Arab Losses, Victim to American Scandals, Estimated 325 Billion $

Muhammad Abdullah
Alintiqad Newspaper (Beruit)
August 20, 2002

One of the few subjects handled by the Arab and foreign press is that related to the size of Arab Losses caused by continual American Bankruptcy and scandals. It is obvious there are large figures for Arab assets found within the economies of the west, America and Europe in particular, distributed between frozen assets, bills, shares, direct investments, and other materials related to modern world economy. In spite of the fact that a month has passed until now, there have been no formal statistics published concerning this subject, and the size of the losses suffered by Arab investors has not been revealed yet. Nevertheless, this summer it has almost become a fixed certainty, that the American economy is no longer a secure shelter for the emigrating Arab money, which is now under the threat of danger within the light of what is being revealed from scandals that shocked the greatest American companies, which caused the gasping of the gambling investors by presenting unbelievable figures of profit. In this case, al “Intiqad” newspaper focuses the light partially and according to the available statistics, which are informal and still at the beginning concerning losses, liable to escalate, suffered by Arab investors.

Case file prepared by: Muhammad Abdullah

Arab collapses

With respect to the Arab region, especially that of the Cooperation Council for the Arab States of the Gulf (GCC), which it is noticeably the most damaged region of the world, more so than the American economy which was struck by damage of variations, especially after the events of September 11, and the consecutive financial and accounting scandals. It is revealed that the Arab and Gulf economics are influenced directly or indirectly by the American economic stagnation and the descending value of the dollar due to tied relations between the two sides, an issue that can be explained according to two major parts: the first part relates to the external field of trade, while the second relates to the field of investments.

First: External Trade

The USA is considered to be the second major partner of the Gulf Cooperation Council after Europe with a value of more than 29 billion dollars in the year 2000 verses 25.3 billion and 24.5 billion dollars in the years 1998 and 1999 consecutively. According to the 1999 statistics, the USA imports from the GCC exceeded 11.7 billion dollars representing 60.8% of the American imports coming from the Arab countries, whereby oil represents 80%.

On the other side, the American exports to the GCC value 12.7 billion dollars representing 70.4% of the total American exports to the Arab countries in 1999. Based upon the previous information, the American economic stagnation and the lowering value of the dollar exchange, against major currencies, influence the external trade of the Gulf Countries through the regression of Gulf exports due to two reasons: first is the regression in the world purchase of oil due to the world economic slowdown, where the GCC contributes to 20% of the world oil supplies; while the second is due to the degeneration in purchase power in the international markets based on the Gulf exports as to the value of the dollar, of which oil represents more than 80-90% of its total, and this is due to the devaluation of the American dollar that exceeded 12% against the Euro, whereas the Gulf currencies are related to the dollar except for the Kuwaiti dinar.

At the end of 2002 the dollar will become the combined fixture of all the Gulf currencies paving the road to reach the one united Gulf currency by 2010; meaning, each devaluation witnessed by the price of the dollar against other currencies will mean a similar regression in the buying value of the imported Gulf oil that reached 107.6 billion dollars in 2001 (one must remember that the price of the Euro has reached its highest level till the date of this report, equaling 1.03 dollar).

Second: Investments

Due to the direct influence of the devaluation of the American dollar and the descending prices of the American shares and regression of some international stocks, the size of the Gulf and Arab losses was estimated, since the beginning of 2002, until July 2002, at 325 billion dollars. The values of these losses, estimated to equal the ratio of 23% of the size of present outside Gulf investments, which values about 1.4 Trillion dollars, meaning 1400 billion dollars according to the international association “Merel Linch”. An estimated 200.000 people possess these investments, most of who are present in the USA (estimated at 700 billion dollars). This money is distributed in the form of investments, of which 40% is in the real estates field, 35% in Bank deposits, and 15% in the form of bills. Saudi Arabia alone possesses half of these investments.

It is expected for the losses of the GCC and Gulf businessmen to witness an ascent over the coming period, especially with the continuation of the American financial scandals, the opening of the files of corruption, collapse in the trust of international deals, and in addition the tendency of the European and Asian stocks to descend.

160 billion Saudi Losses

A Saudi financial expert estimated the size of the losses suffered by the Saudis, at the deteriorating world stocks, at 601 billion S.R. (160 billion dollars). In addition, the general director of “ Bakheet Financial Investment Center ”, engineer “Bushr Bakheet”, weighed these losses, from the beginning of this year until now, at 325 billion.

The Arab association for investments valued the losses that struck the emigrating Arab investments during 2000 and 2001 at 400 billion dollars due to the economic stagnancy, the regression of the world market shares, and the events of September 11.

In return, the Arab stock markets in general, though they did not achieve great ascent, they maintained the price levels and some were able to achieve an ascent in the price. The value of the Arab stock markets maintained its position at 170 billion dollars during the first semester of the present year. This value is not much less than that of the value at the end of last year.

Return of emigrating investments:

The attraction and return of the emigrating Arab and Gulf investments in addition to localizing the domestic investments in the region, have become an essential factor since the events of September 11, especially within the hostile campaign against Arabs in the western countries, and the USA decision to freeze and confiscate many of the Arab financial assets by reason of drying the financial source of the so-called international networks of terror. The last of which was a decision of monitoring all the Arab trade projects in the USA regardless of their size, in addition to the international financial marketing crisis that caused recent losses to investors from the gulf. Some Arab sources indicated the return of 80 billion dollars of Arab and Islamic money after the events of September 11, of which 20 billion dollars belong to the gulf, this is due to fear of this money being frozen or confiscated. It is obvious that attracting Arab emigrating capitals again can only be attained through securing investment security, and guaranteeing competing income on the international level, and facilitating several bureaucratic procedures that retard flow in the right direction.

Loosing confidence in one side of the international financial market can create a chance for the innovative Arab financial market, in order to grow and fill the gap that would arise, whereby the Arab financial market tends to increase the notes of currency, such as financing the public debit via different bills with different periods and dimensions as well.

The following stage of the various Arab countries will be based on increasing the role of the private sector that can begin the execution of projects related to infrastructure or projects related to the new economic sector of techniques and other issues. All these projects need great financing, and it would not be strange, if these emigrating capitals, whose owners already have their doubts, as to how successful these investments can be in the international financial market, financed parts of it.

Regardless of the emigrating Arab capitals, there is unanimity that they are enormous, and they seem from now – as one financial consultant in the gulf says – as hostage of a bizarre “historic moment”; as they are subjected to the risk of unjust freezing, and at the same time, they cannot find an appropriate place for them at home, especially in the Arab financial markets and the present structures of the Arab economics.