Tag Archives: economy

Drivers of Violent Extremism

The Kabul Bank scandal is a prominent case of corruption that undermines governance, and an example of one of a number of factors that can drive extremism.

Extremist violence presents a serious threat to democratic values and societies around the world. The last decade has witnessed increased attention to how and why individuals become involved in extremist violence, including “push” and “pull” factors. “Push” factors are underlying conditions favoring the rise or spread of violent extremism (VE). “Pull” factors work on an individual level and have a direct impact on recruitment and radicalization. They include: social status and respect from peers, a sense of belonging, adventure, and self-esteem, and the prospect of achieving glory and fame. There has tended to be an over-emphasis on the search for broad root causes and an under-emphasis on the examination of individual motivations. This tendency has reduced the success of past programs seeking to counter VE. In the future, programming should focus on preventative measures aimed at preempting radicalization by mitigating specific drivers that are known to heighten the likelihood of VE.

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Democracy that Delivers Podcast #45: Andrea Ewart on Why Trade Matters

Podcast guest Andrea Ewart (left), with hosts Julie Johnson and Ken Jaques.

Podcast guest Andrea Ewart (left), with hosts Julie Johnson and Ken Jaques.

This week on the Democracy that Delivers podcast, President of the Organization of Women in International Trade Andrea Ewart talks about why trade matters. Below she further elaborates on the conversation and gives a few key reasons why. Listen to the podcast here:

Want to hear more? Listen to previous podcasts at CIPE.org/podcast.

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Crunch Time for Egypt’s Economic Reform

via Wikimedia Commons

via Wikimedia Commons

This blog originally appeared in Arabic on CIPE-Arabia.org

Indeed, Egypt is going through a very difficult period. The current economic situation is intrinsically linked to the accumulated weight of poorly addressed economic challenges over the past forty years.  Economic problems were either ignored, or in other instances, their root causes were not addressed in a profound and decisive manner.  On the other hand, undoubtedly, Egypt has all the capabilities to become one of the largest world economies.  This potential has been noted in reports of financial institutions such as the 2010 Citibank report.

The current difficulty stems from fact that there is no alternative to undertaking a comprehensive economic reform program. However, in the short run all Egyptians- the wealthy, the poor, and the middle class, will have to bear the brunt of these reforms. That said, with sound management of reform program, Egyptians will enjoy the fruits of reform in the medium to long run.

There can be no doubt that enacting economic reforms is crucial for Egypt’s progress. Thus, “No,” is my final unequivocal answer to the most critical question of whether Egypt has other alternatives to entering into the loan agreement with the International Monetary Fund (IMF).

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Community and Political Actors Present ‘Ideas for Rebuilding Nepal’ to the Government

On April 25, a devastating earthquake of 7.8 magnitude rocked the central region of Nepal, claiming over 8000 lives, injuring thousands, and leaving another 2.8 million people homeless. The government of Nepal has been posed with one of its biggest disaster-related challenges in recent history. Despite the looming challenges that remain, a window of opportunity has emerged for Nepal to mobilize the energy and enthusiasm of its citizens for a better, more prosperous country. The fabric of Nepali society—which exemplifies cooperation, tolerance, and compassion— has been on clear display in the voluntary efforts of various non-governmental organizations (NGOs), civil society groups, and individuals alike. This energy marks a new beginning for Nepali society and politics.

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A Trinity of Trade: Africa soon to Launch TFTA

Map of TFTA

By Otito Greg-Obi

Recently, African heads of state gathered together in Egypt to sign the Tripartite Free Trade Area agreement (TFTA) which will join the forces of the East African Community (EAC), the Common Market for Eastern and Southern Africa (COMESA), and the Southern African Development Community (SADC).

Free trade is crucial to global economies because it reduces tariff barriers which in turn results in trade creation. The benefits of trade for developing nations in general are numerous. To name a few: first and foremost, trade allows for specialization meaning countries can build a comparative advantage by focusing on producing goods with low opportunity costs. Secondly, trade encourages healthy competition which incentivizes businesses to increase efficiency and cut costs. Lastly, trade can reduce dependence on existing markets and stabilize countries affected by seasonal changes in markets.

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Beyond the elites: Why Syrian businesspeople have a stake in democracy, not Assad

A small business in Syria. Photo: http://www.kfw-entwicklungsbank.de

In searching for an end to the bloody stalemate in Syria, many have identified the Syrian “business community” as one of the last pillars of support propping up Bashar al-Assad’s presidency.

In June, The Financial Times ran a story headlined “Business reluctant to cut loose from Assad.” In October, when The Christian Science Monitor attempted to answer the question “Who backs Syria’s Assad?” it pointed the finger first at “businessmen.” Most recently, Elliot Abrams identified “turning the business community” as one of the four tactics US policymakers can use to knock Assad from his perch and stanch the bloodshed.

The idea that the business community is complicit in the repression of Assad’s security forces stems from the idea that moral concerns of Syrian businesspeople are trumped by those of dollars and cents. As the idea goes, the Syrian business community, or at least sizeable pockets of it in Aleppo and Damascus, believes that the policies of the Assad government have allowed it to prosper, and that future prosperity relies on the guiding hand of Assad.

