Middle Eastern Economic Developments

The Middle East Media Research Institute (MEMRI) argues that there is a severe lack of understanding by western countries and economists of economic developments in the Middle East, and I think they're right. A number of economic occurences that have come to pass recently give me greater hope for peace in the Middle East than any political or military actions ever have.

In one development, Saudi Ayla Development Company, a subsidiary of the Astra Group, signed a deal with the Aqaba Special Economic Zone Authority (ASEZA) in Jordan to construct tourism projects in southern Joran worth $1.79 billion. A second development similarly involves construction of a real estate project in the West Bank near Ramallah by Saudi Land Holding Company (LHC) and the Palestinian Authority's Palestinian Investment Fund, valued at $200 million.

In separate news, Syria and Iraq been negotiating to revive agreements related to ground, air, rail and sea transportation, reactivating the joint companies for ground transportation and establishing a joint company for rail transportation.

Why do I see these as positive signs? Because economic entanglement is a disinsentive to conflict. Any upheaval in the West Bank or Jordan, for instance, could jeopardize the value of the holdings of the Saudi companies investing in those areas. Thus, it is in the best interest of the investors in those companies to avoid violence and conflict that can lead to upheaval and decrease the value of their investments. After all, Israeli tanks and helicopters knocking down your buildings tends to be bad for the value of your investment. Since the Israelis generally only take such actions in response to attacks by terrorist groups, it will then be in the best interest of the investors in Saudi Arabia and Indonesia to prevent attacks against Israel.

The same holds true for the negotiations between Syria and Iraq. Syrian elements have been major contributors to conflict in Iraq through support of the insurgent groups that are trying to destabilize the country (commonly through attacks on economic infrastructure). If Syria benefits from the economic infrastructure of Iraq, the country's leaders will be inclined to prevent attacks on that infrastructure and will take steps to stop whoever is supporting the insurgents.

This, of course, assumes rational behavior, but that's the nature of economics. On the other hand, I tend to think that rational people avoid violence as a general rule, so maybe none of this applies to the people causing the violence and conflict.