Assistance from the outside is incidental, even detrimental, if the overall framework of reform is not driven by domestic developmental considerations, writes Galal Amin* It is about three years since the call for "reform" began to occupy such a prominent place in public discussion in Egypt. From the beginning I have felt uncomfortable about three things at least in this avalanche of discourse about reform. The first has been the universality of this call. Everyone seemed to take part: intellectuals as well as politicians, opposition parties as well as government spokesmen, and debates were launched by highly elitist institutions such as the Bibliotheca Alexandrina as well as popular TV stations. Foreign governments also took part, American and European, and even UN agencies. The UNDP published three annual "Arab Human Development Reports", immensely popular, underlining the urgent need for reform. Such universal participation raises a simple question: "If practically everyone is calling for reform, if everyone is innocent and urging others to reform, who exactly is to blame for the situation we're in?" Some of the tears shed over reform are like those of the crocodile, reputed to weep as a way of alluring its victim. My second source of discomfort is my strong belief that reform, rather like happiness, is most assured when least talked about: genuine reform occurs only when you are busy pursuing some other goal. History gives support to this view. The European Renaissance was a great period of reform, but I'd be surprised to learn that any of its great pioneers were driven by the idea of "reform". This is also true of almost all reform movements in Egypt's modern history. Mohamed Ali, often called the "founder of modern Egypt", certainly led a magnificent and lasting reform movement, but while implementing it he was only thinking either of his personal glory, or of how to establish a dynasty for his family. The 1952 Revolution perhaps comes closest to being a conscious and deliberate reform movement, but Nasser hated debate and conferences. Discussion in his time generally took place not before but after reform was enacted. My third source of discomfort regarding the present advocacy of reform is that it has emanated from outside. As soon as the call for reform was launched, just after 11 September 2001, it was immediately embraced and warmly greeted by most sections of the Egyptian public. But it is still a point of worry that the origin was foreign and that the persistence of outside circles in calling for reform continues as strong as ever. Why should this be a worry if the declared goals are shared by all concerned, domestic as well as foreign? The worry is that we should have learnt by now that the same name can be given to very different things; that widely different goals can be disguised under one noble slogan. Everyone knows that the term "democracy" has embraced such widely different systems of government as that of Britain and the Soviet Union, Kuwait under the Sabah family, as well as Iraq under Saddam Hussein. Few were deceived, but it does not prevent the same trick being used again and again. It is the ill fortune of social science that words like democracy, freedom, development, reason, education as well as empowerment can be understood in a great variety of contexts, taking meanings which may, in some instances, be the exact opposite of each other. It is in the nature of foreign intervention to use people's aspirations that come under foreign domination as cover for less noble motives. When Napoleon invaded Egypt in 1798, he distributed a leaflet declaring that he had come to correct the wrongs done against European traders and to introduce Egypt to the principles of freedom and equal opportunity. In the very next paragraph, he unashamedly warned that any village that showed resistance would be set on fire. Luckily, most instances of contact between cultures are not of this kind and such contacts have often sparked genuine reform. No advance in civilisation may even be imaginable without some contact between cultures. My point is rather that for foreign intervention to produce genuine reform there is one condition of paramount importance: foreign contact should be allowed to trigger indigenous forces of reform; that the foreign injection has to be given in the right dose, at the right time, and in the right part of the body, so that it does not produce a clot, or obstruct the free circulation of indigenous blood. There is ample historical evidence to show that the absence of this condition largely explains many experiences of failure in what used to be called the Third World, including the Arab world, and that it is the fulfilment of this condition which explains the few instances of success. Let us first look at the Arab experience. After the Arab military defeat in 1967, I wrote a book that was published in 1974, on the economic development of nine Arab countries, covering the 25- year period that followed WWII. My conclusion was that this development was exceedingly disappointing. Searching for a title I found none better than The Modernisation of Poverty. What I had in mind was that what happened in the Arab world between 1945 and 1970, was not