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Archive for the tag “Egypt”

Democracy struggles in the global recovery

Democracy has never been so popular. The Arab summer saw dictatorships overthrown and replaced with democratic intentions while in Africa the percentage of democratic countries has increased from 7% in 1990 to nearly 40% last year. The two giants in South America; Brazil and Argentina, have even managed to elect female leaders, something the USA has still yet to achieve. In the world as a whole, democracies roughly account for 60% of the world’s 196 countries, nearly doubling in the last two decades.

So the public should be happy right?

Wrong. The definition of a democracy is vague and the differences between elections in one continent to the next can be staggering. Some “democratic” countries are rather misleading as well; for example Hugo Chavez won consecutive elections, but was an autocratic dictator in all but name, widely considered to have rigged elections and bought votes. Russia as well holds elections, but the chances of President Putin losing an election are slim to none, with the Kremlin wielding a tight fist over the polling system.  That lowers the level of truly democratic countries to a less impressive 25% according to some statistics.

The Financial Times graph shows the election results that awarded the presidency to Vladimir Putin were controversial to say the least. 

Even those countries are now facing troubles. The global recession sprouted protest movements like “Occupy Wall Street” and started a trend that has culminated in the widespread trouble many countries are now experiencing. Brazil angered their people by overspending on the world cup, which has vastly trumped the costs for the South African World Cup, while neglecting the public services that will be so key to the a successful tournament. Turkey’s suppressive leader, Prime Minister Erdogan, has pushed his people too far, putting into law tight rules on alcohol and arresting journalists at a higher rate than that of China. Egypt meanwhile democratically elected the Muslim Brotherhoods front man Mohammed Morsi, who promptly handed himself dictator like powers and refused to listen to the secular opposition.

The world cup stadiums have come at too high a cost for most Brazilians, when the quality of living is nowhere near to that of the stadiums.

In the last two examples there can be seen a link, with both the Turkish and Egyptian leaders exploiting the lack of important institutions and constitutions to grant themselves greater control of the country. Winning majorities in the elections seemed to suggest a remit to do as they liked, without consulting the public, especially the percentage that didn’t vote for them. It’s not a coincidence that Brazil has seen the least hostile protests, with President Dilma Rousseff agreeing with the public’s right to peaceful protests (while quite rightly criticizing the small minority that turned violent).

Yet even the Western countries with stable democracies have seen unrest. Southern Europeans have become frustrated with the levels of austerity being enforced upon them by Brussels and Berlin. Greece has been the main recipient, but even the likes of France are starting to feel the tension, with the approval rating of President Hollande diving to a lowly 24%. Britain suffered more in 2011, when riots in London spread across the country and caused national panic. Though the origin was most likely the austerity the coalition was embracing to cut Britain’s large budget deficit, racial tensions were a common thread, with the London Met still dominated by the white British (around 80%) in a city where that is now considered a minority.

The British riots caused major panic, as some feared the country was spiraling out of control.

The USA however managed to largely bypass these protests, mainly by keeping up their spending levels and kicking the austerity can down the road. Only this year has Barack Obama actually looked to cut down the trillion dollar deficit he had been running consecutively in his first term, with the automatic sequester cutting budgets by $85 billion in 2013. Yet democracy hasn’t looked too rosy for the USA either. The deadlock between the president and congress has become a serious problem, with a polarised government failing to put policies through. A small tightening of the gun laws this year was rejected by the republican dominated congress mostly out of spite, while a recent farming bill (consisting of subsidies for farmers and food stamps) was rejected for the second year running despite holding policies both sides have traditionally liked. Even worse, both sides nearly forced each other to walk off the fiscal cliff at the start of the year, with the president reluctant to cut spending and the congress incessant on not raising taxes. Luckily both sides managed to reach a bipartisan agreement, though if anything this has emboldened both parties beliefs that their way is the only way.

The inability to agree with the more popular President Obama has seen Congress’s approval rating fall sharply to record lows. 

