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[Senate Hearing 108-646]
[From the U.S. Government Publishing Office]

                                                        S. Hrg. 108-646

        THE GREATER MIDDLE EAST INITIATIVE: SEA ISLAND AND BEYOND

=======================================================================

                                HEARING

                               BEFORE THE

                     COMMITTEE ON FOREIGN RELATIONS
                          UNITED STATES SENATE

                      ONE HUNDRED EIGHTH CONGRESS

                             SECOND SESSION

                               __________

                              JUNE 2, 2004

                               __________

       Printed for the use of the Committee on Foreign Relations

 Available via the World Wide Web: http://www.access.gpo.gov/congress/
                                 senate

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                     COMMITTEE ON FOREIGN RELATIONS

                  RICHARD G. LUGAR, Indiana, Chairman
CHUCK HAGEL, Nebraska                JOSEPH R. BIDEN, Jr., Delaware
LINCOLN CHAFEE, Rhode Island         PAUL S. SARBANES, Maryland
GEORGE ALLEN, Virginia               CHRISTOPHER J. DODD, Connecticut
SAM BROWNBACK, Kansas                JOHN F. KERRY, Massachusetts
MICHAEL B. ENZI, Wyoming             RUSSELL D. FEINGOLD, Wisconsin
GEORGE V. VOINOVICH, Ohio            BARBARA BOXER, California
LAMAR ALEXANDER, Tennessee           BILL NELSON, Florida
NORM COLEMAN, Minnesota              JOHN D. ROCKEFELLER IV, West 
JOHN E. SUNUNU, New Hampshire            Virginia
                                     JON S. CORZINE, New Jersey

                 Kenneth A. Myers, Jr., Staff Director
              Antony J. Blinken, Democratic Staff Director

                                  (ii)

                            C O N T E N T S

                              ----------                              
                                                                   Page

Biden, Hon. Joseph R., Jr., U.S. Senator from Delaware, opening 
  statement......................................................    10
Cronin, Dr. Patrick M., Senior Vice President and Director of 
  Studies, Center for Strategic and International Studies, 
  Washington, DC.................................................    48
    Prepared statement...........................................    52
El Hassan Bin Talal, His Royal Highness of the Hashemite Kingdom 
  of Jordan, Royal Palace, Amman, Jordan.........................    28
    Prepared statement...........................................    35
Hagel, Hon. Chuck, U.S. Senator from Nebraska, prepared statement 
  submitted for the record.......................................    12
Larson, Hon. Alan P., Under Secretary of State for Economic, 
  Business and Agricultural Affairs, U.S. Department of State, 
  Washington, DC.................................................    13
    Prepared statement...........................................    15
Lugar, Hon. Richard G., U.S. Senator from Indiana, opening 
  statement......................................................     1
    ``A New Partnership for the Greater Middle East: Combating 
      Terrorism, Building Peace,'' delivered at The Brookings 
      Institution, Washington, DC, March 29, 2004................     4
    Proposal for A Greater Middle East 21st Century Trust........     8
Richards, Dr. Alan R., Professor of Economics and Environmental 
  Studies, University of California at Santa Cruz, Santa Cruz, CA    55
    Prepared statement...........................................    58

                                 (iii)

  

 
       THE GREATER MIDDLE EAST INITIATIVE: SEA ISLAND AND BEYOND

                              ----------                              

                        WEDNESDAY, JUNE 2, 2004

                                       U.S. Senate,
                            Committee on Foreign Relations,
                                                    Washington, DC.
    The committee met at 9:39 a.m., in room SH-216, Hart Senate 
Office Building, Hon. Richard G. Lugar (chairman of the 
committee), presiding.
    Present: Senators Lugar, Hagel, Chafee, Brownback, 
Alexander, Biden, and Bill Nelson.

        OPENING STATEMENT OF SENATOR RICHARD G. LUGAR, CHAIRMAN

    The Chairman. This hearing of the Senate Foreign Relations 
Committee is called to order.
    As the United States and our allies continue to seek 
stability and security in Iraq, we must consider how to address 
broader political and economic issues in the Greater Middle 
East. Ultimately, a new social and political environment must 
develop in the region, which is the source of most terrorist 
threats confronting the international community. Too often, the 
United States policy in the Greater Middle East is focused 
exclusively on the immediate crisis. Constructing a secure 
future in an age of terrorism requires that we not limit our 
thinking to the problems of the moment. We must also work with 
like-minded nations to develop solutions to underlying social, 
political, and economic conditions that breed hatred and 
conflict.
    Although home to some of the world's oldest civilizations, 
with deep reserves of talent and wealth, the Greater Middle 
East region has become a land apart from the modern world. That 
is the conclusion of Arab intellectuals and scholars themselves 
in two reports for the United Nations on Arab human 
development. They said the region suffers from widespread 
illiteracy, economic stagnation, and isolation from other 
cultures. These experts concluded that this backwardness 
results from three important deficits: the lack of freedom, the 
lack of women's empowerment, and the lack of knowledge, 
particularly with regard to science, technology, computers, and 
the Internet.
    These deficits have created throughout the Greater Middle 
East an atmosphere of hopelessness and frustration that has 
helped fuel extremist organizations, terrorist ideologies, and 
reflexive resentment of the West.
    To help foster a new environment of hope, opportunity, and 
progress in the region, I have proposed the creation of a 
Greater Middle East 21st Century Trust. The Bush administration 
has proposed its own Greater Middle East initiative to achieve 
many of the same ends. These ideas will be on the agenda of the 
G-8 summit in Sea Island, Georgia. I hope this hearing can 
provoke debate and provide valuable input for the G-8 leaders.
    I believe that multilateral participation is central to the 
success of any initiative to encourage economic and political 
reform in the Greater Middle East. The United States can and 
should continue to provide unilateral aid to the region. The 
Bush administration and Congress launched the Middle East 
Partnership Initiative in 2002 to support economic, political, 
and educational reform, as well as women's empowerment in the 
region. The other G-8 countries have similar programs. But if 
we want to leverage resources for greater effect and emphasize 
the broader international responsibility for improving 
opportunity and hope in the region, we must have a mechanism 
that includes other nations. Organizing a Greater Middle East 
Trust around the G-8 would maximize the participation and 
provide the imprimatur of the international community.
    The Greater Middle East 21st Century Trust that I have 
proposed would be modeled on the principles of the Global AIDS 
Fund, the G-8 Africa Action Plan, and the U.S. Millennium 
Challenge Account. The concept would unite the G-8 countries 
with donor countries in the Greater Middle East. The donors 
would pool resources to deliver grants and would work together 
with recipients to define the funding criteria.
    It is important the Trust's contributors include wealthy 
countries from the Middle East, such as Saudi Arabia, that are 
willing to invest in the Trust's success. This would increase 
resources and guarantee Middle Eastern voices on the donor side 
of the equation. In addition, it would give donors in Saudi 
Arabia and other countries a secure vehicle for charitable 
donations to its neighbors. Saudi Arabia has completely banned 
its citizens from donating to charities in foreign countries 
because it feared that funds were being diverted to terrorist 
causes. To be sensitive to cultural concerns, the Trust also 
could be structured to respect Islamic financial principles.
    What I have proposed is different from the Bush 
administration's proposal in several key respects. Rather than 
a set of programs to be created and funded, the Greater Middle 
East 21st Century Trust would set broad goals and criteria. 
Specific programs would be developed and offered by the 
recipient countries themselves, and evaluated by the Trust 
based on the standards it sets. In this way, we can confer 
ownership of the reform process on the recipients. The Trust 
would go beyond the primary development paradigm of growth, 
infrastructure, and health. It would help realize what Arab 
Human Development Reports called ``a restructuring of the 
region from within.'' Ultimately, the Trust would seek to 
promote changes in many of the structures that the Development 
Reports identify as roadblocks to modernization in the Greater 
Middle East.
    The Trust concept could be a vehicle for achieving economic 
reform goals in the Greater Middle East that have resisted 
progress for years. These include reforming economic systems, 
reducing state control of economies, diversifying industries, 
reforming labor markets to promote productivity and avenues for 
advancement, revamping weak education systems, creating new 
roles for women, and improving scientific and technological 
capabilities.
    It would also include political reform. Arab reformers 
meeting in Alexandria, Egypt in March, for example, declared 
that they wanted ``without ambiguity, genuine democracy.'' 
After heated debate, the recent Arab summit that occurred May 
22 and 23 in Tunis resulted in calls for greater democracy, 
women's rights, and human rights in the region. That these 
issues were raised on the agenda was a new phenomenon. A dialog 
on reform and modernization is taking place in governments, 
academia, media, and other organizations in the region. This 
dialog is vibrant and reflects American ideals of freedom, 
despite what President Mubarak of Egypt has identified as 
``unprecedented hatred'' in the Arab world for Americans after 
Iraq.
    As the United States and the G-8 nations consider how to 
boost economic development in the Greater Middle East, we must 
examine how democratic reform fits into this process. Some 
experts have said that if many countries in the region held 
elections tomorrow, the result might be Islamic theocracies 
just as undemocratic as the current governments. In other 
words, the concern is that elections would produce ``one man, 
one vote, one time.''
    So the question arises, how can the region move to full 
democracy in stages? What other democratic and civic 
institutions need to be built or strengthened before a country 
is ready for full democracy? Would partial measures inevitably 
be used by the existing powers to put off democracy 
indefinitely?
    We also must examine how the international community can be 
most helpful. We know that political reforms cannot be imposed 
from outside, but can our efforts help generate reforms from 
the inside? What is the best way to get these societies to 
accept changes that in many cases would alter the established 
order? As sensible as it may seem to empower women, restructure 
inefficient state industries, or broaden educational horizons, 
powerful institutions on the inside have vested interests in 
the status quo. How can we enfranchise the forces in these 
societies that want modernization?
    To begin our examination of these questions, the committee 
is pleased to be joined today by three insightful panels. On 
the first panel, we welcome Dr. Alan Larson, the Under 
Secretary for Economic, Business, and Agricultural Affairs at 
the Department of State. We then will have the honor of hearing 
from His Royal Highness Prince El Hassan bin Talal of Jordan. 
Prince Hassan is an extraordinary international leader and a 
creative thinker on the issues we will address today. We are 
grateful for his willingness to travel from Jordan to be with 
us. Finally, we welcome Dr. Patrick Cronin, senior vice 
president and Director of Studies at the Center for Strategic 
and International Studies, and Dr. Alan Richards, professor of 
Economic and Environmental Studies at the University of 
California, Santa Cruz.
    We look forward to the assessments and recommendations of 
our distinguished witnesses.
    [Additional material submitted by Senator Lugar follows:]

  A NEW PARTNERSHIP FOR THE GREATER MIDDLE EAST: COMBATING TERRORISM, 
                             BUILDING PEACE

                         (By Richard G. Lugar)

       The Brookings Institution, Washington, DC--March 29, 2004

    Since the end of World War II, we have recognized that our national 
security rests on four strong pillars: our own democratic values and 
the example of freedom that we hold out to the world; our military 
strength; our alliances with other countries and our ability to work 
cooperatively with the rest of the international community; and an 
enlightened use of both hard and soft power, including diplomacy, aid, 
and trade, that promotes friendship while protecting us from enemies.
    To meet the threat from the Soviet Union, we maintained a strong 
military and created NATO. But we did more. We also launched the 
Marshall Plan to rebuild Europe and helped create the United Nations 
and the Bretton Woods institutions, the World Bank, the International 
Monetary Fund, and the World Trade Organization. The aim was to promote 
international cooperation, to spread the values of democracy and 
respect for human rights, and to fight poverty. Over time, we developed 
more institutions and mechanisms: bilateral defense treaties, regional 
development banks, the Helsinki Process, and the Nunn-Lugar Cooperative 
Threat Reduction program, just to name a few.
    Today we in the West face a major challenge. It is the threat of 
weapons of mass destruction, terrorism, failed states and instability 
that arises in major part from extremist organizations in the Greater 
Middle East. The terrorist ideology generated there has global reach. 
The region is the prime source of what I believe is the greatest single 
threat to modern civilization in the 21st century--that is, the nexus 
between terrorism and weapons of mass destruction. We must promote 
security and stability in this vast but troubled region, where 
demographics, religious extremism, autocratic governments, isolation, 
stagnant economic systems, and war have often overwhelmed the talents 
of its peoples and the wealth of its natural resources.

                            COMMON INTEREST

    This is a challenge for all of us in the developed world. 
Instability, poverty and joblessness increase the flow of migrants to 
Europe. The Palestinian-Israeli conflict causes unrest and discord 
among Europe's Muslim populations. For some, this long-standing 
struggle is both a reason and an excuse for anti-Americanism and anti-
western sentiments in the Arab world. Last week's response to the 
killing by Israel of Hamas leader Sheik Yassin is yet another 
illustration of how events there can reverberate around the region, and 
a foretaste of the conflagration that could ensue if we can't end the 
spiral of violence. It underscores my strong belief that we cannot take 
an election-year time-out in the quest for peace.

                            IRAQ AND BEYOND

    While we cannot ignore the repercussions of the U.S.-led military 
action in Iraq, it is now time to look forward. European and Asian 
countries have the same interest as the United States in seeing that 
Iraq becomes a stable democratic country. By so doing, it can become a 
catalyst for positive change throughout the region, where millions of 
people suffer from grinding poverty and hopelessness. This has led some 
young people to terrorism and to express their despair by lashing out 
at others more fortunate. At the extreme, some have chosen suicidal 
missions.
    But if we strongly support in Afghanistan and Iraq citizens who are 
striving to build successful states that embrace freedom and enjoy 
broadly shared economic development, their success could generate 
extraordinary encouragement to millions of people now mired in 
hopelessness.
    Likewise, if we help to produce a resolution of the Israeli-
Palestinian conflict, fresh political winds would sweep through the 
region and new possibilities for political reform would flourish. We 
should make solving the Israeli-Palestinian conflict an integral part 
of our larger strategy, not an adjunct to it, and consider new 
structures that bring moderate Arab countries into the process.

                           LONG-TERM STRATEGY

    As President Bush has said, our long-term strategy is to replace 
the region's pervasive repression, intolerance and stagnation with 
freedom, democracy and prosperity. The war on terrorism is only a part, 
although a crucial one, of this broad and ambitious agenda. The best 
way to achieve this goal is to cooperate with our traditional partners 
and with countries in the Greater Middle East on a new paradigm of 
reform and development.

    At its June Summit in Sea Island, Georgia, the G-8 (the United 
States, Canada, Japan, Russia, the United Kingdom, France, Germany, and 
Italy) should outline a plan for the G-8 to engage with the Greater 
Middle East in a way that allows the nations of the region to set their 
own priorities for the new millennium.

    Many of the nations of the Greater Middle East have entered this 
new era isolated from the industrialized world. As the U.N. Arab Human 
Development report noted, the whole Arab world translates only 300 
books annually, 65 million Arab adults, including half of the women, 
are illiterate, and only 1.6 percent of the Arab population has 
Internet access. This isolation contributes to the misunderstanding and 
prejudice that leads to violence. Other advancements in communications, 
transportation, health and educational opportunities have yet to reach 
large percentages of the people of the Greater Middle East. As the 2002 
Development report noted, while poverty is a serious problem, ``The 
region is richer than it is developed.''
    The 2003 UN Arab Human Development Report identified knowledge, 
freedom and women's empowerment as the most serious challenges to 
development. Fourteen million Arab adults do not make enough money to 
buy even the most basic necessities. Steep population increases in many 
Arab countries mean that as many as 50 million more Arab workers will 
enter the job market in the next eight years. In addition, the 
Development Report found that Arab countries had the lowest freedom 
score out of the seven world regions. A number of these findings are 
applicable to non-Arab nations of the Greater Middle East as well.
    The G-8 can be a key instrument to effect long-term political and 
economic change in the Greater Middle East by leveraging financial 
contributions from Europe, Asia and the rich countries of the region, 
and by providing the imprimatur of the broad international community. 
The United States has already begun on its own. The Bush administration 
launched the Middle East Partnership Initiative (MEPI) in 2002 to 
support economic, political, and educational reform as well as women's 
empowerment in the region. MEPI currently consists of 87 programs in 16 
different countries. The other G-8 countries have similar programs.

    Many of these existing efforts should continue. But the G-8, 
speaking with one voice, must make a bolder statement.

                                PROPOSAL

    I propose a grant-making Greater Middle East 21st Century Trust, 
sponsored by the G-8. It would be modeled on the principles of the 
Global Fund to Fight AIDS, Tuberculosis, and Malaria, the G-8 Africa 
Action Plan, and the United States' Millennium Challenge Account. The 
21st Century Trust would unite the G-8 countries with donor countries 
in the Greater Middle East in a quest for political, economic, and 
educational modernization. The donors would pool resources to deliver 
grants and would work together to define the funding criteria based, in 
part, on the high priority needs identified in the United Nations' Arab 
Human Development Reports, which were written by Arab scholars. 
Vigorous two-way interaction between donors and recipients is vital: 
change cannot be imposed from the outside.

    The Trust would not only increase development funding to the region 
but would also provide an opportunity for the G-8 countries to work 
alongside countries in the Greater Middle East toward common goals, 
instead of arguing over old disputes. It is particularly important to 
demonstrate to countries like Afghanistan and Pakistan that G-8 
interests stretch beyond capturing terrorists and destroying their 
networks.

    It will be important for the Trust's contributors to include rich 
countries of the region, such as Saudi Arabia, willing to invest in 
their own futures and take a stake in the Trust's success. Equally 
important, Saudi Arabia has completely banned its citizens from 
donating to charities in foreign countries because it feared funds were 
being diverted to terrorist causes. A 21st Century Trust would give 
donors in Saudi Arabia, and other countries, a secure vehicle for 
charitable donations.
    To be sensitive to cultural concerns in the Greater Middle East, 
the Trust could be structured to respect Islamic financial principles. 
These principles, in part, forbid the payment or receipt of interest, 
or any transaction that involves speculation, but allow grants, profit-
sharing, transaction fees and other financial structures. This would 
provide a vehicle that both the religious and the non-religious could 
use.
    This Trust proposal reflects advances in our understanding of 
international development. The programs it is based upon--the G-8 
Africa plan, the global AIDS fund, and the Millennium Challenge 
Account--represent a new form of social compact between governments and 
donors that does not superimpose a plan from donors but, instead, works 
with the recipient countries to plan and set priorities. The MCA and 
the Global Fund institutionalize the inclusion of civil society in 
project design and incorporate benchmarks so we can know if a project 
is effective.
    Under MCA, countries must demonstrate that they are ``ruling 
justly, investing in their peoples, and establishing economic 
freedom.'' The MCA will use independent indicators to judge a candidate 
country's fitness in such realms as corruption, rule of law, political 
rights and trade policy. The MCA includes at least three break-through 
concepts that could be applied to the Trust proposal:

   Donors and recipients negotiate compacts based on goals put 
        forth by the recipient countries. This gives recipients the 
        lead in coming up with their own priorities.

   The compacts contain benchmarks that can be measured over 
        time to assess progress. This lays the groundwork for 
        performance-based evaluations.

   Both the compacts and the projects are to be published on 
        the organization's Web site. This provides transparency and 
        openness.

    What I am proposing today is in some ways parallel to the Bush 
administration's own initiative, which it developed separately. But 
mine has some key differences. For one, the Trust is not a development 
bank, but a grant- and investment-making body that could conform to 
Islamic financial principles. More importantly, rather than a set of 
programs to be created and funded, I am proposing instead building a 
vehicle for action that would set broad goals and criteria. Specific 
programs would be developed and offered by the recipient countries 
themselves, and accepted or rejected by the Trust based on the 
standards it sets. This way, we can confer ``ownership'' of the reform 
process on the countries themselves.
    Similarly, the Trust would go beyond the primary development 
paradigm of growth, infrastructure and health. It would help realize 
what the Arab Human Development Report called ``a restructuring of the 
region from within.'' Ultimately, the Trust would seek to promote 
changes to many of the structures that have been identified by the Arab 
scholars in the Development Reports as roadblocks to modernization in 
the Greater Middle East. This involves reform of economic systems; 
lessened state control of economies; diversification away from over-
reliance on oil and toward more value-added industries; reform of labor 
markets to promote productivity and greater opportunities for 
advancement; revamping of weak education systems; a sea-change in the 
role of women in education, the economy, and society; much greater 
emphasis on research, science, technology and engineering; and 
political reform to give citizens more space to think and to have a 
voice. As the latest Development Report notes, political instability 
and struggles for power ``in the absence of . . . democracy . . . 
impede the growth of knowledge on Arab soil.''
    The Trust would recognize that many of the policies and practices 
that have hobbled the Greater Middle East have been endorsed by the 
governments of the countries in question. It will be a challenge to 
convince them to join the Trust as partners in a process that will 
require them to make such fundamental changes. That's why the Trust 
will seek to engage all elements of societies. The Arab Human 
Development Report calls on ``the state, civil society, cultural and 
mass media institutions, enlightened intellectuals and the public at 
large to plant those values that encourage action and innovation in the 
political, social and economic sphere.''
    This challenge to business-as-usual helps explain why the 
administration's own ideas for a Greater Middle East initiative have so 
far met with resistance from many Arab governments. Some Europeans have 
also criticized the initiative for, in effect, choosing reform over 
stability. I urge the President and his team to stay the course and not 
be cowed by this initial reaction. Many comments about the 
administration's plan have a familiar ring. Arab autocrats have 
denounced it as an imposition of western values by outsiders. They've 
also criticized it as being a mission impossible until western 
outsiders impose a settlement on the Israeli-Palestinian conflict. Such 
obstructionism simply makes the case more clearly for real reform.
    I understand the desire of regional governments for ``ownership'' 
of this process, which is why I have emphasized the two-way nature of 
the Trust's functions. But granting ownership does not mean the G-8, 
through the Trust, should simply write blank checks to Greater Middle 
East governments to pursue their own self-interested visions of reform. 
That would deny the need for fundamental change. We must be prepared to 
use our considerable leverage with allies inside and outside the region 
to promote truly democratic reforms and political freedom, not simply 
maintain the status quo, or our initiatives will lack credibility. At 
the same time, by remaining engaged in the Israeli-Palestinian 
conflict, we will strengthen the rationale for our broader initiative 
in the region.

                         THE SECURITY DIMENSION

    The social and political changes we are seeking will be even more 
difficult in an atmosphere of violence. The industrialized democracies, 
working with the countries of the Greater Middle East, must try to 
maintain a stable environment for long-term progress. I have proposed 
that NATO, with its integrated military command, interoperability of 
equipment and forces, and a proven ability to make decisions and take 
action, assume a larger role in the Greater Middle East and make the 
region a new priority.

    I have made a number of specific proposals. In particular, NATO 
should beef up its presence in Afghanistan, where it is leading the 
International Security Assistance Force, and assume a formal role in 
Iraq. No reasonable country of the Greater Middle East, just as no 
Western or Asian country, can wish for failure in the rehabilitation of 
Iraq. NATO's involvement, by further internationalizing the 
reconstruction effort, will make success more likely.
    More broadly, NATO should launch a major effort to promote strong 
military-to-military relations with Greater Middle East countries, a 
program I have called ``Cooperation for Peace.'' As in NATO's hugely 
successful Partnership for Peace program in Central and Eastern Europe, 
NATO could help with training for peacekeeping, counter-terrorism and 
border security, as well as with defense reform and civilian control of 
the military. This Cooperation for Peace program would complement 
efforts by the 21st Century Trust to modernize Greater Middle Eastern 
societies and integrate them into the international community.

                        THE POLITICAL DIMENSION

    Achieving the kind of regional transformation we seek will require 
many steps over a long period of time. The first step, before deciding 
WHAT change is necessary, must be for the leaders and the people of the 
Greater Middle East to agree, through vigorous and open debate among 
themselves and across the region, that change IS necessary. This reform 
in attitude cannot be imposed from outside, it must be generated from 
within the region, across national boundaries. And it must be seen in 
the context of people taking charge of their own futures. We already 
see examples under way. For instance, the Alexandria Library in Egypt 
hosted a conference on ``Critical Reforms in the Arab World: From 
Rhetoric to Reality'' this month to bring together members of the civil 
society in the Arab region including intellectuals, businessmen and 
academics. They declared they ``are fully convinced that reform is a 
necessary and urgent matter.'' And contrary to the popular notion that 
democracy is somehow an alien concept, they said they embraced 
``without ambiguity, genuine democracy.'' We need much more of this.
    Many in the region say that they cannot support an agenda for 
change unless the United States addresses the Israeli-Palestinian 
conflict. The Arab Human Development Report calls the conflict ``a 
contributing factor to the region's democratic deficit, providing both 
a cause and an excuse for distorting the development agenda.'' The 
search for stability in the Greater Middle East must proceed hand in 
hand with the resolution of the Israeli-Palestinian conflict. But the 
nations of the Greater Middle East must be brought into the process of 
resolving the conflict. They cannot continue to expect the U.S. to 
address these issues on their behalf, and then complain that the U.S. 
is not doing it right. Therefore, I propose that as part of this drive 
to bring the Greater Middle East countries into the modern world, we 
bring them fully into the process of resolving the Israeli-Palestinian 
conflict. This would close what has in the past often been a gap in 
strategies for the larger region.
    As a first step, we should expand the ``Quartet'' which is 
currently directing the peace process--the U.S., Russia, the European 
Union and the United Nations--into the ``Sextet'' by adding Egypt and 
Saudi Arabia. This would give the Palestinians more confidence in any 
proposal that comes forth, and give all countries in the region a 
greater stake in both the specifics of new peace proposals and in the 
efforts to follow through on their implementation. Closer Arab support 
would also give the Palestinians the option to make compromises that 
they might not otherwise make on their own.
    Secondly, we must recognize that Prime Minister Sharon's unilateral 
disengagement has created an opportunity that we should seize to 
generate new attitudes and approaches to ending the violence. His 
decision to evacuate unilaterally almost all settlements in Gaza and a 
number in the West Bank, once unthinkable by any Israeli leader, is 
being accepted by most within Israel. Many in Israel are recognizing 
the demographic reality that if Israel maintains control of the West 
Bank to the beginning of the next decade, Jews could be a minority in 
the state of Israel. Such recognition now reinforces Israel's 
acceptance of the principle of a separate Palestinian state.
    The Israeli withdrawal, as a practical matter, along with Israel's 
construction of a security fence, will reduce the opportunities for 
Palestinians to attack Israelis, and the need for Israeli military 
checkpoints and other intrusions into Palestinian daily life, which do 
so much to inflame anger. The withdrawal, because it is new and was put 
forward unilaterally, could energize the peace effort and provide a 
useful ``detour'' in the Road Map without abandoning it.
    However, it is important that we, along with the Quartet--or the 
Sextet--work actively with the Israeli government to ensure that 
disengagement is done in a way that enhances Israeli security, returns 
a significant number of Arab neighborhoods to Palestinian Authority 
jurisdiction and does not fragment Palestinian territory. It should 
also be coordinated with the Palestinians and others.
    There is concern that the Palestinian Authority is so weak and 
fragmented that upon an Israeli departure, a radical group such as 
Hamas could emerge as the de facto rulers. That's why the 
administration is promoting the active involvement of Egypt and Jordan 
in any security arrangement in Gaza. But we can and must go further. 
With the effective collapse of the Palestinian Authority, Israel has no 
reliable negotiating partner, as events of the past week have 
underscored. We should consider asking moderate Arab countries to 
assume significant responsibility for rehabilitating or restructuring 
the Palestinian Authority so that discussions can be restarted.
    Some experts have proposed turning over control of the Palestinian 
territories to an international trusteeship. This trusteeship would 
provide enhanced security for both Palestinians and Israelis, it could 
restructure the Palestinian security services, and lead a reform of the 
Palestinians' failed institutions. It would turn back sovereignty at 
the appropriate time. Why shouldn't this trusteeship be managed by Arab 
nations? This would give them a role in what they themselves claim is 
at the core of many of their own problems.

    Arab nations' establishment of a trusteeship; Israeli unilateral 
disengagement: these might sound like drastic measures. But taken 
together, they could revive momentum toward a solution of the Israeli-
Palestinian conflict.

                               CONCLUSION

    The G-8 has already taken on one new role in 21st Century security, 
the Global Partnership Against the Spread of Materials and Weapons of 
Mass Destruction and has pledged an additional $10 billion over 10 
years for Nunn-Lugar programs in the former Soviet Union. The Greater 
Middle East 21st Century Trust should be a new form of social compact 
between donors and recipients. By working together with a wide range of 
other nations, Americans can demonstrate that we are strong and 
creative advocates of a peaceful world for all, and that the future 
lies in being a partner with the United States, not a counterweight to 
it.
    In my view, the G-8 Summit in Sea Island at the beginning of June 
represents an opportunity to focus the world on modernization needs in 
the Greater Middle East. This challenge should be addressed by the G-8, 
and it should include the participation, contribution, and vision of 
those in the Greater Middle East. By the same token, the NATO summit in 
Istanbul at the end of June would be the right venue for framing a 
transatlantic security structure that extends throughout the Middle 
East.
    As His Royal Highness Prince El Hassan bin Talal noted last October 
in Amman, ``Peace is real and durable only when the root causes of 
conflict have been eliminated.'' He went on to highlight the importance 
of eradicating poverty to limit violence. We can achieve greater 
security through careful mitigation of well-defined threats. We can 
extend our idealism to create broad opportunities for millions of 
people to enjoy more promising lives for themselves and their children. 
Let us answer the call of those in the Middle East and work with them.

                              *    *    *

                              PROPOSAL FOR

                A GREATER MIDDLE EAST 21st CENTURY TRUST

    At the Brookings Institution on March 29, 2004, Senator Richard 
Lugar proposed the creation of a Greater Middle East 21st Century Trust 
(``Trust'') to combat terrorism and build peace in the region. The 
Trust would unite the G-8 countries with other donors and countries of 
the Greater Middle East regions to promote common interests in 
political, economic and social reform and modernization, particularly 
governance, sound education and health policies and programs, 
entrepreneurial success, and the full participation of men and women.

