Diplomatic Pouch / April 3, 2015
By Larry Luxner
With the Middle East in more turmoil — and more wars and uprisings going on simultaneously, from Iraq and Syria to Yemen and Libya — than at any time in recent memory, now might seem an odd time to be promoting U.S. investment in the region.
But that was exactly the point of the Third Annual Ambassadors Forum, which brought together 11 U.S. diplomats stationed in the Middle East and North Africa, eight Arab counterparts assigned to the United States and more than 400 business leaders.
The March 23 event took place amid heavy security at the State Department and was organized by the National U.S.-Arab Chamber of Commerce (NUSACC).
“In our part of the world, there’s never a dull moment,” said NUSACC President and CEO David Hamod. “Since the Arab Spring, we’re facing unprecedented challenges and opportunities we’ve never seen before. Sensationalist bad news gets more headlines than garden-variety good news, so sometimes we forget about the good things happening in our part of the world.”
For one thing, he said, U.S. exports to the Middle East and North Africa (MENA) region are at their highest levels ever, reaching $74 billion last year. Led by sales to the United Arab Emirates and Saudi Arabia, exports have roughly quadrupled every four years and are expected to reach $315 billion by 2020 — though growth slowed in 2014 due to the strength of the U.S. dollar and the plummeting price of oil.
Furthermore, said Hamod, “the high demand for U.S. goods and services is not likely to fall anytime soon.” That’s because of major infrastructure projects in the works, such as Dubai’s 2020 Expo and the 2022 FIFA World Cup in Qatar.
“Population growth is booming, with youths making up two-thirds of the growth,” said Hamod. “There’s very strong brand awareness and an increasingly strong desire to buy American. At a time when countries are building megacities and megaprojects, they can’t trust fly-by-night companies.”
Military and weapons sales accounts for an increasing share of this business — not a surprise given the sheer number of civil conflicts and wars raging right now across the region. A week after the event, the 22-member Arab League announced it would create a 40,000-man joint Arab military force to defeat Iranian-backed Shi’ite rebels in Yemen and elsewhere. Saudi Arabia is already leading a 10-nation coalition to carry out airstrikes against the rebels — with the help of U.S. allies Egypt, Jordan and Pakistan.
“There are unprecedented levels of cooperation between Arab government and the United States, in commerce, economics, defense and security,” said Hamod. “If there’s any silver lining to al-Qaeda and ISIS, it’s that our governments are working more closely than ever with each other.”
Anne Patterson, assistant secretary of state for Near Eastern affairs, said about 25 percent of U.S. exports to the MENA region are to the five nations with which the United States has free trade accords: Bahrain, Israel, Jordan, Morocco and Oman. She said U.S. exports of goods and services to the Middle East keep 475,000 Americans employed.
In addition, she said, the Qualifying Investment Zone (QIZ) program offers preferential treatment for manufactured goods made in Jordan and Egypt that contain Israeli components, “creating jobs for hundreds of thousands of workers and increasing economic integration between Israel and its neighbors.”
She continued: “The United States has vital national security interests in the Middle East and North Africa, and Secretary Kerry is deeply involved in advancing those interests. I can tell you from direct experience that he never loses sight of the importance of engaging the U.S. business community in promoting investment and job creation.”
Alice Wells, the U.S. ambassador to Jordan, was the first of five American envoys to speak as part of a panel titled “Beyond the Arab Spring: Economies in Transition.”
Wells said Jordan’s top three challenges are regional instability, particularly with Syria and Iraq, whose trade with Jordan has fallen 71 and 52 percent respectively; an influx of some 600,000 Syrian refugees, and energy shortages, especially since the halting of inexpensive natural gas imports from Egypt.
“Traditional tourism has taken a hit. Petra is seeing half the tourists it saw in 2010,” said Wells. “And with the influx of Syrian refugees, electricity and water consumption have increased 20 percent, schools are on double shits, hospitals are at 250 percent capacity, and rents have increased by 300 percent. The national power company has a $7 billion debt, so the next couple of years are going to be tough.”
On the other hand, Wells said Jordan’s economy will grow by 3.8 percent this year, with trade a “key pillar” of that growth.
