Here, here!

Though I would like to see some of that crazy talk applied to the US as well. I always thought finance should be a means to an end, not an end in and of itself, though I hope saying so doesn't make me sound too econ illiterate...

And the post (as well as above) is sheer silly bollocks.

One has to be able to make money. There are non-trivial barriers to that.

I didn't suggest it was easy or trivial; and manufacturing is the way into increased development. Let's get into describing the barriers.

One flaw in my own above is that really step one, about getting money to make money, shouldnt be necessarily fund-driven or even institutional capital driven, except on the infrastructure or macro level. Smaller closer to home investment and loan systems can work to create local manufactures, as happened in certain of the Asian tigers I believe.

L,
I for one, as an interested but totally ignorant outsider, would love to hear what the non-trivial barriers are, even in a "for idiots" format.
Though I have to say, manufacturing as a way to make money only makes sense if you can make things that you can sell at a profit. There are reasons that so much heavy industry closed up shop in the US. I don't know what could be made in MENA and exported profitably, as I don't know what they might have an advantage in. They'll never be cheaper than the Chinese or more high-end than the Germans--or better at assembly and light industry than the Czechs, who have the advantage of EU membership. Or make better steel and not-quite-cutting-edge chips than the Taiwanese. Etc.

Although I am being willfully condescending on the whole issue, and not to our resident experts, I do think that the growth of manufacturing enterprises is ciritcal to transition.

I do think, perhaps that I am wrong to blame the risk-averse funds to some extent, as when I review other experiences like East Asia, alot of the transitional cirtical development capital came from pooling of family or local resources and overseas-acquired skills and remittances.

What may have been different is the extent to which such upward mobility among small to medium enterprises is more inhibited in MENA. Because once those enterprises rise, larger institutional investors go hmmmm, there's money to make here.

If bollocks, elucidate.

Is there any update on that old generalization that characterized peoples in the MENA region as having a DNA that predisposes them to aspire to the merchant class and to disdain making stuff? If they still persist, what interventions have shown success at inoculating these cultural attitudes and perceptions?

"Merchant class" is not a bad thing per se, but either way has not much to do with it. Plus you can jump directly to an information based economy without going to manufacturing (see the huge BPO outsourcing sector to India, where, sheepish bubble style business aside, labor is skilled/cheap enough to create arbitrage opportunities at a very large scale).

Yes, exessive rent seeking as mentioned several times here is a factor. But not the only one. MENA is a high risk area in terms of business (though not necessarily higher than other emerging markets) with a burden of scarce semi-decent gov policies. Where rent seeking is manageable, to catch up with the rest of the world, such conditions would need a high amount of matching of skills, financing and risk taking. Each of those components is present individually, but the necessary amount of matching is not. Grossly oversimplifying that is, there are of course zillions of other "small" factors that need to be addressed.

Your plan reminds of an old Steve Martin skit I ran across, Steve Martin's Guaranteed Plan to be a Millionaire and Never Pay Taxes. . . .

Step 1: Get a million dollars.

Without going into boring detail, I think you'll find that the problems start to set in at Step 5. In order to make the whole thing work, you'll have to sell your "stuff" for more than it costs you to make. This is called profit. If you don't have any comparative advantage in making your "stuff," other people will sell it cheaper than you can so you will either a) be stuck with a lot of "stuff" you can't sell or b) sell it at a loss. This will make the successive steps difficult, especially Step 7. You cannot, as they say, lose a little on every sale but make it up in volume.

Some countries do try to do what you propose by capturing their domestic market. They charge high import duties or erect other trade barriers to ensure that the people making "stuff" will be able to sell it to the locals even if they have no comparitive advantage. There are big arguments about if this is ever a good idea and, if so, when. But I can say with some confidence that for every case where it might possibly be a good idea, there are dozens where it quickly becomes just another rent-seeking scam even if it didn't start out that way.

If your goal is to get a million dollars, step one in Steve Martin's plan makes sense, just needs breaking down a bit.:-)

I didnt say ANY stuff, just stuff that can sell for a profit. Among 200 milllion there are those who can figure that out.

The peeve is directed the absence of development, or rather much talk of the develpoment, of processes that increase exports of goods and services (services like India has sold -- IT-- for example), either directly or forseeably down the road. Whichever or whichever combination works.

