Saturday, 22 April 2017

Egypt's economic tightrope


        Egypt’s government, under the leadership of Abdel Fattah al-Sisi, is firmly wedged between a rock and a hard place – on the one hand the danger of economic collapse; on the other simmering popular discontent, which could descend into open revolt, at the steps being taken to relieve the problem.

        How did the country get itself into this predicament? The short answer is that revolutions cost money, and since February 2011 Egypt has sustained not one, but two full-scale political and social upheavals.

        The first upsurge of popular anger was generated by opposition to the repressive regime maintained for thirty years by Egypt’s President Hosni Mubarak, but fanned into flames by the Arab Spring already raging across the Middle East. Mubarak was forced from office. In subsequent elections the Muslim Brotherhood – a politico-religious movement long banned for subversion and plotting to overthrow the government – won a majority in parliament and also the presidency, in the person of Mohamed Morsi.

        The Muslim Brotherhood rule had lasted for less than two years before the Egyptian public realized that Morsi was systematically using his mandate to seize authoritarian powers. The last straw was perhaps a proposed new constitution which included legislative and executive powers beyond judicial oversight. It seemed clear that Morsi was well on his way to imposing a profoundly undemocratic regime on the country. Consequently the coup engineered by the Military Council against the government gained as much popular support as that which had swept Mubarak from power.

        In acting as they did the military had a motive of their own. According to a Reuters report on 2 July 2013: "Army concern about the way President Mohamed Morsi was governing Egypt reached the tipping point when the head of state attended a rally packed with hardline fellow Islamists calling for holy war in Syria" – in other words, a military alliance with Islamic State (IS) to defeat President Bashar Assad and absorb Syria into the then mushrooming Islamic caliphate. Unlike the leaders of the Muslim Brotherhood, most Egyptians – even the profoundly religious – are not jihadists.

        The military coup executed by General Abdel Fattah al-Sisi could have led to a quick economic collapse, but the Gulf states hastened to provide financial support to maintain the new regime. Their direct financial aid ended in 2015, and since then Egypt’s economic difficulties have worsened.

        In the past six years, the Egyptian currency has lost more than 70 percent of its value. On the day that Mubarak fell, you could buy one US dollar with 5.8 Egyptian pounds; today a dollar costs some 18 Egyptian pounds. At the end of 2010, Egypt’s foreign debt was $34.7bn. By the end of 2016 it had reached an all-time high of $67.3bn.

        It was this rapidly deteriorating economic situation that led to Egypt’s application in 2016 to the International Monetary Fund (IMF) for some form of financial assistance. The IMF is notoriously rigorous in the conditions it imposes before agreeing to disburse its resources. Eventually the IMF was satisfied that the program of policies and structural reforms presented by the Egyptian government would indeed address the problems afflicting the country. Accordingly, on 11 November 2016 the IMF formally approved a three-year loan of about $12bn to support the government’s economic reform program. The arrangement was to be subject to five reviews over the course of the loan period.

        The IMF believes that the program “will help Egypt restore macroeconomic stability and promote inclusive growth. Policies supported by the program aim to correct external imbalances and restore competitiveness, place the budget deficit and public debt on a declining path, boost growth and create jobs while protecting vulnerable groups.”

        The IMF concerns itself with popular discontent only in so far as social unrest might disrupt the tough fiscal and economic action it requires of its debtors. In negotiating with the EU over Greece’s parlous state, for example, the IMF’s main concern is to safeguard the structural reforms needed to tackle the country’s huge debts. It is doubtful whether the IMF is worried overmuch by the simmering unrest evident in Egypt since the Sisi government started implementing its program.

        In fact daily life has been disrupted by inflation and soaring prices. Inflation is currently running at around 30 percent. Everything imported is in short supply, from medicine, to sugar. Food prices have risen by some 40 percent; imported staples such as flour, rice, and coffee have increased by up to 80 percent.

        The journey towards economic recovery will be lengthy and painful, but it has already started. The economy grew by 4.3 percent last year, and it’s projected to grow by 5.4 percent by 2019. Exports are up by 25 percent, while the country’s trade deficit has fallen by 44 percent. Foreign investment is needed to help get Egypt back on its feet, but it is being inhibited by the succession of terror attacks engineered by jihadists intent on overthrowing the Sisi administration. The attacks on two Coptic Christian churches on Palm Sunday which killed 44 people, were the latest in a sustained effort by extreme Islamists to destroy Egypt’s tourist industry, which normally accounts for 12 percent of the country’s GDP.