In the last 5 years democracy has taken a bashing, that much is easy to see. For every success like Myanmar, there is a monumental failure like Syria to counter balance it. Yet, many countries still strive for the democracy that the west has enfamed. Giving the public the ability to choose its leaders is a right many in the west take for granted, but something many societies go without. The protests are simply another form of democracy, giving a voice to a cause that the government might be ignoring or missing. In the three biggest protests right now, you can rank Brazil as the most democratic and Egypt as the least. Egypt could have stopped the protests that started last year by listening to the public and engaging them, rather than trying to stamp them down. Turkey started off in a similar vein, but has now tried negotiating with the protesters, especially with the Kurds, who threatened to take the protests to another scale. Brazil however, have largely allowed the protests to take place, and allowing for some violent episodes have seen the least chaos. The government is also opening up a dialogue with the protesters, agreeing to some of their demands for increased funding to the public services. The country still has a long way to go, and could have foreseen the public out roar that was building, but have so far acted in the most democratic fashion.

The protests might be shocking to see, but they are easily trumped by the actions of say the Chinese government in Tiananmen Square, or the conditions of the North Korean people who are denied any access to the outside world. Such dictatorship allows for such short term protests to be stamped down on quickly, but encourages longer term distrust and anger toward the controlling governments. The answer for the countries facing public unrest is for more democracy not less. Allowing the public to voice its frustrations can let off steam and negate anger building up and people acting out in frustration.  In the USA’s situation, more democratic bipartisan talks between the two parties would result in much higher success rate for important policies. The immigration reform coming through shows signs of this much needed bipartisan agreement, but party politics could still derail negotiations.

It must be remembered that there are much worse scenario’s than the current protests hitting democracy.

As Winston Churchill famously said “It has been said that democracy is the worst form of government except all the others that have been tried”.

Chaos in North Africa

North Africa is in chaos as internal unrest spreads through the region. Egypt saw the kind of mass protests that started the revolution against Hosni Mubarak, Mali is playing host to a battle between the French and the Jihadists that had taken over north Mali, Libya was recently warned off visiting by the British government while the whole world watched on as an Algerian gas plant was taking hostage by Islamist extremists. Even Tunisia, seen as one of the more stable nations was rocked this week by the assignation of an opposition leader.

But on the whole there are positive signs from all these events. The Egyptian unrest was a predictable reaction to President Morsi’s attempt to fast track an Islamist flavoured constitution without any input from the other factions of Egypt. After being elected democratically, he has stretched the public backing he was given, by granting himself dictator like powers and taking advantage of the main lower house of parliament being dismissed on a technicality. The responsibility of selecting an assembly to write the constitution instead fell to the upper house (the Shura council), which was elected on a tiny turnout (10%), stripped of its non-Islamist members in protest and awarded immunity from the courts by Mr Morsi. The constitution was boycotted by the public when it came to voting, with a turnout of just a third of the population. Mr Morsi is now facing the consequences of his choices and clearly no long has the backing up the public. He has called for dialogue between the government and the protesters and could yet back down on some of the extreme parts of the constitution. The public meanwhile are not hungry for another rebellion; they want a voice and some fair leadership, not more death. If both sides can start negotiations, then this could be a turning point in Egypt.

Mr Morsi is losing the public support that won him the election. 

The same can be said for the rest of North Africa. The French are impressively pushing back the Jihadists that took over North Mali, Algeria moved swiftly to deal with the terrorist occupation of their gas plant, in the process sending out a signal to the rest of the world while Libya is finally embracing democracy after decades of dictatorship (if not rather clumsily).

The main problem that is emerging from this volatility is that the economies of these North African countries are grounding to a halt. This could leave many long term problems for these nations.

Growth has stagnated in the region for the last two years, which for these developing countries is extremely harmful, as growth of near 6% is ideally needed to provide jobs and drag millions out of the poverty that plagues Africa. In Mali, a poor harvest in 2011 was compounded by the coup in March last year (where the military has given back power in nothing but name). This has impacted on Mali’s agriculture where around 70%s of the population works (with the north effectively separated from the southern capital). This is a major reason for the rise in unemployment to 17% as well as the contraction in the service sector of nearly 9%. The fighting has seen many foreigners flee the country, taking their money with them, as FDI has been chased away. Aid has also been impacted, which the country heavily relies on, as Obama and Europe cut off donations to the country after news of the coup in March. This all lead to the economy contracting last year by 1.5% (a devastating blow for a country that already ranks among the poorest in the world). Since the start of 2013, France has entered the country and helped establish the authority of the government once again, while the IMF has announced a loan of $18.4 million to help the economy recover. But the political environment is still heavily unstable, and while the French can help battle off the bad guys, they can’t govern the country for Mali, which has long been a problem. The country needs an election and has to break the power triangle between the president, prime minister and the army that has lead to many squabbles. In December the prime minister was arrested and forced to resign live on TV by the army, which managed to reject the calls of another coup by keeping the president in power. Growth is expected to return this year if Mali can inject some stability into their economy, but no-one would be willing to make that bet. This all prolongs the development of the country to the point where it no longer needs to rely on aid and be able to develop its own private sector. The Jihadists might be leaving, but the destruction and instability they leave behind will set Mali back years.

