wednesday 27 May 2009 at 11:13 UAE time


Investment in agriculture abroad does not create ownership issues as long as the lines of responsibility/ownership is very well defined. I for one agree with this concept based on the simple arguments

1) A severe disadvantage in one commodity exposes a country to more risk than it can contain
2) A surplus in one period must be invested wisely to ensure a steady flow of resources the next period
3) The production element, that is the farmers, the labor, and the transportation sector of a food producing country stands to gain if the products have a sure buyer, all 100% of it, instead of relying on the often inneficient local markets in a food producing country.
4) There is a way of ensuring that everyone benefits from this arrangement, from product sharing or profit sharing, to a host of other benefits for the farmers and other sectors servicing this investment.

What is worst is just to sit, do nothing, and accept the current scenario (relative lack of food producing sectors) as a given. If the investing country and the food producing country sit down, talk about the benefits and discuss how each one can be better off, then there will undoubtedly be a mutually beneficial relationship.

In a world of cross border investments in paper assets and derivatives involving trillions of dollars, why not in hard, real, tangible benefit providing investments such as food?

Gulf Public Investment in Agriculture
Posted by Mohamed Djirdeh, Dubai, UAE on Wednesday 6 May 2009 at 21:44 UAE time


Yes Mr. Kouame is right in rejecting Gulf Public Investment in Agriculture in foreign lands.

It is really not logical that wealthy Japanese, S.Korean and Gulf countries are investing big amounts in agricultural projects in Africa, Pakistan, India, Latin America and Australia to secure food. They buy the best land cheap, and deny the poor local farmers the chance to grow food and market abroad.

Nonsense, what security? This creates a new issues of ownership and these projects are doomed. Better buy from these countries, and their farmers; assist in quality control, packaging and transport. And pay good prices. YOU WILL HAVE TOTAL FOOD SECURITY FOR A LONG TIME.

Salaam

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