Author Archives: Pamela Beecroft

Tunisian Business Leaders Weigh in on Country’s Future

tunisia

Since the revolution, CIPE partner IACE – the Institut arabe des chefs d’entreprises, or Arab Institute of Business Leaders – has reached out to citizens from all walks of life in Tunisia – young entrepreneurs, business leaders, students, policymakers and more – to debate and search for solutions to Tunisia’s persistent economic challenges. To involve even more people in the exchange of knowledge and ideas, IACE just launched a new newsletter to share updates on Tunisia’s economic progress and upcoming events.

Among other features, the newsletter includes a new op-ed, The Second Republic, or the Third Conflict Cycle? The piece makes the urgent and vital point that even with a new Constitution approved and focus on upcoming elections, it is the economy that still matters most.

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Authors Needed for Book on Corporate Governance in Emerging Markets

Several countries in the Middle East and North Africa (MENA) are undergoing full democratic transition and others are looking for new ways to generate jobs and provide economic opportunity for citizens, especially for a growing population of youth. In this context, corporate governance reform has taken on a whole new urgency. More fair and transparent management of local companies will level the playing field for business and encourage healthy economic growth inside the country, while creating an environment of rule of law and openness that will attract investment from outside the country.

Enter Sabri Boubaker from the Groupe ESC Troyes en Champagne and Duc Khuong Nguyen of  ISC’s Paris School of Management in France. With the MENA region in mind, they are editing a new book that will try to fill research gaps they see on corporate governance at both the country and the firm level. The book, to be published by Springer Verlag in 2013, will be called Corporate Governance in Emerging Markets: Theories, Practices and Cases.

What these editors need now are applications from potential chapter authors. They are seeking any experts, academic or otherwise, who have new knowledge to contribute. Are you interested?

The editors are requesting submission of a two to four page proposal by the 30th of November. You can find the official call for authors here with Boubaker’s and Nguyen’s contact information and all the other information needed. Among some chapter topic examples they give are: ownership structure in listed and unlisted firms; the effect of corporate governance characteristics on firm decisions and performance; barriers to effective corporate governance reform; best practices in corporate governance; and recommendations for future application of corporate governance in emerging markets. They are also open to any other relevant ideas.

We hope you apply, and if you do, please mention that you learned of the opportunity from CIPE’s blog!

How Improving Egypt’s Business Environment Could Reduce Traffic in Cairo

Photo by Flickr user “tronics”

Having lived in Egypt as a kid in the early ’80s, I still have vivid memories of Cairo traffic – the honking, the intermingled smells of hot dust and exhaust and garbage, the sight of busses going by with people hanging from every handhold like a human fringe – everyone inching along and maybe, eventually, getting somewhere. According to a recent New York Times Cairo Journal article, A Dictator Is Gone, but Egypt’s Traffic and Congestion Seem Immovable, three decades and one revolution later the Egyptian capital still hasn’t resolved its congestion problems.

What struck me most about the article was the connection made between traffic and street vendors. The author quotes a tamarind vendor, Mohammed Ghaleb, who explains that his road-side business works because, “The people in the cars coming this way are all hot, and so they want something to drink.” The article interprets the chain of cause and effect a bit differently: “The people are hot, in part, because of the traffic, and the traffic is bad, in part, because of Mr. Ghaleb.”

Egypt’s President Mohammed Morsi seems to have bought this logic. He has pledged to remove the street vendors and reduce traffic, and has proposed building designated markets or market areas to bring order to chaos.

Designated markets are not always a bad idea, but in many countries such initiatives lead to “forced resettlement” of merchants and end in failure. Why? Because officials rarely think to involve vendors themselves when planning new markets. All too often they end up with shiny new buildings way outside of town. If you’re a vendor surviving on a very narrow profit margin, it’s often better to stay where you are near your clients even if it means continuing to dodge authorities when you must.

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Jobs for Libya’s Ex-combatants…and Everyone Else

Libyan fighters celebrate the capture of Sirte in September 2011. (Photo: Reuters/Esam Al Fetori)

In December 2011, Libya’s National Transition Council announced it would spend $8 billion on a disarmament, demobilization, and reintegration (DDR) program to help militia members disarm and transition to civilian life.