The poorer mideast nations and Taiwan/S Korea had similar levels of production exports two generations ago, I beleive. One set took off. Why one and not the others? I dont believe in DNA nor in the various bigtoed theories of today.

So why not make stuff? Eg Syria has some of the world's better quality cotton in its very own closet, it has an industry of sorts, why isn't a textile superpower? (I agree with the above that protectionism for infant industries is probably not desirable.)

I begin to suspect the barriers in general are ultimately the inability of smaller locally funded industries to take off for reasons related to state repression and its absorbing of increasing profits via corruption or some other form of wealth suction.

Two words

Human Capital.

Otherwise, read some fucking books.

And any comments about finance at the service of whatever, get a fucking clue.

Lounsbury: so, what does MENA lack in terms of human capital? Literacy? Technical expertise? Managerial expertise?

I realise that you probably know far less about this than I do, but I'm giving you the benefit of the doubt.

I realise that you probably know far less about this than I do, but I'm giving you the benefit of the doubt.

Oh. Dear. God.

I didnt say ANY stuff, just stuff that can sell for a profit. Among 200 milllion there are those who can figure that out.

This is just magical thinking.

The set of stuff that a particular country can produce and sell for a profit in a global economy is far smaller than the set of all stuff. It may well, in fact, be the empty set. If the underlying economics aren't there, it doesn't matter how many people you have thinking about the problem.

It is certainly true that corruption, rent-seeking and stupid policies can easily squander what comparative advantages a country might have. For one thing, People with two or more brain cells to rub together have a tendency to leave corrupt, rent-seeking countries with stupid policies, especially if they're any good at business. Very few people will get a Harvard MBA and then head off to say, Libya, to start a business.

But more fundamentally, not every country can be South Korea.

anyone else here expecting a savaging of ajay just about now? I mean, Lounsbury has an area of expertise in business development in the MENA region that I wouldn't believe could be acquired through reading or academic study... and I have no f***ing clue who the hell ajay is, but I doubt he knows more on the subject.

As far as my take on it, particularly the GCC (Gulf countries/Saudi Arabia) no-one who has the economic means to avoid manual labour is anxious to start. They are making a jump from pre-industrial to post-industrial technology within 50 years, and with massive amounts of fluid capital and a rentier class based on tribal patronage, not in anyways striving to change that... not until there is some pressing reason to do, will anything change.

And by pressing reason to do so, I'm imagining the 3rd division doing a Baghdad on Riyadh...

Very few people will get a Harvard MBA and then head off to say, Libya, to start a business.

Precisely the kind of people where you could match skill and money but lack the risk taking. Yet some amount of pioneering there is very rewarding, not despite the problems, but thanks to the problems, if you understand how to deal with them. There might be a need for role models to inspire precsiely those MBAs I guess.

Lounsbury: so, what does MENA lack in terms of human capital? Literacy? Technical expertise? Managerial expertise?

I realise that you probably know far less about this than I do, but I'm giving you the benefit of the doubt.

I'm sure you are.

"particularly the GCC (Gulf countries/Saudi Arabia) no-one who has the economic means to avoid manual labour is anxious to start"

Who would want to still be doing manual labour if they have the economics means to avoid it?

and where does this idea come from that an economy has to go through manufacturing before 'graduating' to service?

"3rd division doing a Baghdad on Riyadh"

an economic-regime change?

"I'm sure you are."? That's it?!? Are you feeling OK?

I haven't quite been able to get my head around what's going on in this thread, but I think I'm beginning to see something.
Correct me if I'm wrong, but I think the problem starts with a fundamental misunderstanding of what a city economy bases itself on.
First and foremost, it's a marketplace. Look at NYC and London: in both places, the priciest real estate and the most lucrative work centers around their oldest markets, which are in both cases financial markets. Those would be, as commonly understood by economists, services.
City exports would obviously center around tradeable goods, not services, back in the day when communications weren't that great. Not so today, when a city can export services and pretty much nothing but: see Bangalore.
However, just as not every nation can be South Korea, so too, not every city can be Bangalore. Indian cities have the advantage of being at least secondarily English speaking. Cairo doesn't have this advantage. Thus, to my mind, Cairo, at least at first, will have to make stuff, at a profit. Dubai, not, because Dubai functions as an international marketplace for all kinds of goods and services, so there's no need to make stuff for export. Moroccan cities, from what I can figure out from here, have a large opportunity to "export" tourism, and could maybe survive, if just for now, on that. (Mecca, like Jerusalem and Rome, "exports" religious tourism, and survives quite happily on that, it appears.)

