2011 Annual Conference Panel 4 - Economic and Development Strategies for a Middle East in Transition

Panel 4, November 17, 2011

Kate Seelye: We’re going to start our final panel of the day. It’s been a long and exciting day examining the implications of the Arab Spring for the region, for regional policies and for US policies in the region. Now we’re going to examine what is arguably one of the most important aspects of this: the need for economic reform and investment in the region. Moderating our fine panel today is Molly Williamson, an MEI Scholar. She is a former Foreign Service Officer who served six presidents, retiring with the rank of career minister.

Molly Williamson: Thank you so much. My appreciation and thanks to the Middle East Institute, President Ambassador Wendy Chamberlin, and Vice President Kate Seelye for the honor of being able to moderate this important panel.
What we saw early on in the demonstrations in Tahrir Square, and you saw the students being interviewed on television and calling for jobs, justice and dignity. This panel is about the criticality of economic growth for the success of these transitions underway throughout the region. It will take time to narrow the skills gaps, to establish the necessary market reforms, to invite foreign investor confidence, but the demand for jobs, justice and dignity is immediate. This piece has to be gotten right. If the calls are not addressed or not seen to be addressed, then this region faces increasing risks of rolling demonstrations, which in turn can be exploited by just another regime followed by yet more regimes throughout the region.
Well before the emergence of unrest in this region, the widely held economic analysis was that 8.5 percent annual GDP growth was necessary just to maintain existing levels of unemployment. Two years ago the region’s labor force totaled some 135 million workers. It’s expected that by 2020 that number will reach 185 million. That means that the countries in this region need to create 50 million jobs over the next ten years – or 5 million a year – compared to pre-Arab Spring (or Arab Awakening, or Arab Unrest) of creating 3 million jobs a year. That’s just to maintain existing levels of unemployment – 50 million jobs over the next decade.
These are overwhelmingly young societies, in some cases 60-70 percent under the age of thirty. The largest cohort is that group between 15 and 29. They have the largest unemployment rates.
To facilitate jobs growth, several key elements must be addressed. Labor market imbalances – we have serious skills gaps in the marketplace. This requires education and training reforms so that the training can be relevant to the needs of the marketplace. An overwhelming public sector that is oversized and not productive. There must be more foreign direct investment to grow private sector industry and jobs and that requires structural and judicial reforms to encourage investor confidence. Over the years, privatization has come to be associated with crony capitalism and corruption. That will mean resistance to some of the necessary reforms that must be undertaken. In the longer term, the oil producing countries will need to diversify, to create more skilled jobs and laborers for those jobs, employees throughout the region.
But the immediate need will be to coordinate international programs to facilitate the achievement of these important and delicate transitions. This panel is critical and important. We have expert panelists to discuss these critical issues.
We will begin with Dr. Odeh Aburdene, president of OAI Advisors, a man of longstanding expertise in Middle East business and the energy arena, particularly in private equity. Dr. Adel Abdellatif, with extensive experience in the UN, particularly UNDP, following two decades in the Egyptian Foreign Ministry and having served as ambassador for Egypt. Dr. Iman Bibars, a vice president of Ashoka, the largest association of leading social entrepreneurs in the world, to talk about the importance of social entrepreneurial development. Finally, Ambassador Bill Taylor from the State Department, who has just assumed his duties as the Special Coordinator for the Office of Middle East Transitions. He is Mr. Transition. He has been working on transitions from the former Soviet Union, he’s been doing transitions in Afghanistan and Iraq, and has headed operations at USIP on transition needs and the like. So we’ve got some terrific experts to talk about these issues. I’ll start by turning it over to Odeh.

Odeh Aburdene: After listening to Molly, I have to think twice about what I have to say because she knows the subject matter very well. But first I want to make a comment. Over the past seven or eight hours I kept hearing the word “Arab Spring.” In places like Egypt you don’t have a spring. Secondly, the spring is a short season. Thirdly, if we go back, a Frenchman wrote a play in the 1950s talking about the Arab Spring and we have seen what happened to that Arab Spring over the last thirty years. I think we should really call it Arab discontent, Arab turbulence. Where will this change lead us?
As Molly said, the name of the game is jobs, jobs, jobs. If we go twenty-five years ahead, the Arab world may have to create 85 million jobs. But let’s talk about first why we had this Arab discontent and Arab turbulence, which began in Tunisia and spread to Egypt, Libya, Yemen, Syria and other countries. To me, it’s a manifestation by young Arabs that say: we don’t want to live in a state that’s based on injustice and unfairness. That’s what these young Arabs, men and women, are calling for.
Robert Zoellick, the president of the World Bank, last April gave a speech and asked: what do Arab men and women want? He said, they want opportunity, justice, a job. They want rules and laws that are fair, predictable and transparent. They want food and shelter for their families, good schools for their children, and neighborhoods that are safe. They want police forces that are protectors, not predators. They want governments that can be trusted. They want a voice and accountability. They want it in villages, towns and neighborhoods. He went on to say: they want also a new social contract. They want dignity and respect. The women want these same things.
I want to talk really about the non-oil-exporting countries – Egypt, Tunisia, Jordan – but also Algeria, Yemen and Morocco. Yemen is the most difficult case. It has a civil war that has produced nearly 1 million people with unemployment, with no income or salaries. In addition, it has scarce water resources and its petroleum assets are diminishing.