I’ve been following this all with great interest, largely since, before I came to CIPE, I was working exclusively on supporting implementation of DDR programs, albeit in Africa’s greater Great Lakes region. What has been increasingly striking to me is how my DDR past and my CIPE present are meeting.

The Libyan government says it expects that at least a third of their demobilized combatants will be hired by the public sector, primarily by the army and police. A few months later, the interim Prime Minister also announced that the government would pay unemployed former rebels for the year they fought, and that rebels who are now students would receive financial grants.

But there are two issues here that I see. One is that DDR programs themselves rarely go quite as planned. Ideally, they serve to create time for peace, taking enough young men out of armed life so that instability decreases and space for development increases. If they work really well, they may provide some ex-combatants with new skills and alternative sources of livelihood, pride, and status that encourage them to stay in civilian life.

However, in reality it is difficult to fully realize either of these goals. The logistics are hard enough – imagine figuring out how to pay thousands of people throughout a country with little infrastructure. Or developing a registration and verification system that will ensure ex-combatants – and only ex-combatants – receive benefits.

Then there are the political dimensions. Militia leaders often want to transform their military clout into political influence once the fighting is over. The period before DDR is full of jockeying and number games over personnel and what will happen to them. Some commanders may keep their fighters from disarming while they negotiate for a place in the future government. Once disarmament begins, they may encourage as many of their men as possible to enter the army or police to become a power base for the future. Commanders will even sometimes “recruit” additional people to register as combatants and increase their “footprint” and leverage even further.

Sure enough, thus far Libya’s DDR experience mirrors several of these dynamics. The first thing many militia commanders did after Qaddafi was overthrown was to delay demobilizing their groups while they negotiated for cabinet positions. Payments were suspended in April after officials discovered that, by some reports, over 450,000 people were paid, even though there are at most 250,000 militia members. If this is true, that means there were at least 200,000 cases of fraud.

Disarmament and demobilization are also not making great headway. Weapons have flowed back to home district caches and some armed groups are getting involved in tribal and regional politics; recent clashes in the southwest left 70 people dead, and there was an attack in Tripoli on the Prime Minister’s offices to protest suspended payments. And then only days ago militias took over the national airport, insisting that the state was holding a militia commander and demanding his release.

Which brings us to the second issue I see as I watch Libya, which is that DDR cannot happen in a vacuum. Even if it is going perfectly it is not enough. In several countries in Africa’s Greater Great Lakes Region where I or my colleagues worked, many ex-combatants came out of DDR programs with allowances, new vocational training and start-up kits. But they could not find jobs. This was not necessarily due to the training – although certainly its quality could vary – but because there were few jobs to find. Economic absorption, as they call it, was extremely low. Starting businesses was almost as difficult. Markets and supply chains were inadequate, and sustainable development was taking much longer than anybody expected.

As I now watch Libya, it seems to me that there is a danger of something similar happening. DDR in Libya is not working well enough to absorb frustrated young fighting men as it should be and some militia leaders apparently still have full or partial command and control of their forces. Indeed, DDR itself may well fail if the broader economic environment is not addressed. The public sector cannot hire every single ex-combatant, and many of those initially absorbed into national security forces ultimately will not be qualified to be soldiers or policemen. Sooner or later they will need something else to do.

And beyond combatants, there are thousands of young civilian men and women who are not eligible for DDR and also need jobs and dignity.

Long-term stability and prosperity in Libya will require a much broader-based, sustainable, and inclusive approach that complements DDR – one that addresses the economic needs of all citizens, ex-combatants included, and creates opportunities that Libyans can access based on merit, rather than identity.

Critical to this approach will be support for small and medium-sized enterprises (SMEs), which must be major engines for job creation and economic growth in Libya. The International Finance Corporation reports that, on average, 29 percent of formal GDP in low-income countries is generated by SMEs. This is particularly true in countries with political and civil instability, where Shari Berenback of USAID recently remarked that, “private enterprise is an important stabilizing force.” And note that this statistic only speaks of formal income. In the Middle East, unregistered businesses contribute even more, well above that 29 percent.

