Saudi Supreme Economic Council discusses global crisis developments

Custodian of the Two Holy Mosques: Saudi economy is currently flourishing

GCC, Saudi Shoura Council stress strength of Saudi, GCC states' economies

Crisis plan approved in Europe summit

In line with the directives of the Custodian of the Two Holy Mosques King Abdullah bin Abdulaziz Al Saud, the Chairman of the Supreme Economic Council, the Council held a meeting under his chairmanship in Riyadh.

The meeting was attended by Prince Mit'eb bin Abdulaziz; Prince Naif bin Abdulaziz; Prince Saud Al-Faisal; member ministers of the Council; and members of Advisory Commission for Economic Affairs.

Dr. Abdulrahman Al-Tuwaijri, the Acting Secretary General of the Supreme Economic Council, stated that the meeting discussed the current global financial crisis that has spread to cover various countries in the world, to affect the status of credit, liquidity and safety of banks in these countries, and to cause heavy losses for all the world's financial markets, prompting most countries of the world, particularly the major industrialized countries, to take action to address this crisis, to approve action plans and to coordinate among themselves.

The Council also discussed the potential impacts of the crisis on the Saudi economy, he said.

Al-Tuwaijri said the Custodian of the Two Holy Mosques affirmed added that the Saudi economy is currently enjoying prosperity due to high rates of growth and investment in various sectors of the economy and to the continual process of the development.

Despite the universality of the crisis, its impact on the Saudi economy will be limited because of local economic progress witnessed by the Kingdom and the safety of the financial position of local banks, the King was quoted as telling the council.

To deal with this crisis and curb its possible impacts on the national economy, the Custodian of the Two Holy Mosques King Abdullah bin Abdulaziz Al Saud has instructed, in his capacity as Chairman of the Supreme Economic Council (SEC), the concerned authorities to continue monitoring the crisis and to take whatever procedures that curb its repercussions on the national economy and the people's welfare and living, Al-Tuwaijri said.

He added that the King also instructed that the Advisory Commission for Economic Affairs, an affiliate of the council, is to monitor the crisis on continuous basis, study its impacts, forge specific proposals to contain it and submit periodical reports on that matter.

Al-Tuwaijri said the SEC ratified the following measures:

First: Saudi Arabian Monetary Agency (SAMA) manages to continuously monitor the performance of Saudi banks and continue to show keenness on their safety by providing the needed flow of money if deemed necessary.

Second: SAMA modifies the restrictions imposed on the provision of liquidity to banks by allowing more reductions in the rate of reserves and reduction of finance costs if necessary.

Third: The government continues to guarantee the safety of local banks and bank deposits.

Fourth: Ministers of Finance and Governors of Central banks in the GCC member states will be invited to coordinate their positions.

In an address to Saudi TV Channel One, Saudi Finance Minister Dr Ibrahim Al-Assaf shed light on the economic situation in the Kingdom of Saudi Arabia as well as on the current international financial crisis.

Dr Al-Assaf said the Kingdom has preserved its economic performance and attained growth and surplus at the level of general finance and current account in addition to reduction of the general debt and registered an increase in the non-petroleum exports.

Dr Al-Assaf expressed optimism in the continuation of the excellent performance of the Saudi economy during next year under the strong banking sector and the ongoing efforts to improve the investment environment and create more job opportunities.

Dr Al-Assaf spoke about the initiative of the Custodian of the Two Holy Mosques, King Abdullah bin Abdulaziz at Jeddah Energy Meeting, and said the King had presented an initiative of energy for the poor so as to enable the developing countries confront the increasing cost of energy.

He welcomed the procedures undertaken by the World Bank to support this initiative.

On the developments of the international economy and the crisis of the financial markets, he said this acute financial crisis in the US and Europe has undermined confidence on the international financial system and created great challenges in the domain of the economic policy.

Dr Al-Assaf welcomed the salvation plan and other procedures recently undertaken by the US and hoped that these would positively contribute to the restoration of confidence on the international financial markets.

He also welcomed the coordinated moves initiated by the international central banks in the countries directly affected by the crisis for supporting liquidity and preserving the stability of the international financial system.

