DATE:     July 3, 1974

TO:        Mr. David E. Bell; cc Mr. R. Edwards, Mr. S. Bunker

FROM:     Courtney A. Nelson

SUBJECT: Why work in the Middle East?  


Palmyra, Jordan 1973

          During your recent visit to the Middle East you asked me for a brief statement of why, with Foundation budgets going sharply downward, we should continue to work in an area which has recently so greatly benefited from increased oil revenues. I found it necessary to review the broader questions of why the Foundation works anywhere abroad and what our comparative advantage in overseas work is, as compared with other people in the development field. These are familiar questions so they are treated rather summarily in what follows. Then I address why the Middle East is important to Foundation objectives, and finally what the Foundation can seek to accomplish in working with the wealthier states of the region.

I.  Why do we work anywhere abroad?

This question has been dealt with recently in the paper on “The Foundation in the Less Developed Countries - Decade of the 70’s,” Mr. Bundy’s statement in the 1972 Annual Report and your own memo to Mr. Bundy of May 14, 1974. One could summarize that the Founda­tion, in seeking to increase human welfare, has decided to work to allevi­ate a number of problems that are international in nature, particularly:

  • the world food supply;
  • the rapid increase in world population;
  • the deterioration of the world’s environment;
  • various aspects of international order, such as inter­national economic institutions and the rate of arms build- up;
  • development.

There is a definitional or at least a semantic difficulty here. Development is a process that involves food production, population curtailment, environmental issues and much else. Work on these three fields is part of our development program. In addition to our interest in them as part of the development process, we have a worldwide con­cern for these issues: they concern us in developed countries, and they would concern us in underdeveloped countries even if we had no over­seas development program. They are conceptually distinct program objectives, but operationally the line is generally not visible. Never­theless, the fact that these objectives are distinct affects the amounts allocated to those subjects under our development program, and some­times it affects the form of program adopted.

The development problem is generally characterized as a concern for poor people of the world and this, in turn, raises the question which prompts this paper: Why should the overseas develop­ment program continue to use resources in countries which are no longer poor? I am rather uncomfortable when the development process is described largely in terms of increasing wealth or alleviating poverty. A satisfactory definition of development has not yet been written, however, so I hope you bear with me through one more attempt to define my own credo.

As population densities surpass the carrying capacity of the land used for subsistence agriculture, and later as demand increases for devices offering greater security and personal convenience, societies require the ability to invent and employ new technologies. Technologies can be classed according to their source of power, for example, human power, animal power, electric power, steam power, nuclear power, etc. Each form of technology requires a correspond­ing form of social organization in order to produce and make use of it.

When a society adopts a new form of technology, either through its invention or transfer from elsewhere, it is obliged to alter many of its social institutions. This change, involving as it does a redistribution of status, wealth and occupation, is a rather difficult process. The difficulty involved is a function of at least three factors and probably more: the strength and rigidity of the existing culture, the size of the technological leap, and the rate at which the new technology is introduced.

The society that invents a new technology may have less difficulty in adjusting to its use than a society that adopts the techno­logy from elsewhere. This is because the introduction of an invented technology is likely to be gradual, while transferred technology is often introduced with a suddenness that creates havoc within many basic social institutions. In the present era, western technology has been found to be irresistible. At the same time it is incompatible with the existing institutions of many of the world’s peoples. It requires, for example, a much higher mass educational level than has ever been possible (or even desirable) before in world history. Mass education in turn creates pressures for forms of government more responsive to popular demands than have existed in traditional societies. More fundamentally, modern technology requires a change in traditional beliefs systems. The supernatural played a much greater role in earlier societies than is compatible with a modern society.

Much attention has been paid to the initial requirements for the introduction of modern technologies to countries still using animal-powered technology. In the agricultural field, for example, remarkable success has been achieved in adapting western cereals technologies to the agro-climatic conditions of other parts of the world. Some attention has been paid to the institutional change required to implement these new technologies. For example, institutions have had to be devised which can supply the necessary ingredients like fertilizer, pesticides and knowledge to the farmer, and markets have had to be created so that he can sell his produce and buy other items of interest to him with the proceeds.

