These remarks came on the sidelines of a seminar organized by the Lebanese American University (LAU) and hosted by the World Bank office in Lebanon and the Lebanese Economic Association to discuss the impact of the financial crisis on Arab capital markets.

A number of officials and economists have expressed similar fears in recent days and some of them even warned that many of the Lebanese working in the oil-rich Gulf states may lose their jobs if the recession affects businesses in general.

Lebanon heavily depends on remittances and tourism receipts to bolster its economy and its balance of payments.

The seminar also examined the structure of Arab capital markets and the measures that can be taken by Arab governments to best address the negative impact of the crisis.

Kouame began his lecture with a brief about the capital-market structure in the MENA region, saying that debt securities continued to play a relatively small role in 2007, with a 4.8 percent of the total size of capital markets, compared to bank assets (45.5 percent) and stock market capitalization (49.7 percent).

According to the World Bank statistics, MENA stock markets are dominated by two regional giants: Saudi Arabia, with a market share of 59.7 percent, and Egypt at 16.1 percent.

Kouame said that the Gulf has been significantly affected because its is more integrated with the global capital market than other regions.

"Gulf countries were affected as global investors were removing liquidity that they had put in those countries to compensate for the loss they had incurred in developed countries," he explained.

However, he said that the governments in the Gulf region were lucky to be able to step in and inject liquidity not only to stabilize capital markets and protect the banking sector but also to support the real economy.

"Luckily the Arab capital market has been seriously hit in countries that have enough resources to respond," he said.

Kouame added that the capital markets in some countries such as Egypt and Jordan were hit in significant way, while others, such as Lebanon and Tunisia, haven't suffered much since their markets make up only 1.3 and 0.6 percent of the MENA total.

A report prepared in November 2008 by Rasmala, a leading regional investment banking firm, said that Egypt, which has the largest regional equity market outside the Gulf Cooperation Council member states, lost a further 11 percent over the month, taking its 2008 loss to 60 percent, while Jordan's total loss is 24 percent.

According to Kouame, the impact of the crisis on debt is reflected by the difficulties caused by increased reliance on syndicated external financing of major projects, while the visible impact on banks has been limited so far but some may have suffered writedowns on their investments in international banks or in foreign currencies.

Kouame also proposed action plans that can be taken by Arab governments to reduce the negative impact of the crisis, saying that they should have a good understanding of the potential weaknesses in the financial sector.

He added that the governments should maintain good fiscal discipline by avoiding heavy borrowing from the financial sector because credit costs have increased all over the world and they may not find enough liquidity since credit markets have frozen.

Instead, Kouame recommended that those Arab governments which are currently short on reserves should turn to international financial institutions to help them finance investments capable of generating employment and growth.

"Arab governments can also use fiscal resources to help the poor through safety net programs so that they can continue to survive in this economy and consume," he explained, "because as consumers they can generate economic activities for the continuous demands for goods and services that are produced in the economy." -Daily Star