Specifically, there is a constant tension between modernizing and Westernizing in the region. Modernization is valued, but only within traditional parameters. Leaders in the Middle East recognize, for example, that broadband is important; everyone agrees that most houses should have fast Internet access. At the same time, the region grapples with the issue of reconciling unlimited information on digital media with the priorities of local culture.
For example, should Internet content be self-managed, or should limits be imposed on what people are able to read and see? These markets are proud of their Arabic heritage and Islamic tradition, and they anchor their business culture in these elements. Within that context, decision making is progressive. The result is a mind-set that seeks ways to embrace progress while maintaining a respect for tradition.
The Islamic system of banking, which is guided by sharia (the body of laws derived from Muslim texts and principles), exemplifies this tension. Sharia prohibits the collection and payment of interest, and governs profit sharing and risk. Responding to the demand for an Islamic alternative to Western-style financing — one that does not financially penalize the faithful — Islamic banking has become more progressive, with the introduction of sharia-compliant derivatives, hedge funds, and structured finance.
Indeed, a new breed of modern Islamic bank has emerged, with the Middle East as the incubator for this industry, which is growing at an annual rate of 15 to 20 percent across the globe. As author Reza Aslan observed at the Aspen Institute Ideas Festival in 2007, these banks are “doing wonderful work in reconciling the requirements of the global capitalist market with Islamic finance morals. Large banks in the Muslim world, instead of charging interest on business loans, will take a certain percentage of that company’s profit. And therefore they are fully invested in making sure that this company succeeds; whereas in the Western system, succeed or fail, the entrepreneur still owes the bank the money. This conception of global finance is focused much more on cooperation, fairness, and economic development than the conventional form of capitalism. There is much the West could learn from them.”
Focused Yet Flexible
In today’s global market, there’s no such thing as a static business plan. A dynamic plan — one that allows room for externalities — can be fine-tuned and recalibrated in response to changing conditions. Within the Middle East, decision makers tend to follow a five-year planning cycle, but they never consider these plans to be set in stone. Decision makers recognize the importance of setting a clear direction, but the sheer number of economic changes taking place mandates strategies that are open to rapid change. The same market that is regulated one day may be deregulated the next; focus and flexibility must go hand in hand.
Since the decision-making process in the region tends to be shorter and more centralized, there tends to be more fluidity than in the U.S. and European markets, where due process at the government level makes policy more difficult to undo if it is unsuccessful. It is easier to experiment in the Middle East.
To be sure, some Middle East policymakers may feel less comfortable with this, especially in economies that have not yet diversified away from full dependence on oil. But a growing number of them are becoming used to the idea of experimentation. In many ways, the reliance on oil adds to the pressures that these leaders feel: If citizens of a country don’t see the money from their nation’s natural resources invested, they will wonder how the proceeds are being used. And should the government invest that money unwisely, it will have squandered the country’s wealth. Focused yet flexible planning allows policymakers in these oil-producing countries to calibrate their choices and experiment.