Am I at least close?

I'm busy.

From operations I've seen, which aren't very many and are all focused on the North African side of things, people can't make products in such a fashion as to turn a profit in anything resembling an open market. Sure, small-scale factories pumping out things for domestic consumption that are otherwise hard to get due to a tariff or sheer mass of the objects (such as some building materials) can make it. Also, with enough government subsidy, larger concerns like the phosphate industry in Tunisia, can survive. But, really. Even those industries are reliant on outside human capital.

On the somewhat flip side, I saw a very healthy Renault (or was it Peugeot?) factory and a silicon wafer factory in Tunisia that seemed to be doing well. Of course, outside management, foreign corporations, etc.

Bing

Dr Doug gets the prize.

Capital is not the key binding constraint (although it is an issue for some firms, efficiency of allocation and all that), and certainly isn't a constraint for say the Gulf.

So our Man Hogan asks, why don't they just build some bloody factories elsewhere. Well, they don't know how. Or rather the sort of network management to have a proper industrial network and globally competitive firm isn't easily obtained inside economies that (i) either have fuck all for industry or (ii) whose industry grew up behind tariff walls and simply isn't terribly competent, nor did it create terribly useful managers....

On the other hand, building buildings is a fairly straight forward operation, and real estate development (versus property management) is a fairly discrete endeavour. You just need to be reasonably certain of selling it off. It's a discrete project as such, and can be semi-self financing if you can sell off of plan to gullible idiots who believe in endless real estate appreciation (or clients who really need something). Management challenges are far less.

Tunisia, I should mention has a bit of a problem as you've got two kinds of firms. Globally competitive sorts largely contained in the free zones, with either expat management or Tunisian Expats (Tunisians who've spent serious time abroad and come back for these opeations), or the best quality mix, etc. Then you've got the domestic market basket cases that Tunisia in its wisdom keeps alive, that are inefficient and poorly run - pure domestic market since they have trade barriers.

Of course for the whole southern Med basin these guys are getting hammered with lower barriers, poor management and little prep.

So, the whole thing comes down to being able to make something profitably after you invest that lovely capital. Building factories to build stuff is fine for the socialists, but not sustainable.

Now, all that Gulf money could be used in say venture funds to id the pearls of talent in theory, but as it turns out it ain't easy to identify talent in the rough, and at the same time overcome the business hurdles described in doingbusiness.org .... while it is relatively straight forward and relatively easy to build real estate developments.

Etc. etc.

(I suppose one could add in issues re challenges of scaling vc actvity, finding proper managers, etc. but it keeps coming down to Human Capital as the key binding constraint, and management expertise as built up capital)

Now, getting back to

Tunisian Expats (Tunisians who've spent serious time abroad and come back for these opeations)

And there are plenty of those (not just Tunisians). Point is, for a diversity of reasons, those do not return, even though opportunities are definitely not lacking.

A lot of the best tallent in the rough does self-identify... and moves to countries with better opportunities.

Several days back, I skimmed an academic article that mentioned off-hand how different nations and/or cultural areas produce different types of engineers (and I imagine other sorts of professionals). Evidently, although I haven't bothered looking at the research since it currently doesn't hold much interest to me, there are a growing body of studies detailing how engineers produced in, say France, differ from engineers produced in the MENA. The article I was reading passed it off as being cultural and national differences (which is a whole academic argument in and of itself RE: nation = culture or nation != culture, etc). Anyway, for those that might be interested in a dry academic take that may or may not be worth the paper it is written on, its out there. Just do some google scholar searches.

By the way, not to hijack the thread, but has anyone used or seen an application of Hofstede's Cultural Dimensions or the GLOBE Survey? Both approaches, for those not aware, try to splay a nation's culture along a number of axes which allows for pretty graphs to show management and supposedly provides insight. I'm interested in it for certain Ivory Tower applications.