QATAR. 'QFinance Debates' was held this week in Qatar to mark the launch of the QFinance reference book, the authoritative guide for finance professionals, a joint venture between Qatar Financial Authority Centre (QFC) Authority and Bloomsbury Publishing.

The debates centred on the policies adopted before and at the start of the financial crisis, the future of the joint Arab economic action and whether the crisis provides an opportunity for further Arab economic integration.

Eminent speakers from around the world addressed the audience and facilitated various debates and discussions.

Dr Abdul Aziz Al Dakhil, former Director General of the Saudi Arabia Investment Fund was one of the panellists. He told the event that GCC countries have been slow in reacting to the impact of the global economic crisis.

He said the policies that the Gulf countries adopted to deal with the financial crisis were neither efficient, nor constructive and the measures that were taken were not bold enough.

“The Gulf countries did not deal with the global financial crisis as it should be," he said.

“With a lot of surplus in terms of revenues, they should have been able to better protect investments whether in the securities markets or in other productive sectors like industry, services and others in general,” said Al Dakhil.

“The central banks and monetary agencies in these countries did not intervene to lessen the level of uncertainties,” he said, adding that the countries that spearheaded the concept of free-market were the first to intervene and play a decisive role in bailing out their economies on the onset of the downturn.

Al Dakhil also noted that there was lack of coordination and collaboration between the Gulf countries to face and the impact of the crisis.

Dr Yousef Al Zalzala, former Industry Minister of Kuwait pointed out that the region had never faced such a severe crisis before and it was unprepared to face its impacts.

“We did not have previous similar experiences. Besides, we do not have the required expertise either in the public or private sector to deal with such a major crisis. That is why what happened is part of the incapacity and failure of governments to react fast enough and find quick solutions. We waited for others to intervene and then decided to come up with our own responses,” he said.

Al Dakhil was of the opinion that there was a need to reexamine GCC economic policies and consider a basket of foreign currencies including the dollar in the long-term in view of new economic realities with the emergence of new global economic players such as China and other emerging economies.

Abdulrahman Ahmed Al Shaibi, who is also a board member of Qatar Financial Centre (QFC) Authority, said the global crisis had gifted the Gulf a “greater stake in the world economy “.

"We now own some of the world’s leading companies,” he said. “The Gulf has been protected from the worst of the financial tsunami.”

He added, however, that local investors had faced “a painful lesson to learn that the markets aren’t a one-way ticket to wealth”.

“No country or region can immunise itself against a recession. We all need to question the easy assumptions we have made about how to do business.”

“There is no doubt Islamic finance is ripe for further development. With banks still reluctant to lend the Sukuk is a viable and reliable alternative. There is a lot of value in this, and the markets are not taking full advantage of it,” he said.

The financial sector is  looking at Islamic finance as primarily asset-backed financing., he said.

"I think they have to look at it as the concept itself – that there is no money that is not linked through to real economic value."

Michael Ong, Professor of Finance, Stuart School of Business at the Illinois Institute of Technology said the macro-economic conditions were almost the same with interest rates still running low and inflation kept below two percent with liquidity remaining high in the system.

"We are in very similar conditions to 12 years ago. We are doomed to repeat the crisis," he said during a panel discussion at the Financial Times  Rethinking the Future of Finance Conference, a part of QFinance Global Debates.

Ong said the market would then be plagued by many rules and regulations instead of good principles for risk management.

He also stated that the rapid evolution of financial risks in the past five to 10 years was attributed to the sustained period of low interest rate levels, the sharp increase in the use of risk transfer method, securitisation techniques and emergence of new players in the markets such as hedge funds.

Ong said the low interest rate period had encouraged the chase for higher yields which foster an unhealthy appetite for riskier investments which were financed by cheap borrowings.

According to Ong, the future of banking shoud be coupled with a strong sense of risk management.

"How can those on both sides of transactions make money everyday? Transparency should be in play," he said.

The global financial crisis had clearly paved the need for "socially responsibility banking".

Ong said the future of banking should take into account the aspects of transparency, responsibility and accountability.

The Managing director of Goldman Sachs and Co, Gerald Corrigan, said over time, one should be looking at a system where fair value has a larger role.

Speaking at the Financial Times' Rethinking the Future of Finance Conference, Corrigan said central banks should play a significant role in the financial system to ensure greater stability.

"I am not convinced that the restructure of regulatory bodies is going to accomplish that much while (having) a single regulatory body is not a good idea. Central banks have to be part of the regulatory process as they are the only instrumentality of public property that operates in the financial market everyday," he said.

Corrigan, who was formerly the president and chief executive officer of the Federal Reserve Bank of New York, also voiced uneasiness that the momentum of reform had somewhat been slow but understood the subject matter as being very complex and controversial.

Rajat Kumar Gupta, senior partner emeritus of McKinsey & Company, said the global financial system breakdown had forced both the private sector and government to be extra careful and recognise the need for risk management.

"Companies need to have dynamic management to deal with uncertainty and reality and also to have a real-time response in making decisions quickly," he said, agreeing that the crisis is still prevailing and "not out of the woods" yet.

Paul Atkins, the former commissioner, US Securities and Exchange Commission (SEC), saw the need to address regulatory failures, bearing the fact the current crisis affected regulated entities.

For Atkins, who is now partner of Patomak Partners LLC, the introduction of a central planning type of aspect to address the present situation as not being realistic because "a stable financial system is itself unrealistic".

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