Speech

Opening Remarks by Agustín Carstens, Deputy Managing Director,IMF

May 18, 2004

It is a pleasure for me to be in Lebanon again and to welcome you on behalf of the IMF to this conference, which is jointly organized with Lebanon's Ministry of Finance.

I believe that Beirut is an ideal venue for this conference. Two obvious reasons are the attractiveness of this beautiful city and the excellent organizational skills of the Lebanese authorities. But it is also a suitable venue because of the extensive experience of this country with fiscal reforms, the topic of this seminar. I believe Lebanon has important lessons to share with the region and with the international institutions present here. A clear example is the VAT, which in just two years has reached tax efficiency levels rivaling those of industrial countries.

This is not to say that Lebanon's fiscal reform agenda is complete. I am sure my friend, H.E Minister Siniora, would be the first to agree that much remains to be done to place Lebanon's public finances on a sound footing. We in the Fund fully support this objective, and we stand ready to assist in the fiscal and other reform efforts of Lebanon and the region as a whole.

Ultimately, fiscal reforms—indeed economic reforms in general—are important because of their role in bringing about higher growth, creating more jobs, and improving standards of living. These are the fundamental objectives of people and policymakers everywhere, and this region is no exception.

But it is in this region that the economic gap between "what is" and "what can be" is particularly large. The economic performance of the Arab world and of the broader region in the last three decades has fallen significantly below its potential. This gap must be bridged if the region is to grow at levels sufficient to meet the needs of a rapidly expanding labor force and to achieve real improvement in the quality of life.

We all recognize that there are many factors that affect growth. We cannot be oblivious to the importance of the security environment for investment and business confidence, especially in a region where, unfortunately, conflicts have been all too frequent. We sincerely hope that this will change, and soon. But we also know that economic policies matter. While the economic challenges may differ from one country to another, we see four main priorities in the region: first, refocusing the role of the public sector and improving its efficiency; second, enhancing public sector transparency; third, strengthening institutions; and fourth, increasing regional cooperation as well integration into the global economy.

We in the Fund are working to help countries meet these challenges. We have been actively involved in post-conflict countries such as Afghanistan, Sudan, West Bank and Gaza, and Iraq, to help them rebuild institutional capacity for sound policy making. We have worked closely with the members of the Gulf Cooperation Council (GCC) on their path toward monetary union. We are providing technical assistance and training on fiscal, financial and statistical matters to many countries in the region, including those that are working to liberalize their economies, such as Algeria, Libya, and Syria. The Fund has also been collaborating with regional institutions. And, the IMF provides concessional financial assistance to the poorer countries, such as Mauritania, in support of their development agendas.

More generally, the Fund provides policy advice to all countries in the Middle East through frequent policy consultations. In addition to those regular consultations, we are helping a number of countries to identify financial fragilities through the joint Bank-Fund Financial Sector Assessment Program. Transparency is being enhanced through the voluntary publication of IMF country reports, and through reports that assess whether internationally agreed standards of transparency and accountability are being met, as well as the steps needed to meet them—the so-called ROSCs.

As an integral part of this advice, we try to draw on the experiences of other member countries, both their successes and their mistakes. We believe that, for policies to make sense and be widely supported and successfully implemented, they need to take into account specific country circumstances and social environment. Therefore, countries and policymakers in the region can benefit greatly from sharing their knowledge, their region-specific insights, and their policy experiences.

This conference provides an important opportunity for this kind of regional exchange, which we hope will build on the significant steps already made in a number of countries and advance the reform agenda in the region as a whole. It will also provide useful feedback to the Fund on how we can enhance our involvement in the region and make it more effective.

In this connection, and as you may already be aware, yesterday we announced the Fund's decision to establish a Middle East Technical Assistance Center (METAC) in Beirut. The center's main objective will be to help strengthen capacity for effective macroeconomic and financial management in ten member countries in the region, with a particular focus on rebuilding institutions and capacity in post-conflict countries. The assistance will include, among other things, in-country workshops and regional training courses. I would like to take this opportunity to again thank the Lebanese authorities for their offer to host and support the center, and I hope that all the countries in the region will support this effort.

Let me end by wishing you all a very successful conference.