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COMMENT Lessons for ArAb economies


Matein Khalid is fund manager in a royal investment office and a writer in finance and geopolitics.


tigers has created vibrant capitalist enclaves across the Pacific Basin. The Asian economic miracles emerged from the traumas of war, foreign invasion, revolution, ethnic slaughter and mass poverty. In Asia, historical traumas deliver economic growth. The Arab world experienced multiple traumas as the colonial era ended. Israel’s creation ended in a military debacle in 1948 and the expulsion of the Palestinian refugees. Syria experienced more than a dozen coups d’état before the Assad regime consolidated power in a nightmarish dictatorship that is now fighting for its survival. Egypt reeled from the 1952 Free Officer coup, the Suez crisis, Nasser’s Soviet alliance, the June 1967 disaster and the loss of the Sinai to the IDF, the assassination of Sadat, an Islamist uprising in Upper Egypt in the 1990s and now the revolution in Tahrir Square. Iraq’s modern history is terrifying, from the murder of the Hashemite


t 24 / DECEMbEr 2011


King Faisal in 1958 to Saddam’s wars against Iran and Kuwait, the Baathist genocide against the Kurds and repression against the Shia, the 2003 American invasion and the terrorist/death squad bloodbath of 2004-2006. Kuwait was invaded by Iraq in 1990. Lebanon survived the 1975-90 civil war. Jordan was almost split apart in Black September. Algeria lost a million people in its anti-colonial war against France and another 200,000 in its civil war of the 1990s. Yemen had multiple civil wars even after unification. Gaddafi’s Libya was just surreal. Yet trauma did not produce economic miracles in the Arab world.


Why? The answer does not lie in autocracy alone since Taiwan, Thailand, South Korea and Indonesia’s economic miracles occurred under military dictatorships. Why do Silicon Valley’s supply chains for cellphones, laptops and disk drives lie in Taipei, Bangkok, Penang and Pusan, not in Cairo,


“The fall of Three auTocraTs in 2011 by people power uprisings armed wiTh TwiTTer, facebook and al Jazeera have changed The rules of The game.”


The Asian tigers offer a new way forward for the strife ridden Arab world.


Amman, Damascus and Algiers? Why did the Arab world not create an Infosys, a Samsung, a Singtel or a Taiwan Semiconductor? Trauma led to an obsessive focus on economic


THE DEVELOPMENT MODEL OF THE ASIAN


development in Asia but not in the Arab world. Why? Firstly, the petrodollar bonanzas since the 1970s have created rentier economies and entrenched dictators. I see Joseph Stieglitz’s oil curse in the rubble of Tripoli and Baghdad. Socialist policies ruined economies, as in Baathist Syria or the FLN’s Algeria. The Arab-Israeli wars nurtured “mukhabarat” states that were run by secret police elites clueless about the capitalist ethos. An Arab intellectual elite did not emerge to persuade the pinnacles of power with a vision for reform, though President Mubarak sought legitimacy in pro-market reforms after the 2004 devaluation of the pound. Huge state bureaucracies made privatisation


dangerous for Arab governments afraid of legions of jobless youths. The education systems in the Arab world were unable to create a Bangalore, let alone a Singapore. The Cold War subordinated economics to geopolitics. Intra-Arab trade was miniscule. Political instability led to the export of more than $1 trillion worth of private Arab capital to the West. The exceptions to the dismal economic tragedies


of Arab history were small Gulf microstates that created trading, logistics or finance hubs, notably Dubai, Qatar and Abu Dhabi. Bahrain replaced Beirut as the offshore banking hub of the Middle East in the 1970s but has now lost its allure after the tragic events of 2011. Kuwait is paralysed due to a continual power-struggle between the National Assembly and the government. Saudi Arabia leveraged its crude oil windfall to


initiate a $130 billion development programme and $60 billion worth of arms purchases. The prices of crude oil and LNG are the most attractive measures of growth, not entrepreneurship or high tech innovation. The Arab world desperately needs to rethink its development model, as the fall of three autocrats in 2011 by people power uprisings armed with Twitter, Facebook and Al Jazeera have changed the rules of the game. History has finally gone fast forward with a vengeance in the Arab world and the stakes are nothing less than regime survival.


IllusTrATIon: TArAk PArEkh


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