But if we look at the labor picture first in the region, it is expected that the population of the Arab countries, which is 350 million today, will increase by 40 percent or 150 million people over the next two decades. If we look at the unemployment rate today for people of the age 15-24, we find that 25-30 percent are suffering from unemployment. In Egypt and Jordan, if you look at the numbers for women, you will find that the unemployment rate is close to 40 percent. The costs of this unemployment and the lack of jobs has been estimated to be around $50 billion annually to the region.
I want to talk briefly about what happened in the last fifteen years in the region. You did have economic growth, similar to other developing countries – around 7-7.5 percent. The difference in the Arab region, or the non-oil-exporting states, is you had economic disparity. You had a few people who benefited from privatization and reform and had access to finance, and the few well-to-do became more well-to-do and the poor became poorer. That has led to an anti-market sentiment today in the Arab region. If you go to Egypt or Jordan or Tunisia, people are beginning to think about going back to the failed socialist principles of the 1960s, where governments took over industry, were inefficient, did not produce jobs, and produced low-quality goods. Therefore I believe that there has to be a debate in the Arab region today about reform.
What is reform? It’s not what happened in these countries in the last fifteen years. Reform starts with competition, with giving people equal access to finance. Reform means corruption has to be wiped out because corruption is a system that is an attack on the market economy. Corruption is an attack on efficiency, competition and most importantly the rule of law. Therefore there has to be a vibrant debate in these countries to look forward and say what we had was not genuine reform – we had crony capitalism and entitlements. True reform is competition, access to capital, bringing foreign capital.
True reform talks about investing in small businesses. This is an area where the Arab world has fallen behind. If you take a look at this country, in the last three decades over 60 percent of the new jobs were created by small companies. There are 29.5 million businesses in this country; 99 percent of them employ under 500 people. Therefore the small business community, people who want to start a business, must have an opportunity to finance their business and compete fairly. So what we had wasn’t real reform, it was entitlements and corruption and privileges for the few.
If we look ahead, talking about 2012, the countries I’m talking about – Egypt, Tunisia, Jordan and other countries in the region – will have an anemic and tepid outlook, for the following reasons. Number one, budget deficits in these countries will expand. This is due to increased subsidies and higher food prices. Foreign exchange reserves will decline due to the drop in tourism and a drop in remittances from abroad. Three, the local business community is on standby or may have left the country. Four, foreign investment has dropped significantly. Finally, due to the debt situation in Europe and the economic situation in the US, foreign aid to these countries may not increase – it may even dwindle.
Let’s look at Egypt today. Egypt, in my view, is the central player in the region. Without a stable and prosperous Egypt, the countries will remain unstable and fragile. Today the Egyptian budget deficit in 2012 will probably increase to 8.6 percent of GDP. By the end of June of this year, economic growth has dropped from 5 percent in 2010 to 1.8 percent. Unemployment has risen from 9 percent to above 12 percent. Tourism in 2010, you had 14 million foreign tourists who generated nearly $13 billion of income. This year, it is expected that tourism will be down by at least 30 percent and would reduce foreign exchange earnings by $3.5 to 4 billion. The only positive elements on the Egyptian scene is the fact that oil revenues are up, Suez Canal transit fees are up, and aid from the GCC will be up.
If we look at Tunisia, it will face the same problems: big budget deficits, already the tourism receipts are down by 40 percent. Over 100,000 Tunisians who were working in Libya had to leave their jobs and go back. Today the unemployment rate in Tunisia stands around 13 percent. Foreign direct investment in Tunisia has dropped by 35 percent. The foreign exchange reserves in Tunisia have declined by 8.2 percent in July to equal $8 billion, which only covers three and a half months of imports.
For the years ahead, Tunisia probably has the best chance among the various Arab countries because it has a small population, a diversified economy and an industrial sector. If the political transition goes smoothly and if tourism gets back to where it was, if you have increased foreign aid, I think Tunisia will emerge by 2013 as stable economically.
Let’s take a look at Jordan. Jordan, again, will have the same problems: increased budget deficits, high unemployment, reduced foreign exchange earnings. In Jordan today unemployment is around 13.2 percent. The budget deficit next year will go up to 14.6 percent of GDP. For 2011-12, the fiscal deficit will require Jordan to receive $2.5 billion in grants. The aid from Saudi Arabia and the other Gulf countries in 2011 has helped Jordan immensely in covering its budget deficit. That aid amounted to $1.4 billion. Also Jordan has suffered from a drop in tourism and there is no doubt that the events in Syria will have a negative impact.
If we look ahead now, I think what the Arab world has to look at is a new economic construction, but it has to be based on competition, on technology and on a workforce that is productive. To help these countries, the following has to take place: you need to provide increased financing opportunities for small businesses; to invest in infrastructure; to invest in education and training to produce productive jobs. The Arab countries also have to learn how to work collectively and create an intra-Arab market. Finally, the international community has an important role with the GCC to provide investment opportunities and financing at concessionary rates. If we take a look at Egypt, Morocco, Jordan, Algeria, these countries in 2012 require $35 billion to meet their budgetary needs. Finally, the US and Europe have to open their markets more for the goods and services that are produced from these countries.
