September 7, 2016 at 11:21 am | Published in: Israel, Middle East, News, Palestine
houses and buildings destroyed by Israeli airstrikesFile photo of houses and buildings destroyed by Israeli airstrikes.
Israeli policies hindering the movement of goods in and out of the Gaza Strip are destroying what’s left of Gaza’s economy, Quds Press reported the Palestinian Businessmen’s Association warning on Monday.
In a statement, the head of the association Ali Al-Hayik said: “The Israeli side causes much and consecutive losses for Gaza’s businessmen and traders to the point that negatively affects the already dilapidated economy due to the ten-year-old siege.”
The Israeli occupation “paralyses” the commercial cycle by blocking goods or returning them to Israeli seaports.
1509 travel permits of businessmen in Gaza have been revoked by the Israeli authorities.
“This causes many losses because the traders are obliged to pay a lot of money to store their goods in Israeli facilities,” he said. “Sometimes, the goods are allowed to enter Gaza after their expiry dates.”
Al-Hayik reiterated that the Israeli occupation policies have contributed to a dramatic decline in the productivity of Gaza’s economy, including the industrial, commercial and service sectors, noting that this increases unemployment rates and poverty.
He added that the Israeli occupation authorities arrest Gaza businessmen or revoke their travel permits when they pass through the Erez crossing, noting that 1,509 permits had been revoked since the start of 2016 and 20 businessmen were arrested, 15 were later released and five are still being held.
The Kerem Shalom commercial crossing in the south of the Gaza Strip is not operating full time or with full capacity and this causes delays in the entry of goods, Al-Hayik explained.
The Egyptian president is damned if he follows the fund's economic recommendations - and doomed if he doesn't
Memory, when it comes to events of magnitude, is rarely hazy. The January 1977 Bread Riots are such a memory marker.
In the mind of a 10-year-old child, there was unknown danger in the air reflected by a smoky Cairo sky after violent clashes. For this child, the Bread Riots, as they would become known, were simply a moment in time when his father disappeared at work for three straight days as a journalist for MENA, the government-run news agency.
For the rest of the world, the “riots" were a thunderous "No" from an Egyptian street, signed in the blood of 80 dead, to the International Monetary Fund (IMF)-dictated, Sadat-approved economic policies. It was a fatal error in judgement that, some believe, may have led to the president’s assassination four years later.
Fast forward 39 years: the child has grown up, Sisi has replaced Sadat and his administration faces life and death choices as another limbo looms between the regime, the people and the IMF.
Just like Sadat before him, Sisi is damned if he does and doomed if he doesn’t. When shrink or sink are your options, you are doing something wrong.
Why is the economy on a cliff’s edge? Start with youth unemployment which has shot up from 29.2 percent in 1991 to 42 percent in 2014 and rising, according to the World Bank. Those figures are nothing short of a subterranean societal bomb.
Economic growth has been "uneven" leading to a staggering official figure of a quarter of Egyptians now living below the poverty line – in other words, living on $1.90 or less each day.
Mix in a hard currency crisis that has seen the dollar outflank the Egyptian pound to the tune of 13 to one in the parallel markets. Inflation, meanwhile, has reached a seven-year high of 14 percent - nothing less than a silent killer.
External debt, which continues to eat away at Egypt’s foreign currency reserves that are down to a dangerous $15bn as of July, has risen during Sisi’s rule from $44.8bn in July 2014 to $53.4bn in January 2016.
At the helm, Sisi recognises the danger and recently said "the country’s future is at stake". Egypt’s top executive is correct, on this occasion.
"The current government will end in the worst economic disaster,” warned Fatema El Asyouty, an Egyptian economic analyst and researcher.
"Rise of the dollar, expanding external debt, unemployment, and unbearably high prices will not be tolerated by people,” she explained.
Indeed. What Egypt has experienced since is exactly what El Asyouty forecast and regime popularity has plummeted. Now the move towards the IMF loan is seen as a necessary course correction but, simultaneously, reflects a desperation that runs counter to a historically contentious IMF-Egypt duality.
Only the potential implosion of the Egyptian economy could drive Sisi into the waiting arms of the IMF. After all, the fund is a complex political economic entity that, while shunning independent regulation of its activities, has cost many a ruler political capital and, sometimes, their very political lives.
But there are two sides to every story and we must examine both the pros and cons on the role of the fund.
Naturally, the IMF views itself as an international helping hand. "Cooperation and reconstruction" are the primary roles of the fund as it sees it.
The organisation’s mantle has spanned five periods: the post-World War II, Bretton Woods era of fixed exchange rates; the debt reforms of the 1980s; the restructuring of East European markets post-Soviet Union collapse; and, finally, the current globalisation.
Despite its vision of itself, the IMF can be a nightmare masquerading as a dream. Repeatedly, the men dressed in expensive suits come knocking on the doors of developing nations with the necktie of neoliberal policies.
But with belt-tightening and reshaping of the economic landscape the name of the IMF’s game, it’s a necktie that chokes rather than adorns. Desperate to recoup losses, however, nation states play its deadly game and frequently wind up in even deeper debt.
Sinisterly, these neoliberal policies often aid the debtor nation's elite while tightening the noose around the lower classes. “In many cases, the recipients are worse off today…than before IMF loans began to flow,” as Ana Eiras, senior policy analyst with the Centre for Trade and Economics, points out.
The IMF’s formulaic structural adjustment policies (SAPs) often seek a devaluation of the country’s currency, an instrument already at play in Egypt. The policies intend to bring foreign investors to the table while decreasing export costs, buttressed by the privatisation of national assets.
But some argue that similar tactics undertaken during Sadat’s Infitah (open door) economic policies of the 1970s helped set off the Bread Riots and still cost Egyptians to this day.
In fact, as well-known lawyer and political figure Khaled Ali explained, "Privatisation has seen the dismantling of Egypt’s industrial structure." Much of this damage was done during the Mubarak era. But Mubarak was a highly strategic political player, using a subtle approach. By contrast Sisi’s regime, with neophyte economic advisors who appear to need their own advisors, has and will do major damage within the neoliberal IMF schemata.
These mechanisms, while deemed necessary by some, are nowhere near as lethal to the regime as the politically explosive removal of the all-important subsidies for a nation that has an official poverty rate of 27.8 percent.
When a nation has over 24 million people living below the poverty line, subsidies are not an economic luxury but a must to keep revolutions at bay. Just like clockwork, demonstrations erupted this past Thursday, mostly by angry mothers demanding children’s formula that they now have difficulty finding in the shops or, when they do find it, find it has doubled in price after the removal of subsidies linked to the proposed fund deal.
In addition to a dearth of hard currency, the industrial wheel has shrunk to tricycle-size as a result of limited foreign investment. Meanwhile Egyptian economic growth, which recovered in 2015 to hit 4.2 percent, is projected to fall to 3.3 percent this year. With the economy teetering and more than $20bn of Gulf aid down the Sisi pipe dream, the nation is in the dreaded vice-like grip of the IMF.
A structural adjustment programme, which is attached to the $12bn IMF loan package, will require that Sisi does what analysts have described as "poor nations lower the living standard of their people". Without the IMF lifeline Sisi may sink.
But with it, Egyptians could suffer the double whammy of skyrocketing inflation and severe price hikes should the projected currency devaluation take place. Most people don’t realise that the projected IMF billions would likely go towards stabilising the disastrous currency market in investor confidence-building measures.
But who is going to trust a Central Bank of Egypt (CBE) that has been bumbling for many months under the unsteady leadership of Tareq Amer? If Egypt’s pro-government parliamentarians recently described Amer as the source of the dollar crisis, how can he be trusted to manage the IMF-prescribed Egyptian pound devaluation?
Many believe Sisi’s ears are open only to "a narrow circle of tycoons". There is little hope, in such a climate, that an IMF package will do anything but increase poverty, foreign debt and potentially throw Egypt into the clutches of veiled economic colonialism.
There are some who hold out hope that the IMF-Egypt tango will not sink the ship. While acknowledging a "rocky" pairing, Mohamed El Arian, a leading economist and chairman of Obama’s Global Development Council, believes that the IMF package includes potentially sufficient safeguards.
The deal, he argues, "promotes fiscal, monetary, and exchange rate measures aimed at containing financial imbalances…and promotes the strengthening of social welfare programs".
However, even a hopeful analysis of the deal’s potential acknowledges the accusations levelled by critics that say the structural premise of the IMF’s aid packages promote poverty rather than economic health.
Moreover, while reasoned in his argument, Arian neglects to mention that while focusing on safety nets, the fund’s programme does not account for rampant corruption which consistently undermines the most well-intentioned social programmes.
