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IMGXYZ4122IMGZYXThe Arab Spring has paved the way for fundamental economic and political change. Old and discredited economic models have marginalized entire communities, and the failure to achieve desired growth has left the majority of the region’s inhabitants stuck in poverty. Experts from across the Arab world gathered on December 15 to discuss the economic challenges facing Arab states.
General Challenges Facing Arab Countries
- Alarming Rates of Unemployment: The most pressing challenge facing Arab governments is the high rate of youth unemployment. At 27 percent, the Arab world now has the highest youth unemployment rate in the world, explained a participant.
- High Levels of Corruption: Corruption has hindered robust economic growth and mismanaged economic policies have led to widespread economic stratification across the Arab world.
- Authoritarian Rule: Major conflicts in the Arab world have been used to justify both military and theocratic authoritarianism in the region. But declining economic conditions, coupled with growing aspirations for freedom of expression and better living conditions, have proved that democratic transitions were the only path forward, argued one expert.
- Rentierism as an Economic Structure: Some estimates indicate that 45 percent of personal income from the Gulf region is a result of rentierism, an economic system that hinders workforce productivity, said a participant. Weak institutions and regulations also encourage corruption and deincentivize innovative work, they added.
Country Specific Experiences
- Syria: The ongoing crisis makes it difficult to quantify the Syrian economy’s performance, explained an expert. The country will face extraordinary challenges particularly when it comes to financing infrastructure destroyed by the conflict. Any future Syrian government will be forced to deal with large trade deficits, high unemployment, crippling economic sanctions, and macroeconomic instability.
- Lebanon: The after effects of the Arab Spring have led to a decline in tourism and foreign direct investment. If the Syrian crisis continues, the Lebanese economy will deteriorate even further, argued one participant. Large influxes of Syrian refugees are bound to exacerbate existing economic problems and the tense political divide in Lebanon obscures the country’s decisionmaking process.
- Jordan: One participant explained that Jordan’s political economy is shaped by three pillars: identity politics, rentierism, and elite interests. Affluent citizens tend to prioritize political openness rather than economic reform, which is the primary concern of middle and lower-income individuals. Furthermore, Jordan’s economy is semi-rentier in structure because of the country’s reliance on foreign aid, remittances, and natural resources. Lastly, elite interests tend to inhibit reform and weaken the demands for progressive change.
- Palestine: Israel’s current policies, coupled with the physical separation between the West Bank and Gaza, suggest a poor economic outlook for Palestine, said an expert. The Israeli government has been using its financial obligations set forth by the Paris Convention as leverage over the Palestinian government. Moreover, this separation has created extra burdens on the economy, making Palestine highly dependent on foreign aid. The Palestinian Authority’s lack of a strategic economic plan also exacerbates existing economic issues, a participant concluded.
- Iraq: Following the U.S.-led war in 2003, Iraq’s institutions were severely damaged. Citizens are now unfortunately looking to oil resources as the primary mechanism for economic development and social justice, rather than productive work, an expert argued.
- Libya: Although Libya can avoid the problems that Iraq has faced, the countries share similar challenges, explained an expert. Libya has the opportunity to avoid becoming a rentier state if it succeeds in outlining a clear economic vision in its new constitution. But such an outcome depends on whether the Libyan government can unite a fractured population and devise a constitution that sets clear guidelines for the distribution of natural resources.
- Sudan: Institutional weakness and the mismanagement of natural resources are symptomatic of a weak Sudanese economy, explained a participant. Ongoing internal and external armed conflicts in the country have also had devastating effects on Sudan’s economy. The ramifications of political conflict have negatively affected the private sector, recently causing the south to separate from Sudan and triggering a subsequent inflation rate of 46 percent.
- Egypt: Citizens living below the poverty line have climbed from 20 to 25 percent over the past few years, with another 20 percent on the verge of slipping into that category, warned an expert. Low education levels and poor training have resulted in a chronic shortage of skilled Egyptian labor. Worse, the government’s existing social expenditures are unsustainable and incompatible with sound economic policy, they said. The full potential of civic participation has not been reached and this impacts the efficiency, stability, and progress of the nation.
- Tunisia: The main difference between Egypt and Tunisia is the latter’s lack of a substantial military command outside of the executive branch, said one participant. The Muslim Brotherhood has taken control of the Tunisian government, vowing to bring economic prosperity although they have produced no significant achievements so far. Partisan conflicts and a weak judicial system have seriously hampered the Islamic government’s ability to produce tangible results, added a participant.
- Yemen: All developmental indicators point to an alarming situation, stated one expert. Statistics show that Yemen is suffering from severe water scarcity and mismanagement has made the problem even worse. Other domestic issues plague the country even though Yemen is being assisted due to its strategic trade location and routes, they added.
Discussants included: H.E. Nicolas Nahas, the Lebanese minister of economy and trade; Dr. Samir Radwan, the former Egyptian finance minister; Professor Samir Maqdisi, the former Lebanese minister of economy and trade; Dr. Omar Razzaz, the director of Jordan’s Social Security Corporation; Dr. Nabil Sukar, the managing director of the Syrian Consulting Bureau; Dr. Mounir El Rached, the acting vice president of the Lebanese Economic Association; Mr. Sami Attalah, the executive director of the Lebanese Center for Policy Studies; Dr. Samir Abdullah, the general director of the Economic Policy Institute in Palestine; Dr. Suffyan Al-Issa, the dean of the executive board at the World Bank; Dr. Emad Al-Samaraee, an associate professor of political economy at Al-Nahrain and Baghdad Universities; Professor Amal Shlash, an Iraqi economist for Bayt Al-Hikma; Dr. Ahmed Jehani, a visiting scholar at the Carnegie Middle East Center; Dr. Mosslem Alamir, an economist at the World Bank’s country office in Sudan; Dr. Ibrahim Awad, a professor of public policy at the American University in Cairo; Dr. Ahmed Ghoniem, an associate professor with the faculty of economics and political science at Cairo University; Dr. Mohamed Haddar, a professor of economics at the University of Tunis, Professor Mohamed Al-Maitami, a Visiting Professor of Economics at Georgetown University; Mr. Khalid Abu Ismail, a policy adviser at the Sub-Regional Resource Facility for Arab States; Dr. Nadia Belhaj, the senior program specialist at the International Development Research Center; and Dr. Mary Kawar of the International Labor Organization. Carnegie’s Ibrahim Saif and Lahcen Achy moderated.