genuine development or genuine reform, but merely "modernisation", for apart from a façade of modernity things remained essentially as they were. What seemed to me at the time, an explanation of this modernisation without development -- or without reform -- and still seems to me correct, is that the Arab world had one of the worst types of contact with the more developed, more modern countries. The injections of foreign influence that Arabs received between 1945 and 1970 were not the right dose, nor given at the right time, nor in the right part of the body. No wonder that they created a clot that blocked the circulation of Arab blood. In the oil-rich countries of the Gulf, foreign injections took the form of large investments in the oil sector, completely out of balance with investment elsewhere in the economy. The inevitable result was an unprecedented flow of oil revenues, but also a massive growth of conspicuous consumption completely unmatched by the growth of productive capacity. Outside the oil sector, modern technology was trapped in imported consumer goods rather than used to increase productive activity. If I were to write today the story of Arab economic development, what title would I chose? I am aggrieved to say that this would be just as an appropriate title to describe the period 1970-2005 as it was for the previous 25 years. For during these 35 years, Arab countries, almost without exception, have become more modern but achieved very little in reform or development. The explanation seems to be exactly the same: large foreign injections in the economy and society that were of the wrong dose, given at the wrong time, and in the wrong place. During the last 35 years, oil revenues were hoarded by oil rich countries at even greater rates, but with very little development elsewhere in the economy. Foreign aid continued to flow, and in the case of Egypt at much higher rates than ever experienced in the 1950s and 60s but again, too much of this foreign aid went to armaments, even though we were pursuing a policy of peace and publicly declared the 1973 war to be the last war. The remaining part went mainly to finance infrastructure that catered much more for consumption than for productive activity, such as the modernisation of the telephone network, or encouraging the greater consumption of electronic gadgets. There was also a big flow of money from migration, another injection from abroad. These huge remittances, with proper economic management, could have been channelled to facilitate the creation of huge employment opportunities. But alas, the process of migration coincided with the introduction of an undiscriminating "open-door policy", so that migrant remittance was allowed to seep away, financing a short spell of economic affluence that ended as soon as migration opportunities dried up. In contrast to Arab failure, the experience of a number of countries in Southeast Asia -- most prominently China, South Korea and Malaysia -- confirm my suspicion that it is largely a matter of how far one allows foreign injections, whether in the form of foreign investment, foreign technology, foreign trade or foreign aid, to enter the body, in what ways and to what end, that decides one's fate. Successful countries monitor foreign infiltration carefully and skilfully, directing it to the right sectors, in the right amounts and under close scrutiny. China, South Korea and Malaysia have each achieved a high degree of modernisation, but it has been modernisation allied with successful reform and development. If this analysis is correct, we should be exceedingly careful, while preparing for the next 25 to 30 years, not to repeat another period of the "modernisation of poverty". Foreign investment and education are only two examples of areas where we face the danger of falling again into this trap of modernisation without genuine reform. With regard to foreign investment, everyone is ready to admit that private foreign investment can bring great benefits to Egypt, but unfortunately, few are willing to admit, in the climate now prevailing, that it can also bring a lot of harm. Foreign investment brings modern technology, but it often brings the wrong technology. It may increase employment but it also may not, and may indeed increase unemployment. It may raise real wages but it can also depress wages for the greater part of the labour force, and divide society in two. It all depends on what kind of foreign investment you have; what it does, not where it goes. It is simply not true that the more foreign investment you get, the better. One has to discriminate, and foreign investment has to be monitored. But in the hysterical climate in which we are living today you hear nothing but a chorus singing the praises of private foreign investment. The talk is only about how little of it we have got, and how much more we should be getting, and hardly anything is said about how little has actually been achieved by the amount of foreign investment we actually got, in terms of employment creation or of foreign exchange earnings, or how we can make sure that the future flow of foreign investment is of the right, beneficial kind. The Egyptian organisation responsible for foreign investment