News / Middle East

Economic Issues Plague the Arab Spring

Tough economic times spark a demonstration in Cairo shortly after the Arab Spring began in 2011 and as the IMF agreed to provide Egypt with $3 billion to deal with the hard times..  Tough economic times spark a demonstration in Cairo shortly after the Arab Spring began in 2011 and as the IMF agreed to provide Egypt with $3 billion to deal with the hard times..
x
Tough economic times spark a demonstration in Cairo shortly after the Arab Spring began in 2011 and as the IMF agreed to provide Egypt with $3 billion to deal with the hard times..
Tough economic times spark a demonstration in Cairo shortly after the Arab Spring began in 2011 and as the IMF agreed to provide Egypt with $3 billion to deal with the hard times..
Mohamed Elshinnawi
Activists in much of the Arab world often risked their lives two years ago to change what they considered to be outmoded, unresponsive and sometimes authoritarian political systems.

The movement, which came to be known as “the Arab Spring,” did manage to dislodge several long-standing regimes – Moammar Gadhafi’s 42-year rule in Libya, Ali Abdullah Saleh’s 33 years in power in Yemen and Hosni Mubarak’s 30 years running Egypt.  It also triggered a bloody civil war that threatens the 41-year Assad family dynasty in Syria.

But what the Arab Spring hasn’t done – at least not so far – is to bring about positive changes in the economies and social development in the North African and Middle East nations whose politics it most transformed.

Some of the Arab countries, Egypt and Tunisia are examples, share common socioeconomic challenges – large budget deficits that preclude large-scale public spending on stimulate the overall economy. Public spending in these countries remains focused on financing public salaries and subsidies on common consumer products.

Another big problem, according to Nemat Shafik, deputy managing director of the International Monetary Fund, is that Arab Spring countries haven’t decided what kind of economy they are trying to create.

Unlike East European countries that chose the European Union’s economic model following the collapse of the Soviet Union two decades ago, Shafik says Arab Spring countries still don’t have a clear vision of their economic future.

"Much of the uncertainty that we see now is a reflection of the lack of consensus about a role model for economic strategy or political strategy of what the destination point is," she said during a recent seminar at the Carnegie Endowment for International Peace in Washington.

This lack of a clear, coherent economic vision, however aspirational, is a problem throughout the Arab Spring nations, according to Ibrahim Saif, a senior associate at the Carnegie Middle East Center in Beirut. He says it creates a climate of insecurity that affects all sectors of an economy.

"The tourism industry, for example, which is viewed as the most important contributor to foreign currency inflows and job opportunities, has been hit particularly hard by the security gap," Saif said.

Bread or freedom first

But Marwan Muasher, a scholar at the Carnegie Endowment for International Peace, says the Arab Spring nations need to work on political reform as much as reforming their economies.

"It is difficult to encourage foreign investment if there is no independent judicial system," Muasher says. "And it is hard to curtail corruption without an independent press or a strong parliamentary system."

The IMF’s Shafik says the political reforms must be applied in all areas of government as well as civil society.

Commerce goes on as it has has for centuries in Sana'a, capital of Yemen, despite the political upheavals of the Arab spring.Commerce goes on as it has has for centuries in Sana'a, capital of Yemen, despite the political upheavals of the Arab spring.
x
Commerce goes on as it has has for centuries in Sana'a, capital of Yemen, despite the political upheavals of the Arab spring.
Commerce goes on as it has has for centuries in Sana'a, capital of Yemen, despite the political upheavals of the Arab spring.
"Business environments should stop favoring privileged groups; economy has to be more export-oriented; education and labor skills have to be improved and untargeted subsidies should move away to a modern social safety net targeting the poor,” she said.

Shafik said the IMF has already restructured its loan policies to reflect those requirements.  Loan recipients must now revamp untargeted consumer subsidies that are not helping the poor, but instead end up helping the established better off classes. As an example, she cited subsidized fuel prices.

According to the International Energy Agency, the Middle East and North Africa regions accounted for almost two-thirds of petroleum price subsidies worldwide in 2009.

"Most of the price subsidies in the world are in this region… as many countries elsewhere have abandoned price subsides and moved to better systems of social protection," Shafik said. Such untargeted subsidies eat up up 22 percent of government revenues, she adds.

"There are many ways to target the poor, either by subsidizing the goods that poor people consume, targeting regions where the poor people live, or by providing cash transfers or coupons," Shafik said.
 
Where is the money?

Fixing the situation would require an enormous amount of money, money that simply is not available.

The IMF estimates Arab Spring nations would need more than $160 billion over the next three years to jumpstart their economies – this at a time when they are in political turmoil and commodity prices are rising.

The United States recently released $250 million of a $1 billion economic relief package to Egypt to help the Egyptian government get an IMF loan.
 
But Muasher notes that this is an exception and a tiny sliver of what’s needed. Western donor countries as well as the IMF, he says, are not in a position to offer much more because of the global economic decline.

Bessma Momani, a senior fellow at the Center for International Governance Innovation in Waterloo, Ontario, expects financing to be the toughest challenge.

"There is some view that perhaps a portion of the needed investment could come from the emerging market economies of Brazil, Russia, India and China," Momani said. "From the Middle East side, investment could come from capital-rich Turkey and the Gulf countries."

But she emphasized that none of this needed foreign investment will be possible unless the Arab Spring nations achieve some measure of political stability. And in some countries, such as Egypt, she said there are even factions discouraging outside investment for fear of political interference.