Pointing out to the repercussions of the current financial crisis in the US and Europe on the developing economies, Dr al-Assaf said priority should be given to the efforts that aim at easing pressures on the financial markets and lead to stability of the financial system.

Saudi Arabia was the largest recipient of foreign direct investment (FDI) in the Arab world in 2006, attracting $18 billion, an increase of 51 percent over 2005, according to a report of the United Nations Conference on Trade and Development (UNCTAD).

The report attributed the increase to the region’s strong economic growth and improved business climate and to high oil prices which have attracted increasing amounts of FDI to oil, gas and related industries as well as to telecom, tourism and financial services.

The unprecedented increase in FDIs came after Saudi Arabia took a series of measures to attract foreign investment. The Supreme Economic Council (SEC) revised the negative list last March, allowing foreign investment in vital sectors like insurance services, wholesale and retail trade, air and train transport, and communication services.

Abdul Rahman Al-Tuwaijeri, secretary-general of the council, which is chaired by Custodian of the Two Holy Mosques King Abdullah, said the SEC opened new economic sectors for foreign investment in line with the king’s economic reforms aimed at strengthening the economy, attracting more foreign investment and enhancing private sector participation.

The negative list of investment was also revised to comply with Saudi Arabia’s commitments under the regulations and conditions of the World Trade Organization. The Kingdom became the 149th member of the WTO in December 2005.

“Also commercial agencies, except franchise rights are now open for foreign investment,” Tuwaijeri said.

According to the UNCTAD report, FDI inflows to the 14 economies of West Asia surged by 44 percent in 2006 to an unprecedented $60 billion. Turkey topped the list with $20 billion, a 100 percent increase over 2005, Saudi Arabia second with $18 billion and the UAE third with $8 billion, with a 23 percent decline in inflows or $8 billion. Jordan with $3.1 billion FDIs and Bahrain with $2.9 billion, were on fourth and fifth positions, respectively.

Efforts by Gulf countries to diversify their production activities beyond oil-related activities succeeded in attracting greater FDI flows to the manufacturing sector. FDI outflows from West Asia totaled $14 billion, an increase of 5 percent over the 2005 level.

The value of cross-border mergers and acquisitions (M&As) by investors from West Asia increased by 78 percent, amounting to $32 billion, as a result of high oil prices and the current account surpluses of oil-producing countries.

About two-thirds of those M&As were targeted at developed countries, in particular the United Kingdom (35 percent by value), Canada (11 percent) and the United States (9 percent).

Accounting for 8 percent of the value of such M&As, Pakistan was also an important target nation. In developing regions, investments in telecommunications (mainly in sub-Saharan African countries), real estate and leisure industries were notable in 2006, the report said.

Services remained the dominant sector for FDI in West Asia, a major proportion of which went to financial services as a result of the privatization and liberalization policies of a number of countries in the region.

Kuwait accounted for more than half of the region’s total outward FDI, mainly in the telecommunications industry.

In light of the region’s high GDP growth and ongoing economic reforms, supported by the prevailing high oil prices, the upward trend in FDI to West Asia is likely to continue, the report said.

The UN agency’s investment assessment of West Asia came two weeks after a World Bank report described Saudi Arabia as the seventh fastest reformer globally and the second fastest in the region. “This year Saudi Arabia made bold business reforms making it one of the world’s leading reformers. Saudi Arabia is now the top ranked economy in the Middle East,” said Jamal Haider, co-author of the bank’s Doing Business Report 2008.

Amr Al-Dabbagh, governor of Saudi Arabian General Investment Authority, said the jump in the new ranking from was a major step toward achieving the “10 by10” goal sought by SAGIA to place the Kingdom in the top 10 countries in terms of investment. “Saudi Arabia has become the number one recipient of foreign direct investment in the Middle East. Inflows have increased from $2 billion to $18 billion in the last two years,”Al-Dabagh said.

The SAGIA chief said the figures would grow more rapidly with the development of the Kingdom’s six new economic cities, and special economic zones that are attracting top global companies with major investment opportunities. King Abdullah launched four mega-economic cities in Rabigh, Hail, Madinah and Jizan, which are expected to draw SR300 billion in investments and create more than a million jobs.