Scholars are beginning to study the income distribution effects of the new technologies, but little work has so far been done in seeking to understand many of the other inevitable side effects of this remark­able change in production patterns. These side effects, not just from altered agricultural technology but from the other machines and processes imported from the West, will involve changes in the most fundamental human institutions, including family structure and the framework of indivi­dual beliefs. Indeed, they are so far-reaching that one is forced to consider whether the best strategy for the Foundation is to be concerned with the adaptation and introduction of the technology itself or rather, recognizing the inevitability of its introduction, to look ahead to the impact of its coming on fundamental social institutions.

All this is a long way of expressing my discomfort with the tendency to define the Foundation’s development program objectives in terms of poverty. Poverty is a social condition that occurs when a growing population has been unable to invent or assimilate a form of technology that will allow them to produce more for their own needs or more which can be marketed to others. An organization devoted to increasing human welfare could not ignore the plight of people living in poverty, but only in some circumstances can we hope to do much about that condition. Our efforts may be better directed to achieving a greater understanding of the development process, to devising means of reducing institutional obstacles to development, and to alleviating the inevitable conflicts that accompany it.

II.  Comparative advantage of the Foundation in overseas activities

Our three main advantages with respect to others in the international development field seem to me to be time perspective, professionalism and operational flexibility.

A.  Time Perspective

The Foundation has a great advantage in being able to concern itself with problems of the middle distance rather than the immediate or the eternal. One of the characteristics of governments is the necessity that they deal with problems of the moment, often in ways that ignore longer-term interests of their society. And one of the prominent characteristics of underdevelopment, in both the personal and societal senses, is the difficulty of deferring gratification. The economists deal best with this subject by using the concept of the social discount rate, which varies largely in accordance with the urgency of a society’s needs. This is an inadequate concept for broader use, however, because it does not explain the individual behavioral patterns of people in underdeveloped countries, which generally tend toward short-run gratifications. In my opinion, an understanding of the reasons for this phenomenon would itself repay intensive study. But my concern here is with the Foundation’s value as an institution inclined to take the longer view.

Our time perspective is revealed, of course, in our concen­tration on research, planning and training activities. These are all forms of human activity akin to saving in the economic sense, that is, deferring consumption in hopes of greater future usefulness.

B.  Professionalism

Some other international institutions support similar functions. Our advantage with respect to them lies in our ability to resist the more immediate demands of our client governments and our parent government. We are not, in other words, merely responsive to what others wish us to do but are able to maintain a certain critical distance from even the most compelling of immediate human and social needs. The accumulation of experience over the past two decades, and our association with most of the thought and action institutions seeking to deal with the problems of developing countries, have given the Foundation a strong comparative advantage in working in this field. This subject has been well articulated in the several program documents referenced above, under the term “networking.” A good deal more could be done in my opinion to exploit our knowledge and experience (c.f. my memo of April 1, 1974 on the need for a Ford Foundation Development Research Institute), but I believe our record is far better than that of bilateral or U. N. agencies in this regard.

C.  Operational Flexibility

These characteristics of the Foundation’s pattern of work have been rather thoroughly discussed elsewhere. They have to do with such things as the Foundation’s ability to make a timely response to project opportunities, to take decisions in field offices, to command a high level of staff quality, to stay in or get out of projects on a basis of objective judgments, and to be relatively free from political pressures. It need only be said here that the first two of these assets have shown signs of erosion in the past few years and that process should not be allowed to get out of hand.

III.  Why work in the Middle East?

First, it is important to get some sense of the magnitude of the oil wealth in the Middle East and its dispersion among the countries of the region. Jared Hazleton has prepared a useful paper with statistical annexes on the rise in the oil revenues and the implications for the Founda­tion’s program; it is attached. Of particular interest is the speed with which oil wealth is rising. In 1960 the seven Middle Eastern OPEC countries (Abu Dhabi, Iran, Iraq, Kuwait, Libya, Qatar, Saudi Arabia) realized only 1.4 billion dollars from petroleum exploitation. By 170 this had increased to 5.3 billion dollars and last year this went up to 16 billion dollars. In 1974, revenues are expected to rise to 62.4 billion dollars and by 1980 they are likely to be in the range from 111 to 156 billion dollars. The per capita incomes of these seven states will be high, and in some cases extraordinarily high, but it may be noted that in 1972 they tended to be in the middle range. Saudi Arabia and Iran had a per capita income of around $600 level, Iraq around $300.