                               STRUCTURE

    Trust donors would pool resources to deliver grants and would work 
together to define funding criteria based on goals and high priority 
needs identified by the recipients. Clear and objective criteria would 
be applied fairly to determine eligibility of recipients; levels of 
support; and types of projects. Criteria and performance indicators 
would be defined jointly by Trust members.
    Donors and recipients would negotiate compacts based on goals put 
forth by the recipient countries. This gives recipients the lead in 
setting their priorities. The compacts would contain benchmarks to be 
measured over time to assess progress in performance-based evaluations. 
Both the compacts and projects could be published on a Trust Web site 
to provide transparency and openness. This vigorous interaction between 
donors and recipients is a vital component of the Trust as change 
cannot be imposed from the outside.
    From the recipient countries, members of civil society, non-
governmental organizations, and local, regional, and state government 
agencies could submit funding proposals to the Trust. The proposals 
should meet agreed criteria and goals laid out in the compact. The 
Trust would review proposals on a competitive basis and provide grants 
to the most promising projects.
    The Trust could be administered by a new corporation designed to 
support innovative strategies and to ensure accountability for 
measurable results or by an existing international organization. It 
could be supervised by a Board of Directors composed of Ministers from 
member countries' Treasury, international development or other similar 
fiscal agency. The Trust could be designed to make maximum use of 
flexible authorities to optimize efficiency in contracting, program 
implementation, and personnel.

                            UNIQUE FEATURES

    The Trust would not only increase development funding to the region 
but would also provide an opportunity for the G-8 countries to work 
alongside countries in the Greater Middle East toward common reform 
goals. Through the Trust, governments and donors would work with each 
beneficiary country to plan and set their priorities. The Trust would 
be modeled on the principles of the Global Fund to Fight AIDS, 
Tuberculosis, and Malaria, the G-8 Africa Action Plan, and the United 
States' Millennium Challenge Account (MCA).

                               RESPONSIVE

    The Trust would seek to promote reforms such as those identified by 
Arab scholars in the United Nations Arab Human Development Reports as 
critical to modernization in the Greater Middle East including reform 
related to economics, governance, education and the empowering women.

                              COOPERATIVE

    The Trust's contributors ideally would include donors from the G-8, 
other industrialized nations, and wealthy nations of the region, such 
as Saudi Arabia and Kuwait, demonstrating their willingness to invest 
in their own futures and take a stake in the Trust's success. By 
considering funding proposals from governmental and non-governmental 
organizations and the private sectors of the countries in the Greater 
Middle East regions, the Trust would seek to engage all elements of 
societies. The Arab Human Development Reports calls on ``the state, 
civil society, cultural and mass media institutions, enlightened 
intellectuals and the public at large to plant those values that 
encourage action and innovation in the political, social and economic 
sphere.''

                               OWNERSHIP

    Rather than a set of programs to be created and funded, the Trust 
builds a vehicle for action that would set broad goals and criteria. 
The Trust could use independent indicators to judge if recipient 
candidate countries are making strides to achieve certain goals such as 
combating corruption and promoting the rule of law. Specific programs 
would be developed and offered by the recipient countries themselves, 
and accepted or rejected by the Trust based on the standards it sets. 
As a result, ``ownership'' of the reform process is conferred on the 
countries themselves.
    Like the MCA, countries could enter into multi-year contracts with 
the Trust with measurable performance yardsticks. Programs would be 
developed and offered by those in the recipient countries, and accepted 
or rejected by the Trust based on standards it sets--thus, 
``ownership'' of the reform process would be held by the countries 
themselves.

                          CULTURALLY SENSITIVE

    To be sensitive to cultural concerns in the Greater Middle East, 
the Trust could be structured to respect Islamic financial principles. 
These principles, in part, forbid the payment or receipt of interest 
but allow grants, profit-sharing, transaction fees and other financial 
structures. This would provide a vehicle that both the religious and 
the non-religious could use.

                               INNOVATIVE

    The Trust proposal reflects advances in our understanding of 
international development. The programs it is based upon--the G-8 
Africa Action Plan, the Global Fund to Fight AIDS, Tuberculosis and 
Malaria, and the Millennium Challenge Account--represent a new form of 
social compact between governments and donors that does not superimpose 
a plan from donors but, instead, works with the recipient countries to 
plan and set priorities. The MCA and the Global Fund institutionalize 
the inclusion of civil society in project design and incorporate 
program effectiveness benchmarks.

    The Chairman. Before calling upon Secretary Larson, I would 
like to call upon the distinguished ranking member of our 
committee, Senator Biden.

           OPENING STATEMENT OF SENATOR JOSEPH R. BIDEN, JR.,
                             RANKING MEMBER

    Senator Biden. Thank you, Mr. Chairman. As we say in this 
body, I would like to associate myself with your remarks.
    Welcome, Mr. Secretary.
    Mr. Chairman, promoting political, economic, and 
educational reform in the Muslim and Arab worlds is in my 
judgment a key to winning the war on terror, but I think it 
also warrants a very, very healthy dose of humility on our 
part.
    We should not make any mistake that there is a war underway 
right now and it is not a clash between civilizations, as some 
suggest in my view, but rather a clash within civilizations, 
the Arab and Islamic civilizations. And it pits the forces of 
reform, modernity, and tolerance against the forces of radical 
fundamentalism, regression, and violence.
    We may be terrorist targets today, but their ultimate aim 
is not us. It is the vast majority of the moderate Muslim 
world, and they will suffer most should the radicals gain 
ascendancy.
    The radical vision is bleak. We saw it on full display in 
Taliban-controlled Afghanistan whose leaders persecuted 
minorities, denied education to women and girls, banned 
political activity, and institutionalized terrorism and 
violence. Military law, law enforcement, and intelligence 
tactics alone are not sufficient, in my view, to defeat radical 
fundamentalists. We must also build an alliance of tolerance 
and progress with moderate Muslim majorities.
    Now, I am assuming and I believe that the vast majority of 
Muslims and Arabs in particular are in fact moderate. The 
radicals feed off the failures of governments, particularly in 
the Arab world, to open up political systems, to modernize 
education, and to build vibrant economies. In 2002, as you 
mentioned, Arab scholars completed a groundbreaking study of 
Arab human development. We have quoted it many times. It speaks 
to the need across the Arab world to make progress in three 
critical areas: empowering women, spreading knowledge, and 
expanding freedom. This is an incredibly difficult challenge 
for us, but it is also an extraordinary opportunity.
    For example, 70 percent of the Middle East population is 
below the age of 30. Unlocking their minds and unleashing their 
talents can be a deep source of strength and progress. Bringing 
women into the work place will boost Arab economies, not just 
as women leaders past and present in Pakistan, in Bangladesh, 
and in Turkey and Indonesia have demonstrated. They energized 
the Muslim world of politics as well.
    This committee has recognized the challenge. Last year, we 
passed my proposal to establish a Middle East Foundation to 
support civil societies, a free press, women's rights, the rule 
of law, and education reform. And I am pleased to see it 
included in the President's 2005 budget. I also look forward to 
working with the State Department to identify the resources to 
get this foundation off the ground.
    Mr. Chairman, as you referenced, you have an excellent 
proposal in my view for the Greater Middle East 21st Century 
Trust. And Senator Hagel, as well, has introduced an important 
bill called the Greater Middle East and Central Asia 
Development Act.
    Whatever the strengths of our ideas for reform in the Arab 
world and Islamic world are, we cannot impose them on that part 
of the world. We cannot advance them alone. As I said again, it 
warrants a significant dose of humility as we undertake these 
efforts.
    I am pleased the administration is working with our allies 
to support reform in the Arab and Muslim world. We must also 
work more closely with those in the region who are committed to 
reform both inside and outside the government, as your Trust 
calculates to do.
    Mr. Chairman, I do not have any problem with us placing 
reform prominently on the agenda of the Sea Island summit, but 
I am a little baffled that the twin elephants in the room are 
not at the top of the agenda: Iraq and the Israeli-Palestinian 
conflict. Iraq at present is serving as more of a dead weight 
on regional reform than a catalyst as some had predicted. 
Scheduling problems in my view did not cause the leaders of 
Egypt, Saudi Arabia, Morocco, and Tunisia to decline President 
Bush's invitation to Sea Island. And I do not know how we 
really get very far on the notion of reform in the Arab world 
when significant numbers of the countries are not engaged in 
the discussion and refuse the invitation. Had President Bush 
decided to focus the summit on charting a new course in Iraq, I 
am of the view that the leaders of these and other Arab 
countries and Muslim countries would have enthusiastically 
attended.
    We also cannot hold reform hostage to the Israeli-
Palestinian dispute, nor can we ignore the reality that 
continuing conflict lets governments off the hook by giving 
them an excuse to drag their feet. We must show sustained 
leadership on this issue, and with your leadership here in this 
committee and the President's focus on the issue, I am hopeful 
that is exactly what we will be able to do.
    I look forward to hearing from our distinguished panel, and 
I would like to thank His Royal Highness for making the trip 
here. It is a significant gesture and we want you to know how 
much we appreciate it.
    Mr. Secretary, I look forward to hearing your testimony and 
working with you and the administration, along with my 
colleagues as to how we can promote this notion.
    I thank you, Mr. Chairman.
    The Chairman. Thank you very much, Senator Biden. Senator 
Biden has mentioned the legislation offered by our 
distinguished colleague, Senator Hagel. I would like to include 
Senator Hagel's statement in the record, as he has presented 
it.
    [The prepared statement of Senator Hagel follows:]

               Prepared Statement of Senator Chuck Hagel

    Mr. Chairman, thank you for calling this hearing on the Greater 
Middle East Initiative. The G-8 Summit next week will consider ideas to 
support political and economic reform in the Greater Middle East. I 
support these efforts. Only through partnership with our allies and 
with the governments and peoples of the region can we develop realistic 
programs and policies that support sustainable change and reform.
    The terrorist attacks of September 11, 2001 signaled a turning 
point in United States foreign policy. The war on terrorism will not be 
won through counter-terrorism and military measures alone. The roots of 
terrorism are found in the hopelessness of endemic poverty and despair. 
Although poverty and economic under development alone do not ``cause'' 
terrorism, the expansion of economic growth, free trade, and private 
sector development can contribute to an environment that undercuts 
radical political tendencies that give rise to terrorism.
    The economic problems of the Greater Middle East and Central Asia 
cannot be considered in isolation. There will be no sustainable 
development in the region if the Israeli-Palestinian conflict continues 
unresolved, or if Iraq becomes a failed state.
    Mr. Chairman, let me acknowledge your proposal for a Greater Middle 
East 21st Century Trust and Senator Biden's initiative to establish a 
Middle East Foundation to encourage political participation and civil 
society in the Middle East. I strongly support both initiatives.
    In that spirit, our colleague Senator Joseph Lieberman and I have 
introduced the Greater Middle East and Central Asia Development Act, S. 
2305. The bill would stimulate private sector development, promote 
strong market economies, invigorate trade relations within the region, 
and empower states to rebuild and open their economies. It does so 
through three new multilateral institutions: a Greater Middle East and 
Central Asia Development Bank to promote private sector development; a 
Greater Middle East and Central Asia Development Foundation to 
implement and administer economic and political programs; and a Trust 
for Democracy to provide small grants to promote development of civil 
society.
    In April, Senator Lieberman and I held an unprecedented meeting 
with 17 ambassadors and representatives from the Greater Middle East 
and Central Asia to discuss how our legislation and other initiatives 
could contribute to progress toward economic and political development 
in their countries. Any initiative for the Greater Middle East must 
allow for the active participation of the governments of the region.
    Promoting political and economic governance practices complements 
our diplomatic objectives in the war on terrorism. We cannot succeed in 
our war on terrorism until hope replaces despair among the next 
generation in the Greater Middle East and Central Asia.
    Thank you.

    The Chairman. We would like to proceed now to your 
testimony. I understand your time is limited, but hopefully not 
too limited today. We will proceed with your testimony and then 
questions from our committee and then on to our second panel. 
We are delighted to have you. Please proceed.
    Senator Biden. It is kind of a good thing not to limit your 
time before this committee.

STATEMENT OF HON. ALAN P. LARSON, UNDER SECRETARY OF STATE FOR 
ECONOMIC, BUSINESS AND AGRICULTURAL AFFAIRS, U.S. DEPARTMENT OF 
                             STATE

    Mr. Larson. I have all the time that the committee has.
    Mr. Chairman and Senator Biden, Senator Hagel, Senator 
Chafee, Senator Alexander, thank you very much for the 
opportunity to join you to discuss efforts to encourage and 
support economic, social, and political reform in the broader 
Middle East and north Africa. I want to also express my 
appreciation for the leadership of this committee in helping to 
keep the issue of reform in the region at the forefront of 
American foreign policy. If I may, Mr. Chairman, I would like 
to just make a few brief comments and submit the longer 
statement for the record.
    The Chairman. It will be included in full in the record.
    Mr. Larson. Thank you.
    The broader Middle East is a region with a very important 
cultural heritage and history of scientific contribution that 
inspires great pride. Today, however, the region faces 
significant challenges in tapping the vast potential of its 
people and in offering them freedom, opportunity, and 
prosperity.
    The people of the region itself have clearly and 
convincingly analyzed the challenges that they face. The 
authors of the Arab Human Development report, the prestigious 
Arab NGOs and individuals who met together at the Alexandria 
Library in Egypt last March, the members of the Arab Business 
Council, all of them have described the dilemma faced by the 
region in very clear terms.
    More recently, Arab leaders themselves answered this call 
at the Arab League summit on May 22 and 23 in Tunis. There 
leaders called on members of the Arab League to continue to 
reform, to foster democratic practice, to broaden participation 
in political and public life, to strengthen the role of civil 
society, and to expand women's participation in the political, 
economic, social, cultural, and educational fields, and to 
enhance their rights in society.
    More specifically, the region has identified several 
primary challenges, including increasing commitment to free and 
transparent elections, improving the functioning of 
parliaments, supporting an independent judiciary, and 
encouraging free media and active civil society, intensifying 
efforts to develop and improve educational curricula and 
teacher training systems and to combat illiteracy, generating 
enough employment to accommodate the 5 million new job seekers 
entering the labor market each year, increasing the region's 
share in international capital flows, and expanding the 
region's share of booming international trade.
    So starting with these issues, the issues that our partners 
in the region have identified, the United States has been 
working, together with other G-8 countries, on a number of 
possible initiatives that could help regional reformers achieve 
their goals.
    Our consultations with the region have informed and guided 
our efforts to develop these reform initiatives. Some of our 
partners from the region who have been involved in preparations 
will attend the G-8 summit at Sea Island. King Abdullah II of 
Jordan, President Bouteflika of Algeria, King Hamad of Bahrain, 
President Salih of Yemen, and President Karzai of Afghanistan. 
In addition to these Middle Eastern countries, Turkey will 
attend the Sea Island summit. As you know, for centuries Turkey 
has been a bridge between eastern and western cultures, and 
Turkey has a long record of democratic institutions and of 
political and economic reform and religious tolerance. So we 
are pleased that Prime Minister Erdogan has accepted President 
Bush's invitation to attend the Sea Island summit.
    The G-8 members have not only an opportunity, but they have 
a responsibility to assist in the reform effort, both through 
collective actions that engage all of the G-8 countries and 
also through enhanced cooperation in ongoing areas of bilateral 
assistance. We are looking for ways to work together with the 
countries of the region to establish a forum for discussions to 
exchange ideas, to examine and share best practices in 
promoting reform and to build intra-regional cooperation and 
consensus.
    We are working on ideas on how better to assist in the 
establishment of the institutions that underlie democratic and 
free societies, things like strong and independent judiciaries, 
strong legislatures, free and professional press, support for 
free elections.
    We have been working to identify better ways to improve 
access in the region to microfinance and to help local 
governments improve the policy and regulatory atmosphere on 
making financing available for small- and medium-sized 
businesses.
    More generally, we have been looking for ways to bring more 
capital into the region both through the promotion of good 
foreign investment policies and through collaborative 
institutions that could tap private capital that in many cases 
is fleeing the region now and could be brought back to the 
region.
    We have been pursuing trade links with the region, 
including the negotiation of free trade agreements, encouraging 
regional governments that are not members of the World Trade 
Organization to become members, and we are considering ideas 
like regional trade hubs and support for local chambers of 
commerce.
    Reformers in the region made it very clear at the Arab 
League summit in Tunis, at the Alexandria Library conference, 
and in Sana'a that they are committed to moving forward on all 
fronts, including governance, not just those reforms that are 
the easiest.
    I am pleased to say that our initial ideas and plans for 
support for a broader Middle East region have met with 
considerable acceptance. As you will see at Sea Island, I think 
there will be a foundation for consensus action. I believe this 
is because we have taken care to reflect the views and 
declarations of the people in the region and we have responded 
to those views and those declarations.
    Mr. Chairman, I want to emphasize that the impetus for 
reform must, of course, come from the region. I also want to 
emphasize that we are leaving no stone unturned in pushing 
forward toward a successful political and economic 
reconstruction in Iraq and a solution to the Israeli-
Palestinian conflict. Yet, as important as these tasks are, 
they should not dissuade us from giving equally urgent 
attention to the longer-term task, the generational task, of 
supporting economic, social, and political reform in the 
broader Middle East. We are encouraged by the region's recent 
movements toward and calls for further reform and we do stand 
ready with our G-8 partners to help the people of this region 
build a future that provides more hope, more opportunity, and 
more freedom.
    Thank you.
    [The prepared statement of Mr. Larson follows:]

               Prepared Statement of Hon. Alan P. Larson

SUPPORTING REFORM AND OPPORTUNITY IN THE BROADER MIDDLE EAST AND NORTH 
                                 AFRICA

    Mr. Chairman, members of the Committee: thank you for the 
opportunity to speak with you today on our efforts to encourage and 
support economic, social and political reform in the G8 Broader Middle 
East and North Africa. Mr. Chairman, I particularly want to thank you 
and Senator Hagel for keeping support for reform in this region at the 
forefront of U.S. foreign policy.
    The broader Middle East is a region with an important cultural 
heritage and a history of scientific contributions that inspires great 
pride. Today, however, the region faces significant challenges in 
tapping the vast potential of its people and offering them freedom, 
opportunity, and prosperity.
    We recognize the importance of a lasting peaceful settlement of the 
Arab-Israeli conflict, and every day we are working toward this goal--
as we are toward the goal of a peaceful, democratic, and sovereign 
Iraq. At the same time, regional voices are calling for reform; we must 
respond to this desire for change. Divisions, disputes, and even 
violence in the region cannot be allowed to become an excuse for 
deferring reform; indeed, reform can help to bring them to solutions.
    President Bush has laid out a vision of partnership in support of 
political, social and economic reform. From the beginning of our work 
on this issue we, and our G8 partners, have recognized that reform must 
be an internal process in each of the countries of the region. No one-
size-fits-all formula can meet the varied needs of this region, nor can 
reform be imposed from the outside. President Bush and the 
Administration are committed to working with the countries of the 
region to help facilitate reforms that each nation and its people have 
identified as necessary for their own advancement.
    Consensus for reform, and recognition of its benefits, is growing. 
In recent years, gradual reforms have led to increased political and 
economic opportunities and improved living conditions for both women 
and men across the region. For example, in the last three years, 
citizens of Bahrain, Jordan, Morocco, and Yemen have elected new 
parliaments. Last year, the people of Qatar approved a new constitution 
by referendum, and just a few months ago Morocco adopted a new family 
code that protects the rights of women. Recently, we concluded free 
trade agreement negotiations with Morocco and Bahrain. The United 
States already has free trade agreements with Jordan and Israel. 
Algeria, Egypt, Kuwait, Qatar, Saudi Arabia, Tunisia, the UAE, and 
Yemen have signed Trade and Investment Framework Agreements with the 
United States.
    Reform has a positive multiplier effect in a society. Political, 
educational, economic, and social reforms connect on many levels to 
reinforce each other and to create hope and opportunity. Even small 
steps can give people more opportunity to shape their lives, their 
societies and their future. Each step leads to greater freedom, greater 
experience and strengthened confidence.
    We recognize, of course, that this region is one of different 
societies and we know each has uniquely different circumstances. At the 
same time, we believe the aspiration for freedom and opportunity is 
universal. We believe that the basic pillars of democracy--such as a 
representative legislature, an independent judiciary, a free press and 
market economy--are suitable for all people and compatible with any 
society, though they may not look exactly the same or function in 
exactly the same way.
    We are looking for ways to facilitate and support reform 
initiatives that are identified and proposed by those who will 
ultimately implement them and benefit most from them. The people of 
this region want reform that will address their needs, and we stand 
ready to help, for as long as it takes to achieve success.
    The people of this region have clearly and convincingly analyzed 
the challenges they face. The authors of the Arab Human Development 
report, the prestigious Arab NGOs and individuals who met at the 
Alexandria Library in Egypt last March and the members of the Arab 
Business Council have described the dilemma faced by the region in 
clear terms.
    More recently, Arab leaders answered this call at the Arab League 
Summit, May 22-23 in Tunis. Leaders called on members to continue 
reform to foster democratic practice, broaden participation in 
political and public life, strengthen the role of civil society, and 
``expand women's participation in the political, economic, social, 
cultural and educational fields, and] enhance their rights and status 
in society.''
    More specifically, the region itself has identified several primary 
challenges, including:

   Broadening participation in public and political life, in 
        particular, increasing the role of women in economic, social, 
        and political spheres.

   Increasing commitment to free and transparent elections, 
        improving functioning of parliaments, supporting an independent 
        judiciary, and encouraging free media and active civil society.

   Intensifying efforts to develop and improve educational to 
        improve curricula and teacher training systems and to combat 
        illiteracy.

   Generating enough employment to accommodate the five million 
        job seekers entering the market each year.

   Raising economic growth to about 6-7 percent annually over 
        the coming decade.

   Increasing the region's share in foreign capital flows, 
        including direct and indirect foreign investments. The region 
        attracts low levels of inward FDI; suffers from capital flight; 
        and needs to allocate more productively the capital that stays 
        behind.

   Expanding the region's share in booming international trade 
        and extending exports beyond primary products to include high-
        value-added products.

   Increasing intra-regional trade and investment.

   Improving access to information by increasing capacity in 
        translation, publishing and access to the Internet.

    Starting from the issues our partners in the region have 
identified, we are working together with the other G8 countries on a 
number of possible initiatives that will help regional reformers to 
achieve their goals. These proposals will offer a broad range of 
opportunities from which governments, civil society, and business can 
draw. This initiative is intended to enhance and support G8 countries' 
long-term engagement and dialogue with this region. We intend to 
proceed in the spirit of collaboration and mutual respect.
    It is for that reason that Secretary Powell, Under Secretary 
Grossman, Assistant Secretary Burns and I--as well as many others 
throughout our government--have consulted extensively with the region's 
governments on this initiative. Secretary Powell, Assistant Secretary 
Burns, and I recently attended the World Economic Forum last month in 
Jordan, where we had excellent discussions with regional leaders on 
this topic. Secretary Snow hosted a meeting in April for Finance 
Ministers from the Broader Middle East and North Africa and G8 
governments to discuss economic aspects of this initiative. These 
consultations have informed and guided our efforts to develop methods 
of supporting reform initiatives emerging from the region. Some of our 
partners from the region who have been involved in our preparations 
will attend the G8 Summit at Sea Island.

   The President has invited King Abdullah II of Jordan, whose 
        strong economic reform program is putting Jordan on the path 
        toward economic growth and rapid development.

   President Bouteflika of Algeria has also accepted the 
        President's invitation and will add valuable experience based 
        on his nation's experience working with the G8 in the New 
        Partnership for Africa's Development (NEPAD) program.

   King Hamad of Bahrain will attend, bringing with him 
        Bahrain's experience as a leader in opening up trade in the 
        region.

   President Salih of Yemen will attend and discuss his 
        country's experience in successfully running recent 
        parliamentary elections.

   President Karzai of Afghanistan will attend and can discuss 
        how democracy can revitalize a society even after decades of 
        repression. Afghanistan is planning for national elections for 
        the first time in decades and has made great strides in 
        literacy and economic reform.

   In addition to these Middle Eastern countries, Turkey will 
        attend the Sea Island summit. For centuries a bridge between 
        eastern and western cultures, Turkey has a long record of 
        strong democratic institutions, political and economic reform, 
        and religious tolerance. As Turkey advances toward full 
        membership in the European family, its unique history affords 
        potential examples of successful reform for the nations of the 
        Greater Middle East region. We are pleased that Prime Minister 
        Erdogan has accepted the President's invitation to attend the 
        Sea Island Summit.

    There clearly are opportunities for the G8 to assist the reform 
effort; both through the collective action of all G8 countries and also 
through enhanced cooperation in areas of bilateral assistance already 
underway. For example, countries of the broader Middle East and North 
Africa would welcome opportunities through which they can exchange 
ideas, examine and share best practices, and build intra-regional 
cooperation and consensus on reform. We are looking at ways to work 
together with the countries of the region to establish a forum for such 
discussions.
    Reformers in the region have also noted the need for more micro 
credit programs and increased investment in small and medium-sized 
enterprises (SMEs). This will help cut unemployment, improve access to 
trade financing for small exporters and increase opportunities for 
women to pull themselves and their families out of poverty. We are 
seeking ways to improve access to microfinance and to help local 
governments improve the policy and regulatory atmosphere and exchange 
best practices.
    Meeting basic educational needs is vital for development and 
economic growth. The region has made training and development of human 
resources--particularly with regard to teacher training, as well as 
vocational and technical training--a priority. We will look for 
opportunities to provide tools to work with the region to achieve these 
important goals.
    Expanding trade needs to be a focus of our efforts as well. 
Regional economic integration and increased trade between the countries 
of the region and the rest of the world will provide more opportunity 
for business and investment. We are pursing trade links with the region 
and encouraging regional governments to work toward membership in the 
World Trade Organization, where they have not already done so. We could 
consider regional trade hubs and support for local chambers of 
commerce.
    We are acutely aware of the magnitude and complexity of the reform 
challenge in the broader Middle East. Reformers in the region have made 
it clear in Tunis, Alexandria and Sana'a they are committed to moving 
forward on all fronts, including governance, not just those reforms 
that are easiest. We should not shy away from the challenge, but 
support them in that great effort to transform this critical region.
    I am pleased to say that our initial ideas and plans for the 
initiative in the greater Middle East region met with considerable 
acceptance and, as you will see at Sea Island, are the basis for 
consensus action. I think this is because those plans reflect the view 
and the declarations of people in the region, to which we responded.
    In closing, Mr. Chairman, I want to emphasize once again that the 
impetus for reform must come from the region. We have no interest in 
forcing a set of proposals on the people of the broader Middle East, 
nor could we do so if we wished. We are leaving no stone unturned in 
pushing forward toward a successful political and economic 
reconstruction in Iraq and a solution to the Israeli-Palestinian 
conflict. Yet, as important as these tasks are, they should not 
dissuade us from giving equally urgent attention to the longer-term 
task of supporting economic, social and political reform in the broader 
Middle East. We are encouraged by the region's recent movements toward, 
and calls for, reform. We stand ready, with our G8 partners, to help 
the people of this region build a future that provides more hope, 
opportunity and freedom.