Looking ahead, the Arab world has to reconstruct. First, you have to create a new culture of venture capital. You have to go from a culture of trading and buying real estate to a culture where you have entrepreneurs, people who are willing to bet on people of ideas and talent. We need to see an Arab Bill Gates down the road. We need to see an Arab Google. There is a lot of money in the region, you have trillions of dollars, but hardly any money goes to promote venture capital. Two, you need new Arab immigration laws so Arabs from Egypt or Tunisia or other places who are talented, who are scientists, can go to countries in the GCC, not only to go work for six months but go have a green card and hopefully down the road be a citizen. Finally, we need to introduce bankruptcy laws in the Arab countries. Bankruptcy laws help businesses who fail to restructure and come back. In the Middle East, if you lose your business, you also lose your personal assets. So when you introduce a bankruptcy law you can separate people’s personal assets from their business assets.
These are principles and ideas that the Arab world has to adopt in the next ten years if it’s going to enter the 21st century and become productive exporting countries, rather than just exporting oil.

Adel Abdellatif: I will try to compensate on the time and speak a little bit less, but I will try also to be a little more controversial. We tend all the time to treat the issue of development as a product that has to be the same everywhere. We say this region needs this and that. But what if the people of the region right now need something else, which means they need to build a system which is totally different?
If we follow the news and the media, I’m not sure that anything that has been raised here is really coming into focus in the debate, particularly in a country like Egypt. The question of jobs and fighting corruption, maybe it’s coming because of the previous regime, or the other issue that we think the people of this region should think about. As I’m coming from an international organization and following this region for at least fifteen years and working since 2002 on the Arab Human Development Report, which actually was based on the premise that development should be the same everywhere – I found that sometimes we are wrong when we think like that. Some people may be thinking differently and thinking about having a developmental model that may not be looking to integrate into globalization. So the premise that we think the region has to do that, to integrate into the global economy, may not be true.
If you read a paper that was introduced to the G-8 at Deauville by the IMF, the region is missing to be integrated into the global economy, I doubt maybe the new regimes will be emerging in this region will be trying to do that. Particularly we have to look at the status of the global economy and also the model of the market economy itself is coming under a lot of attack in the industrialized countries themselves.
So we have to be very cautious when we try to look at the future, and to think also that maybe the countries of this region will try to adopt certain models that may already be there in the neighboring countries and will try to be more inward-looking and maybe integrated regionally rather than globally. I will not try to get into – the way we used to do is in the next forty years we need this and that – because I’m not sure that the new leaders who will be coming will be trying to follow the same as we say.
Of course we see the challenges if you have a high level of unemployment but it’s true some countries have been living with that for a long time. The reason why certain regimes collapse is not only because of unemployment. There were other reasons that actually led to the collapse of these regimes.
That brings me to the crux of what I would like to say on the relationship between what we call economic and political. Most of the countries in the region, particularly the Arab republics, began their developmental model based on a certain premise: we can achieve economic growth but we hold political development as much as we can. We can do that for a long time. They were much more in their thinking similar to an Asian model but without the efficiency of the Asian model, which means these countries were trying to grow and industrialize; they invested in education and health. If you review the last few decades in most of the Arab countries you will find a lot of improvement in education and health, and even in some countries regarding the conditions and empowerment of women.
But the real problem was all the time connecting the politics with the economics. The political sphere was all the time under the control of the government. Even all the attempts that have been done during the last few decades to open up organized elections, it continued to be the same as before, as when the state was established in the 1950s. The state controls completely the political sphere. That of course affected the economic sphere, because when most of the Arab republics – particularly the middle-income – began their reform in the 1970s and 1980s under pressure, because they had deficits and they would like of course to get out of indebtedness, and they were obliged also to go for more liberalization of their economy – these countries and leaders tried also to control the market economy. If you give the space for the private sector you will have more centers of power outside the government, so the way it has been done is nationalization even of the market economy. The business community is very close to the government itself. This relationship that before used to have heads of the public sector – after that, they were called businessmen. It is the same thing, same relationship. Rather than having the separation and the independence of the economic and political spheres, the government tried to collapse everything under its control.
How will the new regimes be able to decipher this? Imagine yourself a minister coming into a ministry that has been controlled by this kind of understanding for the last fifty or sixty years. How do you begin reforming the public sector or public administration from inside? We shouldn’t be very enthusiastic about that because we still have a huge public administration; without reforming this and providing it with a new vision, any reform will not work in the future.
So who will be taking this huge task in order to synchronize what everyone has been saying here, and this will be translated into laws, policies and also achieve results? The real problem that any new regime will find is having a huge public administration, which is the machinery of the state itself – how will this machinery produce a new system while it has been working for the last sixty years conditioned by a certain system? That applies not only on economic and social issues, but take the security sector. Take the army and intelligence, all these networks. How will they work to deliver the new vision we are talking about here? How will they work together? Some of them will be trying to hold the government to the old system and some will be trying to pull it for a new future.
So we will witness a kind of conflict within the state itself, within the new state we will see after the elections, as we have seen in Tunisia and Egypt. What kind of coherence will we have inside the new governments when you have a government is elected and composed of different political parties and there is no common ground connecting them? Unless we will find a government of one color. In that respect, I don’t think we have achieved that much progress in approaching democracy. If we have a government of one color we will find again a new system that is trying to force a certain understanding and ideology on the people themselves.
So I think when we say “in transition” that’s true but this transition, how much time will it take? When will these countries reach a new state of stability that is based on an open system and [indiscernible] of power? It is not clear until now how much time this transition will take.
But if you try to find some clues on what will happen, there is a process of drafting constitutions in both Egypt and Tunisia. Of course in Tunisia, the process will begin soon, after the elections of the constituent assembly. Hopefully in Egypt we will have peaceful elections by the end of this month. This process will reveal what we can expect after that, because the debate at this time will reveal what kind of policies and what kind of directions that both of these countries will take.
