Co-Chairpersons Statement

Summary Records The First Meeting of the Asia-Middle East Dialogue (AMED) Working Group on Economic Issues 3-4 July 2006 Introduction 1. The Asia-Middle East Dialogue (AMED) Working Group on Economic Issues was established at the Inaugural AMED in Singapore in June 2005 to promote mutual understanding and greater interactions among AMED members. With Thailand and Egypt as Co-chairs for the biennium 2005-2007, the Working Group held its First Meeting in Bangkok on 3-4 July 2006, where 197 delegates from 37 countries gathered to discuss possible measures that would enhance cooperation in concrete terms. 2. In his opening remarks, H.E. Dr. Pracha Guna-Kasem Chief Advisor to the Minister of Foreign Affairs of Thailand, emphasised the opportune timing of the AMED initiative. As the economic fundamentals of Asia and the Middle East continue to grow from strength to strength, the two regions’ status as current and future engines of growth are fortified. AMED provides a forum for strengthening ties and forging cooperation that would allow Asia and the Middle East to take advantage of their resurgence in the global economy. The initiative also provides a timely forum for addressing common challenges that the two regions are facing. 3. These views were also reiterated in the opening remarks by H.E. Mr. Tamer Abdel-Aziz Abdallah Khalil, the Ambassador of Egypt to Thailand. Ambassador Khalil highlighted the objectives of AMED to share experiences and learn from one another. He also emphasised the need to put lessons learned and creative initiatives into practice by adopting a concrete work plan that would yield tangible results. 4. Guided by the concept paper jointly drafted by the two Cochairpersons, the Meeting comprised three sessions of interactive and wide-ranging discussions:  Session I: Policy Dialogues on Strengthening Economic Partnership between Asia and the Middle East: Potentials and Opportunities  Session II: Discussions on Trade and Investment Facilitation – Opportunities and Obstacles, which highlighted two potential areas for cooperation on Energy and Information and Communication Technology THE FIRST MEETING OF THE ASIA-MIDDLE EAST DIALOGUE (AMED) WORKING GROUP ON ECONOMIC ISSUES 3-4 JULY 2006, Bangkok, Thailand -2-  Session III: Discussions on intra- and inter-regional financial development – Opportunities and Obstacles In addition, there were four sectoral discussions and business networking on a) halal food; b) construction and infrastructure development; c) healthcare and tourism; and d) financial services for trade and investment facilitation. In each session, papers were presented to the Meeting by distinguished lead speakers from Asia and the Middle East. List of lead speakers and their respective papers are annexed. Salient points of discussion can be summarised as follows: Session I: Policy Dialogues on “Strengthening Economic Partnership between Asia and the Middle East: Potentials and Opportunities” Introduction 5. The Meeting reviewed the current economic conditions, at both global and regional levels, that affect trade and investment flows between Asia and the Middle East. The session was co-chaired by H.E. Mr. Sihasak Phuangketkeow, Deputy Permanent Secretary of the Ministry of Foreign Affairs of Thailand, and H.E. Mr. Tamer Abdel-Aziz Abdullah Khalil, the Ambassador of the Arab Republic of Egypt to the Kingdom of Thailand. Four distinguished speakers offered their views: (i) Dr. Narongchai Akrasanee, Chairman of the Board of Executive Directors, EXIM Bank of Thailand; (ii) Dr. Ashraf El-Rabiey, First Undersecretary of the Ministry of Trade and Industry, Egypt; (iii) Mr. Song Yaoming, Deputy Director-General, Department of Asian Affairs, Ministry of Commerce, People’s Republic of China; and (iv) Mr. Issa Gammoh, Assistant CEO, Jordan Investment Board. Summary of Discussions 6. The panel recognized economic complementarities between the two regions. The Middle Eastern countries are mostly well endowed with oil and natural gas, and are thus an important source of energy supply and investment capitals to Asian countries. Asian countries, on the other hand, have the potential to expand their exports, including food products, garments and textiles, and other manufactured goods, to the Middle Eastern markets. In addition, Asian service providers and labour have already contributed, and can contribute even more significantly, to Middle Eastern economies. 7. Trade and investment between the two regions have not yet reached the level of its full potential. The panel agreed that there are further business opportunities to be gained from increasing trade and THE FIRST MEETING OF THE ASIA-MIDDLE EAST DIALOGUE (AMED) WORKING GROUP ON ECONOMIC ISSUES 3-4 JULY 2006, Bangkok, Thailand -3- investment flows. There are other regional/sub-regional fora already focusing on economic cooperation. AMED will not only complement them, but also serve as a missing link in solidifying the partnership among governments and between governments and the private sectors across the two regions. 