The Chinese model offers the Middle East a path out of its postconflict economic slump
Originally published in The National Interest – Sept. 24, 2012
China has built infrastructure across the Arab world that could facilitate an economic revolution to match ongoing social movements. But that’s hardly been the case.
After revolutions—largely provoked by economic injustice—Arab economies still rely on tourism, oil and foreign aid, even if members of the Arab diaspora are keen to bring international industry to their homelands. The Arab world must reach out to its communities abroad. That’s what China did in the early 1980s, and now it owns a mint in U.S. debt.
A Tunisian American with a plan
After Tunisia’s Jasmine Revolution last year, a Tunisian American eBay executive contacted his homeland’s interim leaders with a plan to revolutionize the economy. Sami Ben Romdhane wanted to turn start a “Tunisian Silicon Valley,” a regional hotbed for IT innovation.
“We have the skill set and a lot of young people who have graduated with degrees in IT. We have the brainware,” Ben Romdhane said of generation that orchestrated a revolution with Facebook and Twitter.
“I talked to the minister of employment, before [Islamist political party Ennahda] came to power. We had very good discussions about what we can do,” Ben Romdhane said. But since Ennahda’s rise, it has declined to engage Ben Romdhane. Tunisia’s nascent IT revolution has stalled. Ben Romdhane says Ennahda has failed to address “the demands of the revolution: integrating young people, letting them become entrepreneurs and make jobs.”
Meanwhile, Tunis lauds a marginal boost in tourism this year as a sign the postrevolutionary economy is returning to 2010 figures—back to Ben Ali and an economic model that famously failed to put bread on the table for many Tunisians.
But Tunisia’s unemployment rate continues to hover around 20 percent after a revolution spurred by the self-immolation of unemployed twenty-six-year-old Mohamed Bouazizi. Like many analysts from the region, Ben Romdhane says the economic impasses Tunisia and other Arab nations face are due to “political instability.”
Who would invest in such a volatile atmosphere? Who invested in China after the tumult of the 1970s cost the country a great deal in human capital? Expatriate business interests such as Ben Romdhane, capable of the kind of foreign direct investment and expertise that initially moved China from chaos into modernity.
At the onset of the opening up and reform in the 1980s, Deng Xiaoping looked to the only people who would invest money and expertise into bringing industry to the People’s Republic, despite the risk.
“When China initially opened in 1979, it did not know how to connect with the rest of the world and people outside China did not know how to deal with Chinese either, because of the long-time isolation,” said professor at the Hong Kong University School of Business Eric C. Chang.
“Deng Xiaoping met many overseas Chinese, including business people and scientists, encouraging them to go back to China and to help play a role model to attract foreigners to come,” Chang added, “They had relatives in China. They had the passion for China. Therefore, they were willing to take the risk.”
“In the initial years, overseas Chinese were the major forces that drove the businesses,” Chang said, explaining that overseas Chinese acted as ambassadors to Western enterprises.
Deng oversaw the creation of eighteen hypercapitalist “special economic zones” in the 1980s in coastal provinces, where industrial manufacture could easily be brought to port for sale on the international market. Incentives like preferential tax exemptions welcomed overseas business interests to invest in the new Chinese industry that blossomed there.
The results for the Chinese ancestral homeland were, as we know, monumental. Between 1979 and 2005, the number of Chinese living below the poverty line dropped by roughly 70 percent, according to the World Bank.
East meets Middle East
It’s time to envision an Arab special economic zone—a space, concrete or abstract, where Arabs can welcome international interests to bring innovative industry to the region. For all of China’s political scandals, corruption and demonization, the Chinese model offers the Arab world a path out of its postconflict economic slump.
There are three hundred forty million Arabs in the Middle East and North Africa region, and over half are under the age of twenty-five. That’s only a fraction of the Chinese population of the 1980s, already approaching a billion. But unified, the Arab World boasts still a considerable wealth in human capital.
And some thirteen million Arab migrants live outside of their home countries, according to the International Organization for Migration (IOM), proportionally rivaling China’s overseas community.
Where an estimated 2.6 percent of Chinese live out of China, nearly 4 percent of Arabs live outside of their home countries, although many have been made refugees by conflict in the region.
The Arab world’s massive domestic workforce and its business community in the diaspora show that Arabs are ready for their own opening up and reform.
Turning remittances into investment
Overseas Arabs have money, and that money already plays a role in their home countries’ economies.
Arab nations received $35.1 billion in remittances flows in 2010, according to the IOM. Remittance figures represent untapped capital that could be redirected to industrial development projects.
“The Arab World accepts a lot of remittances from individuals and households. These aren’t project-specific investments that benefit society as a whole, with professional and societal developments,” said Hazami Barmada, director of Arab development organization Al-Mubadarah Arab Empowerment Initiative, who is working to establish links between international Arab businesspeople and projects in the Middle East and North Africa region.
“Remittances go into personalized accounts,” Barmada added.
Where’s the Arab Deng?
The diaspora is there. The money is there. All that remains is government backing.
Ben Romdhane’s impasses with the new Tunisian government show that all the Arab development project lacks is a Deng Xiaoping.
Not only have some Arab countries failed to provide overseas Arabs with incentives to invest in their ancestral homelands, some have even opposed overseas Arab involvement.
“For many reasons, diasporic business communities are marginal, if not unwelcome, to the process—as is any pressure to widen the political-economic franchise,” said Osama Abi-Mershed, director of the Contemporary Arab Studies Department at Georgetown University in Washington.
“Even when a country such as Iraq [under Saddam] suffered incredible brain drain, its government, while paying lip service to the Iraqi diaspora, was reluctant for economic, political and sectarian reasons to engage in practical resolutions,” said Joseph Sassoon, a fellow at Oxford University specializing in contemporary Arab policy making.
Amid Arab governments’ variety of apprehensions about integrating overseas Arabs into development projects, competition represents one real concern, with historical precedent.
“Lebanon’s post-civil war reconstruction was effectively cornered by big-business from the diaspora, especially Rafic Hariri,” said Hannes Baumann, a fellow in Middle East affairs at King’s College in London, of Lebanon’s assassinated former prime minister, who was a Lebanese expatriate in Saudi Arabia.
The Arab Empowerment Initiative’s Barmada believes that the best way to engage the diaspora in the development of Arab homelands without crushing native industry is to partner overseas interests with local business interests.
The way around obstacles in the integration of diasporic business “is instead to find local entities and have diaspora engage in those entities. You need strong partners on the ground,” Barmada said.
And not all governments are against integration. Barmada has seen Qatar reach out to its overseas population to return to the homeland and develop the nation’s scientific and technological facilities, in what she says is a hopeful gesture to integrate overseas communities.
But Barmada also isn’t totally sanguine about the Arab development project.
“Organizing the diaspora has been a huge weakness,” she said, explaining that many in the Middle Eastern and North African American communities are divided on political, ethnic and religious affiliations.
At a 1961 conference in Guangzhou, Deng Xiaoping famously said, “I don’t care if it’s a white cat or a black cat. It’s a good cat as long as it catches mice.”
This practicality guided the reforms of 1979. Little over three decades later, China has earned more than a modicum of respect from international policy makers and media. At a time when the Arab World expects to harness integrity for its people after only eighteen days in Tahrir, Deng’s resolve is indispensable.