After today, EVERY DAY is #WorldRefugeeDay for 4.8 Million #SyrianRefugees

Each minute, 24 people around the world flee their home because of violence or persecution.~National Public Radio (USA)

Today the UN recognizes World Refugee Day.  This is a day NOT to be celebrated because the world is witnessing the largest amount of displaced people since the United Nations emerged in 1942.  Since writing this sentence and figuring out how to explain why 4.8 million Syrians became refugees while 6.5 million Syrians and 2. 4 million Yemenis are internally displaced, another 24 people have been made refugees.  Of the 6.5 million Syrian refugees, the largest host country is Turkey with 2.5 million Syrian refugees.  The #SyrianRefugee problem is due to –in order of chronology–the following violent events:

  1. the Assad regime’s military clampdown on activists and dissidents, which has led to the blacklisting and murder of journalists and Syrian activists;
  2. the resulting pushback by resistance fighter;
  3. the emergence of foreign fighters, mercenaries and DAESH/”Islamic State” of Iraq & the Levant; and
  4. the bombing campaigns by Russia that precipitated in September 2015.  (Russia and Iran are allies of the authoritarian Assad regime.)

Asma Akhras, a PITAPAL we had interviewed for another project on the Syrian Diaspora project, has contributed a piece that focuses on the humanitarian challenges of Syrian refugees.  Whether the story is repeated in Jordan, or Lebanon, Turkey, or Germany, the financial resource challenges remain the same.

“Breathe, Khalid.

“Breathe, Khalid.

“Breathe, Khalid.”

We are in a white van used to transport Syrian refugees to medical facilities, and the driver has beads of sweat coming down his face. Serious looking with dark sunglasses and a clean white professional shirt, he’s focused on getting us to the emergency room of a nearby hospital as fast as he can.

We couldn’t wait for a taxi or an ambulance anymore.  Dr. Naveed Iqbal is calmly sitting in the passenger seat focused on Khalid’s breathing, holding an asthma inhaler and thinking how to approach a variety of potential medical scenarios. I’m the interpreter, sitting in the back seat next to Khalid and his mom. Khalid is sitting on his mother’s lap. Her hands are wrapped securely around him, and he is quite overwhelmed. (We are not using Khalid’s last name because of his family’s concerns about their security.) Click here to continue on USA Today.

After reading PITAPAL’s, Asma Akhras, account of serving as an interpreter in the UN camp of Zataari, in Jordan, we ask that you apply pressure to your government to ask them how they’re honoring World Refugee Day.  Especially if you have already donated time or money to alleviating the #SyrianRefugee humanitarian concerns, ask your government what’s their action plan… For example, many high-income countries refuse to offer a solution to mitigate the dilemma: 13.5 million people in Syria need humanitarian assistance due to the turmoil.  According to Amnesty International:

  • Gulf countries including Qatar, United Arab Emirates, Saudi Arabia, Kuwait, and Bahrain have offered zero resettlement places to Syrian refugees.
  • Other high income countries including Russia, Japan, Singapore and South Korea have also offered zero resettlement places.
  • Of those that escaped to Jordan, 86% of Syrian refugees in urban areas in Jordan are living below the local poverty line.
  • Germany has pledged 39,987 places for Syrian refugees through its humanitarian admission programme and individual sponsorship; about 54% of the EU total.
  • Germany and Serbia together have received 57% Syrian asylum applications in Europe between April 2011 and July 2015
  • Excluding Germany and Sweden, the remaining 26 EU countries have pledged around 30,903 resettlement places, or around 0.7% of the Syrian refugee population in the main host countries
  • “6. Other countries need to do more. Shameful that GCC countries are not taking Syrian refugees for example.

Bahrain, Kuwait, Saudi Arabia, and who have significantly invested financially and politically into the Speaking of Arab Gulf countries failing to take in refugees, this applies to Yemeni refugees as well.  (For example, the UAE has pledged $137 million in the last 4 Syria Donors Conferences.  But here’s an idea: why not stop spending money on the weapons to supply foreign and local fighters in Syria?  ) Here is the most ironic piece of refugee research we came across:  Although Yemen is the poorest country in the Arab world, unlike its Arab Gulf neighbors, Yemen has signed on to the 1951 Refugee Convention and the 1967 Protocol.  At the same time, Saudi Arabia’s feud with the UN entails the Kingdom’s threat to withhold their funding commitments towards refugee and humanitarian assistance.  We recommend picking one of two action items:

  1. For Bahrain, Qatar, Kuwait, Oman, and the UAE: Reach out to the consular offices or embassies of Bahrain, Qatar, Kuwait, UAE, and Oman and ask them when they will make good on their UNHCR pledges for the humanitarian crises.  If they’ve done that, like the UAE, then follow up with: how will they ease restrictions to allow Syrians access to primary education if they have managed entry into their country.
  2. For Saudi Arabia: Rather than applying for a visa to perform Umrah or Hajj this year, ask the Saudi Counselor Officer to consider housing a Syrian or Yemeni refugee this year–or at least to stop facilitating the violence by arming fighters.

