EMBA Speaker Series Top Ten Trends Defining the Middle East By Rami G. Khouri Director, Issam Fares Institute for Public Policy and International Affairs, AUB Thursday, August 2, 2007

2 Outline Introduction 6 Broad Historical Trends 10 Current Trends affecting the Future Conclusion

3 Introduction Review major trends, in the political, economic and social spheres that define the Middle East region: –6 broad overarching (historical) trends going back to the 1960s –10 current trends that have emerged in the last 5-10 years; As these trends directly affect the business community, it is critical to understand them in order to better grasp what is going on today and plan for the future.

4 6 Broad Historical Trends Changing demographics Interaction with the western world Changing nature of the nation-state Militarization of the region Economic development Government systems

5 Changing Demographics Early 20 th c. population was mostly: –Rural –Middle-aged – elderly –Basic needs (education, healthcare, housing, water, electricity) largely unmet Current population is predominantly: –Urban –Rather young –Reasonably well serviced in terms of basic needs (except for pockets) There has been a significant shift in the basic human demographic context.

6 Changing interaction with western world The west used to intervene to: –protect its interests (oil, bases) –help its friends in the region Nowadays, western interference is much more pervasive and deeply intrusive. It aims to: –change the value system (culture, religion, education) and the software of societies in the region

7 Changing nature of the nation-state A centrally controlled nation-state dominated the region for most of the middle and end of the last century With its fragmentation, much more power is diffused (has devolved) to non-state actors, such as: –Religious groups –Tribal groups –Civil society (unions, NGOs) –Private groups and associations

8 Changing nature of militarization From unsophisticated weapons in the hands of central authorities to widespread militarization of the region; Many of our societies are awash with weapons and are dominated by armies and a plethora of security services and militias

9 Economic development For the past 4-5 decades, there has been sustained growth in the region Since the mid 80s, population growth has largely outstripped economic growth;  with the exception of oil fuelled economies, real purchasing power of the majority has broadly remained flat or even declined

10 Unchanging nature of government In most cases, authoritarian governments have persisted and have been strengthened; Our nations are all still dealing with the essential (unresolved) crises of statehood: –Citizenship rights –Material and economic development –Personal and group identity –Legitimacy of authorities –Lack of democracy and accountability –Basic stability and security –Configuration of countries –Coexistence with foreign powers

11 Looking Forward -10 Specific Trends 1.Politically frustrated & volatile population 2.Increasing number of major conflicts 3.Popularity of violence and military means of expression 4.Intrusive western intervention 5.New security architecture 6.Fragmentation of central state authority 7.Increased resistance to foreign powers 8.Shift away from peace- making and promotion of democracy 9.Economic reform and market deregulation 10.New types of alliances

12 Politically frustrated & volatile population The current (young) population is volatile and politically frustrated at various levels (individual, communal, state). This situation –often translates into acts of violence and social deviance, extremism, and in the worst cases, terrorism; or –may push many young people to be entrepreneurial, to engage with the world, and to be at the cutting edge of globalization. This challenge for business leaders is that the biggest threat and biggest hope for the Middle East lie in the same demographic group.

13 Increasing number of major conflicts Going back 20 or 30 years, the region was defined by two major conflicts: –the Cold War, and –the Arab-Israeli conflict. Nowadays, we are faced with a dozen major interconnected conflicts, which makes it hard to solve any one of them on its own.

14 Widespread use of violence & military expression The 4 major actors in the region: –Centralized states and governments –Opposition groups within countries –Regional or foreign armies/countries –Al Qaeda-type terrorist organizations; all use violence as a routine form of conducting their policies and expressing their views.

15 Intrusive western intervention Western military and political engagement in the region has taken on a very intrusive form  all kinds of “carrots & sticks” are being used to change the software of statehood (political and value system) in the region. This has triggered a reaction in people of the region who are fighting back. As a result, many in the west and many in the region perceive each other as existential threats to one another.

16 New security architecture The 4 major military powers in the region (US, Israel, Turkey and Iran), and the balance of power between them, will define the new security architecture. Since Arabs are only partially involved, this is troubling and augurs for instability –people are going to resist this new architecture imposed on them by what they view as hostile powers.

17 Fragmentation of central state authority Power that had been centrally controlled by the state for many decades has started to fragment and diffuse into new centers of authority in society. This can be observed in 4 areas: –The economy, through deregulation, privatization, globalization, commercialization, and joint ventures; –Military power in the hands of militias, foreign groups, and opposition groups; –Media & information, where education systems and the mass- media are quickly privatizing and decentralizing; –Iconography of identity, where symbols of religion, tribe and ethnicity are controlled by diverse groups in society.

18 Resistance against foreign powers There is a very obvious dynamic of confrontation throughout the region; A coalition of groups, led by Iran and Syria, is brought together by a single motive: fighting back against aggressive western pressures that are trying to change the region (politically, economically, socially and culturally). This kind of direct defiance was impossible in the past because the central government controlled all means of political expression and military action.

19 Likely shift from peace-making and democracy promotion Attention has shifted from democratization to ideological struggles and issues revolving around reconfiguring power structures and legitimacy within countries and across the region. This means that a period of turmoil is still ahead, since the people of the region are not empowered to resolve the core areas of concern: –The Arab-Israeli conflict which is a main cause of tension, radicalization and instability; –The lack of democracy and accountability which engenders militancy, warfare, economic stress, corruption, and tensions with foreign countries; Dealing with these two critical issues may be postponed for now.

20 Economic reform and market deregulation The majority of governments in the region are no longer able, on their own, to provide for the basic needs of their growing populations. –this will allow other actors (sometimes influenced/funded by outsiders) to fill the vacuum Many nations will have to open up and liberalize their economies for private sector and foreign investments. –This, however, will happen without significant political liberalization, which is going to create new kinds of tensions in the region.

21 Conclusion The above trends reflect: –The extensive changes taking place in the region; –The reality that individuals in the Arab world are working for change, through different means, and not passively taking what is imposed on them by the world (the West or their own governments). This tremendous change is for the most part driven internally, but is also the result of interaction with non-Arab forces, regionally and globally. Executives need to : –Understand why and how these change are occurring, and –Decide how to get involved in the process to push it in a constructive and positive direction.