In the Mideast, oil or nothing?

DOHA, Qatar One hundred or so cranes pierce the skyline of this city of less than half a million. Is this another Shanghai, or are these one hundred question marks over the economic future of the oil-rich Middle East? With the world's third largest gas reserves, Qatar can afford plenty of real estate excesses as well as more admirable investments in education, a science park and a television channel - Al Jazeera - that challenges the intellectual and political stagnation of the Arab world as much as it confronts the hegemonistic assumptions of the West. But can ideas as well as money spread beyond the oil-rich enclaves of the Gulf to spur a region which, despite oil, has lagged behind most others in social and economic development? To talk of "the region" may seem a misnomer. It consists of several very different circumstances, ranging from the Gulf emirates at one extreme to Egypt and the Palestinian territories at the other. They are joined, however, by Islam and - with three key exceptions, Turkey, Israel and Iran - by Arab identity. Most of the countries between Iran and the Maghreb are oil exporters, but for the more populous countries such as Egypt, Iran, Algeria and Yemen, oil is at best a poverty palliative, at worst a crutch that prevents them from learning how to walk in the modern, globalized, industrialized world. The current wisdom here is that the region will not waste its oil wealth this time around as it allegedly did after the oil booms of the '70s and '80s. The money, it is said, is being invested in development at home or in the region rather than being squandered on baubles or filling the coffers of Western banks. But none of this will do much for the region's biggest need - job creation. Rich Gulf investors may be building in hotels in Egypt or holiday homes in Beirut that spread some economic stimulus. But what about the labor-intensive factory jobs that are desperately needed to absorb increases in labor forces? What the region needs is a combination of oil money, manufacturing expertise and access to rich-country markets. But there is scant sign of it. With the exception of Turkey, neither European nor Asian investors have done much to take advantage of such preferential access to Europe as the region enjoys. Meanwhile the local investors appear to lack much interest in or knowledge of labor-intensive manufacturing. The region sells oil and buys capital goods and commodities but otherwise is not a player in the global manufacturing world. Regional trade agreements remain just pieces of paper, as bureaucratic obstacles slow the development of trade within the region and local attempts at economic diversification result in the proliferation of small, inefficient, often state-owned industries. Most of the region refuses to face up to its demographic challenges. The economic progress of East Asia and Southeast Asia began with efforts to reduce population growth rates to enable savings to be increased and channeled into education and investment in higher productivity. South Korea, Singapore, Thailand in the 1960s and China from the late 70s followed that path. Although birth rates in the Arab world have come down, especially in North Africa, the region generally continues to have high fertility rates which promise annual labor force growth of 2 percent to 4 percent for the foreseeable future, even assuming that female work force participation remains low. Ironically it is Iran under the ayatollahs that has set an example in both family planning and women's education. But Iran's religious politics, state controls of industry, anti-Western views and separate ethnic identity prevent it from playing a catalytic regional role. Turkey, for its part, looks to Europe and has an uneasy relationship with the Arab world and huge potential conflicts over water with Iraq and Syria. Historical suspicions, the remnants of Arab socialism and current tensions over religious, migration and political issues seem to prevent a productive synergy between Europe and its southern neighbors. The Mediterranean is a human barrier, not a trade waterway. That standoff contrasts with the way Japan and its Asian neighbors took advantage of global trading opportunities to set aside historical grudges as deep as those in the Middle East. Meanwhile the Arab world lacks an exemplar among its own ranks that could show what can be done with openness to ideas and to trade, with commitments to education and, above all, to the realization that progress requires change, often radical. In China the regime feels threatened if there is insufficient economic growth. The opposite attitude often appears to prevail in the Middle East. Here in Qatar, one can see sparks of progress and enlightenment that could combine with wealth to generate change. But talk to the region's businessmen, journalists and intellectuals, who come here for the conferences and debates for which Doha is making a name, and it is hard to be optimistic that energy wealth will readily translate into any other form of wealth or energy.