in Egypt has recently declared its ambition to reduce the time required for the approval of foreign investment proposals to only three days. Or is it two? This is in line with the determination of the World Bank and other international financial institutions to measure the success or failure of countries in achieving "reform" by the length of time required to approve new private foreign investments, and of ranking countries accordingly. Is it not possible that to ascertain the fulfilment of some conditions that are important from the point of view of the national economy -- like employment creation, introducing new desirable skills or real transfer of technology, rather than physical transfer -- one may need a few more days? This attitude of aiming to reduce to a minimum the requirements for approving private foreign investment is not only due to the wrong idea that any private foreign investment is better than none, but is partly a response to the widely held belief, and continuously repeated claim, that the main reason why foreign investment does not flow into Egypt at the desired level is excessive bureaucratic complication and red tape. Spreading this view is in the interest of foreign investors, for if widely believed it can only result in more lenient treatment and greater concessions. But what if this claim is false? For 30 years, investment laws in Egypt have been repeatedly modified to accommodate the interests of private foreign investors, and the history of cabinet changes over this period can be told in terms of replacing one lenient cabinet towards private foreign investment by another more lenient still. Yet, private foreign investment in Egypt has fluctuated quite heavily during these 30 years, with a recent trend towards drastic decline, without any sign of bureaucratic restrictions being tougher. The most likely explanation of this behaviour of private foreign investment in Egypt, is that political conditions in the region as a whole are more critical than bureaucratic restrictions. If this indeed is the correct diagnosis, it does not help very much if you reduce the number of days required for approval, or give more and more concessions, while the political situation in the region remains as it is. My conclusion here can be summed up as follows: one can do oneself harm by refusing to be hospitable to strangers, but one can do equivalent harm if one is too ready to admit to mistakes one has not committed. We are also repeatedly warned that if we continue to be fussy about what we call "national" or "social" considerations, foreign investors will simply go elsewhere. We have many rivals, we are told, more attractive than we are, and the foreign investor does not have the virtue of infinite patience. If we think that we have any particular worth that makes us more attractive to foreign businessmen, we are mistaken, or so we are told. The only thing we have to offer is concessions and more concessions. To this, I am inclined to answer that if we really have no intrinsic attraction whatsoever to woo the foreign investor, and if we have no other way but to sell ourselves as cheaply as possible, to offer ourselves -- body and soul -- to any passer-by, then we really do not need any reforming at all. All we need is some cheap make-up. I can say similar things with regard to education. Nobody is happy about the state of education in Egypt, and foreigners can do a great deal to help. But let us admit it: foreigners get interested in Egyptian education only insofar it's good for business. Private education is one of the most profitable businesses in Egypt today, and the improvement of education is conducive to doing good business with Egypt. This explains the proliferation, in Egypt, of private educational establishments over the last decade and the opening of foreign universities during the last few years. But the reform of education surely goes beyond the requirements of business. Business can doubtless prosper hand-in- hand with the growth of a highly dualistic type of education, with a small island of well-trained computer operators, highly professional in the English language, floating within a vast ocean of illiterates who can hardly write their own names in Arabic. After a few more decades of adopting a largely foreign agenda of reform in education, Egypt could appear more modern than it does today, but Egyptian education would hardly have been reformed. It is really not difficult to draw the same contrast between reform and modernisation in other fields as well, whether in the areas of political democracy, culture, media or the empowerment of women. In all these fields, a country can become more modern without being reformed. Some may comment that what I am saying is merely that foreign-instigated reform is not enough; that it must be supplemented by indigenous reform efforts. But I aim to convey more than this. Reform could have either a foreign agenda or a domestic one, whether assisted or not from the outside. What I am warning against is simply following a foreign agenda for reform, for the inevitable result is not really reform but only a false resemblance of modernity. * The writer is professor of economics at The American University in Cairo.