8. The panel discussed the roles that governments can play to facilitate the expansion of trade and investment. They could provide political stability and security, create conducive business environment, maintain macroeconomic stability, promote sustainable growth, and strengthen good governance. Furthermore, governments could make their countries more attractive to foreign investors not only by offering appropriate economic incentives, but also by pursuing necessary reform measures and streamlining its investment rules and regulations. 9. The roles of government as mentioned are necessary, but not sufficient to enhance economic ties between the two regions. The private sectors are encouraged to play a more proactive role and engage more actively in inter-regional business transactions. Businessmen need to overcome psychological factors that create a gap between perception and reality between business communities of the two regions. They must have an access to accurate information in order to understand their counterparts better. They must also be presented with a wide range of business opportunities in order to assess their options and make strategic decisions. 10. The panel also discussed current income disparities between and within the regions. This problem could be addressed by “prosper-thyneighbors” policies. In this regard, strengthening economic and trade cooperation between Asia and Middle East will not only promote prosperity in the two regions, but also enhance comprehensive social development as well as promote peace and prosperity. 11. Investment climate and business opportunities in Jordan were highlighted as a specific example of cooperation building at a practical level. The stability of overall economic policy, reform measures to improve human capital and physical infrastructure, as well as linkages to the world economy through multilateral and bilateral agreements and partnerships, have all been identified as important factors in promoting trade and investment that fuel growth in the country. Recommendations 12. The Meeting agreed that there is a need to increase trade and investment between Asia and the Middle East. Potential areas or sectors THE FIRST MEETING OF THE ASIA-MIDDLE EAST DIALOGUE (AMED) WORKING GROUP ON ECONOMIC ISSUES 3-4 JULY 2006, Bangkok, Thailand -4- where further cooperation can be strengthened should be identified and explored. These sectors include, but are not limited to, halal food, tourism, banking and financial services, and infrastructure development. 13. It was also suggested that AMED, following the experiences of the Asia-Pacific Economic Cooperation (APEC), establish a group of eminent persons or an informal cooperative framework to explore such objectives. Topics of discussion may include the future directions of how to harmonize differences and learn from one another’s best practices, and how to tackle the obstacles and common difficulties that prevented the two regions from achieving the common goals of mutual prosperity. 14. The business sectors in the two regions are encouraged to forge closer ties and develop a stronger community. It was proposed that an Arab Business Development Center be established in Thailand with branches in other interested Asian countries, and an Asian Business Development Center be established in Cairo with branches in other Arab countries. Among other things, the said establishments should focus on facilitating knowledge and information exchange, conducting economic surveys and research, and providing necessary assistance to SMEs. 15. It was also recommended that AMED members learn to take advantage and become a part of the global / pan-Asian supply chains. It is also important that members, particularly in the Middle East, diversify their economies and develop productive capacity/competitiveness in nonoil sectors. In this regard, AMED members can benefit from enhanced technical cooperation and capacity building among themselves. Furthermore, it was suggested that AMED establish a trust fund that can serve the business sector as their source of finance. Session II: Introduction 16. The discussions in this session were focused on trade and investment opportunities and obstacles experienced by the private sectors. The session started with an overview of the current economic and business environment. It is then followed by highlights of experiences from two specific sectors: energy and information technology, as these two sectors are ones of the important sectors playing important role in development of a country. The overview of relevant issues was presented by Dr. Nagesh Kumar, Director General, Research and Information System for Developing Countries (RIS), India and Dr. Samir