A dictator with a track record of spending untold billions on self-aggrandising projects and a Western economic colossus whose solutions are "one size shrinks all economies" are the short cut to another explosion.
More than $2 billion has been lost from Tunisian coffers since former President Zine El Abidine Ben Ali was ousted in 2011.
A report by the Global Financial Integrity organisation (GFI) highlighted the severity of the loss as $181 per capita and said corruption was the main cause of Tunisia’s tepid economy.
Public expectations of economic reforms and solutions to social grievances since Ben Ali’s ousting have been met with futile efforts that have instead worsened the economy’s standing and created an opening for corruption to thrive. The government’s struggle to revive the economy and raise the necessary funds for investments is often curtailed by deep rooted of corruption.
According to the GFI report, the newly formed government must give “urgent attention to illicit financial flows if they are to achieve a model of sustainable economic growth”.
In his first public address, recently appointed Prime Minister Youssef Chahed said the fight against corruption would be one of the government’s first priorities stating the success of the newly formed government will largely depend on its efforts against nepotism and corruption. He called on the public to “denounce and resist” corruption by calling out those implicit in it.
Recently, Donald Trump said he admires Saddam Husain, the late president of Iraq who was judicially lynched by the successor Shiite government of Iraq during the American occupation of the country. People were aghast at his comment. He also said he sees no reason for America to be an eternal enemy of Russia and that even if the USA does not like Russia it should cooperate with Russia to defeat ISIL (Islamic State of Iraq and the Levant) and that the USA fought along with the brutal dictator Joseph Stalin during the Second World War to defeat the axis powers of Japan and Germany. One may disagree violently with Trump on almost everything but in the instances cited, I can see some sense in his usual madness. I am convinced that the likes of Saddam Husain maintained some kind of peace in the Middle East in spite of the brutality of his regime. Even though he came from the minority Sunni population and treated all opposition Shiite or Sunni with brutality, he ensured that there was peace which was what the generally apolitical ordinary people of Iraq wanted. The mistake people in the West made was wanting to graft democracy on a traditionally autocratic conservative Arab environment.
When people in the West were hailing the so-called Arab Spring, I had the sneaky feeling that things will not turn out well. This was when I listened to the ambassador of Syria to the UN sometimes in 2010 at the plenary of the UN General Assembly pleading for understanding of his country’s problem. He had argued that Syria was a delicately balanced country of Alawites, (Shiite) Sunnis, Christians, Kurds, Armenians and Aramaics and that backing Sunnis who want to overthrow the Bashar-al-Asad regime would bring all sorts of external forces and complications which will not augur well for the future of Syria and the Middle East. After more than a decade of warfare and a whole country with an old civilization destroyed, there has neither been democracy nor peace in Syria rather a murderous group calling itself a caliphate has emerged bridging the frontiers of Iraq and Syria and imposing its draconian rule and will on a helpless and hapless people leading to the largest migration of a destabilizing horde of people since the end of the Second World War. But for the tenacity of the Sharifian dynasty in Morocco and the FLN government led by the old and infirm Abdelaziz Bouteflika in Algeria who were able to resist the forces of the dissidents particularly FIS (Front Islamique de Salut) the so-called Arab Spring would have engulfed the whole of the Maghreb. The situation in Libya was unfortunately not the same for several reasons. NATO wanted Muamar al Ghadafi to be removed from power because of what was considered as his dangerous ambitions in the past especially wanting to develop nuclear and chemical weapons on the other side of the Mediterranean which Europe considers a European lake. Even though he had given up the ambition, he was never trusted. So when the occasion for his removal presented itself, NATO was not going to allow it to slip from its hand. Their forces instigated a local rebellion which it joined to murder without trial an incumbent head of State. But what has replaced the years of stability in Libya is chaos and the takeover of part of the country by forces pledging allegiance to the Caliphate. The situation in Libya is like the case of Humpty Dumpty and everybody is waiting for which forces will secure the vast country of Libya. Whatever anybody may say about Ghadafi, he secured the country for decades after the overthrow of King Idris al-Sannusi. Egypt is back in the hands of the military after the initial hoopla of getting rid of President Mubarak. He was replaced by Mohammad Morsi for about a year before he was overthrown by General Muhammad -al-Sisi. It appears that the Egyptians would rather have stability than some wooly democracy or chaotic rule by the Islamic Brotherhood of Morsi. The effendiyyah in Egypt is just too sophisticated for that. It is only in Tunisia where the Arab Spring has brought in some form of constitutional regime albeit under an 82 year old president! Yemen is in turmoil and the Saudi army is there fighting a proxy war with Iran that is backing the Houthis who are Shiites. Oman and the other Gulf States including Saudi Arabia are maintaining some precarious peace with their Shiite subjects cowed down by overwhelming Sunni forces. Iran continues to pose existential challenge to the gulf Arab states and even far afield to Sunni domination or threatened domination in Lebanon, Syria and Iraq. Egypt which could have provided Sunni counterweight to Iran is held down by a collapsed economy and terrorist challenge in the Sinai. The chaos in North Africa and he Middle East has reverberation in Africa where the Al Qaida in the Maghreb and West Africa, Boko haram in Nigeria, Niger and the Cameroon and al Shabbab in Somalia and Kenya constitute variants of the same Middle East Islamic terrorism. The direct effect of this is the proliferation of weapons of precision that are fueling insurgency all over Africa.
One common denominator to the Middle East and Africa is their sit-tight presidents in Museveni’s Uganda, Mugabe’s Zimbabwe, Bashar’s Sudan, Paul Kagame’s Rwanda and other dictators in the inter-lacustrine state of Burundi as well as virtually all the Francophone states of the two Congos, Central African Republic and the Spanish-speaking Equatorial Guinea. Even the new state of Southern Sudan is torn by ethnic war because of the sit tight syndrome. While this goes on, there is neither growth nor development of the economy. On top of this is the rising population of young people who have no hope of employment. Even countries like Nigeria, Kenya, Ghana, Senegal, Ivory Coast, Ethiopia and Tanzania to mention a few are also afflicted by unimpressive economic performance and joblessness of their ballooning youthful population. This a time bomb in both Africa and the Middle East. The situation is so bad that young people are ready to die crossing to Europe by leaky dinghies and boats across the Mediterranean Sea.
What is to be done? It seems to me that Africa has largely accepted that the democratic way is the way forward. There may be debate about what style of democracy. It is obvious that the western model may have to be modified to suit the peculiar condition of each African state. This is not the same as supporting any bastardized democratic contraption called home-grown democracy which is a euphemism for dictatorship. The market driven economic prescriptions of the West may not work because of paucity of foreign and local investors. The state would have to intervene through direct investment by state corporations side by side with private investors like it happened in South Korea. The enforced orthodoxy of market economy will have to give way to practical solution that would also generate employment for the teeming masses of the people.
But as for the Middle East and North Africa, democracy may not work there for long time to come. The Middle East will only survive if a way is found to satisfy its young people who are suffering from unemployment. This problem would worsen with the decline in the price of gas and oil which will make it impossible for the gulf countries to continue to bribe young people with generous perks because sooner or later they will run out of cash. The future of the almost 350million Arabs is uncertain unless realistic solution is found to the economic and political conditions of those countries There will also have to be a reconciliation between Iran and the Arab states as well as between Sunni and Shiite sectarian traditions in Islam. Finally the question of war and peace with Israel must be resolved by accepting the existence of two states, Israel and Palestine, in old Palestine. Inability to solve this problem may drive Arab youth to extremist tendencies which would not augur well for peace in the Middle East an absence of which could pose a threat to global peace.
Although the growth in the Middle East and North Africa (MENA) at the outset of this year did not fare as well as initial expectations, speculations that an oil deal could be struck at the informal Opec Organisation meeting in September have reinvigorated oil markets and alleviated fears about a severe economic crunch in the region.
Furthermore, after the implementation of harsh fiscal consolidation processes, the economic sentiment improved amid signs that some of the economies which were worst hit by the fall in oil prices in the last two years have started to stabilise.
Nevertheless, the region remains vulnerable to geopolitical risks and volatility in the oil markets. Against this backdrop, the September edition of the “Focus Economics Consensus Forecast Middle East & North Africa” kept the growth projections for the region stable at 2.3%. For 2017, growth in the region is expected to accelerate to 3%.
In its September forecast, Focus stated that Qatar and Iran are expected to be the best performers in 2016, while Saudi Arabia and Lebanon are expected to perform poorly, and Yemen as a result of the ongoing civil war is expected to be the worst performer.
