One Giant Step For Iraq, Smaller Steps Elsewhere

The television images of huge numbers of Iraqis defying insurgents' threats to cast their votes on Jan. 30 were watched across the Middle East -- and nowhere more closely than in neighboring Kuwait, which Saddam Hussein invaded in 1990. "The election is a very important sign for us," says Kamel A. Al-Harami, a Kuwaiti oil consultant. "If the security situation stabilizes and Iraq has a freely elected government, it will be good for Kuwait and, later, the rest of the Arab world."

Those are, of course, big ifs. It remains to be seen whether the Iraqis can parlay their election enthusiasm into an effective government that can quash the insurgency. If they succeed, a tolerant, pluralistic Iraq will turn up the pressure on the region's 1950s-style strongman regimes and monarchies, which are increasingly seen as dead weights on their people and economies. "What you have in Iraq is fundamental change that will have resonance in the rest of the region," says Abdel Monem Said Aly, director of Cairo's Al-Ahram Center for Strategic & Political Studies.

Outsiders may think of the Middle East as a bleak disaster zone, but on the ground there are more than a few signs of a shift, particularly on the economic front. Egypt, Saudi Arabia, and even Syria are taking long-needed measures, from tax cuts to opening the way for foreign investment. The region's stock exchanges are responding: Arab markets were up an average of 74.9% last year, with the 106.8% gain of Egypt's Hermes financial index leading the way.

Why the surge? Most analysts point to local improvements. Egypt's economy is expected to grow 5% over each of the next two years. It's benefiting from growth in tourism and success in exporting food, cement, and textiles. Hassan Heikal, a top investment banker at EFG-Hermes in Cairo, says corporate profits are up some 40% in the last year. Prime Minister Ahmed Nazif, who took office in July, is cutting taxes and looking to restart stalled privatizations of cement companies and banks.

Opening the Door

Saudi Arabia is also witnessing change. High oil prices were a key factor in pushing the Saudi market to an 85% gain last year. Beshr Bakheet, chief of Riyadh brokerage Bakheet Financial Advisors, also points to soaring profits. But the removal of the incubus of Saddam Hussein hasn't hurt. What's needed now to keep up the momentum is political reform to match the economic change. Saudi Arabia will break from tradition and hold municipal elections in late February. Bakheet is one of hundreds of candidates for the Riyadh City Council. He has a Web site,, and gives the process a thumbs-up despite a bar on political parties and the failure to grant women the right to vote. "This is a testing ground to open the door to real power," he says.

Baby steps, maybe. But they're taking place all over. New Palestinian President Mahmoud Abbas looks likely to clean out some rotten wood in the Palestinian Authority and is expected to meet soon with Israeli Prime Minister Ariel Sharon. The Tel Aviv Stock Exchange is hitting record levels as investors bet Abbas will end the intifada.

Of course, militants or Israeli settlers could scuttle Abbas' efforts, and the news from Iraq also could sour. Iraqis need to match the enthusiasm they showed in voting with a sustained effort to seize control of their destiny. If that happens, the Middle East picture could change dramatically.

By Stanley Reed in London, with Neil Sandler in Jerusalem

Edited by Rose Brady

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