I would also like to add that when we try to identify the challenges facing the region we focus sometimes on the lack of democracy or unemployment or what they have to do in having a business environment. But there are hidden challenges that most of the time we disregard which may be related to areas that political scientists and economists may not look at. This region is actually facing a big problem regarding water scarcity. Of all these issues, if we don’t look at it in depth and if the region will not find solutions for it, all that we are talking about will be turned into conflict. Take the situation in Yemen, a country which will face and is already facing water scarcity. All the countries in the Gulf, which we consider are out of the discussion because they have enough resources, they depend 80 to 100 percent on water desalination. Luckily they have money because of the oil but if they don’t have money you can expect environmental refugees. This happened actually in Somalia and even happened a few years ago in the northeast of Syria. These are hidden or unnoticed or nobody is talking about it, but it will affect the future of this region. We have noticed the beginning of that in a country like Somalia and Darfur and in Syria and in southern Iraq, where the water flow coming from the north from Turkey and Syria is actually getting less and less and water salination in the south of Iraq is increasing. This means the agricultural land in the south of Iraq will not be used.
I would like to end my remarks by saying we have to not all the time think that we have people on the other side thinking exactly like us. The second point is we have to identify what the new regimes will think, and there will be some clues in the process of drafting the new constitutions. We will find the discussion during this time will reveal what kind of new regime is coming.
The last thing, don’t forget the environment that this region lives in. It is an arid region with a very fast demographic increase. So when we think about full employment it is something that will never happen. Creating these jobs will never happen, because you don’t have an agricultural sector like many other countries in developing regions that can absorb all these people coming to the labor market. The solution will be all the time migration within the region or outside. The agricultural sector in Egypt is almost saturated – the same thing in Morocco, Algeria and Syria. So where will all the jobs come from? Unless we have a very fast industrialization, which I doubt will happen in the near future, that may not be achieved. We may find more instability inside these countries and inside the Middle East. Thank you.

Iman Bibars: Thank you very much for bearing with us. I hope you are not sleeping by this time. I was asked to speak about the economic and development strategies in a transitional period in the Arab region or the Middle East, and how and where does social entrepreneurship play a role. I decided to change a little bit, because I’m a social entrepreneur after all, and I would like to say some remarks first before I go into the subject.
One of the first things I would like to say, because I have been here for the whole day and I would like to respond to some of the issues that were raised – but also because everything is interrelated. We cannot talk about economics without talking about politics. I think this was also what Adel was saying now.
First, I’d like to say a personal remark. I’m very happy with a lot of the people that talked about the Arab Awakening from March mainly. I wasn’t very happy with the term “Arab Spring.” I think the spring will come – it will be a long way but it will come. But I think what really happened in the region, in Egypt and other places, was an Arab Awakening. We woke up. We were sleeping for a long time, we had no voice, we had no pride. I always say the young people got us our voice back and we will not give it up again. It’s really an awakening. It’s important because in Arabic and English it means a lot of things and it’s important. Semantics makes a big difference.
The second thing is, there was a remark about the identity of the Arab Awakening. Someone this morning said there was a first wave of Arab Awakening, a second one, maybe this is the third one. There was an insinuation – which is also true – that the awakening which started in the Levant early last century was a very secular one. It was started by some Christian intellectuals and leftists. Then there was the second wave which was more nationalistic and again secular, by Nasser and the coups d’etat, against occupation. But what I really am a little bit worried about is tying the latest awakening – and I’m going to speak about Egypt but I think also Tunisia – with a religious awakening. It’s true that the Islamists have hijacked a lot of the things that the young people have done in Egypt now but the beginning of the awakening was secular. I will not claim that I’m one of the young people who started or instigated but the revolution but I was there eleven days out of the eighteen. It was a secular awakening, and it was an awakening more than it was a revolution. People went down because they had no jobs, because they were being oppressed, because there was corruption and repression. People were going out all the time.
I think it’s because the system was so corrupt and there was no foundation and they reacted in the most unintelligent way that really they brought their own collapse. If you look historically at what happened in Egypt it started by revolt, demonstration, asking for more rights, for jobs, for better economic conditions, and it ended in revolution. I think this is very important to highlight.
It is also important to say that during Tahrir Square – and Tahrir Square is only a symbol. People in Egypt were everywhere. Everybody was there, women and men, young people, old people, rich people, poor people – it was started by the young people but everyone was there at the end. I was there and other people who were not veiled were there and nobody harassed us, in a place where there were millions – really it was very tight. So in the end it was a place where everybody was there. So this awakening in Egypt did not have religious zest. It was not an Islamic crusade, if I can say that. This is very important.
What is also important is – again I’m going to speak only about Egypt – this is our first real street revolution. People keep comparing what happened in 1952; although I love Nasser, it was a coup d’etat and it was an ideological movement by people which related to the masses and was able to reach the masses, they helped them and supported them with some economic policies. But this is the first real street revolution. Even in 1919 in Egypt, where people are saying there was a revolt and the people were there – it was a revolt so that the prime minister, Saad Zaghloul, would come back – one of our most important political leaders – but there was no change in the system. In spite of everybody saying that nothing has happened in Egypt – no. The system has collapsed. There of course remnants and still some foundations but I think they are shallow and they will fall. I think this is also very important.