Unfortunately, all too often in post-conflict situations, SMEs lose out on both ends: donors tend to focus on micro-enterprises, while local banks are unwilling to risk giving the small-scale loans SMEs often need, or they are not structured to do so. (For more about this, see Gayle Tzemach Lemmon’s recent working paper on entrepreneurship in post-conflict situations.) For aspiring women entrepreneurs, the challenges to access can be even greater. Cultural factors come into play, as do administrative ones – women often do not hold the deeds to land, for example, and so banks are even less willing to lend them money.

Faced with these and other barriers, many SMEs end up going into the informal sector, meaning they do not register their businesses. Without legal identity, their owners and employees are often invisible and voiceless. If they are abused they cannot go to court, they cannot easily participate in policymaking or join associations, and their taxes do not support national services, along with a host of other costs.

The key, then, will be for Libyan reformers and their international partners to not just focus on helping small business owners, but also on building an environment for small business. Bank financing thresholds, property rights, tax laws and incentives, bankruptcy regulations – these may not be sexy, but they are vital to fostering tolerance for risk and innovation, both among banks and investors, and among aspiring entrepreneurs. Who will start a business if failure and debt mean ending up in jail? How can a bank lend money to a person without legal property, presuming that bank is willing to lend money to a small business or aspiring entrepreneur at all?

With elections coming up in Libya in late June, it’s the right time to ask these and a host of other questions. Systems and institutions that are inclusive, transparent and fair will go a long way to fostering the kind of job growth that all Libya’s young people need to have a bright future, ex-combatants included.

Less is more: Constitution building in Tunisia

(photo: JJ Emru)

Over the weekend, almost four million Tunisians came out to elect members to the Constituent Assembly that will create Tunisia’s new constitution. There is already plenty riding on these elections. As the first free elections in Tunisia’s history, they should go a long way in reassuring Tunisians that their transformation is really moving forward, even if it has been messy and troubling at times.

Just the fact that elections happened at all is inspiration for many countries in the region. They provide a practical model for Libya and Egypt. They up the ante for leaders in Jordan and Morocco, who have launched tentative reforms, but many so far only on paper. And in places where real change seems far on the horizon, these elections may give hope to activists that their struggles will achieve the freedom they seek.

Even more now rides on the future constitution itself. All Tunisians, including the country’s diverse private sector, must be involved in the process. It is a one-shot, historic opportunity to pave the way for freedom, growth and prosperity.

Simple is best with documents that determine the course of nations. The art of developing a good constitution lies in the details, and in keeping most of them out of it. Good constitutions are broad enough to have lasting relevance, and flexible enough for the future. They should enshrine the basic principles, relationships and structures that will underpin all laws and institutions to follow.

The specifics should be left for later, for policymaking processes designed to adapt relatively quickly to the will of the people and their changing needs. Otherwise, a country will have to address its political questions through a continual process of national referendums. This is inefficient and costly to say the least, and likely to cause civic fatigue among even the most ardent citizens.

To be lasting and useful, the Tunisian constitution should define openings and avenues for all citizens. What is should not do is guarantee outcomes – constitutions that have, for example, promised every citizen a job, have rarely held up very well. Tunisians who own businesses will want to look for many of the same constitutional principles as everybody else. With an eye towards the future, the private sector should ensure the new constitution provides a framework that allows all citizens to have a voice in lawmaking, exercise their rights, build their businesses, hold decision-makers accountable and have access to impartial adjudication of disputes.

That means they should be looking at, among other aspects: the policymaking process, who can initiate the process and who has input when; the independence of the judiciary to decide cases and sanction wrongdoers; the balance of powers between the executive and the legislative branches; citizens’ freedoms and rights; and particularly the right to own and dispose of property.

Laws can be changed over time, and there will be many opportunities to advocate for their improvement if they do not come out right the first time. The constitution, on the other hand, is for forever – ideally anyway. Business associations should join forces with other civil society groups to gather and channel the input of citizens, monitor the Constituent Assembly’s activities, and provide support and information that will lead to a constitution that works.