The President of ASCA, Mr. Talal Abu-Ghazaleh, was one of the key speakers at a major seminar organized by the Amman-based Arab Thought Forum in the first week of January, 1987. The seminar on “Alternate Policies to Address the Arab External Indebtedness and Protection of External Investments,” was chaired by the Forum’s Chairman and sponsor, HRH Prince Hassan Bin Talal, the Crown Prince of Jordan, and was attended by a number of Arab intellectuals including Mr. Abdullah Yacoub Bishara, the Secretary General of the Gulf Cooperation Council.
Mr. Abu-Ghazaleh’s paper was an in-depth study on the question of protecting Arab investments abroad, and, incidentally was the only paper tackling the subject at the seminar. As such, it provided an extensive coverage on the ways and means available for providing protection for investment as well as the possibilities for improving such protection.
The study was presented in four parts. The first part was a general analysis of Arab investments abroad. It dealt with dispersion of Arab investments, geographically and historically, the quantum of investments and the kind of financial instruments used.
The second part listed the various risks facing the investor in general outside the boundaries of his own country such as
corporate as well as county risks. The third part went into detail on the means available for protection of investments, including the institutional protection such as that provided by the Inter-Arab Investment Guarantee Corporation (ARIG). It also dealt with the World Bank affiliate under establishment called the Multi-Lateral Investment Guarantee Agency (MIGA) which is similar to ARIG but is on a world-wide basis.
The study also covered other protection mechanisms like institutions or laws for guarantee of bank deposits, Basle Agreement of 1975 as well as other governmental protection legislation in various countries of the world.
The Inter Arab Capital Exchange Agreement of 1980 was discussed as a viable basis for protection of inter-Arab investments as also the Arab investments Court formed in 1984 and similar other agencies such as the Court of International Arbitration.
In the final section, the speaker presented certain recommendations, which may be summarized as follows;
• To enhance the role of the Inter-Arab Investment Guarantee Corporation by capital increase and by widening the scope of
its jurisdictions in order to add different types of guarantees to protect against the commercial risks. The corporation may be allowed to borrow in order to meet its various tasks. It may enter into an agreement with the International Guarantee Agency, which was recently founded, in order to be insured with them.
• To develop the role of the Arab financial and insurance institutions in the capital exporting capitals to insure foreign loan investments and exports. Alternatively, Arab governments could set an official plan to secure their foreign investments as is the case in some developed countries.
• To set up system in the Arab Monetary Fund or in the Arab Fund for the Economic and Social Development aimed at supporting borrowing Arab countries, if they face payment difficulties. This money could be provided by deducting a certain percentage of the returns on their investments.
• To establish a society of Arab bond holders within the Arab world which should be backed by the Arab League or any specialized Arab regional institution, having the redeeming power to protect the rights of the bond holders. The institutions should assume the responsibility of following up the collection in case of defaults or in case of repayment problems.
• To set up an Arab investment fund, by those having surpluses and those willing to participate.
•To encourage all Arab countries to join the International Investment Guarantee Agency, especially the surplus states. This should be considered as a complementary role to that of Inter-Arab Investment Guarantee Corporation.
• To unify Arab financial markets or to establish a central Arab financial market by creating a new market or converting the existing one such as the Amman Financial Market. This market would allow interchange of Arab and international financial instruments. In order to back the operations of that market, it is possible to allow these joint Arab companies to offer the borrowing instruments in the Arab central financial market.
• To encourage the establishment of an operative market between Arab banks and to consider them as corresponding banks, especially those Arab affiliated banks which are operating abroad and to allow the circulation of the financial instruments offered by these banks in the Arab central financial market and also to encourage the setting of systems to secure deposits in the Arab world.
• To increase the financing of well defined projects in addition to the financing of short term payment balances. This should be done after taking all necessary measures to guarantee the refund of the deposits.
• To diversify the investments in terms of management, countries and currencies and to minimize deposits in the offshore units of the foreign countries.
• To give backing to the idea of repatriation of the Arab investments by taking advantage of the laws issued to encourage and to guarantee the investments in the host Arab countries. It is worth mentioning that some Arab countries give guarantees and encourage investment more than some of the foreign countries where Arab monies are deposited.
• To work on an international system which guarantees the foreign investment against political risks in both developed countries and under-developed countries of the world.
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