Arabs are the losers in globalization game, Sarkis Khouri*
Economist gives warning at Beirut presentation

Finance professor argues for greater regional cooperation, as well as moving focus from consumption to production

Ara Alain Arzoumanian
Special to The Daily Star

The phenomenon of globalization is as greatly exaggerated as the elimination of the nation state, and cannot be converted into reality, according to Sarkis Khoury, professor of economics and finance at the University of California.
“The bad news is that Arabs are the victims of globalization,” said Khoury during a presentation entitled The Arab Economic Region and Globalization, at the Federation of Lebanese Chambers of Commerce, Industry and Agriculture in Beirut on Tuesday. “Arabs must understand globalization without actually having the need to participate,” he added.
According to Khoury, the idea of a global village without any national borders is essentially a much larger scale of the domestic financial system, a possible and desirable model, but inapplicable in reality.
Khoury cited the European Union’s difficulty in drafting a common constitution viable for all its member states.
“The Europeans have been unsuccessfully trying to create a common ‘nation’ since the 1850s,” explained Khoury. “The European nation states are still alive and well,” he added.
Khoury exemplified his proposal by quoting British Prime Minister Tony Blair, who recently warned President Jacques Chirac of France “not to go the distance” with the implementation of a unified Europe. The United Kingdom has yet to decide whether to adopt the euro over the pound sterling, with Parliament and the country divided over the benefits of either currency.
According to Khoury, regionalization has become a form of micro-globalization, with greater cooperation and focus on the regional rather than the global level.
The EuroMed partnership agreement, Gulf Cooperation Council and the North American Free Trade Agreement are examples of region-specific international treaties.
“Internationalism is an irreversible trend and the Arabs must strive for both a pan-Arab and EU focus for a better future,” Khoury said.
“Arab nations, except for oil, are considered as consumers, and will never succeed unless they reverse the trend and become producers,” explained Khoury. “On a comparative note, Finland, with a population of 5.5 million, produces far more than all the Arab nations with a population of 300 million,” he added.
“As for Lebanon, exports in 2001 were around $800 million, a figure lower than when the civil war started in 1975,” he continued.
Khoury attributed Arab shortcomings to a general lack of comprehension of the corporate structure and its benefits. The majority, if not all, of Arab companies are solely or family-owned entities.
According to Khoury, venture capital, perpetuation, risk management, increased liquidity, limited liability, greater exposure and transparency are the main benefits behind the corporate structure. Cultural and management systems, employment generation, protection of knowledge assets and measurable results are also greatly enhanced.
“Corporations operate outside the shadow of governments and are an effective engine of economic growth, as well as being a healthy competitor to the government,” said Khoury.
“Israel has 91 corporations registered on the NASDAQ and four on the New York Stock Exchange, with a total value of around $93 billion,” said Khoury. “Not even a single Arab entity is present,” he added.
Khoury considered the stock market and diversification as the means for future prosperity in the global system.
“In the short run, returns can be negative as is the case recently,” explained Khoury. “But take any 20- or 30-year window and you will see that there has never been a negative return on stocks,” he said.
According to Khoury, the debt situation in Lebanon is at a critical stage and steps must be taken to rectify the situation. The devaluation of the pound would make matters worse as it will only dwindle the returns on exports, whereas competitive quality products and services are the only answer.
“Lebanon’s biggest and sole export is its brain power,” said Khoury. “For example, the Mexican economy is run by a group of highly successful Lebanese entrepreneurs,” he added.
“It is only securing the return of such expatriates, and the accompanying investments, that will lead to Lebanon’s recovery,” he concluded.

* Sarkis Khoury, professor of economics and finance at the University of California.