Facial metal or hejab – who’s a natural ally in the transparency movement?

You’re sitting at a gate in an international airport (as I am now) and, just as a parlour game, you’re looking for the transparency constituency among your fellow passengers in oil-producing country X. There are two people from that country sitting straight opposite you on the seats, grimacing through the barely intelligible announcements of delayed boarding: a young professional man, designer glasses, well dressed, maybe an arty beard, fiddling with laptop. You hear him chatting with a friend in fluent accented English on his mobile, talking about who did what on Facebook, then another call where he promises to send a document by email on arrival. Next to him is an lady in her 60s, wearing hejab, arms crossed, waiting patiently, fussing over her grown children and grandchildren if she has them with her, active but clearly “silver age”.

Which of them is the best natural ally in the global campaign for more transparency in the oil industry? As a new book by Vali Nasr points out, it may well be the elderly lady – for two reasons.

First, she’s a stock market investor who’s ridden three roller coaster rides on the local exchange in the last decade, and currently holds shares in three listed petrochemicals firms whose monopoly feedstock suppliers are the joint ventures between the national oil company and international companies; second, she belongs to the conservative middle class and her social network extends to many people in senior positions in government ministries and local business. In short, she’s motivated by capitalist self-interest and is close to the establishment.

So why, when the stakes are so high, do we lazy think in stereotypes? And – generally – assume that colleagues and allies in the fight for transparency across the oil-producing countries must be somehow “like us” – social liberals interested in public good? Surely enlightened self-interest is a much stronger, and at times more rational, force?

Nasr’s book, entitled “Forces of Fortune”, has a very simple central thesis – that the growth of capitalism in the Islamic world is a more realistic and stronger basis to counter-radicalise, as the term of art has it, than democratisation and political liberalism, and that the Western world should stop obsessing about the latter and pay more attention to the former. He cites the rise of the AKP in in Turkey, and of a conservative middle class that is pro-globalisation, pro-European Union in the case of Turkey, but religious and socially conservative. And Dubai, a commercial centre which has been so successful that Iranian ports along the other side of the Gulf have now become satellite docks for global shipping which can’t dock at the Jebel Ali free zone because of the build up of traffic. Nasr, the son of the great scholar Seyyid Hossein Nasr and a professor at the Fletcher School at Tufts, is Iranian born and Iran is his principal focus – arguing against economic sanctions on the ground they penalise the very constituency in Iran which is the natural internal champion for political moderation on issues like the nuclear program, Hizbollah and Israel, both the bazaaris and new business class which the Islamic republic has been encouraging since the early 1990s.

But his arguments can be applied also to the question of transparency. While transnational global society, groups like Publish What You Pay and the Revenue Watch Institute, has worked long and hard, and with some notable successes at building alliances inside resource-producing countries, the majority of partnerships are with a tiny fraction of civil society – NGOs and CSOs engaged in governance more generally, often foreign funded, socially progressive, and more often that not in adversarial positions with their states and governments across a range of issues. Nothing wrong with any of that, and this is not to question the integrity of such groups. But in many countries, they only represent a fraction of the potential constituency for greater transparency.

The lady in hejab is a real world example – the mother of a family friend in Cairo who has played the Egyptian stock exchange since it was revived in the mid-1990s. Now in her 70s, in her professional life Madame Fawzia was one of the first women doctors to achieve officer rank in the Egyptian army. She is well born, retired with the rank of colonel, prays five times a day, and has never voted. How many are there like her? Estimates for the number of Egyptian investors in the local stock market are vague, but generally in the order of several hundred thousand. By definition, they are at least middle class with disposable income, often middle aged and traditional.

Estimates for the numbers of Gulfi citizens with plays on their own exchanges are even higher. One report suggested that as many as 90% of Saudi males may own shares on the local market. The most traded sector in virtually all these new exchanges is finance – the banks themselves – but nudging it for leadership on the Riyadh bourse is petrochemicals. There are several big locally owned companies with listings. Similar patterns obtain to a greater or lesser degree in Kuwait, the UAE, and Bahrain. This entire investing class has an interest in more and better company information to judge their investments on – which in the case of Saudi petrochemicals or Qatar’s LNG and power projects, includes key information about the oil and gas industry, whether its reserves status, trends in market pricing, estimates for future availability of feedstock, and so on. The fact these shareholders are largely apolitical, or, if anything, broadly “pro-regime” only makes their support for transparency more effective. It becomes possible to de-politicise the issue in countries where there is deep suspicion of any change to the political dispensation.

How to engaged with the Middle East’s shareholders? It’s not immediately clear and there are a range of challenges. None of these countries have freedom of access laws, or even broad regulations. Core operations in oil and gas remain the preserve of the national oil companies, and information generally around the industry is often classified as national security secrets. That would suggest a bottom-up approach of researching what information could be available, could serve the self-interest of the share-owning classes, and help shed more light on the oil and gas industries. It would be different from country to country and rely on close analysis of specific windows opened by changing political and economic opportunities.

But what it seems fair to say is, these echelons do not seem the object of much attention within the global transparency movement, and it’s about time that changed.

As for Nasr’s book, I mean it as no disrespect to say the fact the book needed to be written, and has been hailed in Washington policy making circles as an important breakthrough, is a sad comment on the quality of Middle Eastern punditry, which is a not inconsiderable sized industry. What do all those think tanks and institutes and journals spend all their time doing? Is poli sci wonkery so completely detached from basic political economy? A certain kind of Homer Simpson “doh!” is unavoidable.

His main conclusion is sound but should be refined. First, the argument that “capitalism” should be encouraged for its politically moderating effects is too crude. Popular capitalism facing consumer markets – telecoms, for example – is very different to the natural resource capitalism of oil and gas, which is very different again to the mercantilism and services-based economy of Dubai, for example. The potential for shareholder activism in each, and the easy availability of meaningful information to publish in each is wildly divergent. Second, if we’re considering the social impact of economic growth, we need to stop talking about GDP and start to use slightly more refined measures such as GINI and the Human Development Index – and even these are only very vague proxies. The ability for economic growth to contribute to social stability and political moderation depends heavily on how distributive the growth is.

Third, while the principle of looking to encourage indigenous growth and ownership may be sound, Nasr underplays the different trajectories individual countries, in this case in the Muslim world, are likely to be able to sustain in targeting this. It cannot be a coincidence that Turkey was never colonised, and formed its nation state itself, not out of boundaries and paradigms drawn up in London and Paris (compared to Jordan, say, where Nasr tells the story of Winston Churchill adopting the idea of Jordan as a personal project, saying at a conference table in 1922… “well, let’s give it six months and thirty thousand pounds”). Turkey is also more homogenous than either Iran or Pakistan, and questions of communal tensions and power grabs have surely been one of the greatest problems in economic development across the world. Plus, Dubai was only relatively poor as a Gulf emirate – there was no shortage of cheap and easy capital available to develop the Maktoum family’s vision, in a way which is not viable for all the other Dubai wannabes in the region – KRG, for example, or Jordan, which both base their hopes on expatriate funds as the core of FDI to develop service economies.

It is refreshing to read this argument well articulated – the new export kings of central Anatolia being compared to Christian Democrats on the European mainland – but the thesis, while strong at its core, has a lot of fuzzy edges.

In the meantime, why not start working on engaging that shareholder constituency? Long, slow discussions with chambers of commerce and trading houses around company reporting standards, gentle network building across coherent regions such as the Arab world?

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