So what now? Why am I saying this and how is this relevant to the economic and development strategies and social entrepreneurship – or entrepreneurship per se? If we really talk about job creation, and it’s important because we have a very bad economic situation now in Egypt and a deteriorating economic situation, we cannot separate it from the political system. If we want to promote entrepreneurship, which means being innovative, thinking out of the box, being critical, you have to have an enabling environment, an environment that encourages that. An environment that legally, politically, socially and educationally supports and does not penalize people who think out of the box. This is extremely important.
Before the revolution we had high rates of unemployment. We had one in every five Arabs – not only in Egypt – was unemployed. Now we have two out of every five Egyptians above the age of twenty unemployed. This was the latest thing that came out of the current government. We had an educational system and political system – and I believe that if you want to change education it’s a political decision – that penalized people who thought out of the box. Kids in school were penalized even if they had a definition that is not the same one as in the book, although it might be right. Kids in university were penalized because they had a security guy and the professors used it against the students they didn’t like. We also had a legal framework that penalized entrepreneurship per se. Someone mentioned just now about the bankruptcy law. If you are a young person and you want to start a business, you will go to jail if you go bankrupt. So if you have this as a system, why would you even try?
The same thing in the social sector. If I’m in the social sector and the government decided I have done something wrong, that one paper is wrong – not that I have even done an embezzlement or anything – I can go to jail. So people are penalized if they take initiative. This has to change.
So what do we need? We need an environment, a legal structure, a political framework that addresses the above gaps – that encourages innovation and creativity, and recreates from scratch an educational system that promotes tolerance, difference, absence of taboos, freedom of expression. This is really a political decision. If we don’t do this there will not be entrepreneurship or a market that is more open and creates more jobs.
Also a system or a structure legally that addresses the new ways and new entities. For example, the hybrid between social and business: social enterprise. You cannot have social enterprise in Egypt because you are either treated as an NGO, which means everybody attacks you whenever they have free time, or a business where you have taxes and no bankruptcy laws. So this is another dilemma.
We need such an enabling environment, which does not exist. For jobs to be created, markets have to be expanded. Adel was saying we cannot find all these jobs because we don’t have agriculture, but we can create new jobs. The dot.com, eBay, these people were entrepreneurial. When we say we want the Bill Gates everywhere, it’s because they created a new market, they expanded the boundaries of the market. In order to be able to expand the boundaries of the market, to create new markets so you can create new types of jobs, you have to be entrepreneurial. You have to be able to take chances, to be invested in – we don’t have a social investment framework for either social or business enterprises. You have [indiscernible] investors here, venture and growth – we don’t have that. It’s starting in some places in Egypt and the Gulf and other places but it’s not really a legally accepted and structured framework that everybody follows. We need that in order for us to have new jobs and create new markets.
Again, for all this to happen, we must have real democracies. We must have real political powers that do not put restrictions on free thinking, that does not discriminate between women and men or Christians and Muslims or the rich and the poor. We don’t need theocracy. Somebody in the morning said we hope that the new fundamentalists or religiously based groups are not using democracy as a tool to take power. We don’t need that. We need people who are really willing to treat all people, all Egyptians in the same way and not to have taboos. You can speak about this but you cannot speak about that.
From all the political contenders now, whether for the presidential campaign or even the parties, we have four groups: the Nour group, the Jama’a, the Brotherhood, and the moderates (the Wasat or middle groups). None of them has given us an economic vision of where we want Egypt to go. None of them have given us – by the way, neither the liberals or the leftists or anybody else. Nobody has come up now, from everybody who is now trying to get a piece of the cake, nobody has come up with an economic vision for Egypt that is realistic and serious. Not like, I’m going to get rid of corruption, we’re going to be better off, we’re going to go to heaven – nobody came and said, this is what we need to do. And this is what we need.
I will summarize by saying there is an urgent need for us to address the deteriorating economic conditions, the rising unemployment, and the small and getting smaller markets. What are we really afraid of? Somebody this morning, I think Esraa, was talking about that there will be another revolution if the military doesn’t leave power. I think we can win our rights from the military; I think others are more dangerous. However the real revolution that is going to come again will be the revolution of the hungry. The economic situation among the poorest of the poor in Egypt has really deteriorated. In my other hat I work with hundreds of thousands of poor female heads of households. We provide them with micro-credit. Ninety percent defaulted. The people who make their income daily are unable to survive and there are no compensations for them. Nobody is providing that. So this is a real problem.
On a positive note, since I really depressed you, I want to say that therefore social entrepreneurship and entrepreneurship (whether social enterprise or business enterprise) is a solution because it encourages creativity and entrepreneurship. It gives you hope because social entrepreneurs are found in the most dire situations. I will just share with you one of the Ashoka fellows in Palestine who I think is brilliant. This is a young woman who comes from a very humble background. She doesn’t speak English. She started the first incubator for businesswomen, for very poor, rural businesswomen. She has never heard of venture capitalists but that’s what she’s doing. She created this incubator. She provides them with seed money at the beginning, she provides them with marketing training, she helps them in marketing and the packaging, of honey, which she is selling, and some herbal medicines and milk. She sells them in Palestine, now in Jordan and in Dubai. She takes 20 percent of the profits, so it’s not a micro-credit program. She is able to cover her own costs and she’s managed to help 1,200 women in just the last year and a half.
This woman is a social entrepreneur. In the most dire situation – and we have sixty-one of them in the Arab region. Ashoka is working now in seven Arab countries and we have sixty-one of those social entrepreneurs who are a hybrid between social and business entrepreneurs, who regardless of where they are have managed to expand the market and create new jobs and new hope for people. Thank you.

