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French Version

One year later: Repercussions of 11 September remain

One year following the 11 September attacks on the US, the global economy remains in panic.

The US stock markets are in a state of trepidation about a possible forthcoming US attack on Iraq. The past 12 months demonstrated the fact the global economy is underpinned by machinations in the international political system.

The repercussions of the attacks on New York and Washington swept the international money markets, creating an economic slump in most of them.
Economists agree the current US preparations for a potential military strike on Iraq is adding to the tensions and making the prospects for recovery in the short-term unlikely.

US economists seem nervous, suggesting the issue of 11 September will probably be the most meaningful in the market between now and the US strike on Iraq. They are divided over the notion that Bush's rushing to attack Iraq is a symptom of domestic failures.

"The cumulative impact of all the things we have had since September 2001 wouldn't have been as bad if it had not come after the attacks," said John Silvia, a high-ranking economist in America. The US economy went into deep recession months following the attacks, where many economists considered it then as "a precipice, at the line between not too bad and a full-fledged downturn." American economists disputed the assumption that the US economy's recession will come to an end soon.

The fourth quarter of 2001 was utter confusion for the US economy. The leisure travel business was a dying one. Besides its massive $40 billion anti-terrorism budget, the US administration introduced new policies to ease the economic situation, making gradual reductions on the interest rates and taxes as part of a package of procedures to adjust the imbalance in the American economy.

This year's 11 September anniversary comes with no big changes. The current heated politics is overshadowing the possibilities of shoring many world economies to help them come out of recession. In the Middle East, indications show prolonged stagnation is over-riding most of the regional economies, this is also either due to political instabilities or inefficient state policies.

"Over the past 12 months, all indications show the global economy, including the Arab one, is becoming worse all the time," said Dr Munir Hamarneh, professor of economics at the University of Jordan. "It is true there are still signs of improvement in some of the global economies, but such an improvement remains below the desired levels." Hamarneh's remarks come in tune with a recent report by the World Economic Forum indicating almost all of the Arab economies are suffering a prolonged stagnation.

The report noted Arab economies need to pursue urgent reform, open its doors to foreign investment, privatize state-run economies, improve the quality of government, tackle corruption and modernize the education systems.

"The Arab world has suffered a 20-year growth slowdown," stated the report, putting the blame on Arab governments which failed thus far to fight corruption and adjust their economies towards more transparent policies.

* The report didn't link the current economic slump in the Arab world directly to the 11 September attacks, but reiterated most of the Arab economies rely far too heavily on capital accumulation as the engine for their growth. This, the report added, made these economies stagger behind globalization. "The 11 September attacks were a piercing stroke against globalization," stressed Hamarneh. "Before the attacks, the gap between the poor and the rich nations was about three folds. Now, this gap is estimated at more than seven folds."

As for Jordan, the repercussions of the 11 September attacks had lesser of an impact. The Amman Stock Exchange is currently witnessing a downward trend due to US threats against Iraq. The overall trading volume at the ASE in the last eight months increased by more than 107 percent to JD 782.4 million, compared to the same period of last year.

This is despite news reports suggested the market lost around JD 200 million days before the one year anniversary due to US stepping efforts to strike Iraq.

Many shareholders and investors were suspending trading in the ASE lately. Brokers indicate local and Arab investors decided to wait and see what will the coming weeks bring in. "The arrival of 1 anniversary of 11 September stimulating much negative prospects among traders. They, all the time see in the current political situation a misfortune for the economy," said a broker, who preferred to remain anonymous.

Minister of Trade and Industry Salah Eddin Bashir noted his country's trade ties with Iraq are growing fast, and warned a military strike on his country will jeopardize the Kingdom's economy at large.

"Iraq is Jordan's biggest trade partner, and we can't afford such a threat to this partnership," he added. "We need to balance our trade ties with Iraq on one hand, and the west on the other. If one party collapses, the economy will not stand it."

The biggest losses of the post-11 September was in the aviation sector. William Gaillard, spokesman of the International Air Transport Association (IATA), said "people are no longer worried about security, they are worried about the security checks." He noted the international airlines made last year their most horrendous losses for over a century. According to him, the global air industry lost $12 billion in 2001, a dive from their $3.7 billion in profits in 2001.

Gaillard, however, predicted the international airlines will recover part of their losses in 2002, although they will still make $8 billion in losses. Hamarneh indicated the effects of the 11 September attacks has created much psychological fears resulting in their refusal to travel via planes. Hamarneh reminded that Arab airlines were in deep trouble in the post-attacks but quickly responded to the crisis. "One should notice many airlines today are still lacking the potential to recover their customers' trust in making secured flights," he added.

Royal Jordanian, the Kingdom's national carrier, succeeded in overcoming the crisis by taking precautionary steps to maintain its operations worldwide. The carrier was the first Arab airlines to fly to US airports in the weeks following the 11 September attacks. "We expect a significant profit for 2002," said Samer Al Majali, RJ's chairman and CEO. "However, an imminent strike on Iraq will certainly send the whole regional airlines back into recession."

Economists, meanwhile, agree the current economic crises in the US, Europe and Japan are also behind the continuing decline in passenger turnovers. US economists warn the panic that troubled world financial markets can start again if the US attacked Iraq. Bradford Delong, chief economist at the University of California, said the US economy is quite below the potential growth by 3-4 percent. "Investors today are more tolerant of risk than in the past. Faster growth does not necessarily mean higher profits if it is accompanied by higher interest rates...this put downward pressure on stock valuations," he added.

Hamarneh predicted the plunge in global economy will remain unless the developed nations revised their economic and political policies toward the developing nations. "Economic difference between the US and its European allies are now visible. This shows the beginning of the end of the US monopoly on global economy. The 11 September last year was the evidence."

Ghassan Joha
The Star

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