    The Chairman. Thank you very much, Secretary Larson.
    We have three panels today and several Senators raising 
questions, so we will try for a 7-minute round at this point. I 
will commence the round by asking you, Secretary Larson, what 
is the best outcome you can anticipate at the G-8 meeting with 
regard to a Greater Middle East initiative. By that I mean, 
will there be pledges of money? Will there be some structure of 
the G-8 as to how proposals are to be considered? Has the Trust 
idea that I have suggested been a part of discussion at our 
State Department or with anybody else in the G-8? Give us some 
flavor of what we can anticipate. You say some preconsultation 
has occurred. You give some optimism in your testimony of the 
results, but can you sketch out more particularly what they are 
likely to be?
    Mr. Larson. I think the most fundamental thing we want to 
see coming out of Sea Island is a recognition that the issue of 
reform in all its dimensions is fully and permanently on the 
agenda. Beyond that, I believe we will be able to come forward 
with some new initiatives that will include the members of the 
G-8 and include the countries of the region. One of those I 
hope we will move forward is some type of ongoing forum where 
we can further develop areas of cooperation. I think we will be 
able to come forward with some specific initiatives that will 
push the ball forward on issues like microfinance, small 
business lending, push the ball forward on cooperation in the 
promotion of democracy. But we recognize that this is just an 
initial plan of support for reform, and we will have to work, 
together with our partners in the region and outside of the 
region, to further develop this architecture. The idea that you 
have put forward for a 21st Century Fund is, I think, among 
those types of very big challenging ideas.
    We have had a round of discussions with the region about 
ideas for new regional financing institutions. Those have not 
fully gelled, to be perfectly honest. But I think that there is 
a debate that has been opened up on those, and I think those 
are the sorts of ideas we would hope to continue to discuss in 
institutions like a forum.
    The Chairman. Just for the sake of the record and our 
information, lets us focus on this topic. The G-8 meets and, as 
you say, is seized with various issues. It is not clear how 
things move after that. In other words, the G-8 discussed--and 
we have discussed before in these hearings--the so-called 10 
plus 10 over 10 program in which the G-8 countries were to 
match contributions by the United States in terms of the 
destruction of weapons of mass destruction and nonproliferation 
efforts.
    From time to time the committee has probed how this is 
going. What have the other seven nations stepped up to do? Who 
meets with whom? And is there any sort of ongoing committee 
work or structure that leads people to do things except on an 
ad hoc basis, which contributes obviously to the overall 
result? Can you give any idea who might meet whom after the G-8 
on the issue that we have in front of us today?
    Mr. Larson. Definitely. We have a team of people that work 
on the preparation for the G-8 summit that includes the 
President's representative at the National Security Council, 
Mr. Edson, myself, Mr. Bolton at the State Department, of 
course, works on issues like 10 plus 10 over 10, and others.
    This year we are in the role of the chairmanship or the 
presidency of the G-8, and we hold that responsibility through 
the end of the calendar year. We have made a firm decision that 
our presidency does not end on the 10th of June when the Sea 
Island summit is over. We have determined that we are going to 
need to drive a number of initiatives forward over the rest of 
the calendar year, and this is one of the most important. We 
would hope, for example, to host or co-host meetings that would 
be designed to carry out initiatives of the broader Middle East 
and north Africa later in the fall. We will be using the team 
that prepared for the summit to drive this process with our 
colleagues in the G-8 but also colleagues in the broader Middle 
East.
    The Chairman. Well, that is very encouraging. I am 
encouraged by the fact that the U.S. presidency of the G-8 this 
year gives us the ability to raise these issues at the G-8 
summit and through the end of the year. As president of the 
institution, you can call meetings and will do so. So that 
really offers some promise.
    Now, just for sake of our understanding, what do you 
believe the Greater Middle East covers? In other words, what 
countries or what areas are we talking about in terms of the 
issues at the meeting we are about to have?
    Mr. Larson. We have believed that it is important to have 
an open architecture on a concept like this because we found in 
other regional organizations when it is successful, others want 
to join. So we have not wanted to draw very sharp lines 
excluding some and including others. But we certainly imagine 
the countries of north Africa, the Levant and the gulf and some 
adjacent countries. We think that the geography will vary 
somewhat depending on the topics under discussion. On economic 
topics, these regional interconnections are very important and 
you need to reach out to all of the necessary players. If there 
are security-related conversations, we would naturally exclude 
countries that are state sponsors of terrorism. So we believe 
it should be open. It should be broad beyond the traditional 
confines of the Middle East, and that the geography of it may 
vary somewhat depending on what subjects are under discussion.
    The Chairman. Carrying forward a question that Senator 
Biden had in his opening statement, why have many countries 
declined the invitation? This is a distinguished list who have 
accepted, and that is the good news. But the Greater Middle 
East covers, as you have defined it, a large number of 
countries who obviously do not plan to participate. Do you have 
any view as to why they are not interested?
    Mr. Larson. Well, I think a number of countries that are 
not attending the conference at Sea Island are very interested 
in the broader Middle East and, in fact, are going to play a 
leadership role in it. For example, Morocco is not going to be 
in a position to attend the meeting, but the leader of Morocco 
will be coming a couple weeks later. And Morocco is going to 
play a leadership role on one of the initiatives designed to 
promote better training and internship opportunities for young 
people who want to have careers in business.
    We recognized, when Sea Island was selected as the venue 
for this meeting, that it would not make it possible to have 
many guests outside of the G-8. We are having a separate 
outreach meeting for the Africans, and we have zeroed in on six 
African leaders who will be coming. And that is about the 
extent of what you can accommodate.
    But I can assure you that countries that are not 
necessarily participating in this particular conference have, 
nevertheless, had very productive conversations with us about 
the content of this initiative and expect to work with us in 
the implementation of it.
    The Chairman. Let me just say parenthetically, given the 
presence of our distinguished guest today, perhaps a better 
venue would have been Amman or the Dead Sea conference area, 
which has accommodated a good number of people from the Middle 
East.
    Mr. Larson. Well, the Dead Sea meeting that was recently 
held under the auspices of the WEF, World Economic Forum, did 
provide a wonderful opportunity for Secretary Powell and others 
of us to consult the region, and so we took full advantage of 
the hospitality of His Majesty King Abdullah II.
    The Chairman. Thank you, Mr. Secretary.
    Senator Biden.
    Senator Biden. Thank you.
    Mr. Secretary, let me move back to the centerpiece of this 
initiative as I see it, the Forum for the Future, as I see it, 
which is this ongoing framework for discussion, and you fleshed 
it out a little bit for the chairman. Could you elaborate on 
how this forum will function, how far advanced is the concept 
of the forum? Is there consensus among the G-8? Did you arrive 
at a consensus before you arrived at Sea Island? Is there 
consensus in the region about it? And are any countries and all 
countries going to be invited to participate in the forum, 
including Iran and Syria?
    Mr. Larson. One of the most important things that we 
learned from our consultations in the region was that more 
important than any single initiative that might come up was the 
sense that there was an ongoing, sustained engagement on the 
part of G-8 countries with the region. So you are right, 
Senator, in suggesting that this idea of a forum has begun to 
move to center stage because it is something that is seen in 
the region as important and it is something around which the G-
8 has coalesced.
    Many of the details of this will have to be worked out in 
further consultations with the region, but I think the basic 
framework is quite clear. We would imagine, for example, an 
opportunity to have ministerial level consultations. That could 
include foreign and economic and other ministers so that one 
could look at the process of reform across the board, including 
educational reform, economic reform, reform in areas of 
governance. We would imagine a forum that would allow for a 
discussion of best practices so parts of the region could learn 
from the experiences, the successes of other parts of the 
region----
    Senator Biden. May I interrupt you?
    Mr. Larson. Yes.
    Senator Biden. I think that is extremely valuable and I am 
sure there are other fora based on subject matter. But with 
most summits, before people arrive, they agree on the major 
points. Summits are not impromptu gatherings. Is there an 
agreement on how often that forum will meet? Have you set dates 
for these various kinds of meetings between now and the end of 
the year when our presidency moves on? And have you arrived at 
a consensus whether or not, for example, Syria and Iran can 
participate?
    Mr. Larson. We expect and believe we have an agreement on 
the idea of a meeting before the end of the year. We believe we 
have agreement on a structure that, in addition to the elements 
I outlined, would include the opportunity for input from the 
business community and civil society. We anticipate that the 
forum itself would be open to all countries in the region and 
interested partners from nearby the region, but that on certain 
types of topics, the participation would be affected by these 
countries' policies, and I gave the example of security 
discussions that might take place.
    Senator Biden. Over the weekend, the Jordanian Foreign 
Minister expressed reservations about the inclusion of such 
countries as Turkey, Afghanistan, and Pakistan in the 
initiative. He said the dialog ``is best conducted between the 
G-8 and the Arab group and not through a wider definition of 
the Greater Middle East where we do not share sometimes the 
same common interest.''
    According to Robert Satloff of the Washington Institute of 
Near East Policy, ``More than a quarter of all residents of 
Arab countries are not Arabs, and by the Greater Middle East 
Initiative's geographic definition, Arabs will be a distinct 
minority in the region.'' And Mr. Satloff continues. 
``Virtually all of the proposals, analyses, and recommendations 
are directed toward Arabs. Where is the recognition of the 
region's ethnic, cultural, religious, and linguistic mosaic?'' 
Could you respond to his question?
    Mr. Larson. Surely. We think that it has been profoundly 
important that the Arab League and Arab institutions have moved 
forward to embrace this reform agenda. I think the Arab League 
summit statement in Tunis was a very important initiative.
    We also think, though, that the challenges that are faced 
by the Arab world are not unique in every respect and that 
there is a lot that can be learned from the experiences of some 
of their neighbors, including neighbors like Turkey, neighbors 
like Pakistan. I think it is very important that we have the 
flexibility to have a dialog that brings in some of these other 
countries as well.
    You mentioned in the quotation that you just gave that in 
many of these countries there are very important populations 
from outside of the Arab world. Certainly in the gulf, the 
links between the gulf and countries like Pakistan are very, 
very prominent. So if you are going to have a discussion of 
increased trade, increased investment, I think you need to be 
able to include some of these adjacent countries, and that has 
certainly been our concept.
    But we have not in any way wished to diminish the 
importance of the Arab identity or the importance of Arab 
institutions as being key components of this push toward 
reform.
    Senator Biden. Thank you very much, Mr. Secretary.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Biden.
    Senator Hagel.
    Senator Hagel. Mr. Chairman, thank you.
    Secretary Larson, welcome. I think it is important that we 
acknowledge the good work of Secretary Powell and Secretary 
Burns, yourself, others in the administration who in fact have 
put an effort into dealing with the underlying issues in the 
Middle East and that is why we are here this morning. I know we 
are not as far as we all would like to have come, but 
nonetheless we are focused on it, and that in itself is 
important and now we need to do exactly what you said in your 
testimony, connect the reality and the relevancy of the 
programs that will enlist the support of the people of the 
Middle East.
    The first question. Give me your sense of the balance, the 
relationship between the Israeli-Palestinian issue, our efforts 
in Iraq, the overall development challenges that we face in the 
Middle East. Are they related? How are they related? And give 
me your best sense of that.
    Mr. Larson. We believe that it is very important to make an 
all-out effort to promote Middle East peace, peace between the 
Arabs and the Israelis to persevere with the task of political 
and economic reconstruction in Iraq and to pursue longer-term 
economic, social, and educational reforms in the broader Middle 
East. We have to do all of these.
    We must be clear that we are addressing the first two so 
that the sense does not creep in that the discussion on the 
third is somehow an alternative. But at the same time, we have 
to be very firm, I believe, in suggesting to our friends in the 
region that a setback tomorrow in the Middle East peace process 
is not an excuse for saying we cannot address these economic 
reforms that are so important for the future of our own people. 
These are simply things that have to be addressed. They have to 
be addressed with equal urgency and equal vigor.
    Senator Hagel. Do you believe the current administration's 
policy in fact is doing that, exactly that? I guess the other 
part of that is how much emphasis are we putting on the fact 
that all the programs that we are talking about, what may well 
be laid on the table next week in the way of specific programs 
in economic development are, in fact, related to the Trust that 
the people in this region, the Middle East, Muslim world in 
general, have in our leadership and confidence in that 
leadership and trust in our purpose. What I am trying to get at 
is how much is the Israeli-Palestinian issue woven into the 
fabric of what we are talking about this morning, as well as 
the great challenges of the Middle East, specifically now with 
140,000 American troops in Iraq?
    Mr. Larson. Both of those issues are fully woven into the 
challenge of promoting reform in the broader Middle East. 
Certainly they are huge psychological factors in the minds of 
the citizens of this part of the world. I think that on Iraq, 
for example, we are in a pivotal month where if we can show 
that we have successfully moved forward with a Security Council 
resolution, we have seen the announcement yesterday of the 
interim government, we are working to get broader international 
support for the task of reconstruction, I think those efforts 
will help improve the climate for moving forward with the 
broader Middle East Initiative.
    I think that the way that we approach the prison abuse 
scandal will be also very important. Obviously, it was a huge 
setback for us in terms of our image in the region. But if we 
address it in the way that shows a sense of democratic 
accountability and that our institutions are working, I think 
that will show that we are serious when we talk to the region 
about democracy, about accountable institutions.
    So we will need to pursue our efforts on all three of these 
issues simultaneously. That is certainly what we are trying to 
do, and I think we are making good progress on all fronts.
    Senator Hagel. Mr. Secretary, how important do you think it 
is in the minds of the people of the Middle East that they 
believe that the United States is doing everything we can to 
help resolve the Israeli-Palestinian issue? Can we make 
progress on these other fronts we are talking about today, as 
well as other more specific issues like Iraq, without that 
piece?
    Mr. Larson. We will always be running uphill in trying to 
convince many of our friends in the Arab world that we are 
doing everything we can to promote peace between the Israelis 
and the Palestinians. Nevertheless, in our candid discussions 
with friends in the region, I believe I have detected an 
acknowledgement that they cannot hold hostage the reform and 
the improvement of opportunity in their own societies for the 
benefit of their own people to the day-to-day ups and downs in 
the peace process. It would simply be irrational. There is a 
psychological factor that we must always take into account, but 
they are not pursuing reforms for our benefit. They are 
pursuing reforms for their own benefit, and we are trying to 
put ourselves in a position to----
    Senator Hagel. But does not an awful lot have to do with 
the confidence in our efforts by the people themselves? If we 
lose the people, we lose the effort, the trust in our purpose, 
and certainly it has to spill over into the Israeli-Palestinian 
issue, as well as all of the other challenges that we have.
    Mr. Larson. It comes up in every conversation. You are 
right. It comes up in every conversation.
    Senator Hagel. Thank you.
    One last question. Any new, specific proposals going to be 
introduced at the G-8 conference next week? You talked about 
microfinance. You talked about a number of objectives, things 
that we should be doing. We are doing now some of them, but 
more need to be done. Anything new that we can expect?
    Mr. Larson. I think we will have some things that will be 
new twists on existing programs. We talked at some length about 
the forum which we hope to launch. We hope that we will find it 
possible to come up with new, more effective and expanded ways 
to support small- and medium-sized businesses in the region.
    A lot what we need to try to do requires mobilizing 
resources from the region, from the governments of the region, 
as well as from the private sector. The chairman has talked 
about a 21st Century Trust. We are trying to focus on a 21st 
century approach to the financing needs of the region, and that 
means recognizing that the vast majority of funds potentially 
available to support development will come from the private 
sector. This is a region where resources have not been coming 
in from abroad. In fact, their own resources have been fleeing. 
So part of what we need to do is get private resources coming 
back to the region.
    Senator Hagel. Thank you.
    Mr. Chairman, thank you.
    The Chairman. Thank you very much, Senator Hagel.
    Senator Chafee.
    Senator Chafee. Thank you, Mr. Chairman, very much, and 
welcome, Secretary Larson.
    As a career public servant and having served around the 
world, I believe in Zaire, Sierra Leone, Jamaica, you are 
trained to understand and pick up what is happening on the 
ground. How would you assess honestly our credibility and 
stature at this time in the Greater Middle East?
    Mr. Larson. What I find interesting from my travels in the 
greater, broader Middle East is that despite some very 
difficult setbacks, including some of the recent developments, 
prison abuse scandal in Iraq, and the tough road that we have 
been walking on the Middle East peace process, people in the 
region still look to us as a country that has a model that 
works, where people would like to come and live. We have found, 
in particular, in our meetings with young people, outside of 
government, young entrepreneurs, young rotarians, that there is 
deep interest in this reform agenda. There is deep interest in 
the question of what they can do to make sure they have a 
bigger voice in the future of their country, bigger opportunity 
to pursue their educational and economic dreams.
    So I think that we are able to work with the region to 
pursue an initiative like this, and it really comes from that 
reservoir of confidence in the United States, notwithstanding a 
lot of disagreement with what is perceived to be--what is 
perceived to be--some of the policies that we are following.
    Senator Chafee. Yes. That is putting a good face on it, and 
I respect that.
    The President's own Djerejian report said that hostility 
toward America is reaching shocking levels. So we do have to be 
concerned that actually--and what I am hearing from people in 
the region is that by pushing this, conversely we are hurting 
the effort, that we are undermining real reformers just because 
our credibility and the hostility toward us is, as the 
Djerejian report said, reaching shocking levels. Does that 
concern you, that by pushing it, we are actually hurting the 
real reformers in the region?
    Mr. Larson. I think it is something to consider. Secretary 
Powell went to the World Economic Forum and sat down with 
leaders of the Arab Business Council and of leading Arab NGOs, 
and the message that we heard there was keep it up. You have 
helped to start a debate that needs to take place. Obviously, 
reform must come from within the region. We all respect that. 
We respect the fact that it will have to come in different ways 
and at different paces, but there was very strong support from 
these groups in civil society and from the business community 
for the agenda that we were helping to push. I found that 
encouraging because, as you pointed out, the Djerejian report 
and other similar reports have suggested that there is serious 
disaffection with what is perceived to be our policy in many 
parts of this region.
    Senator Chafee. Yes. I am sure there are some that say, 
keep it up, but certainly the majority of the comments, upon 
the release of the initiative, were in strong opposition and I 
have a whole list of quotes here. The Jordanian Foreign 
Minister said, ``our objective is for this document never to 
see the light,'' and on and on it goes. So we have to be 
realistic also and honest about how we want to pursue our 
goals.
    Mr. Larson. Let me comment a little bit about just how we 
pursued consultation in the region. The document that the 
Foreign Minister was commenting on was one that was an internal 
G-8 working document that was leaked by someone in the G-8 
process, and I must say that in my experience over a couple of 
decades working on G-8 summits, it is the first time this has 
ever happened. It was very, very unfortunate and we suffered a 
setback because of it because it carried the perception that 
there was some sort of blueprint that was being developed 
without consultation from the region.
    What we have done since then is to engage in an all-out 
process of consultation with the region. We have shared our 
ideas, including a few non-papers, with government leaders, 
with business leaders, with NGO leaders. We have had meetings. 
In one of my preparatory meetings with the G-8, I invited to 
Washington the main author of the Arab Human Development 
Report, the President of the Arab Business Council, and leaders 
of the reform process, government and non-government, from the 
region. We sat down and we got their advice.
    So I think we have begun to recover from that period a 
couple of months ago when there was a sense that we had a 
secret plan that we were going to publish at Sea Island and 
only then the region would find out about it. We are meeting 
even this week. We are continuing our consultations with the 
region so that they have a full opportunity to give us advice 
on these types of initiatives, and I think through those 
efforts we have helped turn around the sentiments that you are 
referring to.
    Senator Chafee. I might argue that our credibility being 
what it is, that the cynics would say that it was purposely 
leaked just to make compromise all the more palatable down the 
road.
    Now, of course, many of the G-8 countries have been 
opponents of the war in Iraq. How do you expect the feedback at 
Sea Island from these particular countries--I have many quotes 
here in opposition also talking about a paternalistic attitudes 
toward the region that they have been very involved in much 
longer than we have.
    Mr. Larson. First of all, having just gotten off a 
conference call with my G-8 counterparts earlier this morning, 
I think we are very, very close to agreement on the package of 
ideas that we have been developing for Sea Island. So we have 
been bringing this process along.
    Second, I would just say that I think it is paternalistic 
to say that this is a region that cannot experience democracy, 
that cannot experience economic growth, and cannot experience 
educational opportunity. I think it would be the worst form of 
paternalism to say that we can talk about these issues in other 
parts of the world, but we cannot really have it part of the 
agenda in this part of the world.
    Senator Chafee. I know my time is up, but I do not think 
anybody is saying it cannot happen. Nobody is saying that. It 
is just at its own pace as opposed to on our time table.
    Mr. Larson. I think we would all agree with that, that it 
will have to be at their own pace and that will differ from 
country to country.
    Senator Chafee. Thank you, Mr. Secretary.
    The Chairman. Thank you very much, Senator Chafee.
    Senator Alexander.
    Senator Alexander. Thank you, Mr. Chairman.
    Mr. Secretary, thank you for being here.
    I would like to continue the line of discussion of my 
colleagues about American credibility and how we seek to 
improve what the world thinks of what we are doing as a way of 
helping us succeed in what we are doing. I am trying to keep it 
in balance.
    I can remember that the American Revolution, if there had 
been a poll, would not have received a majority support in the 
colonies. Yet, we do not think that was a wrong revolution.
    I remember being in Amsterdam and in Germany in the 1980s 
and hearing preachers in the pulpits talk about Reagan and 
Begin and Hitler. They objected to our presence there. Yet, we 
do not think it was a wrong decision to say, Mr. Gorbachev, 
tear down this wall.
    And Professor Graham Allison at Harvard likes to talk about 
the elephant and the mouse in the bathtub theory, that no 
matter how nice the elephant is, if you are the mouse in the 
bathtub with the elephant, the mouse is not going to like it 
very much. That is one of the problems that the United States 
has in the world.
    But having said that, where we are today is not where we 
would like to be in terms of what the world thinks of what we 
are doing and the support we have in the Middle East for what 
we are trying to accomplish. We know, as a tactical matter, 
that if we want to succeed in what we are doing, we need to 
isolate the radicals. We are told by the Brookings Institution, 
as reported in the New York Times, that in a country of 25 
million, Iraq, that there are only 5,000 insurgents whom we are 
fighting and only 500 jihadists out of 25 million. That is the 
size of the opposition. So we do not want to enlarge that. We 
want to isolate and narrow that. How do we do it?
    We have talked about several ways here today, the peace 
process in Israel. You said, dealing with prison abuse in a 
straightforward way is a way to do it. All the proposals that 
you have suggested at Sea Island would be helpful, the various 
proposals Senator Lugar and Senator Hagel and others in the 
administration on the Trusts reminds us that the Marshall Plan 
was a plan of the European countries. It was not our plan. they 
came up with their plans for their countries, and this gives us 
a chance to do that. You have emphasized that.
    I wanted to ask you about one other thing, and that has to 
do with what I would like to be able to call the ``first Bush 
doctrine,'' although it is not for me to call it that really. 
Most of us agree with what I would call the ``second Bush 
doctrine,'' which came after 9/11 occurred unexpectedly, which 
is if terrorists hit us, we will hit you back and you are 
either with us or against us. The President was courageous in 
that. I support him in that.
    But he also said these words in his campaign debate October 
11 in Wake Forest. In talking about foreign policy in the 
future, Governor Bush then said, ``I think the United States 
must be humble and must be proud and confident of our values, 
but humble in how we treat nations that are figuring out how to 
chart their own course.'' I would like to call that the first 
Bush doctrine, and I would suspect that it is still an 
operative doctrine even though we have heard more about what I 
would call the second one.
    So I guess my question for you would be, Mr. Secretary, are 
words like these still operative words in the administration? 
And as we move into a different era in Iraq, particularly after 
June 30, might we hear more words like I think the United 
States must be humble and must be proud and confident of our 
values, but humble in how we treat nations that are figuring 
out how to chart their own course?
    Mr. Larson. Senator, I find it interesting that both you 
and Senator Biden have touched on this theme of humility and 
being humble. I think that when it comes to discussing reform, 
being humble and having humility is an important part of the 
message that we need to convey. We need to be able to convey 
that we believe that the work of building free democratic open 
societies is never done, that we do not believe that we have 
achieved perfection. It is because we think that, that we have 
encouraged this debate so much.
    It was also interesting what you said about the elephant 
and the mouse because I think that however careful we are, 
sometimes by our pronouncements, because of our power and our 
prosperity, things that we do not believe are meant to be 
imposition sound like that sometimes to others. So we have had 
to work very, very hard in the region to say that this is a 
response, an initial response, to your own priorities. You set 
them out in Tunis and in Alexandria and Sana'a and other 
places. We have developed these proposed initial responses in 
consultation with you, and we are prepared to implement them 
and develop new ideas through some type of forum where we can 
work together as equals. I think that message is sinking in, 
but it has, frankly, taken a very serious effort, and I think 
the visit of the Secretary of State to the region at the Dead 
Sea conference was an important milestone in that effort.
    Senator Alexander. I thought it also was important in the 
President's remarks the other night and in your remarks today 
what you did not say in terms of our objectives. The President 
listed five. You listed several. But I did not hear anybody say 
that you must have exactly our Bill of Rights. You must have 
exactly our separation of church and state doctrine, which is 
unique in the world really, our own version. You must have our 
federalism. You must have our checks and balances. You must 
have our e pluribus unum. In fact, the President's objectives 
in his remarks and your objectives here today I would 
characterize both as being modest and realistic and going a 
long way toward the kind of words that the President himself 
talked about in 2002, which are that we can be strong and 
humble in recognizing that people will chart their own course, 
and there is a limit to what we can realistically expect.
    Mr. Larson. I would agree with that. At the same time, I 
would stress that we believe that there are values that are 
universal, and it is interesting to me that even though you or 
I, if we were Arab leaders, might have written this summit 
statement slightly differently, you nevertheless see language 
about consolidating democratic practice, broadening 
participation in political life, reinforcing the rights of 
women in society. These are very strong statements, in their 
own words, expressed in their own way.
    But I think, to pick up on another phrase that you used, it 
gives us reason to have confidence that the values that we 
stand for and the principles that we are trying to help make 
available in this region are ones that the region itself is 
embracing. In other words, we are pushing on an open door. It 
is just that we have to do it in a way that is tactful, that is 
helpful, and that clearly reflects the priorities of the 
region.
    Senator Alexander. Thank you, Mr. Chairman.
    The Chairman. Thank you very much, Senator Alexander.
    Secretary Larson, we appreciate your testimony. We are 
delighted that, as you pointed out earlier, our presidency of 
the G-8 will continue throughout the year. We are looking 
forward to hearing from you and from your colleagues what your 
impressions are after the G-8 meeting. Our hearing today was 
scheduled to offer a contribution through this forum of the 
U.S. Senate to that meeting. We take it very seriously, as you 
do. We think it is important for the G-8 to have successful 
initiatives, but also that they be implemented and that there 
be some evidence of the organization that moves on, that builds 
consensus and has these contacts with nations that may want to 
work with us. We thank you very much for your testimony, as 
always, and we look forward to hearing from you again as things 
proceed.
    Mr. Larson. Well, thank you very much, Mr. Chairman, and 
thanks to the committee.
    Senator Biden. Good luck, Mr. Secretary.
    The Chairman. Now we will hear testimony from His Royal 
Highness Prince Hassan, who has come to us today from Amman, 
Jordan. Prince Hassan, it is a genuine privilege to have you 
before the committee today. Many members of our committee have 
had the privilege of being entertained by you in your country, 
as well as opportunities through the Jordanian Embassy here in 
Washington for events that have brought us together in the 
past. Your visit is timely, and your testimony is especially 
timely this morning.
    We would ask you to proceed, and then to entertain 
questions by the committee in much the same form as you 
witnessed with Secretary Larson. Please proceed. Your full 
statement will be, of course, a part of our record.

 STATEMENT OF HIS ROYAL HIGHNESS PRINCE EL HASSAN BIN TALAL OF 
  THE HASHEMITE KINGDOM OF JORDAN, ROYAL PALACE, AMMAN, JORDAN

