What the Arab Spring Has Taught Us

By Masood Ahmed

(Version in عربي)

As we launch the IMF’s Arabic blog, Economic Window, we are witnessing an historic shift in the Middle East and North Africa (MENA). It is clear that the popular uprisings that began 10 months ago were born of a desire for greater freedom and for a more widespread and fairer distribution of economic opportunities.

But the scale of protests in the region and the associated deplorable loss of life came as a surprise to everyone, including us at the IMF.

Like others, we had pointed to the ticking time bomb of high unemployment, but we did not anticipate the consequences of the unequal access to opportunities. We had focused our efforts on helping countries in the region build solid macroeconomic foundations, liberalize economic activity, and introduce market-based reforms that would generate higher economic growth. IMF lending, policy advice, and technical assistance have indeed contributed to improving the economic indicators of many countries in the region. However, with hindsight, it is clear that we were not paying enough attention to how the benefits of economic growth were being shared.

Clear lesson

A clear lesson is that even rapid economic growth cannot be maintained unless it is inclusive, creates jobs for the growing labor force, and is accompanied by social policies for the most vulnerable. For economic reforms to be sustainable, their gains must be broadly shared, not just captured by a privileged few. Widespread corruption is not just an unacceptable affront to the dignity of citizens, it also deprives them of the economic benefits. And the absence of transparent and fair rules of the game will inevitably undermine inclusive growth.

An equally important lesson is that a socially inclusive agenda will not survive without economic and financial stability. Since the beginning of the year, the region has witnessed considerable uncertainty and economic pressures, from both domestic and external sources. The recent worsening of the global economy will add to these pressures. Countries have stepped up spending to respond to the needs and aspirations of their people. Higher spending is indeed necessary in the short term, but it needs to be designed such that it can be unwound later to sustainable levels in order to limit its long-term fiscal consequences. Given difficult economic circumstances, some countries will need official financial support.

Own path to change

Now is also the time to start formulating national reform strategies, essential for building confidence and providing the basis for sustained inclusive growth, and which some countries have already embarked upon. Each country must find its own path for change, but all will need to encompass commonly accepted goals of higher, job-creating economic growth; greater social and economic inclusion; strong institutions that ensure accountability and good governance; and social protection for the most vulnerable.

Leadership on the road ahead should come from countries themselves. The international community can contribute to success of this agenda by providing an ambitious and multifaceted program of support, encompassing incentives such as financial assistance, market access, labor mobility, and credit guarantees. The Deauville Partnership has brought together an impressive group of countries and institutions and could now become a valuable platform for driving the process forward.

Committed to help

Here at the IMF, we are fully committed to helping the region. We stand ready to provide financial support in the amount of about $35 billion to the region’s oil-importing countries, if requested—in addition to the $38 billion pledged by the international and regional financial institutions. We are also expanding our technical assistance and looking at how we can adapt our work to reflect the lessons of the Arab Spring. And we are taking into greater consideration not just how our policy recommendations benefit the economy, but also how they affect different parts of the population.

While there are many uncertainties, and the months ahead will be challenging and inevitably marked by setbacks, we should not lose perspective of the potential long-term benefits of the Arab Spring. The region has many strengths: a dynamic and young labor force, vast natural resources, ancient civilizations and rich culture that attract scholars and tourists, a large regional market, an advantageous geographic position, and access to some key markets. The current period of transition will ultimately result in improved living standards and a more prosperous future for the peoples of the region.

6 Responses

  1. In my opinion, the Arab community is not plugged in to current events around the world, and is retarded as reflected in its social policy. If the Arab people do not evolve, neither will their policy. Politics in many Arab countries is chaotic and corrupt, as happens in countries of South America or the rest of Africa and is even still going on in the old European continent.

  2. The country needs jobs and fair wages, as well as support to the employer, which is what creates jobs; without financial support the employer will not work. An honest government should handle well the money in your country–corruption and speculation are two drags on the economy of a country.

  3. It is banking and so called financial services that have been part of the tyranny and misery of those living in North Africa and the Middle East. Support the oppressed in Syria, N. Africa, Middle East & Globally. Watch MEN OF CONVENTION on youtube BEFORE IT’S BANNED in Syria, Yemen, Jordan, Egypt & France! This is a director’s cut of ‘Men of Convention’ dedicated to the global uprisings against oppression 2011 – 2012 and beyond. It has been launched on Youtube for the first time on the significant date of 11/11/11. http://www.youtube.com/watch?v=CB4anCnxobo see the Zayd Depaor film blog http://zayd-depaor-films.blogspot.com/2011/11/men-of-convention-2012-cut-launched-on.html Please tell your friends.

  4. What people need is a stable country and jobs. Either they go for some kind of dependency on the United States– and people loose their souls but they have the money and the assets or the other model is Mexico. They retain their political independance? Anyway, now the Arab Spring people are survivors of their past authoritarian regimes. They can talk about it, and eventualy teach it — so it should be appropriate for donors help them.

  5. Anyway without rights, a community is dead. So, it was worth fighting for them. Now, you have rights and there are identified needs. Rights are the basic needs for community safety. Try to get the best from your new freedom and mainly avoid mistakes in selecting future projects –money is a scarce resource too, but microfinace and World Bank finance are there to help you.
    THINK GREEN ECONOMY TOO . . .

    • Masood Ahmed comments:
      We are pleased to see that our new Arabic blog has attracted quite a bit of interest! We welcome the feedback and appreciate the very informative comments.
      I would like to pick up on a few points raised by readers. On the issue of securing political stability before embarking on economic reform, clearly, the two are closely linked: delays in stabilizing the political situation will continue to fuel uncertainty and weigh on investor sentiment and economic growth, while adding to government spending pressures and raising borrowing costs and public debt. At the same time political—and social—stability can only be assured if economic and financial stability prevail. Absence of the latter can test even countries with strong institutions, as the recent global financial crisis has shown. In fact, economic instability creates social pressures, which, in turn, could undermine the political stability.

      More broadly, a meaningful political transformation could not succeed unless reforms create well-paying and productive jobs for the rapidly growing young labor force. Overcoming longstanding high unemployment will require higher and more inclusive economic growth, which calls for additional investment and improved productivity. To achieve this, the private sector will have to take the lead, and government policies, in turn, should support an enabling business climate in which the private sector can flourish. In many countries across the region, a difficult business environment has resulted in large informal sectors, which provide only low-wage and low-productivity jobs and little job protection or opportunity for advancement. Breaking down rigid labor market and business regulations that keep people out of the formal sector will help spur the economy and promote more inclusive growth.

      On the external front, obtaining greater market access for MENA’s exports would also boost the region’s output and foster job creation. Given the large share of MENA exports to the European Union (EU), trade agreements with the EU should be revisited. Trade liberalization remains incomplete, with many barriers, such as high tariffs and quota restrictions on certain products, and farmer subsidies in the EU. In addition, concessions granted by the EU to MENA agricultural exports are far less advantageous than those available to EU accession countries, while rules-of-origin requirements remain complex and restrictive. Liberalization of trade in services, which is a high potential area for the region, will also benefit the MENA economies.

      Thank you for your feedback and please keep posting your comments!

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