On the other hand, Egypt and Israel are forecast to have the fastest growth among the rest of the MENA countries, with a projected GDP expansion of 3.1%, and 2.6% respectively.
Egypt’s economy still faces many conundrums, from shortages in US dollars to severe capital outflows and plummeting tourist numbers. As a result, the government plans to raise $21bn to fund an ambitious three-year programme in coordination with the International Monetary Fund.
Consequently, Egypt will commit to quick implementation of economic reforms, which will include the introduction of the value-added tax (VAT), which was recently approved by parliament, and further devaluation of the Egyptian pound.
Although the government’s programme could stabilise Egypt’s macroeconomic fundamentals, various factors will still negatively impact Egypt’s GDP: soaring inflation, a severe US dollar shortage, and a weak private sector. As a result, Focus Economics projects Egypt’s GDP to expand 3.1% for fiscal year (FY) 2016, and 3.6% for FY 2017.
Inflation reached a record level high in June at 14%, and continued into July, which is Egypt’s highest reading since early 2009. As a result, consumer prices are likely to increase as well. Focus Economics expects an average inflation of 11.8% for calendar year 2016, and 11.5% for 2017.
With regards to Egypt’s real estate sector, the Emirates NBD Purchasing Managers Index (PMI) recorded a notable decrease from 48.9% in July to 47% in August, which is considered the lowest reading in the past four months.
The deterioration in PMI value in August comes as a result of different factors: weak demand dynamics, US dollar shortages, and an increase in the price of raw materials.
“The August PMI figures underscore the urgency to initiate a wide-ranging economic reform programme. Most importantly, the survey data highlights the ongoing need to move to a more flexible exchange rate system in order to achieve a market-clearing rate for the Egyptian pound,” said Jean-Paul Pigat, senior economist at Emirates NBD.
In August, a popular Iranian news outlet, Fararu, interviewed four renowned Iranian economists. They were asked to examine the state of Iran’s economy under President Rouhani. Then, because it is expected that economy will be the primary flashpoint between the conservatives and the moderates in the upcoming presidential elections next spring, the four economists were asked to investigate the probability of Rouhani winning a second term in the context of his major economic failures and successes.
Farshad Momeni, known as a religious-nationalist economist, maintained that “the period of 2005-2013,” under the tenure of Mahmoud Ahmadinejad was “the worst years in the history of the Islamic Republic of Iran” due to the emergence of “vast and deep corruption”.
“This, I say based on a report published in 2013 by Iran’s Islamic Parliament Research Center,” Momeni remarked.
He noted that “net capital flight within a span of five years, i.e. between 2005 and 2010 increased 125 times”. He emphasised that this was before sanctions were imposed on Iran.
He then noted that Rouhani not only inherited a disastrous economy that suffered an inflation rate of 40 percent, but even worse was that in the first year after he took office the price of oil was reduced by $70 per barrel.
'Deep and unprecedented recession'
While he praised Rouhani for bringing inflation down, from 40 percent to around 10 percent, he warned that this has been done at the price of creating a “deep and unprecedented recession … [resulting in the] people’s dissatisfaction.” “My studies show that, as a result [of this recession], we are witnessing the rapid shrinkage of the middle class and the unprecedented expansion of poverty.”
Momeni suggests that “undoubtedly … [the current economic conditions] will have serious negative effects [on Rouhani’s election] because the low-income do not feel any improvement in their livelihood under Rouhani whatsoever”.
Nasser Imani, another economist, politically known as a conservative, also emphasised that Rouhani and his cabinet have been able to control inflation, but at the cost of deepening the recession. He said that long-suffering people are disappointed because they had high expectations for change as a result of the realisation of the nuclear deal (JCPOA). None has been met, he noted.
Even worse there “were false expectations at the managerial level of the government that the JCPOA will create huge economic opportunities and billions of dollars will quickly flood into the country’s economy. Once this did not happen the management at the highest level was left confused and things came to kind of a halt,” Imani said.
He added, “People vote for a person whom they think is capable of bringing change and improving their livelihood. As a result, the upcoming elections will be the toughest an incumbent president has faced since the revolution.”
Imani added, “I’m not saying that Rouhani will definitely lose … I’m saying that he will face a very difficult situation in the elections.”
Production rising
Saeed Leilaz, close to the reformist camp, argued that the 4.4 percent economic growth in the first three months of the current Iranian year, which began on 20 March, has had a positive effect on people’s livelihood. “We are manufacturing 500,000 more cars this year compared to 2012 [during Ahmadinejad] while we know that buyers of locally made cars are typically low and middle-income families.”
He criticised those who claim that Rouhani has only been able to control inflation at the cost of pushing the economy into recession. He said that according to economic definitions we are in recession if economic growth is zero or negative for two consecutive quarters. “We have never had such a situation in the last three years,” he remarked.
When asked about the effect of the economy on Rouhani’s electability, he said: “Let me ask you this: didn’t we have parliamentary elections five months ago? People voted positively for Rouhani. … There is no doubt that Rouhani was the victor because the reformists and independents won the majority [in parliament against the conservatives]. I’m certain … that Rouhani will win the 2017 elections,” he concluded.
Where is the benefit of nuclear deal?
Ali Dini Torkamani, an institutionalist economist closer to the reform camp, says that people see no change in the reduction of unemployment while a recession is palpable. “People ask, there is no improvement in the job market, retailers say they are struggling because of low sales, manufacturers claim that they are not working at their full capacity, so where does this economic growth come from?”
Dini argued that the 4.4 percent growth is most likely correct but that it is mainly due to the doubling of oil exports and oil derivatives. Dini believes that Iran needs higher growth rates and a longer time to compensate the negative growth during recent years.
He argued that with high unemployment, “people are depressed and hopeless. Naturally they partly blame Rouhani’s administration for this situation.
“But I believe Rouhani will be able to convince people that the root of the current problems originates [in the administrations] before him.” Dini also believes that Rouhani can convince people to vote for him by telling them that in the absence of the nuclear deal and improved relations with the world, the situation could have been much worse. Dini says Rouhani can win people’s vote by saying: “This is the path we are walking while our opponents’ intention is to take the country back to the pre-JCPOA era,” bringing back sanctions and political isolation.
Concluding, Dini raised a crucial point. He says, “During elections people do not decide just based on economic factors. In the recent parliamentary elections … the effect of political affiliation of the candidates on attracting people’s votes was very obvious.”
In February's elections, the mega-city of Tehran, which has 30 seats out of 290 in parliament, was one of a handful of cities where the number of moderate/reformist candidates who were vetted by the Guardian Council and were allowed to run was more than the number of seats – giving voters a greater choice of candidates. Tellingly, voters in the capital prevented the conservatives from gaining even one seat out of 30.
There are also other factors to be considered when weighing Rouhani’s chance for victory.
Comeback for Ahmedinejad?
Conservatives – Principlists as they call themselves – are now divided into two camps. The majority is now closer to the moderates, distancing itself from the ultra-conservatives, also known as hardliners. Ali Larijani, chairman of the Parliament and the leading figure of this majority current has very good relations with Rouhani.
In July, Mohammad Reza Bahonar, a key Principlist figure who also belongs to the majority current
said: “Rouhani is one of the options that Principlists are considering.” Simply put, conservatives have no plausible candidate to rival Rouhani.
So, regardless of Rouhani’s report card, if people say no to Rouhani, who they are going to say yes to?
Some polls suggest that former president Mahmoud Ahmadinejad could be another people’s choice.
While the dominant, moderate faction of Principlists will not support Ahmadinejad – Larijani has a very strained relationship with the former president – political activists coming from different political currents
overwhelmingly believe that should Ahmadinejad become a candidate, he will be disqualified by the Guardian Council.
KUWAIT CITY: A U.N. rights expert Thursday urged Kuwait to abolish its "kafala" system for foreign workers which has long been criticized as a form of bonded labor or even slavery.
Under the system, domestic workers are forced to work long hours, mistreated and beaten, prompting hundreds to flee every year, said Maria Grazia Giammarinaro, a U.N. special rapporteur on people-trafficking.
"The kafala system ... creates a situation of vulnerability which favors abusive and exploitative work relationships," she said.
The kafala system restricts workers from moving to a new job without their boss's consent before their contracts end, leaving many trapped.
Human Rights Watch and other groups have documented widespread abuses under the system, including non-payment of wages, long working hours with no rest days, physical and sexual assault, and no clear channels for redress.
Similar systems operate in all six member states of the Gulf Cooperation Council, where about 25 million foreigners live and work.
Kafala should be "replaced by a different regulation allowing migrant workers to enjoy substantial freedom in the labor market," Giammarinaro said at a news conference after a five-day visit to Kuwait.