    Prince Hassan. Senator Lugar, Mr. Chairman, Mr. Biden, 
distinguished Senators of the Senator Foreign Relations 
Committee, I want to say from the outset that I have been here 
before. It was in the 1970s that David Rockefeller convened a 
meeting, which I recall included the participation of Jacob 
Javits, a bridge-builder like myself who knew both worlds. It 
included Robert McNamara, former Secretary of Defense, who I 
knew in his then new incarnation as President of the World 
Bank. It included Senator Edward Kennedy and nationals from 
other countries, including Simone Weil herself, a World War II 
holocaust survivor.
    We presented a concept of the Middle East 2000, and 
referring to the Palestine question, we presented a regional 
assessment of human, natural, and economic resources, on the 
basis of a computer model, we suggested that 10 million 
consumers of water could live between the Mediterranean and the 
Jordan River.
    The only person who has taken that study seriously as an 
indicator, over the many years and over the years that I have 
spoken to him, is Prime Minister Sharon. In fact, I feel that 
the settlement policy has been deliberately allowed to grow by 
neglect of reading the small print by Arab countries. Settlers 
were less than 1,000 in the 1970s. Today they are in the 
hundreds of thousands.
    And today presumably this new initiative of building peace 
and combating terror is based on a projection of what-if 
scenarios. I would start by saying that the administration's 
Greater Middle East Initiative should be understood as a 
misnomer. There is no such thing as a Middle East or even a 
Greater Middle East, at least in the language of the United 
Nations. I am an Asian. An Egyptian is an African. An Israeli 
is not a part of any region.
    South Asia and west Asia--and I think here you have got it 
right, with all due respect, in your Near East and South Asian 
Committee. Their combined population is larger than the 
population of China. And as you know, Senator Lugar, as a 
guiding light in the nuclear threat initiative with Senator 
Nunn, there is no weapons of mass destruction agreement or 
protocol within that region which is brimming with weapons of 
mass destruction. So on basic security, there is a conspicuous 
absence.
    On current security, as Mr. Brzezinski said the other day, 
we did not fight against the Blitzkrieg. The Blitzkrieg and 
terror are tools of war, however odious they may be. But we 
fought against despotism. And I do not need to be told, after 
30 years of lonely bridge-building, what the problems of 
governance in our region are, but I would recite them for the 
record: population growth, poverty and deprivation, slow 
economic development, high illiteracy, high infant mortality, 
poor health care and sanitation, and inadequacy of democratic 
processes. Democratization is a process. Democracy is an end 
result. The problem is the poor quality of the institutions of 
governance. Politicians, unfortunately, have lost their bedside 
manner, the ability to talk to people. Governments are 
alienated from people. There is failure of political parties 
and the politicization of the armed forces. And 9/11 has come 
as a windfall to many countries whose security services now 
regard the security priority as the main issue of policy, 
flying in the face of democracy and democratic values. The 
problems also are the rise of ethnic conflict, the rise in 
violence, growth of urbanization, the degradation of the 
environment, and corruption in public life.
    And I do not think it takes too much wisdom to suggest that 
the common minimum agenda for our region is to recognize the 
sovereignty of the citizen, to make stakeholders out of 
citizens in planning their future, obviously to control 
population growth, to bring justice back to development, 
economic growth with equity, not to make the rich richer. The 
development reports you have quoted include the reference by 
Merrill Lynch to $1.3 trillion owned by 300,000 Middle 
Easterners in the United States, and yet I come from a region 
where 24 percent of the population live on a dollar a day and 
55 percent live on $2 to $5 a day.
    Terrorist organizations do not ask for collateral on loans, 
and while we sit here and talk about small- and medium-
enterprise projects, the fact is that our middle class has left 
the region because there is not a merit-based system for them 
to participate in.
    The three baskets of Helsinki through Barcelona are 
security, economy, and then culture, and humanity as an 
afterthought. In 1995, I believe it was, Shimon Peres and I at 
the Middle East-North Africa summit conference proposed $35 
billion for a decade of infrastructure development to encourage 
the will of migrants to stay in 24 countries from Morocco to 
Turkey, inclusive. We were told by the European Union, first 
come, first served, on the basis of what was then known as the 
Copenhagen shopping list.
    My hope is that the Greater Middle East Initiative is not 
an initiative of sherpas and shepherds without listening to the 
sheep, as I once told President Clinton before a G-8 meeting in 
Denver. I hope that the people of the region can be recognized 
in terms of their legitimate quandary. The Middle East region 
will be discussed at the G-8 summit at Sea Island, but as 
Senator Biden pointed out, it has already been sharply 
criticized by those who consider that it fails to address the 
Palestinian-Israeli conflict and seeks to impose reform extra 
cathedra, from the outside.
    Allow me to start by saying that such critics may be proven 
wrong on both counts because they may have missed the point on 
both counts. My part of the world needs as many initiatives for 
reform as can be imagined, both from within and from outside 
the region. Incidentally, I am here as an NGO, a 
nongovernmental organism. Reform can also accelerate rather 
than retard peace in the Middle East.
    I would like to suggest that we must remember that over the 
millennia, our part of the world prospered only when it had 
two-way openness and interaction. The free movement of ideas 
was the key to prosperity. The free movement of goods, capital, 
and people followed. And yet, when we heard the statements 
during the visit of Prime Minister Sharon, which included 
references to the fact that the right of return and the 
question of compensation were to be discussed in the context of 
Israeli-Palestinian particularity alone, if they were to be 
discussed at all, I would like you to know that in a 
Palestinian refugee camp a week ago, with visitors from all 
over the world, young men and women were saying why is it that 
we are not allowed a town hall meeting where we can ask the 
question, what of the long-awaited right of return and the 
right to compensation. Why do we not interact with people?
    The down side of the Internet revolution is that it has 
created enclaves of hatred. The positive side of it is that the 
other day I witnessed Bedouins in the northeast of Jordan 
talking directly to Navajo Indians in Albuquerque, New Mexico 
about sheep shearing. We need more citizens conferencing and 
less elitism. It is all very well to talk, as Secretary Larson 
mentioned, about rotarians and young entrepreneurs, but we are 
not all rotarians or young entrepreneurs.
    During the 1990s two ideas or initiatives were launched in 
the region: the 1991 gulf war and the Madrid Middle East peace 
process. They had bilateral and multilateral tracks, and of 
course, there was objection to multilateralism until the 
bilateral issues had been addressed. My problem with that is 
that I, through the ages of the Quakers, if they will permit me 
to say this, the friends for whom I have great respect, have 
had the Iranians, the Israelis, Turks, Arabs, and Westerners in 
one room discussing weapons of mass destruction, but the minute 
they leave that room into the cruel light of day, they are 
concerned about their unilateral standing with the strong 
nations and in particular with Washington.
    Gentlemen, there is a law of war. Treatment of prisoners is 
a concession from the law of war. But there is no such thing as 
a law of peace. And the new, independent humanitarian order is 
on the agenda of the General Assembly of the United Nations 
every year. The call for a culture of compliance for state 
actors and non-state actors is on the agenda of the General 
Assembly every year. Let us all in this region step up to the 
template of international law. On that basis, we can begin to 
convince people that this is not a new initiative emphasizing 
``pipeline-istan,'' if I may on the one side, and if you will 
forgive the impropriety and the lack of political correctness, 
``uslikestan'' on the other.
    The Israeli-Palestinian conflict and Iraq are, of course, 
key issues for the people of the Middle East. Although 
interrelated, it would be unwise and impractical to assume that 
the Israeli-Palestinian issue, Iraq, and overarching regional 
reform should be tackled in any chronological order. Resolution 
of any one issue should not be conditional upon any other.
    Senator Lugar, I agree with your statement and I quote. 
``If we help to produce a resolution of the Israeli-Palestinian 
conflict, fresh political winds would sweep through the region 
and new possibilities for political reform would flourish.'' I 
am deeply worried, as I think many of you are, during this 
election period of the next 4 months, without presuming on 
internal American domestic politics, that initiatives will 
remain initiatives in name. I am afraid of the dreadful 
initiatives that might be taken by extremists within the region 
or beyond the region that will change the context to which we 
have been alluding.
    And for three decades, I have been trying to foster reform. 
As a Prince, this may sound a contradiction in terms in 
Republican/Democratic America, but I would like to say that the 
long list of NGOs with which I am associated, both Arab and 
Israeli, are civil liberty oriented, but they are 
representative of the majority which is being squeezed out by 
our fanatics, your fanatics, their fanatics, and without the 
centrist platform, I do not see how reform can be addressed. It 
is a lonely task to be the powerless lobby for the powerless, 
and that is why I accepted your kind invitation solely on the 
word ``partnership.''
    The Achilles' heel of reform efforts is the thin and often 
invisible dividing line between patronage and partnership, 
between compulsion and cosmopolitanism. I want to know how do 
we move from principles to instruments. Karl Popper, the 
philosopher, once said any meeting that goes beyond 18, maybe 
15, is not a meeting. We need a concept group of people who are 
larger than the newspaper headlines, people who can exchange 
ideas. There is an English expression, I believe in a meeting 
of minds. If you have a mind, I would like to meet it.
    Hard security, soft security have to complement each other. 
Civil society stakeholding is essential in Pakistan and in 
India. The first act after 9/11 was to stop importing the silk 
that is being woven by the poor, who normally would be killing 
each other, in the Kachi Abadi authorities in the Gramin Bank 
projects.
    I would like to suggest that the 21st Century Trust is a 
trust that should be built on principles that can be turned 
into instruments. I would like to explain that the imaginative 
leaps into non-traditional combinations of policies can be a 
part of a matrix for the new Middle East Initiative where we 
make incremental progress, but progress all the same, 
unrelenting progress, on basic security, current security, and 
soft security.
    The GMEI, the Greater Middle East Initiative, suggests to 
me at least, if I understand it correctly, that self-reliance 
is the unifying objective rather than looking to the United 
States as policeman, nurse maid, and benefactor. You have said 
yourself, Senator Lugar, that the United States cannot feed 
every person, lift every person out of poverty, cure every 
disease or stop every conflict.
    I would like to suggest that the Trust should represent the 
new form of social compact to institutionalize the inclusion of 
civil society in project design. In doing so, it will avoid the 
patronage trap. I see it as a vehicle for action. I see it as a 
vehicle of hope for neglected elements of society.
    As for Islamic financial principles, I have called for an 
A-L-M-S. We have enough of the A-R-M-S. An A-L-M-S fund focused 
on the poor for over 20 years, transparent, guaranteed by 
governments, using vehicles such as the Islamic Development 
Bank and other foundations in the region to focus on creating 
stakeholders out of the poor.
    I wonder whether a regional conference of NGOs, ministers 
of development, Middle East opinion makers, can be led up to in 
terms of a process. Regional reform should focus on issues of 
collective security, free trade, free movement of goods, 
people, and capital, but most of all, I think they should focus 
on the importance of vitalizing or revitalizing something that 
is really nonexistent, an ECOSOC, an economic and social 
council, for the region about which we speak.
    We keep hearing about summits in Tunis. Summitry is a 
rarity in our part of the world. Prime Ministers do not meet on 
a quarterly basis to discuss transboundary issues. Europe was 
brought together on one transboundary issue, coal and steel. 
Can we not work together on a transboundary issue of water and 
energy?
    The Alexandria Declaration, with all due respect, focused 
on security, democracy, human rights, and development. But I 
feel that on the security issue, with the forthcoming NATO 
meeting, there should be an emphasis on a framework for 
cooperation with states in the Middle East, and it is for this 
reason that I worked hard and successfully to include in the 
Israel-Jordan peace treaty a reference to CSCME, a Conference 
on Security and Cooperation for the Middle East.
    I would like to thank the Arab Development Report and the 
Unified Arab Economic Report, which is less spoken of, issued 
by the Arab League, the Arab Fund for Economic and Social 
Development, the Arab Monetary Fund, and OAPEC. But over 
association from the United States with the good works of these 
committees, unfortunately, tends to kill with kindness.
    I would like to suggest that the World Development Report 
in its latest form states that development is not just about 
money or about numerical targets, as important as those are. It 
is about people, and the recommendations of these groups are 
only important inasmuch as they can empower people.
    As for the revival of Islamic thought, I have been working 
with President Musharraf in Pakistan, with leaders in Malaysia 
and Turkey and elsewhere to develop an Islamic World Forum, a 
forum of the majority of the same. I hope that such an effort 
can be focused on consensus, pluralism, Arabs and non-Arabs, 
Muslims, Christians, Jews, and for that matter, Sunnis and 
Shi'a. Whatever our differences, the challenges that face us 
are far greater than those perceived differences. If we all 
observed the Ten Commandments, we would not be in this mess in 
the first place.
    As for violent extremism, I feel that with proper 
leadership and proper governance, we can effectively develop a 
great resource in terms of the Muslims of the Diaspora who have 
been brought up in countries like yours and who know the 
institutional rules of the game of building nations.
    The question is not whether the United States and the G-8 
can fix the Middle East, the real question is whether we in the 
Islamic world can redeploy our intellectual resources in 
partnership with the United States and the G-8. And I hope that 
the Greater Middle East 21st Century Trust can be such a 
vehicle.
    Peace is real and durable only when the root causes of 
conflict have been eliminated, Mr. Chairman, and I would like 
to suggest that important initiatives of leadership have been 
taken over the past decades. In a bold breakthrough, President 
Sadat went to Jerusalem. King Hussein concluded the peace 
treaty. The Palestinians partnered in Oslo. President Nixon 
called on China; Reagan on the Soviet Union. Are we inevitably 
on a course of collision with the ``axis of evil''? Or would an 
initiative, possibly a high level American visit to Tehran, be 
justified?
    The British Prime Minister visited Libya. The British 
Foreign Secretary visited Tehran, presumably with prior 
consultation. Can we go the extra mile particularly in the next 
few months to avoid the inevitability of conflict? Can we move 
from politics to statesmanship?
    In terms of detail, I am going back to initiatives. Help us 
to help ourselves.
    I would just like to make a few specific suggestions by 
referring to human resources as defined by the Commission on 
Human Security, that it complement state security, furthers 
human developments, and enhances human rights. It complements 
state security by being people-centered. I hate to think what 
is happening in all the prisons of the world, having worked 
with the International Committee of the Red Cross and human 
rights organizations all my adult life. We need to broaden the 
human development forces beyond growth with equity.
    At the core, we have to respect human rights, and in early 
May, I hosted the Amman Roundtable on Human Security and we 
focused on the Helsinki Citizens Assembly. We suggested MECA, a 
Middle East Citizens Assembly. We worked jointly with the 
Canadians and the Norwegians on the Lysoen Declaration in 1998. 
The Swedish Government's Fundamental Standards of Humanity of 
1992 were set on the basis of international law and human 
rights, as well as cultural and ethnic norms.
    I would like to suggest that producing a shopping list of 
ideas, as with the shopping list we suggested in Copenhagen and 
then in Brussels, will produce the answer, first come, first 
served. Thirty-five billion dollars for 24 countries for a 
decade of development to encourage the will to stay, to stop 
migrants crossing the Mediterranean. And $35 billion was what 
was spent in one day on homeland security to create Fortress 
America.
    Can we talk about crisis avoidance through the use of this 
important vehicle of the 21st Century Trust? Can we promote 
good governance in South Asia? Can we realize the hope of an 
Independent Commission on International Humanitarian Issues 
where we called for a new law of peace?
    I spoke 3 years ago in Mainz, Germany at the First World 
Congress of Middle Eastern Studies. The Congress brings 
together Middle East studies associations from Europe and from 
the Middle East, and from the United States. The second 
Congress will be held in Jordan in 2006. I have suggested that 
this is part of a process, a process where conferences have 
been held, where it is found clearly that Islam and elections 
are not incompatible.
    We have proposed the creation of a parliament of cultures, 
which will open its doors in Turkey, at the School of 
Mediterranean Humanities only a few weeks away. By comparison, 
the Middle East Peace Initiative, MEPI, has spent hundreds of 
millions of dollars but not on interactive conversation 
building.
    I remember addressing the USIA board when James Michener 
was a member of that board. He was talking of the American 
image abroad, which concerns you gentlemen as it concerns me. 
We share the same values only if we interact, and I would like 
to see that citizens conferencing, that Partnership in 
Humanity, as we call the organization that we founded shortly 
after 9/11, be given serious consideration in building a new 
citizens accord, a new citizens compact based on human values 
for developing a shared consciousness.
    You may be amused to know that I am also involved with a 
University of Wisdom Studies. It does not mean that students 
will graduate with a degree in wisdom. I wish it did. But the 
cornerstone is the new Alexandrian Library of the Philosophical 
Research Society comprised of over 25,000 volumes of texts and 
manuscripts of ancient Greek philosophers, ancient Hindu and 
Chinese masters, the traditions of Judeo-Christianity, the 
mysticism of Islam, all the traditions comprising what Huxley 
called the ``perennial philosophy.'' It is time to say to those 
who have privatized religion that religion did not start with 
you.
    To emphasize the continuum, we need to encourage script 
writers, interactive script writing for the media, which is so 
voracious. Embedded scholars rather than or as well as embedded 
journalists.
    The Arab League summit in Tunis reminds me of the Arab 
Economic Summit in 1980 in Amman. We proposed a decade of 
development, a strategy for Arab development. My colleague, the 
former President of Lebanon, Mr. Saleem Al-Huss, presented the 
call for Arab League reform of the 16 Arab League institutions. 
Nothing happened. Unilateralism is the order of the day.
    And I would like to conclude my remarks by emphasizing that 
the Kuwait Symposium, the call for Arab civil society, the 
meaning of the concept of belonging and development are all 
steps in the right direction. But let us start with considering 
in a concept group a matrix and a strategy where incremental 
progress can be achieved.
    I would like to commend to you the initiative of 18 
countries entitled TREC, Trans-Mediterranean Renewable Energy 
Corporation. Water and energy.
    Oil prices ended last week at just below $40 a barrel in 
New York and around $2 a barrel lower than a week earlier amid 
optimism that OPEC would act to bring prices back down to the 
cartel's $22 to $28 range. Let us not leave the future of the 
happiness of the most populous region in the world, South Asia 
and West Asia, to the huge gap, the huge divide between the 
poorest and the cartel.
    I would like to suggest that the crescent of crisis, which 
goes from west Africa all the way down to the south of the Red 
Sea, the Persian Gulf, and right up to the top of the Caspian, 
is a ``crescent of crisis'' because we have not adopted the 
universal declaration on the basic principles of democracy, the 
universality or relativity of democracy, democracy as a process 
or a condition, democracy as methods and modalities or as 
substance and substantive outcomes. Let us take these bold 
steps together. Let us develop a process of implementation and 
compliance of international humanitarian and human rights law.
    The Club of Rome, of which I am the first Asian President, 
presented limits to growth in the 1970s. Today I would suggest 
that there are limits to ignorance, and I would like to commend 
to you the socioeconomic plan of members of the Club of Rome 
and friends, such as Mary Robinson, as an indicator of one way 
to spend fruitfully the investment that we all seek from the 
21st century fund in human dignity, in anthropolitics, in 
politics where people matter.
    Thank you for your kind attention.
    [The prepared statement of His Royal Highness Prince Hassan 
follows:]

Prepared Statement of His Royal Highness Prince El Hassan Bin Talal of 
                    the Hashemite Kingdom of Jordan

    Thank you Mr. Chairman, Senator Biden, and members of this 
distinguished Committee. Thank you for your kind invitation.
    The Administration's Greater Middle East Initiative to be discussed 
at the G8 Summit in Sea Island has already been harshly criticised by 
those who consider that it fails to address the Palestinian-Israeli 
conflict and seeks to impose reform from the outside.
    Allow me to start by saying that such critics miss the point on 
both counts. My part of the world needs as many initiatives for reform 
as can be imagined both from within and from the outside. Reform can 
also accelerate rather than retard peace making in the Middle East.
    Let us remember that over the millennia, our part of the world 
prospered only when it had two-way openness and interaction. The free 
movement of ideas was the key to prosperity: the free movement of 
goods, capital and people followed.
    During the nineties, two ideas or initiatives were launched in our 
region. After the 1991 Gulf War, the Madrid Middle East Peace Process 
was sponsored by the United States and the Russian Federation. It had 
bilateral and multilateral tracks with working groups on refugees, 
water, environment, economic cooperation and regional security and arms 
control. In 1994, the European Union launched the Barcelona Process for 
Euro-Mediterranean Partnership. The Madrid Process is now at a 
standstill. But Barcelona is still ongoing and has been conceptually 
expanded by the new neighbourhood initiative.
    The Palestinian-Israeli conflict and Iraq are of course key issues 
for the people of the Middle East. Although interrelated, it would be 
unwise and impractical to assume that the Palestinian-Israeli issue, 
Iraq, and overarching regional reform should be tackled in any 
chronological order. Resolution of any one issue should not be 
conditional upon any other. These issues can and must be addressed 
simultaneously. Progress on any one of these fronts will facilitate 
resolution of the others. The inverse is also true. Failure to address 
any one of these issues diminishes the prospects for resolving all of 
them. Senator Lugar is correct to assert in his proposal that ``if we 
help to produce a resolution of the Israeli-Palestinian conflict, fresh 
political winds would sweep through the region and new possibilities 
for political reform would flourish.'' A stable, secure and democratic 
sovereign Iraq would have a similar effect. Each issue is an integral 
part of any credible initiative to promote permanent reform in the 
Middle East.
    Today I speak before you as a person who for more than three 
decades has worked to foster reform through civil society. As a 
``Prince'' this may sound contradictory. But this life-long journey 
started in 1970 when I founded the Scientific Society to promote 
technology transfer and education. The long list of other NGOs that I 
sponsored includes the Arab Thought Forum, the Institute for InterFaith 
Studies, the Hashemite Educational Society, El Hassan Youth Award. 
Currently, I am promoting the concept of an Islamic World Forum.
    I am referring to all this not for immodest self-acclaim, but to 
say what a lonely task it has been. During these years, I often 
referred to ``toothless declarations'' and the ``powerless lobby for 
the powerless.'' That is why I welcome any conversation on reform in 
the Middle East whether from within or from without.
    Let me now move from the general to the specific.
    The Achilles' heel of reform efforts and attempts to nurture civil 
society is the thin, and often invisible, dividing line between 
patronage and partnership. Society itself, the ultimate beneficiary of 
reform, can easily be tempted by the ``patronage trap.'' Short-term 
material gains can be more attractive than long-term institution 
building.
    The key question is how to change attitudes and move from 
principles to instruments and mechanisms--to move from concepts to 
defining objectives and processes for implementation. The basic dilemma 
or contradiction is that society itself is both a target and an 
instrument of policy.
    In the hard security field, governmental institutions in our part 
of the world are well developed. Perhaps too well developed in the 
military and intelligence field. Cooperation in the soft security field 
means building new partnerships with civil society and businesses. But, 
as we know, civil society institutions are only embryonic in our 
region. And the process should not end up unwittingly nurturing 
``sham'' civil society institutions, like the oxymorons created by 
communist governments during the Cold War.
    That is why I consider that the proposal for the Greater Middle 
East 21st Century Trust is a key component for the success of 
initiatives to promote reform in the Middle East. Let me explain why.
    As we struggle to keep up with complex phenomena, the world has 
slipped during the last decade into a static approach in the face of 
mobile cultural, social, political and economic realities. The world 
requires imaginative leaps into non-traditional combinations of 
policies.
    The concept of a ``Greater Middle East 21st Century Trust'' is one 
such imaginative leap. It is both timely and essential to achieve a 
better future in our region. It should promote the list of ideas of 
GMEI and at the same time promote other complementary initiatives from 
within the region. Self reliance is the ultimate objective, rather than 
looking to the United States as policeman, nurse maid and benefactor, 
to be blamed selectively when problems arise.
    I totally agree with what Senator Lugar has recently said, and I 
quote:

          The United States cannot feed every person, lift every person 
        out of poverty, cure every disease, or stop every conflict. But 
        our power and status have conferred upon us a tremendous 
        responsibility to humanity. In an era afflicted with terrorism, 
        the world will not be secure and just and prosperous unless the 
        United States and talented individuals devote themselves to 
        international leadership.
          To win the war against terrorism, the United States must 
        assign U.S. economic and diplomatic capabilities the same 
        strategic priority that we assign to military capabilities. 
        There are no shortcuts to victory. We must commit ourselves to 
        the slow, painstaking work of foreign policy day by day and 
        year by year.

    The Trust should represent a new form of social compact to 
institutionalise the inclusion of civil society in project design. In 
doing so, it will avoid the ``patronage trap.'' In addition, it should 
have benchmarks to assess progress, and performance-based evaluations. 
A third key element is transparency and openness. Senator Lugar's 
vision includes all these concepts in the Trust.
    In the words of Senator Lugar, it is a vehicle for action rather 
than a set of programmes. I would add that it should stimulate the 
evolution of genuine civil society in our region because it goes beyond 
the primary development paradigm of growth, infrastructure and health. 
This is the area or rather the vacuum that many of the extremist 
organisations have exploited to engage the neglected elements of 
societies. The Trust should aim to deal with those neglected elements 
as partners. As a grant- and investment-making body that could conform 
to Islamic financial principles, the Trust can be a culturally 
sensitive vehicle.
    The Lugar Trust could begin with a regional conference of NGOs, 
Ministers of Development, Middle East opinion-makers and academics to 
map out a mechanism for funding meaningful development projects with 
broad impact. Working groups on education, infrastructure, free speech, 
human rights, entrepreneurship, government and fiscal reforms, 
technology, and poverty eradication should convene to weigh and 
recommend specific projects.
    Meanwhile, regional reform should focus on issues of collective 
security, free trade, and free movement of goods, people and capital.
    Others should be brought into the mix. The European Union and the 
OSCE could provide high-level capacity-building support to Middle East 
regional forums, in particular to explore regional declarations, such 
as the Alexandria Declaration, on security, democracy, human rights and 
development. NATO should develop its framework of cooperation with 
states in the Middle East, especially to prepare the ground for a 
system of regional security cooperation based on transparency, 
verification, and arms control. I have called for many years for a 
regional code of conduct. In fact the Treaty of Peace between Jordan 
and Israel calls for a CSCME (a Conference on Security and Cooperation 
in the Middle East).
    It has become fashionable to talk about the lack of progress in the 
Middle East and the Islamic world. But, the Arab Development Report, 
and the Unified Arab Economic Report, known as the quadpartite report 
(issued by the Arab League, The Arab Fund for Economic and Social 
Development, the Arab Monetary Fund and OAPEC), contain many positive 
indicators. The challenge is to build on the progress realised so far 
and achieve a transformation in the economies of the region.
    In the latest World Development Report (WDR), The World Bank 
considers that for the first time in human history it is possible to 
eradicate global poverty in our lifetime. It states that development is 
not just about money or even about numerical targets, as important as 
those are. It is about people. The WDR focuses on basic services, 
particularly health, education, water and sanitation, seeking ways of 
making them work for poor people. The objective should be to invest in 
and to empower people, and improve the climate for investment.
    The revival of Muslim intellectual thought should be a priority in 
the Greater Middle East. A momentum has to be built for a Muslim 
movement for peace and a new humanitarian order. This is the aim of the 
Islamic World Forum (IWF) which I hope to launch. A wakeup call is 
urgently needed to lead to a number of programmes aimed at Muslim 
intellectual proactivism.
    This effort will provide a platform for a centrist movement to 
bridge the gaps between non-Arab and Arab Muslims, as well as between 
different Islamic groups including Sunnis and Shiites.
    With proper leadership this effort can reveal that violent 
extremists in our region are only Islamic in name. They are in fact as 
Islamic as the GDR (German Democratic Republic) was democratic.
    For the last fifty years the centre of gravity of the Western 
Alliance has been Europe, but its future is moving to the East and 
South. The Alliance has to redeploy conceptually and materially to 
Central and South Asia, the Middle East and Africa.
    The question is not whether the United States and the G8 can 
``fix'' the Middle East. The real question is whether we in the Islamic 
world can redeploy our intellectual resources in partnership with the 
United States and the G8 so that the front lines are transformed into a 
meeting ground for security, cooperation and prosperity. The GME 21st 
Century Trust is a vehicle that can help us achieve that 
transformation.
    Peace is real and durable only when the root causes of conflict 
have been eliminated. It is important to eradicate poverty to limit 
violence. The Trust answers the call of those working for reform in the 
region and will make their task less lonely and more productive.
    There is a need for partners that can network. For four decades I 
have worked for concepts. I have come here to put those concepts into 
instruments. Yes, I believe in the power of ideas, and I have come here 
to work with you in this partnership to try to put this concept into a 
strategy. Ideas from within and beyond the region should be tabulated 
within a matrix that develops a strategy based on a vision. When one 
faces a closed door--one must open another.
    Whereas the G8 is presenting a list of ideas, I would hope that the 
partnership concept of Senator Lugar would hone these ideas, strategise 
them and evolve the instruments for implementation. To succeed we must 
be positive on how to contribute to the partnership. We need a coherent 
and dynamic civil society; a network of think tanks. Hence the 
importance of ideas such as the Council on Foreign Relations' suggested 
Tri-Consortium. This is what I bring with me to the table. Sea Island 
is about governmental cooperation at the highest level. People to 
people cooperation, citizens' conferencing can turn it to partnership.
    I stand before you as an Arab who believes in the power of ideas. 
Arab intellectuals need to talk to governments about government deals. 
In my former position, I worked for 34 years in pioneering a Jordanian 
centrist policy alongside my late brother, King Hussein.
    What we seek is cosmopolitanism and a broader based 
interdisciplinary strategy--not a policy of compulsion. I regard 
partnership as complementary to official responses. Complementary of 
the broader partnership--economic, social, cultural. Common humanity is 
the basis for promoting soft security.
    I regard Europe as a possible role model given historic geographic 
proximity with the Arab world and in terms of pluralism.
    We have to gently step up to the template of compliance with 
international norms because we are a region without a name--a noname 
region. West Asia and South Asia combined have a greater population 
than China.
    Robert McNamara, who I knew as Secretary of Defence as well as 
President of the World Bank, contributed to the architecture for peace. 
My concern is for how wars end. In that context, I am grateful to 
members of the panel of the Middle East Commission of the 1970s--David 
Rockefeller, Jacob Javits as well as Robert McNamara.
    Help us to help ourselves. Help us to come to terms with ourselves 
and to help promote the views that we share and end the stereotyping of 
each other. I call for a rule of law, not of power.
    The time has come to ask for a bold breakthrough. Sadat went to 
Jerusalem; King Hussein concluded the Peace Treaty. The Palestinians 
partnered in Oslo. Nixon called on China, Reagan on the Soviet Union. 
The British Prime Minister visited Libya. Can we go the extra mile to 
avoid the inevitability of conflict? Can we move from politics to 
statesmanship?
    What would you think of convening a meeting with the sherpas of the 
G8 for which I have been calling for years?
    A number of concepts come to mind in considering what mechanisms 
exist or should be established to help develop new partnerships with 
governments, businesses and civil society to promote political, 
economic and social reform in our region. First come first served will 
not work (e.g. Casablanca). A matrix of regional and global initiatives 
is an important tool for deciding priorities. ``The Greater Middle East 
21st Century Trust'' can partner and network extensively with a number 
of on-going efforts, that include the following examples:

                          (A) HUMAN RESOURCES

    Human security has been defined by the Commission on Human Security 
that it complements state security, furthers human development and 
enhances human rights. It complements state security by being people-
centred. It broadens the human development forces beyond ``growth with 
equity.'' At the core is respecting human rights and promoting 
democratic principles. Early May, I hosted the Amman Roundtable on 
Human Security in the Middle East which considered organising a MECA 
(Middle East Citizens' Assembly) in Amman. We worked jointly with the 
Canadians and Norwegians on the Lysoen Declaration in 1998. The Swedish 
Government's ``Fundamental Standards of Humanity'' of 1992 were set on 
the basis of international law and human rights as well as cultural and 
ethical norms testifying to the growing awareness of the need for 
global action against flagrant violations.
    Copenhagen produced a shopping list of ideas for the economic 
basket of the Middle East multilateral peace track. When we met in 
Casablanca for the MENA economic summit, Shimon Peres and I had a 
vision for a new Middle East, a vision based on earlier studies which 
included a zone of human, economic and natural resources.
    ``Governance in South Asia'' is an ongoing study of the roots of 
misgovernance in that region and how to move towards a common minimum 
agenda for good governance that includes recognising the sovereignty of 
the citizen, social development and common culture.
    Through co-chairing the Independent Commission on International 
Humanitarian Issues in the early 1980s, we looked at the challenge, the 
victims and the hope. We advised the UN on the need for a New 
International Humanitarian Order. We called for a new law of peace--the 
powerless lobby for the powerless.
    WOCMES. I spoke three years ago in Mainz, Germany at the First 
World Congress for Middle Eastern Studies. This Congress brought 
together Middle East Studies associations from Europe and from the 
Middle East (all countries). The second of these Congresses will be 
held in Jordan in 2006.
    At the end of June, together with colleagues from Turkey, a 
Parliament of Cultures will be inaugurated to promote understanding 
among different cultures in the world and to enhance dialogue between 
their thinkers and intellectuals. The first project out of the 
Parliament of Cultures, will, we hope be a School of Mediterranean 
Humanities to bridge the intellectual and cultural gap between Western 
and Eastern Europe and the Mediterranean, through a new curriculum of 
terra media studies.
    Partners in Humanity is an idea preceding 9/11. This calls for a 
humanitarian outreach programme that would serve to improve 
understanding, build positive relationships and promote dialogue 
between the Muslim world and the U.S. We met in Boston and New York and 
last year we held our first roundtable in Amman.
    A Middle East Citizens' Assembly. Similar to the Helsinki Citizens 
Assembly that arose out of the links of the 1980s between the Western 
peace movement and East European opposition groups. The aim was 
``detente from below.'' The Helsinki Assembly has been effective in 
transmitting ideas and proposals to governments and to institutions.
    Human Values for Developing a Shared Consciousness. Extending a 
hand over the boundary. It is not the pipelines that matter but the 
people living next to the pipelines. e.g. Iraq post-war psychological 
reconstruction and development--to empower Iraqis to decide their own 
future. A Truth and Reconciliation Commission is one instrument.
    University of Wisdom Studies. This is being established in the 
belief that humanity will only successfully deal with the challenges of 
the future if it is firmly rooted in the wisdom of the past. The 
cornerstone is the ``new Alexandrian Library'' of the Philosophical 
Research Society, comprised of over 25,000 volumes of texts and 
manuscripts of ancient Greek philosophers, ancient Hindu and Chinese 
masters, the esoteric traditions of Judo-Christianity, and the 
mysticism of Islam--all the traditions comprising what Huxley called 
the ``perennial philosophy.''
    Script Writers. Interactive script writing for the media. Embedded 
scholars rather than (or as well as) embedded journalists.

                          (B) THE ARAB LEAGUE

    The Arab League Summit in Tunis. The attitude is that you cannot 
address structural reform for the Middle East unless you address 
parallel political crises. These principles were conveyed to the United 
States and other partners. Tunis pointed out certain fears. The 
Alexandria Declaration certain opportunities. This is what I see being 
brought to the table.
    The economic documents that were presented at the 1980 Arab 
Economic Summit, included some very important approaches, which are 
still valid such as the call to remove barriers to facilitate the free 
movement of goods, capital and labour.
    However Arab divisions, especially the estrangement between Arab 
countries and Egypt after its signing the Camp David Accords, had led 
to a state of disarray in Arab structures, to moving the Arab League 
headquarters from Cairo to Tunisia, and to the disruption of several 
technical initiatives at the level of Arab institutions. Accordingly, 
Lebanese Prime Minister, Mr. Saleem Al-Huss, was commissioned, at the 
end of the 1980s, to head a working team to examine the condition of 
the Arab League. These concepts can be revisited.
    Unfortunately, though, the existing Arab order has fallen short of 
appropriately employing these resources to interconnect the 
infrastructures of Arab countries or to come up with a shared vision. 
Perhaps ``what-if scenarios'' would help us envision the future, away 
from ``short-termism'' that has bridled us.
    Are we addressing unilateralism or are we addressing 
multilateralism. If we want to talk of region, then it is a 
multilateral concept. Soft security, or what Professor Joseph Nye calls 
soft power, is the key.
    If we talk of region, we must talk of South Asia and West Asia. Not 
only to talk about difficulties but about solutions. In terms of 
regional groupings in the Senate Foreign Relations Committee, you have 
got it right as our part of the world is covered by the Subcommittee on 
Near Eastern and South Asian Affairs.

