The prospects for Arab economic development in the nineties is a highly complex subject that does not easily lend itself to generalizations valid for all countries. As is well known, the countries of the region vary greatly. For the oil countries, development will depend to a very large extent on what happens in the oil markets. Despite intensive efforts to diversify their economies, these countries are still heavily dependent on oil as the major source of income. Other countries may not be so heavily dependent on oil, but a good part of their growth is derived from the oil countries through workers’ remittances, development assistance, and Arab investment and trade. Still another group of countries is only remotely affected by the fortunes of the oil countries and is more concerned with developments in the export markets for their principal products. In addition to variations based on oil resources, Arab countries differ a great deal with respect to levels of development, per capita incomes, whether they export or import capital, and the extent to which they follow inward-looking or export-oriented development strategies. These variations complicate the task of assessing development prospects in the current decade.
Currency convertibility—defined in the broadest sense as the right to convert freely and without limit a currency into any other at the prevailing exchange rate—is the linchpin of today’s globalized world economy. To assess the importance of convertibility, it is only necessary to point out that a system of well-managed convertible national currencies imparts to the international arena advantages analogous to those resulting from the introduction of money in a national economy, most notably, the elimination of barter (and the need for coincidence of needs) as a basis for international trade and the provision of an instrument for the development of financial markets.
On April 15, 1994 at Marrakesh, Morocco, more than one hundred countries signed the Final Act of the Uruguay Round. This marked the conclusion of a complex and protracted process of negotiations that began in September 1986 with the Punta del Este Declaration. The Uruguay Round was the eighth round of multilateral trade negotiations conducted within the framework of the General Agreement on Tariffs and Trade (GATT). Since its establishment in 1947, the GATT endeavored to achieve three principal objectives:
Despite adverse exogenous factors, Arab countries have achieved important economic gains in recent years. Nevertheless, many of them remain subject to internal and external constraints that prevent the full realization of their considerable economic potential. The welfare gains forgone are of particular relevance in the current environment, characterized, inter alia, by rapid population growth in some countries in the region, concerns about the availability of natural resources (namely, water), uncertain oil prices, and a move outside the Middle East toward regional economic blocs combined with slow progress in multilateral trade liberalization efforts.
It is an honor and a genuine pleasure for me to deliver the opening remarks today for this seminar on currency convertibility. I wish, first of all, to welcome you to Marrakesh, a city with a rich cultural heritage and a wealth of tourist attractions. I also wish to thank the authorities of the Arab Monetary Fund and the International Monetary Fund for choosing to hold this seminar in the Kingdom of Morocco. In addition, I would like to express our appreciation to Mr. Osama Faquih, Director General and Chairman of the Board of the Arab Monetary Fund, who has honored us by attending and participating personally in this important event, and to congratulate him on his election as President of the Islamic Development Bank. Furthermore, I wish to extend greetings to the senior officials from the participating countries. Their presence demonstrates the interest and importance that the Arab countries’ monetary authorities accord to the topics to be discussed during this seminar.
This chapter describes the principal results of the GATT’s eighth round of negotiations, launched in Punta del Este, Uruguay, in September 1986, and concluded in Marrakesh, Morocco, in April 1994- The World Trade Organization (WTO), the principal result of the Uruguay Round, enters into force on January 1, 1995 and replaces the GATT as the basis for trade relations among its members. After an overview of the GATT system and a brief summary of changes in the framework for trade relations contained in the Uruguay Round agreements, the chapter concludes with a description of the steps a country must take to become a WTO member.
Currency convertibility has always been a fundamental notion in international economic relations. Yet, since the abandonment of the Bretton Woods par value regime, a remarkable degree of silence has until recently surrounded the subject. Possibly this silence is related to the advent and prevalence of flexible exchange rate arrangements that followed the Bretton Woods order. The reason could be that, in theory, flexible exchange rates would make exchange and other restrictions unnecessary or redundant; and, therefore, under such exchange rate arrangements currencies would be convertible by definition, so to speak. But as is often the case, what can be expected in principle does not always materialize in practice; exchange, payments, and other international restrictions have continued to prevail in the period of flexible exchange rates and, therefore, questions of currency convertibility have remained open.
Paul Chabrier, Mohamed A. El-Erian, and Rakia Moalla-Fetini
The Uruguay Round has been heralded by many as constituting a major advance in the process of multilateral liberalization of trade in goods and services and in strengthening the supporting institutional base. By seeking to bring in the old but contentious issues of trade in agriculture and in textiles under comprehensive GATT discipline, as well as to expand GATT discipline to some new areas, the Uruguay Round has been regarded by many as the most ambitious of all GATT negotiating rounds. If fully implemented, the Uruguay Round agreements are expected to enhance welfare-increasing trade and to contribute to world economic growth.
This paper examines the flow of foreign direct investment (FDI) into the Arab countries, its developments during 1970–90, differences among countries, and reasons explaining these trends. The paper’s main purpose is to assess how successful Arab countries have been in attracting FDI into sectors other than oil and gas as a means to expand and diversify their economic base and their exports, and to create high-quality employment. The growing preoccupation with FDI in developing countries in general and in Arab countries in particular reflects the fact that over the last decade FDI has changed from being a rather small and marginal source of foreign capital in the developing world to become a large and significant source; it is rapidly becoming a very important single source of long-term foreign capital available to developing countries, replacing the more traditional sources such as official grants and loans as well as commercial bank borrowing. According to the latest World Bank statistics, net long-term resource flows from industrial to developing countries increased only marginally over the last ten years, from an annual average of $68.6 billion during 1982–86 to $72.9 billion during 1987–91, or by less than inflation (Table 1). During the same periods, however, FDI to developing countries more than doubled, from under $10 billion to nearly $23 billion. As a result, the share of FDI in the total net resource flow increased from 14.3 percent to 31.5 percent.
International financial intermediation since the mid-eighties has made an enormous leap in apparent efficiency going hand in hand with the unprecedented explosion of cross-border capital flows, as new financial instruments have been created and competition among borrowers, lenders, and financial intermediaries has strengthened markedly.