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Arab financial flows in a post-crisis world

June 21, 2010

June 2010 – The World Bank and the Arab Monetary Fund jointly hosted a conference on June 21-22 in Abu Dhabi for regional monetary authorities, policy makers, investment community, and academic experts to discuss how best to mobilize financial flows to and between Arab countries to ensure sustainable economic growth and stability.

The conference addressed three issues on the agenda of financial integration among Arab countries in the evolving multi-polar world economic order:

  1. Stimulate debate on the future trajectory of Arab economies in their search for a better utilization of their vast financial resources;
  2. Develop the capacity for systematic tracking of cross-border financial transactions;
  3. Review the main challenges and policy options for further monetary and financial integration that would best fit the region’s needs and priorities.

Financial regionalism

A greater financial and monetary integration may contribute to further trade integration in the region and also contribute to the development of financial institutions and markets, enhance competition, and improve access.

Financial regionalism can also provide a safeguard mechanism against both global capital market upheaval as well as monetary policy shocks emanating from the industrialized countries.

The pressing need to move forward on designing regional arrangements is further underscored by international efforts to reshape the global financial architecture in the wake of the financial crisis.

There remains significant heterogeneity across countries in the Arab world, especially between the oil-exporting Gulf Cooperation Council (GCC) countries, the developing oil exporters, and the emerging non-oil exporting economies. Also, financial development in many Arab countries remains at an early stage.

A forum for promoting a better understanding of intra-Arab financial integration

The conference gathered the key players involved in facilitating cross-country financial flows among Arab countries. Through the rich knowledge sharing sessions and the debate, the conference participants developed a better understanding of intra-Arab financial integration and reflected on the challenges and opportunities of this integration.

The presentations and discussion in the last session focused on the future for Arab financial integration in a post-crisis and multipolar world.

The conference was also an important platform for greater collaboration in the monitoring and analysis of financial flows. Unlike trade flows, for which reasonably sound statistics are available from national and international sources, financial flows are notoriously difficult to measure and estimate.

The Arab Monetary Fund, a regional partner for the Middle East and North Africa (MENA) Finance Flagship report

The Financial Sector Flagship Report, currently in preparation, represents a major diagnostic effort that is expected to throw further light on the strengths and weaknesses of MENA’s financial systems.

The report benefits from joint work being conducted with regional partner institutions such as the Arab Monetary Fund, the Islamic Development Bank, and Union of Arab Banks, and regional associations of financial regulators.

It analyses various aspects of the financial systems in the region: Financial Infrastructure, Financial Institutions and Instruments, and Financial Regulation.

The report is expected to contribute to the formulation of financial development policies in the region and to the World Bank’s assistance strategy. The first workshop, on Financial Infrastructure, will be held on June 29, 2010, in Abu Dhabi, in partnership with the Arab Monetary Fund and in collaboration with the Union of Arab Banks.