An Arab Development Bank: Institutionalising Change in the Middle East

RSIS presents the following commentary An Arab Development Bank:   Institutionalising Change in Middle East by James M. Dorsey. It is also  available online at this link. (To print it, click on this link.). Kindly forward  any comments or feedback to the Editor RSIS Commentaries, at   RSISPublication@ntu.edu.sg No. 145/2011 dated 10 October 2011 By James M. Dorsey 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.  he 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. James M. Dorsey is a Senior Fellow at the S. Rajaratnam School of  International Studies (RSIS), Nanyang Technological University. Click here for past commentaries. Click here to subscribe/unsubscribe to the mailing list. Find us on Facebook.

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