The general population has also been affected by globalization. Connected to the rest of the world through both the Internet and the increased ease of travel, Middle East consumers are becoming more and more sophisticated: They want what other parts of the world have. Moreover, they want it within their own cultural norms, and they are asking more from their governments, which are responding.
Countries are eager to create links abroad, and those flush with petrodollars have the direct means to do so. Firms from the region are increasingly interested in going global by buying assets in the West. One example is Saudi Basic Industries Corporation’s $11.6 billion purchase of General Electric Company’s plastics unit in May 2007, making it one of the world’s largest producers of high-performance polymers. (See Exhibit 2.)
In addition, a growing number of countries in the region have joined or are in the process of joining the World Trade Organization (WTO), which provides incentives to governments to open up their economies through the liberalization of restricted sectors. Jordan has been a pioneer in this regard. Upon his accession to the throne in 1999, King Abdullah II bin Al Hussein redoubled Jordan’s efforts to comply with WTO requirements. Within a year, Jordan had successfully undertaken the necessary economic and legislative reforms, and in 2000 it acceded to the WTO. A year later, Jordan became the first Arab country to sign a free trade agreement with the United States. Jordanian exports to the U.S. jumped from just $73 million in 2000 to $1.42 billion in 2007 — an increase of an astounding 1,800 percent. Jordan has continued along this path of economic growth and is an active participant in and has been host to the World Economic Forum.
Also at play is the natural generational time lag of education and wealth. Qatar, on the Arabian Gulf, is a good example. Like many of its neighbors, Qatar was radically changed by the discovery of its oil reserves in the 1940s. Until then, its economy had been dominated by fishermen and pearl divers; nomadic Bedouin roamed the territory’s sandy expanses. Sixty years later, Qatar has been transformed, with modern infrastructure and a high standard of living. Its “Education City” — another of the Middle East region’s specialized economic zones — is home to branch campuses of major U.S. universities, including Cornell, Georgetown, Carnegie Mellon, and Texas A&M. This focus on world-class education does not exist in a vacuum: The current generation of leaders, reared with the benefits of oil wealth, were educated at universities in Europe and the U.S. They returned home with a sophisticated world view and a determination to bring their societies up to speed. Since 1995, when Emir Hamad bin Khalifa al Thani came to power, Qatar has also experienced a significant amount of sociopolitical liberalization, including expanded women’s rights and a new constitution. It may have started to modernize slowly, but Qatar now has adrenaline coursing through its veins.
In another example of adrenaline-fueled progress, Saudi Arabia — the region’s largest economy and largest producer of oil — is quickly implementing measures aimed at attracting and sustaining investment. For years, the kingdom suffered from considerable bureaucracy; its regulatory environment carried high risks for foreign investors. That began to change in 2000, with the creation of the Saudi Arabian General Investment Authority (SAGIA), which aimed to attract foreign capital by promoting the creation of a business-friendly regulatory environment.
SAGIA embarked in 2006 on an ambitious initiative called “10 x 10.” Its goal is for Saudi Arabia to become one of the world’s 10 most competitive nations by 2010, as ranked by independent agencies like the World Bank and the World Economic Forum. This would be accomplished, leaders announced, by removing barriers to regional and international investment, and by capitalizing on the country’s main strengths as an energy powerhouse and strategic transportation hub between East and West. Indeed, in the World Bank’s 2008 Doing Business report — which ranks the world’s countries in terms of regulatory effectiveness — Saudi Arabia jumped 15 places from the previous year, from 38th to 23rd (and from the 67th position in the 2006 report). It now has the highest rank of all Middle East countries in the report. Although not yet in the global top 10, the country is clearly on a fast track.
