[Futurework] US economic initiative in Middle East

[Keith Hudson]

Here's a very interesting item from today's FT:

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US eyes economic regime change in Mideast
Edward Alden

Nearly 2,000 people, including Colin Powell, the US secretary of state, gather in Jordan this weekend for a Middle East conference that will try to focus on the low politics of economic reform rather than the high politics of war and peace.

But if it is not derailed by the continuing violence in Israel and Gaza, this extraordinary meeting of the World Economic Forum will highlight a US initiative that is no less radical than regime change in Iraq or the faltering road map for Israeli-Palestinian peace.

Under the awkward rubric of the US-Middle East Partnership, the US is hoping to use a combination of moral persuasion and targeted foreign aid to foment a democratic capitalist revolution in a region still dominated by autocracies and state-led oil economies.

The driving force is Elizabeth Cheney, 36-year-old daughter of vice-president Dick Cheney. Her appointment as deputy assistant secretary of state for the Near East in March 2002 raised eyebrows, but even opponents say she may be the best person to lead President George W. Bush's vision of remaking the Middle East in America's image.

Judith Barnett, who held the same post in the Clinton administration and is now with PA Consulting Group, calls her "brilliant", and says: "She is absolutely the right person in the right place at the right time."

Ms Cheney came to the job with limited government experience, including stints with the State Department and the World Bank, but a long interest in development issues. As a college student she travelled twice in the mid-1980s to famine-ridden regions of Kenya, only to be shocked, she says, to see villagers cutting open bags of corn and using the bags to build huts while leaving the food on the ground. "They had never seen yellow maize," she recalls.

But unlike the generation who joined President John F. Kennedy's Peace Corps, Ms Cheney came back persuaded that governments were a big part of the problem. "You've got the remnants of very statist-controlled economies and the failed economic policies coming out of the 1960s and 1970s which have completely stifled the potential for growth," she says of the Middle East. "Those are unsustainable."

In the bureaucratic wars of Washington, Ms Cheney has already been able to increase funding for the US-Middle East Partnership initiative from $29m (�24.5m, �17m) last year to $100m this year, with a request for $145m next year.

"What we're doing is really very new and important because it's the first time the US has made such a commitment to these issues of economic and political reform in the Middle East," she said in an interview.

"Through successive administrations, both Republican and Democratic, there has been a real tendency to say we're going to pursue and support reform in Latin America and in Asia and in eastern Europe, but we're not going to deal with these issues in the Middle East."

The initiative involves some very large steps - such as Mr Bush's call last month for a US free trade agreement with the region by 2013. That will involve persuading some of the world's most heavily protected economies that their future lies in opening to international competition and investment.

Ms Cheney is focused on a series of smaller steps, which the US hopes will help push the region towards economic openness and political democracy. One of her favourites is an increased political role for women; she hosted a conference in Washington last year to help provide resources for female candidates in the handful of countries where women can run for office.

Legal reform is another priority. A survey of Arab companies in 2000 found that weak legal systems that fail to enforce contracts are considered the biggest obstacle to business. Sandra Day O'Connor, the US Supreme Court justice, will lead a forum on judicial reform in Bahrain in September.

The US will push these initiatives by reviewing its aid programmes in the region, beginning with the largest - Egypt - which receives $600m a year in direct US economic support. Washington wants to step up its support for small businesses through micro loans, launch education pilot projects that promote a new curriculum not tinged with Islamic fundamentalism, and support girls' literacy programmes.

Sceptics say that by pushing for such sweeping reforms in tradition-bound countries the US may raise expectations that could backfire if Washington cannot carry through. "You need to be very sensitive for the process it's going to take for these countries to liberalise," says Ms Barnett.

"These steps provide a certain degree of hope, and if we don't follow through on this it will leave the region in a far worse state and our interests in the region in a far worse state," she says.

Ms Cheney is sensitive to the charge that the US is trying to impose its own model on the region. She refers often to the UN 2002 Arab Human Development Report - authored by Arab economists - which contained a devastating critique of the Middle East "freedom deficit" and embraced many of the same steps now backed by Washington.

"This is not about imposing the US model. Each country will have to sort out what works best for them," she said. "It is about looking for ways that the US can help to support those in the region who are making the difficult decisions that are required to undertake the necessary reforms."
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Keith Hudson, 6 Upper Camden Place, Bath, England