“With Saudi Aramco’s recent expansion of refineries and the building of the Kingdom’s economic cities, foreign investment in the country has become more attractive to investors abroad, mainly due to the liberalization of investment rules in which SAGIA has played a vital role,” said Abdul Rahman Mousa, an investment specialist at SAGIA.

Minister of Finance of the Kingdom of Saudi Arabia Ibrahim bin Abdulaziz Al-Assaf, who is also leader of his country's delegation to the joint annual meetings of the International Monetary Fund (IMF) and World Bank (WB), talked about the risks facing the global economy as a result of the exacerbating current financial crisis, stressing the need for concerted efforts to address its possible impact on every country in the world, especially developing countries, and pointing to the leading role that must be played by the developed countries in this field.

He praised the efforts of the WB in helping developing countries, especially poor ones, to address the economic impact caused by rising food prices and energy, noting the efforts made by the WB in response to the "energy for the poor" initiative launched by the Custodian of the Two Holy Mosques King Abdullah bin Abdulaziz Al Saud at Jeddah Energy conference, confirming the Kingdom's readiness to support these efforts particularly those aiming at meeting the energy needs of poor countries.

On the other hand, the Saudi minister welcomed the serious consultations which led to forging the WB's new strategy for dealing with the repercussions of climate change, stressing that it is important that such growing interest in climate change issues should not have negative repercussions on the priorities of growth boosting and poverty reduction in developing countries and that it is also important to see coordination with the international concerned organizations, and respect for the concluded international charters and conventions.

He pointed to the feasibility of forging technical solutions that reduce the impact of fossil energy and increase its being preferred as the most appropriate option to meet the energy needs of poor countries.

The minister welcomed the package of measures submitted to the Development Committee aiming at enhancing the voting power of developing countries, citing the addition of one more seat for the African group at the WB's Board of Directors, bringing the number of its seats to twenty-five. He also called for striving for a greater balance in the representation of advanced and developed countries in the World Bank Group, taking into account the global economic changes, and the country-in-question's financing ability to support development programs, the economic standing in the global system and its impact on the stability of the world economy.

Concluding his speech, Al-Assaf cast light on the efforts exerted by the WB to apply modifications on its strategic priorities in line with the new economic developments, calling for greater flexibility and caution in using the bank's potentials so that it would become more responsive to the requirements and needs of developing countries. He also pointed to the WB's interest in the Arab world within the bank's strategic priorities.

Secretary General of Gulf Cooperation Council (GCC) Abdurrahman Al-Atiyyah reiterated the strength of the gulf economy.

In a statement issued, he noted that the economies of the Gulf States do enjoy a remarkable economic growth, adding that the commercial gulf banks have a high rate of liquidity and a distinguished financial status.

Al-Atiyyah confirmed that the central banks in the GCC member states are ready to make the required liquidity available for banks if they need liquidity.

Qatar launched a $5.3-billion (Dh19 billion) plan to purchase bank shares in the most dramatic move to date by Gulf Arab states to shore up confidence in their banks, sending stocks across the region soaring.

Middle Eastern policymakers have joined Europe and the United States in combating a financial crisis that has battered bank stocks and threatened a five-year boom, and more moves by the cash-rich states to fortify capital defenses are likely.

It also marks acceleration by sovereign wealth funds - the state-run investment agencies that control trillions of dollars - to invest at home instead of abroad, a sour turn for Westerners who had once counted on rich Gulf investors to bail them out of the financial crisis.

In the plan, the Qatar Investment Authority, the Gulf Arab state's sovereign wealth fund, will buy 10-20 per cent of banks' listed capital on the Doha bourse based on closing share prices, the state news agency said.

The announcement sent shares rocketing across the Gulf, with Dubai's main index marking a 10.5 per cent gain - its biggest ever. Qatar's leading index rose 8.5 per cent.

"People are starting to have confidence in the market," said Adel Nasr, a local brokerage manager at United Securities, in Muscat.

