July 1988, Page 14, 15

Trade and Finance

By John T. Haldane

Egypt Readmitted to Arab Development Fund

Arab financial ministers attending the annual meeting of the Arab Development Fund (ADF) in Oman in April agreed to restore Egypt's membership to the organization. Cairo had been suspended from the ADF after it signed a peace treaty with Israel in 1979. The ADF was established in 1975 to supplement loans from the International Monetary Fund (IMF) in order to help Arab nations overcome budgetary deficits and finance development projects. The ADF provides its Arab members with more flexible loans at lower rates than those given by the IMF.

Libyan-Tunisian Economic Cooperation

High-level talks between Libya and Tunisia are continuing in an effort to speed the implementation of a political and economic pact signed between the two countries in April. Libyan leader Moammar Qaddaffi met with Tunisian President Zine El-Abidine Ben Ali May 22 to discuss the pact.

The agreement includes provisions for the free movement of persons and goods between the two countries, a common identity card, and the right to live, work, and own property in either country. A number of joint industrial and economic projects are under study, including the construction of a gas pipeline from Libya to Tunisia and the distribution of Tunisian refined products by Libyan companies. A follow-up contract for the joint exploitation of the oil-rich continental shelf of the Gulf of Gabes is planned.

Prior to a 1985 break in diplomatic relations, Libya was Tunisia's biggest regional customer for a number of exports and a major labor market for jobless Tunisians. While the Libyan labor market has shrunk compared to its oil-boom years, Tripoli still offers high salaries to skilled workers.

Tunisian Central Bank President Ismail Khalil said the economic accord will strengthen the Tunisian economy, which, since the 1985 break in relations, has lost at least $200 million in revenues from exports to Libya, tourism, and worker remittances, in addition to serious losses from drought. Libyan citizens will also benefit, as they will be allowed once again to cross the border to shop in Tunisian department stores and food markets, where they are expected to spend an estimated $300,000 daily.

Jordan Signs Arms Deal With France

Jordan has signed contracts with four French aircraft firms for the supply of 20 Mirage 2000 jet fighters and the modernization of 15 older Mirage F-1s at an estimated cost of $1 billion. The French government and Saudi Arabia will provide most of the financing for the fighter aircraft package.

The French company of Avions Marcel Dassault-Breguet Aviation won out over the British-German-Italian consortium that builds the Tornado fighter. Serious competition for the sale to Jordan began last year, after the U.S. Congress blocked the Reagan administration's proposed $2 billion sale of F-16s and F-20s to Amman.

Abu Dhabi Banks Loan $50 Million to Soviet Bank

The Abu Dhabi Commercial Bank and the Abu Dhabi Investment Company, both government owned, have agreed to lend $50 million to the Soviet Bank for Foreign Economic Affairs. This represents the largest financial deal since diplomatic relations were established between the Soviet Union and the United Arab Emirates in 1985.

A senior Abu Dhabi bank official said the purpose of the loan was to foster economic cooperation between the two nations. Additional loans to Soviet financial institutions are expected to be arranged in the near future.

Texas Oil Official Urges Dialogue with OPEC

An unusual feature of the recent OPEC meeting was a series of discussions between Kent Hance of the Texas Railroad Commission, which regulates oil production in that state, and Rilwanu Lukman, OPEC president, and several of the participating oil ministers.

Hance later told the press that the talks in Vienna marked the first time a Texas state official had met with OPEC representatives to discuss possible cooperation. The Texan said he would consider ordering cuts in his state's production in order to help bolster world oil prices if the oil cartel formally asked Texas to do so and if OPEC took firm action to tighten verification procedures of production levels.

From the 1930s to the early 1970s, Texas played a role identical to that currently played by Saudi Arabia as the world's swing producer, stabilizing the price of oil by changes in output. However, Texas lost this influential position with the formation of the OPEC cartel.

World Bank Aids Four Arab Nations

The World Bank recently extended loans to Algeria, Morocco, Sudan, and the Yemen Arab Republic. Algeria received $20 million to improve and expand its water supply services. Morocco received $225 million to liberalize its agricultural, food-pricing, and marketing techniques. Sudan is to use its $35 million loan to rehabilitate the Sudan Railways Corp. While the Yemen Arab Republic received $17.6 million to increase agricultural production and farmers' income in the northern region.

Iran Renews Oil Accord With Syria

Syrian Oil Minister Matanyas Habib announced recently that Iran has agreed to renew the oil agreement under which Syria receives one million tons of free crude oil annually. According to the pact, Iran will also supply Syria with additional quantities of oil at current market prices.

In recognition of Syria's continued political support for Iran in the Iran-Iraq war, Tehran has also agreed to roll over $1.2 billion in overdue payments for past shipments.

The original agreement was signed in 1982, after Syria closed the Iraqi pipeline running through Syria to the Mediterranean.

Tourists Skipping Israel This Year

Tourism, Israel's largest foreign currency earner, is in the doldrums. The daily television coverage of the Palestinian uprising in the West Bank and Gaza Strip, seen almost nightly by American and European viewers, has scared away all but the most determined visitors to Israel.

Figures released for April show a 30 percent drop in the number of tourists, compared to last year. Hotels report unusually low occupancy, with the popular Jerusalem Hilton filling only about 40 percent of its rooms, compared to the 80 percent considered normal for this time of year. One airline charter company has canceled over 400 flights to Israel in the last few weeks, representing half of all the flights usually scheduled. El Al, the Israeli national airline, has switched from jumbo jets to smaller planes on some of its overseas flights.

Minister of Tourism Avraham Sharir says he is especially concerned that more Jews than non-Jews are canceling their plans to visit Israel during the country's 40th anniversary year. "Unfortunately, and this is a surprise even to me, the Jewish tourists are the first to cancel their trip," he said.

In addition to regular tourists, the number of children of American Jewish parents scheduled to visit Israel this summer, as part of several programs to familiarize them with their heritage, also has plummeted.

Because of the many cancellations, the Ministry of Tourism has abandoned its original goal of attracting up to 1.8 million foreign visitors in 1988.

Tourism brought in almost $2 billion last year, roughly twice the value of Israel's agricultural exports, and was matched only by Israel's large arms sales.

Islamic Development Bank Changes Policy

The Jeddah-based Islamic Development Bank (IDB) recently announced a plan to restructure its financing activities during the coming year. Set up in 1975 by the Islamic Conference Organization to foster economic development and promote greater intra-Islamic trade, the bank now has 44 members.

Under the plan, attention will be given to financing private sector projects and balancing "available funds and resources in productive investment." A second goal will be to concentrate on projects increasing the flow of capital goods between member states and increasing co-financing with other development funds, such as the Saudi Fund for Development and the World Bank.

The IDB has entered a period of low activity, caused by falling oil prices, currency fluctuations, and an inability to locate feasible new projects. Funds approved for projects and foreign trade operations totaled only $728 million in 1986-87, compared to $844 million the previous year.

Bank officials say the new efforts will increase intra-Islamic trade, which currently represents only 10 percent of trade conducted by IDB members.

John T. Haldane is a Middle East specialist who has served as a Foreign Service officer in Baghdad, Cairo, and Beirut, and as an international economist in the departments of Commerce and Treasury.