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'Marshall Plan' needs a strategy as well as funds

As talk of a Marshall Plan grows, we ask what such a plan would actually mean for the GCC, Egypt and the greater Arab world.

The GCC has already committed $20 billion (Dh73 million) to Oman and Bahrain for capital projects. It could be just the beginning. In these pages we have argued that targeted economic aid to other areas of the Middle East, Egypt in particular, may be necessary for regional stability. And yesterday, The National reported that Saad al Ajmi, a former Kuwaiti minister, has called for a $100 billion fund to help Egypt's economic recovery.

In recent weeks, many voices have advocated an Arab-style "Marshall Plan", modelled on the US economic reconstruction in western Europe after the Second World War. Amid the cacophony, however, many seem to forget what the Marshall Plan actually was. More importantly, there have been few details about how a similar plan would be applied here.

The analogy is easy to make; people assume that a massive influx of funds can transform a country. The actual lesson, however, is almost the opposite. Throwing money at a problem rarely works. It was not the Marshall Plan's largesse - $13 billion in 1947 dollars - but how it was spent that transformed Europe. Decentralised local boards, advised by US businessmen, allocated the money in line with an ambitious scheme to import technological know-how and best practices.

Whether in the United States after the economic crisis, or Europe after the war, state mega-projects are an obvious way to get the economic engine turning. The development package for Oman and Bahrain, earmarked for housing and infrastructure, follows this model with big bricks-and-mortar projects that boost employment.

But there are many key differences between today's Middle East and post-war Europe: in 1947, aid was spent rebuilding infrastructure and economies devastated by the worst war in history. Many Middle East economies may be stagnant, but they are not starting from the ground up.

Gulf countries certainly can muster the necessary capital. The question is how it is spent. But can transport or other infrastructure spending really stimulate enough activity and put enough people to work?

Fresh GCC funds in the region would have to find productive investments while negotiating structural corruption and inefficiency. It is the same dilemma of stimulating growth that we saw after the recent financial crisis.

But just because it would be difficult doesn't mean it shouldn't be done. The Middle East is at a crossroads, moving towards political reform but also an economic and demographic crisis. Mr al Ajmi rightly said that the Gulf countries should act in this "historic moment". Now is the time to start filling in the details of that plan.

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