                         (C) ARAB CIVIL SOCIETY

    The Arab Thought Forum. Founded twenty-three years ago to promote 
exchange of ideas in the Arab world that include: reform of the Arab 
League; establishment of an Arab court of justice; an Arab parliament 
and an Arab security council. Its activities include:

          a. Sana'a Symposium on ``Arab Conflict Resolution through 
        Peaceful Means'' was held in 1999.

          b. The Kuwait Symposium ``Prospects for Arab Cooperation 
        between Regionalism and Internationalism''--proceedings 
        published in 2002.

          c. Next symposium will be on ``Centrism'' (or ``enlightened 
        moderation,'' as President Musharraf calls it).

    The meaning of the concept of ``Belonging and Development'' which 
has been upheld by the Arab Thought Forum since its foundation. The 
1980 Economic Summit held in Amman was the first Arab summit to be 
totally devoted to Arab development. In-depth studies were prepared and 
discussed, such as ``The Arab Development Strategy'' and ``The Decade 
of Arab Development.'' Accordingly, that summit constituted a bridge 
between thought and policies, and between intellectuals and decision-
makers. Now action is needed for the phoenix to rise from the ashes.
    The Al Ahram Centre for Strategic Studies was established a few 
years ago and boasts a number of fine researchers.

                               (D) ENERGY

    TREC: Trans-Mediterranean Renewable Energy Corporation, for 
development, climate stabilisation and good neighbourhood. The 
objective is to help transform the Mediterranean from a region of 
various divides and conflicts into a region of harmonised socio-
economic development, cooperation and good neighbourhood.
    From Larry Elliott's article, The Guardian Monday 31 May, 2004--
``The attack [Saudi Arabia] has some shock value for oil prices, but 
things may calm down again,'' said Peter Gignoux, senior oil adviser at 
the New York-based GDP Associates. ``This was a terrible act of 
terrorism, but it hasn't had any impact on Saudi oil production or 
exports.'' The effects of dearer crude are already being felt in the 
west, with inflation in the 12-nation eurozone rising from 2% to 2.5% 
in May, prices of unleaded oil in the UK moving above 90p a litre and 
US motorists paying a record $2 a gallon for their fuel.
    Oil prices ended last week at just below $40 a barrel in New York, 
around $2 a barrel lower than a week earlier amid optimism that OPEC 
would act to bring prices back down to the cartel's $22-$28 range.
    I wonder how can such thought be implemented in a wise, prudent and 
enlightened way? How can it spur people's conscience? Perhaps the first 
step consists in defining the nature of issues and problems that form a 
common basis for Arab countries in every geographic region of the 
greater Arab Nation: the Arabian Peninsula, the Arab Mashreq and 
Maghreb, and the Nile Valley. Undoubtedly, the cluster consisting of 
the triad: (water--energy--human environment) furnishes the common 
ground, both subregionally and inter-regionally.

                             (E) GOVERNANCE

    Towards a Universal Declaration on the Basic Principles of 
Democracy: From Principles to Realisation: Professor Cherif Bassiouni 
is working on the three paradigms of (i) the universality or relativity 
of democracy; (ii) democracy as a process or a condition; and (iii) 
democracy as methods and modalities or as substance and substantive 
outcomes.
    Project Proposal relating to Problems of Implementation and 
Compliance in the field of International Humanitarian and Human Rights 
Law. This was presented to the UN in June 2000 by the UN Office for 
Coordination of Humanitarian Affairs and the Independent Bureau for 
Humanitarian Issues.

                              (F) ECONOMY

    A Global Marshall Plan for a world-wide Eco-Social Market Economy: 
This Plan represents--

   First, a solid foundation for a new, sustainable, global 
        increase in economic prosperity.

   Second, an especially intelligent and efficient way towards 
        global sustainable development.

    The Chairman. Well, thank you very much, Prince Hassan, for 
a very comprehensive statement drawn from your extraordinary 
experience over the years. As a humanitarian, you have been 
involved in all the issues you have discussed today, and many 
more.
    Let me just say as preface for my question--and we will 
have another 7-minute round for questions--that prior to 9/11, 
many observers of American foreign policy, both here and 
abroad, have noted, if not quite a total lack of interest in 
the area we are discussing today, certainly less diplomacy and 
activity. After 9/11, things stepped up very substantially. We 
dropped sanctions on many countries that had inhibited our 
trade and likewise, we focused much more on our diplomacy. We 
became involved because we were at war. We were threatened.
    Now, essentially in fairness to the administration and the 
proposal we have heard today from Secretary Larson, this is an 
attempt, at least by American statesmen, to try to say that we 
ought to be much more interested, a great deal more interested. 
As a matter of fact, American taxpayer funds, organizational 
elements of the State Department and our NGOs ought to get busy 
and ought to be involved in trying to address the root causes 
and fundamental problems, as you have talked about.
    The dilemma of all this, of course, as you mentioned, is 
the patronage trap. In other words, the enthusiasm--and it is 
genuine and it is idealistic--strikes many in the area in a 
very different way. So our dilemma or our challenge today in 
this dialog is, how do we eliminate or get out of the trap, and 
back on to a plane of genuine idealism and commitment? You have 
illustrated a good number of attempts that have been made by 
international humanitarian individuals and groups over the 
years. Some of these reports and their implementation are still 
on-going. Others have been, unfortunately, forgotten, and ought 
to be revived. You have offered sort of a check-off list of 
causes and ideas that ought to be thought of by people who are 
serious about this.
    The immediate political problem that I think that we have 
and that I ask your attention to turn to is, there are a good 
number of people in our country who are not extremely 
enthusiastic about foreign assistance at all. Each year this 
committee attempts to support budget requests by our State 
Department and by others. That was the case this year. Just to 
take a topical situation, the State Department requests by 
Secretary Powell were 8 percent up, not just for the Department 
but for what could be called broadly foreign assistance, 
international involvement. And that was as many of us would 
have requested.
    Now, almost immediately, the Budget Committee of the Senate 
chopped $1 billion just arbitrarily out of this, really without 
great discussion of the merits of any of this. Fortunately, 
Senators on the floor of the Senate worked and restored the 
billion dollars, but not for long. Our colleagues in the House 
of Representatives, as I understand their Budget Committee 
deliberations, promptly chopped $4.5 billion out of the same 
request.
    Whether we ever come to a budget in the Senate or the House 
or the Congress or not--and that is a problem for us just in a 
parliamentary way now--is illustrative of the dilemma, even as 
we discuss what the State Department might do, or what Mr. 
Larson might do as he goes to see the G-8. We face a practical 
political problem of simply implementing our own idealism.
    Worse still, if there is a sense of a patronage trap about 
all this, that is even worse, because many Americans would say, 
well, this is just simply impossible. Not only are we being 
asked to contribute, but those to whom we are contributing are 
unhappy, ungrateful, and may even indicate their dislike for 
us.
    Now, some of us would argue there are reasons historically, 
long before we had this debate today, why this might be the 
case. Even if it is the case, even if the Pew polls and others 
show huge numbers of people in these countries saying they 
dislike America or they dislike the American Government, even 
if they like only some Americans or what have you, this is a 
situation that is difficult.
    Now, I preface all this by saying you come here today as a 
person of good will, a friend not only of our country but of 
many countries and of all the people whom you are talking 
about. How do you propose, just as a mechanism, not just a 
public diplomacy for Americans, quite apart from public 
diplomacy; for those in the Middle East to supply. How should 
we go about this? How might we illustrate why the security of 
the world, peace, and some mitigation of terrorism are needed? 
It all depends upon getting it right, trying to implement 
things that people will know about, and in which people will 
have confidence that there is some degree of good will in the 
world, not just in this country, but also in the G-8, and in 
other countries that might come together.
    Quite frankly, the reason that I offered this idea of this 
Trust fund was to try to escape the patronage trap, to say that 
essentially countries or people within countries who had ideas 
might come forward and present them as their ideas, and then we 
might applaud those ideas. I still think that probably is a 
better course than attempting to do it the old-fashioned way as 
we are inclined to do.
    What appeal can you make, say, to Americans, leaving aside 
people in the Middle East, as to why we ought to be doing this? 
And in what manner can we be most successful even if we have a 
generous spirit?
    Prince Hassan. May I suggest, Senator, that 15 million 
people inhabiting Israel, Palestine, and Jordan living next 
door to 25 million Iraqis, 40 million people, could provide the 
nucleus for human and natural resources needed for a renewed 
democratic and prosperous Middle East?
    I would like to suggest implicitly and explicitly that 
attending to the two political crises is essential at this 
time. In terms of Iraq, for example, it is obviously very 
important that neighboring countries to Iraq should not 
interfere in Iraqi affairs or, for that matter, in Lebanese or 
Syrian affairs. I think that the problem, with all due respect, 
is that a super power should not be playing Byzantine politics.
    We should be all stepping up to the same template of a 
regional concept for the future of the region on the basis of 
an international conference for the region. Where and how this 
can be convened has yet to be decided or thought of, but 
unfortunately, the international conferences that are being 
held are either NATO conferences with a view to sending more 
troops into the region or, as you rightly said to Secretary 
Larson, if the G-8 is to be part of a process, what is the 
mechanism that is going to ensure that? So where is the 
partnership element?
    I would like to emphasize that democracy is not the only 
issue here. Pluralism is as well. So the reference to the Arabs 
being a minority in the concept of the Greater Middle East does 
not worry me at all if the Greater Middle East is also south 
Asia and west Asia. What worries me is that APEC, the Asia 
Pacific Economic Corporation, goes all the way to the borders 
of Turkey, and we, bristling with nuclear weapons and the 
possibility of dirty bombs, are not being pacified, let alone 
stabilized. And in that context, I think that sooner rather 
than later the sense of drift has to stop. There has to be a 
focus. Now, I do not know where that discussion group can be 
formed. Maybe the meeting of the shepherds of the G-8 is one 
way to do it.
    But I do hope that the goal for exit strategies can be 
given more serious consideration. Obviously, the term is used 
by Prime Minister Blair with reference to Iraq by 2005. Today I 
do not know in terms of the exit strategy from the occupied 
territories how or what base it is going to move from, if at 
all.
    I think there is a huge responsibility on the host and 
donor countries like my own to address the issue of 
integration, not necessarily the issue of assimilation. The 
late Prime Minister Rabin would say no to the right of return, 
and I would say yes to the right of return. You look good with 
your people and we look good with ours, but let us think of 
something creative in the future on the realistic assumption 
that those who would want to return may not be as large as the 
figures that we have spoken about in the past.
    But today none of these crucial issues are being discussed. 
That is why I feel that a conference that does not address the 
key political issues is the reason for the absence of many key 
leaders from the region.
    The Chairman. Without oversimplifying, then you, would put 
just for sake of argument, a line around Iraq, around Palestine 
and Israel. That would include Jordan in that group. In other 
words, you would concentrate your effort on about 40 million 
people, out of all the mass that we are talking about, because 
of the two large political questions that arise there, as well 
as humanitarian questions. You would suggest a conference of 
people of that area or of others who maybe want to be helpful. 
Perhaps you would define the issue more narrowly than the 
Greater Middle East, or whatever we are looking at.
    Prince Hassan. Exactly.
    The Chairman. You made the point that probably there has to 
be some degree of peace, as well as a solution to these two 
major problems, for things to work satisfactorily, in terms of 
the public relations aspects and the other areas.
    Prince Hassan. Our region is bereft, Senator, of any crisis 
avoidance center or crisis avoidance capability. So crisis 
avoidance, crisis management, which is almost an oxymoron, a 
contradiction in terms, is basically through unilateral 
policies. But we have to involve everyone, and this is why I 
suggested that a high level American contact with Iran, for 
example, if properly finessed, might serve notice not only on 
Iran but on the region as a whole as to our seriousness in 
building peace on the basis of mutual respect.
    The Chairman. A very important suggestion, which I think 
our members noted.
    Senator Biden.
    Senator Biden. Thank you very much, Mr. Chairman.
    Your Royal Highness, I found your testimony fascinating and 
enlightening. I would like to ask a couple really just very, 
very basic questions.
    You are very much accustomed to leading and attending 
meetings at the highest level with, as you would say, the 
elites of the world and the region, as well as your efforts 
with the numerous NGOs you have been involved with reaching out 
to, what we might say in this country, average people in the 
region.
    The conundrum that many Americans look at is how to get the 
kind of help--and that is a broad, generalized term from 
economic assistance to education reform, access to intellectual 
creativity and activity--to ``average'' people--``town 
meeting'' I think you referred to and why could you not in the 
Palestinian region have a town meeting. There is in most places 
in the Middle East from your country to Saudi Arabia to the 
Gulf States to Egypt, a requirement to essentially have to go 
through the governing body, and the governing body is presumed, 
even in your country, which is the most open, not to be 
welcoming to this kind of fora. Just the ability to engage in 
an open discussion with leading Arab intellectuals in open is 
not something that would be very welcome in Riyadh, might even 
have some difficulty in Cairo. Other parts of the Arab world 
may have some difficulty.
    So the question I have, as just a plain, old politician 
doing this job for 32 years, is how do we embolden and 
enlighten or provide the accommodation for enlightenment for 
the populace of the Arab world--I am going to focus on the Arab 
world, not the whole Islamic world for a moment--without 
greater cooperation or initiative coming from the governments 
in the region?
    Or put another way, if I can speak to Iraq, I am operating 
on the premise that a significant majority of Iraqis want a 
representative government, that they want something other than 
an Islamic state modeled on Iran and a strongman modeled on 
Saddam. They want something other than that that is more 
representative. If I am wrong about that, I might add, I think 
all of this is useless.
    How do we get the--I realize ``moderate'' is not the 
appropriate adjective, but how do we get the--I do not even 
know the term--``average''? How do we get those people who are 
making a dollar a day in your country and $3 a day in a 
position where they are able to sort of raise their head, where 
they are able to express their interests, their desires? What 
forum is there for that?
    Prince Hassan. I have had the privilege of knowing Vaclav 
Havel, Bonislav Geramek, Adam Michnik, all people from eastern 
European countries that had strong policing methods, and yet 
the chapters of the Helsinki Citizens Assembly, to address your 
first question, proliferate in eastern Europe. You have 
chapters in Turkey, Armenia, and Azerbaijan. And I say to 
people in our region, however the intensity of hatred, it is 
not unique. Turks and Armenians and Azeris are talking to each 
other.
    So I do feel that in terms of this paralysis of the ability 
to talk--I have been to Indonesia as moderator of the World 
Conference for Religions and Peace, and to the Balkans. We say 
to the religious community leaders--and in the case of Iraq, 
they have met in Amman in May of last year, in Baghdad in 
August, in March again in Amman, and last week actually in the 
United Kingdom--you are the servants of the community, and we 
are servants of the servants. How can we help you talk? And you 
almost get the answer: talk? What is that?
    Senator Biden. Let me interrupt you there, if I may, Your 
Highness. Helsinki was a product of a negotiation, a long, 
drawn-out negotiation, which we were a part of, as you 
observed, that had heads of state and governments signing on. 
That is a very different circumstance than what we are talking 
about in the Middle East. That would require the heads of state 
of those various governments--you had Azerbaijan, you had 
everyone from Poland to Czechoslovakia, all signing on through 
a negotiation involving two super powers. And it produced, I 
think, some stunningly positive benefits. I would argue it 
hastened the demise of the Wall.
    What is the forum though? How do you do that in your part 
of the world?
    Prince Hassan. I come to heads of state, and of course, I 
served alongside King Hussein for 34 years, and I think Jordan 
has been a pioneering country in terms of reform. Of course, my 
nephew, King Abdullah has been referred to on more than one 
occasion as a genuine reformer, and I would second this 
concept.
    But I think that the spectrum of reform has to be enlarged 
because heads of state today and governments are on the 
defensive. The bin Ladens of this world sadly are on the 
offensive. I think that we can only resolve this problem by a 
double compact, the first between the people themselves and the 
second between the people and their rulers. I mean turning the 
power pyramid upside down, beginning to devolve power so that 
legitimate village democracy can be discussed at the village 
and rural level.
    Senator Biden. I agree with that, but I become conflicted 
as to what our role is, the role of the United States in that 
effort. In other words, I have often stated that, with possible 
exception of your nephew, every world leader with whom I meet 
importunes me and the committee, because we have that 
opportunity. It is our function. We are viewed as the totality 
of their problem and the sole source of their solutions. I 
realize at least it is beyond my capacity and I think beyond my 
country's capacity, not that we are not the problem of many and 
not that we are not the solution for some.
    But what you have just described, it seems to me, I am not 
sure how the United States or the G-8, for that matter, 
promotes exactly what you just said, turning that pyramid 
upside down so that you actually have village meetings where 
people can actually have an impact on what happens in their 
country.
    What we seem to be debating here in this country among the 
intellectuals, left, right and center, in America ranges from 
we can go in and ``impose'' democracy which will in fact be 
welcomed by the people--we are seeing an example of that right 
now in Iraq in part--all the way to others concluding that we 
cannot do much of anything other than be responsive only when 
there is an indigenous movement.
    For example, the comments made at the Arab League's summit 
in Tunisia. There were several no-shows and a dramatic Qaddafi 
early exit which is not surprising. The League did issue this 
Declaration of Reform, but the Arab press did not seem 
particularly impressed with the document, using terms like 
``ridiculous,'' ``a failure,'' ``empty rhetoric,'' ``instantly 
forgettable.'' The Lebanon Daily Star stated in an editorial, 
``the only good news is that the word `reform' is now a matter 
of general concern across the Middle East.'' The Economist 
retorted that ``this expression of freedom to savage the kinds 
of Presidents for life who run the region was itself a better 
omen for reform than the verbiage of the communiques.''
    I will end with this. My dilemma is your point about 
partnership and paternalism. Almost anything we do--and I do 
not mean to imply that somehow we have the answers, nor that we 
have the capacity. But it seems to me that our greatest 
difficulty here, assuming that the better angels prevail here 
in the Congress in terms of moneys for foreign assistance and 
the like and assuming, as I hope will occur, that Senator 
Lugar's initiative becomes the law, is passed here--I have such 
difficulty trying to determine at what part we can be a 
positive impact other than refraining from doing things that 
are negative, which would be a big help. But how we are going 
to be able to be in a position that we can generate some of the 
kind of change you suggested.
    I was very impressed with your point--I happen to agree 
with it. Maybe that is why I was impressed with it--that there 
is no chronological order to tackling the problems that you 
list. To use a slang expression in this country, we ought to be 
able to walk and chew gum at the same time. We ought to be able 
to do more than one thing or work on more than one thing.
    But I am in a quandary as to how to work out this 
distinction between paternalism and partnership and what 
prospect is there for there to be more spontaneous, internal 
calls for change within the Arab world and short of your 
country, how welcoming are those ideas and what is the forum 
for them internally.
    Assume the United States were lifted up and taken to Mars 
and dropped on Mars. There is no United States. The whole North 
American Continent is gone. It is sitting up on Mars. The ocean 
extends from Japan to England. What do you all do?
    Prince Hassan. Well, first, I would like to say that the 
values of the United States, not least of all ``We, the 
people,'' are very much my values and the values of many, many 
people who have come over here to make a better life, millions 
of them from our part of the world.
    The quandary for us is that if you hold elections, then the 
Islamists will win. So the theocons will win. My point of view 
is that you hold elections and you live with the results until 
that process is repeated and they possibly leave office. But to 
wait until economic conditions are ideal or the political winds 
are favorable and not hold those elections belies the sincerity 
of the democratic initiative that we are talking about.
    Senator Biden. I agree with you completely.
    Well, I thank you. I see our colleague, Senator Brownback, 
is here and I will yield to him.
    The Chairman. Thank you very much, Senator Biden.
    Senator Brownback, do you have a question for Prince 
Hassan?
    Senator Brownback. If I could, Mr. Chairman. Thank you for 
holding the hearing.
    I apologize for not getting here for your direct testimony. 
But I wanted to catch on a particular issue. I was actually 
encouraged by the recent meetings of the Arab League and the 
discussions that are taking place. These are difficult things 
to talk about and difficult topics to address.
    I am curious. In your country, if elections were held 
within the next year or so, what would be the results of those 
elections, would you speculate?
    Prince Hassan. Elections were held only last year and we 
have a new parliament in session at the present time. But I 
think again, if we are going to talk about issues, there was a 
phenomenon--and I do not want to sound critical of the 
mechanisms of Israel, which is always held up in democratic 
terms as being the only democracy in the region, but for a 
Prime Minister to come here, to commit himself to withdrawal 
and then to poll his own party rather than polling the Israeli 
people came as quite a shock to people in our part of the 
world.
    So today, unfortunately, national elections are not going 
to be held on domestic issues alone. Today, as His Majesty King 
Abdullah said I think before this committee, we are caught 
between a rock and a hard place. I think that people have 
legitimate concerns about Finlandized Jordan. We have always 
looked at the Helsinki process because Finland had troublesome 
neighbors. I once said to Shimon Peres--he said, we have 
difficulty with our neighbors. I said, you think you have a 
problem. We have difficulty with our friends.
    So I would just like to point out that we can hold 
elections and parliamentary participation in public life is 
strong and vibrant. But the issue of regional questions that we 
are asking around this table has to be addressed by leadership, 
convincing leadership, and this is why I would hope that in the 
coming period, we can move from politics to policies. This is 
why I am setting up a Center for Policy Dialog in Jordan 
because I have no ax to grind, and I think that objectivity of 
rediscovering the public realm is so important for all of us.
    Senator Brownback. Do you anticipate within the next 5 to 
10 years that elections for all positions throughout most 
Middle Eastern countries will begin to take place? I would 
sincerely hope so. The alternative would be the fragmentation 
of the region into untenable ethnic and sectarian groupings, 
balkanization if you will, and in that event, you will be 
talking about autonomous realities which are really 
unmanageable. I think this is the last opportunity, this 
Greater Middle East Initiative, or whatever we call it at the 
end of the day. I hope that something comes from the region 
that is convincing, of course, but this is the last opportunity 
to stabilize a region which is fraught with dangers, weapons of 
mass destruction in Pakistan and India. I am interested to see 
that Mr. El Baradi of the IAEA is now visiting Israel, which at 
least is a step in the right direction. But the sooner these 
issues are put on the table and discussed in terms of securing 
the region, the less likely it will be that we will face some 
major catastrophe.
    Thank you, Mr. Chairman.
    The Chairman. Thank you very much, Senator Brownback.
    Thank you again, Your Highness. We appreciate your 
testimony and your coming here and the wisdom of your 
presentation.
    Prince Hassan. Thank you very much, indeed.
    The Chairman. The chair would like to call now Dr. Patrick 
Cronin and Dr. Alan Richards to the witness table.
    Gentlemen, we thank you for coming before the committee 
today. I will ask that you testify in the order that I have 
introduced you. That would be, first of all, Dr. Cronin, and 
then Dr. Richards. I would state that your full statements will 
be made a part of the record in full, and you may proceed as 
you wish. Dr. Cronin.

 STATEMENT OF DR. PATRICK M. CRONIN, SENIOR VICE PRESIDENT AND 
  DIRECTOR OF STUDIES, CENTER FOR STRATEGIC AND INTERNATIONAL 
                            STUDIES

    Dr. Cronin. Well, thank you very much, Mr. Chairman, for 
this opportunity and for your leadership. Our country is well 
served by having you here as the chairman of this committee.
    The Chairman. Thank you.
    Dr. Cronin. I think next week's G-8 summit at Sea Island 
provides a timely opportunity to review where we and other 
countries stand with respect to reform and freedom in the 
Middle East and beyond.
    For me, it is impressive to note how the issue of promoting 
internal reform in the Middle East has risen over the past few 
years on a lot of agendas, not just our own. European leaders 
have been talking about promoting reform in the Mediterranean 
Basin for almost a decade as part of the Barcelona Process, and 
I was in the administration and we were talking about these 
issues every day after 9/11 and we continue to talk about them 
now 3 years later.
    Some of the most impressive and impassioned debates have 
come from the Arab world itself. The first Arab Human 
Development Report, issued in September 2002, represented an 
unprecedented Arab critique of their own societies, citing 
major deficits of freedom and justice and opportunity. It was a 
blunt assessment. It was clear in its urgency, and the second 
report, that was issued the following spring, was very much 
along the same lines of reasoning.
    We have seen an impressive summit in Alexandria last March, 
which brought together nongovernmental activists from around 
the Arab world to lay out urgent and practical steps to lead 
the region forward, and then last month the Arab League also 
embraced reform.
    What I want to highlight here in my preface is simply that 
we are seeing not a U.S. phenomenon, not a European phenomenon, 
not an Arab phenomenon. We are seeing a growing consensus not 
only about the need to address this issue, but also about what 
our goals should be. The consensus is much less clear on how we 
can reach those goals, and that is where the sort of 
coordination the United States is seeking at Sea Island--and 
will surely seek elsewhere as well--is so vitally important.
    I am not an expert on the Middle East, but I have thought a 
great deal about aid programs, including as the No. 3 official 
at USAID and as someone who helped to set up the Millennium 
Challenge Corporation in recent months. I want to really focus 
my testimony around three points with respect to structuring 
aid programs.
    I first want to be clear that we have to be realistic about 
what we are hoping to achieve with development assistance or 
foreign aid in general. Foreign aid is a very limited, if still 
useful, element of foreign policy. In fact, what matters the 
very most is the recipient country's policies. It is the 
environment in which you are putting that aid. I think you know 
that, Mr. Chairman. It produces the best results when it is 
focused on achievable objectives that do not contradict other 
goals like security goals that we are trying to achieve. It 
works best when you have adequate resources not spread out 
everywhere but focused, concentrated. And they are being 
implemented through partners on the ground who have both 
capacity and most importantly the political will to see through 
successful implementation.
    I think the purposes associated with the Greater Middle 
East Initiative have generally vacillated really between two 
overlapping, yet different objectives. So we really are talking 
about one conversation with two purposes. Some of us are 
talking about democratization, and some of us are talking about 
development. There is a middle way here. We can bridge these 
gaps, but there are still, at the end of the day, two 
discussions going on at the same time. One goal is about 
political reform. The other one concentrates on basic 
socioeconomic shortcomings in a lot of these countries. Either 
goal, though, will take leadership and support from within the 
region, within the countries. It will take decades of sustained 
commitment from a variety of actors, and we cannot hope to go 
from Sea Island to sea change overnight.
    The most realistic goals will be those that are locally 
grown and enjoy a strong degree of ownership on the ground. In 
these cases, we can use funds opportunistically to foster 
reform and change. Although more difficult, we will still have 
opportunities to use firm diplomacy to push for opening 
political space. We must remember at the outset that the 
diplomatic discipline necessary to open political space in the 
Middle East in particular can quickly get lost amidst the 
myriad competing security and political objectives we must 
simultaneously pursue.
    When it comes to funding specific programs or projects, 
Members of Congress and the public will want to know that the 
initiatives represent a serious plan to achieve tangible 
results, with clear benchmarks to help measure progress. Such 
oversight is justified and indeed desirable. Third-party 
independent auditing would help avoid corruption and provide a 
level of accountability we do not see, Mr. Chairman, for 
instance, in the multilateral development bank projects today. 
They do not have independent third-party auditing. And we 
should do that with respect to whatever grants we eventually 
support.
    A second point I want to make is that we need to think 
carefully about the role and utility of money and resources 
with respect here to our countries in the Middle East. Money is 
a limited lever, especially in this region, I would argue, even 
if we were to contemplate a very vast Marshall Plan-like 
opportunity for the Greater Middle East.
    We already spend more than $1 billion of nondefense foreign 
aid in this region, although the bulk of it has tended to go to 
Egypt and Israel in support of very real, important strategic 
goals and peace and stability, such as supporting the Camp 
David Accords of 1979. This has perhaps, though, created over 
time a sense of entitlement, a set of expectations of what the 
United States will be giving to the region. And it is 
politically difficult and costly to alter. When we launched the 
Middle East Partnership Initiative in December 2002, it was 
criticized by many in the region as a mere token, representing 
such a small percentage of aid to the region, especially 
relative to the increased numbers we were talking about, say, 
with respect to the Millennium Challenge Account of $5 billion, 
and here we are talking about $25 million or $100 million for 
the Middle East Partnership Initiative. So even a well-
intentioned U.S. program can be portrayed as a snub, and in 
these situations, international coordination again can be very 
helpful for U.S. diplomacy to be more effective.
    We have to tailor our approaches to individual countries. 
They are all different. The gulf countries bear little 
resemblance to some of the least developed countries we see in 
sub-Saharan Africa where the prospect of a $200 million, 3-year 
grant can really have an impact on reform, but in countries 
that have such vastly larger GDPs, it is, again, much more 
difficult to think about the impact of that grant on reform and 
government change.
    The Middle East is also home to some of the wealthiest 
governments in the world. We have little ability to use money 
as an incentive since there are so many opportunities for 
profit through business ventures, personal subsidies, and 
government grants. The dependence of populations upon their 
governments, instead of the government's dependence on their 
populations, makes nurturing democracy there difficult. For 
many in government, business, and the military, no reasonable 
amount of money is enough to induce them to embark on changes 
that could bring down the whole system from which they profit.
    So money in the Middle East may be better understood, 
frankly, as an analgesic not an incentive. By itself, it is 
insufficient to induce change, but if combined with other 
tools, it can make change more acceptable. The pain-killing 
effect may make it easier for governments and other local 
leaders to create the political space for reform for those 
interested in pursuing different types of reform and 
activities: political reform by strengthening political and 
judicial institutions, civil society and independent media; 
knowledge acquisition and the exchange of ideas by investing in 
primary and higher education, vocational training, educational 
changes, and the leveraging of information technology; and 
economic reform and socioeconomic opportunity by seeking 
economic growth, trade capacity building, and employment, as 
well as supporting basic infrastructure or a healthy work 
force. In this sort of indirect manner, such investments, if 
appropriate to a particular country in the Middle East, might 
further pave the way toward larger national reforms over time.
    But we have lost the strategic point the moment we think 
this is primarily about resources. It is not. Our economic 
carrots are unlikely to have as much leverage in the Middle 
East as they may have in Africa, and in this region we run the 
moral hazard of poisoning our friends with our carrots because 
they may be seen as tainted with U.S. policy.
    Now, my third and final point, Mr. Chairman, is that as we 
think about specific structures for providing assistance, I 
believe very strongly we should borrow heavily from our lessons 
of recent experience, both with respect to the Global Fund for 
AIDS, Tuberculosis and Malaria and certainly the Millennium 
Challenge Corporation. I think these models provide the 
attributes that we are seeking here, a transparent, locally 
owned partnership arrangement where there is competition, there 
is inclusivity, there is a results-based approach around which 
we could build a very broad consensus.
    Calls for attacking illiteracy in the region where half the 
women and a large plurality of men are illiterate can only be 
welcome. Supporting microfinance is a way to provide greater 
equity and hope to those lacking even modest sums to invest in 
a business. A regional development bank could help to make wise 
investments in larger infrastructure projects on which economic 
growth may hinge. And a democracy foundation could help to 
foster greater dialog for good governance and political reform. 
I assume Under Secretary Larson talked about all of these 
useful initiatives this morning.
    But of all the proposals, the one that really strikes me as 
the most important and promising is the one, sir, that you have 
put forward, the Greater Middle East Trust for the 21st 
Century. I think it is a sound idea because, as with the Global 
Fund, it could be international in scope. So it removes the 
U.S. footprint from being the dominant issue. It instantly 
internationalizes it. It could provide a basis of making grant 
decisions that is beyond reproach because as with the Global 
Fund, they use technical reviews that are not politicized. They 
are literally out there trying to provide on the technical 
merits of the proposals recommendations as to whether these 
grants should be approved or not.
    I think like the Millennium Challenge Account, it could 
introduce a very healthy domestic competition because the 
proposals would be coming from within countries to this Trust 
and it could be still done in an inclusive process as the 
Millennium Challenge Account assumes as well where you ensure 
that civil society, business, and the government are all part 
of that mix competing for these grants. It could lead, 
therefore, to creative homegrown solutions with clear 
benchmarks and a focus on closely monitored results, which is 
again a hallmark of the Millennium Challenge Account approach, 
making sure that we understand how this money is being spent.
    And finally, the Trust could pool resources and provide a 
common mechanism for providing grant assistance to these 
countries rather than adding to the confusion created elsewhere 
by multiple donors imposing so many competing approaches to 
assistance.
    I do think there is one difference between this Trust 
concept and the Millennium Challenge Account, however. It may 
be tempting to want to run a regional Millennium Challenge 
Account competition, so judging the Greater Middle East 
countries by the three categories of ruling justly, investing 
in people, and economic opportunity. That competition already 
exists on a global basis, and a country like Morocco may well 
be successful in the second round of a Millennium Challenge 
Account. So you take away the incentive for some of that.
    Meanwhile, the intended reform effect of the Millennium 
Challenge Account in this Greater Middle East might be lost on 
the countries of the region for the reasons I have already laid 
out. The reforms really have to start in the region, supported 
by realistic and firm diplomacy, and then supported by 
effective targeted assistance, financial assistance, 
development assistance. That is really the best recipe for 
ensuring that we are actually going to yield some sustainable 
and helpful results here. If we expect foreign aid to be the 
catalyst for change in Egypt that it may be in Mozambique, for 
instance, I think we are destined to be frustrated.
    Last month's Arab League summit in Tunisia suggests that 
there is both interest in reform, and as seen by the inability 
to agree on establishing an oversight body, there are limits to 
the likely depths of such reform in the region. Analogous 
efforts in other regions have fared little better. We have to 
be blunt here. This is not just the Middle East lagging behind. 
The New Economic Partnership for African Development, NEPAD, 
and even the Association for Southeast Asian Nations have been 
disappointing to those of us who expected such regional 
groupings to tackle corrupt governance head on, whether in 
Zimbabwe or in Burma, for instance.
    Grants from a trust, however, could provide a vehicle for 
engaging the region on the basis of partnership and merit, but 
not so directly as to confuse suspicions about donors with 
national interests and their own development. The details of 
the Trust proposed by the chairman can be best worked out in 
multilateral consultations with a variety of partners, perhaps 
also in the form of international conferences that we have just 
heard about by our previous speaker today.
    I think through such relatively modest investments, as part 
of a larger comprehensive set of policies and diplomacy, the 
United States may sow the seeds of a new generation of progress 
and peace in the Middle East. If we are to do so, we will have 
to rely on our own example, as you have said, Mr. Chairman, as 
well as our adroit use of both hard and soft power, tough love 
diplomacy and generous and smart assistance. Through all these 
means, with sufficient time, we can buttress good governance in 
these countries. We can strengthen political and economic 
institutions that allow for transformation of the lives of 
young men and women who are educated but unemployed. And we can 
reinforce the reality that the United States stands in 
partnership to help these people rather than as part of the 
problem.
    I will stop there, Mr. Chairman. Thank you very much.
    [The prepared statement of Dr. Cronin follows:]