After today, every day is World Refugee Day for the over 65 million refugees reported by the UN — until June 20, 2017 arrives.

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Panama Papers’ Leak Leads to Flood of Questions for these MENA Figures

The [Panama Papers] are:

11.5m documents were obtained by the German newspaper Sueddeutsche Zeitung and shared with the International Consortium of Investigative Journalists (ICIJ).

The ICIJ then worked with journalists from 107 media organisations in 76 countries, including UK newspaper the Guardian, to analyse the documents over a year.

In all, the details of 214,000 entities, including companies, trusts and foundations, were leaked.

The information in the documents dates back to 1977, and goes up to December last year. Emails make up the largest type of document leaked, but images of contracts and passports were also released.~BBC News

BBC graphic comparing size of Panama Papers data leak to other recent leaks

If we pushed fast forward on the events from Noah’s Flood, and brought them to the 21st century, we would be drowning in a sea of names, numbers, currencies, and banking entities in what we will, henceforth, refer to as the “Panama Leaks…and the Kitchen Sink”.  On April 1st, the “Panama Papers” linked names with “shell companies”–businesses set up outside the owners’ countries of origin to hide dark money in offshore tax havens through some of our biggest banks, which include HSBC, UBS, Credit Suisse, and Societe General. The International Consortium of Investigative Journalists received the data– which PITAPOLICY used to search for the people listed below — from the German Newspaper, Sueddeutsche.

The Panama Leaks and the Kitchen Sink give credence to what many warned about in the 2008 Global Financial Crisis, and continue to argue: politicians, and their close associates, will hide their largest financial holdings away from the watchful eyes of tax collectors–and may engage in more nefarious activities.  For example, associates of deposed Libyan leader, Muammar Ghaddafi, are also listed with secret offshore holdings.  Given the wealth that Ghaddafi’s sons accrued from Libya’s Sovereign Wealth Fund–money that was supposed to be invested on behalf of the Libyan people– billions of dollars from that fund float in and around the United Kingdom, Dubai banks, and maybe with other entities listed in the Panama Papers.

Where the Gaddafis have hidden their vast funds is anybody’s guess, although Niblock expects that most of it is “in bank accounts and liquid assets in Dubai, the Gulf and south-east Asia” rather than in relatively transparent countries such as the UK, where the Libyan state has invested in London properties and in companies such as Pearson Group, owner of the Financial Times.~The Guardian UK

One wonders about the origin of these secret offshore holdings belonging to Libyan officials…and other countries’ political and business elite.

Panama Papers’ Implications

The names listed below do not necessarily equate with criminal activity, but, these individuals do represent the political and business elite in Middle Eastern and North African countries who chose not to keep all their wealth in their home country’s banks for legitimate or illegitimate reasons.  Legitimacy is not the only factor in the financial review.  Storing money offshore–even when legitimately earned–raises issues about whether the money will ever return to the country of origin for local investment or consumption.  For example, Arab Gulf countries store 57 percent of their national wealth offshore, according to finance expert, Gabriel Zucman. In which countries will that stored money be spent?

In other countries, the political figures are not listed in the Panama Paper, but rather, their the larger business conglomerates–in one case: 600 companies and two banks.

Remember the impact Wikileaks had on the Ben Ali regime in Tunisia?  He was ousted after mass protests in Tunisia followed revelations of his regime’s kleptocracy.

Algeria: Abdeslam Bouchouareb, Member of Parliament & Minister of industry and mines

Egypt: Alaa Mubarak, Son of Former Authoritarian Leader, Hosni Mubarak

Mubarak and his brother, Gamal, were released from jail in October 2015.  They were indicted for embezzling millions of dollars from the state.  However, they still face trial for insider trading.  Meanwhile, Mossack Fonseca, the Panamanian law firm, was fined $37,500 in 2013 for failing to properly carry out checks on Alaa Mubarak who was defined as a “high-risk customer”.

Iraq: Ex-Prime Minister Ayad Allawi (2004-2005)

Allawi is a former Baath Party member who opposed Saddam Hussein, which led to his exile and prompted a working relationship with the U.S. intelligence agencies.  Allawi is the sole director and shareholder of Foxwood Estates Limited, Moonlight Estates Limited and IMF Holdings Inc.  According to ICIJ, Allawi’s office emailed this response:

any income generated in the United Kingdom from the properties owned by the companies has been properly accounted for” and “taxes have been paid promptly and on time.

