Seven Weeks in the Middle East

My main attraction to this allocation was the opportunity to spend time in an important part of the world that is going through a period of transition and uncertainty. Over the last 7 weeks I have spoken to ex-pats who have spent large portions of their careers in the Middle East, I’ve read a number of articles on the region, I’ve spent time working and speaking with Saudis and I’ve also formulated a few opinions of my own. A consensus on the future of the Middle East has emerged from all these sources: no one really knows what will happen.

There are plenty of reasons for optimism. Parts of the region, particularly Saudi, are overflowing with oil wealth and finally seem to have realized that while that is a great thing, it’s not enough. Efforts to diversify economies, adapt to global standards and plan for a more sustainable future are at the very least being talked about, if not acted upon. In other parts of the region where oil is less abundant, countries are pulling themselves up by their boot straps and diversifying and growing in other ways. The region is also represented by a more progressive set of leaders than in the past, even if some of them remain conservative by western standards. For many places in the Middle East, this is one of the most promising times in history.

That said, growth is coming at a high cost. Dependency on a foreign workforce is an almost universal characteristic of the GCC states. They simply don’t have educated and skilled indigenous resources. That isn’t something that can be changed in a few years. Generally it takes generations to establish a knowledge based economy. That’s time some, if not all, Middle Eastern nations may not have.

Adding to this problem is the fact that having a house full of guests is generally not sustainable. At the bottom of the ladder you have an abundance of blue collar workers – mainly Indians, Pakistani, Bangladeshi, Pilipino and Thai – becoming increasingly discontent doing dirty work for low wages and under poor conditions in one of the richest parts of the world. On the other end, you have Western and Asian bankers, lawyers, businessmen and policy makers influencing key strategic decisions with two priorities in mind: 1) those of the clients / region, and, 2) those of their business / country. And not always in that order.

Then there is the general mindset of the region, which I believe has two fundamental flaws toward achieving economic diversification and sustainable growth. The first of which is the conservative nature of the region. This is perhaps the most spiritual place on the globe. Religion heavily influences both cultural and state matters and Islam is inherently conservative. This conservatism is perhaps the greatest opponent of change in the Middle East.

The good news: most people get that and realize growth and change must co-exist with religious devotion. The bad news: others (a small minority) do not and they are willing to go to great lengths to defend their position. Fear of upsetting extremists or moving “too quickly” with social reforms is a major deterrent to growth and change throughout the region and a crippling disability in Saudi.

The second fundamental flaw has to do with drive. China and India, two model developing world economies, share a common mindset: a desire and a drive to rival if not surpass the biggest of the developed world economies. In much of the Middle East the desire is there, but the drive is highly questionable. Another way to put it is there’s a lot of talk, but not a proportionate amount of action or a sense of urgency. Throwing money at a problem (at least in Saudi) continues to be viewed as the best way to fix it.

While the problems mentioned above are daunting, perhaps the most immediate concern is the same one that has been plaguing the region for 1000s of years: stability. Just across the Persian Gulf a once formidable regional power is pulling out of seven years of war exhausted, depleted and re-designed. At best it will take years to recover. At worst the efforts to reform Iraq will fail and the country will once again become a rogue state.

The Iraqi’s neighbor is just as big of a concern. Iran’s disengagement with the West seems to increase almost daily and its threat within the region is of great concern. There are also significant economic constraints associated with one of the region’s largest countries being handicapped by UN sanctions.

Last, but certainly not least, there is Israel - hated by everyone in the region and seemingly one step away from plunging the entire Middle East into conflict. There’s also Yemen or unstable countries from neighboring regions such as Somalia, Afghanistan and Pakistan.

Such a high degree of instability and unpredictability makes it difficult for highly promising Middle Eastern economies. No matter how nice your house is, it’s hard to sell it when it’s in a tough neighborhood.

So, as I leave the Middle East I don’t have it any more figured out than the day I showed up, but that was what I expected. However, I am quite grateful that I’ve had the opportunity to experience this part of the world at such a pivotal point in time and I do feel as though I understand – and respect – the issues facing the region more than I did when I arrived.