You May Like

Photogallery South Africa Bans Travelers From Ebola-stricken Countries

South Africans returning from affected West African countries will be thoroughly screened, required to fill out medical questionnaire, health minister says More

Multimedia UN Launches ‘Biggest Aid Operation in 30 Years’ in Iraq

Move aims to help thousands of Iraqi religious minorities who fled their homes as Kurdish, Iraqi government forces battle Sunni insurgents More

Video African Media Tries to Educate Public About Ebola

IT specialists, together with radio and TV reporters, are battling misinformation and prejudice about disease More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Gaza Conflict, Hamas Popularity Challenge Abbasi
X
Scott Stearns
August 21, 2014 9:20 PM
The Palestinian unity government of Mahmoud Abbas has failed to convince Hamas to agree to Egyptian-negotiated terms with Israel on a Gaza cease-fire. VOA State Department Correspondent Scott Stearns reports on what the Gaza conflict means for President Abbas, with whom U.S. officials have worked for years on a two-state solution to the Israeli-Palestinian conflict.
Video

Video Gaza Conflict, Hamas Popularity Challenge Abbas

The Palestinian unity government of Mahmoud Abbas has failed to convince Hamas to agree to Egyptian-negotiated terms with Israel on a Gaza cease-fire. VOA State Department Correspondent Scott Stearns reports on what the Gaza conflict means for President Abbas, with whom U.S. officials have worked for years on a two-state solution to the Israeli-Palestinian conflict.
Video

Video Nigeria's 'Nollywood' Movie Industry Rolls in High Gear

Twenty years after its birth in a video shop in Lagos, Nigeria's "Nollywood" is one of the most prolific film industries on earth. Despite low budgets and whirlwind production schedules, Nigerian films are wildly popular in Africa and industry professionals say they hope, in the future, their films will be as great in quality as they are in quantity. Heather Murdock has more for VOA from Lagos.
Video

Video UN Launches 'Biggest Aid Operation in 30 Years' in Iraq

The United Nations has launched what it describes as one of the biggest aid operations in 30 years in northern Iraq, as hundreds of thousands of refugees flee the extremist Sunni militant group calling itself the Islamic State. As Kurdish and Iraqi forces battle the Sunni insurgents, the fighting has forced more people to flee their homes. Kurdish authorities say the international community must act now to avert a humanitarian catastrophe. Henry Ridgwell reports for VOA from London.
Video

Video Cambodian American Hip Hop Artist Sings of Personal Struggles

A growing underground movement of Cambodian American hip hop artists is rapping about the struggles of living in urban America. Most, if not all of them, are refugees or children of refugees who came to the United States from Cambodia to escape the Khmer Rouge genocide of the 1970s. Through their music, the artists hope to give voice to immigrants who have been struggling quietly for years. Elizabeth Lee reports from Long Beach, California.
Video

Video African Media Tries to Educate Public About Ebola

While the Ebola epidemic continues to claim lives in West Africa, information technology specialists, together with radio and TV reporters, are battling misinformation and prejudice about the disease - using social media to educate the public about the deadly virus. VOA’s George Putic has more.
Video

Video Ferguson Calls for Justice as Anger, Violence Grips Community

Violence, anger and frustration continue to grip the small St. Louis suburb of Ferguson, Missouri. Protests broke out after a white police officer fatally shot an unarmed black teenager on August 9. The case has sparked outrage around the nation and prompted the White House to send U.S. Attorney Eric Holder to the small community of just over 20,000 people. VOA’s Mary Alice Salinas has more from Ferguson.
Video

Video Beheading Of US Journalist Breeds Outrage

U.S. and British authorities have launched an investigation into an Islamic State video showing the beheading of kidnapped American journalist James Foley by a militant with a British accent. The extremist group, which posted the video on the Internet Tuesday, said the murder was revenge for U.S. airstrikes on militant positions in Iraq - and has threatened to execute another American journalist it is holding. Henry Ridgwell has more from London.
Video

Video Family Robots - The Next Big Thing?

Robots that can help us with daily chores like cooking and cleaning are a long way off, but automatons that serve as family companions may be much closer. Researchers in the United States, France, Japan and other countries are racing to build robots that can entertain and perform some simpler tasks for us. VOA’s George Putic reports.
Video

Video In Ukraine, Fear and Distrust Remain Where Fighting has Stopped

As the Ukrainian military reclaims control of eastern cities from pro-Russian separatists, residents are getting a chance to rebuild their lives. VOA's Gabe Joselow reports from the town of Kramatorsk in Donetsk province, where a sense of fear is still in the air, and distrust of the government in Kyiv still runs deep.
Video

Video Five Patients Given Experimental Ebola Drug Said to Be Improving

The World Health Organization has approved the use of experimental treatments for Ebola patients in West Africa. The Ebola outbreak there is unprecedented, the disease deadly. The number of people who have died from Ebola has surpassed 1,200. VOA's Carol Pearson reports on the ethical considerations of allowing experimental drugs to be used.
Video

Video China Targets Overseas Assets of Corrupt Officials

As China presses forward with its anti-graft effort, authorities are targeting corrupt officials who have sent family members and assets overseas. The efforts have stirred up a debate at home on exactly how many officials take that route and how likely it is they will be caught. Rebecca Valli has this report.
Video

Video Leading The Fight Against Islamic State, Kurds Question Iraqi Future

Western countries including the United States have begun arming the Kurdish Peshmerga forces in northern Iraq to aid their battle against extremist Sunni militants from the Islamic State. But there are concerns that a heavily-armed Kurdistan Regional Government, or KRG, might seek to declare independence and cause the break-up of the Iraqi state. As Henry Ridgwell reports from London, the KRG says it will only seek greater autonomy from Baghdad.
Video

Video In Rural Kenya, Pressure Builds Against Female Circumcision

In some Kenyan communities, female genital mutilation remains a rite of passage. But activists are pushing back, with education for girls and with threats of punishment those who perform the circumcision. Mohammed Yusuf looks at the practice in the rural eastern community of Tharaka-Nithi.

AppleAndroid