In another sign of relief, credit tensions eased in the UAE and Saudi Arabia, where the interbank lending rates in both countries edged lower in one of the clearest signs of easing tensions since interbank rates began climbing marching higher in June.

The easing comes one day after the UAE said it would guarantee bank deposits. It clarified its position yesterday, saying it would cover deposits for three years including those with foreign banks with core operations in the Gulf Arab state.

"That was a very strong message sent by the government to reassure banks and depositors. We should see the markets easing and returning to normal soon," Walter Pompliano, head of treasury at Abu Dhabi Commercial Bank.

Kuwait is the only other Middle Eastern state to say point blank that its sovereign wealth unit would buy local shares to support prices with the view that the local bourse had suffered too much due to an investor exodus from developing markets.

Qatar's purchase plan and the UAE's guarantee come in a busy week for Gulf policymakers struggling to prevent contagion from the West's financial crisis from spreading. Saudi Arabia slashed its benchmark rate by 50 basis points in a surprise move to restore confidence.

The plans reflect a multi-pronged approach by Gulf policymakers and more moves by other Gulf States are likely in the coming days, said banking analyst Raj Medha at investment bank EFG-Hermes in Dubai.

More measures might include placing sovereign deposits directly with commercial banks, recapitalizing banks with weak capital bases, and flooding the interbank lending market with cheap liquidity to keep the banks lending to each other. "It's a proactive approach from Qatar to pump liquidity into the system," he said.

"They might also have to make deposits directly into the banks. The same is true for the UAE," Medha said.

Qatar's biggest banks include QNB, Qatar Islamic Bank, Qatar Commercial Bank, Doha Bank and Ahli Bank.

The combined market capitalization of the top six Doha-listed banks at closing prices was $26.4 billion, according to Reuters data, meaning the QIA plan would be worth $2.2-5.3 billion.

President Mubarak discussed the necessary measures for confronting the world financial crisis and its potential impacts on the economic and financial conditions in Egypt.

The Egyptian banking system is capable of fully absorbing the international financial crisis without leaving behind any negative impact, Prime Minister Ahmed Nazif said at a joint press conference with Central Bank of Egypt Governor Farouq al-Oqda and Investment Minister Mahmoud Mohieddin.

"As the financial crisis started to bite, the government with all its sectors was following up developments in the international stock markets and their impact on international economic growth rate as well as on the Egyptian economy to avoid any repercussions," he said.

The crisis could have an impact on three levels; the Egyptian financial and banking sectors, the Egyptian bourse and the Egyptian economic growth rate, he said.

Prime Minister Ahmed Nazif said Egypt launched a plan for reforming the banking system in 2004. The first stage will be finalized by the end of 2008.

Under the plan, several small banks have joined bigger entities, banks' capital increased, he said, noting that the auditing system of the Central Bank was reinforced and the bank's law was amended.

"The Central Bank took crucial measures, including diversifying the currency basket and setting ceiling for foreign deposits, to dwarf the impact of the ebb and flow of international markets," he said.

Meanwhile, he said "although the real estate sector is still nascent, it has a great impact and we would rely on it in the coming period to help maintain the economic growth rate." "The international financial crisis affected the world market and the Egyptian stock market was no exception," he said.

Prime Minister Ahmed Nazif voiced hope that Egypt would maintain its economic growth rate between 6.8 and 7.2 per cent in line with the past few years.

President Hosni Mubarak ordered the government to draw up a mechanism for maintaining the growth rate while proceeding with the basic economic reform program, Nazif said.

On his part, Dr. Farouq Al-Oqda, the Governor of the Central Bank of Egypt (CBE) said the CBE has reserves worth $ 35 billion which are deposited in safe government bonds. He said the CBE has not lost a penny.

He reiterated that the current developments in foreign banks would not be echoed in the Arab ones, noting that the plan for reforming the banking system which was ratified by President Hosni Mubarak in 2004 succeeded by 95 per cent. He said the foreign exchange rate is disciplined, adding the black market has been closed for ever.

Meanwhile, Investment Minister Mahmoud Mohieddin said the Egyptian banking system was safe and solid, noting that banks had enough liquidity.

