Mideast leaders defend free market at economic forum
Despite capitalism's recently damaged reputation, participants at the World Economic Forum on the Middle East this weekend agreed that minimal regulation was key to growth.
Dead Sea, Jordan
With US policymakers focusing on bailouts, stimulus measures, and expanding social welfare programs, it can be easy to believe that the whole world's economic agenda has changed. But in Jordan and other countries in the broader Middle East, the drive for economic liberalization is alive and well.Skip to next paragraph
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At the World Economic Forum on the Middle East this weekend, the economic crisis and reforming institutions dominated much of the agenda – but for many of the participants, reform meant pushing for freer trade, more foreign investment, and minimal regulation.
"I hope governments do not take what has been happening in the last eight months as an excuse to interfere more in business," said Khalid Abdulla-Janahi, chairman of the Ithmaar bank in Bahrain, in a panel discussion at the Forum. "If we [allow governments to come] in again, that is going to be the biggest damage that we're going to have [from the crisis]."
And the panel on reforming financial markets concluded that "regulation may, in fact, create more problems in the near and long terms, especially vis-a-vis the pre-eminent goal of furthering economic growth."
Why the discussion is different in the Middle East
There are many reasons the discussion in Jordan sounds very different from the one in Washington.
For one thing, says Mahsood Ahmed, regional director for the International Monetary Fund (IMF), Middle Eastern nations simply weren't hit as hard by the crisis. The IMF is predicting growth in the region will slow down to about 3 percent for the oil exporters, and 2 to 2.5 percent for the non-oil economies. That's down significantly from recent years, but it's still not contraction.
Another reason is that the non-oil producing states of the Middle East simply don't have the cash for bailouts and stimulus packages; their budgets rely on foreign investment, foreign aid, and remittances.
But perhaps most important, the Middle East has a pressing concern that Europe and North America don't: a massive youth boom. According to one estimate floated often at the forum, the Middle East will have to generate 100 million new jobs in 10 years – and it only has about 100 million jobs now. Youth unemployment in Jordan is currently at about 73 percent, according to a report on the topic released this week by the Middle East Youth Initiative.
The youth bulge was perhaps the most-discussed topic at the Forum, and another major argument for open markets: liberalization fueled the high growth rates of the past decade, the reasoning goes, so more liberalization is needed to create jobs for millions of young people.
"The only sustainable way to provide jobs for the young and growing population is by encouraging a lot of small and middle enterprises, and private sector activity," says Ahmed. "And the role of governments has been to create the regulatory framework and infrastructure and support that would make that possible."
Over the past decade, many Middle Eastern countries have been involved in IMF structural adjustment programs, which offered them economic support in exchange for liberalizing, or "reforming" their economies. The progress of those reforms hasn't always been even, but open markets and foreign investment have become rallying cries that neither Arab businessmen nor governments are likely to give up, analysts say.
Jordan's free-market success