              Prepared Statement of Dr. Patrick M. Cronin

    Thank you, Mr. Chairman and Senator Biden, for this opportunity to 
testify. Our nation is well served by your leadership, and it is a 
privilege to be here today before you and other distinguished members 
of the Committee.
    Next week's G-8 summit at Sea Island, Georgia provides a timely 
opportunity to review what the United States and other major powers are 
doing to support stability, prosperity and freedom in the Middle East 
and beyond.
    It is impressive to note how the issue of promoting internal reform 
in the Middle East has risen on agendas all over the world. The 
President and many senior members of his administration have spoken out 
clearly since September 11 on the need to promote reform in the Middle 
East not only for the sake of people there, but also for the sake of 
our national security. Individuals from across the U.S. government have 
been working for more than two years to turn this idea into a reality. 
European leaders have been talking about promoting reform in the 
Mediterranean Basin for most of a decade, seeking to use the European 
Union's so-called ``Barcelona Process'' to promote economic growth and 
political openness.
    Some of the most impressive and impassioned debates have come from 
the Arab world itself. The first Arab Human Development Report, issued 
in September 2002, represented an unprecedented Arab critique of their 
own societies. It was blunt in its assessment and clear in its urgency. 
The second report, issued last spring, strongly followed the precedents 
of the first.
    We have also seen an impressive summit in Alexandria last March, 
which brought together nongovernmental activists from around the Arab 
world to lay out urgent and practical steps to lead the countries in 
the region forward. The Arab League, in its meeting last month, also 
embraced reform in the region.
    What I want to highlight here is that what we are seeing is not a 
U.S. phenomenon, a European phenomenon, or an Arab one. We are seeing a 
growing consensus not only about the need to address this issue, but 
also about what our goals should be. The consensus is much less clear 
on how we can reach those goals, and that is where the sort of 
coordination the United States government is doing in Sea Island--and 
will surely do elsewhere as well--is so vitally important.
    I am not an expert on the Middle East. I have thought a great deal 
about how to structure aid programs, however, and it is to that topic 
that I would like to devote the rest of my brief testimony.

    First, we have to be clear and realistic about our goals. Foreign 
aid is a limited if useful element of foreign policy. It produces the 
best results when it is focused on achievable objectives that do not 
contradict other, usually security, goals we are trying to obtain at 
the same time. Aid works best when adequate resources are provided to 
implementing partners with sufficient political will and capacity.

    The purposes associated with a Greater Middle East Initiative have 
generally vacillated between two overlapping yet different objectives: 
democratization and development. The former goal focuses on political 
reform; the latter concentrates on basic socio-economic shortcomings. 
Either goal will take leadership and support from within the region, 
and decades of sustained commitment from a variety of actors. Either 
way, we cannot hope to go from Sea Island to sea-change overnight.
    The most realistic goals will be those that are homegrown and enjoy 
a strong degree of local ownership. In these cases, we can use funds 
opportunistically to foster reform and change. Although more difficult, 
we will have some opportunities to use firm diplomacy to push for 
opening ``political space.'' We must remember at the outset, however, 
that the diplomatic discipline necessary to open political space can 
quickly get lost amidst the myriad competing security and political 
objectives we must simultaneously pursue in the greater Middle East.
    When it comes to funding specific programs or projects, members of 
Congress and the public will want to know that the initiative 
represents a serious plan to achieve tangible results, with clear 
intermediate benchmarks to help measure progress. Such oversight is 
justified, and indeed desirable. Third-party, independent auditing 
would help avoid corruption and provide a level of accountability of 
U.S. tax money not present in most aid programs. Over time, independent 
evaluations could offer serious analysis of whether investments are 
starting to achieve the desired outcomes.

    Second, we need to think carefully about the utility of money and 
resources in the Middle East. Money is a limited lever in this region, 
even if we were to contemplate a ``Marshall Plan'' for the great Middle 
East.

    The United States already spends more than $1 billion in non-
defense foreign aid to the region, but the bulk of it has tended to go 
to Egypt and Israel in support of the 1979 Camp David Peace Accords and 
regional stability. One could argue that that money has been well spent 
if it has indeed helped to provide regional peace and security. This 
has perhaps created a sense of entitlement and a set of expectations 
that are politically costly to alter. When the Middle East Partnership 
Initiative was launched in December 2002, many in the Middle East 
criticized the program because it was a ``mere'' $100 million/year, 
thereby representing such a small percentage of aid to the region and 
an even smaller percentage of increased aid to other regions. Thus, 
even a well-intentioned U.S. program was portrayed as a snub. In these 
situations, in particular, international coordination can be helpful.
    We must tailor our approaches to individual countries. The Gulf 
countries in particular bear little resemblance to some of the least 
developed countries we see in sub-Saharan Africa, where the prospect of 
a $200 million, three-year Millennium Challenge Account grant can 
provide a real incentive for undertaking additional reforms. In this 
region, however, a potential grant, even a relatively large one, might 
as easily be seen as an insult, a threat, or an invasion of 
sovereignty.
    In addition, the Middle East is also home to some of the wealthiest 
governments in the world. We have little ability to use money as an 
incentive, since there are so many opportunities for profit through 
business ventures, personal subsidies and government grants. The 
dependence of populations upon their governments, instead of the 
governments' dependence on their populations, makes nurturing democracy 
there difficult. For many in government, business and the military, no 
reasonable amount of money is enough to induce them to embark on 
changes that could bring down the whole system from which they profit.
    Money in the Middle East may be better understood as an analgesic, 
not an incentive. By itself, it is insufficient to induce change, but 
if combined with other tools it can make change more acceptable. The 
painkilling effect may make it easier for governments to create the 
political space for local reformers interested in pursuing different 
types of activities: (1) political reform by strengthening political 
and judicial institutions, civil society and an independent media; (2) 
knowledge acquisition and the exchange of ideas by investing in primary 
and higher education, vocational training, educational changes, and the 
leveraging of information technology; and (3) economic reform and 
socioeconomic opportunity by seeking economic growth, trade capacity 
building, and employment, as well as supporting basic infrastructure 
and a healthy workforce. In this indirect manner, such investments, if 
appropriate to a particular country in the Middle East, might further 
pave the way toward larger, national reforms.
    But we have lost the strategic point the moment we think this is 
primarily about resources. It is not. Our economic carrots are unlikely 
to have as much leverage in the Middle East as they may have in Africa, 
and in this region we run the moral hazard of poisoning our friends 
with our carrots because they are tainted by a U.S. policy agenda.

    Thirdly and finally, as we think about specific structures for 
providing assistance, we should borrow heavily from recent experience 
in establishing new entities such as the Global Fund for AIDS, 
Tuberculosis and Malaria and the Millennium Challenge Corporation. 
These models provide attributes for a transparent, locally-owned, 
competitive, results-oriented assistance program around which we could 
build a broad consensus.

    Calls for attacking illiteracy in a region where half the women and 
a large plurality of men are illiterate, can only be welcome. 
Supporting microfinance is a way to provide greater equity and hope to 
those lacking even modest sums to invest in a business. A regional 
development bank could help to make wise investments in larger 
infrastructure projects on which economic growth may hinge. And a 
democracy foundation could help to foster greater dialogue for good 
governance and political reform.
    But of all of the proposals, the one that resonates with me is the 
Trust for the 21st Century proposed by Senator Lugar. The idea is sound 
because, as with the Global Fund for AIDS, Tuberculosis and Malaria, it 
could be international in scope and base grant decisions on the expert 
technical review of proposals emanating from each country. Like the 
Millennium Challenge Account, it could introduce a healthy domestic 
competition that leads to creative, homegrown solutions with clear 
benchmarks and a focus on closely monitoring results. Finally, the 
Trust could pool resources and provide a common mechanism for providing 
grant assistance to these countries, rather than adding to confusion 
created by multiple donors imposing so many competing approaches to 
assistance.
    At the same time, there is at least one fundamental difference in 
my mind between a Trust and the MCA. It may be temping to run a 
regional MCA contest in which countries of the region would be measured 
by objective criteria of ruling justly, investing in people, and 
economic freedom. However, that competition already exists on a global 
basis, and a country like Morocco is a good bet to qualify in the 
second round on its own merits. Meanwhile, the intended reform effect 
of the MCA would be mostly lost on the countries of the region. As 
mentioned before, reforms will have to start in the region, be 
supported by realistic diplomacy, and then backstopped where helpful 
with assistance. If we expect foreign aid to be the catalyst for change 
in Egypt that it may be in Mozambique, for instance, I think we are 
destined for frustration.
    Last month's Arab League summit in Tunisia suggests that there is 
both interest in reform and--as seen by the inability to agree on 
establishing an oversight body--limits to the likely depths of such 
reform. Analogous efforts in other regions have fared little better. 
The New Economic Partnership for African Development (NEPAD) and even 
the Association for Southeast Asian Nations (ASEAN) have been 
disappointing to those who expected such regional groupings to tackle 
poor or corrupt governance head on--whether in Zimbabwe or Burma, for 
instance.
    Grants from a trust, however, could provide a vehicle for engaging 
the region on the basis of partnership and merit, but not so directly 
as to confuse suspicions about donors with national interests and 
development. The details of the Trust proposed by the Chairman can be 
best worked out in multilateral consultations with a variety of 
partners.
    Through such relatively modest investments, as part of a larger 
comprehensive set of policies and diplomacy, the United States may sow 
the seeds of a new generation of progress and peace in the Middle East. 
If we are do to so, we will have to rely on our example, as well as an 
adroit use of both hard and soft power, tough love diplomacy and 
generous and smart assistance. Through all these means, with sufficient 
time, we can buttress good governance in these countries; we can 
strengthen political and economic institutions that allow for 
transformation of the lives of young men and women who otherwise may 
join the tens of millions of educated but unemployed; and we can 
reinforce the reality that the United States stands in partnership to 
help these people rather than as part of the problem.
    Senator Lugar has said eloquently that our long-term strategy is to 
replace the region's pervasive repression, intolerance and stagnation 
with freedom, democracy and prosperity: but in the absence of any easy 
nostrum for effecting that transformation, we would be wise to listen 
to our friends in the region, Europe and elsewhere, even while we 
signal a willingness to make our commitment to the region both tangible 
and enduring.

    The Chairman. Thank you very much, Dr. Cronin, for that 
very helpful testimony.
    Dr. Richards, would you please proceed.

 STATEMENT OF DR. ALAN R. RICHARDS, PROFESSOR OF ECONOMICS AND 
  ENVIRONMENTAL STUDIES, UNIVERSITY OF CALIFORNIA, SANTA CRUZ

    Dr. Richards. Thank you very much for the invitation to 
comment here on the concept of the Greater Middle East 21st 
Century Trust proposed by Senator Lugar.
    As someone who has been studying the development problems 
of the Middle East for the past 35 years, it seems to me that 
Senator Lugar's proposal has at least seven quite positive 
elements.
    First, the proposal's overall perspective seems entirely 
correct. We simply cannot successfully combat the violence 
emanating from the region through military force alone. We 
must, therefore, formulate a long-term strategy to help 
regional political actors manage the profound social, economic, 
and political challenges which they face.
    Second, the proposal recognizes the complexity of the 
problems facing the region. These societies are now enmeshed in 
an absolutely huge crisis, with social, economic, political, 
and cultural dimensions. No single country, least of all the 
United States, can control these tumultuous changes. The 
proposal appears to recognize this complexity.
    Third, there is a very healthy stress on the absolute 
necessity of international cooperation, for the involvement of 
the G-8 countries, and for serious ownership of the process of 
change in the region.
    Fourth, the proposal seeks to engage with broad elements of 
the societies in the region. It does not pretend that a better 
approach can come from existing governments alone.
    Fifth, it explicitly recognizes that change cannot be 
imposed from the outside. This is a crucial fundamental point, 
which we Americans, with our impatience and inattention to 
history, regrettably forget far too often.
    Sixth, the proposal forthrightly and correctly, in my 
judgment, recognizes how the ongoing violence and lack of a 
political settlement between the Israelis and the Palestinians 
poisons any attempt by the United States or of the G-8 to help 
manage the broader problems facing the region. The concept of 
extending the Quartet to include Egypt and Saudi Arabia seems 
to me to be a particularly interesting idea.
    Seventh, the three specifics of the proposal of the Trust 
that I have seen seem quite sound. The stress on a partnership 
between the G-8 and the regional donors, the focus on broad, 
mutually negotiated goals rather than on specific projects, and 
the plan's openness to conforming with the norms of Islamic 
finance--all three of these features are consistent with the 
proposal's broader aim, as I take it, of a truly cooperative 
approach.
    These are all highly positive features. Let me now sound a 
few cautionary notes.
    Senator Lugar's proposal, at least in the Brookings speech 
that I have read, cites the Arab Human Development Reports some 
nine times, and we have heard that report cited repeatedly 
today this morning. Three weeks ago, I was invited to join a 
readers' group held at UNDP headquarters in New York to discuss 
a draft of the 2004 report, which will be devoted exclusively 
to the questions of democracy and freedom. These reports are, 
of course, written by the friends of political liberty and of 
democracy in the region. The authors share our values and they 
hope for fundamental political change in their homelands. I 
regret to tell you, however, that at this time they are also 
absolutely furious at the Government of the United States, for 
our policies toward the Palestinian issue and for our invasion 
and occupation of Iraq. If such people who share our values are 
this viscerally angry, it takes little imagination to realize 
what a daunting task any proposal for American leadership for 
change in the region will face.
    The sad reality today is that the United States is almost 
universally perceived as a neo-colonial power throughout the 
Arab world and in many other circles of the Greater Middle 
East. Our reputation has sunk to an all-time low throughout the 
region. For example, my good friend and co-author, John 
Waterbury, now President of the American University of Beirut, 
wrote to me a few days ago: ``In the 44 years I have been 
dealing with this part of the world, I have never seen 
relations between the U.S. and the Arab world remotely as bad. 
The most worrisome shift is that the old distinction of 
opposing U.S. policies is now sinking into dislike for 
Americans as individuals and as a people.'' So long as such 
perceptions persist, any proposal for international cooperation 
to effect positive changes for governance in the region will 
face the greatest difficulties.
    This is one reason why I think that the proposal's concept 
of linking the Trust with moving vigorously toward trying to 
resolve the Israeli-Palestinian conflict is such an excellent 
idea. However, it seems to me it is equally true that very 
sensitive proposals, such as Senator Lugar's Trust, will be 
hobbled so long as the United States is so widely perceived as 
an illegitimate occupying power in Iraq. Our behavior in Iraq 
over the past month seriously compromises the laudable goals of 
the Trust proposal. After all, with more than 130,000 troops in 
Iraq, few people in the region believe us when we say that we 
know we cannot impose change on the region. An early exit of 
American military force from Iraq is a necessary condition for 
the success of helpful proposals such as that of Senator Lugar.
    We Americans say that we want to promote democracy in the 
region. We may actually believe this. But given the history of 
the region, it is hardly surprising that we are widely 
disbelieved. The proposal correctly and forthrightly states 
that the governments in the region continue to block the 
transition to democracy. Many long-term students of the region, 
including me, also think that our own government's actions too 
often create additional obstacles to democratic change. We 
continue to support authoritarian states throughout the region, 
particularly if they help us hunt for the fanatics and 
militants of al-Qaeda. Part of the problem remains the clash 
between our perceived strategic goals and the fact that 
democracy is inherently unruly and unpredictable.
    Let me elaborate this last point very briefly. For more 
detail, you can see my written comments.
    It seems to me that a necessary condition for a democratic 
transition is for both government and opposition politicians to 
play by new rules and for each to control their more radical 
elements whether outside the government in opposition or inside 
the government. In many countries, indeed probably in most 
countries, of the Greater Middle East, the best organized 
opposition forces today and for the foreseeable future are 
those of political Islam. The Islamist movement is huge and 
diffuse, with many national and local variations. Increasingly, 
what we used to call secular nationalists in opposition have 
either joined Islamist movements or are cooperating with them 
politically.
    If we are really serious about promoting democracy in the 
region--and we certainly should be--then we simply must learn 
to distinguish among the different types of political Islam. 
There will be no democracy and no stability without their 
participation in the polities of the region. If we are serious, 
we must recognize that future democracies of the Greater Middle 
East will often have lukewarm, sometimes testy, and 
occasionally frigid relations with the United States.
    A half century ago, some Americans believed that we could 
play a central role in shaping the modes of governance in 
China. We discovered that this was impossible. A generation 
ago, many Americans hoped that we could bring democracy to the 
countries of Indo-China. We found, much to our cost, that we 
were incapable of doing this. A decade ago, some Americans 
thought we could transform Russia into a market economy all at 
once. Again, history intruded and the results of our efforts 
were far more complicated than we had initially imagined.
    In China, in Southeast Asia, in Russia, and in the Greater 
Middle East, the United States can, at best, facilitate 
indigenous change. To believe that we can do anything else is, 
in my view, dangerous, a-historical hubris. Since Senator 
Lugar's Trust proposal appears to avoid this delusion, it could 
make a real contribution to a safer and more prosperous world. 
It is vital that we not pretend that we can do more than is 
possible, and it is essential that our actions conform to our 
stated intentions and to our most deeply held values.
    Thank you.
    [The prepared statement of Dr. Richards follows:]

                Prepared Statement of Dr. Alan Richards

    Thank you very much for the invitation to comment here today on the 
concept of the Greater Middle East 21st Century Trust proposed by 
Senator Lugar.\1\ I am happy to do this.
---------------------------------------------------------------------------
    \1\ Senator Richard Lugar, ``A New Partnership for the Greater 
Middle East: Combatting Terrorism, Building Peace'', speech at 
Brookings Institution, Washington, D.C., March 29, 2004.
---------------------------------------------------------------------------
    As someone who has been studying the development problems of the 
region for 35 years, it seems to me that this proposal has at least 
seven quite positive elements.
    First, the proposal's overall perspective seems entirely correct. 
We simply cannot successfully combat the violence emanating from the 
region through military force alone. We must, therefore, formulate a 
long-term strategy to help regional political actors manage better the 
profound social, economic, and political challenges which they face.
    Second, the proposal recognizes the complexity of the problems 
facing the region. These societies are now enmeshed in a huge crisis, 
with social, economic, political, and cultural dimensions.\2\ No single 
country--least of all the United States--can control these tumultuous 
changes. The proposal appears to recognize this complexity.
---------------------------------------------------------------------------
    \2\ For a sketch of some key dimensions of the crisis, see Appendix 
1.
---------------------------------------------------------------------------
    Third, there is a very healthy stress on the absolute necessity for 
international cooperation, for the involvement of the G-8 countries, 
and for serious ownership of the process of change by countries of the 
region.
    Fourth, the proposal seeks to engage with broad elements of the 
societies in the region--it does not pretend that a better approach can 
come from existing governments alone.
    Fifth, it explicitly recognizes that change cannot be imposed from 
outside. This is a crucial, fundamental point, which we Americans, with 
our impatience and inattention to history, regrettably forget far too 
often.
    Sixth, the proposal forthrightly and correctly recognizes how the 
on-going violence and lack of a political settlement between the 
Israelis and Palestinians poisons any attempt of the US or the G-8 to 
help manage the broader problems facing the region. The concept of 
expanding the ``Quartet'' to include Egypt and Saudi Arabia seems to me 
a particularly interesting idea.
    Seventh, the three specifics of the proposal for the Trust seem 
sound. The stress on a partnership between the G-8 and regional donors, 
the focus on broad, mutually negotiated goals rather than on specific 
projects, and the plan's openness to conforming to the norms of Islamic 
finance--all three of these features are consistent with the proposal's 
broader aim of a truly cooperative approach.
    These are all highly positive features. Let me now sound a few 
cautionary notes. Senator Lugar's proposal cites the Arab Human 
Development Reports some nine times, by my count. Three weeks ago I was 
invited to join a ``Readers' Group'' at UNDP headquarters in New York 
to discuss a draft of the 2004 report, which will be devoted 
exclusively to the questions of democracy and freedom. These reports 
are, of course, written by the friends of political liberty and 
democracy in the region. The authors share our values, and they hope 
for fundamental political change in their homelands. I regret to tell 
you, however, that they are also absolutely furious at the United 
States government--for our policies toward the Palestinian issue and 
for our invasion and occupation of Iraq. If such people--who share our 
values--are this viscerally angry, it takes little imagination to 
realize what a daunting task any proposal for American leadership for 
change in the region will face.
    The sad reality today is that the United States is almost 
universally perceived as a neo-colonial power throughout the Arab world 
and in many other circles in the Greater Middle East. Our reputation 
has sunk to an all-time low throughout the region.\3\ So long as such 
perceptions persist, any proposal for international cooperation to 
effect positive changes in governance in the region will face the 
gravest difficulties.
---------------------------------------------------------------------------
    \3\ My friend and co-author, John Waterbury, President of the 
American University of Beirut, wrote on May 27: ``In the 44 years I 
have been dealing with this part of the world I have never seen 
relations between the US and the Arab world remotely as bad. The most 
worrisome shift is that the old distinction of opposing US policies is 
now slipping into dislike for Americans as individuals and as a 
people.'' (Personal communication)
---------------------------------------------------------------------------
    This is one reason why I think that the proposal's concept of 
linking the Trust with moving vigorously toward resolving the Israeli-
Palestinian conflict is such an excellent idea. However, in my 
judgment, it is equally true that sensible proposals such as the Trust 
will be hobbled so long as the U.S. is so widely perceived as an 
illegitimate, occupying power in Iraq. Our behavior in Iraq over the 
past months seriously compromises the laudable goals of the Trust 
proposal.\4\ With more than 130,000 troops in Iraq, few people in the 
region believe us when we say that we know that we cannot impose change 
on the region. An early exit of American military force from Iraq is a 
necessary condition for the success of helpful proposals such as that 
of Senator Lugar.
---------------------------------------------------------------------------
    \4\ The lead author of the Arab Human Development Reports writes: 
``To those Arabs who dream at freedom at the hands of the Americans, I 
have this to say: Look at what is happening with the Iraqis''. Nader 
Fergany, ``Ghosts of Abu Gbraib'' Al Ahram Weekly On Line, No. 691, 20-
26 May, 2004, http://weekly.ahram.org.eg/2004/691/op65.htm
---------------------------------------------------------------------------
    We Americans say that we want to promote democracy in the region. 
We may actually mean this, but given the history of the region, it is 
hardly surprising that we are widely disbelieved. The proposal 
correctly and forthrightly states that governments in the region 
continue to block the transition to democracy there. Many long-time 
students of the region, including this one, think that our own 
government's actions too often create additional obstacles to 
democratic change. We continue to support authoritarian states 
throughout the region, particularly if they help us hunt for al-Qaeda 
militants. Part of the problem remains the clash between our perceived 
strategic goals, and the fact that democracy is inherently unruly and 
unpredictable.
    Let me elaborate this last point very briefly.\5\ A necessary 
condition for a democratic transition is for both government and 
opposition politicians to ``play by the new rules'' and to control 
their more radical elements. In many countries of the Greater Middle 
East, the best organized opposition forces today and for the 
foreseeable future are those of ``political Islam''. The Islamist 
movement is huge and diffuse, with many national and local variations. 
Increasingly, what were formerly called ``secular nationalists'' in 
opposition have either joined Islamist movements or are co-operating 
with them politically.
---------------------------------------------------------------------------
    \5\ For greater detail, see Appendix 2.
---------------------------------------------------------------------------
    The logic of transition to democracy implies that moderates within 
the Islamist (and nationalist) camp must be willing to play by 
democratic rules, convince reform elements within the state of their 
sincerity, and maintain control over their radical allies. Likewise, 
reformers in government must be willing to allow the full participation 
of Islamist forces in the political process.
    If we are really serious about promoting democracy in the region--
and we certainly should be--then we simply must learn to distinguish 
among the different types of political Islam. There will be no 
democracy, and no stability, without their participation in the 
polities of the region. If we are serious, we must recognize that 
future democracies of the Greater Middle East will often have lukewarm, 
sometimes testy, and occasionally frigid relations with the United 
States.
    A half-century ago some Americans believed that we could play a 
central role in shaping the modes of governance in China. We discovered 
that this was impossible. A generation ago, many Americans hoped that 
we could bring democracy to the countries of Indo-China. We found, much 
to our cost, that we were incapable of doing this. A decade ago some 
Americans thought that we could transform the Russian economy, all at 
once. Again, history intruded, and the results of our efforts were far 
more complicated than we had initially imagined.
    In China, in Southeast Asia, in Russia, and in the Greater Middle 
East, the United States can, at best, facilitate indigenous change. To 
believe that we can do anything else is, in my view, dangerous, a-
historical hubris. Since the Trust proposal appears to avoid this 
delusion, it could make a real contribution to a safer, more prosperous 
world. It is vital that we not pretend that we can do more than is 
possible, and it is essential that our actions conform to our stated 
intentions and to our most deeply held values.
    Thank you.

                               Appendix 1

              A PRIMER ON MIDDLE EASTERN POLITICAL ECONOMY

Overview:
   The countries of the Greater Middle East face a daunting 
        complex of challenges. These challenges are demographic, 
        social, economic, and political.

