Fareed Zakaria: Welcome to Foreign Exchange; I’m Fareed Zakaria...

The rise of capitalism in the Arab world; believe it or not that is what we are going to discuss with Afshin Molavi, the Director of the Middle East global initiative of the New America Foundation. Afshin, you’ve been traveling around the Arab world for the last couple of years and do you feel that what you’re witnessing there is something quite different from the past that--that you are seeing new entrepreneurial fires in almost every part of the Arab world? Tell me what--what is the most exciting place in--in these terms in the Arab world today?

Afshin Molavi: Sure; I think that clearly the most exciting place in terms of the activity is the Gulf Region, the six countries of the Gulf Cooperation Council, Saudi Arabia, Bahrain, Oman, Kuwait, Qatar, and the United Arab Emirates. These six countries combined are the sixteenth largest economy in the world if you take them as a whole, and with the oil price rise we’re witnessing significant innovation in places like Dubai and Abu Dhabi and Qatar--they’re attracting educational institutions. There’s about one trillion dollars worth of projects taking place in the Gulf Region as a whole today.

Fareed Zakaria: Meaning construction projects, industrial projects--?

Afshin Molavi: Industrial, construction, real estate, and tourism projects--a small city state like Dubai attracts more tourists than India. It attracts almost as many tourists as Egypt so that’s where you see a lot of the headlines you know but--but I think a place like Egypt is very important to watch because Egypt has been you know--has dramatically underperformed its economic potential over the past five decades you know. If you go back to the early 1950s and you compare Egypt and South Korea they had roughly equivalent GDP per capita, roughly equivalent per capita income. Today South Korea is the 11th largest economy in the world and Egypt is stagnant and a regional laggard. But finally the--the giant on the Nile, the one eye is fluttering and it’s--it’s slumbering from--it’s--it’s awaking from its slumber and what we’re seeing is you know new efforts to streamline the bureaucracy, the famed Egyptian bureaucracy, we’re seeing things like a new mortgage finance law, and--you know people--sure.

Fareed Zakaria: Now why is all this happening?

Afshin Molavi: Yeah.

Fareed Zakaria: You know so you--you described it correctly; for decades these--the Arab world has been the laggard in the march of globalization and modernization. And then something has happened quite recently; do you think I mean is it the shock of 09/11 that--that has played some part in this?

Afshin Molavi: I think it has definitely; the shock of 09/11 and also bureaucratic things like take for example what happened after 09/11 made it more difficult for leading Arab merchants who had long trading ties with the United States to get visas to come to the United States. There was also that animosity that arose between the United States and the Arab world. So when we saw it in the 1970s in the last oil boom, a lot of the money was automatically being recycled into the west and to London and New York investment banks. After 09/11 when the oil price rose a lot of money stayed at home. It was looking for investments at home and not only in the Gulf Region but in Egypt and Morocco and other places as well...

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