In general, the more populous Arab states in the region do not benefit directly from petroleum revenues. Egypt, with its 35 million people, has a per capita income of around $200, the Sudan, with 17 million, and the tiny but overcrowded Yemen, with 7.5 million, are close to the $100 income per person level.

The flow of resources across national boundaries in the Middle East is a complex subject, but it can safely be said that the increased financial reserves of the oil states do not automatically redound to the advantage of the less fortunate states in the region. Egypt, for example, will need to overcome a legacy of nationalization and non-payment of loans before wealthier states will be prepared to invest or loan major capital there. On the other hand, Kuwait has been both generous and responsible in making its funds available to other Arab states for the past several years through the Kuwait Fund for Arab Economic Develop­ment. The size of this fund has increased recently from $300 million to $3 billion. A new Arab Economic Development Bank, also based in Kuwait but with funds subscribed from other sources as well, has sprung up and promises to be a significant source of capital for the states of the region. Other initiatives less well advanced include an Islamic Development Bank, and Arab contributions to the African Development Bank.

The Arab states have been less successful in finding mecha­nisms to devote their wealth to regional social and cultural purposes, such as university development, research, and training. The Arab League was created shortly after the Second World War and has a set of specialized agencies paralleling U. N. development agencies, but these are not in good repute throughout the region, partly because of persistent Egyptian domination of the League and partly because of the dismal track record of its organizations. In 1972, President Sadat publicly called on the oil-rich states to establish funds for social pur­poses and cited the Ford Foundation as a model, but to date this idea has not been acted upon.

The case for working in Egypt and the other poor countries of the region is thus the same as that for working in Asia or Africa, but there remains to be made the special case for working with the wealthy oil states and the middle-income countries such as Lebanon, Jordan and Syria. It seems to me there are three arguments to be made here, having to do a) with international peace and stability, b) with development and c) with the opportunity in this situation to learn about development.

A.  International Peace and Stability

In 1974 one need not dwell on the impact of Middle Eastern events on peace and progress in other parts of the world. This has always been a strategically important region because of its geographical location. Now, in addition to being a crossroads of the world, the Middle East is also the site of the Arab-Israeli conflict, one of the most intract­able problems of our times, and the source of supply of a staggering proportion of the world’s energy resources. An organization devoted to human welfare could hardly ignore this part of the world at the present time, but that does not, of course, mean that it should automa­tically concern itself with the development problems of the wealthy states.

B.  Development

If the earlier comments on development problems are accepted, it may be seen that the oil-rich countries are themselves embarking on one of the most dramatic and difficult developmental periods of modern times. The pace of economic growth and the importation of the latest technology, occurring now and accelerating in the immediate future, is unparalleled in history. At the same time, the countries in which this growth is occurring were until very recently peopled largely by nomads who were sustained in their arduous existence by the most rigid and doctrinaire schools of Islamic thought. The Wahabis of the Arabian Peninsula and the Sanusis of Libya are renowned for the tenacity with which they have clung to the literal words of the Prophet, as well as for their qualities of survival in a desert habitat. Surely the stage is set for the most profound engagement of the forces of tradition and modernization that we have yet seen. It would be a subject of fascination even if the international economic institutions of the world were not so likely to be deeply affected by its outcome.

The Foundation should, in my opinion, strive to bring all the experience and wisdom at its command to aid the development process in Saudi Arabia and in the other oil-rich states. Nowhere is it more important that the development process be an orderly one. Operationally, it will not be easy to be effective in contributing to development in these areas, however. These governments do not wish to be the objects of philanthropy and they have only a partial understanding of the objectives and the abilities of an organization such as ours. We are separated by a vast cultural and language gap, and bridges across that chasm need to be grounded in the kind of political trust that is difficult at present for an American organization to establish in Arab countries.