Radwan, THE FIRST MEETING OF THE ASIA-MIDDLE EAST DIALOGUE (AMED) WORKING GROUP ON ECONOMIC ISSUES 3-4 JULY 2006, Bangkok, Thailand Discussions on trade and investment facilitation – opportunities and obstacles -5- Managing Director, Economic Research Forum, Egypt. Discussions on the energy sector was led by Dr. Khajohn Bhasavanija, Manager, Strategic Planning, PTT Exploration and Production PLC, Thailand, while discussions on the information technology (IT) sector was led by Dr. Sherif Kamel, Associate Professor of Management Information Systems (MIS), The American University in Cairo, Egypt. The session was moderated by Dr. Darmp Sukontasap, Senior Vice President, Tesco Lotus Co. Ltd., Thailand. Summary of Discussions 17. The panel discussed the history of economic cooperation within and between Asia and the Middle East. Such economic cooperation has been forged primarily through regional, sub-regional and bilateral trade agreements. It was noted that joining separate sub-regional and bilateral agreements into a broader framework, such as an inter-regional free trade agreement, would be a concrete first step towards a stronger relationship between the two regions. This also presents an opportunity to mutually reinforce relationships among the multiplicity of trade agreements in existence. 18. There is a great potential to increase the flows of trade and investment between Asia and the Middle East. Many countries in the Middle East have become attractive destinations for foreign direct investment from Asia, for example in infrastructural development and information technology industry. Several countries in the Middle East are also implementing reforms measures to improve business environments. The flows of labour force from Asia into the Middle East present a success story – they enable the expansion of the construction and related industries in the Middle East while absorbing unemployment in developing Asia. 19. It was emphasized that the timing of this meeting could not be more appropriate to strengthen Asia–Middle East cooperation. The two regions also have dynamism, shared history and culture, geographical proximity, resources, and capabilities that should complement each other. The difficulties in accessing markets in the US and EU, and the increase in financial liquidity in the Middle East also presented windows of opportunity to promote inter-regional trade and investment. Areas of cooperation so identified include: logistics and infrastructure, SMEs development, energy and food security, information and communication technology (ICT), agriculture, and human resources development. 20. Asia’s increasing demand for oil was the main driving force for Asian companies to invest in oil exploration and production ventures THE FIRST MEETING OF THE ASIA-MIDDLE EAST DIALOGUE (AMED) WORKING GROUP ON ECONOMIC ISSUES 3-4 JULY 2006, Bangkok, Thailand -6- overseas. Statistics on oil production and reserves confirmed that Middle Eastern countries would continue to be an important source of energy supply for Asia. It was noted that unlike earlier times when investment in the energy sector was dominated by US and European companies, Asian companies’ shares are rising. 21. The panel also discussed the possibilities of greater investment in the IT sector to help develop state-of-the-art infrastructure that will benefit both Asia and the Middle East. There exists a great potential in jointly developing human as well as physical infrastructure in the sector. Collaborative partnerships between the public and private sectors have been proposed as a solution. This may include projects to support incubator start-ups, building online infrastructure for business exchange programs for IT professionals. Recommendations 22. Recognizing that the synergies and complementarities of the two regions can be harnessed through an inter-regional FTA, and that several AMED members have already concluded FTAs with each other, the Meeting agreed to convene FTA training workshops to share experiences from FTA negotiations and their implications for trade among countries of Asia and the Middle East. Singapore indicated its readiness to take the lead in this initiative 23. Further work was required to examine how trade and investment could be facilitated in specific sectors of high potential such as halal food, financial services and joint industrial ventures. The Meeting proposed to establish Sub-Working Groups for governments and the private sector to work together on trade and investment facilitation in such sectors. In this effort, it was agreed that the private sector should work hand in hand with the government sector. Specific example to be explored further included a halal food certification programme with a view towards establishing a Mutual Recognition Agreement (MRA), and financing facilities for trade and investment promotion. 