AMMAN, 17 May 2004 — There is a strong resistance in the Arab world against reform and democracy being imposed from an external power. Even if US “democratization” campaign is genuine, it will not be able to put in place new standards of Arab governance. Democracy and reform should be home grown and should take into consideration internal conditions and limitations of the various Arab countries. It is up to us to decide how we want to transform our countries in order to step firmly into the 21st century.
However, under the pretext that we should not submit to external pressure, the whole process of reform is being delayed. Most Arab countries do not have in place a mechanism to implement change and in certain countries there are no elections, no parliaments, not even a constitution that could provide a road map for such a process. Governments on their own are unlikely to introduce the kind of change and reform needed because this would undermine their control and power structure. What is left is for the Arab masses to go to the streets demanding change. But this is also unrealistic because the majority are simply busy trying to survive, besides there are all sorts of restrictions on public meetings, freedom of expression and formation of political parties. If reform cannot be immediately initiated from within, then allowing others to “reform” us may be the only option left.
When the Noble laureate in Economics Amartya Sen was asked to single out the most important event of the 20th century, he chose the spread of democracy. In spite of the momentous events of the last century, such as the two world wars, the defeat of Nazism, the disintegration of the Soviet Union, the landing on the moon, the rise of the Internet, and the cloning of living beings, Sen argues that preeminence should be given to democracy, because it enriches individual lives through more freedom and provides incentives to rulers to respond to the needs and demands of their people.
Democracy is not only the rule of the majority, but the route to greater tolerance, the protection of the rights of the minorities, and the acceptance of differences. In several countries of our region, there is still resistance to these basic principles at various social levels, thus hindering rapid progress and development.
The Arab region today is at a crossroads. Its leaders can either choose the traditional conservative approach, aimed at marginal damage control, or take bold decisions aimed at securing the future. The minimalist approach will almost certainly mean giving away the right to have a say in the future of the region and accepting what is imposed on us by outside powers.
One profound dilemma facing policymakers is the perceived conflict between freedom versus security, progress versus stability and change versus traditional values. The authorities in the region have typically responded to challenges facing them in the past with long time lags. Today the region is experiencing the cumulative effect of delayed responses to a long series of challenges in the course of the last few decades.
The main dimensions of a reform strategy would include: (a) strengthening and broadening the domestic political support base of governments in the region; (b) making economic growth a national obsession; (c) developing the region’s human resources; (d) changing the role of the state; from being the main promoter of economic activities to that of a regulator and a facilitator; (e) empowering the private sector and (f) re-engaging the world by projecting a positive image of the region’s culture and religion.
Each of these requires reforms and policies that constitute radical departure from the past, have short-term costs and can alienate many vested interests. At the domestic political level, this calls for changes in the mode of governance and in the introduction of democratic practices.
At the economic level, the challenge is for policymakers to think beyond short-term revenue needs and allocations in their annual budgets and to concentrate more on macroeconomic viability, competitiveness and sustainable growth.
By far the most dangerous enemy at this stage is complacency. In the current geopolitical environment, every missed opportunity to act has direct and immediate risks associated with it that should not be underestimated.
To attract capital, national economies have no choice but to be soundly managed. Every country in the region has to put reform and strong corporate governance at the top of its agenda. If governments do not have in place an effective legal and regulatory framework that protects the rights of investors and consumers and if governments do not live up to their fiscal promises while their central banks produce excessive liquidity or keep their currencies overvalued, they would be subject to “capital” punishment. Not only will they fail to attract the required capital funds but may even lose the financial resources they already have.
Allowing markets to prevail requires having a set of cultural values that emphasize the virtue of competition, the ability to create and gain in a socially acceptable way, the legitimacy of profits and the importance of freedom of transaction. Spreading a market culture in the region is therefore not only an exercise in economic restructuring, but also an acceptance of the basic values and standards that make the system work.
However, excessive freedom and market competition if left without regulation can lead to anarchy. Regulatory bodies in telecom, banking, insurance, transport, etc., are needed to ensure fair pricing and competition, stem corruption, force accounting transparency and provide a stable socio-economic environment for enterprises to flourish. Free markets can function only if the right combination of regulation, supervision and the rule of law is put in place.
The region has been preoccupied with the Arab-Israeli conflict and huge amounts of resources were devoted to mitigate this threat. In many cases, long-overdue economic and political adjustments were delayed, using this cause as an excuse. While the Arab region allocates about 8 percent of its national GDP on defense, this rate falls to less than 3 percent in many other regions of the world. Not only have these resources been “misallocated”, but the forgone income and opportunities associated with this misallocation have undoubtedly affected the region’s economic growth rates. Some governments have argued that before a solution is found to the Palestinian and Iraqi problems no genuine progress on reform could be achieved. While it is crucial to reach a just and lasting peace settlement in the region, nevertheless, reform should not be held hostage to such an event, otherwise the region will be the loser on the two fronts.
To conclude, it is time for all of us in the region to stop blaming others for our miseries and identify our internals weaknesses that have been dragging us behind. These lie in our educational systems that do not prepare us to think creatively, in the lack of freedom of expression, in our weak legal and regulatory environment, in the absence of transparency and accountability, and in our inability to look at our religious and cultural past as an inspiration for the future rather than an ultimate goal we aspire to achieve. Only by confronting the enemy from within we will be able to address the legacy of failure that has restricted growth and development of the region.
(Henry T. Azzam is chief executive officer at Jordinvest.)
