Economic and political reform must go together



What started with the self-immolation of a lone Tunisian fruit seller - frustrated with his lack of earning power - has become a regional struggle for political reform. This is the story of the fate of one man as the premise for revolution. Failed economic policies were the impetus for change in Tunisia. And no lasting political progress, there or elsewhere, can be accomplished without long-term economic development.

At the heart of the region's economic woes are government structures that restrict access to markets and fail to distribute wealth equitably. Resource-rich nations generate massive revenue streams with little effort and low costs. But these models fail to inspire transparent economies, strengthen fiscal institutions or bolster competition among industries and investors.

Resources can be a boon, but only if revenues are allocated well and lead to ample job opportunities. That means investment with the money earned. For too long, the region's less-prudent regimes have relied too much on handouts at the expense of real economic development. As Egypt's former president, Hosni Mubarak, learned, this model of patronage is not sustainable. What is needed are investment in jobs, and then more of them.

Political upheaval in the Arab world can be an opportunity for a broad economic reset. The first step is to restore investor confidence by addressing corruption and making honest attempts to diversify. Do this much and foreign investors will be intrigued enough to test the comparative advantages to be found. The lesson for countries in the region with large populations are to be found in East Asia and Latin America: manufacturing for the global economy builds employment and local consumption, creating a virtuous circle.

To do this, states will need to encourage greater transparency by lowering the barrier to entry for new businesses. Diversification will naturally follow.

Stable economies such as Dubai and Abu Dhabi are seen as safe havens from the region's turmoil, with investors looking to the UAE in growing numbers. But the UAE also benefits when its trading partners are strong and secure.

As demands for political change continue to percolate in the Middle East and North Africa, it's worth remembering that it was an economic wobble that knocked things off balance. It stands to reason, then, that economic renewal must accompany changes on the political front.