        Egypt is among the top recipients of US military and economic assistance. Prior to Sisi’s meeting in Washington with President Trump on 3 April 2017, all US aid packages were being evaluated as part of the new administration's push for dramatic budget cuts to diplomacy and development. From Trump’s warm endorsement of the US-Egypt relationship and his declared strong support of the Egyptian people, it seems clear that the $1.3bn military aid package, and the hundreds of millions of economic assistance that Egypt receives annually from the US are not under threat.

        Now Sisi must keep his nerve, stick to the rigorous financial reforms demanded by the IMF, and ride out the consequent fall in popularity ratings. A survey at the end of 2016 showed that Sisi’s popularity had declined by a half since taking power. The survey asked respondents what they wanted Sisi to do in 2017. Decreasing prices was the first choice of 35 percent of those questioned. On present evidence they are likely to be disappointed.

Published in the Jerusalem Post on-line, 21 April 2017:

Published in the Eurasia Review, 23 April 2017:

Published in the MPC Journal, 25 April 2017:

      [Next posting:  Saturday 29 April at 9 pm GMT]

Sunday, 16 April 2017

Saudi Vision 2030 one year on

                   The Riyadh metro, scheduled to open in 2019, will be a 6-line network with 85 stations

        The kingdom of Saudi Arabia is such an established feature of today’s Middle East that it comes as something of a surprise to realize that it is less than a hundred years old. It was only in 1932 that Abdul Aziz ibn Saud, after a 30-year political and military struggle against local warlords and the Ottoman empire, named the area that he had conquered “Saudi Arabia”, and proclaimed himself its first king. 

        It was doubtless with an eye to the eventual centenary celebrations of the monarchy and the kingdom that in April 2016 Saudi’s dynamic young deputy crown prince, Mohammed bin Salman Al Saud, launched Saudi Vision 2030, an ambitious plan to revitalize the nation. If it succeeds, by 2032 Saudi Arabia will have been transformed from its current dependency on oil revenues into a modern, thriving, entrepreneurial society, its prosperity underpinned by flourishing industrial, financial, economic and commercial sectors.

         Saudi Vision 2030 has been described as a “neo-liberal blueprint”. It envisages, among hundreds of initiatives, privatizing entire sectors of the economy, cutting subsidies, courting investors at home and abroad, streamlining government services, and going public with the national oil company, Saudi Aramco.

        The plan is partly a response to the dramatic fall in oil prices post-2014. “We will not allow our country ever to be at the mercy of… commodity price volatility or external markets,” the deputy crown prince has said.

        A number of factors contributed to the drop in oil prices. The rate of growth of economies such as China, India and Brazil began to slow, and with it their demand for oil. Meanwhile the US and Canada began increasing their efforts to produce oil themselves. In the US private companies began extracting oil from shale formations, using the process known as fracking, while Canada began extracting from Alberta's oil sands, the world's third-largest crude oil reserve. As a result the two North American countries were able to cut their oil imports sharply, putting further downward pressure on world prices.

        Russia also pressed ahead. Its oil extraction in 2016, an increase of 2.5 percent on the previous year, set an all-time record.

         Saudi Arabia itself contributed to the fall in the oil price. Faced with letting prices continue to drop or cutting production, and thus ceding market share, Saudi kept its production stable. It reckoned that low oil prices offered less of a long-term disadvantage than giving up market share. But the policy took its toll. In 2015 alone Saudi’s net foreign assets fell by $115 billion, and they continued to fall throughout 2016. The rate of the drawdown prompted the International Monetary Fund to warn that Saudi’s reserves could be exhausted within five years, assuming oil prices remained low and public spending was not curtailed. Saudi’s low oil price policy undoubtedly sharpened awareness of the need to reduce the country’s reliance on oil revenues.

         One of the key issues Saudi Vision 2030 aims to tackle is unemployment. With nearly three-quarters of the population under the age of 30, Saudi Arabia faces a potentially huge rise in the number of young people coming into the job market in the next few years. Diversifying the economy, and thus employing more domestic labor, will depend in part on expanding Saudi Arabia’s manufacturing base. For example, whereas Saudi Arabia currently imports 98 percent of its military needs, one of Vision 2030’s ambitious goals is to manufacture 50 percent of all military gear and hardware, including sophisticated aircraft, inside the kingdom.

         Saudi Vision 2030 also plans to expand its less robust industries through direct investment. The country’s sovereign wealth fund – the Public Investment Fund (PIF) – is slated to lead this effort, and the proposed transfer to the Fund of Aramco shares would boost its resources to some $2 trillion, making it the largest sovereign wealth fund in the world. These huge assets will be used to fund development projects under the plan.