“With FTAs, QIZs and other liberalized trade agreements, Jordan is well-placed to be a hub, and will be even better should Syria and Iraq reach some sort of stability,” she said, noting that Jordan’s information and communications technologies (ICT) sector is already supported by more than 5,000 companies. In fact, Jordanian software firms now produce about 75 percent of all Arabic content on the Internet today.
Deborah Jones, the U.S. ambassador to Libya, was far less upbeat.
“We had to withdraw from Libya in July 2014,” said the envoy, who runs her mission from the Mediterranean island of Malta until things calm down back in Tripoli. “It’s going to take some time, but the reality is, Libya is a developer’s dream. Once Libyans make peace with one another and establish security, a regulatory framework and rule of law, Libya will be a spectacular investment opportunity.”
For now, however, the economy is in shambles. Oil production fluctuates from 350,000 to 400,000 barrels a day — down from six million barrels a day when longtime strongman Muammar Qaddafi was in power.
“It’s often been said that this is not about conflicts between sides, but between fragments. That’s what makes it particularly challenging,” she said.
“We do not recognize the al-Hassi government, and we do not support the GNC [General National Congress] of Libya. Those of you who are contemplating doing business in Libya need to realize that,” she warned. “You’re putting yourself in a fairly precarious business situation if you decide to go there.”
In neighboring Tunisia, where the Arab Spring began in 2011, things were going fairly well until last month’s deadly terrorist rampage at the Bardo Museum.
“I was optimistic about Tunisia’s future before this attack,” said U.S. Ambassador Jake Wallis. “The fundamentals remain strong. As you know, Tunisia made remarkable progress last year, and that has created new opportunities for trade and investment. And we do want to see U.S. companies get their share of these investments.”
With a democratically elected president and a newly ratified democratic constitution, Tunisia does offer hope, said Wallis.
“The new government is supported by four of the five largest parties. It reflects a broad consensus and spirit of cooperation,” he said. “Our message to the government of Tunisia is two-fold. It must maintain continued vigilance on the security front. This was true before the attack and remains the case now. Without that, economic progress will not be possible. Secondly, Tunisia must reform its economy if it wishes to grow.”
Specifically, he said, that means passing a new investment code, restructuring banks and offering greater transparency in public services.
Algeria, with 39 million inhabitants the largest country in North Africa’s Maghreb region, will soon host a commercial office at the U.S. Embassy in Algiers.
“Our relations have never been better. Everywhere I go — from the president on down — I hear a very strong desire for closer, deeper and broader relations with the United States,” said U.S. Ambassador Joan Palachik. “The Algerian government realizes that its current economic model is not working. It’s been dependent on hydrocarbons for a very long time, and I hear loud and clear that the government wants to open up, diversify and reform its economy.”
Dwight Bush, the U.S. ambassador to Morocco, said the only African country that has a free trade agreement with the United States is Morocco, which is sometimes called “the best house in a tough neighborhood.”
“In the wake of the Arab Spring,” he told investors, “Morocco’s political stability and its job-creating industrial strategies are serving to diversify its economy and build foreign-investor interest in Morocco as a regional hub for Africa.”
The only U.S. diplomat without ambassadorial rank to speak at the NUSACC event was Michael Ratney, the U.S. consul general in Jerusalem.
“Politics weighs very heavily on doing business in the West Bank and Gaza, but there are opportunities. It’s a fairly highly educated community and very business-savvy, with a real affinity for U.S. brands and products,” said Ratney, the 50th American to hold that post since the mission was established in 1857. “But it’s not for the faint of heart.”
Some promising sectors include agribusiness — especially olive oil — as well as herbs cultivated in the Jordan Valley, and a thriving IT sector. In fact, he said Israeli-based affiliates of U.S. software firms are doing extraordinarily well in the West Bank.
“One of the great frustrations of the Palestinian business community is, they feel they could access regional markets if it were easier to transport their goods,” he said, noting the Israeli security barriers imposed as a consequence of the military occupation that has existed since 1967. “Crossing the bridge is tough, and it’s just easier to ship your goods out of [Israel’s port of] Ashdod or Ben-Gurion Airport than through Jordan.”
Ratney told his audience that lifting barriers to access and movement of people and goods would spur investment in tourism, an area that’s been neglected for years.
“If there isn’t a thriving Palestinian economy,” he warned, “there isn’t a future for Palestine — whatever the politics might be.”