Distinguished Lectures

A Middle Eastern Miracle? Development Policy Lessons from East Asia

Publication Number: ECES-DLS4-E

October, 1996

Author : John M. Page Jr.

Type : Distinguished Lectures

Some Egyptians laugh at the prospect of economic prosperity in their country, and cite the joke about a super-intelligent computer that could predict the future. When this computer was asked about Egypt's economic growth outlook and timing, it simply froze in response. But poverty is no laughing matter, and hearing about the East Asian miracle may compound despair, given that the age of miracles is over. The real prospects, however, for high sustainable economic growth in Egypt- and the Middle East in general-are somewhat more hopeful. After all, the miracle of East Asia is not really a miracle, but the consequence of policy reforms designed and implemented by mortals. In this publication, John Page shows just that. By identifying features and policy components of East Asia's 'miracle', he unravels a few of the mysteries, and the road to prosperity is no longer opaque. The challenge is for policy makers to articulate appropriate strategies to promote shared growth through investment, rural development and boosting small and medium enterprises. Key policies for success include educating all population groups-especially girls, promoting exports, reducing the size of government, and empowering the private sector through privatization and deregulation. The impact of such policies can be significant for growth. Some of the evidence shown by Page suggests that more than half of the growth differential between East Asia and the Middle East came from improved productivity, not from factor accumulation. John Page's conclusions about East Asia's lessons for the Middle East did not go unchallenged. Some participants argued that the region is not homogeneous, nor does it share the cultural values or the political commitment of East Asia. Others emphasized the role of oil, or doubted the role of government as a referee. Each response from Page carried this message: While the environment in which policies are designed does matter, the economic practices adopted in East Asia had some similar features: quality education for all, export-friendliness, smaller government, active private sector involvement and shared benefits from growth. Notwithstanding the diversity of countries in the Middle East, a similar policy orientation is needed. Page concludes on a positive note: 'There can be a Middle Eastern miracle.' That is so indeed, given that income distribution in the region is actually not as bad as in some other regions of the world. Moreover, the region is close to Europe's markets, and has abundant and skilled labor and an active commercial class. The missing link for regional prosperity is concerted effort on the policy front.