Jordan: Former Prime Minister, Ali Abu Ragheb

Ragheb resigned from his shortly after the invasion of Iraq in 2003.

Morocco: Mounir Madidi, Personal Secretary to King Mohamed VI

 

Pakistan: Children of Prime Minister Nawaz Sharif of Pakistan

Maryam, Hasan and Hussain run their family businesses in the sugar and textile industries from overseas.  Their family has been scrutinized for corruption, tax evasion, and money laundering in the past.  They faced trial and were acquitted during their exile in Saudi Arabia.

Palestine: Tareq Abbas, the son of Palestinian Authority President Mahmoud Abbas

Tareq Abbas invested $982,000 (£695,265) in the Arab Palestinian Investment Company.  Currently, over 40 percent of Palestinians live below the poverty line.

Qatar: Hamad bin Khalifa al-Thani, Former Emir &  Hamad bin Jassim bin Jaber al-Thani, Former Prime Minister

Hamad bin Jassim bin Jaber Al Thani served as Qatar’s Prime Minister between 2007 until 2013, when a new Emir took power.  His business deals earned him a spot on Time Magazine’s ‘100 Most Influential People” in 2012.

Sheikh Hamad bin Khalifa Al Thani seized power from his father in a bloodless takeover and ruled as Qatar’s Emir from 1996 until 2013.

Saudi Arabia: King Salman of Saudi Arabia & Crown Prince Mohammad bin Naif bin Adbulaziz Al-Saud

King Salman bin Abdulaziz bin Abdulrahman Al Saud began his reign in January 2015. He served in key positions of Defense Minister, Deputy Prime Minister, and as the Governor of Riyadh.

King Salman did not respond to repeated requests made through the Saudi Embassy in the United States for comment.

Mohammad bin Naif bin Abdulaziz Al-Saud serves as Saudi Arabia’s interior minister and counterterrorism chief.

Syria: Bashar the Butcher’s Entourage

Syria’s authoritarian butcher, Bashar Al-Assad is connected to others named in the “Panama Leaks”: his   cousins, Rami Makhlouf  The Makhlouf brothers, appear on the Panama Papers with offshore holdings under the guise of shell companies, to avoid the sanctions directed at them with the Assad regime’s brutal reprisals against civilian protesters, reports Democracy Now.   They monopolize Syria’s oil (to fuel Syria’s airforce in bombing its citizens)–yes, this lower-middle income country has enough oil for an authoritarian to capitalize on it, but not enough for Syrian citizens to benefit as well– and telecommunications company.

United Arab Emirates: Sheikh Khalifa bin Zayed bin Sultan Al Nahyan

Al Nahyan currently serves as the Emir of Abu Dhabi and the President of the Emirates.  PITAPOLICY counted 31 companies that he is affiliated with regarding offshore holdings.  In the U.S., he financed one of the healthcare facilities in Johns Hopkins Hospital.

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Response to “Lessons for the GCC” About the European Union #Migration #Regulation

Senior Research Fellow Omar Al Ubaydli outlines the lessons that the Gulf Cooperation Council countries may learn from the United Kingdom’s experience with the European Union–specifically the migration and regulatory experiences.  He uses the Eurozone framework to compare and contrast with the GCC countries of Saudi Arabia, Kuwait, Bahrain, the United Arab Emirates, Oman and Qatar.  At the Arab Gulf States Institute, he explored the migration issue in more detail, which may explain why it was not a primary focus in his March 11th article for Al-Hayat “The UK and the EU: Lessons for the GCC”.

Migration in GCC: “It’s Complicated”

On the issue of migration, Al-Ubaydli states, “In the GCC, the migration issue is not a concern since the GCC economies are built upon foreign workers, which represent more than 70% of the labor force.”  However, I would tweak this a bit and say that the labor dynamics within the Gulf Cooperation Council is simple economics married to complicated politics for two reasons.  First, the migration issue is a socio-political concern regarding human rights, as documented by Human Rights Watch.

Second, the migration issue is a socio-economic concern regarding future labor opportunities for the second generation of expatriate labor and their families.

Perceptions and aspirations of non-Emiratis, especially 2nd generation ones, are important in terms of their future retention in, and productive contribution to the labor force.~Nasra Shah, Kuwait University at the MESA 2014 Conference discussing “Arab Gulf Labor Markets and Migration: Data, Challenges, Policy”
In all fairness, Al Ubaydli advocated in a related conference for GCC policy interventions to reduce the number of migrant workers arriving in receiving countries under false pretenses.

Background: How Did This Happen?

Since the 1970s oil boom in the six GCC countries’ increased oil revenues facilitated more infrastructure projects, which translated into more employment opportunities.  Coupled with a demand for both skilled and unskilled labor, hundreds of thousands immigrated to each of the GCC nations to either train domestic labor or fill the construction jobs.