C.  Opportunity to Learn

This memo began with the lament that the development process is still so little understood. Generally, the human misery present in underdeveloped countries has compelled primary attentions to the basic human needs for food, clothing, shelter and health. Educational and organizational competence required to meet these pressing needs receive due attention, but many underlying social and cultural factors affecting the development process have tended to be ignored.

The oil-rich states present us with an opportunity to observe the complexities of the development process when the financial constraint is removed. Observation of this phenomena could well lead us to alter our priorities even in the poorest developing countries.

IV.  What can the Ford Foundation seek to accomplish by working in the wealthy Middle East states?

We are really only beginning to work with the rich states of this region. It is true that for eight years we had a large-scale jointly funded public administration program in Saudi Arabia, but it did not really yield a model for our future activities. That project was largely an attempt to transfer administrative structures and techniques directly from American governmental experience to Saudi Arabia. After eight years and $6 million, $5 million of which came from the country itself, some accomplishments not unexpectedly can be found, but the major opportunities inherent in that project to adapt, innovate and learn were for the most part missed. The legacy that remains, insofar as current operations are concerned, are a few valuable Saudi contacts, one good public administration training center, and a reputation for fiscal integrity. The University Rector still tends to think more about what we can do for his accountants than for his professors, but that perception will presumably change with time.

Starting nearly from scratch, therefore, we can talk more about what we seek to do than about what has so far been accomplished. It seems to me there are four main themes on which we should be working:

  1. To reduce wastage of the world’s resources in the internal development processes of the rich states;
  2. To help focus attention on problems of the middle distance;
  3. To find ways of making use of the financial resources of the wealthy states for the development of the poorer countries of the region and of the world;
  4. To foster communications and understanding between the wealthy Arab states and the international community.

These are, of course, directions in which to work and are not attainable or even measurable objectives. We have moved somewhat beyond the wishful thinking stage, however, and can cite examples of the type of activities we are embarking upon under each heading.

A.  Reduction of Wastage

The diseconomies of small scale are likely to typify develop­ment efforts in the Gulf States and Saudi Arabia, because their popula­tions are small and in the Saudi case scattered, and because they have little hope of producing anything other than oil very cheaply. In addition to the scale problem, newly wealthy people of the peninsula have difficulty in choosing among those who would offer services and goods. On the other hand, the purveyors of services and goods generally know so little about their would-be clients that they may in all honesty not recognize that their recommendations may be extravagant or unsound.

The net result of this situation is a waste of the world’s re­sources that seems likely to grow in importance. One pattern of waste is frequently observed. Because it is relatively easy to let contracts for construction and equipment, major investments are being made in fancy buildings and the latest gadgets, with little thought given to the availability of staff to man the facilities once completed. Consequently, fully equipped hospitals and modern researeh laboratories sometimes stand empty, never used.

The Foundation can sometimes help to rescue such invest­ments. Haradh, a $20 million irrigation scheme, built in the desert to be turned over to the Bedouins, was completed after six years’ engineering work in 1971. The Bedouin recipients of this beneficence had not been consulted or studied, so they did not show up and volunteer to become peasants. The Foundation helped the government recruit a manager from the United States and turn the scheme at least temporarily into a large-scale commercial farm with state ownership.

In another case several of us were shown through a new $6 million agricultural laboratory with the latest equipment and asked for suggestions not only of who might staff it, but to what use it might be put. The facility was constructed on the recommendation of an international agency and not of equipment merchants. We were regret­tably unable to offer a solution to that conundrum. It appeared most likely that a solution to most of the problems that could be attacked with this fine facility would not be worth staff costs, even if the building and equipment were considered sunk costs and not a charge on operations.

These are extreme examples, but obviously the savings can be considerable if reliable professional advice is available in the plan­ning stages of a project. In the past six months, the Foundation has provided pre-investment consultation on the following:

1)  Educational Television. The Saudi Government contracted for a feasibility study of the introduction of ETV into the educational system on a pilot basis. An American firm recommended a five-year pilot project that would cost between $20-25 million to implement. Through the good offices of David Davis, specialists from several countries screened the feasibility study; as a result the contracting company was asked to go back and make modifications in its report.