        In the retail sector national Saudis represent just 20 percent of the workforce. Under Vision 2030 retailers can for the first time be completely foreign-owned, and this reform could create one million new retail jobs as early as 2020. In addition to expanding youth employment, the plan seeks to raise the percentage of women in the overall workforce by 2030 from 22 to 30 percent.

        One early success story arising from Vision 2030 is the Riyadh metro, an impressive $20 billion project already under construction. EU Commissioner for Transport Violetta Bulc visited the project, an integrated urban rail and bus system, in January 2017. She described it as “the biggest global project in urban mobility.”

        “The timeframe is very demanding,” she said, “but so far they’re keeping to the deadlines well.” It is scheduled for completion in 2019.

        Bulc believes her delegation laid the foundation for the EU to work more closely with Saudi Arabia on the implementation of Vision 2030, leading to further trade, business and investment exchanges.

        Britain’s prime minister, Theresa May, included Riyadh in her first overseas trip after triggering Bexit, running the risk of criticism from human rights and left-wing activists who want Britain to cut military ties with the Saudis over allegations of war crimes in Yemen. Her trip underlines her commitment to investing in Britain’s long-standing alliance with the Saudis and other Gulf states.

        She has personal experience of the importance of Britain’s relationship with the Saudis from the six years she spent as home secretary, where part of her brief was to oversee the operations of MI5, the UK’s domestic security service. Over the years, Saudi intelligence officials have provided information that has helped thwart a number of major terrorist attacks against Britain, including the plot to blow up a number of flights from Heathrow to the US.

        But it is trade not security that weighs heaviest on Theresa May’s mind at the moment. Having closer ties with the Saudis offers post-Brexit Britain a new world of economic opportunity outside the confines of the EU. Under Vision 2030 the Saudis are planning to develop a whole range of new industries and technologies, spending trillions of dollars and creating a wealth of commercial opportunities that Britain will be eager to exploit. 

        Saudi Vision 2030 is only just off the launching pad. The hugely ambitious project will doubtless run into problems as it proceeds. To keep it on track will require a sustained effort, and as a start a conference scheduled for early May 2017 in Riyadh plans to analyse progress achieved in its first year. The plan as a whole may never be realized fully, but the imagination that inspired it is surely to be applauded.

Published in the Jerusalem Post on-line, 16 April 2017:

Published in the Eurasia Review, 18 April 2017:

Published in the MPC Journal, 18 April 2017:

          [Next posting: 22 April 2017 at 8.30 pm GMT]

Saturday, 8 April 2017

Turkey’s referendum: will Erdogan win supreme power?


        Since mid-July 2016 Turks have been living in a state of emergency, subject to the sweeping powers permitted the president and his ministers in this situation. Triggered by the coup attempt on 20 July, in which 240 soldiers, police and civilians were killed trying to stop rogue troops who had commandeered fighter jets and tanks to bomb parliament, the state of emergency was extended on 19 January 2017 for a further three months.

        Officially, therefore, the emergency comes to an end on 19 April, but by then Turkey may be facing a quite different emergency, the biggest perhaps since Kamel Ataturk swept away the Ottoman sultanate in 1922. For three days earlier, on 16 April, Turkey will have voted in a referendum on whether to grant its president, Recep Tayyip Erdogan, supreme powers, changing Turkey from a parliamentary to a presidential republic.

        Under the new constitution that Erdogan is asking the Turkish nation to endorse, the role of prime minister would be scrapped and the president would become the head of the executive, as well as the head of state. He would be given sweeping new powers to appoint ministers, prepare the budget, choose the majority of senior judges and enact certain laws by decree. The president alone would be able to announce a state of emergency and dismiss parliament, which would lose its right to scrutinize ministers or propose an inquiry.

        Erdogan argues that the reforms he seeks would streamline decision-making and avoid the unwieldy parliamentary coalitions that have hamstrung Turkey in the past. The problem is that while a presidential system works well in a country with proper checks and balances like the United States, in Turkey, where judicial independence and press freedom have plummeted, an all-powerful president would be akin to a dictator on the lines of a Hitler or a Stalin. On 13 March a Council of Europe inquiry expressed “serious concerns at the excessive concentration of powers in one office... It is also of concern that this process of constitutional change is taking place under the state of emergency.”

        Erdogan’s presidential ambitions go back a good few years. The events of 2013, when he held the post of prime minister, may have crystallized them. Twice during the course of the year violence directed largely against Erdogan and the party he leads, the AKP, broke out on the streets of Turkey’s major cities. The incidents precipitating the protests may have been different, but the underlying cause was essentially the same – a widespread perception that Erdogan had become too dictatorial and too arrogant in attempting to end Turkey’s role as a model of secularism in the Muslim world.