“We were building two schools every three days. We had to build seven universities. We were trying to do so much in a constrained period of time. So the debate was, ‘Do we import foreign labor, or do we wait until we train our labor and then carry the projects ourselves?’ And I was of the opinion then that the decision that was taken at the time to import foreign labor was a great decision.” ~Shaikh Hisham Nazir, Saudi Minister for Petroelum in an interview with PBS Frontline

Consequently Gulf countries’ human development accelerated while GCC labor gaps were filled by overseas labor, both skilled and unskilled.  Think “land of perceived opportunity”–but without the chance for citizenship, unlike the Eurozone.

Between 2002 and 2008, the oil boom re-emerged to increase the average purchasing power in GCC households.  For example, the oil boom resulted in as high as $36,000 for a Qatari household.

However, filling these employment opportunities–both skilled and unskilled labor–presented an economic solution with socio-political challenges.  Bahrain’s VP Labor Regulatory Authority observed how importing foreign labor would trigger a critique of how non “citizen” labor were treated by citizens:

This “great decision,” which was made by all of the GCC states at that time, had a profound impact not only on the shape of the labor market, but also on power relations within the whole society between the citizens and non-citizens.

It is true that labor gaps had been filled, and continue to be filled by foreign/expatriate workers in the last five decades, as cited by Al-Ubaydil in “The UK and the EU: Lessons for the GCC”.  

In the GCC, the migration issue is not a concern since the GCC economies are built upon foreign workers, which represent more than 70% of the labor force. The six countries are also culturally and linguistically highly homogenous, and there are strong cross-border tribal bonds. The Gulf peoples did not experience any analogue to the horrific wars of Europe, and thus we find that Gulf citizens welcome and trust their Gulf bretheren.

However, Al-Ubaydli does not outline the various expatriate groups working in GCC countries and how much of the labor force they make up in each GCC country.  For example, Qatar is an example of the foreign workers outnumber the citizen population: Qatar has a native population of 300,000 while 1.8 million represent foreign labor.

Not all expatriate workers undergo the same treatment–especially the unskilled labor force.  The labor policies and practices remain under scrutiny due to treatment of foreign workers who do not come from neighboring GCC countries.In the unskilled labor sector, foreign workers undergo the most challenging conditions, or “indentured servitude”, as discussed in “Kingdom of Slaves”.  Through the “kafala” system, which is Gulf country sponsorship of foreign workers through a middleman, foreign workers must pay off their debt to middlemen who brought them into the country.

Regulations: GCC versus European Union “Eurozone”

In Al Ubaydi’s review, he highlights how regulation challenges and opportunities also exist for the GCC, and that, “the GCC economic model is based on economic freedom and commercial flexibility.”  One example of regulations is measured by the “Doing Business Index”.  However, I would push back on his assertion given how foreign employers undertake doing business.  First, I push back because the “Ease of Doing Business” measures the ease for LOCAL businesses–or startups founded by the country’s own citizens.  It will not indicate the experience of foreign businesses trying to invest, for instance, in the UAE. Second, I push back because, in the Eurozone framework, foreign companies are not required to identify local partners as partial owners.

In contrast to the labor dynamics of expatriate employment in the GCC region, being the expatriate employer is a different experience–but still challenging.  According to the Doing Business Index, the UAE ranks 31st overall, and leads the MENA region, for “Ease of Doing Business”, which is compiled by the World Bank Group. Yet, foreign firms seeking to sell products and services in the U.A.E. market must have a local agent/distributor.  This adds a layer of bureaucracy to the challenge of working with an emerging market.

One may critique this regulation– that is popular in other GCC countries– by saying that small to medium foreign businesses cannot fully participate, nor introduce intellectual capital, unless a local partner is “dealt in” like a poker game.  As such, it looks like the local partner must be given some type of majority ownership after setting up a subsidiary.

However, the UAE may be more receptive than other GCC countries to outside businesses, or expatriate employers, trying to do business because the UAE has implemented “Free Zones”.  In a country of 9 million people, a whopping 85 percent are actually expatriates living and working in the UAE.

The U.A.E. Commercial Companies Law, Federal Law No. 8 of 1984, as amended, provides
for a number of different corporate structures. The primary alternatives for foreign entities to establish direct business operations in theU.A.E. (outside the free zones) are (i) registration of a branch or representative office; or (ii) incorporation of a limited liability company with a U.A.E. national “partner”.
Except for companies located in the free zones, at least 51% of a business establishment must be owned by a U.A.E. national. A business engaged in importing and distributing a product must be either a 100% U.A.E.-owned agency/distributorship or a 51/49 (U.A.E./foreign) limited liability company. Subsidies for manufacturing firms are available only to those companies with at least 51% local ownership. Branch offices do not involve U.A.E. national ownership, but do require a U.A.E. national as a sponsor.
It is recommended that a U.S. company retain the services of a local attorney to ensure its best interests are carefully considered when establishing an office or entering into a business partnership of any kind.
Nonetheless, foreign firms that hope to manufacture in UAE –or even other GCC member countries–must still identify a reliable UAE citizen as a business partner and allocate “at least 51% local ownership.”  This is a markedly strong departure from Eurozone practices for American businesses.  Given these two conditions, I am curious to know to what extent the U.S., or other foreign, manufacturing companies find it cost-effective to produce in the GCC so that they may export to their Asian markets.

