Financial flows within and between selected Arab states

Abstract

As a result of oil revenues accruing to certain Arab States over the last decade, it has become apparent that all capital needs to meet development plans can be met from internal sources, A number of inter-Arab development institutions have been established in the region since 1960. These include the Kuwait Fund For Arab Economic Development, The Arab Fund For Economic and Social Development and the Inter-Arab Investment Guarantee Corporation, The Kuwait Fund has been in operation for twelve year and has successfully disbursed funds and technical assistance to a number of poorer Arab States. The Arab Fund and the Guarantee Corporation only recently begun operations. The commercial banking sectors of the major Arab oil states have grown rapidly over recent years. Despite this growth the banks have still to play a major role in the process of regional economic development Advances to vital growth sectors such as industry, agriculture and communications have been small. Banks have preferred to finance trade, mostly imported consumer goods, and to invest outside the Arab area. A number of specialised financial institutions such as agricultural and industrial banks operate in the region. These institutions have as a primary function the provision of medium and long term capital for particular sectors. To date they have not made a decisive impact on economic development within the region. Activities of the specialised institutions have been too restricted by financial, practical, and political barriers. The existence of a certain amount of capital does not itself ensure economic development. A vehicle for mobilising and distributing capital in accordance with real growth objectives must necessarily be established. Despite rapid growth of financial institutions within the Arab region, the financial superstructure remains inadequate to meet these objectives.