The oil gift and the challenges facing Arab banks In light of the globalization of banking services

The oil gift and the challenges facing Arab banks
In light of the globalization of banking services
Prof. Dr. Moustafa El-Abdallah Al Kafry
The Arab world is in large part the gift of oil. Instead of being a means of consolidating political and economic independence, oil has become a means of integration and dependency in an unforgiving global market, and thus its-limit-ed and fluctuating return has become between funds recovered by certain countries to give us food, clothing and some development tools, and money recovered by other countries as well as the price of the largest arms consumption in the world.
It is in this bleak picture that we confront globalization:
This external image of oil, while the internal picture, many oil countries were suffering from budget deficits in the nineties due to the decline in oil prices. As for the real instrument of progress, manufacturing, its share of GDP did not exceed 11%. Thus, 27 years after the oil boom, our economy is still dependent on raw materials mainly, and is unable to build an advanced economic structure capable of employing the labor force, until unemployment has become a nightmare that terrifies all Arab countries.
In this bleak picture, we face globalization and the changes of the times, so where are the governments that should plan and develop policies and programs? Are they successful´-or-failed governments? Do you get ISO and standard certificates of excellence in the language of industry and management?´-or-do quality systems kick it out of its bliss? The quality indicators of governments are no longer hidden, the United Nations Development Program is known and talks about a government capable of providing human development such as food, drink, housing, health and education, and the Office of the High Commissioner for Human Rights talks about the availability of these rights as a condition for the credibility of the government, and the World Bank and before it the IMF talk about (the quality and eligibility of governance) through a recent expression that has spread recently, which is governance (governance), a term that provided a typical recipe for good government, it is a government: It has popular participation in decision-making, believes in and practices transparency, and is accountable and enforced.
The recipe here comes from an economic source, as decision-making in society, which is the end of the journey of democracy, is concerned with choosing the quality of life and the quality of rights and duties. The state budget determines: (who receives). The collection system determines: (who pays). The laws and regulations issued by the government and monitored by the judiciary and their implementation are monitored by the judiciary, the distribution of justice´-or-injustice among peoples in societies, and all of this has its reflection on economic performance and on people s lives, which is the goal of any system, participation and consultation is therefore the basis of good governance, transparency is a tool of knowledge for those who will participate and accountability is a way to resist corruption, which has become one of the features of the times, and corruption from the point of view of the IMF and the World Bank is an obstacle to investment because it gives the opportunity to those who pay more, and thus it hits the opportunity for equal competition.
Challenges facing the banking sector in the Arab countries:
With the entry of the third millennium, the banking sector in the Arab countries is facing radical changes, as the distinction between banks, brokers, insurance companies and investment funds will become less than before with the provision of financial and banking services via the Internet, as customers today prefer to use self-service channels to completetheir banking business.
Therefore, it is expected that Arab banks will focus on maximizing the return on equity, which requires phasing out activities whose revenues do not cover the cost of capital allocated to them and transferring more capital to banking businesses whose returns increase over time. Profitability can be increased by reducing operational expenses through the effective use of modern technology such as the Internet if it is to face fierce competition from abroad. If there is any doubt about the impact of this competition on local markets, take a look at what has happened in online stock trading in recent years.
In recent decades, the global economy has undergone significant structural changes and international markets for goods, services and capital have become increasingly interconnected. In light of these changes, Arab economies face major challenges, most notably the shift in economic thought and forms of cooperation and economic bloc. Arab countries cannot remain immune from interaction and integration into the new global economy. The Arab region, with its strategic location, various wealth and potential future markets, will not be able to isolate´-or-close, and therefore cannot remain outside the global economy. While emphasizing the importance of the banking sector in the Arab countries, which has witnessed important changes that have taken place in the regional and global financial sector, it is expected to have a significant impact on the banking sector, namely:
Liberalization and globalization of banking services:
It seems that joining the World Trade Organization requires Arab countries to grant foreign banks the same treatment as local banks, and foreign banks will be able to enter Arab markets and attract customers by providing them with advanced banking services that may not be available in the local market. Globalization and liberalization of banking services have also made it easier for banks in industrialized countries to enter emerging markets and exploit the expected growth of these markets, with Spanish banks, for example, expanding in Latin America, German banks in Eastern Europe, and American banks in East Asia.
The liberalization of financial and banking services in the world is causing concern in the Arab banking sector due to the fear that foreign financial institutions are more efficient than Arab financial institutions and are therefore able to gradually dominate the domestic banking sectors. Foreign banks may excel in some investment banking services, technology and private banking, but Arab banks knowledge of their local markets and their strong relationship with their customers will provide them with a significant competitive advantage over foreign banks, in addition to the fact that the World Trade Organization allows the application of financial liberalization in stages if local banks need more time to adapt their conditions to the new competition.