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Remember the Syrian Electronic Army

Sadly, the so-called Islamic State struck again–this time in Brussels–to claim31 lives and injuring over 270 others.  Yes, we realize that the tragic irony is the so-called Islamic State targets Muslims just as brutally–but with less media attention and solidarity declared for those victims’ families.  Because of this vehement entity, more Muslims died weekly, in Syria or Iraq, between 2013 to 2016.  This fact does not escape the pita-consuming region or pita-consumer community.  Terror is universally experienced, and  experienced disproportionately by Muslims and Christians in non-“Western” countries like Lebanon (Beirut attacks in October 2015), Iraq, and Syria.

There is another tragic irony: cyber-terrorism introduces more financial damage to the U.S. economy than the so-called Islamic State high-jacking Iraqi oil fields.  Remember the Syrian Electronic Army–the group that falsely claimed President Barack Obama was caught in a White House attack in 2013?  It’s a group of Bashar al-Assad regime sympathizers who punish countries who declared that Assad must go.  As a result of the Syrian Electronic Army’s malevolent cyber attack, the Dow Jones Industrial Average–America’s business health indicator– fell by 143 points and “wiping out $80 billion in value”!

It is no surprise that the Dow’s top performing American companies responded so sensitively.  What is surprising is that the information was FALSE, but still, adversely influenced investors to lose confidence in the U.S. economy as if there was an American political crisis.

On Tuesday, March 22, those responsible for carrying out the Syrian Electronic Army cyber attack were charged, according to Bloomberg News.

The alleged hackers include Ahmad Umar Agha, 22, known online as “The Pro,” and Firas Dandar, 27, who goes by the online alias “The Shadow.”~Bloomberg News

In another cyber-terrorism incident that hurt the U.S., US Attorney General, Loretta Lynch, charged seven Iranians for allegedly hacking nearly 50 financial companies and a New York dam between 2011 to 2013.  The financial damage amounts to “tens of millions of dollars“.  The Department of Justice believes that the cyber attacks were coordinated from employees at Iranian computer companies: ITSecTeam and Mersad Company..

The seven defendants include: Ahmad Fathi, 37; Hamid Firoozi, 34; Amin Shokohi, 25; Sadegh Ahmadzadega, 23; Omid Ghaffarinia, 25; Sina Keissar, 25, and Nader Saedi, 26.  However, it is unlikely that their extradition will come to light.

“It’s very unlikely that the Iranian government will allow these people to be arrested and have them sent to the United States to face these charges,”~Al Jazeera’s Kimberly Halkett, reporting from Washington.

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Were Economic Issues the Driving Force For Higher Voter Turnout in #IranElections2016?

What would you rather ponder: the first set of elections after almost four decades of sanctions…or a theory of why a so-called group–whose name will forever not be named in the header of this blog– is gaining more recruits?  Fine, we’ll touch upon both in a very disjointed way.  Economic issues factor into why many turn out to vote…and may factor into why people join crazy groups–not just violent extremist groups across the Atlantic Ocean, but extremist groups (like the Ku Klux Klan) that follow #DonaldDrumpf.

Congrats to Iranian Voters Who Hope Legislation Will Reflect Top Concerns, Like Economy

Post-sanctions, Iran held its first parliamentary elections February 26th where about 28 million Iranians voted.  That’s half of Iran’s eligible voting population–impressive.

  • Eligible voters: 54,915,024
  • Districts: 52000
  • Boxes: 120,000
  • MP seats: 290
  • Candidates: 6200

Why is a huge voting turnout a notable point? Well, Trita Parsi, a U.S.-based Iranian scholar tweeted:

Big turnout in #IranElections2016 isnt cuz of agreement with political system; rather, people recognize votes can lead to change. Peacefully

Post-sanctions also means Iran is developing a pathway to re-engage economically.  Iran’s Energy Minister announced a new development plan that aims to increase its GDP by 8 percent each year beginning this year because foreign companies, like the U.S. giant, Boeing, hope to win contracts.