24. To help AMED members explore prioritized areas of cooperation, a joint study among leading research institutions have been proposed. This study group may comprise, but not limited to, (i) the Fiscal Policy Research Institute (FPRI), Thailand, (ii) the Research and Information System for Developing Countries (RIS), India, and (iii) the Economic Research Forum (ERF), Egypt. The Meeting also agreed to explore proposals to organise trade and investment fairs to promote networking among business communities, as well as to explore possible cooperation THE FIRST MEETING OF THE ASIA-MIDDLE EAST DIALOGUE (AMED) WORKING GROUP ON ECONOMIC ISSUES 3-4 JULY 2006, Bangkok, Thailand -7- in projects for infrastructure development in air and maritime transport, and for investment and capacity building in oil and gas industry. 25. The organisation of trade and investment fairs to promote networking among business communities in high-potential industries, such as the tourism sector and high-tech industry, the organisation of workshops or seminars to provide platforms for identifying opportunities and promoting business partnership in ICT sector, the exploration of the appropriate modalities for setting up a working group or forum on financial cooperation with a view to facilitating two-way capital and financial flows between the two regions, have also been identified and agreed by the Meeting for further exploration. 26. To mitigate negative economic impacts of oil price fluctuations, it was proposed that assistance from Middle Eastern oil producers be given to Asian countries, particularly the smaller states, which could take the form of a barter trade agreement. Session III: Discussions on intra- and inter-regional financial development – opportunities and obstacles Introduction 27. In this session, Dr. Samir Radwan, Managing Director, Economic Research Forum, Egypt, and Dr. Pichit Akrathit, President, MFC Asset Management PLC, Thailand, presented to the Meeting current development and future potentials for the growth of financial centres in Asia and the Middle East. Summary of Discussions 28. The panel first discussed the potentials for development generated by revenue surpluses in the petroleum industry. As large developing economies continue to grow, and hence increase their consumption of petroleum, oil prices are expected to remain at high levels in the medium term. The increased profits are being spent constructively in the Middle East, for example in public-sector debt repayment and asset building in essential infrastructures. Middle Eastern governments are also implementing reform measures that will help diversify their productive base away from petroleum production, such as promoting tourism and the service industries. This will help generate a sound basis for sustainable development in the long run. THE FIRST MEETING OF THE ASIA-MIDDLE EAST DIALOGUE (AMED) WORKING GROUP ON ECONOMIC ISSUES 3-4 JULY 2006, Bangkok, Thailand -8- 29. Asia’s challenges are to plan its strategies constructively such that the two regions mutually benefit from petrodollars. In this respect, the panel believes that there exist ample opportunities for Asia to assist the Middle East along its growth path, notably in technological cooperation and providing expanding markets for the latter’s goods and services. 30. On the other hand, the Middle East faces the challenges of investing wisely as opportunities in its own regions are still limited in the short term by existing financial infrastructures and institution. In this respect, Middle Eastern investors could be encouraged to learn more about potentials and opportunities in Asia – a region which is still largely unknown to the Middle East. 31. The panel then discussed opportunities and obstacles in improving developing countries’ financial infrastructures. Three aspects that need improvement were identified. 31.1 On the supply side, there is a need to deepen markets and increase liquidity by expanding the range of products available to investors. Single-country markets are usually limited by their size, indicating that they may benefit from joining together to form a regional market. On the demand side, the problems lie in investors’ limited awareness, knowledge, and understanding of emerging economies and their potential, resulting in the continuation of investment in more familiar markets in developed economies. In this respect, governments of developing countries can play a crucial role in disseminating information and organizing public education programmes to help promote a greater understanding and build trust among foreign investors. On infrastructural issues, the role that regulations play in creating a suitable environment for financial investments was highlighted, particularly those concerning contracts and their enforcement, risk sharing and monitoring. Again, local governments can play a substantive role in creating clearer and more facilitative regulations to attract investors. The panel agreed that regular meetings and experience sharing among financial regulators of AMED members may greatly help planning and policy making in the region. 