Mohieddin denied that Egypt had direct investments in any of the heavy-weight financial institutions that collapsed recently. He added, however, that Egypt was not isolated from international developments.

The international crisis could affect exportation and importation, Suez Canal revenues as well as investments in the Egyptian bourse which contribute part of the hard currency reserves as well as foreign investments which are the main source of foreign currency, he said.

Mohieddin expected the tourism sector to be influenced by the crisis, calling for tapping new markets for tourism in Arab and Asian states.

Egypt's banking system will not be much affected by the world financial crisis as most of credits are limited to local market and so the national economy is away from the current world real estate financing crisis, the Finance Minister Yousef Butros Ghali said.

"Besides, our economy is strong and is capable of surmounting the current crisis," Ghali said at the 18th meeting of the International Monetary Fund (IMF) international committee of financial policies in Washington.

The committee meeting comes on the margin of the IMF and World Bank annual meetings to wind up.

In case demand on Egyptian exports goes down, local consumption and investments will give an impetus to the national economy to keep budget deficit rate, estimated at 6.6 percent of Gross Domestic Product, stable, and keeping Egyptian pound stable to the Dollar, he said.

"We also have an international reserve of $ 34 billion and there is a surplus in public budget account," Ghali said.

Local and foreign debts are also within safe limits, he added.

Fifteen European leaders met in Paris to tackle the global financial crisis, with governments being asked to commit themselves to preventing any major banks from collapse.

French President Nicolas Sarkozy, the current head of the European Union, said he hoped to persuade his peers "to speak with one voice" in a desperate effort to contain the worst financial crisis since the 1930s Great Depression.

Under the terms of a draft declaration being discussed, the 15 member states of the Euro zone single-currency bloc were to commit themselves to prevent any bank collapse and would step in to recapitalize failing institutions.

"We confirm our commitment to act together in a decisive and comprehensive way in order to restore confidence and proper functioning of the financial system," according to a copy of the draft statement.

"Governments remain committed to avoid any failure of systemically relevant institutions, through appropriate means including recapitalization," the statement added.

The draft statement said the countries would also guarantee new medium-term loans between private banks in a bid to kick-start interbank lending, which has ground to a halt since the credit crunch began.

This offer would stand for an "interim period" and would see governments underwriting new loans of up to five years "on appropriate commercial terms" by a variety of means, including issuing securities, the statement said.

Before joining his 14 Euro zone colleagues, Sarkozy held bilateral talks with Prime Minister Gordon Brown of Britain -- which does not use the euro currency -- to talk about British plans already unveiled to partially nationalize some of Britain's major banks.

Later at the summit, as he greeted European Commission president Jose Manuel Barroso, who was also taking part in the talks, Sarkozy said he expected a "coordinated, ambitious" plan to contain the financial crisis to emerge from discussions.

"We're going to try to get all of Europe facing in the same coordinated and ambitious direction," he said, referring to this week's Brussels summit of all 27 European Union members.

"That's what I expect: Europe speaking with one voice," he added.

Upon entering the talks, German Chancellor Angela Merkel said the summit would send a "very important signal" to calm down the markets.

"This meeting is to decide on coordinated joint action in the Euro zone so that every country in the coming days can put in place measures that stabilize the financial markets," Merkel told reporters.

Financial markets across the world suffered massive losses throughout last week when all efforts to restore confidence appeared to fail.

Brown believes that confidence can only be restored if governments follow his lead in providing funds to not only prop up individual banks, but to free up loans between institutions that keep capital markets moving.

Brown's government has set aside 250 billion pounds (315 billion euros) to guarantee this trade, in addition to 200 billion pounds in short term loans and 50 billion to buy stakes in major banks.

Austria's Chancellor Alfred Gusenbauer said the rest of Europe should follow the lead set by Britain.

"What Britain has done makes good sense and we should follow their experience," he said.

Sarkozy confirmed that there would be an emergency cabinet meeting to examine a plan to guarantee interbank loans, followed by an address by the president to the nation in which he would "announce a number of measures".

