Bring the Revolution to Arab Economies

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Op-Ed Globe and Mail
While failure to reach a power-sharing agreement in Egypt will prolong political instability, economic inaction would be just as damaging to the consolidation of democratic rule.
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The showdown between Egypt’s Islamists and military rulers is a clear reminder of how difficult democratic transitions in the Arab world are likely to be. Failure to reach a power-sharing agreement will prolong political instability. But economic inaction would be just as damaging to the consolidation of democratic rule.

Emerging Arab leaders, from Islamists to reinvented former regime officials, are keenly aware of the need to improve their countries’ economic prospects. They know full well that their popularity can be sustained only if they are able to deliver growth, employment and higher living standards. This would be a difficult challenge under any circumstances – and is all the more daunting against the backdrop of the Arab Spring’s destabilization of economic systems across the Middle East and North Africa.

Even in countries like Tunisia and Egypt, where the transition to democracy is more advanced, political uncertainty has tended to plague economic achievements. In 2011, Tunisia’s economy shrank by 1.8 per cent – its first contraction since 1986. Unemployment reached 18 per cent, up five points from 2010. The Egyptian economy contracted by 0.8 per cent, and one million people lost their jobs. Egypt’s foreign-investment inflows have also dried up, falling from $6.4-billion (U.S.) in 2010 to a mere $500-million in 2011.

These trends are affecting these countries’ fiscal balances. Egypt’s budget deficit reached 10 per cent of GDP, while its foreign-exchange reserves have fallen to $15-billion – barely enough to cover import bills for the next three months. In Tunisia, the budget deficit has widened sharply since the revolution, rising from 2.6 per cent of GDP in 2010 to 6 per cent in 2011.

This rapid economic deterioration, combined with the high political expectations, is creating a sense of urgency. Emerging political actors feel compelled to develop more detailed economic programs and to address growing material grievances. For example, whereas the Islamists had previously focused on political themes, the recent election campaigns saw a rhetorical shift to economic aspirations.

Overall, the emerging political players – particularly Islamist parties – have adopted a rather conciliatory tone regarding engagement with international actors. These parties’ economic programs are by and large pro-market, emphasizing the private sector’s role in driving growth and the need to attract foreign capital. The state is seen as a vehicle for ensuring social justice, and there are scant references to sharia principles.

Both in Tunisia and Egypt, for example, Islamist politicians have given assurances that the economically critical tourism sector will not be hindered by Islamic law. Their economic programs also foresee a role for international institutions in helping overcome challenges.

Indeed, whereas resistance to foreign intervention and assistance has been strong with respect to democratic reforms, new Arab leaders seem more receptive to the West on economic objectives. This is an unprecedented opportunity for international engagement with the new Arab leadership, which should incorporate short-, medium-, and long-term goals.

Short-term goals must have priority, because many Islamist parties are being pressed to produce positive results within a single electoral cycle. The new governments will face the immediate challenge of creating jobs, for which the only available recipe is investment in large-scale public-works projects.

The international community can help Arab governments with such initiatives in several ways: It can increase the amount of promised financial assistance. It can provide technical expertise on debt management. And it can help establish a secure and predictable legal and regulatory framework for public-private partnerships. International actors, jointly with Arab governments, can then help to market these opportunities.

Only a combination of these options would allow Arab economies to create jobs now, while avoiding the risks of destabilizing fiscal imbalances or a lack of financing for private-sector investment. The West, for its part, stands to gain in myriad ways. Even in the midst of a protracted currency crisis, foreign governments can surely sign on to an agenda that prioritizes transfers of know-how over cash infusions.

This article was originally published in Globe and Mail.

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In Fact



of Brazilian protesters

learned about a massive rally via Facebook or Twitter.


million cases pending

in India’s judicial system.

1 in 3


now needs urgent assistance.


political parties

contested India’s last national elections.


of Egypt's labor force

works in the private sector.


years ago

Carnegie began an internship program. Notable alumni include Samantha Power.


of oil consumed in the United States

is for the transportation sector.


of Chechnya’s pre-1994 population

has fled to different parts of the world.


of oil consumed in China

was from foreign sources in 2012.


of Syria’s population

is expected to be displaced by the end of 2013.


million people killed

in Cold War conflicts.


of the U.S. economy

is consumed by healthcare.


billion in goods and services

traded between the United States and China in 2012.


billion in foreign investment and oil revenue

have been lost by Iran because of its nuclear program.


increase in China’s GDP per capita

between 1972 and today.


billion have been spent

to complete the Bushehr nuclear reactor in Iran.


of Iran’s electricity needs

is all the Bushehr nuclear reactor provides.


new airports

are set to be built in China by 2015.



were imprisoned in Turkey as of August 2012 according to the OSCE.


of the world's population

will reside in cities by 2050.


million Russian citizens

are considered “ethnic Muslims.”

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