31.2 31.3 32. The panel agreed that the financial sector plays a vital role in promoting inter-regional trade and economic growth. It noted that both Asia and the Middle East offer ample opportunities in portfolio as well as THE FIRST MEETING OF THE ASIA-MIDDLE EAST DIALOGUE (AMED) WORKING GROUP ON ECONOMIC ISSUES 3-4 JULY 2006, Bangkok, Thailand -9- direct investment. However, there are still psychological and cultural barriers that keep investors rooted to traditional financial centres in developed economies. There is thus an urgent need to promote intercultural understanding among the business communities, potentially through strengthening existing bilateral as well as regional links. There is also a need for regulators to share their experience and consider deregulatory steps that will facilitate greater regional flows of capital. Recommendations 33. The panel supported calls for concrete cooperation in information and experience sharing among investors as well as financial regulators in different countries. Proposals of Sub-Working Groups on financial cooperation have also been supported and are to be further explored. Sectoral Business Talk: “AMED Business Networking: Better Vision, Better Business” 34. The business discussion and networking session was organized in addition to the formal Meeting sessions, and were moderated by Dr. Supakorn Soontornkit, Executive Vice President, Financial Engineering Dept/Research and Strategy Department, MFC Asset Management PLC, Thailand. The session includes four rounds of discussions focusing on key sectors: a) Halal food; b) construction and infrastructure development; c) healthcare and tourism; and d) financial services for trade and investment facilitation. Sector I: “Halal Food: Feeding global appetite?” Introduction 35. Panelists in this round include: (i) Mr. Anirut Smuthkochorn, President, Thai Islamic Trade and Industrial Association, representing Sheik Saleh Bin Abdullah Kamel, President of Islamic Chamber of Commerce and Industry (ICCI), (ii) Associate Prof. Dr. Winai Dahlan, Director, Halal Science Center, Chulalongkorn University, and (iii) Mr. Nordin Abdullah, Director, KasehDia Sdn. Bhd. They shared their views on how to improve Halal food industries in the regions and to increase trade of Halal food between the two regions. THE FIRST MEETING OF THE ASIA-MIDDLE EAST DIALOGUE (AMED) WORKING GROUP ON ECONOMIC ISSUES 3-4 JULY 2006, Bangkok, Thailand - 10 - Summary of Discussions 36. The panel identified existing and high-potential markets for Halal food. They agreed that Halal food exporters would greatly benefit from agreeing upon a common set of food standards that can be easily understood and approved by Halal food importers. This would boost confidence among consumers, and thus increase trade and help promote investment in Halal food industry. To draft such standards, collaboration between Islamic scholars and Islamic scientists is necessary. Recommendations 37. Assoc. Prof. Winai Dahlan volunteered the support of the Halal Science Center, Chulalongkorn University, Thailand in drafting guidelines for achieving common Halal food standards in Asia. The guidelines will be prepared in time for the Second Meeting of the Working Group on Economic Issues to be held in Cairo in 2007. The Ministry of Foreign Affairs of Thailand will give its support in this endeavour. Sector II: “Construction/Infrastructure: Unmatched needs?” Introduction 38. Panelists in this round include: (i) Mr. Jarudol Tulyagijja, Advisor to Department of International Business Affairs, the Federation of Thai Industries; (ii) Mr. Vinote Gupta and (iii) Mr. Salil Sen, both from Federation of Indian Chambers of Commerce and Industry, Bangkok branch, Thailand. Summary of Discussions 39. Obstacles faced by Thai entrepreneurs in establishing construction business in the Middle East were highlighted in this session, some of which are: 39.1 Transport costs between Thailand to the Middle East are comparatively high, causing disadvantages to Thai suppliers of raw materials. 39.2 Currently Thailand supplies mostly unskilled and semiskilled work force to the Middle East. To benefit from the region’s growing dynamism, Thailand needs to train and supply more skilled labour, for example workers at managerial level. 39.3 Thai entrepreneurs suffer from lack of full information about supply chain and distribution channels in the Middle East. THE FIRST MEETING OF THE ASIA-MIDDLE EAST DIALOGUE (AMED) WORKING GROUP ON ECONOMIC ISSUES 3-4 JULY 2006, Bangkok, Thailand - 11 - An effective way to improve market access is mainly through existing supply chains while, in Mr. Tulyagijja’s opinion, trade fairs have only a limited impact on trade and investment promotion. 