B - Transformations in the administrative philosophy of Arab banks:
In light of the emerging global changes in the banking sector, Arab banks should prepare to implement a new management culture that takes into account the continuous change in market conditions, and is based on a network of lines of communication between work centers instead of a rigid job pyramid, and relies more on the principle of partnership with other financial institutions rather than working alone. Banks will increasingly rely on support operations, research, technology, financial products and other external institutions that can provide these services more efficiently. Such a partnership exists now, but it will be needed even more under the new management cultures, and managing complex networks of partnership and external relations will become as important as managing the internal operations of banks.
Under the new management culture, banks will realize that technology not only enables them to do business more efficiently, but also gives them the ability to continuously develop their business, and it is about using the latest versions of computer programs as well as the prevailing culture and mentality. Technology should not become a goal in itself but one of the factors increasing efficiency for the bank, and senior management should be an inspirational department that values the outstanding performance of employees and encourages them to come up with new banking ideas and services.
C. Spread of Internet Banking:
Self-banking services´-or--dir-ect distribution channels have become preferred by customers, and are offered by all banks in the world. As for Arab banks, they have invested millions to develop their ATMs, points of sale and the talking bank, and most of them are now moving towards providing services via the Internet (Bank Online). Therefore, we find that the use of branches is gradually declining, and the cost of completing a banking transaction through an ATM is estimated at only 10% of the cost of completing it through the branch, and this cost drops to 1% if it is done through the phone´-or-the talking bank, and if the same service is provided through the Internet, the cost drops to much lower. With just 10 branches in India and using ATMs and a talking bank, Citigroup has become the largest issuer of credit cards in India.
Arab banks are still far behind American and European banks in providing Internet banking services, and the main reason for this is due to the lack of Internet penetration in the Arab countries significantly, as less than 10 percent of the Arab population uses the Internet compared to more than 50 percent of the population in America, Europe and developed countries. All U.S. banks have websites, many of which offer services through this network, including current account management, including bill payments, credit card issuance, personal home loans, brokerage services for the purchase of stocks and bonds, as well as mutual funds.
A consortium composed of the National Bank of Kuwait, National Bank of Dubai, Commercial International Bank of Egypt, Arab Bank of Jordan and the Saudi American Bank has been formed in the Arab region to develop a regional electronic market for the exchange of services between companies (B2B) and to formulate a payment network for it at the level of the region as a whole.
d. Increasing need for mergers among Arab banks:
Arab banks will face fierce competition from giant international banks that are offering online banking services. These banks do not need to have a physical presence and they offer their services in more than one language, which will help them attract the best customers. Today, Arab banks have only the option of merging to create banking entities capable of competing in liberalized global financial markets, and the merger will help reduce operating costs, reduce the number of branches, reduce similarity and redundancy in business, distribute high-tech expenses on a larger base, and allow the benefit of economies of scale.
(The Arab banking sector is expected to witness more mergers and acquisitions in the next few years, whether between local banks in pursuit of greater market share,´-or-between banks from different Arab countries aiming to expand beyond their local market.
The past few years have also seen a number of M&A deals, but most banks that talk about mergers and life remain ink on paper, with only a handful of successful mergers so far. It seems that banking integration in Arab countries will only succeed if monetary authorities intervene and force weak banks to Merger).
It has become necessary to establish advanced supervisory systems to be more effective and able to keep pace with developments in international financial markets, and the increasing demand for transparency in international markets will accelerate the development of supervisory systems in the countries of the region. Monetary authorities will feel that their ability to control the size of the cash supply has weakened with the spread of online banking and the expansion of the use of electronic payment in online commerce.
Central banks and interest rate control:
Central banks can implement their monetary policies by controlling interest rates rather than affecting the size of the money mass. For this reason, it has become necessary for countries in the region to develop domestic bond markets, as the availability of a secondary market for government bonds will allow the central bank to use open market operations to set interest rates, even in an economy where it is difficult to control the money supply in circulation.
Arab countries also need to develop the corporate bond market to form another source of financing when needed, in order to compensate for the decline in banks lending activity when economic crises occur to reduce the effects of these shocks, as the existence of an effective bond market for companies leads to reducing the impact of crises, and the presence of non-banking sources of financing for companies leads to mitigating the impact of crises that operating banks may be exposed to (in the event of a crisis´-or-the collapse of prices in the real estate market). Conversely, countries where companies rely mainly on financing from banks and very little on the bond market have taken longer to resolve their financial crises.
This is how politics and economics are mixed, and good political performance becomes the way to a good economy. Where do the Arab countries stand in all this? A difficult question and the answer to it is even harder. Here, Arab governments must realize that the tools for evaluating their performance exist, which are the general acceptance of the people, the development of their livelihood, the survival of their money, and the opposite of that is a vote of dissatisfaction. It is time for the Arab world to be satisfied with its governments, and this will only come with serious government policies that take into account the interests of its peoples honestly and honestly, not with flimsy slogans.
Prof. Dr. Moustafa El-Abdallah Al Kafry
Faculty of Economics - Damascus University

Rate the article
Bad	1	2	3	4	5	6	7	8	9	10	Very good
Result : 55%							Participated in the vote : 4