   There is no ``easy fix'' for any of the problems outlined 
        here. Confidence in the efficacy of the ``Washington 
        Consensus'' has eroded both intellectually and politically 
        (although this may be least obvious inside the Beltway).

   Many of the relatively easy changes have already been made.

   The same political forces that blocked change altogether in 
        the 1980s slowed change in the 1990s. There were, and are, good 
        political reasons for such gradualism, but the difficulties 
        continue to mount.

   One element of the Washington Consensus remains: better 
        governance will be essential for coping better with these 
        challenges.

   Contrary to currently popular political rhetoric and 
        actions, outsiders, particularly including the U.S., are 
        singularly poorly placed to foster more legitimate, accountable 
        governance structures.

   It is delusional to think that outside intervention--
        especially, military intervention--can improve the quality of 
        governance. Change must come from within. Outsiders can help, 
        but only if they are credible. Today, the US lacks such 
        credibility.

                          TEN KEY CHALLENGES:

An Overview
     1. Restoring Economic Growth

       2. Restraining population expansion

     3. Providing jobs

       4. Alleviating poverty

       5. Educating the young, especially, young women

       6. Coping with urbanization

       7. Saving water

       8. Obtaining food

       9. Slowing environmental destruction

    10. Attracting money for investment, both from foreigners and (more 
importantly) from domestic savers

                      1. RESTORING ECONOMIC GROWTH

   For the past two decades, the economies of the region have 
        essentially been ``running faster to stand still''.

   During the 1980s, output per person (GDP per capita) 
        essentially stagnated.

   The performance during the 1990s was only marginally better: 
        output growth rose from 2.4% per year (1981-1990), to 3.1% per 
        yer (1991-2000), and has remained at roughly the 1990s level 
        during the last few years. Since population growth rates have 
        fallen to about 2%, output per person has grown at slightly 
        more than 1% per year since the first Gulf War.

   GDP per capita is no greater today than it was in 1980.

   Only sub-Saharan Africa has done worse.

   Such numbers are, of course, based on conventional national 
        income accounting. Such data fail to include two very important 
        phenomena:

          1) The informal or underground economy, which would make the 
        above picture look better; and

          2) The costs of resource depletion and environmental 
        degradation, whose inclusion would make the situation look 
        considerably worse--the growth rates would almost certainly 
        become negative.

   There are considerable differences among countries' growth 
        performances.

   Reducing unemployment and raising real wages even modestly 
        would require growth rates of GDP of between 6% and 7% per 
        year. No country in the region has achieved anything like this 
        performance.

                  2. RESTRAINING POPULATION EXPANSION

   The population of the region was slightly greater than 300 
        million in 2000; it is expected to increase to about 400 
        million by 2015 (US Census Bureau)

   The population of the region is now growing at about 2% per 
        year (according the to World Bank), or at 2.3% (UN Population 
        Division).

   Only sub-Saharan Africa has a faster rate of population 
        growth.

   Population growth rates have fallen quite sharply in many 
        countries during the past 10 years (from some 3.2% in the mid-
        1980s to 2.7% in the early 1990s, to 2-2.3% today).

   Sharp fertility declines caused this change; there are 
        reasons to expect further falls.

   However, fertility (TFR  4.2) remains well above 
        replacement levels and past rapid growth means that an 
        unprecedentedly large generation of young women will soon enter 
        their child-bearing years.

   This overall picture masks significant national differences. 
        Fertility has fallen sharply in Egypt, Iran, and Tunisia, for 
        example, but have remained stubbornly high in Gaza, the West 
        Bank, Yemen, and Saudi Arabia, whose rates (over six children 
        per woman) are among the highest in the world.

   Thanks to these demographic phenomena, most people in the 
        region are young: half of all Arabs, Iranians, and Pakistanis 
        are younger than 20 years of age. Two thirds of all Middle 
        Easterners are younger than 30.

   A large literature in political sociology confirms that the 
        experiences people have while they are young have long-lasting 
        consequences for their political views. (Consider, for example, 
        the impact of their disparate experiences during the Vietnam 
        War on the Baby Boom generation of Americans).

   This implies that American actions in the region, now, will 
        have deep and longlasting consequences for the future.

                           3. PROVIDING JOBS

   Current levels of unemployment are high. Methodologies for 
        estimating unemployment vary widely, but a consensus figure is 
        that unemployment stands at some 15-20% of the labor force.

   Real wages have stagnated for two decades.

   Three forces explain this dismal--and politically highly 
        destabilizing--phenomena:

          1) The demand of labor has grown slowly, due to sluggish 
        growth.

          2) The supply of labor has grown very rapidly thanks to 
        population expansion.

          3) Government policies have created relatively inflexible 
        labor market institutions in the urban, formal sector.

   Labor force growth in the region is the most rapid in the 
        world: 3-4% per year, twice as high as in the rest of the 
        Global South. The region needs to provide an additional 4 
        million jobs every year, just to keep up with additions to the 
        labor force.

   The problem would become still more difficult should large 
        numbers of young women enter the labor force.

   Unemployment is particularly high among the young and 
        relatively educated.

   Arguably, this is the most politically volatile problem 
        produced by faltering political economies.

                         4. ALLEVIATING POVERTY

   The conventional wisdom holds that poverty in the region is 
        lower (head count measure) than elsewhere in the Global South.

   However, poverty rates are quite sensitive to the choice of 
        a poverty line. Large numbers of people live on incomes close 
        to the line: in Egypt, for example, although some 23% of the 
        population live on less than $2 per day, another 37% live on 
        less than $2.60 (only 30% more than the poverty line). They 
        are, therefore, highly vulnerable to falling into poverty.

   There is consensus that aggregate poverty rates in the 
        Middle East fell during the years of the oil boom (from the mid 
        1970s to the early to mid 1980s), but started to rise after 
        that. Poverty has been increasing during the past decade, in 
        some cases, dramatically (e.g., Yemen: from l5% in 1990 to 45% 
        in 1998).

   Three factors are plausibly the key drivers of the rise in 
        poverty.

          1) Unemployment is high and rising;

          2) Most job creation has occurred in the low wage informal 
        sector, not in higher paying formal sector employment.

          3) Real wages in formal sector urban employment are falling. 
        (One might add that in some countries, including Egypt, real 
        wages in agriculture have also fallen).

   On the other hand, , FAO data suggest that the share of 
        undernourished people in the total population declined over 
        time (from 8.8% in 1979/81, to 7.2% in 1990/92 and 6.9% in 
        1997/99). (Because of population growth, the absolute numbers 
        grew by about 25% to some 26 million).

   Government policies of consumer subsidies and public sector 
        employment have prevented poverty from rising further. The 
        latter policy also contributes to slow growth and other 
        difficulties.

   Persistent poverty undermines the legitimacy of regimes, 
        particularly among the young.

                      5. COPING WITH URBANIZATION

   Urbanization has increased rapidly during the past 
        generation: the number of urban Middle Easterners has increased 
        by about 100 million in the past 35 years.

   Over half (56%) of all Arabs now live in cities. In only 4 
        countries (Egypt, Somalia, Sudan, and Yemen) do most people 
        live in rural areas.

   The number of urban dwellers is expected to rise from its 
        current level of over 140 million to over 350 million by 2025.

   Public services and utilities are already overwhelmed: in 
        Jordan and Morocco, for example, one-third of the urban 
        population lacks adequate sewerage services. Urban water 
        supplies are often erratic at best.

   Governments attempt to provide urban services through heavy 
        subsidies, subsidies which are largely captured by the 
        relatively better off urban residents. Such policies strain 
        government budgets, and thwart the necessary investments to 
        extend and to improve services.

   Housing problems are severe: for example, more than a half 
        million Cairenes live on rooftops, and well over one million 
        live in and around the tombs of the City of the Dead. New 
        construction has lagged slightly behind new households so that 
        the gap remains vast.

   Such problems are both cause and effect of governance 
        deficiencies. Few cities have much independent tax authority, 
        thanks to the typical pattern of fiscal centralization in most 
        countries in the region. At the same time, macroeconomic 
        austerity has deprived many municipalities of the funds needed 
        to cope with urban problems.

   Rapid urbanization and its attendant problems strains 
        budgets, legitimacy, and governance, while swelling the ranks 
        of regime opponents.

                         6. EDUCATING THE YOUNG

   Literacy rates remain relatively low in many Arab countries. 
        In only two countries (Jordan and Lebanon) can more than four 
        out of five adults read and write (which, in practice, means 
        ``read and write at the fourth grade level''). More than \3/4\ 
        of adults are literate in Kuwait, while adult literacy stands 
        at between \1/2\ to \2/3\ in Algeria, Iraq, Libya, Tunisia, 
        Saudi Arabia, and Syria. Only about half, or fewer, of adults 
        are literate in Egypt, Morocco, Sudan, and Syria.

   Literacy rates in Iran, Israel, and Turkey are considerably 
        higher. The rapid increase in literacy in Iran since the 
        Revolution is especially notable.

   By comparison, the average literacy rate for lower middle 
        income countries (similar to most countries of the Greater 
        Middle East) is nearly 90%.

   The comparatively low levels of literacy contributes to high 
        fertility rates, low foreign direct investment, and low 
        international competitiveness.

   Adult illiteracy is concentrated among women. In only seven 
        counties of the region can a majority of adult women read and 
        write.

   The past generation has seen a dramatic increase in school 
        enrollments of both boys and girls. Nearly all boys are 
        enrolled in primary school in most countries.

   Nearly all girls, are enrolled in primary school in Algeria, 
        Egypt, Jordan, Lebanon, Libya, Syria, and Tunisia.

   The picture is less rosy in countries like Saudi Arabia, 
        Sudan, Oman, Morocco, and Yemen.

   The waste of human resources continues to be appallingly 
        vast.

   Despite these weaknesses, the region's social structures 
        continueto be transformed: increasingly, most residents of the 
        region are urban, with some education, and with increasing 
        access to information about the wider world.

                  7. SLOWING ENVIRONMENTAL DESTRUCTION

   The costs of environmental neglect may be about 3% of 
        regional GDP.

   Deforestation and soil erosion are particularly serious in 
        parts of Algeria, Morocco, Tunisia, and Yemen. According to the 
        FAO, for example, over 60% of the cultivated land in Morocco is 
        ``severely degraded''.

   Air pollution adversely affects the health of 60 million 
        urbanites, about 40% of all city dwellers. These numbers could 
        rise to 160 million in ten years, if ``business as usual'' 
        prevails.

   Some countries, notably Egypt, could be severely, impacted 
        by global warming; the country could lose 60% of its cultivated 
        area as sea levels rise by 2050.

   Water pollution is a serious problem. For example, Damietta, 
        Egypt, a city of nearly one million people, has no sewerage 
        system. The city depends entirely on the Nile, which is heavily 
        polluted. Up to 40% of the population in the governorates of 
        Dametta and neighboring Daqahuiyya may be suffering from liver 
        and kidney ailments as a result of such pollution.

   As educational levels rise, people elsewhere in the world 
        have become increasingly sensitive to environmental questions, 
        and have become much more demanding of environmental quality. 
        It seems highly unlikely that NESA residents will be any 
        different.

   Suppression of NGOs (the usual advocates for such demands) 
        and restrictions on press freedom simply guarantee still worse 
        environmental problems. As with famine, so with environmental 
        disaster: freedom of the press, and of association, are good 
        for you, as the Nobel Award in economics, Amartya Sen, has 
        amply documented. The parallels of the region with the former 
        Soviet Union are obvious: Unaccountable, corrupt governance is 
        helping to destroy the region's natural resource base and 
        ambient environmental quality.

                            8. SAVING WATER

   Water scarcity continues to rise in the region. Annual 
        renewable water resources per capita today (about 1,250 m\3\) 
        are less than \1/2\ of what they were in 1960. By 2025, the 
        number will probably fall to less than 650 m\3\ (compared to a 
        global average of 4,780 m\3\ per person per year).

   Water use in ten countries--and Gaza--already exceed 100% of 
        renewable supplies.

   Water quantity problems are exacerbated by water quality 
        problems. The latter become increasingly serious as nations 
        seek to solve the ``water quantity'' problem through the reuse 
        of water. Technologies exist to do this safely, but they 
        require extensive funds and careful management. Neither are 
        abundant in the region.

   As everywhere in the world, groundwater over-pumping is a 
        serious problem. In Yemen, for example, water pumping stands at 
        over 130% of renewable supplies. The region is ``mining'' 
        fossil groundwater.

   Powerful interest groups block reallocation and 
        restructuring of the rules of allocation of increasingly scarce 
        water supplies.

   Government water management systems suffer not only from 
        lack of money, but also from managerial cultures which were 
        geared to a situation of relatively abundant water.

   Most water resources in the region are rivers and aquifers 
        which cross international frontiers. There is a sharp clash 
        between economic/engineering logic, which would favor managing 
        a river basin as a unit, and political considerations, marked 
        by fear and distrust of neighboring countries.

                           9. OBTAINING FOOD

   The Middle East and North African region is the least food 
        self-sufficient region in the world.

   Regional agricultures used more land, water, fertilizer, 
        machines, and labor--all just to keep up with population growth 
        during the past two decades.

   Concerns--often obsessions--with food security have driven 
        policy in this sector for over a generation.

   Food security has often been conflated with food self-
        sufficiency.

   Policies to achieve the latter have often had disastrous 
        environmental consequences.

   Water constraints doom dreams of self-sufficiency, a fact 
        which is becoming increasingly apparent.

   There is, consequently, no alternative to increased reliance 
        of ``virtual water'', or food imports to meet future increased 
        demand for food.

   Managing such a strategy requires robust non-food exports, 
        which, in turn, requires significant policy changes.

   Although the burden of food imports fell in most countries 
        during the past decade, serious further challenges lie ahead.

                  10. ATTRACTING MONEY FOR INVESTMENT

   Huge sums of money are required to cope with these problems.

   To create enough jobs to keep up with the growing labor 
        force over the next fifteen years will require about:

          Algeria: $25 billion

          Egypt: $14 billion

          Iran: $31 billion

          Morocco: $30 billion

          Tunisia: $12 billion

   To meet the increasing demand for education in the region as 
        a whole for the next fifteen years may require some $26 billion 
        per year. Spending on education needs to increase by about 20%.

   Very large sums of money are held ``off-shore'' by regional 
        residents. Estimates are notoriously unreliable, but reasonable 
        guesses range from a minimum of $100 billion to over $800 
        billion.

   The region has captured only a very small fraction of global 
        FDI (foreign direct investment).

   The efficiency of investment has fallen during the past 25 
        years (1975-2000).

   All three phenomena--the very large off-shore holdings, the 
        reluctance of foreign firms to invest in the region, and the 
        declining efficiency of investment, are plausibly explained by 
        poor governance, particularly the absence of accountability of 
        governments, and the weakeness--or non-existence--of the rule 
        of law.

                          WHAT IS TO BE DONE?

   The conventional remedy to all of these problems has been, 
        for at least 15 years, the policies of the ``Washington 
        Consensus''.

   As a generalization, macroeconomic ``policy reform'' has 
        been the most successful, as measured by variables such as 
        government deficits as a % of GDP, inflation rates, and (in 
        some cases), real exchange rate over-valuation.

   Sectoral and microeconomic policy change has proceeded more 
        slowly.

   The governance structures created after independence and 
        during the oil boom of the 1970s--state controlled industries, 
        extensive, arbitrary controls, and relative inward-looking 
        trade pictures--remain in place today.

   It is unclear whether changes in such governance structures 
        would, in fact, actually be able to cope with the challenges 
        enumerated earlier. Such changes seem to provide the best 
        management strategy, but there is no guarantee of success.*

   The institutional changes which would be necessary can only 
        come from within societies, because the changes require a 
        strong domestic constituency, and solid domestic legitimacy.

   It is delusional to think that outside intervention--
        especially, military intervention--can enhance the quality of 
        governance. Our historical record in promoting more accountable 
        governance in this way has been poor, and there are strong 
        regional reasons to doubt that the political economy of Middle 
        Eastern countries provides a favorable environment for such 
        externally-driven reform. (See Appendix 2).

------------
    * For a detailed argument along these lines, see my ``Economic 
Reform in the Middle East: The Challenge to Governance'', in Nora 
Behsahel and Daniel L. Byman, eds, The Future Security Environment in 
the Middle East. Santa Monica: RAND, 2004, pp. 57-128.

                               Appendix 2

       DEMOCRACY IN THE ARAB REGION: GETTING THERE FROM HERE \1\
---------------------------------------------------------------------------
    \1\ Alan Richards, Professor of Economics and Environmental 
Studies, University of California, Santa Cruz, USA. An earlier draft of 
this appendix was prepared as a background paper for the UNDP's Arab 
Human Development Rerort, 2004, at the request of UNDP.
---------------------------------------------------------------------------
Introduction
    Successive Arab Human Development Reports have extensively 
documented the ``freedom and good governance deficit'' in the Arab 
region. There is likewise consensus that a ``democracy deficit'' both 
exists and contributes to the other deficits which have been the focus 
of previous reports. Although democracy is no panacea for the problems 
of the Arab region (or of any other region), there are excellent 
reasons to suppose that more accountable governance would certainly 
help, and there are firm grounds to support transitions to more 
democratic governance simply for their own sake.
    A ``democracy deficit'' contributes very strongly to the ``freedom 
deficit'', although, as we all know, democracies can also repress 
dissent and behave intolerantly. After all, freedom, however conceived, 
may be threatened not only by the actions of a repressive state 
apparatus, but also by strong demands for conformity from civil 
society. A transition to democracy would very likely reduce the first 
threat to freedom, which would be a huge contribution to the peoples of 
the region and, indeed, to everyone in the world.
    It also seems clear that a democratic transition would make a 
significant contribution to ``development as freedom'', as Nobel 
Laureate Amartya Sen \2\ has called it. By enhancing accountability, 
democracy would also very plausibly improve economic governance and 
stimulate investment. It could, for the same reason, likewise improve 
environmental protection, and the sustainable growth of the ``wealth of 
nations''. It would almost certainly be an improvement over the current 
scene, in which corrupt elites enrich themselves while plundering 
natural capital, neglecting human capital formation by the poor, and 
impeding physical capital formation by less privileged economic agents.
---------------------------------------------------------------------------
    \2\ Amartya Sen, Development as Freedom, NY: Anchor Books, 1999.
---------------------------------------------------------------------------
    Students of democracy employ various perspectives on 
democratization. Some focus on the meaning of fundamental principles 
such as freedom, equality, participation, and legitimacy. Others 
concentrate on the institutional structures which are needed, such as 
an independent judiciary, a functioning parliament, and human rights 
laws. Still others examine the role and functioning of ``civil 
society'' in stimulating the demand for democracy and freedom. Those 
electing to study ``civil society'' typically try to explain what the 
concept means, why it matters, how it is now faring, and what can be 
done to strengthen it now and in the immediate future. All such studies 
are very valuable for helping us better to understand democratic 
institutions. They tell us much about the question, ``What is 
democracy?'' They also tell us something about ``Who wants democracy?''
    They tell us rather less, however, about two other, critical 
questions: ``Who will effect a transition to more democratic 
governance?'' and ``How will this transition happen?'' They tell us 
little, in short, about how and by whom democracy is supplied. Now, in 
an important sense, such questions cannot, indeed should not, be 
answered a priori, least of all by outsiders. They cannot be answered 
in general, for the region as a whole, simply because of the 
specificity of national experiences, and because of the vast complexity 
of events such as democratic transitions. Large scale historical 
changes of any kind are the product of ``conjunctures''--the 
simultaneous occurrence of many disparate forces. The complexity and 
indeterminacy of such changes is well-reflected in the fact that 
historians and political analysts continue to debate, for example, the 
causes of the French, Russian, Mexican, and Iranian revolutions. They 
likewise dispute, and will continue to contest, why and how democracy 
came to Eastern Europe, Korea, Chile, and so on. Such questions also 
should not be answered in advance, because, after all, the self-
selection of ``who'' undertakes democratic transitions, and how they do 
this, is itself part of the democratic process itself. Such a process, 
by its very nature, can only unfold with the freely given participation 
of the relevant social actors.
    Nevertheless, there remains a place for analyzing both the 
questions of ``Who?'' and ``How?'' One can sketch some broad answers to 
these questions without presuming to provide definitive answers, or to 
pre-empt the actual political process. One may simply point to a few 
important forces and issues which, in the analyst's judgment, require 
the attention of the relevant social actors who, alone, can effect the 
transition to democracy in any country. This brief paper tries to do 
this.

The Concept of ``Pacted Transitions''
    Several insights from the literature on democratic transitions may 
help us to understand both what forces have impeded democratization in 
the region, and how more accountable governance may be enhanced. One 
prominent analysis \3\ distinguishes between two phases of the 
transition, ``extrication from authoritarian rule'', and ``constitution 
of a democratic one''. When the repressive powers of the state are 
intact during the transition (e.g., Chile, South Korea), the first 
process dominates. When these institutions have shattered, typically 
thanks either to military defeat (e.g., Argentina, Greece) or to strong 
civilian-party control of the repressive apparatus (Eastern Europe), 
the second process is ``unencumbered by extrication'', which removes 
(in theory) at least one barrier to success. From a regional 
perspective, however, one should note that in both the Greek and 
Argentine cases, the military defeat shattered the legitimacy of the 
dictatorship, and was not followed by any occupation by foreign forces. 
The salutary benefits of defeat in war for democracy are easily lost if 
these two features are absent, as the current Iraqi situation suggests.
---------------------------------------------------------------------------
    \3\ Adam Przeworski, Democracy and the Market: Political and 
Economic Reforms in Eastern Europe and Latin America. Cambridge: 
Cambridge University Press, 1991.
---------------------------------------------------------------------------
    Especially for a transition which requires a simultaneous 
extrication from authoritarianism and a transition to democracy, three 
features are necessary: 1) a sufficiently large number of reformers 
within the existing regime must reach an agreement with moderate 
opponents of the regime; 2) these reformers must persuade military/
security ``hardliners'' within the regime to cooperate with 
institutional change; and 3) moderates in opposition must contain their 
allies, more radical opponents of the regime. Only if all three 
conditions are met will it be possible for a large enough set of social 
actors to believe that a ``credible commitment'' has been made by both 
current power-wielders and their opponents to follow a set of ``rules 
of the game'' in which ``defeat at the polls'' does not mean 
annihilation. The literature describes (infelicitously, alas) such 
coalitions and their fruits as ``pacted transitions'', so called 
because a tacit agreement or ``pact'' between moderates inside the 
government and in opposition is necessary for a transition toward 
democratic rule.

On the Political Economy of Autocracy in the Arab Region
    Several historical forces have conspired to impede such transitions 
in the Arab region. One major historical force is the dominant position 
of the military and security apparatuses in Arab polities--many of 
whose members are ``hardliners''. The social formation often known as 
the ``Mukhabarat State'' is itself very much the product of the 
struggle against European colonialism and the intersection of that 
struggle with the Cold War between the US and the USSR. For at least 
the first two-thirds of the twentieth century, Arabs governments 
unsurprisingly believed that they needed to be militarily strong to 
protect their often hard-won independence. (The Anglo-American invasion 
and occupation of Iraq has revived these fears.) The continued conflict 
with Israel was and is understandably perceived as an extension of this 
struggle. And, during the Cold War, an authoritarian military regime 
could always count on support from one superpower, provided that such 
an Arab regime made suitable political moves against the other 
superpower. In short, the fact that the often violent struggle for 
independence was followed by a half-century of conflict with Israel, in 
a context of global Cold War, greatly strengthened authoritarianism.
    A second critical barrier to transition has been the ``low 
dependence of states on citizens'' \4\. This is a variant, of course, 
of the ``rentier state'' argument \5\. Although it was first formulated 
in the context of oil rents, it has and should be extended to include 
what we might call ``strategic rents'', as the preceding paragraph 
suggests. So long as authoritarian governments have sufficient 
resources, whatever their other failings, they may have little 
incentive to reform. Oil and strategic location from a Superpower 
perspective have provided--and continue to provide--important barriers 
to ``pacted transitions'' away from authoritarian rule in the region.
---------------------------------------------------------------------------
    \4\ E.g., Mick Moore, ``Political Underdevelopment''. Paper 
presented at the 10th Anniversary Conference of the Development Studies 
Institute, London School of Economics, New Institutional Theory, 
Institutional Reform and Poverty Reduction, London, 7-8 September, 
2000. http://www.ids.ac.uk/idS/govern/pdfs/PolUnderdevel(refs).pdf
    \5\ E.g., Kirin Aziz Chaudhry, The Price of Wealth: Economies and 
Institutions in the Arab World. Berkeley and Los Angeles: University of 
California Press, 1999.
---------------------------------------------------------------------------
    The decline in oil prices in the 1980s and 1990s led to much 
discussion of the weakening of the ``authoritarian social contract'' (a 
presumed tacit agreement, in which the state supposedly supplied social 
services to the citizens, while citizens reciprocated with loyalty and 
obedience). Some Arab democrats hoped that softer oil prices would 
weaken autocrats sufficiently that they would expand the social space 
for political participation and foster greater accountability in 
governance. Unfortunately, however, such a change did not occur on any 
wide scale; further, the current up-tick in oil prices--which many 
economists think will persist for some time--does not bode well for any 
further weakening of the ``rentier state''.

The Prospects for ``Pacted Transitions'' to Democracy in the Arab 
        Region
    A necessary condition for a ``pacted transition'' is the 
willingness of reformers within the state to trust that key regime 
opponents will both ``play by new rules'' and control their more 
radical allies. The problem is fully symmetric: moderate reformers need 
to know that reformist elements within the state apparatus can and will 
restrain hardliners. Understanding the conditions under which such a 
situation can come about seems essential for understanding how and by 
whose agency democracy might come to the Arab region.
    In many Arab countries, the best organized opposition forces are 
those of ``political Islam''. The Islamist movement is huge and 
diffuse, with many national and local variations. Increasingly, what 
were formerly called ``secular nationalists'' in opposition have either 
joined Islamist movements or are co-operating with them politically. 
The logic of transition to democracy implies that moderates within the 
Islamist (and nationalist) camp must be willing to play by democratic 
rules, convince reform elements within the state of their sincerity, 
and maintain control over their radical allies. It seems highly 
probable that such a process will be a protracted and complex one, with 
advances as well as reversals along the way.
    Islamists now participate in elections in Bahrain, Jordan, Lebanon, 
Kuwait, Morocco, Palestine, and Yemen. They have tried to do in Egypt 
(under the banner of the Hizb al-Wasat), where the Muslim Brotherhood 
has made many statements confirming its support of fundamental 
democratic changes, such as fair and free elections, the amendment of 
the laws on political parties and on professional syndicates, and the 
lifting of the Emergency Law. Such changes are called for by all 
Egyptian democrats, regardless of other ideological differences. 
Further afield, Islamists have participated in elections in Bangladesh, 
Malaysia, Pakistan, and Indonesia. Most pertinently here, the current 
governing party of the Turkish Republic is Islamist. Many outside 
observers (e.g., Olivier Roy and Graham Fuller) have noted that there 
exist strong democratic trends within the (still broader) movements of 
``political Islam''. One of them (Fuller) has gone so far as to remark, 
``The charge, `One man, one vote, one time' is no more than a slogan 
wielded by authoritarians and Westerners who fear Islamist power at the 
ballot box''.\6\
---------------------------------------------------------------------------
    \6\ Graham E. Fuller, The Future of Political Islam. NY: Palgrave 
Macmillan, 2003, p. 138.
---------------------------------------------------------------------------
    Nowhere in the world has the transition from authoritarianism 
toward democracy been simple; the Arab region is likely to be no 
exception. Vibrant debates over the relation between cultural 
authenticity and democracy have been going on for some time in the Arab 
region. Yet precisely because Arab authoritarians have remained 
stronger than their counterparts in some other Muslim majority 
countries, an even livelier debate has emerged in Indonesia, Iran, 
Malaysia, Pakistan, and Turkey. Friends of Arab democracy have much to 
learn from these discussions.
    These debates are particularly revealing concerning questions of 
the relationship between interpretations of Islam and various forms of 
democracy. There is no doubt that for Islam, as for other religions, 
(e.g., Roman Catholicism), religious texts may be interpreted to 
prohibit democracy. The fact that some prominent Islamic opposition 
movements (e.g., some Salafis) oppose democracy as an alien importation 
is unsurprising--and hardly decisive. After all, the Roman Catholic 
Church vociferously opposed democracy throughout the late 19th and 
early 20th centuries, yet Catholic Europe is today entirely democratic, 
as is most of largely Catholic Latin America. As noted earlier, 
Islamist thinkers are now finding ways to ensure that democracy in 
Muslim majority countries is culturally authentic. In short, despite 
the deplorably belligerent rhetoric now fashionable in some American 
circles, there is little reason to suppose that the ``culture'' of the 
Arab region constitutes a barrier to the transition toward democracy. 
The political economy model sketched above seems far more parsimonious, 
and therefore, to many analysts, far more persuasive an explanation of 
the absence of democracy in the region than ponderous (and often ill-
informed) theological pontifications.
    Nor is it reasonable to argue that Arab countries are somehow ``not 
ready'' for democracy thanks to their current ``level of development''. 
The correlation between democracy and economic development was always 
rendered suspect by the fact that the world's largest democracy, India, 
was also desperately poor. Current levels of literacy, education, and 
urbanization in the Arab region are certainly high enough to guarantee 
a vibrant democracy--if the critical political barriers can be 
overcome.
    Although much attention has--rightly--been paid to the question of 
whether many opposition forces are willing to play by the rules of the 
democratic game, rather less focus has been directed to the other side 
of the equation: why and how moderate reformers within the regime can 
restrain the hard-liners of the mukhabarat and armed forces. There are 
two broad reasons why those in power resist democratization: simple 
material self-interest, and deeply held ideology. After all, wielding 
the levers of power in an autocratic state permits one to garner 
substantial rents; bluntly stated, tyrants become rich rentiers. The 
hard-liners ask, ``Why should we give up our special privileges, our 
wealth, and our incomes?'' One possible response by would-be 
democratizers could be to show a significant portion of these rentiers 
that democracy threatens their material comfort rather less than they 
imagine. After all, the knowledge and connections which such people 
enjoy will continue to be valuable in a democracy. Such a conclusion, 
after all, seems to have been that drawn by many of the former Soviet 
nomenklatura.
    Economic and status benefits do not fully explain autocrats' 
reluctance to forge a pacted transition, however. Ideology also 
matters. The ideological opposition to sharing power which emanates 
from government circles is usually framed in nationalist terms. Here 
too, however, Arab democrats have opportunities. After all, autocrats 
have done rather poorly in defending Arab rights in the international 
order. The argument that democracy holds out considerably greater hope 
for whatever genuine national autonomy remains possible in today's 
globalized, interdependent world may find a friendly hearing among 
forward-looking military officers. After all, for nearly all of these 
men, patriotism runs very deep. It is at least possible that an 
Islamist-nationalist opposition could forge a ``pact'' with patriotic 
reformers within government. The devil, as always, will be in the 
details of the pact, the levels of trust of the respective parties, and 
the conjuncture within which the pact is negotiated. But such a pact 
seems to offer the best prospects for a transition to an authentically 
Arab democracy.