Recently, Radwan Ziadeh, Syrian activist and member of the Syrian National Council (SNC), spoke at Johns Hopkins School of Advanced International Studies and exposed this idea as myth. “There is no business community support for the Assad regime,” Ziadeh stated. On the contrary, he argued that many in the business community form a pillar of support for the opposition, funding many of its operations.

Indeed, The Guardian reported in May that one of the earliest opposition conferences was funded by prominent Syrian businessmen, such as Ali and Wassim Sanqar, sibling luxury car dealers, and Ammar Qurabi, chairman of Orient TV. Exploring their motives, the article reported that all three had been burned directly by the government’s preferential treatment of Syria’s most notorious crony capitalist Rami Makhlouf. These three businesspeople do not stand alone in their support for the protest movement. According to Ausama Monajed, a member of the SNC, “Millions of Syrian pounds are coming from these people. If a protesting community needs something, the money gets to them very quickly.”

In comparison, the segment of the business community supporting Assad seems to be small. At an event at USIP on October 13, Murhaf Jouejati, a member of the SNC, estimated that Assad’s support in the business community is limited to perhaps 10 to 15 elites who have long benefitted from his favor and now stand to lose much from his ouster. In a recent article in Foreign Policy, Randa Slim estimated that Assad’s nouveau riche “do not exceed 200.”

Of course, as my colleague Abdulwahab Alkebsi argued recently, the idea of a monolithic business community unanimously supporting or opposing anything is a myth. The term business community, even more than the term private sector, encompasses a range of firms of various sizes, operating in a range of different sectors. This diverse part of society comprises a dizzying array of conflicting agendas. Thus, it’s not surprising that some support Assad and some oppose him. Yet, the question remains whether the average businessperson has a stake in supporting the continued rule of Assad.

Recent Syrian economic history does not seem to merit significant support among businesspeople. Indeed, under Assad, the Syrian economy has underperformed for many. Between 2006 and 2010, due to some limited economic reform, Syria’s per capita GDP rose from just over $1700 to just under $2900. That rise put the average Syrian on par with the average citizen of Guatemala or Egypt. While Syria’s 6 percent growth in 2009 was relatively impressive, its 3.2 percent growth in 2010 lagged behind the world average. This growth has benefitted very few, many of whom selected by Assad rather than the markets.

The story of Rami Makhlouf is telling. While Bashar inherited the political power of his father Hafez, Makhlouf inherited the economic power that had been granted to his family when Makhlouf’s aunt married Hafez. Initially operating in the telecommunications industry, Makhlouf scooped up businesses throughout the economy during Assad’s period of “reform.” With his connections in the halls of power and in the security forces, Makhlouf’s participation in a business deal was thought to be crucial to its success. An oft cited figure characterizes Makhlouf as controlling 60 percent of the Syrian economy. Some, like Makhlouf, have prospered due to their connections. Others have prospered because they have operated in a sector that Assad and Makhlouf chose to support. For the majority, however, business has been difficult.

Even before the uprising, Syria’s economy offered extremely barren soil for business. The recently released Arab World Competitiveness Report sheds light on this troubled business climate. The report ranks the Syrian economy 98th in the world in competitiveness, putting it ahead of only Yemen in the Arab world. Beyond the ranking, the report describes a Syrian economy in which it was difficult to secure capital, difficult to compete with the country’s few mega-firms, difficult to hire and fire workers, and difficult to participate in trade or attract foreign investment. If the average businessperson supported Assad heading into the uprising, it was not because Assad had made conducting business easy.

Assad’s effect on business since then has only made things more difficult. His brutal crackdown on unrest has disrupted commerce, crushed the country’s growing tourism industry, and attracted economic sanctions that have put the country’s annual $2.5 billion in oil revenue in serious jeopardy. While the IMF recently forecast that the Syrian economy would shrink by 2 percent this year, some economists estimate that the damage is actually far worse. The governor of the country’s central bank recently admitted that the government has spent $3 billion to stave off the collapse of its currency. With access to Euros limited by international sanctions, government officials recently “threatened” to conduct transactions in rubles.

With the country’s economy in disarray, Assad’s hand has been anything but firm. Last month, Assad’s government announced an import ban. After days of spiraling prices, the government quickly retracted the ban. With its economy collapsing, Assad’s government announced that rather than tightening the belt during tough times, it would increase next year’s budget by 59 percent to provide social support, a decision that would make even Keynes stir in his grave. In August, a Syrian businessperson told The Financial Times, “The regime has sacrificed the economy for its own survival.” Indeed, if Assad’s years of economic mismanagement had failed to alienate the Syrian private sector, the past few months may have done the trick.

The remaining justification for Syrian businesspeople to stand behind Assad would be a combination of confidence that the current government can right the ship, and fear that in the absence of Assad, there will be no stability in Syria. In a country in which sectarian identity seems to matter, it is concerning to some that the opposition has been slow to unite and present a positive vision of a better future for all Syrians. The increasing militarization of the Syrian uprising has blurred moral lines to some. The difficult transition in Egypt is also affecting the attitudes.