President Hollande can’t fix Mali’s political problems. 

The Libyan economy is still trying to recover from the fall of the Gaddafi dictatorship in 2011, but has the helping factor of being one of the most oil rich states in Africa. Since the revolution, many large oil companies have been able to return to the country and oil production has impressively returned back to original levels, lifting Libya to third in the oil production league table in Africa. The small population and high oil earnings should help Libya recover much faster that its fellow North African economies. In fact, in 2012 the IMF estimated that Libya grew by 121%, though this was after a contraction of around 60% in 2011. This growth is majorly inflated by the mass oil production, with oil production accounting for 70% of GDP and 90% of exports. A true recovery is still years away and the current government spending on rebuilding infrastructure is too high to be sustained in the long term. More FDI is needed to help lift the service sector and the private sector off its knees, but this is unlikely when the country is still beset by social unrest. The murder of the American ambassador last year and the recent travelling alerts are big warning signs to businesses investing in the country, as internal divisions remain high.  Until this can be resolved, the country will remain reliant on a volatile oil market.

Algeria remains the only country not to experience the same sort of social problems as its neighbours, though this is mainly down to the government raising wages and deferring taxes last year. They could only afford this because of the rebounding oil market, which accounts for 97% of its exports along with gas. The country is just as reliant on oil as Libya and faces the same problems of become dependent on a volatile market without any other diversification in their economy. The increase in wages and food prices also saw inflation rise above 8% last year, weakening the growth of 2.5% for 2012 that was already downgraded from the 4.7% growth forecasted by the government. The hostage situation was dealt with swiftly by the government and perhaps reduced the chance of Islamic extremists moving into Algeria and causing the havoc that has unravelled in Mali. But a less publicised negative impact was that on the countries oil and gas sector, as the terrorists targeted a BP gas plant. If investors and energy companies become anxious that their plants are going to be targeted in the future, they might start pulling out of the country, as they did with Libya when a (albeit more dangerous) civil war broke out. The country is already ranked lower than Mali for business friendliness by the World Bank. This incident has pointed out not only the danger of growing terrorism in the North African region, but also the utter reliance of Algeria on its oil and gas sector.

Tunisia is being hit by angry protests against the Islamist government after the assignation of a secular opposition leader. Tensions have been rising for a while between the two sides, with skirmishes occurring across the country. The unrest reflects their economy that has struggled on since the toppling of its dictator at the start of 2011, registering decline of 1.8% in 2011 and 3.5% growth in 2012 that was overshadowed by increasing unemployment of nearly 20%. The lack of positive change since the revolution has helped increase tensions in the country, with the sacking of the internationally respected Mr Nabli as head of the central bank showing a lack of common sense according to critics of the government. The top aim now is for the country to create real jobs (not just artificial ones) by investing in areas that it could become market leaders in the region. Tunisia’s close integration with Europe has cost the country during the euro crisis, but with the tide perhaps turning in the continent, a chance for economic progression could arise. Tunisia surely needs some signs of economic progress if the governance is to hold off talk of upheaval.

Tunisia fared rather badly in the aftermath of the revolution; declining in GDP and suffering from higher unemployment than its neighbours. 