There’s huge appetite for Turkish business.  It’s a neighboring country where Turkish is widely spoken, with a similar culture. It’s very easy to engage with Iranian business.~Turkish Government Official to Reuters

Within the neighborhood, Turkey is optimistic about increasing bilateral trade with Iran.  Specifically, Turkish Economic Minister, Mustafa Elitas, said that Turkey will increase trade from about $10 billion to $30 billion by 2023.  Turkey’s optimism comes from Iran’s recent parliamentary elections that resulted in 30 moderate candidates winning seats in Tehran.

Of the 290 parliament seats: Reformist-oriented candidates won all 30 Tehran seats as well as 49 seats in other districts. Independent candidates won 44.  Of the 290 parliament seats, 20 women made it into ‘s parliament– a major achievement.  In total, 123 seats may support President Rouhani’s proposals to increase foreign direct investment into Iran and bilateral trade with Iran.

The hope is that, with more moderate legislators, industry reforms will follow in the automobile sector, oil and gas sector, and information technology.  Let’s see 🙂

***************************************************************************************************

Economics factor into why many turn out to vote…but do economic factors influence people, to the same extent, to join violent groups?  #PitaPal, Nathan R. Field [tweets from @betterworld2100], enthusiastically contributed this week’s PITAPOLICY posting.  Although we dislike discussing the so-called Islamic State of the Levant/ ISIL/ ISIS, Field looks at an argument posed by Yaroslav Trofimov in the Wall Street Journal in February.  Field believes that Trofimov dismisses the link between economic conditions, in countries like Tunisia, and reasons for joining groups like ISIL.  Both refer to ISIL as Jihadist groups. PITAPOLICY prefers to use the term violent movements rather than “jihadists” because the term Jihadist assumes that those using violence are justified by Islamic doctrine.

Anyways, here’s Trofimov’s article, “How Tunisia Became a Top Source for ISIS Recruits” that was published in the Wall Street Journal.  Below in red is how Field framed his points and responded to Trofimov’s points.  As always, you be the judge.  The authors’ points below do not reflect wholly reflect PITAPOLICY’s point of view.  PITAPOLICY is on pause and will respond in detail in next week’s posting.

Debating the Link Between Economics and 7k ISIS recruits in Tunisia

By Nathan R. Field, entrepreneur and blogger in Washington, DC

The wise Yaroslav Trofimov  of the Wall St Journal makes a standard “establishment”  dismissal of the link between economics and the appeal of Jihadist groups in a recent article on Tunisia, which has produced more ISIS fighters than any other country.

I have long argued that economics is a major, major factor: 

(1) See a very long 18 comment back and forth with a smart reader a couple of months ago.  Many detailed, post-worthy comments in themselves.

(2) My  In-depth Arabist.net study on ISIS from November – Makes a very important point  that is misunderstood by many Westerners who assume that being educated means that one can’t find Jihadism appealing for economic reasons:

Many commentators are misunderstanding this because of a focus on superficial symbols of economic status, such as university attendance, which are no longer indicative of much in a 2015 world where more people than not attend universities. For example, Saudi Arabia is sending a shocking 78% of its high school graduates to university – one of the highest rates in the world.

Peter Bergen of CNN argued against the Obama administration’s assumption that economics is a cause, by pointing to a lead ISIS terrorist who had received a degree in Computer Science from a British university. Yet what about the fact that this individual could not find a job with his degree? The more important question for those trying to understand the appeal of ISIS, is whether a person could get a job  after university, not whether they went in the first place.

How Tunisia Became a Top Source of ISIS Recruits: 

I am open-minded — happy to consider opposing evidence to my theory.  However, I don’t think he makes a strong case – the comments I would have made if I was editor.

25 February, The Wall St Journal.  By Yaroslav Trofimov

The cradle of the Arabic Spring. Tunisia remains the freest Arab democracy. It has one of the region’s most developed economies [ #1 What exactly does that mean — if the suggestion is that the ” most developed economy” somehow  undermines the link b/w economics and the appeal of Jihadism – how do we explain the  constant stories about massive protests over 37% unemployment ( HERE )  #2 – Even if we assume it’s “developed” in some notable way —  to channel my inner Bernie Sanders — how are the rewards distributed?  Isn’t that important?  All indications are that any economic rewards are confined to maybe 20% of society] and highest literacy rates. And is also by far the largest source of foreign fighters heading to join the Islamic State in Syria and Egypt.

Between 6,000 and 7,000 Tunisians  [#1 – IF  the conventional wisdom of the link to economics is being “defied” — don’t we need to unpack the backgrounds of these 7k people?   All indications are that these 7k people are from the bottom socio-economic 80%  — the Have notes — unable to obtain meaningful status by playing according to the conventional rules of the game.  #2 – Isn’t it problematic to not even attempt to look at the socio-economic background of the recruits while dismissing economics?]  have left the small North African country to fight for the self-proclaimed caliphate – several times more than from much-more populous Akgeria or Egypt. As many as 15,000 others have been barred from international travel because Tunisia’s government suspects them of planning to follow suit.

