Mideast leaders defend free market at economic forum

Jordan accepted an IMF structural adjustment program after it had its own debt crisis and currency collapse in the late 1980s. Since then, it has heavily promoted its liberalism in a bid to attract foreign investment. It embarked on an ambitious program of privatizing state-owned industries, joined the World Trade Organization (WTO), opened a free zone in the city of Aqaba, and embraced public-private partnerships to implement everything from municipal projects to tourism developments.

The drive for foreign investment is evident at the forum, where the Jordan Investment Board has set up a huge booth in the central hall. Their brochures tout the country's "reformed and liberal legislation" and "streamlined regulations and procedures."

And in Jordan, at least, the effort has been fairly successful, earning good reviews from the IMF, and contributing to the country's huge currency reserves in 2007 and 2008.

According to members of the government, those reformed markets are what enabled Jordan to weather the financial crisis.

"The reforms that we've had over the past 10 years will help us take the shock of this year, and accept a high deficit," said Finance Minster Basem Al Salem, in a panel discussion. The priority now, he said, was to continue those reforms.

"We're concentrating very much on the reform process ... to make Jordan a very competitive place to invest in," he said.

Egyptian Minister of Trade and Industry Rachid M. Rachid responded that his country's situation was very similar.

"If we had not done the [structural] reform in the last 10 years, we would be in a really terrible situation," he explained. "By letting go of the government, giving more space to a private sector ... we created confidence, we created momentum.... If we are reform-minded and we want to continue [opening up the economy], we should not miss this fantastic opportunity of a crisis."

Conservative banking helped mitigate the crisis

But while it's true Middle Eastern countries haven't yet been hit as hard as the rest of the world, most analysts, including Ahmed, say this was actually because their banking sectors were very conservatively regulated, and weren't involved in the kind of dubious financial products that caused problems for more open economies.

"The region has been extremely prudent," said Loay Nazer, chairman of the Saudi Arabia-based Nazer Group, in a televised discussion panel. "A big part of monetary and fiscal policy is determined by very conservative governments."

But Mr. Nazer is also among those who says that this crisis will be an opportunity for more deregulation. "We need to be less conservative going forward, because if we don't take advantage of the opportunity we have right now," we won't see the benefits in the future, he said.

Mr. Abdulla-Janahi also said he worried that more banking regulation would make Middle East banks "uncompetitive."

But some at the forum did say that free-market reforms were a harder sell than they used to be.

"It is becoming much more difficult now to push [for] reform," Nazer said. "Many people say, if we had not been integrated [into the global economy] we would not have felt the crisis."

"People are citing the experience of Saudi Arabia, which because of its conservative policy, and not being as liberal or as opened up, was protected, in a way, against the major crisis that happened – compared to a place like Dubai, which was more open," said Henry Azzam, Deutsche Bank's CEO for the Middle East and North Africa, just before the panel discussion on finance reform.

"But again, if you are conservative, on the way up, you will be conservative on the way down, and you will not benefit when the crisis ends," Mr. Azzam added.

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