Time for a Mideast infrastructure development bank
YOU can tell a lot about a region by the jokes its peoples tell about themselves. Occasionally a joke travels far and wide, adapted to local circumstances. Here is one I have heard in Dubai, Jeddah and Cairo, and I heard it retold recently in the context of a Palestinian refugee camp.
The basic setup is the same: A fussy Western professor approaches a young boy in a bazaar and asks if he knows his math. The boy says: “Yes.” The questioner then asks imperially: “Ok dear boy, what’s two plus two?” The boy pauses and says: “It depends.” The Westerner is aghast: “It depends on what?” The boy does not skip a beat and deadpans: “It depends if I’m buying or selling.”
After a few chuckles, the joke-teller usually makes the point: “Entrepreneurialism is in our DNA. We’re an old trading culture. Even a young boy can be a trader. We don’t need lessons in capitalism.”
The joke-teller has a point. Anyone who travels to Cairo, Amman, Karachi or Casablanca will immediately see street entrepreneurs selling, hawking, pitching and cajoling. A city such as Dubai has put itself on the map globally as a hub — for air travel, logistics, tourism, services, and of course trade. There are a lot of people in those places asking: “Am I buying or selling?”
But the self-satisfaction in the joke belies the region’s economic underperformance. The combined gross domestic product (GDP) of the 22 countries of the Arab League is only slighter higher than the GDP of California.
California is an economic colossus that would be a top-seven economy (roughly equivalent to the size of India) if it were independent, but this should not excuse what has largely been slow, often corruptionhampered development across the region.
When US President Donald Trump meets with Saudi King Salman and other Arab and Muslim leaders at a series of summits in Riyadh, security and regional geopolitics will be high on the agenda. But the leaders should find time to tackle an equally consequential challenge: Long-term youth unemployment and underdevelopment.
With a few exceptions, notably the UAE and some individual entrepreneurs and companies, the Middle East and North Africa (MENA) is a region punching far below its potential weight. This underperformance has damaged societies, creating long-term youth unemployment levels that are the highest in the world, contributing to social breakdowns and widespread disaffection with rulers.
The Arab uprisings had a heavy economic frustration component undergirding them, and the situation has only gotten worse. On the eve of the Arab uprisings, youth unemployment stood at 27 percent, and today hovers around 30 percent.
Young populations can — and should — be a demographic gift. Much of East Asia’s industrial revolution was fueled by a young population. With more than half the MENA population under the age of 25, the question remains: Will this youth bulge be a gift or a burden?
There is one way to ensure the youth bulge is more productive. I have long argued that the Middle East needs its own development bank. This is even more urgent now. Such a bank should borrow a page from the new Asian Infrastructure Investment Bank spearheaded by China. Infrastructure investment is one of the greatest ways to get bang for your buck, and a surefire growth accelerator.
The region is awash in consultancy reports about the right regulatory environment for business growth, and the World Bank is bulging with technical experts who can help craft investment laws and develop capital markets regulations. There is no knowledge gap about how to develop an economy, build a productive private sector and grow export industries. There is an implementation gap.
The region is not short on entrepreneurship or conferences extolling entrepreneurship. The joke-tellers are right: There are some very talented entrepreneurs in the region, and not just the street-hawkers.
People such as Fadi Ghandour, founder of logistics company Aramex, Basil El-Baz, the Egyptian industrial entrepreneur building a petrochemicals empire from scratch, and Ronaldo Mouchawar, the Syrian CEO of Souq.com, the largest online retailer, are among the most talented business leaders in the world, not just in their regions.
The gathered Arab leaders should spare a moment away from the political crises of the day to consider the long-simmering economic crisis staring them in the face. They should join hands to create a Middle East infrastructure investment bank. The Trump administration should encourage and endorse such a move, and even find ways to partner with the region in this endeavor, though it should be a home-grown initiative.
The creation of such a bank will be a tangible achievement with long-term positive effects on the region that will benefit all actors. Trump recently announced a $1 trillion infrastructure investment plan in the US over the next decade. That is the kind of ambitious plan the Middle East needs — now. Afshin Molavi is a senior fellow at the Foreign Policy Institute of the Johns Hopkins University School of Advanced International Studies, and co- director of the emerge85 Lab.