Structural financial reforms key to ME prosperity: Experts

RITIKA SHARMA / Emirates Business

There is a dire need of creating a new financial paradigm in the Middle East in order to diversify economies and end the dependence on oil. Experts are suggesting a well-thought-of-change in monetary policies to strengthen GCC economies by an increased participation of private sector and retention of human capital in the region.
This was speculated at the ICAEW’s Corporate Finance Faculty roundtable held recently in Dubai. The event discussed the possibility of private sector investment pools bridging the gap in the GCC’s capital funding needs.
Sunil Kumar, managing director of SKN Capital told Emirates Business, “We can diversify economy through structural reforms and active private sector participation mainly by allowing more public–private partnerships (PPP) in infrastructure development and capital-intensive project investments.”
Things that can be taken into consideration for effective reform can include bank, currencies and investors, he said. “We need more bank polies directed towards commercial lending and they have to be to be more qualitative. This will reduce NPA’s and dishonored cheques. Plus we need a floating system,” he added.
“Also we need to attract private sector foreign investors. There must be more structural reforms which include initiatives like 100 per cent foreign ownership in major sectors, long-term residency/ green card residency policy, and improved transparency and corporate governance, these reforms are made, GCC countries will build and retain their human capital within the region,” he further said.
It was suggested that the GCC countries need both revenue and economic diversification, but in order to achieve this, the economic policy has to change.
Michael Armstrong, FCA and ICAEW Regional Director for the Middle East, Africa and South Asia (MEASA), said during the event, “GCC countries have started making fiscal reforms, such as introducing taxes and reducing subsidies. However, in order to get greater buy-in from the private sector and attract foreign investors, there must be more structural reforms.”
Experts are warning that the central economic challenge facing the countries in the region is job creation. By 2020 the region will have to create around 130 million new jobs.
Failure to do so risks more extremism and poverty.
Abu Dhabi Economic Vision 2030 states that by 2030, it is expected that the non-oil economic sector will contribute 64 per cent of GDP. The strong diversification of UAE’s economy will also include the much-anticipated Expo 2020.