Economics?? I can barely figure out a restaurant tip!

I'm not known for my math skills. So I was a bit worried when I was assigned to cover the session on "Leaders of the New World Economic Order." Didn't they realize I was a humanities major for a reason??Fortunately, I'm a fast typist so I was able to take notes and boil them down into a somewhat comprehensible one page document. For those of you with an interest in such things, the report is below...

There are some seriously smart and articulate people here. My head is spinning!

ENRICHING THE MIDDLE EAST’S ECONOMIC FUTURE V CONFERENCE

PANEL - LEADERS OF THE NEW WORLD ECONOMIC ORDER

JUNE 1, 2010

Participants:
• Hani Findakly, Chairman of Potomac Capital (Moderator)
• Dr. Ben Simpendorfer, Chief Asia Economist, Royal Bank of Scotland, Hong Kong
• Brad Bourland, Chief Economist and Managing Director, JADWA
• Michael Sarris, Former Minister of Finance, Republic of Cyprus

The main focus of this session was how the world economic order will rebalance itself in response to the recent economic crisis. The group agreed that it is impossible to discuss ME economic restructuring without also focusing on China’s position as a leader of the new economic world order. It is China’s long term development prospects that will have the biggest impact on the ME. However, the US economy will remain extremely important to the world and to the ME region.

Findakly opened with a couple of questions that he asked the panel to address: 1. To what extent has the recent financial crisis impacted or accelerated the trend of the global economic shift (from west to east)? 2. Will Europe be able to handle its debt and currency challenges and will the current financial crisis lead to further economic integration of Europe or a disintegration of the EU? 3. Will the large fiscal deficits around the world lead to major inflation over the coming five to ten years, or will the challenges of over-investment, unemployment and excess capacity lead to deflation and lower growth? 4. How will the ME region deploy its considerable resources to build a sustainable economic infrastructure that will provide jobs and become integrated with the rest of the world?

The first panelist, Ben Simpendorfer began by stating that we are witnessing a historical rebalancing of the global economy. The rise of the east will have much faster growth rates than the west. China has overtaken the US as the world’s largest exporter to the ME. As a result, goods have become more affordable for some, but at the same time, there are already factory closings and job losses in the ME region as the ME no longer produces these goods themselves. Putting local youth to work is going to be harder if the ME is importing a majority of its products from China. It’s not all bad, however. As China is rebalancing, its interior provinces will need more oil, and not just the coastal cities. China’s production costs are rising and they are looking to manufacture goods in the ME in countries that make it easy to do so. This depends on the possibility of free trade agreements between China and other nations (i.e., Egypt). As the ME region thinks about economic restructuring, they need to continually think about capturing the Chinese trade, particularly vis-à-vis low cost manufacturing (as manufacturers have done in Doha and Dubai), and can therefore become the intermediary trade partner in China’s rise to economic power.

The second panelist, Brad Bourland, noted that global GDP growth is occurring at vastly different rates for different countries. China will have high growth rates for the next couple of decades and its GDP may possibly catch up to the US in the next 100 years. The ME region as a whole is not currently a large global economy. What will keep the ME important is its role in hydrocarbons. Natural gas and petro chemicals will also be important, but hydrocarbons will be particularly so. Capital that flows into the ME region will increasingly flow towards China.

The third and final panelist, Michael Sarris, noted that before the economic crisis, the world was experiencing unprecedented prosperity. With the liberalization of international trade, the role of government regulation was not taken seriously and there were a number of imbalances. The most visible imbalance was that China was amassing huge surpluses and the corresponding deficit was mostly in the US. Markets then forced a correction to the imbalances and policymakers had to step in. Markets also began to distinguish between sovereign debts that were likely to be repaid and those that were not (i.e., Greece). The EU’s social model will need to be rethought. The US and China will need to find ways to work together. Countries will need to increase their competitiveness and need to reform their labor markets. Overall, the ME has handled its wealth quite well, but questions remain as to whether the region is making sustainable investments that will contribute to a global economic balance.

Bullet point summary:
• China’s long term development prospects will have the biggest impact on ME
• ME countries should focus on capturing Chinese trade markets, particularly by offering low cost manufacturing
• Hydrocarbons will continue to play a big role in the ME’s economy
• Capital that flows into ME region will increasingly flow towards China
• EU social policies need to be rethought; early retirement, welfare, long vacation periods are not sustainable
• China and the US need to find new ways of working together economically
• The ME will need at least 100 million new jobs over the next 10 years
• Higher end service jobs are better candidates for job growth in ME than oil production (i.e., banking, investment, tourism)
• China’s role in Africa will continue to grow