39.4 It is almost impossible to promote business in the region without well-prepared financial planning. Clients in the region have high spending power and are scrupulous in choosing the most competitive offer. Recommendations 40. Governments could help new entrepreneurs to invest more in the Middle East by: 40.1 facilitating plans to foster strategic partnerships with incumbent entrepreneurs in the region. 40.2 promoting the synergies between the construction industry and related/upstream-downstream industries, for example, hospitality and service sector, tourism, agro-business, and spa. 40.3 setting up financial facilitation scheme in cooperation with banks for investment facilitation, for example, export-import banks, to help finance new projects. 40.4 cooperating with training institutions to improve the quality of human resources, especially at managerial level, available to the Middle East. 41. In addition, business and investment opportunities in India were highlighted as another example. The panel agreed that there are untapped potentials in foreign direct investment across AMED countries. The panel also emphasized the need to mitigate cultural misconceptions while promoting greater social and cultural understanding among entrepreneurs and peoples of Asia and the Middle East as a crucial factor to improved trade and investment at macro level. Sector III: “Healthcare and Tourism” Introduction 42. The panel consisted of (i) Dr. Jason Yap, Director, Healthcare Services, Singapore Tourism Board, and (ii) Ms. Suwadee Pachariyangkul, Federation of Thai Industry. They discussed the current conditions of infrastructures and market demand and supply in healthcare and tourism sectors in South East Asia. THE FIRST MEETING OF THE ASIA-MIDDLE EAST DIALOGUE (AMED) WORKING GROUP ON ECONOMIC ISSUES 3-4 JULY 2006, Bangkok, Thailand - 12 - Summary of Discussions 43. The panel discussed factors that have promoted South East Asia as a major tourist and healthcare destination in recent years. Some of these arise from international trends, such as the decline in the costs of air travel and the rise in patient awareness about available choices. Some, on the other hand, arise from the fact that Asia has developed greater expertise in advance medical care. The forum identified visa application and security concern as major obstacles for patients from the Middle East to get treatment in Asia. Recommendations 44. Opportunities for further cooperation among AMED members were identified. These are (i) to focus on the niches that each country has so as not to compete but rather complement each other; and (ii) to increase experience and knowledge sharing among medical practitioners to promote mutual learning to improve services. It was also proposed that the Working Group on Economic Issues consider setting up a SubWorking Group to carry out work specific to the healthcare sector. Sector IV: “Banks for Investment and Trade Facilitation” Introduction 45. The panelists were (i) Mr. Dheerasak Suwannayos, Chairman of the Executive Sub-Committee and acting President, Islamic Bank of Thailand, (ii) Mr. Mustapha Hamat, Chief Executive Officer, Islamic Banking and Finance Institute, Malaysia, and (iii) Ms. Naveen Ahmed, Deputy Manager, Information and Decision Support Center (IDSC), Egypt. The roles of Islamic banks in investment and trade facilitation were discussed. Summary of Discussions 46. Various Islamic financial products have been described at the discussion. Islamic banks were highlighted as having a small but important role in stabilizing foreign direct investment, especially when markets faced sudden volatilities, for example those during the Asian financial crisis. Capital inflows from Arab countries seeking Islamic financial products could help counter-balance capital outflows. The panel also raised the importance of timely information as one of the key tools that help governments and private sectors prevent future financial crises. 47. The panel pinpointed imbalance between the demand and supply of Islamic financial products as one of the obstacles to increasing THE FIRST MEETING OF THE ASIA-MIDDLE EAST DIALOGUE (AMED) WORKING GROUP ON ECONOMIC ISSUES 3-4 JULY 2006, Bangkok, Thailand - 13 - investment: currently demand outweighs supply by a large magnitude, and AMED countries could benefit from this untapped potential by promoting the development of Islamic financial products. Recommendations 48. The panel welcomed the suggestion made by Ms. Ahmed that more cooperation among Middle Eastern and Asian research institutions to build a network of information and databases to help private sectors make efficient investment choices as well as improving their risk management decisions. *********************** THE FIRST MEETING OF THE ASIA-MIDDLE EAST DIALOGUE (AMED) WORKING GROUP ON ECONOMIC ISSUES 3-4 JULY 2006, Bangkok, Thailand