The region's central bankers have recommended plans to establish an Arab payment settlement system to promote regional trade and investment. Under the arrangement, payment for trade and investment deals between the Arab countries would be completed by banks in the region rather than in foreign financial centres, helping to lower costs and reduce the amount of money governments have to hold in foreign exchange reserves.
Tourism, exports and remittances contribute to the annual US$200 billion (Dh734.6bn) of trade and investment between the region's Arab countries. The proposals were discussed during the annual meeting of the Permanent Bureau of the Council of the Arab Central Banks Governors at the Arab Monetary Fund (AMF) headquarters in Abu Dhabi yesterday. "The inter-Arab financial movement is huge and this requires a huge amount of foreign exchange resources," said Sabir Mohammed Hassan, the governor of Sudan's central bank and the chairman of yesterday's meeting. "Now the settlement takes place elsewhere, either in New York or London.
"If we succeed in establishing a regional settlement arrangement that will minimise the foreign exchange requirement, minimise resources and provide a basic infrastructure for the promotion of inter-Arab trade and promotion." Sultan al Suwaidi, the Governor of the UAE Central Bank, and the other central bank governors approved the proposal for the next meeting of the region's financial regulators in Tripoli in September.
Trade experts said there was significant potential for Arab economies if further reforms were implemented. "There is a lot of scope for increasing inter-regional trade," said Robert Lawrence, a professor of international trade and investment at Harvard Kennedy School in the US. "The data still suggests countries are still trading too little with their neighbours. "Not only do tariffs need to be addressed, but how well customs operate and the regulatory framework needs to be improved."
Led by an economic rebound in the Far East and the subcontinent, world trade is expected to expand by 9.5 per cent this year, the World Trade Organisation forecast. The central bankers also considered a report on banking supervision and liquidity management in the Arab banking sector, which would be released this year. They also discussed the impact of the Israeli occupation on the Palestinian economy. A total of 22 countries are members of the AMF, which aims to promote trade and investment across the Arab world. It also aims to develop financial markets in the region.