KUWAIT CITY, Oct 31, (Agencies): Current global economic and financial troubles have placed challenges that must be tackled collectively, Central Bank of Kuwait (CBK) governor said on Monday.

“At a time when the Arab region faces serious political turbulence, these challenges, that have affected the region’s economic and financial systems, must be faced in order to enhance political and economic stability”, Sheikh Salem Abdulaziz Al-Sabah said in his keynote speech at Third Kuwait Financial Forum.
“Economic and social development strategies are required that take into consideration the need of sustainable economic growth, appropriate job opportunities and the ideal use of economic resources,” he added.
On Europe, he said: “The agreement of world leaders in their Brussels meeting represents a breakthrough in solving the European sovereign debt crisis, and has received a warm welcome internationally as it enhanced the confidence across markets.” “Despite the US having taken the decision last August to raise its public loan limit and to lower the deficit of the general budget, there are still fears that required reductions to public spending could cause damage to the US economy’s growth, thus lengthening this recession and leading to unprecedented developments that could have negative outcomes on monetary and financial markets in several countries worldwide.” Kuwait’s Central Bank governor urged the need to focus on crucial matters in the reform process, like ensuring the importance of international economic cooperation in facing the crises, the need to control public budgets and the need to disallow the accumulation of risks by adopting the best risk-management policies.
On Arab countries, Sheikh Salem urged the importance of applying the Basel III, set of global bank risk-management reforms.
Kuwait is currently carrying out a number of decisions enabling the banking sector to work according to set guidelines particularly related to risk-management, and that ensure the importance of the internal assessment of capital, he noted.
He also referred to the recent International Monetary Fund report on Kuwait that noted Kuwait’s evident improvements in the banking sector, represented by a rise in capital from 17pct at the end of 2009 to 19pct at the end of 2010.
The Third Kuwait Financial Forum kicked off in Kuwait on Monday with the inauguration and attendance of HH the Prime Minister Sheikh Nasser Al-Mohammad Al-Ahmad Al-Sabah and Gulf region and international finance pioneers.
Deficit of European countries’ economy, caused by great accumulation of public debt and a rise in unemployment, greatly affected the overall growth of world economy, the CBK governor said.
Sheikh Salem added that European countries are still facing great economic challenge even if they sought to increase lending from the European Financial Stability Facility, which was created to combat the European sovereign debt.
“The repercussions of the European crisis will negatively impact some of the countries, especially the Gulf Cooperation Council countries,” Al-Sabah said on the sidelines of the forum’s first session.
“The GCC countries would suffer from a decrease in oil demands that would consequently affect sovereign investments in private sectors, banks and financing process of some projects in the Gulf region,” he noted.
He pointed out that inflation rates in GCC countries should be controlled in order to prevent any inside inflation, since these countries completely depend on imports of commodities.
Governor of Saudi Arabian Monetary Agency Mohammad Al-Jasser praised European leaders for their recent decision to solve the Greek sovereign debt crisis and their attempt to isolate the crisis from spreading to other countries in the EU and the world.
He stressed that distributing fortune, especially in the last decade, to economically-developing countries, such as China, India and Brazil, led to alleviating this global crisis by 50 percent.
Meanwhile, Governor of United Arab Emirates Central Bank Sultan Bin Nasser Al-Suwaidi said that GCC banks are “in good condition” in comparison to world banks.
“The demands on oil is still on the rise despite this economic crisis,” he noted, adding that “this hike of demand would provide the GCC countries a chance to increase their spending on their developmental plans up to 80 percent”.
Political changes in the Arab world place a huge burden on the need to formulate an economic reality, not only in the nations of the Arab Spring revolutions, but for the world as a whole, the head of the Kuwait Banking Association said Monday.
“The world is witnessing abnormal economic changes that have led to an unclear perception on the economies of advanced nations along with the emergence of a confidence crisis,” Board Chairman of the Kuwait Banking Association Hamad Al-Marzoug said in his speech at the Third Kuwait Financial Forum.
“This has put countries in front of huge challenges, for which hefty financial and monetary policies, aimed at reviving their economies, have not succeeded in solving.” The crisis has enveloped banking sectors and financial institutions, and Al-Marzoug viewed that banking policies would top the agenda of talks.
The second threat international economies are faced with is the fluctuation of oil prices.
“In spite of the clarity of these threats a long time ago, we (Gulf states) have not succeeded in severing the link between oil, as a depleting and replaceable commodity, and the fate of our economies, with oil and its derivatives still representing 79 percent of the exports of GCC states until the end of 2010,” he added.
In Kuwait’s case, he stressed the need to enact laws on privatization and solving imbalances that have undermined the development plan. This can be achieved by focusing on human development first and foremost, through developing the education system, in order for it to go hand-in-hand with the needs of the market.
Al-Iktissad Wal-Aamal Group CEO Raouf Abu Zaki said that the third forum of its kind in Kuwait is being held amid a renewed crisis, which will have an immense impact on European and global banking sectors, and unprecedented political changes in the Arab world.
“Despite these political changes so far only affecting Egypt, Tunisia, Libya, Yemen and Syria, its repercussions will affect every Arab nation and their economic realities,” he added.
Meanwhile, Kuwait’s Oil Minister Mohammad al-Baseeri said on Monday that world demand for crude oil is forecast to remain high and put pressure on supply even after Libya returns to pre-crisis production.
“Libya’s return (to full production) is still very slow and is expected to take time to reach pre-crisis production,” Baseeri told reporters on the sidelines of the Kuwait Financial Forum.
“But regardless of whether Libya’s production returns or not, the world market will continue to need more oil ... increasing the burden on main OPEC producers,” he said.
Baseeri said that based on OPEC estimates, world market demand is forecast to grow by between 1.0 and 1.5 million barrels per day “for the rest of this year and the beginning of next year.”
The minister said Kuwait continued to produce 2.9 million bpd in October after reaching this level in the previous month, adding that OPEC’s third largest producer “is capable of sustaining this output level and increasing thus production to 3.05 million barrels per day if needed.”
All non-OPEC and most of OPEC producers were pumping at full capacity and “only Saudi Arabia, Kuwait and UAE have spare capacity,” said Baseeri, adding that if they had not raised output, oil prices would have been higher now.
Kuwait’s Minister of Commerce and Industry Dr. Amani Bouresli expressed hope political problems would be limited in order for quick solutions for global financial crises to be adapted.
“Draft laws (in Kuwait) have been raised to enhance the ability and the governance of financial institutions to face risks in addition to amending legislations, some of which have impeded economic development,” she told reporters on the fringes of the Third Kuwait Financial Forum.
Through these proposals, the ministry is seeking hasty legislation, as talk is emerging of executing development projects through legislative and practical means, she added.
She also attributed political instability to the slow execution of Kuwait’s development plan.