William Taylor: Good afternoon, I’m very pleased to be here. I’m the last speaker of this excellent panel as well as this excellent conference. I want to compliment Molly and the whole team at the Middle East Institute, Wendy Chamberlin, for putting on such a great event. I’m honored to be here.
Secretary Burns last night described to us and to you why it is we care about the success of these transitions in the Middle East and North Africa, so I won’t have to go through that. He did very well to indicate that the United States does care. We have a lot at stake, we think, in the success of these transitions. So we have begun to think about how we can support those transitions. As Secretary Burns said last night, we have established an office. My office in the State Department is meant twenty-four hours a day, seven days a week, three hundred and sixty-five days a year, to focus on these three transitions at this point. Now we are talking about Tunisia, Libya and Egypt. We can hope that these will be joined by Yemen and Syria later on but for now we are talking about these three. The US government is focused on how we can materially and politically support these three countries in their transitions.
They are three different countries, as everyone in this room knows and as you heard this afternoon. We can’t do the same things in each country. We have to tailor each of our programs for the specific countries that we are dealing with. The Egyptians clearly have already a lot of support from the United States on the military side as well as on the economic side, so we have to provide the kind of support to civil society, election preparations that we are doing by demand – we are demand-driven in our support for these. So Egypt has that kind of a program.
Tunisia, much smaller, we can focus more on the elections that they just had – very successful elections. We coordinated with the EU so that election preparations, the voter information that we provided in some parts of the country and the EU complemented in other parts of the country.
Then Libya, with a lot of resources, a fairly small population, different kinds of needs and requirements that we can help with. Again, we are doing this on demand. There are security issues for Libya – it’s probably the most trenchant concern.
For each of these transitions they will need security – for investors, for individuals, for democratic development. They will need economic growth to support the changes in the democracy institutions they are instituting. So each of these three will be a different example and will require a different package.
The State Department and USAID – we have several USAID representatives here today – we are working on packages for each of these. It’s my office that coordinates the work at State and USAID but it’s also with other donors. I mentioned our work with the EU in Tunisia. The European Union has also established an office very similar to mine and we are coordinating very closely as well.
There’s a non-governmental component of this support to the transitions. It’s not just the government and the international community with the IMF and the World Bank; it is also the business sector. Many people in this room have already contributed and we want to help channel, catalyze and support that kind of business sector support for these transitions. Universities, foundations, NGOs, it’s a broad range of organizations in the United States that can help. Again, it’s because it’s important to us that these transitions succeed.
Secretary Burns last night mentioned how important these transitions are and compared it to the revolutions in 1989. Many people have talked about the similarities and dissimilarities. From an assistance standpoint, from a “support to the transition” standpoint, there are real differences. Two I would highlight. One is there are different levels of resources available today than there were in 1989-1992 and throughout the 1990s. We supported the revolutions in Central and Eastern Europe and in the former Soviet Union in a big way, with a lot of resources that Congress was willing to provide. We were doing economic reform and democratic reform; we did a lot of security work on securing nuclear weapons. This was very expensive. This was a high-level, very important issue for the United States as well as for these emerging democracies. We were able to provide the resources to do that.
Everybody in this room knows the resources are different today than they were then. We don’t have the same level of resources so we have to think differently. There are different requirements which require different things. I’ll come to that in a moment.
But the other difference is that the Central And Eastern Europeans and indeed the former Soviet republics had a place to go. They had a goal, they had a home. They had the EU, NATO for many of them. They had a common history and culture with many of these. They had a place that was their guide, that was their home. Much less so in these Middle East and North African revolutions. We’re seeing if there is a mechanism or a framework, a structure that can be used to encourage the reforms that are necessary, that we have talked about this afternoon.
Both of these differences – the difference in resources and the difference in structure – lead us to ask whether or not trade – and we’ve only talked about trade a little bit here but I think we can elaborate on that. Trade among countries in the region is important and it’s low right now, for all kinds of reasons that people in this room understand. But it can be increased, and the jobs and economic growth that it would bring could be a major contribution, much more than any particular assistance programs that the international community could provide to these countries. So trade among themselves. Trade with the Europeans – the European free trade agreements, some exist. In most cases they are not particularly effective or useful for the kinds of exports that are coming from North African and Middle Eastern countries. That might change. Again, in my coordination with my European colleagues, we are going to see what we can do to try to encourage both of us – the Europeans and the Americans – to open markets.
That leads to the third piece, which is trade with the United States. We need to open our markets as well.
So those three pieces – the Americans have a model that we’re using and just recently put into effect in the Pacific countries. We have this specific partnership that the United States, along with seven or eight other countries in the region, are doing to open markets multilaterally. Maybe there is a model for Middle East and North African countries with Europeans, with the Americans, to open markets that would allow trade to flow and jobs to be created.
I’m hoping we have time for some comments or questions on this but let me just conclude by saying we do care about where these transitions end up. The problem for us at this point is we’re not sure exactly where they’re going to go. It’s kind of like getting on an airplane without knowing exactly where it’s going to land, and the pilot is Tunisian or Egyptian or Libyan. They are in charge. We are on the plane and we can give advice and we can point out landmarks and mistakes we’ve made but they’re going to decide where they land. If they land in a democratic place with open markets and respect for human rights, that’s a good place to land. But we’re not flying the planes and so we have to have that kind of humility but remembering how important it is for us that they land in a good place. Thank you very much.

