Arabs' economic malaise demands local solutions

An Arab Bank for Reconstruction and Development, based on the European model, is an overdue idea that could be a big help for this region's economies.

Over the past year, the European Bank for Reconstruction and Development (EBRD) has added four new target countries to its mandate: Egypt, Jordan, Morocco and Tunisia. The development body founded in the aftermath of the 1989 European revolutions and the end of communism has been investing across eastern and central Europe and Central Asia and the Caucasus for two decades - with measures of success.

The EBRD has played a vital role in the transition from command and control to free market economies across these vast swathes of land that were once part of the Soviet Union. It has focused much of its attention on that key fuel for growth: small- and medium-sized enterprises. Indeed, Egypt, Jordan, Morocco and Tunisia could certainly use the expertise - and the funds - of a successful development institution like the EBRD.

Still, one cannot help but wonder: why not an ABRD, an Arab Bank for Reconstruction and Development?

The needs are obvious and immense, particularly in populous non-oil Arab states. The World Bank has estimated that the region needs to create 100 million jobs by the year 2020 just to keep up with current employment levels and absorb new entrants into the labour market. Youth unemployment is the highest in the world. Small and medium enterprises struggle and splutter. Infrastructure needs are massive.

There is little need to formulate the laundry list here or to reconstruct the familiar argument. Everyone in the region knows that economic concerns played a major role in the uprisings that rocked the region. From Alexandria to Aden, the Arab world - with a few exceptions - has been failing its people, its youth and its future with sclerotic, corrupt economies that fail to tap the natural talents of their citizens.

This brewing storm of economic indignity was no secret. Anyone who has attended any major Arab conference over the past decade would have heard ministers and civil society leaders lament the jobs crisis in the region and the frustration felt by youth. Anyone who travelled a few miles outside the glitzy conference centres would have met the legions of unemployed, under-employed or badly employed young, educated men and women who were as much part of the Middle East landscape as satellite dishes, bazaars and clogged traffic.

And yet, despite this, no collective action has been taken at the pan-Arab level to address this issue effectively. There were plenty of words, but few deeds. Where was the Arab League? Where was the leadership of the better-off Gulf Cooperation Council countries? This is a crisis of leadership, of short-term thinking, of putting out fires without building a safer structure to avoid fires in the first place.

Often, at those same conferences, Arab intellectuals would wag their fingers in the air and declare that the West should mind its own business and leave the region to sort out its own problems. This was often met with applause by audience members - especially during the era of US President George W Bush.

And yet, here we are, with the Arab world facing one of its most important long-term problems of all time, and … the European cavalry has been called in.

There is an indignity about this state of affairs. I do not begrudge the EBRD's work. All hands should be on deck to support Egypt and Tunisia and other populous non-oil Arab states. But there is no doubt that the best development solutions are often local ones, and development banks often morph into knowledge centres that could be helpful even to countries with no need for aid or loans.

Indeed, the World Bank - the world's most visible global development body - is actually a minor player in terms of capital flows and loans. Its total of some $57 billion (Dh209billion) in commitments in 2011 is dwarfed by, for example, the $900 billion in private capital flows to emerging markets last year. But the World Bank is relevant as a policy advisory body even more than a lending body, as a knowledge centre and a forum for collective action more than a source of capital.

The EBRD president, Thomas Mirow, speaking at the London School of Economics this month, smartly noted that: "It is better to be straight with citizens - telling them that jobs cannot be conjured up overnight but that real economic change requires patience and unfolds over generations."

He also noted: "Just as we did two decades ago, we need to convince people that for all the short- and medium-term pain, the long-term gain is worth it."

This is an important message and important conversation. It's a pity that there is not an Arab leader who is delivering this message.

Afshin Molavi is a senior advisor at Oxford Analytica and a senior fellow at the New America Foundation in Washington