We need South-South integration

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Yes, Virginia, there is a conspiracy: in our grandparents’ generation it centered on the Sykes-Picot agreement and its successors; nowadays, the intimations of dark villainy that upset some in the Middle East are summed up in the term globalization. Then as now, rich and powerful foreign countries dictate the rules under which business is done in the region.

So what else is new? The answer is that the originality of the current phase of capitalism lies in the internationalization of production partly made possible by the information and communication revolution. Will this aspect of globalization somehow be stopped or reversed? Not a chance: no matter what happens politically and otherwise in Iraq, Palestine, Lebanon, Sudan or, for that matter, the Antarctic ice shelves, internationalized production–an important aspect of globalization–is here to stay.

My message to the people of the region is therefore to join the globalization bandwagon–not try to stop it. The challenges facing Middle East economies from globalization require capitalizing on a system where demand from the North is increasingly being met through subcontracting arrangements, with large foreign distributors relying on small local suppliers. In this model, the strategy for Middle East firms involves economies achieved through clusters, improvement in the information and communication technology infrastructure, and better marketing. Low wages will no longer be a competitive advantage.

An interesting example in this respect is the growth and efficiency that small and medium enterprises in the region have shown in some sectors. Traveling around the Middle East for the past few years, I have seen more and more successful exporters of clothing enter the global loop, with food processing firms not far behind. In the services sector, transport and tourism are areas where Middle East producers–many of them on the smaller side–are doing better at exploiting their competitive advantages under the rules of the new global game.

Not that the news is all good. Globalization’s negative impact in the region as elsewhere includes volatility of capital flows, rampant consumerism, environmental impacts, and death of infant industries. There is also a cost to labor that is losing rights because of the new system of global production relying on temporary jobs.

To maximize the positive impact of globalization, regional integration must proceed as fast as possible. Middle East integration is beneficial, long overdue, and inevitable under globalization. There will be more advantages for the region to speed up South-South integration ahead of integration with the European Union, creating a larger market and raising competitiveness and productivity in the face of coming competition from both North and South.

This will require movement on political fronts, which becomes easier if an effort is made on improving governance and diffusing development so that fruits of globalization are more equitably shared.

The latter point–on governance–is perhaps the newest in the list of reforms being presented to the people of the region. Articulating a new dimension of globalization for the Middle East, the economies of the region were in the 1990s asked to remove trade barriers, plug fiscal and external deficits, stabilize macro-economic indicators, reform various sectors, and privatize public enterprises. Some of these steps having been taken, Middle East states are now being called on to move from revamping economic policies to straightforward political reform.

The transformation of Middle East regimes into more-or-less liberal constitutional democracies involves imposing principles of participation, the rule of law, transparency, and accountability. There is now a variety of programs in the region to expand access to justice, improve legislative processes, make electoral systems more effective, render public institutions more accountable and widen access to information about good governance, including lessons learned from other regions.

This process implies expanding the scope of globalization, defined as the elimination of various barriers to international trade, to include bringing down restrictions caused by domestic government practices. In that spirit, growing numbers of intermediaries conveying experiences and lessons in economic and political liberalization from international institutions and a variety of bilateral development programs are invading the region. In particular, EU partnership agreements with Southern Mediterranean Middle East states call on them to engage in governance reforms, as well as economic ones.

Contributions to this process are being made by publishing information on websites, commissioning original research from think tanks and individuals, and organizing conferences in which information is widely shared. The hope is that such publicity will induce changes that could transform regimes by transforming mentalities and practices.

Though this is a tall order, I’m not unsympathetic, and many of my fellow western-educated Middle East technocrats trained in economics and related subjects also want the region to get serious about governance reform. Otherwise, the tension between economic globalization on the one hand and local backwardness on the other will lead to yet more regional unrest.

Ending this essay as I began it with a reference to Sykes-Picot, that accord was described by George Antonius, writing long before the globalization era, as the product of greed at its worst, that is to say of “greed allied to suspicion and so leading to stupidity.” It would be a pity if historians writing about the globalization of the Middle East in the early 21st century were to note that same quote carved on the tombstone of an unreformed regional polity.

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