Questions and Answers

Molly Williamson: Thank you all. We’ve got about twenty-two minutes for questions.
Question: My name is Mehmet; I’m from Georgetown University. If I may, I will be asking two questions. The first question is about the financing issue. As far as I can understand from all these presentations, there is a huge willingness to invest but there is a total limitation from the governments. When this limitation goes down there will be a financing issue. So my question is, who is going to finance that? Is there a financial capacity in the region or do we wait for others to come by and finance these projects?
The second one is related to my first question. We have been talking about the United States and the European Union influencing the region or the moves of these actors to change the region. What about the BRIC countries (Brazil, Russia, India and China)? How do you consider their roles in the region?
Question: On the subject of Libya, rentier economies have often proved detrimental if not deadly to the establishment of democratic institutions as well as institutions necessary for the growth of a vibrant economy. What steps if any has the transitional government there taken to avoid this fate? If none have been taken, what kind of suggestions might you give the new Libyan government?
Question: This is for Ambassador Taylor. I’m Don Yacoe, I was previously the senior communications advisor for PEPFAR. I’m now with the Center for Health Policy Research and Ethics at George Mason. My question is specifically about PEPFAR, which is a very successful program that has helped build up health infrastructure as well as AIDS relief, not only in sub-Saharan Africa but in the Middle East to some extent. You can’t really have a vibrant economy, as we know in the United States, without a health care infrastructure. So I’m wondering what the United States is doing right now to ensure the continuity of that program and others that deal with health care?
Odeh Aburdene: On the financing question, there is no doubt that the region has plenty of financial resources. If you look at the savings of the private sector in the Arab region and the savings of the sovereign wealth funds, we are talking about $2.5 trillion that’s mainly sitting abroad, parked outside the Arab region. But for any investor to go into any region, stability matters. The rule of law matters. Until these issues are embedded in Arab societies, I don’t see any investor – I don’t see even Arab investors. There are plenty of opportunities in Egypt, Tunisia, Jordan, Morocco, but stability matters and therefore it behooves all of us to make sure that the transition is democratic, peaceful, and that the new economic measures will give equal opportunity and access to finance.
Regarding the role of Russia, Brazil, China and India, there is no doubt that these countries have a lot of resources. The Chinese are looking for investment opportunities. The Indians, you go to Dubai, they are looking for investment opportunities. So on the economic side I think there are opportunities but you have to go back to the politics. The opportunity is here to establish democratic institutions. When we talk about democratic institutions, we are not just talking about free elections, we are talking about rule of law, the rights of minorities as equal citizens not just protected minorities.
Adel Abdellatif: If I understand the question, it was about the future of the rentier economy in Libya. The first thing when the events in Libya took place, I tried to find information about this country. Of course we have some indicators and statistics but you’ll find this is among the ill-researched countries in the Middle East. You’ll find actually very little literature about it. Anybody who would like to talk with authority should be somebody from Libya itself.
But in the last four decades, or since 1969, the country has been encapsulated in one person. So you will find a big void in the public administration. Whatever the Libyans have to do at the beginning is building the state itself. There are no ministries, there was no parliament, there was no system actually inside the country itself. It was totally centralized. I’m not saying in the leadership but in one person. So that’s a challenge itself.
The only positive thing for the Libyans, they have a source of income. But this source of income may be the curse in the meantime. How will this be managed in a transparent way? How will the resources be shared and used among the population itself? It may be a reason or cause for conflict if it is not well managed at the beginning, rather than be a source of growth for this country. I think if this will not happen in the first few months then I will not speak with any positive sense about this country. If they will not have an agreement among the different political forces how they will manage their source of income, that actually will become a source of conflict.
They have to live for some time on this – it’s one source. It will be very difficult to imagine diversification in the Libyan economy in the next five to ten years. They don’t have any tourism industry, which actually is one of the sectors that can attract investors. It depends also how much they will welcome to invest in this sector and what will be the ideology of the new government. That will decide if they go this way or not.
The other thing is how much they will depend on foreign labor. Until the events they were depending highly on labor either from Egypt or other countries in North Africa and also from Africa itself. This is another problem they have to face because they don’t have the adequate human resources to manage the transition itself, whether in the private sector or inside the government. The government itself used to depend a lot also on some experts coming from other Arab countries.
So to get out of this rentier economy in a short period, I don’t imagine this will happen. The most important thing is how the government will be structured to be able to manage the resources with a lot of transparency. You have to think also about the other countries in the region. Until now we don’t have any model of the management of oil resources in a transparent manner. We don’t know how much income is coming out of it, how it is used and distributed.
William Taylor: In the three countries that I mentioned, we have been working in Egypt for a long time, for thirty years, on a range of issues, including health. Great progress has been made on this. In Tunisia it is well known in the region that it has hospital capabilities, health care capabilities, health technology capabilities that are used by many of the countries in the region. In Libya, where the fighting has caused a lot of damage to people and a lot of amputees and a lot of wounded warriors, we have begun a program to bring some of these wounded warriors to the United States. The US government put together a program to bring two dozen Libyans, young men, to a hospital in Boston three weeks ago now, with all of the care being provided by the state-of-the-art, one of the most modern hospitals for prosthetics and other trauma-related injuries in the world. Unfortunately the United States has a lot of experience lately with war injuries.