At the same time, Assad’s supporters sing a bizarrely confident tune. A Syrian official recently predicted, “In a few months the protests will stop and the situation will be getting back to normal. This is a problem we will overcome.” One Syrian analyst stated, “Economic reforms will continue and if waste is cut and corruption cut back, the economy will emerge from this period stronger than it was at the start.”

These rosy predictions, like much of the administration’s message, seem largely divorced from reality. The Syrian economy has far greater problems now than waste and corruption. Even if Assad is to gain the upper hand in this conflict, life in Syria is unlikely to return to its previous normal. The sanctions will likely remain. The tourists will be slow to return. The economic dislocation is likely to persist. Resentment will fester. Another uprising will likely always lurk around the corner. While the opposition’s road is difficult, Assad’s road seems more so.

In February, when Hosni Mubarak clung to power despite the widespread calls for his resignation, I attended an event at the Carnegie Endowment titled “Egypt on the Brink.” At the event, Neil Hicks, advisor for Human Rights First, observed that Mubarak had a choice: he could hand over power or he could remain as the Robert Mugabe of North Africa. Today, Bashar al-Assad is presented with a similar choice: he can leave, or he can preside over a collapsed economy and perhaps a civil war. While he may be able to choose the second option, I doubt there will be many in the business community excited to stand behind him.

What do Libya, Norway and El Dorado have in common?

(photo: NewsWarped.com)

Husni Bey, a Libyan entrepreneur, employed the language of legend to express confidence in his country’s ability to rebuild itself after decades under Gaddhafi. “Definitely, Libya is an El Dorado,” he said.  “It has great resources that [will] really allow it to turn around in no time.” Indeed, with vast fields of oil beneath it, Libya’s natural wealth is substantial. While many countries would buckle under the weight of a post-civil war reconstruction that some estimate will cost $80 billion, Libya should have no problem paying its bills.

Yet, while this oil revenue should ease the costs of Libya’s reconstruction, many observers are concerned that it could make Libya’s path to democracy hazardously slick. That’s because all too often an abundance of natural resources, oil in particular, allows wealth and power to gather into the hands of the few and prevents the development of democracy. El Dorados usually make poor democracies.

Indeed, since the 1960s and 1970s when many states began to seize control of their oil resources from Western oil companies, many scholars have noted an inverse relationship between oil export revenues and freedoms in a given country. Headed by countries such as Saudi Arabia and Iran, a perusal of the world’s largest oil exporters reads like a roll call of autocracies. This relationship is more than a correlation.

In these countries, oil distorts the relationship between state and citizen. States that do not require tax revenue to provide services to their citizens are less likely to feel accountable to them. When citizens express frustration, the state can co-opt them with handouts. If that fails, these states are able to lean on their disproportionately well funded coercive apparatuses. Unaccountable to their citizens and flush with revenue, resource-rich states can become incubators for corruption. Such was the case under Gaddhafi whose nationalization of Libya’s oil allowed the country’s descent into kleptocracy.

Fortunately, the connection between oil and corruption is not a fait accompli in Libya. In the wake of Gaddhafi’s fall, some have shifted their attention to Norway, which has largely broken the link between oil and corruption, as a possible model for Libya. By limiting the amount of oil companies may drill and shielding oil revenues from the reach of government officials, Norway has managed to facilitate the growth of a diverse economy and transparent political system.

In Libya, a country in which tribal identity is an important means of social organization, the distribution of oil revenue has the potential to combust. The distribution of oil revenue has already emerged as a source of contention: Businessmen based in Benghazi, an eastern city that suffered disproportionately under Gaddhafi and ultimately spawned the now ruling National Transitional Council (NTC), have launched a campaign to pry the state-owned National Oil Company away from Tripoli.

The Norwegian model cannot and should not be applied directly to Libya, a country whose similarities to Norway may start and end with its oil wealth. Still, it is heartening to know that by fostering transparency and accountability, a country can avoid succumbing to the oil curse. With critical decisions regarding the distribution of oil revenue among Libya’s many tribes looming, the time to focus on instilling and institutionalizing these values is now.

Libya will likely resume oil exports in the next week or so. The International Energy Agency projected that Libyan oil production, currently operating at about ten percent capacity, will reach 1.1 million barrels a day by the end of next year. While this amount would still be below capacity, it would nevertheless represent a massive flow of revenues into the economy.

Should consequential decisions about oil revenues be made by the consensus of representatives of all Libyans in an atmosphere of transparency and accountability, they could infuse Libya’s fragile transition with the confidence of its people. Should it appear that the victors of Libya’s civil war are merely collecting their spoils at the expense of the losers, however, Libya’s transition to democracy will have been made more difficult. Libyans would be wise to focus on creating a transparent system that limits opportunities for abuse before the oil resumes its free flow. Many El Dorados have become miserable places in which to live. With transparency and good governance, Libya – like Norway – can become an exception.