An Arab Development Bank: Institutionalising Change in Middle East

Syn­op­sis
Auto­crat­ic regimes and pro-democ­ra­cy pro­test­ers in the Mid­dle East and North Africa agree on the need for sus­tain­able eco­nom­ic growth and inte­gra­tion into a glob­alised world. To achieve that, the region needs an Arab Devel­op­ment Bank like the devel­op­ment engines in Asia, Africa and Latin Amer­i­ca.

Com­men­tary

TEN MONTHS into a wave of pop­u­lar protests that are reorder­ing the Mid­dle East and North Africa, the inter­na­tion­al com­mu­ni­ty has yet to for­mu­late a coher­ent, region-wide response to the shap­ing of the new real­i­ties that have buried long-stand­ing assump­tions and cer­tain­ties. With the over­throw of three auto­crat­ic lead­ers in Tunisia, Egypt and Libya this year and the embat­tled pres­i­dents of Syr­ia and Yemen tee­ter­ing on the brink of demise, almost every oth­er coun­try in the region has been swept along by the tidal wave of protests.

For­eign pow­ers – the Unit­ed States, Europe, Chi­na and Rus­sia – have respond­ed ad hoc to the suc­ces­sion of crises rather than view­ing them as a groundswell of demand for change that will shape the region’s polit­i­cal map for a decade to come.

To be sure, the world’s pow­ers have dif­fer­ent per­spec­tives on the pop­u­lar push for greater free­dom and more eco­nom­ic oppor­tu­ni­ty. More­over, the sit­u­a­tion dif­fers from coun­try to coun­try. Nonethe­less, if there is one thing all, includ­ing the pro­test­ers, agree on, it is the need for devel­op­ment that pro­motes sus­tain­able eco­nom­ic growth, cre­ates jobs for the region’s huge youth bulge, strength­ens the pri­vate sec­tor and par­tic­u­lar­ly small and medi­um enter­pris­es, and inte­grates the region into an increas­ing­ly glob­alised world.

A region­al engine for devel­op­ment

To do so, the region needs an Arab Devel­op­ment Bank much like the engines of growth in Asia, Africa and Latin Amer­i­ca that func­tion as coor­di­nat­ing oper­a­tion cen­tres and knowl­edge hubs. Cre­ation of such an insti­tu­tion may be one of the few things that all par­ties – world pow­ers with mutu­al­ly exclu­sive agen­das, embat­tled Arab lead­ers and emerg­ing post-revolt gov­ern­ments – can agree on.

The region has the nec­es­sary build­ing blocks: fund­ing from the oil-rich Gulf states, a pool of indige­nous tal­ent and insti­tu­tion­al mod­els like the Asian Devel­op­ment Bank (ADB), the Euro­pean Bank for Recon­struc­tion and Devel­op­ment (EBRD) and the Inter­na­tion­al Finance Cor­po­ra­tion (IFC).

Coop­er­a­tion in the cre­ation of an Arab Devel­op­ment Bank could help shift the basis on which world pow­ers seek to find com­mon ground on ways to halt the blood­shed in coun­tries like Syr­ia and Yemen and respond to the like­ly erup­tion of vio­lence else­where in the region as the pop­u­lar revolts spread.

Fuelling the pop­u­lar revolts is the fact that two thirds of the Arab world’s 300 mil­lion peo­ple are under the age of 29 in a region with an aver­age youth unem­ploy­ment rate of 40 per cent. Accord­ing to the World Bank, Arab nations need to cre­ate some 100 mil­lion jobs in the next eight years. How­ev­er Arab gov­ern­ments have not demon­strat­ed vision or lead­er­ship to tack­le the prob­lem let alone dis­played cre­ativ­i­ty and inno­va­tion in devis­ing their poli­cies.

A devel­op­ment bank to seek solu­tions

Cre­at­ing an Arab Devel­op­ment Bank would help to break the log jam and cre­ate a basis for tack­ling the most press­ing prob­lem in the Mid­dle East and North Africa. It would pro­vide a vehi­cle for Arab gov­ern­ments to seek solu­tions and pro­vide a frame­work for nec­es­sary reform, for exam­ple, the way mem­ber­ship of the World Trade Organ­i­sa­tion forced Sau­di Ara­bia to take a hard look at parts of its legal sys­tem.