She welcomed a number of "positive" developments in the oil-rich state, including the opening of two government-run shelters for female domestic workers who leave their employers.
In July, Kuwait became the first Gulf state to set a minimum wage for its hundreds of thousands of mostly Asian domestic workers.
In its 2016 "Trafficking in Persons" report, the US State Department upgraded Kuwait from tier three, the worst level, to tier two while keeping it on watch list, citing an improvement in its treatment of migrant workers, including maids.
It’s time for Israel to recognize that it can coexist with its neighbors without fear or feelings of superiority. Academia can lead the way.
By Assaf David
The heads of the Arab city Umm al-Fahm, in the presence of Israeli military officials, sign an oath of allegiance to the State of Israel after the city came under Israeli control in the 1948 war.
Leaders of the Arab city Umm al-Fahm, in the presence of Israeli military officials, sign an oath of allegiance to the State of Israel after the city comes under Israeli control in the 1948 war, May 20, 1949. (GPO)
The perception of Israel as a foreign entity in the Middle East, hence a fortress under threat, is shared by all major purveyors of knowledge and discourse in the political and public Israeli-Jewish sphere. Alas, the academia, as well as the so-called “peace camp,” do not offer an alternative perception, which would view Israel for what it really is: a country becoming well-integrated into the Middle East, and one that can and should live in the region without fear or feelings of superiority.
The following talk was presented, in Arabic, at a conference titled “Winds of Change in the Middle East” at Ben Gurion University on January 26, 2015.
***
Good afternoon,
Instead of offering you a well-organized thesis on the Israeli public discourse with respect to the Arab Spring, I would like to address a few aspects of the topic. These aspects have to do with the way in which Jewish citizens of Israel tend to view the Middle East, and the ways in which the various purveyors of knowledge and discourse vis-a-vis the region — be they members of the establishment, of academia, or of what is known as the “peace camp” in the political sphere and outside of it — replicate this point of view.
Let us start at the beginning: the claim that Israel is a foreign entity in the Middle East fails the test of reality. Israel, in fact, is closely tied — for better or worse — to the region in which it exists, much more so than to the liberal-democratic West, and much more so than some Jews or Arabs are willing to admit. Israel and its neighbors are new nation-states, products of the withdrawal of colonial powers from the region in the middle of the last century. All countries of the Middle East face processes that are characteristic of post-colonial states, the foremost being the threat toward their national identity from super-identities (such as religion and pan-nationalism) or sub-identities (community, origin, or ethnicity), and the prioritization of military-security considerations over civilian ones in decision-making.
Supporters of Labor and Tzipi Livni’s ‘Zionist Camp’ at a rally calling to oust Prime Minister Netanyahu, Rabin Square, Tel Aviv, March 7, 2015. (Photo by Oren Ziv/Activestills.org)
Supporters of the Israeli ‘peace camp’ at a rally calling to oust Prime Minister Netanyahu, Rabin Square, Tel Aviv, March 7, 2015. (Photo by Oren Ziv/Activestills.org)
Second, Israel is a state in which a certain nationality and religion control the government and the resources, similar to other countries in the region (with the exception of Lebanon). Third, in all countries of the region, including Israel, religion and the state compete for primacy as well as for shaping the public sphere. Fourth, with its many communities, Israeli society is a collectivist society, resembling the surrounding societies more than it resembles those of the liberal-democratic West. And finally, the Mizrahi background, with its many aspects, is a central component in the Israeli identity, including Israeli Jewish identity.
I could go on and on, but I think that the principle is clear. Israel, as a state, community, and population, fits well into the Arab Middle Eastern world. How prominent is this fact among the Israeli purveyors of knowledge and discourse regarding the Middle East? Not so much. They find it convenient to think of Israel as a Western, liberal state, different from the regional landscape. But this is only partially true and only in certain aspects. If we take into account long-term trends, Israel is — in significant aspects — a proud Middle Eastern state.
If Israel is a Western, liberal, different state, then the Middle East necessarily constitutes a threat. And there are well-known ways to address a threat. If it is a real threat, it is possible to strike at it or live with it in tense coexistence. If it is a potential threat, it can be disregarded as long as it is small and insignificant. When it awakens and becomes powerful, it should be monitored in order to know when it reaches the level of a real threat. These are exactly the means adopted by the State of Israel and its purveyors of knowledge and discourse toward Arabs, Islam, and the Middle East. Since all of these are perceived as threats, a path-dependence is created which ostensibly compels us to address the “threat” using known means.
Thus the peace agreements between the State of Israel and Egypt, Jordan, and the Palestinians are intended primarily to contain that threat. Once contained or neutralized, it is relegated to the level of potential threat. It can be disregarded (like Jordan), watched with concern in case it is a great threat (like Egypt), and be under constant debate whether we should attack it, live with it in tense coexistence, dismiss it or monitor it. If the threat is domestic like the Palestinians, even if contained or neutralized, it remains an eternal threat and cannot be viewed as an opportunity for a genuine connection with the region in which we exist. Or in other words: to replace the security attitude with a civil one.
King Hussein of Jordan lights Prime Minister Yitzhak Rabin's cigarette at the Royal Residence in Aqaba, Jordan, shortly after signing the peace treaty at the Arava Border Crossing. (photo: GPO)
King Hussein of Jordan lights Prime Minister Yitzhak Rabin’s cigarette at the Royal Residence in Aqaba, Jordan, shortly after signing the peace treaty at the Arava Border Crossing. (photo: GPO)
Hence the attitude of the Israeli purveyors of knowledge and discourse toward the vicissitudes of the Arab Spring. We should not complain about the establishment. The state institutions charged with collecting intelligence, research, and evaluation of the uprising are by nature conservative, cautious, and more risk-averse than opportunity-driven. No wonder that when the Arab Spring began to falter, state authorities adopted a pessimistic view of the events and preferred the return of oppressive regimes to the democratically elected Islamic option. This attitude is justified, at least in part, by instability and rising violence, and certainly the disintegration of some states, which concern not only Israel’s citizens, but even more so, the citizens of these states.
But what is the role of purveyors of knowledge and discourse in the public and political sphere, in the academia and the media? I cannot avoid cynicism; in a Western, liberal, civilized state, they are expected, and should be expected to present an alternative world view — a pluralistic and multi-dimensional perspective of reality. But the central purveyors in Israel accept the two components of the prevailing paradigm: first, Israel is a foreign entity in the region, and second, as a consequence, Israel is permanently faced with an existential threat. This paradigm blinds many from seeing that there is no big difference, for example, between integrating the Muslim Brotherhood into the political regime of the neighboring countries, versus the struggle between religious-conservative parties and the secular-liberal parties in Israel. Political Islam is perceived by the Israeli purveyors of discourse and knowledge as a threat, whereas political Judaism is perceived as reality — not desirable, perhaps, but nevertheless a product of a democratic process that has to be accepted.
Mourners wail at the funeral of Rabbi Ovadia Yosef, October 7, 2013 (Photo: Yotam Ronen/Activestills.org)
Mourners wail at the funeral of Rabbi Ovadia Yosef, October 7, 2013. Israeli scholars view groups such as the Muslim Brotherhood as a threat to democracy, whereas religious Jewish parties are seen as part of the democratic system. (Photo: Yotam Ronen/Activestills.org)
Let us start with the Israeli academia. Is research on the Middle East conducted in Israel capable of offering alternative, critical, and complex thinking about what is going on in the region? Moreover, does the Israeli academia itself reflect the recognition that Israel belongs in the Middle East? The answer is emphatically “no.” Were the answer “yes,” there would have been Regional Studies programs offering courses on Israel and the Middle East alongside one another, and the various courses would have featured the relationships between society and state, religion and state, army and politics, sociology, political economy and so on — of all Middle Eastern states, including Israel. However, the studies of modern Israel are concentrated in the faculties of Social Science (sociology, anthropology, political science, economics), and the study of Israeli and Jewish history and the history of Islam and the Middle East are segregated in the humanities and liberal arts faculties
Study of the modern day Middle East in general — and inter-disciplinary study in particular — is missing from the Israeli academia, for two reasons: first, the prevailing perception that “Middle Eastern studies” necessarily, and exclusively, means the history of Arabs and Islam; and second, the lack of interest on the part of Middle Eastern studies in true inter-disciplinary research. In other words, it is doubtful whether the Israeli academia, in its present form, is capable of creating a large body of research and scholars who could analyze the events in the Middle East from different angles and within diverse scientific disciplines, which is the only way to enrich the local academic discourse, currently focused on history or, at best, on modern political or radical Islam. Without the contribution of social sciences — sociology, political economy, political psychology, political science, anthropology and culture studies — it is impossible to put together a body of knowledge about any society. Israeli research offers none of the above, and it is doubtful that it can offer any, given the lack of academic programs and research training. This in spite of the fact that inter-disciplinary research of the Middle East is flourishing in the Western, liberal academia, to which we ardently aspire to belong.