Lawmakers said a law on guaranteeing French banks would go before parliament this week.

And in Germany, Europe's biggest economy, press reports said that Merkel's government would announce after the summit a rescue package worth several hundred billion euros for its banks.

Berlin is expected to guarantee interbank loans with between 300 and 400 billion euros (405 to 540 billion dollars) and to provide banks with fresh capital in exchange for shares in the banks, as in the British plan.

Portugal's finance minister also announced that his government was offering a 20-billion-euro state guarantee for banks headquartered in that country.

Leaders of the Group of Eight (G8) major economies pledged in a joint statement to hold a global financial crisis summit "in the near future" with other key countries.

"We are confident that, working together, we will meet the present challenges and return our economies to stability and prosperity," they said in the statement, which was released by the White House.

Leaders of the G8, which groups Britain, Canada, France, Germany, Italy, Japan, Russia and the United States, "are united in our commitment to fulfill our shared responsibility to resolve the current crisis," they said.

The G8 also embraced the idea of an emergency international summit on the crisis - a gathering called for by French President Nicolas Sarkozy - while stressing it "must involve both developed and developing countries."

"We look forward to a leaders' meeting with key countries at an appropriate time in the near future to adopt an agenda for reforms to meet the challenges of the 21st century," the leaders said.

"While our focus now is on the immediate task of stabilizing markets and restoring confidence, changes to the regulatory and institutional regimes for the world's financial sectors are needed to remedy deficiencies exposed by the current crisis," they said.

The statement came three days before Bush was to welcome Sarkozy and European Commission chief Jose Manuel Barroso to his Camp David retreat for talks on the crisis.

The G8 leaders praised economic remedies administered after the Group of Seven (G7) - the G8 minus Russia - decided on a series of steps to address the crisis through "individual and collective action" by member countries.

"These measures will help financial institutions gain access to needed capital, support systemically important financial institutions and prevent their failure, unfreeze credit markets, restart secondary markets for mortgages, and protect savers and depositors.

"We will implement these measures on an urgent, transparent, and non-discriminatory basis. We pledge continued close cooperation and coordination," the leaders said in the statement.

The leaders said they "strongly support" the International Monetary Fund's efforts to aid "emerging economies and developing nations"

"We reaffirm that open economies and well-regulated markets are essential to economic growth, employment and prosperity. We therefore underscore the importance of not turning inward and of continuing efforts to promote trade and investment liberalization," they said.

"In this regard, we are determined to intensify efforts to bring about a successful conclusion of the WTO (World Trade Organization) negotiations with an ambitious and balanced outcome," they said.

Despite strong economic growth that produced millions of new jobs since the early 1990s, income inequality grew dramatically in most regions of the world and is expected to increase due to the current global financial crisis, according to a new study published by the research arm of the International Labor Organization (ILO).

The new report, entitled World of Work Report 2008: Income inequalities in the age of financial globalization, produced by the ILO's International Institute for Labor Studies also notes that a major share of the cost of the financial and economic crisis will be borne by hundreds of millions of people who haven't shared in the benefits of recent growth.

"This report shows conclusively that the gap between richer and poorer households widened since the 1990s", said Raymond Torres, Director of the Institute responsible for the report. "This reflects the impact of financial globalization and a weaker ability of domestic policies to enhance the income position of the middle class and low-income groups. The present global financial crisis is bound to make matters worse unless long-term structural reforms are adopted."

The report notes that while a certain degree of income inequality is useful in rewarding effort, talent and innovation, huge differences can be counter-productive and damaging for most economies, adding that "rising income inequality represents a danger to the social fabric as well as economic efficiency when it becomes excessive".

The report marks the most comprehensive study to date of global income inequalities by the Institute, and examined wages and growth in more than 70 developed and developing countries. It calls for longer term action to put the global economy on a more balanced track, including promotion of the ILO's Decent Work Agenda to link economic, labor and social policies to boost employment and improve incomes and income distribution.

The report says that as global employment rose by 30 per cent between the early 1990s and 2007, the income gap between richer and poorer households widened significantly at the same time. What's more, compared with earlier expansionary periods, workers obtained a smaller share of the fruits of economic growth as the share of wages in national income declined in the vast majority of countries for which data was available.

