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    Middle East
     Jun 2, 2011

Growth vital for Arab Spring
By Hossein Askari

President Barack Obama, while focusing on political change in his long-awaited speech on the Middle East last month, to his credit also recognized the need for economic development and growth in the region.

This is not just a need; it is an imperative for achieving a successful transformation of the region from autocratic to democratic governance. For regime change to be successful, it must be quickly followed by meaningful economic prosperity. An economic turnaround will not begin in earnest before regime change is well underway. The importance of the sequence and the symbiotic relationship between a political and an economic about-face may have escaped policymakers and regional experts, or

has been underestimated, in the Washington shuffle.

To differing degrees, one of the major reasons for, if not the major drive behind, protests in the Middle East and North Africa has been economic deprivation and injustice. While a combination of many factors go into economic success, the quality of institutions - the rule of law, respect for contracts, protection of property rights, trust, effective regulations and their supervision, civil freedom and the like - are recognized as important elements for economic success and sustained growth.

In the Middle East and North Africa region, where dictators have been the norm and numerous countries have been blessed with enormous oil and natural gas reserves, illegitimate rulers and their cronies have little incentive to develop and nurture good institutions. They can best enrich themselves if they are the law unto themselves and face no restrictions, allowing corrupt practices and rent-seeking activities to thrive.

While rulers are busy enriching themselves and signs of economic injustice - such as fat foreign bank accounts, lavish palaces, luxury cars, parties with expensive artists and much more - develop, the local economies languish, citizens are deprived amid rising unemployment and there is little hope for the average person to live a dignified life. Invariably, economic and social injustice drive protests, but the foundation for an economic turnaround and economic justice will not come about under autocratic rule because ruling elites are unlikely to adopt reforms that will ultimately limit their ability to enrich themselves.

In such a setting, while protesters may be euphoric in the immediate aftermath of a dictator's departure, their euphoria might be short-lived. Citizens will need to see tangible economic benefits quickly, at least the basic necessities of life, followed by jobs. Otherwise, new protests will be sparked and the ensuing turmoil will only exacerbate already poor economic conditions. The military may step in to restore law and order with the noblest of intentions, but they could then become comfortable in their new-found position, and the euphoria could end with a military dictatorship and the continuation of a closed circle of economic deprivation and injustice.

The White House should take note. The effort to bring about the required sea change in economic performance in the Middle East will be much more difficult than the political change we have been witnessing. While the right spark can overthrow dictators in a matter of days, the initiation of a sustained economic turnaround, depending on the circumstances, could take a number of years. It will require significant resources as well as a deep understanding of these economies.

In the case of Egypt, it will require much more than what was initially articulated by President Obama in his speech, namely US$1 billion in debt relief and $1 billion in guaranteed loans; those amounts are in addition to proposals from the International Monetary Fund and the World Bank, $180 million pledged by Britain, $1.75 billion by the European Union, and $20 billion "loosely promised" last month at the Group of Eight summit in France.

The White House should look to the assets of the Mubarak regime, most of which have been stashed abroad. Although Qatar is initiating a drive with the rich members of the Gulf Cooperation Council (GCC) to establish Middle East Bank for Reconstruction and Development, this may be a tough sell to family rulers who may be praying deep down for a failure of the Arab Spring and with Saudi Arabia doing all they can to stop political change and protect all remaining Arab dictators in the region.

Still, the members of the GCC - Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates - should think long and hard about their financial support for an orderly transition to democracy in those countries already troubled by internal unrest, lest they be blamed for turning their backs and face turmoil that could be their own undoing.

France's President Nicolas Sarkozy, ever the optimist, has expressed the hope of getting $10 billion from the GCC. Washington will have to develop a much more thoughtful plan for Egypt and Tunisia, and indeed for the region, than what a standard IMF or World Bank proposal is likely to offer. Libya may be much easier, given its significant foreign assets and the confiscated foreign assets of Muammar Gaddafi, his family and cronies.

Again, the important point that cannot be overemphasized is the significant attention, time and resources required for an economic turnaround. If the White House underestimates this need and does not move quickly to get the process underway, Obama's initiative to improve relations with the Muslim world will fail and the Arab Spring will quickly turn back into the Arab winter.

Flowery speeches that single out some of the tyrants of the Middle East while saying nothing about the al-Sauds who are trying to reverse the movement to representative government and undermine US efforts, and committing insufficient resources to an economic turnaround, will do more harm than good in improving relations with the Muslim world.

Hossein Askari is Professor of International Business and International Affairs at the George Washington University.

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