CAIRO: Before the close of Egypt's International Economic Forum this year, chairman Shafik Gabr reminded the audience that the United States was able to force France, Israel and the United Kingdom out of Sinai in 1956 largely because it held so much British debt. The message was that the current financial turmoil is about more than the balance sheets of banks and automakers - it is about the balance of nations' power. Celebrating its 10th year, the forum invited panelists and audience from across Egypt's political and economic landscape to debate the roots and implications of the financial crisis, moderated by CNN business anchor Richard Quest. The failure of Western finance is accelerating the eastward shift of the world's economic bases, which have been concentrated in the West since the Industrial Revolution, said Alastair Newton, a political analyst at Nomura International. "Frankly, the world is going to be a very different place in 20 years, he said. Despite this upheaval, however, policymakers should not depart from the basic principles that have sparked a boom in international trade over the past four decades, said Joseph Diess, former president of Switzerland. These principles, he said, are property rights, open markets and democracy. The role of government is important during the crisis, particularly in poor economies, said Shaukat Aziz, former prime minister of Pakistan. "I am a believer in free market economy, he said. "However, free market economy does not mean abdication by the government. Subsidies - long a contentious issue in Egypt - are still important in poorer countries, Aziz said. "The success of any government is helping the poor, he said. "You have to even out the cost of food for people who can't afford it. But in normal times, the ideal world is that we allow market forces to work. States like Egypt should maintain special distribution systems for poorer areas alongside buffer stocks that can be released if these systems fail, he said. Newton agreed. "It really is the responsibility of governments to make sure that the poor people in your community can afford the basics of life, he said. But "subsidies do ultimately undermine the market. Price caps for food and fuel, for instance, discourage producers from making more food and fuel, he said. And subsidy money could often be better spent on infrastructure, education or other social improvements. With oil prices falling, many governments will have an opportunity to scale back fuel subsidies, Newton said. "Food is more difficult, much more difficult, because it is so much more of a basic. The key is to ensure that subsidies are "well-targeted, he said. "One of the problems here in Egypt, in my view, is that fuel subsidies tend to be benefiting the better-off members of society, who have cars - and the very poor clearly don't have cars, he added. Another pressing issue for Egypt is terrorism, Newton said. The attacks in Mumbai last week were a forceful reminder that terrorism can hamstring economic confidence. "There are some interesting comparisons between India and Egypt, he said. "A terrorist attack in Egypt would have quite serious implications for the way in which the international markets and the foreign direct investors - on which the Egyptian economy is very dependent to grow - view Egypt. Responding to a question about the Mumbai attacks, Aziz said that terrorism often "stems from a feeling of deprivation, whether that is deprivation of a future, respect, income or dispute resolution. This means it is vital that a state win the "hearts and minds of its people, he said. The three countries with the most people living below the poverty line are India, Bangladesh and Pakistan, he added. Aziz, a former investment banker at Citigroup, has experienced the financial institutions at the root of the current crisis first-hand. The problem, he said, is not that bankers weren't smart enough. "We had a lot of smart bankers, he said. "But what the world needs everywhere is wisdom.