Let us take one of the main purveyors of Middle East knowledge in Israel, the Middle East Media Research Institute (MEMRI), as a prime example. MEMRI’s motto is “to get to know the neighbors in order to make peace.” However, anyone reading their publications gets the impression that “knowing the neighbors” merely aims to reinforce the prevailing paradigm — namely, that the Arabs and Islam are fundamentally different from Israel — rather than challenging it. Under these circumstances it is futile, of course, to speak of peace. Other extra-academic research institutes and information (not to mention intelligence) gathering centers are sometimes guilty of lacking the ability to conduct research in Arabic, therefore unable to cope with the complexity of the reality of the Arab and Islamic region; or of inundating us with information and analysis reflecting the security-based “perception of threat.” And I ask: why do we need more knowledge if it only reinforces what we already know?
File photo of Israeli Prime Minister Benjamin Netanyahu looking out over the Egyptian border. (Ariel Jerozolimski/POOL/FLASH90)
File photo of Israeli Prime Minister Benjamin Netanyahu looking out over the Egyptian border. (Ariel Jerozolimski/POOL/FLASH90)
For its part, the Israeli media derives its information mostly from these purveyors of discourse. Sometimes it provides a stage for academics who, as discussed earlier, lack the knowledge, time, attention, and necessary scientific tools to analyze modern events, although they may possess rich historical knowledge. With the exception of a few pundits, the central commentators in the Israeli public discourse, both from the academic and the communication perspective, support and inflate the “threat thesis.” The fear-mongering TV programs of Zvi Yehezkeli, in the spirit of “Allah, Islam, and ISIS” are the most prominent examples of this phenomenon.
One of the greatest features of the public discourse on the Middle East in Israel is the preservation of the imaginary separation between Israel and other Middle Eastern countries, and the belief that what happens “here” is fundamentally different from what goes on “there.” It therefore follows that there is no reason or need to compare the two sides: these are not just distinct domains of reporting and analysis, but rather separate worlds that are essentially different from each other. The result is that the public discourse in general, and the public discourse vis-a-vis the Middle East in particular, reflects the belief that criticism of Arabs and of Islam is professionally legitimate and “indicative of reality,” whereas criticism of similar problems and phenomena on “our” side belongs, at best, to domestic politics punditry, and at worst it is “politically biased,” “non-professional” or, to use the explicit term, “leftist.” This tendentious structuring is the work of those dominant research and information institutes, which examine only the Arab contribution to the perpetuation of the conflict. Although some of them can pass academic muster, they nevertheless manufacture a distorted and partial picture of reality.
Will salvation come from civil society organizations, especially from what is known as the “peace camp?” Regrettably, I do not think so. Most of these organizations give up when it comes to a genuine connection to the region. At best, they can communicate in neo-liberal English with the Arab liberal elite. They are obviously incapable of producing alternative knowledge about the Arab region, because most of their members are Ashkenazi Jews, usually male, who never took the time to learn Arabic and, furthermore, do not understand why it is important to do so. Even worse, they gladly leave the graduates of Arabic and Islam studies to join the government and military-security apparatus, which is very eager to incorporate them into its ranks and provides them plenty of opportunity to perpetuate the threat concept. For these organizations, graduates of elite American universities with glittering titles suffice. These graduates may have a natural talent fund-raising, but when it comes to Islam, Middle East, and Arabic, they are completely foreigners to the Middle East, and, in fact, to large segments of Israeli Arab and Jewish society as well.
The “Forum for Regional Thinking,” which I co-founded and head, was established recently based on the “CanThink” website. This site was established over three years ago by a number of Middle East scholars from the Israeli academia, whose convictions differs from what has been described above. The Forum seeks to make its modest contribution to undermining the paradigm of separation between Israel and the Middle East, and to bringing about a significant change in the Israeli public discourse about the Middle East. The Forum members come from different backgrounds, but for each of us the Middle East is part of our lives. We are sick and tired of the tangible and the intangible fences, of the cultivation of ignorance and the resulting anxiety. The damage caused by the fortified walls that Israel has erected to separate itself from its environment is growing, and if we continue to raise them further, it will lose contact with reality.
We seek to change the constricting mode of thinking about Israel’s place and its very existence within the Middle East, which is based on ignorance, a lack of understanding, and fears. We feel that Israel should recognize its strength as a regional power, which can and should coexist with its neighbors without fear or feelings of superiority.
To that end, the members of the Forum are expected to work on formulating an alternative to the conventional and hackneyed representations of the Middle East in the Israeli consciousness. We will do all we can to infuse the Israeli discourse with civilian thinking, acquaintance, understanding and, above all, with empathy. The path we intend to chart leads directly to meeting with our neighborhood and neighbors. Only when we recognize and get to know “them” — the Arabs, their culture, their society, their economy and their politics, as well as the Arab elements that exist within Jewish and Israeli identities — only when we learn to recognize all of these as part of our environment with which and within which we live, only then we can think of a durable future in the Middle East.
I invite every one of those present here, especially the Arabs among us, to contribute analyses, research and policy papers to enrich the Israeli public discourse about Islam, Arabs and Israel in the Middle East.
In an effort to decrease government costs and shrink the budget deficit, Saudi Arabia hopes to cut over $20 billion in projects and slash 25 percent of the ministry budget.
Bloomberg reports that thousands of government projects are under review in the biggest economic reform in the kingdom’s history. Projected cuts are said to be valued at some 260 billion riyals ($69 billion). A third of the projects on the chopping block would impact the national budget for several years. There also plans to terminate and consolidate several ministry offices. © FLICKR/ PAUL LOWRY Russia-Saudi Oil Deal: Harbinger of New Alliance to Challenge OPEC? Last year, Riyadh’s budget grew to 16 percent of its gross national product (GDP), resulting in billions being cut, and utility and fuel subsidies being reduced. By 2017, the International Monetary Fund believes the deficit will shrink to some 10 percent of the GDP. Raza Agha, VTB Capital’s chief economist for the Middle East and Africa, explained in an email to Bloomberg, "The revenue and economic diversification strategy being pursued will only start to yield results over the medium- to long-term… In the short term, it is a question of living with lower oil prices by cutting some capital spending, and financing what’s left via debt sales and drawing down foreign reserves." The Tadawul All Share Index — the Saudi stock exchange — has dropped 17 percent over the last year, falling 0.2 percent at the close. Since the price for crude has dropped, Deputy Crown Prince Mohammad bin Salman Al Saud, who is leading the National Transformation Program, is hoping to curtail Riyadh’s dependence on oil. Objectives of the program include the creation of some 450,000 non-government jobs by the year 2020, fortifying relationships in the private sector and strengthening digital platforms. © AP PHOTO/ HASAN JAMALI Oil Prices Rebound After Saudi Arabia Crashed the Market, But Will it Last? Mohammad is seeking to create the world’s largest source of sovereign wealth by selling a stake in the large Saudi oil corporation Aramco. A special project-management office will also be created to oversee municipalities, government spending and ministries for the world’s 20th-largest economy. The office will ensure that projects stay within budgets and are completed on time. Mohammed will chair a committee dedicated to reviewing reports made to the head office.
Saudi government is about to take the ax to its spending plans once again. According to a story by Bloomberg, the government is planning to slash the budget of government departments by a quarter, merge some departments and ditch around a third of its major projects worth more than $20bn.
In an economy which is already slowing down sharply as a result of previous austerity measures – and which still relies heavily on state spending – the latest cuts are unlikely to do much for the popularity of the regime, or the state of the economy.
The government may feel that it has little choice in the matter. Low oil prices mean that oil export revenues are down by around $200bn from their 2012 peak, according to London-based Capital Economics. That’s equivalent to around 30% of the country’s GDP and helps to explain why the government ran a 15% budget deficit last year.
The government has been trying to tackle the oil price squeeze in three ways: cutting spending, dipping into its savings and increasing its debt. There are some big numbers involved. Spending has already been cut by around 26% according to some analysts. The country’s foreign exchange reserves fell from $746bn in mid-2014 to $563bn in July this year, and government debt has risen from 1.6% of GDP in 2014 to an expected 17.5% of GDP by the end of this year.
