Using Iraq to remake the economy of Mideast

As much as the Bush administration would like to use Iraq as a beacon of democracy in the Arab world, the bigger impact of the war may be a transformation of the economy of the Middle East.

Even before hostilities had broken out, interest was growing in Washington and in Arab capitals to find a way to spur growth in a region that over the past quarter century has lagged well behind other developing areas. As recently as March, Saudi Crown Prince Abdullah floated a regional economic plan, but virtually no one noticed because of the cataclysm over Saddam Hussein.

Now, with the transition in Iraq moving from conflict to reconstruction, the US is hoping to marry political reform and economic development in a way that could improve endemic problems in the region, such as youth unemployment, which Washington believes underlies terrorism. While some of the initiatives will no doubt find support, carrying out a broader economic plan, like any political one, will prove daunting, in part because of Arab hostility toward the US.

"The war has been like an earthquake under the whole region, and it will be important to take advantage of that shaking up on the economic side as well as the political," says Martin Indyk, a former US assistant secretary of State for Near East affairs. "It may even be easier to get at some of the reforms that are vital to the region's progress through economic initiatives, since to some of the regimes that will seem less threatening."

Already, the US is considering an economic initiative that might include trade incentives and other elements. Last week US Trade Representative Robert Zoellick said the administration is "working on following up military victory in the Gulf with some economic initiatives." Among the ideas being considered is an "enterprise initiative" similar to one the administration launched with Southeast Asian countries last year to spur economic reforms and trade liberalization.

That could foster the kind of economic opening that would work in tandem with the political reforms the administration hopes the war will have encouraged.

Other moves are bubbling up to help the process along. One is to put a priority on including Iraqi and Arab companies in the reconstruction of Iraq - as a way to develop a sense of participation in the country's rebuilding. Another is to promote the empowerment of women in Iraq and its neighbors as a key to democratization and development.

"The war has tormented the Arabs and left them in a moment of tremendous introspection and self-criticism," says Clovis Maksoud, director of the Center for the Global South at American University in Washington. "This can have a desirable outcome if this examination leads to a full spectrum of reforms, because we can't have genuine economic development without some form of democratic governance."

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