The Tunisian exodus is remarkable because defies conventional wisdom that has long sought to explain terrorism by evoking “root causes” such as political repression by dictatorial regimes, or the frustrations of poverty [Who exactly says that it’s “poverty”?   This seems like a quick dismissal of an argument about the role of economics that is more nuanced and substantive than this suggestion]

The working-class…. suburb of Tunis a spread of drab concrete buildings that wouldn’t be out of place in parts of Spain or Eastern Europe, is one of the hot spots for such departures to Syria and Iraq [After dismissing the role of economics — we head straight to a “working class suburb” to look at where the recruits come from….doesn’t this undermine the argument that economics is not the driving factor?]

Ahmed Amine Jebri, a 27 year old architecture student, counted some 20 neighbors who had joined Islamic State. Several of them are now dead. “So what explains this paradox? In a country that remains deeply divided, the answer, predictably depends on whom you ask.

Tunisia’s functioning democracy remains an exception: Arab Spring revolutions elsewhere have either turned into civil wars as in Syria, Libya or Yemen, or were crushed by re-established dictatorships, as in Egypt.

Yet even in Tunisia, popular disappointment is spreading, said Moncef Marzouki, a human rights activists who served as democratic Tunisian’s first president from 2011 and until the end of 2014. While the Country’s Jasmine Revolution ushered in democracy, it failed to spur economic growth or curb rampant corruption, he said.

“We had a dream, our dream was called the Arab Spring. And our dream is now turning into a nightmare. But the young people need a dream, and the only dream available to them now is the Caliphat,” he said.

Mr Marzouki’s successor as president, Beji Caid Essebi, served in pre-rev administrations. Many other former officials returned to power after the 2014 elections. To some, especially in disadvantaged areas, the new Tunisia isn’t that different from the Tunisia of old.

“In Tunisia, a policeman can, just as before, stop a citizen on the street and slap him,” said Rafik Ghaki, an attorney, who represents Tunisians who returned from Syria and Iraq.

To more secular Tunisians, such explanations ignore what they see as the ambigious attitudes of post-rev govs towards Islmaic extremists. The local branch of the Muslim Brotherhood dominated Tunisia’s administration after the first elections in 2011, and remains a minority partner in the current government.

An amnesty declared soon after the revolution freed imprisoned jihadists and followed others to return from exile. The government initially tried to entice radical groups to participate in politics. It began to crack down on Islamist radicals after their attempt to storm the US embassy in 2012.

To critics – including some relatives of jihadists – the government is still far too lenient. [Click here to continue.]

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No kidding: GDP grows slower in war than during peacetime #SyriaCrisis #YemenCrisis #iraq

A study by Collier (1999) found that, during civil war, countries tended to grow around 2.2 percentage points more slowly than during peace. ~ World Bank

No kidding: War costs money and GDP grows slower in war than during peacetime.  The World Bank’s Middle East & North Africa division released the “MENA Quarterly Economic Brief, January 2016: The Economic Effects of War and Peace” and concluded that the Middle East & North Africa region will not grow as much as anticipated due to the costs of conflict in Syria, Libya, Yemen, and Iraq.  The report also considers how the decision to lift economic sanctions off of Iran–although positive economic impact–is not enough to offset the costs of conflict in the region.  In fact, GDP growth, in 2015, grew only 2.6 %.

Terrorism Obviously Affects Tourism & Adversely Affect MENA Growth

The report itemized the costs of terrorism to MENA countries who heavily rely on tourism for its economic health–like Egypt, Lebanon, and Tunisia.  Since the last quarter of 2014, the number of visiting tourists has dropped by at least 15%, according the United Nations World Tourism Organization.  This is no surprise as we discussed on PITAPOLICY in 2015 regarding the Sinai attacks in Egypt, the Bardo museum and beach bombings in Tunisia, and Lebanon’s bombing in December.

The World Bank report concludes:

Our findings show that if MENA countries, which are the least democratic in the world, are able to transition to full-fledged democracies, average per-capita GDP growth rates, currently expected to be about 3.3 percent, will reach 7.8 percent in five years.

 

Syria Conflict Costs over $115 Billion + Human Lives

As Syrian still residing in Syria operate under the February 26th ceasefire, we wonder how much of the humanitarian aid has miraculously appeared in besieged towns–and at what cost.  The human cost is over 260,000 people dead.  The human cost also includes the forced migration of 4.6 million Syrians to leave the country, according to UN figures.  The World Bank report says that the Syria conflict costs about $35 B (measured in 2007 prices) to Iraq, Lebanon, Jordan, Turkey, and Egypt.  This is equivalent to eating up Syria’s peacetime GDP for one whole year.   At the same time, Syria’s economic health is measured by its “capital stock”– or if Syria was a company, its infrastructure and assets.