Deputy Crown Prince Mohammed bin Salman at a meeting with Chinese officials on August 31, 2016 in Beijing, China. (Photo: Rolex – Pool/Getty Images)
At the centre of it all is deputy crown prince and defence minister Mohammed Bin Salman, the son of the king. He is the chief proponent of the wide-ranging economic reform programme, which was brought together in a document called Vision 2030 launched earlier this year.
Despite all the cuts that have already been made, the government seems to have decided that more austerity is needed. The consequences could be very damaging to the economy, at a time when the country desperately needs private sector, non-oil activity to pick up.
“Fiscal austerity has inflicted a lot of pain on the economy,” says Jason Tuvey, Middle East economist at Capital Economics. “Our GDP Tracker suggests that the economy contracted by 2% year-on-year in the second quarter of this year.”
The King of Bahrain arrives in Moscow on Monday for his second such visit of 2016. This visit is important considering, in a way, Bahrain is playing the role of the GCC’s ambassador.
Its unique position in the region, its capabilities and role permit the country deliver indirect messages to the Russian government. Russia listens to Bahrain attentively as it knows the val-ue of the messages that are delivered and is interested in building strong ties with Bahrain as it considers the country a door to the Gulf and the wider Middle East.
The visit coincides with the ARMY-2016 international military-technical forum in Moscow, where the Bahraini delegation will reportedly ink a military cooperation agreement with
Russia. Bahrain is interested in Russia’s Mi-8/17 and Mi-26 helicopters as well as in the opening of the regional helicopter service center. The signing of the cooperation agreement does not guarantee contracts. But the agreement opens up new opportunities for
bilateral cooperation. There is no doubt that during his visit, the king will discuss issues of an economic and political nature.
Vital interest
For the Russian side, cooperation with Bahrain is of vital interest. Having avoid-ed severe recession, Russia’s economy is still drastically affected by the deep crisis, the pro-spects of which are unclear until now. The main medium-term risk for Russia’s economy is the continued slump and lack of investment. The significant loss of investment from Western countries makes an investment from the East warmly welcome. Russia is turning East is search of new markets and allies as its relations with the West have been drastically affected by se-vere tension over many issues on the international agenda and Russia’s newly active foreign policy. While its capacities in terms of investments are quite limited, the Russian market is looked upon warmly by foreign investors. However, it should be admitted that investments are quite risky.
Russia’s strong involvement in the fate of the Middle East and its return to the region make it an important partner
Maria Dubovikova
The risk is not the only reason cooperation can be tricky. Russian business is notoriously slow and irresponsive to neither challenges nor to opportunities. Business, political and decision-making circles have little understanding of the way things work in the Middle East and how to cooperate with it. The Bahraini case is not an exception. Thus it is important for Middle Eastern countries and for Bahrain to work on how they are perceived by Russian society and seek out suitable partners.
As for political issues, the common agenda has significantly extended in the past years. Russia’s strong involvement in the fate of the Middle East and its return to the region make it an important partner. The Western policy of imposing its will and its treatment of the Middle East as the third world is no longer acceptable for regional powers. Middle Eastern countries have accumulated enough power to permit them to claim independence on the world stage.
A point of convergence
The Syrian crisis can also become a point of convergence for Middle Eastern powers and Russia, despite the contradictions in positions regarding this issue.
There is no need to expect a breakthrough or any significant agreements to be reached between the two countries during this visit.
Russia-Bahraini relations will witness a strong boost in the near future, as the bilateral agenda is more than positive. There is hope that this positive example will stimulate a further strengthening of ties between the other GCC countries and Russia.
The UAE's economy is poised to start recovery in 2017-18 on the country's strong balance sheet, but is likely to record its slowest growth since 2010 this year, Capital Economics said in its latest UAE forecast.
The forecast said recovery is expected in the 2017-18 fiscal year. "The UAE has been more proactive in terms of economic diversification than other GCC states and is, therefore, expected to cope relatively well with a prolonged period of low oil prices and to be one of the Gulf's best-performing economies in the coming years."
Despite low oil prices, the UAE's economy held up well last year with GDP growth picking up to 3.8 per cent from 3.1 per cent in 2014 - helped by strong growth in the oil sector, it said. The non-oil economy, on the other hand, recorded its weakest growth in five years. "This was largely due to fiscal tightening - fuel prices were deregulated last year and electricity and fuel prices were hiked, while Abu Dhabi cut spending by 20 per cent," it said.
The report noted that as fiscal tightening continues throughout 2016 and the boost from oil falls, growth will fall to two per cent by the end of the year, compounded by the fact that Dubai in particular is highly exposed to weak economic growth across the rest of the Gulf.
According to Capital Economics' Q2 2016 Middle East Outlook, the average GDP growth for countries in the region will be just 1.3 per cent. But institutions, including the International Monetary Fund (IMF) and International Institute of Finance, have predicted the UAE can expect growth of up to three per cent.
The IMF said in a note recently that the growth of UAE's non-oil sector is expected to increase above four per cent in the medium term, thanks to recovery in oil price, pick-up in private investment in the run-up to the Expo 2020 and a host of other factors.
"Economic activity is expected to moderate further in 2016, before improving over the medium term. Over the medium-term, non-hydrocarbon growth is forecast to increase to above four per cent as the dampening effect of fiscal consolidation is offset by improvements in economic sentiment and financial conditions as oil prices rise, a pick-up in private investment in the run-up to the Expo 2020 and stronger external demand," the IMF executive board said in an assessment note of the country's economy.
Executive directors welcomed the UAE's resilience to the oil price shock. Directors commended the authorities for prudent policies which helped build large fiscal and external buffers and strengthened the economy.
The IMF said persistent lower oil prices continue to pose challenges. Directors underscored the need for sustained sound macroeconomic policies to reduce fiscal vulnerabilities, safeguard financial stability and promote long-term growth.
IMF directors welcomed the authorities' commitment to pursue fiscal consolidation. For the near-term, in light of the ample buffers, they generally considered a gradual adjustment effort to be appropriate in order to minimise the negative impact on growth. However, stronger fiscal consolidation will be needed over the medium term to ensure intergenerational equity.
The executive board of the IMF also called for the Emirates to ease restrictions on foreign direct investment (FDI) in the new investment law and spur competition. Directors called for continued action to increase productivity and foster competitiveness.
"Efforts should continue to improve the business environment, ease restrictions on FDI in the new investment law and spur competition. In addition, priority should be given to upgrading the quality of education, promoting innovation and entrepreneurship, and facilitating SMEs' and start-ups' access to finance," the IMF said.
Given the economic disaster under Sisi, the changes demanded by the IMF will almost certainly wreak havoc on the majority of Egyptians
The IMF recently announced an agreement in principle to provide the Egyptian regime with the second largest package in the international lender's history. It is three times as large as the previous package offered to Egypt during the short-lived Mohamed Morsi presidency.
Egypt first entered into negotiations with the IMF shortly after the 2011 revolution. However, after broad-based opposition by Egyptians across the political spectrum to the harsh terms demanded by the IMF, negotiations were put off. Under the Morsi presidency, negotiations resumed with the objectives of securing an IMF loan to bolster the economic credentials of the country and encourage further injections of foreign capital, both loans and direct investment. The total package negotiated at the time was $4.7bn.
The initial IMF demands were opposed by the Egyptian government as likely to have a disproportionate impact on lower and middle income Egyptians. The Egyptian government presented a counter-proposal that mitigated the impact on poorer Egyptians and still met two key demands: reducing the budget deficit to 9.5 percent of GDP and restructuring the subsidy regime. The government developed a mechanism for food and fuel subsidies that targeted end-users rather than distributors and retailers thereby reducing the potential for waste and corruption.
Unacceptable demands
In June 2013, the IMF backed out of the negotiations on the pretext of insufficient political support from the opposition for the IMF package. Furthermore, it demanded a hike of the sales tax to 12.5 percent, which was not acceptable to the government due to its direct negative impact on low and middle-income families.
The IMF is making more demands: an end to the subsidy regime, implementation of VAT, reduction of governmental jobs and devaluation of the Egyptian pound. Given the massive deterioration in the Egyptian economy under the military government of Abdel Fattah al-Sisi, these changes will almost certainly wreak havoc on the majority of Egyptians, 95 percent of whom earn less than $14 per day, and more than one quarter of them earn less than $1.5 per day.
But beyond the impact on large strata of society, the important question to pose is whether this package will actually lead to an improvement in the moribund Egyptian economy. To answer that question, one must first ask another question: why is the Egyptian economy so moribund?