2)  The University of Riyadh requested a review of its arehitectural drawings for a new University library about to be constructed. A librarian from the University of Colorado and an arehitect from the University of Jordan conducted this review, with the result that the original drawings have been rejected and the University now has a better idea of what it needs from a library building.

3)  Pre-selection testing for study abroad. The Ministry of Education in Saudi Arabia has been accustomed to selecting candidates for overseas study on the basis of position and personal recommendation rather than objective testing. The Foundation arranged for a de­monstration of selection tests by the Office of Tests and Measurements at AUB, following which the Ministry offered AUB a contract for the testing of 250 candidates. The Ministry has agreed to contract with AUB for this service annually.

B.  Middle-distance Problems

This subject is much related to the preceding one in that the best way to avoid waste is, of course, to plan. In the Gulf, the Founda­tion has had a manpower-planning specialist based in Bahrain for a year. It was hoped that he would contribute not only to the rational development of Bahrain’s training institutions but would also participate in Gulf-wide planning for shared facilities. He has to date succeeded in compiling a comprehensive survey of the manpower situation in Bahrain, in having his methodology replicated in two other Gulf states, and in being invited to participate in planning a conference on manpower utilization in the Gulf, which will be sponsored by the United Nations-supported Arab Development Institute of Kuwait next February. Gulf-wide cooperation depends more on political factors than on technical knowledge, of course, but to date the pattern has been distinctly optimistic.

In Saudi Arabia, the Foundation’s Assistant Representative cum Project Specialist is helping to design and install a reliable unified information system for planning and management purposes in the Ministry of Education. He has been assisted in this process by local consultants selected by the Foundation in Cairo. The Saudi Govern­ment will meet development costs for this system through a contract with the American University in Cairo.

Next October an economist with a background in environ­mental work will join the Beirut office staff. High among his priorities will be to find ways of inducing investment planners on the peninsula to consider the environmental impact of their decisions.

C.  Using Oil Funds for Regional Purposes

The anticipated accumulation of large sums by the govern­ments of the peninsula leads one to hope that a modern version of the Islamic tradition of charitable trusts called “Awqaf” will be revived for secular purposes. Of primary importance to the Foundation is the investment by Saudi Arabia and Kuwait in meeting the recurrent costs of a new international agricultural researeh center for the semi­arid lands. Such investments could indirectly, but almost immediately, relieve the Foundation of a research cost and reinforce our belief that our work in agriculture is desired and demanded by the governments of the region.

In addition, the Foundation has suggested to the Government of Saudi Arabia that it could consider establishing inter-Arab special funds for such purposes as financing large-scale translations of scholarly works, library development throughout the Arab world, pre-school children’s educational programs on television, and scientific research on solar energy. The first of these items is to be presented immediately to King Faisal for his concurrence and the others are under consideration at a lower level.

The limiting factor in these cases may well be the shortage of managerial manpower in Saudi Arabia and the other wealthy states. They may not wish to create a large fund and have it managed by nationals of other Arab states, even if they would accept an inter-Arab board of directors.

Another way in which the oil states can benefit regional institu­tions is to make use of their services on an institutional contract basis, rather than to contract for services with a European or American firm or hire specialized personnel away from the Arab institutions on indivi­dual contracts. We have recently brought the Ministry of Education in Saudi Arabia together with the Science and Mathematics Education Center at AUB, a center set up with Foundation funds, with the result that a one-year $90,000 contract has been offered and accepted. It is anticipated that this will be expanded and renewed for the next three years. SMEC will not only perform a service under this contract but will continue to broaden its experience with the educational systems of the Arab world and hence deepen its own knowledge and expertise.

D.  International Communication

It is of great importance that communications on many levels between the wealthy Arab states and the West remain open. It is, of course, also important that the contacts yield acceptable results in so far as possible; that is, that they are not plagued by too frequent dis­appointments. It seems to me there are two reasons why disappoint­ments are likely to be frequent. The first is that the Arabs have little basis on which to discriminate among western institutions so they are likely to get hooked up with the wrong people. The second is that the cultural gap between the United States and Saudi Arabia is so great that even with the best connections the U. S. has to offer, there are bound to be frustrations and disappointments on both sides.

