To globalise or not to globalise?

Dr Yezid Sayigh, a renowned author, Palestinian peace negotiator and University of Cambridge academic, offers his answers to the above question

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By  David Ingham Published  April 29, 2001

The Middle East and the globe|~||~||~|Dr Yezid Sayigh is assistant director of studies at the Centre of International Studies, University of Cambridge, UK. Amongst other things, he is a renowned author and has been a key figure at Palestinian peace talks. In June, he will be a key presenter at the Cambridge Middle East Executive Retreat. Here, he offers his thoughts on the region’s progress in joining the New Economy

Arabian Business.com
The Cambridge Executive Retreat will focus on global issues — how relevant are these to the Middle East?

Yezid Sayigh
Whatever the degree of Middle East integration into the global economy, there can be little doubt that global issues are relevant to the region. This applies to the broadest themes, such as the direct physical impact of global warming and the parallel implications for hydrocarbon exporters, as well as to the spread of Internet use, automated banking, intellectual property, etc. The region is already very integrated by certain measures, and it is definitely technologically-dependent, and so the question is not whether global issues are relevant but rather whether or not local governments will attempt to respond more pro-actively to emerging challenges and opportunities.

Arabian Business.com
There’s a lot of talk about the Middle East needing to join the global economy. Two things: does it really need to join the global economy and do you think it will, or will the forces of isolationism win?

Yezid Sayigh
We saw during the 1997 Asian financial crisis (and the lesser Russian crisis in 1998) that the Middle East a) had not fully joined the global economy, and b) had been spared the resulting upheaval. This gave grist to the mill of those who argue against globalization. However, I feel that this is something of a straw man or red herring argument that misses the point.

The Middle East had not joined the global market fully NOT because governments in the region had individually or collectively decreed not to or had put formal policies into place to prevent participation by citizens or corporations, but because the structure of local political economies (including the often parasitical or non-competitive nature of the private-public sector relationship) offered secure return and lower risk and therefore reduced the comparative advantage of engaging more actively in the global economy. In other words, many Arabs operate in the global economy; but the incentive structure is not in place to make this a major pattern nor is it backed by targetted government policies, for example in the IT sector).

Incidentally, I’m not convinced we know all that much about Arab economic and financial behaviour. We don’t really know, for example, how Arab flight capital invested overseas fared in 1997 and 1998. I suspect that much of the broad generalizations about Arab economies and globalization lack empirical basis.

It also follows that I don’t think that the forces of isolationism will win, in those countries where contact with the global economy is relatively open and especially where transaction costs are cheap, such as in GCC states. This is not to say, however, that each country won’t find its own way of adapting to, or even integrating into, the global economy; nor is it to imply that they can do so as autonomous players or on their own terms.
||**||Is isolationism necessarily bad?|~||~||~|
Arabian Business.com
Is isolationism necessarily bad?

Yezid Sayigh
Depends what you mean by isolationism. Albanian-style autarky? Syrian style? Are Libya, Syria, or Iraq isolated, to take what in some ways are arguably the most isolationist? If you mean by isolationist a deliberate attempt to minimize or prevent direct and unfettered access to the Web Economy, then it might be possible to survive economically and accept a lower level of growth and of living standards, but I’m dubious that the associated social and political pressures can be absorbed beyond the medium term.

That said, authoritarian or semi-authoritarian politics can co-exist with more liberal economics, but I suspect that in order to secure a stable balance the government(s) concerned would have to be part of an effective regional market grouping in order to provide markets on favourable terms. (Bear in mind that no Middle East country has been autarkic since independence — all are internationalized, even if they are not truly globalized. Many of the challenges facing governments in the region arise not from globalization as such, but rather from liberalization, which is what brings direct social pain and affects power relations.)

Arabian Business.com
Re-engineering businesses to make them more e-business centric and more responsive requires cultural changes. Are regional companies and also governments capable of changing their mindset and do they have the political will to do it?

Yezid Sayigh
The key issue at stake is not whether or not to give a blanket endorsement of a broad, vague notion like globalization. Nor is it simply to learn to use modern information and communications technology in conventional business operations, or even to reorganize business. Rather, the key issue is to understand that business and governments cannot respond effectively to changing global market realities — meeting challenges and seizing opportunities — without taking into account ‘soft’ factors in their own national home bases. Factors such as entrepreneurial culture and skills, and the relationship between private and public sector or between economic and political decision-making.

Reforms are certainly needed. And in order to bring them about, governments must have a clear vision of their objectives and of their way to achieving those objectives. Turning vision into reality therefore requires sustained political will, and also requires coalition-building in order to persuade key groups in domestic society and political economy of the need for change and of the particular strategies adopted.

The availability (or not) of additional resources, such as windfall hydrocarbon export revenues, allow some Middle East countries to cushion their public during the transition, so long as they actually pursue well thought-out and determined reforms and attempt to limit the extent to which income disparities widen. In other words, the likelihood of genuine commitment to reform or of successful reform is low in certain countries, but could be substantially higher in others, thanks to a combination of skillful political management and availability of capital.
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Arabian Business.com
As long as certain Middle East countries, particularly smaller ones, can rely on oil and natural gas, are they ever going to feel the need to diversify and streamline their economies?

Yezid Sayigh
Difficult to say. The Saudi and Kuwaiti examples are not encouraging, though the other GCC cases seem more so. My previous remarks about cushioning the impact of reforms apply.

Arabian Business.com
Assuming deregulation and opening is a good thing, how much progress do you think the region is making?

Yezid Sayigh
I don’t have up-to-date statistics and analyses, but my understanding is that privatization and deregulation have proceeded slowly, though opening up in trade and certain product and service sectors has moved more. My view is that the more important question remains unresolved in most Arab countries: a) the close fusion or lack of clear separation between political and economic decision-making, and b) the lack of checks and balances to prevent unwarranted and inappropriate executive intervention in the competence of central government institutions that deal with financial management (including economic and fiscal).

Arabian Business.com
Are governments doing a good enough job of telling their people about the benefits of openness and deregulation?

Yezid Sayigh
No, I don’t get the impression that local governments are doing a good enough job in telling their publics about the benefits of deregulation, nor do almost any seem to be pursuing reforms with sufficient determination or consistency, other than the minimal stabilization measures that allow them to placate the IFIs while preserving the basic structure of the domestic political economy and of domestic power relations.

Arabian Business.com
What factors are holding back the region’s economic development?

Yezid Sayigh
Whew, too many questions. A whole lot, but above all authoritarian political structures that view the emergence of social groups with growing autonomous wealth as more a threat than a boon, and that retain the ability to intervene willfully in domestic markets and economic policy and to cause further distortions.

Note: I speak not as a Thatcherite free-marketer, but as someone fed-up with the self-indulgent willfulness of many Middle East rulers and power elites and big businessmen.

The Middle East Executive Retreat is being co-ordinated by Intevents.||**||

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