The Arab World and Liberalization of Trade in International Services
01 Nov 2002In his keynote address, Mr. Talal Abu-Ghazaleh, the Vice Chairman of the UN Information and Communication Technologies Task Force, said that finance is a form of intermediation, a symbolic language that facilitates communication and assessment of values and that the establishment of a strong financial system supported by comprehensive economic systems is a basic requirement for sustainable economic development.
He added that the conference agenda narrows around the AGCC common currency, liberalization of trade in financial services exposing and fighting suspicious financial transactions, Basel New
Capital Accord and the responsibilities of companies. He stressed that all of these topics are linked to globalization and form challenges, He said that the Arab World is now at a crossroad and has to face many options. The most important pre-condition for achieving economic prosperity is to establish a dynamic banking sector that can support the national economy.
Abu-Ghazaleh explained that the world has missed the opportunity to reach an agreement for the liberalization of trade in financial services based on the Most Favoured Nation Principle (MFN Principle).
This agreement had eluded negotiators on two occasions, at the end of the Uruguay Round and again at the establishment of the World Trade Organization in 1995, until some WTO members managed to conclude a far-reaching set of commitments on financial services in December 1997. On December 13, 1997,WTO members signed the Financial Services Agreement (FSA), which in addition to locking in
signatories’ commitments on financial sector openings, also extended the General Agreement on Trade in Services (GATS) to cover financial services. Today 113 WTO members, including China have binding commitments in the sector, more than in any other sectors except tourism.
The principle of the GATS commitments is that countries agree to “lock-in” the level of openness that they can commit to after that other nations can count on them not deviating from that commitment.
It is also built upon the principle of continuing improvement in member’s commitment to market access. All that GCC countries need is a robust organizational and managerial structure for the financial sector on which all other sectors can depend. That is why the Basel New Capital Accord is important. He pointed out that this accord depends on three basic supporting elements that allow the banks and regulatory and supervisory bodies to better assess the risks faced by these banks. The first is to specify the minimum requirement for capital adequacy in order to further develop the measuring methods
mentioned in the 1988 Accord. The second is the supervision by the
banking supervisory bodies on capital adequacy and the internal assessment norms, while the third foundation is the market system that offers vast opportunities for effective disclosure that result in
more secure banking operations.
Abu-Ghazaleh went on to say that careful study of the New Basel Accord would help GCC countries in making more structural improvements in their economies for the national interest. “It is important that before we liberalize our financial sector and open it for foreign competition and before we strive for the achievement of more
regional and international integration, we have to improve internal systems. An Arab World that was open within itself and to itself would begin to become strong enough to compete with the rest of the world.” Abu-Ghazaleh added.
At the end of his exposition, he said that the Arab financial sector was once the strongest and the leader of the world. During the glory days Arabs invented numbers, algebra, credit system and ran the world’s trade and finance system. At that time, there was open and free trade between the entire Arab world, from Spain to Africa and Asia. There were no borders, no customs, no tariffs and no impediments to free trade in goods, services and money.
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