The Foundation can be useful in steering Saudi officials into the right channels when seeking American services, and can perhaps on some occasions helpfully suggest other sources of expertise that would come closer to filling the bill.

Several examples of the first type of opportunity have already arisen this year. Fahad Dughaither, Director of the Institute of Public Administration, wants assistance in establishing a management training program of very high quality. In Ted Smith and Frank Sutton we have two of the world’s most up-to-date experts on the field, so we have asked their help in designating contacts for Dughaither when he visits the States this summer.

The Saudi Ministry of Education is also interested in identify­ing an American institution that can assist in the revision of curricu­la and the production of materials and technical teaching aids in the fields of science, mathematics and the English language. Here again, with Champ Ward’s help, we may be able to steer them to the most competent people in the States for this purpose; but we will also be looking for a way to relate the experience and expertise of SMEC and the English Language Institute at AUC to Saudi needs. Having helped to develop these institutions over the past five years we are, of course, interested in seeing their skills utilized throughout the region; but beyond that we believe that these regional centers, with Arabic-speaking staff, have more relevant experience and accessibility to Arab problems than have American institutions, however high their quality. SMEC and ELI have a limited capacity to meet Saudi needs for assistance, given their limited staff numbers, but we will try to build them into any pack­age of external assistance which results.

The Arab Cities Organization is a regional association of city governments, which has survived for fifteen years with modest budgets. The Government of Saudi Arabia is now prepared to put up $ 2 million for a research and training center and the ACO is very interested in securing outside guidance in setting up a program for this new center. We are helping to arrange a trip for three ACO officials so they can visit centers in Europe and the United States to get some idea of the state of the art. The ACO will of course, finance any continuing relationship that emerges.

V.  Summary

This memo seeks to make the case for working in the oil-rich Arab states and to offer examples of a few initiatives already taken. In our kind of business it is difficult to draw up a balance sheet to show the profitability of one course of action as compared with another. But it seems to us in the Middle East that the social stresses and strains of the development process in the newly wealthy Arab states will be as great or greater than in any region in which the Foundation works; that the importance to world peace and international order of the resolution of these development problems is as great or greater in these countries as elsewhere; and that the Foundation’s principal assets of experience, competence and linkages can be used with as great effect and at less cost in these states as else­where.

We do not believe it will be operationally as easy to function effectively in these countries as it is with less affluent clients, because of political and cultural differences and the fact that they have no real need for our money. Nor will our activities be without cost to the Foundation. We will often need to support exploratory ventures and to pay our own way in terms of staff, salary and support costs.

Currently, we are not spending very much in these countries. We have one man in Riyadh and one in Bahrain. They are performing useful professional services, serving as conduits to the rest of the Middle East staff, and establishing the credibility of the Foundation as a development agency. In time greater expenditures should be antici­pated, especially if it becomes possible to assist these countries to use some of their funds to help poorer countries. As Hazleton points out, we may find opportunities to provide technical assistance to both donor and recipient countries in the Middle East, assisting the donor to manage an aid program, and the recipient to utilize the funds. But, lest this heady vision bemuse us, it is wise to end with Hazleton’s important caveat:

“We should not over emphasize the amount of ‘leverage’ that the Foundation can exercise over the funds of the oil-rich countries (or, for that matter, over any external funds). Our efforts to improve managerial performance, adminis­trative mechanisms, and development policies take place, by necessity, at a level within government which prevents our having access to the principal decision-makers. Our modest funds are insufficient to buy us a seat at the table for the melon cutting!  In short, we can assist in seeing that the funds allocated to domestic development or external assistance get used more effectively and more efficiently than they would have been used in our absence. However, we are unlikely to play any significant role in making the initial allocation decisions. The justification for our activities is, and I believe should be, not that they permit us to influence vital decisions, but rather that they play an important role in assisting countries to fulfill their own aspirations for development.”  

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