Education's vital development role (page 1 of 3)

It goes without saying that entrepreneurship and economic growth go hand in hand. But cultivating the elements of entrepreneurship is no simple task.

It is a fragile construct demanding innovation, leadership, determination and the confidence to take risks in charting new ground. It also requires a climate of political and social stability, and a large degree of regulatory flexibility to enable business to move with changing markets.

Perhaps the most important ingredient is education. The rise of economic powers throughout history, and indeed the pre-eminence of the Arab world in ancient times, can be traced to a corresponding expansion of the arts and sciences.

This critical relationship can be seen at the industry level. Stanford University in California is a critical talent pool for Silicon Valley, the global IT hub, while India's position as an IT leader has been fueled by astonishing levels of computer literacy in its higher and vocational education system. It's clear, then, that quality education, the availability of ready markets, modern infrastructure, sound economic policy and government support, and the steady injection of investment make an ideal recipe for budding entrepreneurs - at least on paper.

It is a five-point scale that is providing more food for thought than ever for Arab governments as they grapple with the twin challenges of developing the competitive skills of their rapidly growing indigenous workforce and transforming vital foreign direct investment (FDI) from a trickle into a flood.

At the kitchen table of FDI, the Middle East is making do with shockingly small helpings. The region attracted just 0.7 percent of global FDI in the 1990s, while business between member states of the region during the period was responsible for a mere eight percent of Middle East trade.

At least the parlous state of the Arab world as an investment destination is prompting a response. The publication of the UNDP Arab Human Development Report in 2002 highlighted the scale of the work needed to attract greater cash flow into the Middle East.

The consequences for business growth when the right economic conditions are not met are profound, and the comparative figures available make for a compelling read. In 1950, Egypt and South Korea shared the same per capita income. Today, average earnings in Egypt are barely 20 percent of its East Asian counterpart. Another Tiger economy, Malaysia, currently boasts three times the GDP of Morocco; 40 years ago, the two countries' GDPs were roughly the same.

The emerging status of many Middle East markets is little justification for underachieving on the FDI front; studies show that 75 percent of investment capital flows to developing countries. Naive economic policy, inadequate infrastructure and underdeveloped human resources are compounding the region's more publicized problems.

The predominance of government in Arab societies, in particular, is restricting moves towards greater flexibility in economic policy. Rather than fast-tracking efforts to promote liberalization, Lebanon has slowed the rate of its industry privatization. Syria, meanwhile, has shelved privatization plans as state enterprises undergo restructuring.

Political upheaval from Libya to Palestine has rendered much of the region an apparent investment no-go area, and discredited education systems - which promote learning by rote above personal development based on problem solving and initiative - are failing a young and growing population.