Good afternoon ladies and gentlemen, before talking about developing countries, it is perhaps important to talk a bit about developed countries – the crisis and the development from the G7 to the G20. The G20 is much more representative than the G7 with 87% of world GDP now being represented. I represent a country that is one of the G186 and we also like to hear our voice heard from time to time. Although I now sit on the G20 because of this new rule, it is a temporary role, but I think I understand the challenge of having 186 countries; consensus is not easy.
The G20 is a forum that has done very well dealing with the challenges of the crisis, particularly looking at how we can improve governance in general in this more globalised world. What have they done so far? They have managed to avert a significant development in trade protectionism, which is very good and I think countries now believe in trade and making sure that we are not moving towards protectionism in any way.
Another key message from the G20 has been using fiscal means to stimulate demand and I think we managed to handle the crisis by introducing a better way of dealing with it. I think another major contribution from the G20 was stabilising financial markets. It helped emerging and developing economies get access to finance including liquidity facilities, which is important and remarkable to note. They have also been introducing and pushing for reform of the IMF and the World Bank and I am happy to report that in the spring meeting the World Bank actually approved a change in the voting system to bring the share of the vote for developing and transitional countries (DTCs) in the World Bank to 47.19%.
This is a major agreement by all the member countries of the World Bank and I think it is important in that it shows how we are reacting to better governance. The G20 leaders were also involved in those discussions. I think it is important when world leaders sit around a table and have a chance to discuss and understand the challenges from different points of view. We see that as very positive and I think the two leaders’ meetings planned for this year show true progress and commitment to the process of governance reform in general. The challenges for the G20 will remain particularly how its role develops post the crisis, but we will leave that for the future to discuss.
Looking at our world today we have uncertain and unbalanced growth, different countries, regions and parts of the world are moving at different speeds, which is of significant importance when we are dealing with these quick shifts and their effects on markets. We are, however, no longer looking at the abyss, which was the prospect only a few months ago. That is very important.
Looking at the developing countries I see them as middle‑income and also low‑income developing countries. In the low‑income developing countries we have five years to reach the millennium development goals (MDGs) and the challenge as countries to maintain the spirit of giving to poorer countries to help them to reach those goals in a time when all countries are facing huge fiscal deficits. It is a very interesting challenge to build consensus within each constituency, parliament or country to maintain that spirit of giving, but it is also an important aspect of not losing all the work that has gone into helping those countries grow in the past.
What has the World Bank and the IMF done? The World Bank has put more than $100 million into this crisis since its start and the IMF has put in $175 million. A lot of work has gone into making sure that the Bretton Woods institutions are doing what is necessary to maintain that multilateral role they were given after the Bretton Woods agreement.
Looking at the future, the challenges and the things we all need to address, these include financial sector reform and particularly capital standards and accounting standards ‑ mitigating excessive risk taking. How are we going to deal with those things? I am posing those questions, because we are a financial centre with more than one quarter of our GDP coming from financial services. We like to adhere to best practice like many countries. We need to know that the standards we apply, and international standards are applied across the board in all countries otherwise regulatory arbitrage would mean we would lose business. It is very important to have standards across the world that applied and adhered to by everyone. That is certainly very important to us here in the Kingdom of Bahrain.
We are watching to see how international standards on compensation go. I think the Financial Stability Board has done good work and more is expected of them. I think they can contribute significantly to the quality of regulation that we have, making sure we have that level playing field.
Whether it helps our countries grow our economies or whether it helps sub-Saharan African countries get more growth and more traction in their growth, free trade is paramount to global growth. I think it is important that we continue to support free trade. I am very pleased to see that the protectionist movement has not emerged to derail the process we have right now.
Another issue is energy subsidy distortion. Energy subsidy distorts the efficiency within an economy. It gives us the impression that we are competitive in areas where maybe we are not. It is very important to understand how energy subsidy needs to be taken into account when understanding the competitiveness of an economy. It is also important for countries that are developing and growing to make sure that they are able to introduce energy policies that will make the best use of different types of energy and their associated costs.
Sovereign debt is another challenge for many countries. We have always maintained the policy here of looking very long term. One of the elements of our 2030 vision is sustainability and I see part of my role as lowering sovereign debt as much as possible, although we did follow a countercyclical investment strategy in our economy to maintain positive growth, but longer term sovereign debt is a serious issue. There is a major adjustment that needs to happen where people simply cannot spend what they do not have.
All in all, the world is moving to a place where I think we are all seeing the world as smaller. Companies are operating around the world; regulation has to be similar in different countries and standards have to be similar so we can compare like with like.
In Bahrain we have gone through a democratic process; we have a parliament and I deal with them almost every day, so I know what it is like to be questioned on every issue. I think it is a natural, positive progression for us. It is a noisier way of building consensus, because everybody has a view and everybody wants to build the right consensus. It is, however, noise that is good, because it ultimately leads to us understanding how to build a decision that is more inclusive.
We have a 2030 vision built on competitiveness, fairness and sustainability. I think we went through the crisis because we entered it with a low debt to GDP ratio. We were able to handle the spending that was necessary to maintain positive growth. We did 3.2% growth last year and we are expecting 4% this year. We are still below the trend of about 6.5%, but we expect to be back to trend within a couple of years. More important for us is the fact that we have managed to keep unemployment at 3.7%.
The challenge for the future is an emphasis on productivity and technology. We have done quite a bit on labour reform and I think we need to maintain that. We need to focus on the critical engines of growth for our economy in the coming years.