        In May 2013 popular fury was triggered by a terse government announcement that a shopping mall was to be built on Gezi Park, one of the last green public spaces in the centre of Istanbul. Over the course of the summer, though, a more dangerous opposition built up within Erdogan’s own party, the AKP. This centered around followers of Fethullah Gulen, an influential Turkish cleric who lives in the US. Gulen was once one of the AKP's main spiritual leaders, preaching a blend of moderate, business-friendly Islam that helped the party rise to power. His dispute with Erdogan and the AKP leadership arose over a government decision to shut down the large network of private schools that the Fethullah Gulen community, or Hizmet Movement, operated.

        Gulen had followers at high levels in the Turkish establishment, including the judiciary, the secret service and the police force. Early in December 2013 Erdogan was furious to discover that, for more than a year and unknown to him, the police had been engaged in an undercover inquiry into corruption within the government and the upper echelons of the AKP. By the end of the year Erdogan’s own son had been named in the widening corruption investigation. Erdogan undertook a major cabinet reshuffle, describing the police investigation as a plot by foreign and Turkish forces to discredit his government ahead of local elections in March 2014.

        Those elections were the key to unlocking Erdogan’s ambitions. The AKP party had to retain its political lead. It did so and, returned to office, Erdogan was able to change the constitution to allow him to remain as prime minister beyond his statutory three terms. Subsequently he was able to stand for president in 2014, and then to imbue the office – once largely ceremonial – with greatly increased powers. If he succeeds in the forthcoming referendum, he will have realized his long-held dream of supreme power.

        Erdogan blames Fethullah Gulen for inciting the coup attempt in July 2016, and he has been exacting a ruthless revenge on those accused of having links with Gulen. 170 media outlets have been shut down, including 29 publishing houses, 3 news agencies, 45 newspapers, 16 TV stations, 23 radio stations, and 15 magazines. 1,577 university deans have been forced to resign, while 2,700 judges, 163 admirals and generals and 24,000 teachers and Interior Ministry employees have been fired.

        The referendum that would effectively confirm sweeping powers like these in Erdogan’s hands is already under way. On 27 March Turkish citizens started to vote at airports and borders in Turkey, as well as in Turkish diplomatic missions in Germany, Austria, Belgium, France, Switzerland, and Denmark. Voting will start in other countries in due course. All voting outside the country will end on 9 April, with the main referendum vote taking place on 16 April in Turkey itself.

        On present indications, Erdogan is not assured of a favorable outcome. Of 28 recent public opinion polls, 12 predict a ‘no’ vote and eight ‘yes’. But the gap has been narrowing. Gezici Research has found that while the ‘no’ camp was ahead in January by 58 to 42 percent, when early voting began on 27 March its lead had reduced to just 51 percent. This no doubt reflects the fevered efforts by Erdogan’s AKP party in the last few weeks before the referendum. While the “no” campaign is having a hard time getting its message past the AKP’s pressure on media outlets, the “yes” campaign has bought massive TV, radio, newspaper and billboard ads. 

        Will Turkey’s opposition maintain its momentum and carry the day? Or will Erdogan reverse the tide and finally reach his long-held objective of accruing supreme autocratic power in his own hands?

Published in the Jerusalem Post, 8 April 2017:

          [Next posting: Sunday 16 April, 2017 at 8 pm GMT]

Saturday, 1 April 2017

Is BDS winning?

        The life cycle of many enterprises can best be described as a parabola – an arch-like curve, like an object thrown high in the air which falls back to earth. From a slow start they often gain considerable momentum, reach an apogee, and then decline. Is the anti-Israel Boycott, Divestment and Sanctions (BDS) movement following this pattern? Born in 2005, it grew rapidly in influence, penetrating university campuses across the free world, local governments, trade unions, churches, and even supermarkets and concert halls. It reached what seemed like a high point in 2015, a decade after it began. Since then opposition has hardened, and it has suffered a series of reverses. Are they significant, or is it still on the up and up?

        Many of BDS’s liberal-minded supporters, especially perhaps churches such as the Presbyterian Church, the Church of Scotland and the World Council of Churches, but also left-wing and liberal bodies across the globe, including some Jewish organizations, subscribe to the campaign because they support a Palestinian state within pre-1967 borders, and oppose the frozen status quo which has perpetuated the Israeli occupation of the West Bank since the Six Day War.