The Difficult Conjuncture of the First Years of the 21st Century
    The key point is that the barriers to a transition away from 
authoritarianism toward democracy in the Arab region are fundamentally 
political. Unfortunately, current developments are far from encouraging 
here. The continued, increasingly brutal Israeli occupation of the West 
Bank and Gaza has not only destroyed whatever nascent democracy may 
have been emerging in Palestine, but has also greatly increased the 
nervousness of Arab security services and militaries everywhere. The 
fact that the world's sole superpower simply refuses to restrain the 
Israeli government helps to ensure that the conflict will get worse, 
not better. Such a situation, in addition to being a grave and on-going 
human rights disaster, impedes ``pacted transitions'' toward democracy 
by encouraging both hardline authoritarians within governments and 
extremists in opposition. The American invasion and occupation of Iraq 
has further increased the already high level of nervousness among Arab 
military and security elites, while greatly strengthening the popular 
appeal of the arguments of anti-democratic radicals such as those of 
al-Qaeda.
    The American reaction to the events of September 11, 2001 has also 
provided a poor environment for ``pacted transitions''. From a 
political economy perspective, the main result of the post 9/11 policy 
shifts in the US has been to ensure that any authoritarian who 
resolutely pursued violent enemies of the US could depend upon US 
support. Such a policy stance, of course, further bolsters hardliners 
within authoritarian regimes, giving them fewer reasons than before to 
seek accommodation with opposition elements.
    The final barrier, then, to a transition to democracy in the Arab 
region is that the world's sole superpower does not really want it to 
happen, pious neo-conservative rhetoric notwithstanding. As Talleyrand 
famously remarked, ``Nations do not have friends, they have 
interests''. So long as ``American interests'' in the Arab region are 
defined as they are currently, namely, 1) support for Israel, 
regardless of her occupation policies in the West Bank and Gaza, 2) 
opposition to any single state having even short-run market power over 
oil prices, and 3) opposition to any regime which might harbor 
terrorists, US policy actions (as opposed to rhetoric and marginal 
activities, such as some support for some NGOs) are likely to undermine 
``pacted transitions''.
    This is fundamentally the case because the opposition in nearly all 
Arab countries is dominated by the forces of political Islam. Would the 
US really welcome a ``pacted transition'' in which, say, moderate 
Muslim Brothers and reformist, patriotic generals in Egypt agreed to 
share power? Even assuming that the thorny internal problems of 
``credible commitment to the democratic rules of the game'' had been 
surmounted, wouldn't the US oppose such a government--a government 
which would certainly vociferously oppose current American policy in 
Palestine and Iraq, for example? Given the current balance of forces in 
the world today, wouldn't that opposition endanger the transition?
    The situation in the Arab region today resembles that of Latin 
America during the Cold War, when American paranoia about Marxism 
undermined existing democracies and blocked nascent ``pacted 
transitions''. As in today's Arab region, the internal and external 
obstacles to a democratic transition helped to create and reinforce one 
another:, the US strengthened hardliners (and, therefore, also radicals 
in opposition), partly because it feared that Marxists would not play 
by the democratic rules of the game if they won elections. Moderates in 
opposition were weakened, because radicals could plausibly argue that 
winning an election would be meaningless, since the hardliners, with US 
help, would engineer a coup to overthrow an elected opposition 
government. Substitute ``Islamist'' for ``Marxist'', and you have a 
reasonable picture of the key dynamics currently thwarting a transition 
to democracy in the Arab region.
    Friends of such transitions, in the Arab region and in the US, will 
have much work to do in the months and years ahead. Some of us hope 
that the recent Turkish election may set a standard of an elected, 
truly democratic, Islamist government. If hardliners in the Turkish 
military, radicals in the Turkish opposition, and the US government can 
all refrain from undermining the current government, the Turkish case 
could set an important precedent for the Arab region. If so, progress 
toward closing the ``democracy deficit'' may accelerate.
    It would also greatly help, of course, if the world's only 
superpower reversed its current declared policy of unilateral military 
intervention, as well as modified its opposition to the accession to 
power--democratically--of the forces of political Islam. Unfortunately, 
current political and cultural trends in the United States are not 
encouraging in this regard. Until these trends are reversed, 
democratization in the Arab region will continue to face difficult 
obstacles. In these grim times, however, it may be helpful to remember 
how quickly historical tides may shift. We can only hope that such a 
shift may be forthcoming, and soon.

    The Chairman. Thank you very much, Dr. Richards.
    Let me state at the outset that I appreciate the work that 
Dr. Cronin has done on the Millennium Challenge idea. Clearly I 
referenced that as a model of how our own efforts are 
proceeding. I think you have offered, Dr. Richards, some very, 
very important thoughts about the Millennium Challenge if we 
are anticipating intrusion or attempting to wring out results 
from many of the countries in the Middle East that we are 
talking about today. Indeed, we were attempting to avoid the 
patronage trap that Prince Hassan mentioned earlier on simply 
because, as a practical matter, it really will not work. 
Unfortunately, as you point out from your recent conference, 
the Pew Foundation and others have found very, very deep 
resentment of our country, well beyond that perhaps, in the 
expressions of a few.
    As you say, it is a daunting task to be talking about how 
some changes in which we are involved might occur. I tried to 
point out in my dialog with Prince Hassan that Americans are 
interested in change, both from a humanitarian standpoint and 
from a political one. I suppose, with some optimism, that the 
American people, hope to foster the expression of democratic 
sentiments, freedom of the press and speech and so forth. These 
are likely to make the world safer in due course, although 
maybe not initially. Both of you point out that democratic 
governments in the area that we are talking about might be very 
hostile to us also. There may be expressions of people in that 
democracy who are not finding what we are doing to be any more 
compatible than those that are not so.
    Let us say that we, just for sake of argument, had a Trust 
fund and the United States has made a generous contribution to 
the fund. Likewise, some of the members of the G-8 decide to 
make contributions. Maybe, as I suggested, Saudi Arabia might, 
too, although this is simply a hypothetical case. But there 
could be other countries in the area who have some wealth that 
would find this to be a useful vehicle. If so, that would make 
the dialog among those that were setting up either criteria for 
objectives, or who gets the money, more meaningful, I suppose, 
the more cosmopolitan and wider the group.
    What sort of proposals are likely to come from any nation 
at this point? In other words, for the thing to work, the Trust 
fund is set up and the money is there. The assumption is that 
often with trust funds people are brimming with ideas of 
candidates for change. They are eager to compete for the 
resources.
    But is this so? Is it likely that there would be a line of 
potential recipients who would want to make use of this? There 
are some skeptics who would say that there is not going to be 
much of a line as a matter of fact. You are waiting for 
countries to come to the Trust fund and suggest ways that they 
might do things. We heard earlier today about microbanking and 
loans of this sort, certain literacy projects, maybe even 
humanitarian health objectives. But that is not exactly why we 
are headed into this fund. There are other funds that handle 
these sorts of things, although this one might be well advised 
to head down that path to buildup some trust.
    Do either of you have any idea of who the potential 
recipients might be? Why would anybody would be interested in 
the concept, and would anybody come to the party?
    Dr. Cronin. Thank you, Mr. Chairman. I think there would be 
people interested in receiving these grants from a Trust fund. 
Obviously, the context does cloud the issue, but I assume this 
context can improve and change with time. This is not a fixed 
state.
    We looked at this issue, in fact, post September 11 at the 
more than 100 activities we are already conducting at USAID on 
the ground throughout these countries, and we had relatively 
few missions in the Middle East. We had Jordan and Egypt, of 
course, but we only reopened Yemen subsequent to that. We were 
actually drawing down in Morocco. And a lot of these countries 
were wealthier countries where we did not have missions on the 
ground, although clearly we had embassies. So you have a 
variety of different levels of interaction. Along the lines of 
the three areas I mentioned, political reform, education 
essentially, and economic opportunity, there was a range of 
activities and a range of abilities for civil society, whether 
in Alexandria, Egypt, for instance, to create an open space of 
civil society there, or in Cairo, whether to help train 
journalists, again create space that way, or whether it was 
much more focused on microenterprise, small, medium enterprise 
loans and grants to set up a business to really supplement 
education.
    A couple of cautionary note, just in terms of the 
discrepancy. Outside of the Middle East proper, I think of 
Pakistan in the late 1990s, the World Bank focused all of the 
donor money on a so-called social action plan to really help 
health and education, which are lagging behind. At the end of 
spending $8 billion, the exact same amount was being spent per 
capita in Pakistan on health and education as before the $8 
billion from outside went in the country. So there is this 
black hole where you could pour in a lot of outside money and 
not change the situation at all, which is why getting to 
specific goals in an agreement is useful and then coming up 
with specific plans that, based on their own merits, are 
essential and they have to be audited and look at the results. 
I think you can find, again, a whole array of different 
activities that could be very helpful.
    Governments may want to opt more for the social action plan 
kind of approach of essentially budget support. Civil society, 
individual organizations may also opt for a much smaller level. 
Does it add up to national change is a good question.
    And maybe related to my colleague's very poignant 
testimony, one of the challenges we face as a government is 
whether or not we can engage Islam. In Indonesia, again to take 
a non-Middle East example, look at what we have failed to do on 
the ground with very successful aid programs. We have not 
engaged the two largest Islamic organizations that are actually 
responsible for promoting democracy in Indonesia and a moderate 
form of Islam as well.
    The Chairman. We heard from the multinational bank hearing 
that we conducted, that there is a desire on the part of many 
countries for so-called budgetary support. That should not be 
ruled out. In fact, the multinational banks have made a lot of 
such loans. But I think as you pointed out, Dr. Cronin, it is 
very important that there be some third-party auditing that is 
pretty good because speaking of black holes, if you were going 
on the budgetary support of the United States, you could lose a 
lot of money very rapidly and not have much to show for it. 
Unhappily that has been the case sometimes elsewhere.
    On the other hand, one of the problems of all the third-
party auditing are the charges of intrusion that somehow or 
other you are reaching in and examining how the government 
works, which indeed you are doing. One of the dilemmas in a 
government that has a fair degree of corruption--and many 
governments do--is that there may be some whistleblowing and 
some political embarrassment from the whole process.
    Now, how all of this is to be separated while doing good 
defys a lot of very wise people, but needs to be thought of in 
advance as we initiate some new situation, particularly given 
the antagonism toward the United States. This would perhaps be 
mitigated by the international quality of the Trust fund, by 
the board of directors, by those doing the job, and so forth. 
So at least the blame would be spread more widely. But even 
here, it could be placed on the wealthy countries. If you have 
just the G-8, perhaps the antagonism would be not just toward 
the United States but toward others, the haves as opposed to 
others that have not.
    I think these are questions that we are wrestling with in 
this dialog. The purpose of the hearing is to try to flesh out 
for our own government some issues that I think they must 
address.
    Yes, Dr. Richards.
    Dr. Richards. My response to your question would be to 
stress the importance of the context. The context is all 
important. If there is progress, perceived-to-be progress in 
the region on what Senator Biden described as the two elephants 
in the room of Iraq and the Israeli-Palestinian conflict, 
first, and second, if there is genuine change coming internally 
in the region in the form of what I view as--after all, 
democracy is a political process, as Prince Hassan has said. 
This process is domestic and it is fundamentally political. And 
if there is this ongoing kind of a pact, a tendency toward a 
deal between the moderates in opposition and the moderates in 
government, then all kinds of things are possible. We might see 
proposals covering the whole range of the things that Dr. 
Cronin outlined: civil society, economic restructuring, 
education. You might see a lot of them.
    But if those things are not taking place, either the two 
elephants or the internal political deal necessary to get a 
kind of democracy of whatever sort functioning, then I think 
there are two dangers. One danger is that anything that we do 
will really not matter very much because without that internal 
deal, we are really just putting Band-Aids here and there. And 
second, it could even be worse. As you know well, we could be 
perceived to be the Judas kiss, the kiss of death, that the 
United States is embracing these people and they want nothing 
to do with us.
    So I would just stress the answer to your question will 
depend almost entirely on the context.
    The Chairman. On that context issue, we just heard Prince 
Hassan suggesting perhaps temporarily that this be confined to 
what he described as 40 million people, Iraq and Palestine and 
Israel and maybe Jordan, because that is a context in which 
these two basic political issues have to be addressed, and some 
progress presumably has to be made. Others might not agree with 
the narrowness of that idea, but it certainly does address the 
situation that you have just discussed.
    I will yield to my colleague, Senator Brownback, for his 
questions.
    Senator Brownback. Thank you, Mr. Chairman. Thank you, 
gentlemen, for being here.
    I appreciate your thoughts that you are putting forward. 
Particularly Professor Richards, I was looking at your 
conclusions about a half century ago we thought we could shape 
what was taking place in China; we failed. We thought we could 
shape things in Southeast Asia; we failed. We thought we could 
shape things in Russia; we failed. I would look at all that and 
wonder, well, then maybe we should not be trying here at all.
    But I would also suggest to you maybe you are reading it a 
little harsher in the history. A number of those countries are 
moving much in the direction of open societies and democracy, 
and while our efforts perhaps were not as successful as we 
would like and not moving as fast as we would like certainly in 
places like China and in others in that region, there has been 
a movement overall clearly toward an open society and democracy 
in those regions even though our attempts may not have been as 
successful as we would like. So reasonable efforts with 
reasonable goals should be our design, but most of all, I think 
we have to stand on principles and do the best we can ourselves 
of being a good democracy, of being a solid country, of trying 
to walk wisely.
    The other thing I would really question--and this is 
something that I have been troubled about since being on this 
committee. When I first became a committee member, I chaired 
the Middle East Subcommittee and held a number of hearings and 
met with a number of Arab leaders, traveled the region. Every 
one of them blamed the Israeli-Palestinian conflict for 
anything that happened in the region. That was their summation 
of basically any problem that took place. Well, if you could 
resolve the Israeli-Palestinian conflict, everything goes away. 
If you could resolve that, we would have better education, we 
would have open societies, we would have virtually everything. 
And I listened and for a period of time I thought, OK, I can 
see how that is an irritant and a difficult thing in the region 
and we should be paying attention to it.
    We, by that point in time, had invested a good 20 years in 
kind of a land for peace or some different type of design of a 
little land for a little peace type of arrangement. We were on 
Oslo at the time. We had preceded that with other types of 
discussions, of trying to get some resolution within the 
region. All the while, it seemed to be a very useful excuse for 
a number of the Arab leaders not to engage democratizing or 
opening their societies up or providing for real economic 
opportunity or involving women in the society. So the more I 
looked at it and studied it, I thought, while this is a key 
issue--there is no question about it--for too long it has been 
used as an excuse not to engage and to open up a society and to 
educate greater their own people, to open up for more democracy 
and human rights and religious throughout the region.
    So while I think we clearly need to be engaged in the 
Israeli-Palestinian conflict--and right now we have difficulty 
with that of having an interlocutor on the Palestinian side 
that we can work well with--I just do not think we should allow 
that sort of blame game to be played on us by the Arab 
leadership in the region and saying the rest of this does not 
move forward effectively without this moving forward 
effectively. I would hope that we would push both, but push 
them separately and independently, and not have the linkages be 
made nor allow the linkages to be made.
    Now, people are going to draw their own conclusions and 
believe what they want to believe themselves. We certainly 
cannot change that. We can try to be as wise and as humble in 
our own policies as possible and not do things that exacerbate 
it maybe more than we need to. But these need to be pushed on 
separate tracks and independent of each other and pushed 
regardless of each other.
    Having open societies in the Arab world and human rights, 
religious freedoms, gender equality, is good in that region. It 
is good for the people there, and it is a fundamental principle 
on which we stand. And we push these principles everywhere and 
people can accuse us of heavy-handedness or whatever they would 
like to. But these are things that we have stood for and they 
have stood the test of time. We are at our best when we stand 
on principles and at our worst I think when we forget them and 
try to say, well, OK, we cannot really do that here because we 
are hunting for al-Qaeda now and we need to work with this 
dictator in this particular country or this monarch in that 
country because he is helping us with al-Qaeda. That is useful.
    But we did that model in the 1970s in Central and South 
America where a number of countries were headed by dictators, 
military dictators, but they were not Communist and we were 
against the Communists. So we worked with these dictators, but 
the people resented it and it hurt us on a longer-term basis 
because we did not stand on our own principles.
    So I would hope we would not just play into the blame game 
in the region but we would just stand on our principles that we 
have stood for, that we have stood for around the world, that 
we have been hesitant about standing on in the Middle East and 
the Islamic world for various reasons, but we have been 
hesitant about standing on principle there. I think we would be 
far wiser to do that and to do modest measures that, while they 
may not be as successful as we would like, continue to point 
the way toward open societies, free societies, and that people 
that are vested themselves in their own societies are the most 
motivated and produce the greatest abilities and the greatest 
opportunities for people of a country.
    That is long to say that I can see some possibilities here 
in what Senator Lugar has, that you have as well, but my 
rationale at coming at it would be somewhat different from the 
support that you look at it.
    I do hope, Mr. Chairman, we can work on these sorts of 
issues in a modest framework where we are after big goals but 
realize the limitations of what we can get done. Thank you, Mr. 
Chairman.
    The Chairman. Thank you very much, Senator Brownback.
    Let me just followup the Senator's question and statement 
by asking, in the Greater Middle East situation, what 
difference does the presence of madrassas schools, and the 
large number of young people who come from that type of 
training, make in relation to the matters that we are talking 
about today? Pessimists would say that there are some countries 
in which a large number of students have very little prospect 
of an education, aside from these religious-oriented schools. 
The extremism that comes into their lives, and their 
motivation, does not make them candidates for the hopeful 
policies that we are discussing today. It may be that they have 
a theological view that people who are outside of their way of 
thinking are enemies. As a result, they engage in conflict.
    Clearly, as we have all been discussing, on the security 
side, leaving aside the humanitarian side, this is a serious 
problem. These people seem to form the cores of terrorist 
groups or of those who sympathize with them and who sort of 
cheer them on. That is really daunting, leaving aside general 
antipathy toward the United States or the West or so forth. 
What if in those societies there are people, in fair numbers, 
with this kind of extreme commitment? How do we meet this 
problem? Do you have a thought about that, Dr. Richards?
    Dr. Richards. If we had about 5 days, we could talk about 
that. It is such a huge topic.
    Maybe the most useful thing I could say is I was asked to 
write a short monograph for the Army War College, which is in 
their monograph series, that is called ``Socioeconomic Roots of 
Islamic Radicalism.'' It talks about these different things and 
makes some suggestions about the way we might best deal with 
this kind of phenomenon.
    Your specific question about the madrassas schools depends 
very much on what country you are talking about. In Pakistan, 
yes, it is an important thing. In Egypt, it is really quite 
minor, and so forth. It all depends on where exactly you are. 
In Yemen, they exist but some of them then join the Islah Party 
which is an Islamist party, but which nevertheless interacts in 
the government and is not necessarily that they do not like a 
lot of American policies, but they are not a violent threat to 
us necessarily. So it all depends on the specifics.
    More generally, I would say part of perhaps the key of the 
daunting task that we face is that today from Morocco to Iran, 
there are something like 300 million people. Nearly two-thirds 
of those people are under 30 and half of them are under 20. 
Another 100 million will be added by 2015. We are facing the 
largest generation of young Arabs and Muslims in the history of 
the planet. We all know from our own experiences in life that 
what happens to us politically when we are young shapes the way 
we think for a long time. After all, look at my own baby boom 
generation with the disparate experiences of Vietnam. It shaped 
people's politics.
    What is going on right now is absolutely poisonous in the 
region because, it seems to me, to be quite blunt, Osama bin 
Laden is winning. He is doing very well not in the military 
sense. It is not a military conflict except in part. It is a 
political conflict. And the thing that disturbs me the most is 
that his poisonous message is finding many more recipients, 
much more friendly reception in all kinds of different circles, 
not just in the madrassas. But these kinds of things that my 
friend, John Waterbury, mentions, all of this sort of thing is 
what disturbs me the most.
    I think your proposal can help this, but it all depends on 
the context. It all depends on what else is going on and what 
else our own government is doing and other things that are 
happening over which we have no control. One of the things I 
very much liked about your proposal was precisely the humility 
borne, no doubt, of your great experience in understanding that 
the United States can really only do certain things. We can 
only do so much. As Dr. Cronin has said, there are all kinds of 
examples from elsewhere in the world where we are simply not 
capable of doing things. As I said in my remarks, we Americans 
are a very impatient people. We like results right away. This 
is not going to happen in this particular area.
    The Chairman. Well, thank you for your comment about my 
proposal. It is modest because I suspect that probably the 
overall thoughts you have just expressed are the more difficult 
challenge that we have. I have gone forward with this idea in 
large part because our government officially has come forward 
with a proposal, which it was planning to go to the G-8 with, 
is visiting with other countries about, and which was running 
into some difficulty which you and other witnesses have 
described. So as opposed to simply being an arm chair critic 
and saying you folks you are not doing very well, why, you try 
to step up to the plate and offer a suggestion.
    But the context, the background for this is really so 
important. The idea of daunting, which keeps coming up, is 
clearly there.
    Just out of curiosity--and you are probably right this is 
sort of a five-chapter, five-session situation--when you make 
the comment that Osama bin Laden's message is getting greater 
resonance with young people--and you suggest half of the 300 
million are under 20 and so forth--why? What are some of the 
reasons why that would be a winning message?
    Dr. Richards. These reasons would include, but not be 
limited to, first, the kinds of socioeconomic problems that 
have been alluded to at various times in testimony today. The 
simple way to say it is this generation is, first, very large. 
Second, there is widespread unemployment, particularly 
typically concentrated among those with some education. So they 
have some education, no jobs, living in cities for the first 
time, cities that are crumbling where the only place that is 
calm and quiet and cool when outside is dusty and noisy and hot 
and chaotic, is the mosque. Further, their governments are 
perceived, with some reason too often, to be illegitimate, 
autocratic, unresponsive. So they are very angry at their 
governments. Their societies are not producing what they need. 
Yet, they have some education and there is this huge ferment 
going on about, well, how do we cope with these kinds of 
problems. So far, the kinds of arguments that appear to be in 
the region the most culturally authentic are those of political 
Islam of one sort or another.
    As I stress, Osama bin Laden is only an extreme loony in 
that huge political movement. There are many kinds of political 
Islamism that we can easily work with. That is the critical 
task. We need to be able to make those kinds of distinctions, 
and to some extent, we already are doing this, but doing this 
better, more often, and more thoroughly would be absolutely 
crucial.
    Finally, of course, when these young people see on 
television all the time--they are just like everyone else. They 
may not have the same Internet access because their governments 
block it, but they have access to television and they can watch 
it, as you know well, in their own language. They watch al 
Jazeera. They watch al Manara from Beirut. They watch all these 
things and they can see the kind of violence, of course, spun 
in that one way as our news is spun in another way, and this 
has an impact on people.
    So these are just some of the features.
    The Chairman. Dr. Cronin, do you have a comment about any 
of this?
    Dr. Cronin. Well, the one thing I would add, Mr. Chairman, 
is that we also have weak state institutions in many cases on 
the educational side. So there is very little of a 
counterweight to madrassas, if they happen to be radical. Dr. 
Richards is right. This is a much bigger problem in Pakistan, 
for instance, which has some 10,000 madrassas but maybe only 1 
percent may be radical, but still, maybe that is a bigger 
number now than a year ago. Who knows?
    In any event, the fixing of state educational institutions 
in large countries like Pakistan and Egypt are a huge 
challenge. Just as I mentioned the social action plan failed in 
Pakistan, Egypt's education bureaucracy may be one of the 
worst. So it is a very, very daunting challenge even for well-
intentioned and logical trusts to try to fix quickly. This is 
going to take a generation. We hopefully have to deal with this 
huge Arab youth bulge, but look out a generation from now and 
hopefully have done a better job at promoting reform and 
partnership than we have done maybe in the past 20 years.
    The Chairman. Well, can ideas such as the ones we are 
talking about today, whether they be a trust or grants or what 
have you, make an impact upon educational systems in countries? 
We have problems reforming education in our country because 
people do have status and they do things the same way. 
Obviously, there has to be some substitute for the madrassas, 
or for whatever else fosters extremists. But how we intrude 
into those societies and effect some marked change, even in a 
generation, is not really clear to me. I ask the two of you. I 
think it is probably an important objective, but it may be a 
bridge too far in these initial efforts. I am not certain. 
Would anybody step up and apply for educational grants if we 
had a trust and that type of opportunity?
    Dr. Cronin. Well, I think, first of all, you would see the 
governments interested in trying to provide greater budget 
support. The question is could you structure that budget 
support and audit it in a way that it would be helpful. We ran 
into this problem with Pakistan right after the Afghan war in 
trying to structure assistance to Pakistan. I am not sure we 
did the best job. You could maybe insist upon a bit more 
intrusive accountability if you have the government requesting 
this assistance obviously.
    I think the answer is yes, Senator, there are ways: UNESCO 
from the United Nations education organization, to working with 
NGOs, to providing direct government assistance, to indigenous 
groups in these countries. There are a number of ways to 
provide educational support.
    In Egypt, for instance, they wanted to focus mostly on the 
top level of education that leads to jobs. So that might mix in 
something like, ironically, information technology, the 
Internet, which is being repressed, as Dr. Richards said. But 
if you could imagine Cairo University, this Internet 
university, opening up political space, in tandem with taking 
technical assistance so that the Egyptians could take a leading 
role in the Internet and an information-based economy that 
would lead to real jobs for some of these people, I think that 
could be one small way of making some tangible progress. But it 
does rely upon the right political space in Egypt. It relies 
upon the right regulatory environment so you can make this more 
equitable.
    So from basic education, you can support these programs. 
They are well established through a number of international 
organizations. The secondary and higher education is something 
that is less well funded. There is our own exchange question 
about our own ability to bring our knowledge and to transfer it 
to build our own capacity, our Arab-speaking abilities up to 
speed. These programs have atrophied internationally, not just 
toward the region. Those could be supported somehow. English 
language is something that is attractive regardless of the 
views of the United States policy I believe.
    I think the question of finding other ways for increasing 
information through a free press, just as the Arab media have 
essentially multiplied, I think there are ways, even within the 
constraints on a free press, to try to encourage 
professionalism and the flow of information in a way that could 
be very constructive for longer-term reform and even economic 
growth.
    That is a very long answer, Senator. There is no easy way, 
but I think there are proposals out there that could be 
effective in addressing this on a country-by-country or a 
regional basis within a country.
    The Chairman. Dr. Richards.
    Dr. Richards. I agree with most of what Dr. Cronin said. 
Let me just add two additional small points.
    First of all, it seems to me that the function of proposals 
such as yours, should it come to be enacted, is not really even 
so much the specific grants that are made. I know some friends 
of mine who work for the World Bank tell me that it is not so 
much our World Bank loans that cause change. The existence of 
those loans really undergirds our policy dialog between the 
bank and the government about what kind of policies we should 
have.
    So I think an analogy here may be appropriate with your 
Trust proposal. It could be, under the right conditions, given 
a favorable context with those two dimensions of the context 
that I mentioned before, that in such a context it might 
promote the kind of policy dialog, for example, on the 
education front. Suppose, for example, that there were an Arab 
government that was undergoing some kind of transition to a 
genuine democracy where people at fairly high levels in the 
government were energized and fully believed the findings of 
the Arab Human Development Report of last year, of 2003, which 
is all about, as you know, education. And suppose then through 
that, they came up with some specific proposals and then came 
to the Trust. Well, under those circumstances, many things 
could be possible. Obviously, you would have to look at the 
specific proposal and so forth, but it could easily do things 
and we could promote a kind of a dialog and help.
    But that is really all we can do. We have to let them make 
proposals and work together with them, we, other members of the 
G-8, and countries of the region, formulating these kinds of 
proposals.
    The Chairman. That is an important comment, that the Arab 
report of 2003 does go into education. So if you were 
attempting to find some chapter and verse upon which people in 
some countries might want to act, it is an Arab proposal and 
indigenous in that respect.
    Dr. Cronin.
    Dr. Cronin. Mr. Chairman, could I just add one other 
thought that occurred to me? And that is that it would also 
help with your Trust proposal if the Saudis, for instance, were 
contributing to this, then that vehicle would be seen as a 
positive way of working where those funds could go, as opposed 
to sending charitable funds to radical madrassas which could be 
exacerbating the problem rather than solving the issue.
    The Chairman. I appreciate that comment. I would mention 
that these endorsements I suppose are conditional and 
superficial, but after the Brookings speech, Prince Bandar went 
out of his way to indicate that he found a lot of merit in this 
proposal. Since Saudis were named as a potential donor, why, 
that was more significant perhaps, but interesting. Likewise, 
Prince Hassan, whom we heard today, has been interested not 
necessarily in my proposal but in this general area of trying 
to think through how our government might be constructive. He 
realizes, as we do, that it is very important that we do the 
right thing if we are hoping to be successful. We certainly do 
hope so, given all the challenges that you both have mentioned 
and other witnesses.
    Well, I thank you again for coming and for your patience in 
an extensive hearing, one which I think has been helpful.
    Dr. Richards. Thank you.
    Dr. Cronin. Thank you very much.
    The Chairman. Thank you very much, and the hearing is 
adjourned.
    [Whereupon, at 12:46 p.m., the committee adjourned, to 
reconvene subject to the call of the Chair.]

                                 
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