A more hopeful macroeconomic picture for the Middle East

Pick-up any newspaper, anywhere in the world and the chances are that the politics of the Middle East will be on the front page. Whether it is the insurgency in Iraq, the Palestinian problem or an isolated terrorist attack in Qatar - the region is always featured prominently as bad news.

How ironic that much of this bad news is actually good news for the region's macro-economy. For the process of political reform that is now unfolding is creating a new era for regional business; one of free trade deals, intra-Arab trade, good corporate and domestic governance, and last but not least heavy investment in domestic infrastructure.

To highlight an example: Last week Qatar experienced its first-ever terrorist attack, which may very well prove to be its last. But the Government's proactive reaction was to trumpet its $100 billion investment plans over the next few years; and this is no shallow boast, the money is all there.

The same figure of $100 billion was mentioned at a MEED Major Projects conference with regard this time to Dubai. It is true, if you add up all the amazing real estate and infrastructure projects in this emirate then that is the correct amount; Abu Dhabi is also gearing up its spending to catch up.

Meanwhile, Bahrain is booming and even Saudi Arabia is rolling out major projects, though not on the same scale yet as Qatar and the UAE. Indeed the decision to restrict ownership of property in Mecca and Medina to Saudi citizens does seem a step backwards from economic reform.

However, perhaps the biggest economic growth will not be in the Gulf. The peace-dividend of a settlement to the Palestinian question and the creation of a unified government in Iraq have the potential to bring even bigger business opportunities, certainly in relative if not absolute terms.

Even the situation in Lebanon looks more promising as the horrific assassination of former Prime Minister Rafiq Hariri has provoked an uprising that has pushed the Syrians out of the country.

Lebanon is a place bursting with entrepreneurial flair and energy and perhaps this political change will bring longer term economic advantages, particularly if Lebanon can now be swiftly re-integrated into the global economy.

Everywhere you look in the Middle East political change is leading to economic opportunity. The obvious parallel is the break-up of the Soviet Union and the East European bloc. The collapse of state control and communism led to an upsurge of new ideas and economic expansion, though it has to be said that smaller countries generally managed the transformation better than Russia.

This is the new hope for the new Middle East; that out of a period of chaos and disharmony a new peaceful era for business can be created. Provided that people stand firm and like the demonstrators in Lebanon and Qatar this week make it quite clear that times have to change, then peace and prosperity will follow.