It would also stream­line efforts to cater to post-revolt expec­ta­tions of a bet­ter life and increased oppor­tu­ni­ty that run high in Egypt, Tunisia and Libya in the wake of the fall of their erst­while lead­ers, Hos­ni Mubarak, Zine El Abe­dine Ben Ali and Moam­mar Ghaddafi.

An Arab Devel­op­ment Bank would give the region own­er­ship of its tran­si­tion at a time that post-revolt gov­ern­ments are sen­si­tive about ensur­ing their country’s sov­er­eign­ty. Egypt, for exam­ple, can­celled in June plans to bor­row US$3 bil­lion from the Inter­na­tion­al Mon­e­tary Fund and the World Bank because the terms of the loan alleged­ly vio­lat­ed the country’s sov­er­eign­ty and would invite pub­lic protests.

Inter­na­tion­al com­mu­ni­ty takes first step

The inter­na­tion­al com­mu­ni­ty took a first step in the direc­tion of the devel­op­ment bank mod­el when the G‑8 that groups the world’s biggest economies recent­ly man­dat­ed the EBRD to assist the post-revolt gov­ern­ments of Egypt, Tunisia and Libya as well as Jor­dan and Moroc­co, whose mon­archs have ini­ti­at­ed a process of change. The EBRD is wait­ing for the 63 coun­tries and insti­tu­tions that are its share­hold­ers to rat­i­fy the expan­sion of its man­date. The G‑8 coun­tries have pledged US$38 bil­lion in new loans to sup­port the region’s tran­si­tion to democ­ra­cy.

The EBRD is the world’s one finan­cial insti­tu­tion whose rai­son d’aitre is and was tran­si­tion. Cre­at­ed in 1991, its task was to assist east­ern and cen­tral Europe in build­ing mar­ket economies and ensur­ing growth and devel­op­ment in the wake of the demise of com­mu­nism. The EBRD has much to offer the Mid­dle East and North Africa, yet it remains a Europe-based, Europe-focused organ­i­sa­tion rather than one that is ori­ent­ed to the Mid­dle East and North Africa.

Sim­i­lar­ly, the IFC, the World Bank’s pri­vate sec­tor devel­op­ment arm, could serve the Arab bank as an exam­ple of how to turn a prof­it on invest­ments in risky mar­kets and become a bea­con that gives pri­vate sec­tor investors the con­fi­dence to fol­low suit. This is par­tic­u­lar­ly rel­e­vant to the Mid­dle East and North Africa where the state dom­i­nates the econ­o­my.

Final­ly, the ADB has demon­strat­ed in the Asia-Pacif­ic that youth bulges are as much an asset as they are a chal­lenge. ADB’s focus on pro­mot­ing edu­ca­tion, the devel­op­ment of small and medi­um enter­pris­es and region­al inte­gra­tion ensured that eco­nom­ic growth was dri­ven by a young pop­u­la­tion that was gain­ful­ly employed.

The wave of pop­u­lar revolts sweep­ing the Mid­dle East and North Africa feed on indige­nous deter­mi­na­tion to force change despite the high price in blood that pro­test­ers are pay­ing. They demand to be part of the post-revolt tran­si­tion after the demo­li­tion of the old regimes. By giv­ing Arabs own­er­ship of the process, the Arab Devel­op­ment Bank would func­tion as a cat­a­lyst and a bridge in an increas­ing­ly polarised part of the world.

About The Author:
James M. Dorsey is a senior fel­low at the S. Rajarat­nam School of Inter­na­tion­al Stud­ies at Nanyang Tech­no­log­i­cal Uni­ver­si­ty in Sin­ga­pore and the author of the blog, The Tur­bu­lent World of Mid­dle East Soc­cer.

More news and arti­cles can be found on Face­book and Twit­ter.

Fol­low GlobalDefence.net on Face­book and/or on Twit­ter

Team GlobDef

Team GlobDef

Seit 2001 ist GlobalDefence.net im Internet unterwegs, um mit eigenen Analysen, interessanten Kooperationen und umfassenden Informationen für einen spannenden Überblick der Weltlage zu sorgen. GlobalDefenc.net war dabei die erste deutschsprachige Internetseite, die mit dem Schwerpunkt Sicherheitspolitik außerhalb von Hochschulen oder Instituten aufgetreten ist.

Alle Beiträge ansehen von Team GlobDef →