Under the presidency of Mohamed Morsi, foreign exchange reserves hovered at around $16bn, the Egyptian pound mostly traded around 6 pounds to the US dollar and there was no gap between the official and black market rates. The economy made modest gains and inflation was a reasonable 6.9 percent.
Three years of decline
Today, three years after the violent coup of 2013, foreign exchange reserves remain at $15.5bn, but that number is almost entirely made up of foreign government deposits due to be paid in two to five years. Inflation has doubled to 14 percent, a seven-year high, and the Egyptian pound has lost half of its value in three years, trading at nearly 13 pounds to the dollar with a severe shortage.
The official exchange rate stands at a Kafkaesque 8.75 pounds to the dollar; that is the gap between the official and black market rates is almost 50 percent of its value. Egypt’s foreign debt has now soared to $53.7bn. The combined domestic and foreign debt now stands at over 100 percent of the GDP with another $30bn being added as a result of the IMF package, which requires an additional $6bn annually to successfully implement the envisioned program.
Debt servicing currently eats 31.5 percent of the budget and this will only soar with the additional debt. And, ironically, the IMF has now dropped any pretence of requiring societal and political consensus to approve the package.
But this morbid account of the state of the Egyptian economy does not answer the underlying question of why it has come to this sad state.
Corruption
There are three basic reasons that account for the current state of the economy and none of them is likely to improve as a result of the IMF deal.
First, the regime is corrupt to the bone. The government’s own loyal auditor announced that the estimated income lost to corruption totalled 600 billion pounds ($67bn) over four years. He was promptly sacked and prosecuted for harming Egypt’s image. The corruption is more than a symptom of political life, it is a structural feature of this regime that depends for its survival on paying off those that support it, whether crony pseudo-capitalists, security forces or other vested interests.
Lack of vision
Second, there is no economic vision for the country. The military has achieved a near total monopoly over economic life, thereby choking private enterprise and is focused on Soviet-era mega projects in the deluded belief that propaganda and growth are in fact one and the same thing.
Finally, this is a brutal, repressive and exclusionary regime that has engendered both legitimate peaceful opposition to its policies and practices as well as terrorist activity that threatens vital interests like tourism and the Suez Canal.
The IMF is unconcerned about the structural reasons for the economy’s near-death experiences. And yet, it is obvious that a substantial portion of the money that will be injected into the Egyptian economy will go to line the pockets of those in power, and some to cover the short-term accounts deficit, including debt servicing.
But the consequences to Egyptians of this package will be devastating, creating further instability and societal breakdown.
Over the past three years, Egypt received some $50bn from its Gulf sponsors and the economy has progressively flirted with complete disintegration. As the annual need for hard currency to secure imported basic needs of Egyptians now exceeds $80bn, with limited resources after the collapse of the tourism industry and lack of foreign investment, even if Egypt secures another $30bn over the next three years, there is absolutely no reason to believe that this constitutes anything other than “throwing good money after bad”.
Saudi Arabia took another major step in diversifying its oil dependent economy by cementing relations with Japan.
The two countries signed seven memorandums of understanding (MoU) to begin greater cooperation between Riyadh and Tokyo.
Deputy Crown Prince Muhammad Bin Salman met Japanese Prime Minister Shinzo Abe yesterday in the Japanese capital met in an effort to cement ties between the Gulf monarchy and the third largest economy in the world.
The two will now see greater cooperation in investment, energy production, cooperation between press agencies, enhancing competitiveness in global markets, build cultural ties amongst other areas.
Delegates accompanying the Crown Price held a number of meetings with their Japanese counterparts from the Ministry of Economy, Commerce and Industry, trade organisations and various Japanese companies.
The Saudi Ambassador to Japan Ahmed Bin Younes Al-Barrak described Prince Muhammad’s visit to Japan as of paramount importance.
According to the Saudi Gazette the ambassador said the “visits exchanged between the kingdom and Japan contributed to closer cooperation between the two countries, based on mutual respect to promote true partnership.”
In April 2016 Saudi Arabia launched an ambitious plan to diversify its economy through privatising state assets, raising taxes and creating a $2 trillion sovereign wealth fund.
Egyptian mothers gathered yesterday in Cairo, blocking traffic, holding empty milk bottles and crying babies, to rally against severe shortages of subsidised baby formula.
Egyptian Minister of Health and Population Ahmed Emad El-Din Rady denied that a crisis exists.
This is the first time in Egypt’s history that baby formula subsidies have been cut, however it is the latest measure introduced by the government to get Egypt’s struggling economy back on its feet. Like the cuts in energy subsidies and tax increases that have also been implemented, shortages of subsidised baby formula will hit the poorest Egyptians the hardest.
Egypt’s economy has struggled over recent years, in part because tourists and foreign investors, who once made up a considerable amount of its GDP, have stayed away from the country as news of widespread human rights abuses continue to emerge from the country. As a result, the country’s domestic debt is estimated to stand at around
2.25 trillion Egyptian pounds ($0.25 trillion).
As well as cutting services at home, Egyptians are in the final stages of negotiating a $12 billion IMF loan after having accepted, and exhausted, billions of dollars in aid from Gulf countries which was handed over after the first democratically elected President Mohamed Morsi was ousted from power in 2013.
Anyone familiar with Japanese politics would know that MP Taro Kono never shies away from swimming against the tide, whenever needed. This Japanese Liberal Democratic Party (LDP) member has famously opposed the government nuclear policy, plans for nuclear fuel and building new stations. He also supports an amendment of the Japanese Constitution, which allows the self-defense forces to engage in warfare and “conflicts with the official position” on the issue of US Marine Corps Air Station in the Okinawan City of Futenma. In fact, so different are his views that the Wall Street Journal labelled him a “LDP Rebel with a Cause” in a profile piece about him published in 2011.
There is also another aspect to this politician. By Japanese standards, he is uniquely internationally-minded. Despite a long history of tensions with South Korea, he was the only lawmaker in his country to have had a Korean version on his official website. Korean interns regularly work with him and he maintains interesting views on the future of relations with both Korea and China.
More interestingly, Kono has a deep-rooted and genuine interest in Middle Eastern affairs. When I visited his office at the Japanese Parliament last year, I was fascinated to see that he possesses more books about the Arab world than I do. He almost always has an intern working at his office who hails from the Middle East, and speaks Arabic. He has visited a number of Arab countries including Syria, Lebanon, Jordan, UAE and Saudi Arabia.
Currently, a senior Saudi delegation, led by Deputy Crown Prince Mohammad bin Salman, is in Tokyo as part of a high-profile Asian tour, which will conclude next week at the G20 Conference in China. The delegation has signed MoUs, business deals and has been engaging in cultural diplomacy activities in a bid to strengthen the Kingdom’s alliances in the East.
MP Taro Kono is scheduled to meet with Saudi Arabia’s Deputy Crown Prince Mohammad bin Salman, who is also the country’s defense minister and the architect of Vision 2030; an ambitious reform plan which aims to balance the kingdom’s financial sheets, end the reliance on oil by diversifying the economy, open-up the country and improve the standards of living of Saudi citizens.
Mr. Kono has agreed to answer a few questions via email prior to his meeting with Prince Mohammad. Having been the chief cost-cutter for Japan’s national budget for over a decade, and a Minister for Administrative Reform, the meeting with Prince Mohammad is expected to be fruitful, considering that Mr. Kono says that he understands how hard Riyadh is trying to transform its role and streamline the budget.
“We hope to share our experience and work together,” he says. Contrary to the mainstream political views in Japan, Mr. Kono believes that his country should take in Syrian refugees and be "more politically involved in the Middle Eastern affairs.”
Furthermore, Mr. Kono (who has served as Chairperson of the National Public Safety Commission under current PM Abe) believes Japan and Saudi Arabia can cooperate in areas such as combatting terrorism, particularly given the Japanese security emphasis in the build up to the 2020 Olympics, which his country will host.
This, of course, goes hand-in-hand with Saudi Arabia leadership of the Riyadh-based coalition of more than 30 countries called the Islamic Alliance to Fight Terrorism (IAFT), which Prince Mohammad oversaw the formation of, with the objective to defeat international violent extremism militarily, ideologically, financially and electronically.
A picture posted on Twitter by Japanese MP Taro Kono of his audience with HRH Prince Mohammad bin Salman after the interview took place. (Photo courtesy: Twitter)
Complete transcript of the interview:
- Al Arabiya English: In December last year, you went on record saying that Japan needs an integrated immigration policy to cope up with its shrinking policy, or risk losing to China in competition for vital foreign workers. To what extent is the Japanese society willing to accept an influx of foreign workers? And do you think the society would have a preference for or against Arab immigrants?