Finally there is Egypt, the biggest economy in North Africa. Said economy is now collapsing, with the Egyptian pound falling in value, imports at double the rate of exports and public debt equal to over 70% of GDP (too high for a developing economy). Negotiations with the IMF over a vital loan have stalled as well, as the government refuses to cut unhealthy subsidies for gas and food. In a similar situation to Tunisia, the public are impatient over an economic situation that has only gotten worse since the revolution in 2011. High growth in the years before have been replaced by stagnation and decline, unemployment has risen and the private sector is in tatters. Stability more than anything is required to help the economy; after the revolution year of 2011, 2012 was filled with divisions between the supporters of Mr Morsi and those wary of the Muslim Brotherhood working behind the scenes. Because of this, foreign investment has significantly dropped, falling by over three quarters in the last five years. Negotiations is needed between both sides, with neither covering themselves in glory; Mr Morsi remains too radical on the Islamic changes he wishes to implement, while his opponents are too ready to charge to the streets over the smallest issues. If Egypt can achieve some sort of consistency, then an economy full of potential can start to recover, if not then another revolution is never off the cards, worryingly.

This table shows the collapse of Egypt’s currency, as the country spends billions of foreign exchange reserves to try and keep it pegged to the US Dollar. 

North Africa was once one of the leading lights of the African economy, but has since been derailed by the Arab Spring. While the immediate danger of civil wars and revolutions are not as serious as believed, a collective effort must be made to reform the economies and encourage growth. For some there needs to be some diversification in the economy away from oil and gas, while for others some stability and political leadership remain the key principles needed for growth. Otherwise the dreams of the revolutions could become a nightmare.


Palestine: a matter of time?

Relations between Israel and Palestine are deteriorating as both sides land destructive blows upon each other. Israel managed to kill Hamas’s military commander Ahmad Jabari and destroyed multiple long range missiles that had been stockpiled by a more extremist group in Gaza. Hamas meanwhile (the governing party of Gaza) managed to successfully strike at the heart of Tel Aviv (Israel’s capital city in all but name). Israel now threatens to put troops on the ground as matters seem to be getting out of hand.

Meanwhile, in the background of all this fighting, Mahmoud Abbas (the Palestinian leader of the West Bank) is set to apply for an upgraded “observer” status within the UN on November 29th. This would allow Palestine to participate somewhat in the UN’s activities and despite objections by Israel, is predicted to win such a vote on the international stage. This could be the road to Palestine establishing itself as a truly separate state.

Mahmoud Abbas is all set to upgrade Palestine’s UN status. 

But could they really survive as a new state?

Well in Gaza, they had been experiencing an economic boom of sorts. Growth in the constructions sector had been kick started by the smuggling of materials in underground tunnels from Egypt (a major backer of Palestine) and less strict economic sanctions from Israel in 2010. GDP grew by 20% in 2011 alone, while unemployment dropped from 45% to 28% in Gaza. Recently economic activity had started to slow in the west bank (controlled by the PA) to just 5% last year, down from the double digits of the previous years, though growth in the Gaza strip remains at around 10%. International investment has also helped improve the private sector, with Qatar a keen investor in the Gaza strip, investing around $400 million dollars and creating nearly 10,000 new jobs.

Palestinian GDP

This graph from the Financial Time shows the Palestinian GDP over the last few years. An economic boom now seems to be slowing down.

But there are still many problems economically for the Palestinians. They are reliant upon foreign aid, with it accounting for around 30% of their GDP. This has become a problem as aid money from the Arab world has dried up drastically, leaving a large gap in the PA’s (Palestinian Authority’s) budget of a suggested $400 million this year. Stemming from the problem, the PA has had to increasingly borrow money from its local banks, rising from half a billion dollars to $1.2 billion, roughly equivalent to just under 100% of the bank’s equity. The other large problem is Israel’s continued economic sanctions, which still restricts a large majority of trade in and out of Palestine. Israel collects custom duties and value added tax for Palestine and then transfers over the funds, but refuses to release all the information and is suggested to have held money back over the years ranging from $200 million to $450 million a year (depending on who you believe). They also hold the power to freeze these funds, which leads onto the current problem. Last time the PA tried to apply for observer status with the UN, Israel froze the tax funds to the country and has threatened to do so again this time around. Even worse, the finance minister has warned that Israel might just stop collecting such taxes, meaning a complete loss of the much needed funds for the Palestinians. This seems an empty threat in truth, as Israel has transferred over hundreds of millions of dollars already to help keep the PA ticking over, but such talk will not help already frayed relations between the two sides.Alongside this Israel continues to build upon Palestinian land and divides up the population with border controls, which has had a large effect on East Jerusalem, where nearly 80% of the people are suggested to live in poverty.

