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

Koreas Mark 61st Anniversary of War Armistice

Muted observances on both sides of heavily-armed Demilitarized Zone that separates two decades-long enemies More

Judge Declares Washington DC Ban on Public Handguns Unconstitutional

Ruling overturns capital city's prohibition on carrying guns in pubic More

Pricey Hepatitis C Drug Draws Criticism

Activists are using the International AIDS Conference to criticize drug companies for charging high prices for life-saving therapies 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.
Students in Business for Themselvesi
X
Mike O'Sullivan
July 26, 2014 11:04 AM
They're only high school students, but they are making accessories for shoes, fabricating backpacks and doing product photography - all through their own businesses. It's the result of a partnership between a non-profit organization that teaches entrepreneurship and their schools. VOA's Mike O'Sullivan and Deyane Moses met the budding entrepreneurs near Los Angeles.
Video

Video Students in Business for Themselves

They're only high school students, but they are making accessories for shoes, fabricating backpacks and doing product photography - all through their own businesses. It's the result of a partnership between a non-profit organization that teaches entrepreneurship and their schools. VOA's Mike O'Sullivan and Deyane Moses met the budding entrepreneurs near Los Angeles.
Video

Video Astronauts Train in Underwater Lab

In the world’s only underwater laboratory, four U.S. astronauts train for a planned visit to an asteroid. The lab - called Aquarius- is located five kilometers off Key Largo, in southern Florida. Living in close quarters and making excursions only into the surrounding ocean, they try to simulate the daily routine of a crew that will someday travel to collect samples of a rock orbiting far away from earth. VOA’s George Putic has more.
Video

Video Not Even Monks Spared From Thailand’s Junta-Backed Morality Push

With Thailand’s military government firmly in control after May’s bloodless coup, authorities are carrying out plans they say are aimed at restoring discipline, morality and patriotism to all Thais. The measures include a crackdown on illegal gambling, education reforms to promote students’ moral development, and a new 24-hour phone hotline for citizens to report misbehaving monks. Steve Sandford reports from Bangkok.
Video

Video Virtual Program Teaches Farming Skills

In a fast-changing world beset by unpredictable climate conditions, farmers cannot afford to ignore new technology. Researchers in Australia are developing an online virtual world program to share information about climate change and more sustainable farming techniques for sugar cane growers. As VOA's Zlatica Hoke reports, the idea is to create a wider support network for farmers.
Video

Video Airline Expert: Missile will Show Signature on Debris

The debris field from Malaysia Airlines Flight 17 is spread over a 21-kilometer radius in eastern Ukraine. It is expected to take investigators months to sort through the airplane pieces to learn about the missile that brought down the jetliner and who fired it. VOAs Carolyn Presutti explains how this work will be done.
Video

Video Treatment for Childhood Epilepsy Heats up Medical Marijuana Debate

In the United States, marijuana is classed as an illegal drug by the federal government. But nearly half the states have legalized it, to some degree. Proponents say some strains of marijuana might have exceptional health benefits, for treating pain or inflammation in chronic conditions such as cancer, multiple sclerosis and epilepsy. Shelley Schlender reports on a strain of medical marijuana developed in Colorado that is reputed to reduce seizures in childhood epilepsy
Video

Video Airbus Adds Metal 3D Printed Parts to New Jets

By the end of this year, European aircraft manufacturing consortium Airbus plans to deliver the first of its new, extra-wide-body passenger jets, the A350-XWB. Among other technological innovations, the new plane will also incorporate metal parts made in a 3-D printer. VOA's George Putic has more.
Video

Video AIDS Conference Welcomes Exciting Developments in HIV Treatment, Prevention

Significant strides have been made in recent years toward the treatment and prevention of HIV, the virus that causes AIDS. This year, at the International AIDS Conference, the AIDS community welcomed progress on a new pill that may prevent transmission of the deadly virus. VOA’s Anita Powell reports from Melbourne, Australia.
Video

Video IAEA: Iran Turns its Enriched Uranium Into Less Harmful Form

Iran has converted its stockpiles of enriched uranium into a less dangerous form that is more difficult to use for nuclear weapons, according to the United Nations’ Atomic Energy Agency. The move complies with an interim deal reached with Western powers on Iran's nuclear program last year, in exchange for easing of sanctions. Henry Ridgwell reports for VOA from London.

AppleAndroid