LONDON – The economic situation in the countries of the so-called Arab Awakenings is deteriorating quickly. Egypt is running low on cash – before recent rescue loans, currency reserves covered less than three months of imports – and Egyptians are hoarding fuel and foodstuffs in anticipation of future shortages. More frequent and longer-lasting power outages foretell worse to come in an economy already struggling with mass unemployment, widespread exclusion, and deep pockets of poverty.
Short-term macroeconomic stability is the immediate priority in Egypt and the other Arab Awakening countries. In the medium term, however, the viability of the current order is at stake – and not only in these countries, but across the rest of North Africa and the Middle East.
With so much at stake, Majid Jafar of UAE-based Crescent Petroleum was right to worry at the recent World Economic Forum on the Middle East and North Africa at the Dead Sea. His proposal of an Arab Stabilization Plan, inspired by the post-1945 Marshall Plan in Western Europe, is laudable. The imperative for large-scale coordinated action is overwhelming. But is the Marshall Plan the right model?
The Marshall Plan was a macroeconomic strategy involving massive capital transfers to help reconstruct the war-ravaged industrial capacity and infrastructure of economies with well-developed institutions. But what the Arab region needs are micro-oriented, project-based, and governance-heavy investments conditioned on deep reform of a business environment that is generally considered among the worst in the world.