This table found at shows how occupied Palestinian territories have declined in GDP per person. 

So could the country survive independently? It is very difficult to suggest while the Israeli government has such a tight hold upon the Palestinian people and economy. Such restrictions have made it near impossible for the Palestinian private sector to grow, a necessary action for any economy to become sustainable. Palestine will need to be released to really see if it can grow into the sort of economy Israel currently boasts.

Even more important could be the USA and Egypt’s role in this divide. Israeli Prime Minister, Mr Netanyahu, was close friends with Mitt Romney and would have favoured his election, as his comments on the Palestinians economic problems being down to cultural differences showed a dislike of the country. Mr Obama’s re-election could see renewed peace talks between Israel and Palestine and more equality between the two sides. While America will need to put quiet pressure on their close allies, Israel, to not allow this current fighting to escalate. Egypt’s President, Mr Morsi, is a member of the Muslim Brotherhood and backs Palestine more than his predecessor. He is already brokering peace talks between the two sides and his countries ties with the Palestinian held territories (via underground tunnels) are an essential economic link to any future prosperity.

Mr Morsi and Mr Obama could hold the key to helping Palestine grow. 

If Palestine does achieve an observer status with the UN, it could be the start of a great journey towards independence. But fewer restrictions by Israel and closer links to Egypt will be needed; otherwise it could unravel before it has even begun.

Egypt’s new Pharaoh?

On the 23rd/24th May the first round of Egyptian elections took place, this saw the race narrowed down to two candidates, who will now compete to become president on the 16th and 17th June.  This should be a defining moment in Egypt’s history as only the second presidential election in their history with more than one candidate and the first since the revolution in 2011. But the shortcomings of both candidates are clear to see, while a year on from the revolution Egypt still seems as divided as before. The presidential choice has become a question not of who is the best candidate to run the country, but rather which candidate would be the lesser evil.

First up is Muhammad Morsi, an engineer that was backed by the Muslim Brotherhood (albeit their second choice) and won 25% of the vote (the biggest share). The Muslim Brotherhood won a majority of seats in parliament last year, so if Mr Morsi was to win they would have a clear say in how the country is run. This would almost certainly mean the inclusion of Islamic Sharia law and an intertwining of state and religion.

Muhammad Morsi

His opponent Ahmed Shafiq was the Prime Minister under former President Hosni Mubarak, who is currently facing charges of corruption, abuse of power and premeditated murder and has been sentenced to life imprisonment. Mr Shafiq finished with 24% of the vote and benefits from the backing of businesses, Christians and those wary of another revolution.

Ahmed Shafiq

The trouble is that neither might not accept defeat, with the Muslim brotherhood and the Egyptian army backing each candidate and reluctant to give up on power. This could lead to clashes and undemocratic leaders – the opposite point of what this election hopes to bring. The elections also showed a lack of support for any candidate with a turnout of just 46%, though many were happy that the candidates were at least arguing with their mouths and not their guns as in earlier debates.

Election results from first round.

But who is the best choice? This is hard to decide, as both represent such extremes and the more centralist vote which probably would have won, was split between three candidates resulting in neither getting enough support.  Whoever does win will need to kick start an economy that has slowed down with such political uncertainty. Egypt is one of the strongest economies in Africa, just below South Africa in GDP terms and a potential beneficiary of the FDI pouring into the continent right now.  But the revolution has caused quite some damage; with unemployment around 13%, growth predicted at 1.8% (not enough for a country that needs high growth) and around 40% of the population now living in poverty. The president also won’t even know what powers he has yet, as the new constitution promised after the revolution remains unwritten and will likely remain that way until after the elections are finished. Then there is the Egyptian army that is currently in charge, they will need to be convinced to let go of their power and return to their original roles, a task that could prove tricky.

Egypt GDP not far off South Africa’s in 2011. 

So who will win? Mr Shafiq may get the centralist vote as a more reliable choice but Mr Morsi can rely on the Islamic vote to boost his numbers, so it will be extremely tight. I would probably suggest Mr Morsi will edge it, but to be honest neither candidate seems able to lead Egypt into the new future promised in the revolution.

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