Wednesday,19 September, 2018
Current issue | Issue 1288, (24 - 30 March 2016)
Wednesday,19 September, 2018
Issue 1288, (24 - 30 March 2016)

Ahram Weekly

The perils of change

Five years after the Arab Spring revolutions, Arab countries in transition are continuing their fire-fighting policies in the absence of a clear development agenda, writes Niveen Wahish

The perils of change
The perils of change
Al-Ahram Weekly

When she was last in Cairo in 2011, following the 25 January Revolution, Sarah Cliffe, director of New York University’s Centre on International Cooperation, witnessed what she called an impatience for change.

Those she spoke to thought that waiting longer for change to come was unacceptable, but Cliffe, in Cairo again this week to address the Economic Research Forum’s (ERF) annual conference, said that transitions could take 15 years or more to bring about. In countries with weak institutions, such transformations can extend to between 20 and 35 years, she said.

The question is how to go about that transformation. “How do you translate the slogan of ‘bread, freedom and social justice’ into a development agenda?” asked Ahmed Galal, managing director of the ERF, referring to popular demands after the 2011 uprisings.

We had the headline of what we wanted, but we did not know how to achieve it,” he told participants at the conference, entitled “Towards a New Development Agenda for the Middle East”. The aim was to explore how countries in the region could manage their transitions in the short run and come up with a development agenda for the medium to long term.

Putting an end to conflict and violence in the region is crucial because this is not confined to certain countries but threatens the region as a whole, said Shantayanan Devarajan, chief economist at the World Bank for the Middle East and North Africa Region (MENA).

Across the region, and especially in conflict zones, extreme poverty is rising, and the middle class, between 2010 and 2013, shrunk by 15 per cent to around 30 per cent of the population, said Khalid Abu Ismail, chief of economic policy for the United Nations Economic and Social Commission for Western Asia (ESCWA).

In civil war-devastated Syria, ESCWA estimates that some $3.6 trillion will be needed between 2015 and 2030 to put the economy back together, provided the conflict stops soon, Abu Isamil said.

Conflicts aside, countries in the region must avoid the mistakes of the past. “There were economic problems before the revolutions that were not about growth but about distribution,” said Hafez Ghanem, vice-president at the World Bank for the Middle East and North Africa Region.

Many people, mainly youth, women and small farmers, felt excluded from the economic growth that countries in the region were able to achieve in the years prior to the revolutions, he said.

So far, little has been done since the revolutions, and over the past five years the governments of Arab countries in transition have been preoccupied with political issues, said Mohsin Khan, senior fellow with the Rafik Hariri Centre for the Middle East at the Atlantic Council, a Washington-based think tank.

Khan said that they had no economic model to follow, unlike in the Eastern European countries in the 1990s which had the EU to look to when they went about their transitions. Furthermore, the governments of the Arab countries in transition are implementing reactive economic policies and putting out fires as they go along in the absence of a larger plan, he said.

To top it all, they are implementing populist policies by increasing subsidies, government employment and wages.

But there is little that these governments could have done differently, said Adeel Malik, a lecturer at the Oxford Centre for Islamic Studies in the UK. The governments have had to implement such policies, which have caused their fiscal deficits to grow, to pacify popular demands. However, he lamented that the governments have not taken the opportunity to agree with their populations on a new social contract after the revolutions.

In devising policies during the transitions, Malik stressed that what the countries of the region lack is not just reform policies but also a discourse on reform. The Arab countries need “the politics that create vibrant discourse on economic reform,” he said. In implementing such reform, he suggested a form of gradualism in which elements of the old system are kept in place while introducing new elements.

A true social contract” is what Joost Hiltermann, MENA programme director for the International Crisis Group, an international NGO, wants to see in the region and one that is truly negotiated with all stakeholders in society.

Under the old social contract in the region, states were responsible for their citizens. They were often the employer of first resort, and they subsidised basic needs such as housing, education and health.

One of the elements of the new social contract, according to Devarajan of the World Bank, is that states are no longer responsible for subsidising basic services such as education because this has shown itself to be inefficient. Instead, he recommended that cash transfers be introduced to replace subsidies that are not actually reaching the poor.

This would mean that citizens would have to be willing to pay market prices, and teachers would be accountable to parents when they did not perform well, he said. However, such changes will not be easy, since there will likely be resistance from teachers’ unions.

Another problem could be vetoes from the security services on reforms, as “subsidy cuts could affect regime security,” Malik said. One element that has had a revolutionary effect in forcing reform is falling oil prices, he said, pointing to recent reforms such as fuel subsidy cuts in the Gulf states of Saudi Arabia and Kuwait following falls in oil prices.

While there is a need for a new social contract in the Arab world, reform in the area of education is the most crucial. Quantitative indicators of education have improved but quality has not followed, Hafez Ghanem of the World Bank said.

He said that children are not learning the basic skills of numeracy and literacy in many schools in the region. “It is a problem of the quality of the curriculum and teaching methods that are not providing children with the skills needed for the 21st century,” Ghanem said. It is not an issue of financing because the problem exists even in Gulf countries such as Qatar and Saudi Arabia, he added.

Another priority area is job creation through the promotion of small- and medium-sized enterprises (SMEs). Two-thirds of employment in the OECD countries is in the SME sector, Ghanem said, but in the Arab world most activity is carried out by informal micro-firms and larger firms that are able to find their way around a business environment that is not always friendly.

However, Caroline Freund, a senior fellow at the Peterson Institute for International Economics, said that creating jobs needs more big firms rather than more small ones. “There are too few large firms in the Arab world,” she said. It is these that create jobs and better quality jobs and get countries in the global value chain, she said, pointing out that while India, for example, has certain sectors where only SMEs are allowed to operate, these had not grown until after restrictions were lifted.

She said that while SMEs create jobs, they also destroy them because they often failed and go out of business. Countries in the region must not only put in place policies that attract multinationals, but they must also be proactive in going after multinationals and inviting them to set up in the region, she said.

Besides domestic policies, external factors also have a bearing on transitions. Malik highlighted the need for a form of regional integration as an incentive for reforms. He pointed to the example of Eastern European countries reforming themselves in order to join the EU and Turkey’s current reform programme.

While regional integration could be positive, foreign intervention has been a negative influence on the region, fuelling conflicts and distorting outcomes. “Post-intervention political orders in the Arab world are defined by ethnic and sectarian political settlements,” Malik said. Devarajan of the World Bank drew a similar conclusion, saying that religious polarisation had increased in the Arab countries after foreign military intervention.

This is leading to an increased trend towards federalism based on ethnicity, as witnessed with the Kurds in Syria, he added. Ambassador Nabil Fahmy, a former Egyptian foreign affairs minister and founding dean of the School of Public Affairs at the American University in Cairo, said he would not want to see any significant change in borders following existing conflicts because this would be on the basis of ethnicity.

Divisions based on ethnicity and religious beliefs spell chaos and catastrophe in today’s environment,” he said.

The solution? Put an end to further conflict. Find common ground between the US and Russia so they can exercise pressure on regional powers, suggested Hiltermann. But even this may not be useful in the case of Syria, he said.

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