TK: Japan is fast losing its population, and its birth rate is still around 1.4, which means unless Japan allows immigration, it cannot sustain its economy. Immigration, however, is still a very touchy issue in Japan.
Although many Japanese people might be skeptical about accepting immigrants, and the official government policy still denies foreign workers, in reality, there are many foreign workers, or cheap foreign workers to be exact, already in Japan. Many Chinese and South East Asians have come as “trainees” and many Japanese-Peruvians and Japanese-Brazilians have been admitted under the pretext of having the Japanese blood. They are, nonetheless, nothing but cheap workers. Without them we will not be able to build facilities necessary for the Tokyo Olympic Games in 2020 and the lettuce and cabbage will go rotten in the field.
If, or when, Japan is to open up for immigrants, what matters most is the language capability. We have learned that hard way. In the 1980s many Japanese descendants came from South America to work in factories in Japan. They all had the Japanese blood but most of them were not able to speak the language. They were not able to assimilate into the society. It is not the blood that matters, but the language.
Japan today is non-religious country, or the Japanese people are not religiously dedicated. Many Japanese have their wedding in the Christian church, most funerals in Japan are held with the Buddhist monks. The Japanese kids believe in Santa Claus and every town has a Shinto shrine where people enjoy the Shinto festivals. Even Halloween and St. Valentine’s Day are celebrated by young Japanese. When you talk about the word “religion” in Japan, you need to understand the same word probably means very different culturally from your country. That is something both the Japanese society and a foreign immigrant need to understand and work together to overcome.
So anyone who can speak or is willing to speak the Japanese language and understands the Japanese idea about religions should be welcome.
- Al Arabiya English: Workforce aside, Japan has made negative headlines with regard to its position which doesn’t favor bringing in Syrian refugees. This position is strange coming from a major country which is both well-off and in need of immigrants. What are your thoughts on this and what can be done to convince the Japanese to do more for Syrian refugees?
TK: It is true that Japan has not accepted many refugees. I believe this needs to be changed. The Japanese society needs to change so that we can accept immigrants or refugees as new members of the community.
- Al Arabiya English: There is a major Saudi delegation visiting Japan at the moment, and you have been to the kingdom on several occasions and you have said that Japan is seeking multilayered relations. What are the points on your agenda for the upcoming meeting in Tokyo and how do you see Japanese-Saudi relations developing and working together to resolve regional issues?
TK: As said earlier, Japan is religiously very neutral; there are almost no Muslims and Jews, and the Christian population is about 1%. Japan sells no weapon systems to anybody on this planet. Japan has had a very good relationship with the United States. The Japanese economy depends on the oil and gas from the Middle East. So Japan can be an honest broker in the Palestine peace process and can agree to disagree with the United States.
It is time for Japan to be politically more involved in the Middle Eastern affairs and play an independent role in solving the regional conflicts. In order to take such steps, I believe we need to create much stronger personal relationship with Arab nations at many levels. Politicians should be able to pick up a phone and call their counterparts when necessary.
We have established an organization called the Japan-Arab Leadership network, and its members have visited Arab countries every year for last fifteen years. We would like to extend this network to the Kingdom of Saudi Arabia as well.
Japan is transforming its economy. Much of manufacturing has moved out of the country to near the market. Japan is more heavily relying on automation as the supply of the labor contracting. On the other hand, Saudi Arabia has an exploding population especially at the young generation. There are a lot to complement each other’s economy.
I have been the cost-cutter for the national budget for last 10 years and had been Minister for Administrative Reform. The Saudi government is now trying hard to transform its role and to streamline the budget. I hope to share our experience and work together.
- Al Arabiya English: Late last year, you mentioned that ISIS could mount a cyberattack in Japan. Also Japan - like Saudi Arabia and other Arab countries - was a victim of terrorism when Japanese hostages were murdered by ISIS. As you know KSA has established and is leading a new Islamic Anti-Terror coalition. Do you see room for more and active cooperation with Japan on this front? And what can be hoped to be achieved?
TK: We all need to fight against terrorism. As the host of the 2020 Olympic Games, Japan is stepping up anti-terrorist measures. We shall exchange information and work together to prevent terrorism in the real world and in the cyber world. The possible damages caused by the cyber terrorism is limitless. We need to closely cooperate with each other to protect our people and economy from cyber-attacks.
It seems as if Egypt’s President Abdel Fattah Al-Sisi has fallen out of favour with his Western backers; that he has become a liability rather than an “asset”, as intelligence spooks might say. Although it might not be as stark as that, there are good reasons to believe that Sisi is no longer seen as the hero or saviour that he claimed to be back in 2013 when he deposed the country’s elected civilian President, Mohamed Morsi. For Egypt’s sake, the West must persuade him to go, before it’s too late.
Apart from Russia’s Vladimir Putin, no other world leader seemed keen to be seen with the Egyptian president during the G20 summit in China. Social media buzzed after a video was posted showing Barack Obama giving Sisi the cold shoulder as he jockeyed with others to shake the US president’s hands. How has Egypt’s so-called “strongman” fallen from grace – from hero to villain — as suddenly as this?
The Economist gives more than just a hint. It has been scathing in its criticism of the performance of the Egyptian government for weeks. In its latest feature — “Of bread, bribes and fungus” — the internationally acclaimed magazine described Egypt’s “unorthodox” agricultural policies as stupid and “riddled with corruption.” That was the verdict after underscoring the fact that the country is the world’s largest importer of wheat.
Obviously, the Economist could have chosen another edition in which to run such an article. It apparently wanted to make a point, though, by timing its publication to coincide with the G20 summit, when Sisi would be on the world stage rubbing shoulders with his political benefactors.
Since the coup that brought him to power, the former chief of army intelligence has been given an easy ride in the West. Many political leaders embraced him readily, if only because he had toppled a government led by the Muslim Brotherhood.
Nevertheless, although it is far from lacking in human or natural resources, Egypt has become an economic basket case. Sixty years after the British withdrawal from the Suez Canal Zone the country has not realised the huge potential benefit from this great waterway. Instead, it remains anchored stubbornly in the bottom half of the World Bank’s ease-of-doing-business index. The only thing that seems to rise consistently is its foreign debt, which increased from $47.9 billion in the fourth quarter of 2015 to $53.4 billion in the first quarter of this year.
Last month, Minister of Supply Khaled Hanafi resigned in the blaze of a corruption scandal, after a parliamentary investigation revealed that 40 per cent of this year’s wheat harvest was either missing or never actually existed. Hanafi has been replaced by an army officer, Major General Muhammad Ali Al-Sheikh.
Call it cronyism or whatever you like, the fact is that these developments are only the tip of the iceberg that is causing unease and mistrust in Western capitals. The situation is so bad, in fact, that when Assistant Justice Minister and Head of the Illicit Gains Authority Adel El-Said announced last month that the government had completed a deal with fugitive business tycoon Hussein Salem to return 75 per cent of his wealth to the state, few were impressed. The underlying fear is that the 5 billion Egyptian Pounds which was said to be returned will, sooner rather than later, find its way into other privately-owned overseas bank accounts. No wonder Sisi’s plea in China for world leaders to help repatriate Egypt’s stolen wealth fell on stony ground.
If all of this was not bad enough, there remain yet other issues that have become a source of embarrassment and discomfort for Western governments. Egypt’s human rights record, for example, which has been swept under the carpet for far too long, has now become as disconcerting as its financial mismanagement and corruption.
Several human rights organisations have drawn attention to the dramatic increase in the number of forced disappearances in Egypt. The horrific abduction and murder of Italian student Giulio Regeni in early 2016 has no doubt brought home to Westerners the reality of the country under Sisi’s rule. In July, Amnesty International published a report on the disturbing rise in the number of abductions and accused the Egyptian authorities of torturing those who they have “disappeared”. According to the Egyptian Coordination for Rights and Freedoms there were a total of 2,811 cases of forced disappearance between July 2013 when Sisi seized power and June 2016. These figures do not include the North Sinai Governorate in the north-east of the country, which is effectively off-limits to human rights groups.
Sisi’s honeymoon with the West may not be quite over yet; but there are clear signs of unhappiness in the coupling. Despite his well-established anti-Islamist credentials, the Economistbelieves that he has become part of the problem and not the solution. It advises him to announce that he will not seek another term of office in the 2018 presidential election.
Ultimately, Egypt will always be a strategically important country in the Middle East. Under its current leadership, though, the future looks hopelessly grim. Western leaders must be well aware of this, even if the penny hasn’t quite dropped with Sisi yet. They need to do something about it, and quickly, if their “asset” isn’t going to take Egypt down beyond redemption.