So we are providing that. We are going to continue to help on that. But the Libyan government, as I said earlier, has a lot of resources. It is going to pick up that responsibility and pick up that program using a private sector NGO, international medical NGO, to identify other wounded soldiers and bring them to the United States. Also bringing them to Europe. We will follow up this program with work in pharmaceuticals. One of the important components of our assistance to these three countries is going to be to motivate and generate support from our private sector, which has contributed dramatically to this effort in Libya, to provide pharmaceuticals, equipment as well as other health care services.
So those are the three things in those three countries. Others may have something to contribute.
Question: Shadaya Mansour [phonetic] from Tunisia and the College of William and Mary. I think my question is directed to Madame Iman. You talked about the importance of how the economic reforms are strongly tied to political reforms. If you take Tunisia and Egypt, we find that the Tunisians have understood that there will not be any economic reforms until we change the political reforms. They did occupy [indiscernible] squares and they were able to put down, the first interim government and the second one, a lot of pressure to change. Major political reforms. But the price of this was the economy, it went really down. But in Egypt this did not happen. Mubarak is out but the government is the same corruption, the same no political reform whatsoever. Do you think that now the solution for Egypt is to go back in the streets like the Tunisians did and make major changes in the government and the military power and then start the economic one?
Question: My name is Claire [indiscernible], I am a Master’s student from American University and I’m working on human rights in the Middle East so I apologize if my economic background is limited and I may be getting this wrong. But in my experience being in the Middle East, mostly in Egypt and Lebanon, many of the powerful, especially in business and politics, have gained their power by paying off the right people or knowing the right people. This is mostly to Dr. Iman. I was wondering how you suggest that these new regimes combat such types of corruption in order for new businesses to be able to rise.
Iman Bibars: I will start with the second question, it’s easier. I think what happened in Egypt was what we call the marriage of political power and economic power. The circle of those who controlled Egypt was getting smaller and smaller and really they became decadent. One of the issues here is – I knew some of them and I never expected, except after the revolution, how corrupt they were, because you just couldn’t believe it. I think this will not come back.
The real issue here is accountability and freedom again. So I’ll go back to the political system. If there is accountability – for example, one of the things that I’m not happy about is now that we’re going to have parliamentary elections, I had expected that in our parliament we have two types of immunity. There is political immunity for any MP and criminal immunity. Unfortunately the criminal immunity, which means that if somebody has been accused of embezzlement or corruption or whatever, you are unable to pursue this if he is an MP unless two-thirds of the parliament will agree that this person can even be interrogated. So the idea here is I had expected at least this criminal immunity would be removed and we could have the political immunity so that nobody will use their freedom of expression against them in the parliament.
Saying that, what we’re having now is accountability. People are extremely vocal now. People have gone to the streets many times. I think since the toppling of Mubarak and his people in February there were maybe two or three Fridays that nobody was there [indiscernible]. So the idea here was that we were in the street all the time – actually I think there were also demonstrations against everything in the streets. I think it is paralyzing our economic situation. For example, I was stranded for fourteen hours in the airport and Egypt lost $30 million that day because the air controllers, who are already making $5,000 a month – which is huge in Egypt – wanted to make $6,000 a month.
I think people are going down the streets and there is accountability. So I don’t think corruption will come back.
I also disagree with a lot of the people who are saying that no change has happened in Egypt. There have been a lot of changes in Egypt. But Egypt is 85 million people. We have economic problems, social problems, legal problems, education problems. With all due respect to Tunisia, which has led all this movement in the Arab region, with 4 to 5 million people – we joke in Egypt, but we say it’s one district. The idea is there are so many things happening. In addition, although we don’t have a lot of ethnic differences or differences in the demography, we have a lot of differences geographically within the country, politically and orientation. Even when we talk about the Islamists, there are four groups of Islamists already there. We have a joke that now we have 85 million politicians. It’s not a joke.
For the first time in our history – in seven thousand years – we have a voice. We are experimenting with it. Although I think I will be one of the groups that will suffer in the next ten years because of what will happen, and I really think there will be a rise of fundamentalists, I still believe that it’s okay in the bigger picture. This is the price we pay. The French Revolution, it took them seventeen years and there was the guillotine. At least we haven’t started killing each other yet.
It will take time. I think there has been a major change in our way of thinking, in our kids. My kid who went with me to Tahrir Square had never thought in his life – I didn’t think in my life – that we can change the leaders. It wouldn’t even cross our minds. So I think there are a lot of changes. People are still going down into the streets. People are going tomorrow. Personally I’m against the people going tomorrow – I still think, why not? People will continue going down. Although I think the fundamentalists will take the majority, they will not last for a long time. In five to eight years somebody will come up after they discover they haven’t done anything for Egypt and then we will go back to what we really wanted, which is a real democracy.
Molly Williamson: Thank you. I can see we still have more questions, I’m sorry we don’t have more time.
Kate Seelye: Yes, I’m afraid we have to draw this to an end. I hope you enjoyed this conference today. We’ve really been honored by an amazing group of panelists who have come from Egypt, Saudi Arabia, the United Arab Emirates, Lebanon, Israel, Ramallah – it’s really an honor to hear these insights from the region. We’d like to do more programs like these but we rely on support like yours. It was a free conference and we’d like all of our conferences to be free, so that they’re open to students – that is our form of democracy here. So please contribute to MEI. We’ve got a donation desk in the hall; you can become a member or just give $10 or buy a journal. Thank you once again and please join me in thanking this amazing group of panelists.