"The ongoing global economic slowdown is affecting low-income groups disproportionately", the report says. "This development comes after a long expansionary phase where income inequality was already on the rise in the majority of countries."

Among its other conclusions, the report says:

- Employment growth has also occurred alongside a redistribution of income away from labor. In 51 out of 73 countries for which data are available, the share of wages in total income declined over the past two decades. The largest decline in the share of wages in GDP took place in Latin America and the Caribbean (-13 percentage points), followed by Asia and the Pacific (-10 percentage points) and the Advanced Economies (-9 percentage points).

- In countries with unregulated financial innovation, workers and their families became increasingly indebted in order to fund housing investment and consumption. With stagnant wages, this was the key to sustain domestic demand. However the crisis has underlined the limits to this growth model.

- Between 1990 and 2005, approximately two thirds of the countries experienced an increase in income inequality. The incomes of richer households have increased relative to those of the middle class and poorer households.

- Likewise, during the same period, the income gap between the top and bottom 10 per cent of wage earners increased in 70 per cent of the countries for which data are available.

- The gap in income inequality is also widening – at an increasing pace – between top executives and the average employee. For example, in the United States in 2007, the chief executive officers (CEOs) of the 15 largest companies earned 520 times more than the average worker. This is up from 360 times more in 2003. Similar patterns, though from lower levels of executive pay, have been registered in Australia, Germany, Hong Kong (China), the Netherlands and South Africa.

Noting that prospects are for a continuing increase in income inequality in the course of the present economic situation, the report also added that excessive income inequalities could be associated with higher crime rates, lower life-expectancy, and in the case of the poor countries malnutrition and an increased likelihood of children being taken out of school in order to work.

"Already now, there are widespread perceptions in many countries that globalization does not work to the advantage of the majority of the population", the report says. "The policy challenge is therefore to ensure adequate incentives to work, learn and invest, while also avoiding socially-harmful and economically-inefficient income inequalities."

President George W. Bush reassured Americans about the long-term health of the economy, insisting that the U.S. is still "the best place in the world to start and run a business."

"In the long run, the American people can have confidence that our economy will bounce back," Bush said in his weekly radio address.

"America is the best place in the world to start and run a business, the most attractive destination for investors around the globe, and home to the most talented, enterprising, and creative workers in the world."

The comments came as new data showed construction starts on new U.S. homes slumped 6.3% in September to the lowest level since the 1991 recession.

Housing starts fell to an annualized rate of 817,000. That was down 31.1% from a year ago in the latest evidence of the bursting of the housing bubble that has ravaged the U.S. economy and led to the global financial crisis.

In hope of halting the downward slide, the U.S. government is now using a portion of the $700 billion authorized by Congress to inject capital directly into troubled banks by purchasing their equity shares.

"These actions will take more time to have their full impact," Bush cautioned. "But they are big enough and bold enough to work."

The president argued that the U.S. remained a country where all people have the freedom to realize their potential and pursue their dreams.

The Organization of the Petroleum Exporting Countries said it had brought forward an emergency meeting to discuss the impact of global recession on oil markets to Friday next week from November.

Pressure has been mounting within the 13-member group to reduce supplies as oil prices have fallen by more than 50 percent from an all-time high of $147.27 hit in July, dragged down by assumptions economic weakness will destroy demand. U.S. crude fell below $70.

OPEC has not officially said what price it was seeking, but analysts said the market was heading towards unsustainable levels as far as producers were concerned.

U.S. deficit rises, and consensus is to let it grow "They are concerned that the momentum was going to pull it down to $60... At around $60, it starts to impact the Saudis' budget," said Lawrence Eagles of JP Morgan.

A statement from the Vienna OPEC secretariat said only that the OPEC secretary general, following consultations with other ministers, had decided to reschedule a meeting planned for November 18 to October 24.

OPEC last met in September and originally had not been expected to meet again until December 17, but earlier this month, it called an extra meeting to discuss "the global financial crisis, the world economic slowdown and the impact on the oil market."