In 2011, a group of American high-tech executives and angel investors traveled to North Africa as part of an innovative State Department economic development program. Local entrepreneurs flocked to workshops in Tunisia, Morocco and Algeria, where the Americans judged their business proposals and encouraged them to open start-ups. The initiative embodied the “economic statecraft” at the heart of Secretary Hillary Rodham Clinton’s vision for American foreign policy.
But the program turned out to be so poorly financed that it had no prize for the winners. Embarrassed delegates cobbled one together: an internship at a start-up incubator in Detroit.
Today, the Middle East is an economic powder keg. About 60 percent of the Arab world’s population is under the age of 30; millions of jobs are needed or already high unemployment levels will explode.
The Obama administration’s efforts in the region should be more economic than military. “The United States government has done a terrible job of focusing on economic issues in the Middle East,” Thomas R. Nides, a former deputy secretary of state, told me recently. “You have huge youth unemployment and no hope.”
This argument is hardly new. “To succeed, the Arab political awakening must also be an economic awakening,” Mrs. Clinton said, more than a year ago. “Economic policy is foreign policy,” her successor, John Kerry, said this week.
Last month he asked Congress to approve the creation of a $580 million “incentive fund” that would reward countries in the Middle East and North Africa for enacting reforms that foster market-based economies, democratic norms, independent courts and civil societies. But Mrs. Clinton’s proposal for a similar fund received scant support last year from a Congress that was understandably focused on domestic issues. With the sequester now in effect, Mr. Kerry’s request could suffer the same fate.
After Iraq and Afghanistan, it’s no longer politically feasible to sponsor vast development initiatives with little regard for whether they create self-sustaining growth for the region. We must find innovative ways to conduct economic statecraft in an age of austerity. The incentive fund — a small fraction of the $1.2 trillion Washington has spent in Iraq and Afghanistan — is a good start.
Some countries in the region have had success implementing, on their own, the kinds of reforms the fund would encourage. Over the past decade, Turkey has carried out a harsh International Monetary Fund economic reform program, opened its economy and attracted foreign investment as part of its effort to join the European Union. Today, few Turkish business owners care if the country is part of the union. In 2011, Turkey boasted a faster growing economy than any other European nation.
And in the West Bank, the economic and security reforms of Salam Fayyad, who recently resigned as prime minister of the Palestinian Authority, deserve muchpraise.
Mr. Kerry should also focus aid in areas where viable markets and partners exist. Tareq Maayah, a Palestinian engineer who runs a West Bank high-tech firm, said $100,000 from the United States Agency for International Development helped his firm gain a tryout with Hewlett-Packard. Today, his company writes software for Cisco, Hewlett-Packard and Alcatel-Lucent, with no government assistance.
Ahmed El Alfi, an Egyptian-American Silicon Valley venture capital investor, said American officials could “do a lot more” at little cost. Mr. Alfi, who began a high-tech incubator in Cairo, said Egyptian start-ups clamor for access to American investors. “Have a weekly call for companies from the region doing 10-minute presentations to American companies,” he suggested.
Finally, Mr. Kerry should emphasize to American companies that investment opportunities exist in the region, particularly in infrastructure, energy and aviation. Chinese firms exported an estimated $150 billion to the Middle East and North Africa in 2011, twice as much as American firms.
Of course, some countries in the region are too unstable for American private investment. But in others, public-private initiatives that foster trade, investment and job creation with little taxpayer funding could be expanded. The high-tech entrepreneurship delegations started by Mrs. Clinton should be increased and properly funded. Wealthy Persian Gulf countries should be asked to finance a regional bank for small and medium-size enterprises.
Perhaps most important, we should stop thinking we can transform societies overnight. Even if the United States perfectly executes its policies and programs, they alone will not stabilize countries. We need viable local partners. Nations must transform themselves.
We should scale back our ambitions and concentrate on long-term economics. By trying to do fewer things over longer periods, we will achieve more.