        “Useful idiots” is a term often wrongly attributed to Lenin. It describes people who support a cause whose goals they are not fully aware of, and who are used cynically by the leaders of the cause to promote it. The unpalatable truth is that many BDS supporters are, all unwittingly, the “useful idiots” of a movement whose leaders regard the whole BDS enterprise merely as a stepping stone towards an officially unacknowledged objective – Israel’s destruction. Were they aware of this, very many BDS supporters would not subscribe to it. The scales fell from the eyes of the United Methodist Church in May 2016, when it voted to withdraw from the umbrella organization promoting BDS in the United States.

        The term “Boycott, Divestment and Sanctions” first made its appearance in a declaration issued in July 2005 by an amalgam of Palestinian organizations. It condemned Israel in a succession of emotive trigger-terms (colonialist, ethnic cleansing, racial discrimination, occupation and oppression), drew a direct parallel between the Israeli-Palestinian dispute and apartheid South Africa, and called for a similar world-wide response from all “people of conscience.”

        Neither that original BDS document, nor the movement that developed from it, have time for the nuances of a highly complex situation. There is no reference to the unanimous decision by the League of Nations in 1923, later ratified by the United Nations in 1947, that the Jewish people had the right to establish a national home in the land of their origin, side by side with an Arab state. The BDS view of the founding of Israel is that “the state of Israel was built mainly on land ethnically cleansed of its Palestinian owners”.

        This implication of malevolent intent, and indeed action, by Israel omits any reference to the fact that Israel’s original boundaries were actually set in the UN-sponsored 1949 armistice agreements with Egypt and Jordan, following the unsuccessful attack by Arab armies on the nascent state.

        On equally shaky ground, the BDS declaration defines the outcome of the 1967 Six Day War as “Israel’s occupation of the Palestinian West Bank”, implying that Israel acquired it in the course of an aggressive war. There is no indication that Israel overran the West Bank only in the course of defeating the Jordanian, Egyptian and Syrian armies that had banded together to annihilate it.

        Based on foundations as uncertain as these, what precisely does the BDS movement claim that it wants to achieve?

        According to a recent interview with the BDS founder, Omar Barghouti, BDS has three objectives: ending Israel’s occupation of Palestinian and other Arab territories since 1967; ending what BDS terms “Israel’s system of racial discrimination against its Palestinian citizens”; and respecting the right of Palestinian refugees to return to their homes – “refugees” as defined by UNWRA, the UN organization dealing specifically with the Palestinian issue.

        The UNWRA definition of “refugee” uniquely includes not only the original 850,000 Palestinian Arabs displaced during the Arab-Israel war of 1948, but all their descendants generation after generation. The number has consequently mushroomed to around 7 million – all of them, apparently, entitled to return to their original family dwellings. How 7 million people could be accommodated in the living space once occupied by 850,000 is left unexplained, and for a very good reason. The call, clearly, is intended to swamp Israel with eponymous “refugees” to the point where the Jewish state ceases to exist as such.

        Unlike the leaders of the movement, many BDS apologists are quite unequivocal about their desire to eliminate the state of Israel. Pro-BDS author Ahmed Moor writes: “”BDS does mean the end of the Jewish state.” Or As’ad Abu Khalil: “The real aim of BDS is to bring down the state of Israel.” And John Spritzler: “I think the BDS movement will gain strength from forthrightly explaining why Israel has no right to exist.” And BDS activist Anna Baltzer: “We need to wipe out Israel.”

        Over and above this, BDS has recently latched itself to a social theory that has become very popular with the politically correct – intersectionality, the idea that all forms of discrimination are interlinked. Into these intersecting forms of oppression, BDS has injected the anti-Israel cause. As a result, groups considering themselves oppressed increasingly perceive Israel as part of the oppressive global power structure, and Palestinians as fellow victims.

        This concept has penetrated many US and UK radical student movements and other left-wing groups. BDS has convinced many activists that you cannot fight for any cause – women's rights, academic freedom, anti-racism – without acknowledging that Israel is oppressing Palestinians. In short, intersectionality offers BDS an acceptable way of wielding the classic anti-Semitic weapon – linking every perceived evil in the world to the Jews.

        Inevitably the reality behind the BDS façade is emerging – that its leaders have no interest in a two-state solution, that all the talk of freeing the Palestinians from their colonialist apartheid oppressors masks its true objective, which is to overthrow the state of Israel. This is why some 20 US states have passed anti-BDS legislation, while others are in the process of doing so, why the British government has prohibited procurement boycotts by all UK public authorities, why in 2016 the Paris municipality barred city departments and city-affiliated organizations from fostering ties with the BDS movement .

        BDS cannot continue fooling the world indefinitely. Has it begun its fall to earth?

Published in the Jerusalem Post on-line, 1 April 2017:

Published in the MPC Journal, 10 April 2017:

           [Next posting: 8 April 2017 at 8.30 pm GMT]