V Shankar, Standard Chartered CEO: It’s The Economy, Stupid

Recent events in Egypt made me sit up and think about how fortunate we are to live in the UAE. Living here, it is all too easy to forget that we sit smack in the middle of a region that is seen as the world capital of bad news. Think of this – Dubai is under four hours’ flight time from Afghanistan, Iran, Iraq, Syria, Somalia and Egypt.

Less than two years ago when the revolutions began in Tunisia and Egypt, there was optimism in the air. People referred to the uprisings in rather glowing terms as the ‘Arab Spring’. Spring signified hope, rebirth, renewal, rejuvenation and vitality. Subsequent events have suggested that the term ‘Arab Spring’ was possibly a misnomer. If you talk to the common man in Misrata or Tahrir Square, he would say things have gotten worse, not better.

The challenge with the post-spring Arab administrations is that they have been consumed in playing politics, instead of focusing on economics. How else would one explain the Muslim Brotherhood administration’s focus on gerrymandering and constitutional amendments to ensure their parliamentary dominance, ahead of concluding an economic assistance programme from IMF, even in the face of Egypt’s fast dwindling foreign currency reserves?

It would be too simplistic to ignore the complex interplay of social, ethnic, religious, domestic and geo-political factors at play in each one of these revolutions. All the same, there is no disputing the fact that demographic change and unemployment, especially among educated youth, played a very significant role.

The problem cannot be fixed without economic development. The need of the hour is economics, not politics.

Economic development is the best antidote for uprisings. Growth creates jobs and jobs reduce poverty. To fuel this virtuous circle you need investment, and here is the good news. The MENA region as a whole has sufficient money to fund its own growth. With oil prices stubbornly hovering around the $100 mark, MENA is still generating considerable surplus.

It also has large accumulated surpluses from the past which has traditionally been invested outside the region. If some of these monies can be redirected towards investing at home and in the region, we can make a tangible difference. This, of course, assumes that the necessary pre-conditions of peace, stability and a welcoming attitude to foreign investment are created in the first place.

Assuming money is available, what should it be spent on? While by no means an exhaustive list, I would start with:

■ Infrastructure. Not just roads, ports and airports, but also the institutional infrastructure around rule of law, property rights, sanctity of contracts, credit bureaus and customs regimes, to name a few.

■ Technical education. Job creation is about employability and skills- building. We need to create workers who can build widgets, research enzymes, split stem cells, operate lathes, or make good furniture.

■ Nurturing private companies in manufacturing and services. Eastern Europe, communist run until few decades ago, has three times more private sector companies per capita than the MENA region.

■ Promoting intra-regional trade. Arab companies account for less than one per cent of world non-fuel exports, compared with four per cent for Latin America with a similar population. Worse, intra-Arab trade accounts for less than 10 per cent of the exports due to a combination of non-tariff barriers, red tape and poor logistics.

■ An active infrastructure development bank. Asia and Africa have the Asian and African Development Banks respectively, Latin America and Europe have their own. The Middle East currently does not have an active one. We need one to supplement what commercial banks and capital markets do to finance infrastructure.

“It’s the economy, stupid” was the famous slogan of then US presidential candidate Clinton’s campaign of 1991 when he unseated President George H.W. Bush who was basking in the aftermath of a successful Operation Desert Storm. The parallels are quite stark. You may win a war, but you will get unseated if you ignore the economy. Play economics, not politics.