Priorities for Arabs Reviewed work(s): Source: Economic and Political Weekly, Vol. 3, No. 3 (Jan.

20, 1968), p. 182 Published by: Economic and Political Weekly Stable URL: http://www.jstor.org/stable/4358138 . Accessed: 25/01/2013 17:33
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January 20, 1968

ECONOMIC AND POLITICAL WELKLY investment abroad. Savings from this source are anticipated at $1 billion Loans extended abroad by American banks, government spending abroad (though nlot military expenditure ill the East) and American tourist travel outside the Western hemispheresaving on each of these is expected to be about $500 million. direct investment curbs axe The aimed most at Europe. No fresh invest. ment is to be allowed there or in other developed countries, but Britain, Canada, Australia, New Zealand and Japan may still expect new dollar investment annual. ly at 65 per cent of the 1965-66 level. Germany and Italy can absorb the blow to their payments surpluses but France will feel the tightening of screws siniceits payments have been in deficit of late. What marks out the 1968 package from that of 1964 is that unlike the interestequalisation tax which had expressly exempted developing countries, it wiil, in fact, operate arbitrarily on the developing countries. True, fresh direct investment in these countries can be 110 per cent of their 1965-66 level but (as opposed to Britain or Canada) 1965-66 was not a year of substantial dollar investment in the developing world. For India particularly, 1965-66 was not the best year for direct American private
investment.

would seem to confirm this view. It is also clear that taking advantage of the crisis faced by the UAR, countries like WHILE Gunnar Jarring is trying to Saudi Arabia want to have certaini evolve a formula for the restoration issues settled in their favour for all of durable peace in West Asia, politics time to come. Ihere is little doubt that in the Arab world is relapsing into the Saudi Arabia has not observed the pre-Khartoum pattern of internal con- terms of the Khartoum agreement and flicts. It is unlikely that the Arabs has given help to the Yemeni Royalists. will ever accept humiliating peace But progressive Arabs have to deter. terms but it is equally unlikely that mine their priorities. they can get honourable peace without It is impossible that the winds of a perceptible improvement in their change which are now sweeping the bargaining position. The presence of the Arab countries will leave Saudi Arabia, Soviet Navy in the Mediterranean is Yemen, Jordan or any other couintry an obvious new plus factor for the this issue be untouched and unchanged. On Arabs; if the sea had continued to of social transformation of the prea Western lake, Israel would have found modern nations, the Arabs can thlerefore military ventures much easier to undciWhat they cannot afford not solve afford to wait. take. But this by itself does is to allow Israel to get away wtAh the Arabs' problem. For, Israel holds the fruits of its aggression or even to large parts of their territory and Soviet retain them for long. The cost of conpower cannot be made available to tinued Israeli occupation can prove to them for a counter-offensive. be very heavy, even for the stoutest of The problem now is essentially one Arab regimes. There is no dearth of of using the United Nations and other extremists among the Arabs; the situaagencies to put pressure on Israel to tion can be exploited by them to diswithdraw. The position of Israel's credit secular and progressive leaders patrons has to be made to undergo a like Nasser. Recent events in Algeria great deal of change. If the Arabs can have shown that many of the Arab demonstrate that they are united in regimes are still extremely vulnerablefacing 'srael, even the United States The anger against Israel and the West cannot resist their legitimate demands can easily be given a little twist and for long. After all, for every one every turned into anger against the establishwhere what ultimately matters in West ed Arab governments. That would Asia is Arab friendship. It is significant make the task of the Arabs even more that the West European nations, par- difficult, but if this was a very imticularly France and Britain, are no portant consideration for poweflonger such ardent supporters of Israel. hungry political adventurists the quesThis cannot but have an impact on tion itself would not arise. American policy, unless the Arabs The Khartoum spirit, therefore, still fritter away their energies in mutual remains the Arabs' best hope and it recrimination and conflicts. is worthwhile for Arab leaders to take This, however, is precisely what they the initiative in restoring it. Tf Saudi seem to be doing now., With the summit Arabia is still unresponsive, they will conference cancelled, the Yemeni civil have to tread the other road. But that war escalated, and the Syrians con- road is too long and too arduous to tinuing to play the loud tune, Arab be anyone's first choice. solidarity does not appear any nearer than it was in the worst periods of inter-Arab conflict. It will not be suir- US Deserts the Liberal Line prisinig if both Israel and the United Johnson's new States view the situation with great UNDERSTANDABLY, to safeguard the par year measures satisfaction. to be compreIt is possible for belie vers in the value of the dollar had to hensive. The operation of the earlikr immutable laws of social conflict of the Kennedy assert that so long as feudal and reac- interest-equalisation tax Administration left many loopholes to tionary regimes persist in some parts firms have a of the Arab world, Arab unity and be plugged. International of ways for transferring funds solidarity will remain a fantasy. The variety axe this time regularity with which inter-Arab prob- across borders; hence the new have cropped up since the war has fallen most heavily on direct lems

Priorities for Arabs

With official aid tapering off, the US has been pressing India, directiy and through the IBRD and the IMF, to liberalise investment and fiscal policies to attract foreign private capital. Has the US then abandoned this line? US private investment in Asia and Africa is only a third to a fourth of ail US private investment abroad. So exempting the developing countries from the operation of the curbs on investment abroad would not have weighed too heavily on US balance of payments. But apparently American companies with subsidiaries in the developed world might resent the exemption of others who operate in the developing world. So this may be the US Administration's attempt at equity by spreading the hurt. The ceiling might operate arbitrarily in another way. To keep within the 110 per cent limit, it may be that a more viable major programme would have to be dropped and others, less economic, included. And, since investment in a project is not perfectly divi-

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