A preliminary World Bank-led assessment of damage in six cities in Syria (Aleppo, Dar’a, Hama, Homs, Idlib, and Latakia), showed an estimate of $3.6-4.5 billion as of end 2014. As of end of 2014, damage to the housing sector in Syria accounted for more than 65 percent; restoring the energy sector in the six cities will require between $ 648 and $791 million; damages to the health sector infrastructure was estimated to be between $203 and $248 million; damages to education sector infrastructure was estimated to be between $101 and $123 million.~World Bank Report

So when economists say that Syria’s capital stock faces damages of $80 Billion, they’re saying that .  Essentially, the Assad regime and all proxy actors have facilitated a damages bill of  $115 Billion that will be passed on to who is ever left standing and able to pay.

No wonder the international donor community pledged $10 B pledged earlier this month–yet that’s only one-third of the war cost resulting from the Assad regime’s military expenditures, opposition forces spending, foreign intervention, foreign arms sales to other combatant groups, refugee flight and associated food/shelter needs, as well as the damage to Syrian infrastructure.

 

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Oil Games: What is the Nash Equilibrium for Iran and Saudi Arabia? #OilGames #

Dear Pita-consumers:

We are trying to include both the Saudi Arabia stock exchange index, Tadawul (Tasi) and Iran’s stock exchange index, Tepix, within the PITAPOLICY blog so that you can read and critique our posts while getting updated about the biggest stock markets in the Middle East & North Africa region–all in one place!  But we are troubleshooting with some plug-ins that allow Tasi and Tepix to run across our sidebars on the screen.  Currently, we are fumbling with ‘Custom Stock Widget’ and ‘Custom Stock Ticker’.  Soooooo, if you have any suggestions of which widgets or plug-ins to install, please tweet us @PITAPOLICY!  We especially feel that our readers would appreciate these tools on the blog as they read through this week’s post on the oil business spilling into political shenanigans among Saudi Arabia, Iraq, and Iran.

Oil Games

Freezing now at the January level is adequate for the market. We don’t want significant gyrations in prices, we want to meet demand. We want a stable oil price.~Saudi Arabian oil minister Ali al-Naimi

Despite Saudi Arabia’s and Russia’s opposing stances in the Syria crisis, both oil-producing countries believe they will more likely gain if they agree to cut oil output as OPEC members.  Oil prices have dropped to $35 a barrel in contrast to $116 in June 2014.  Their mission: convince other OPEC members (Venezuela, GCC countries, Iraq, and Iran) that they share in this oil production freeze interest. The United Arab Emirates, OPEC’s third largest producer, has already agreed to the Saudi-Russia strategy to cut oil production.

A set of choices to either ‘produce oil’ or ‘not produce oil’ is a clear example of predicting player behavior:  deciding whether the country/’player’ decides to cut oil production or not cut oil production, hence game theory.  So far, Iraq, Venezuela, and the UAE have agreed to play along with the Saudi-Russia strategy.  This is significant since Iraq is the OPEC’s second largest producer and captures quite a bit of the oil market share.  However, Iran remains unconvinced of their strategy providing gains for all OPEC members since they’ve been prohibited from selling oil for decades.  Iran wants to recapture what it believes is its market share of oil before the sanctions took Iran out of the oil game.  Let’s play a round, pita-consumers.

Now, before we play, let’s step back to remember in the movie, a “Beautiful Mind“–about Nobel prize winner for economics, John Nash–where he stands in a bar with his friends and notices a group of women.  Two of the women are physically attractive, two are average-looking, and the last one is considered the most physically attractive.  Nash applies game theory to the problem that he and his friends encounter at the bar.  He questions whether they should all approach whom they feel is the most attractive option and risk all getting rejected–not once, but twice–since they will likely be rejected by her friends after feeling that they are the men’s second choice.

Finally, Nash concludes that the two attractive women–or attractive options with less risk, and higher gain– rather than the ‘most physically attractive”–high risk and chance of zero gain– are more likely to be approached by his friends because each can be paired off successfully and produce no ‘losers’.

We introduce this somewhat crude explanation of Nash equilibrium to illustrate how the choice to cut output by each member depends on how much each OPEC member believes it gains in the short-run.  By cutting output to raise demand, and hence oil prices for pita-consumers, many OPEC members argue that this produces stability in the long-run for them.

Yet, at the same time, if another player/member, like Iran, decides to play the Saudi/Russia/Kuwait strategy, then they must lose out on the opportunity to regain their market share.  Yesterday Iran’s oil minister, Bijan Namdar Zanganeh, said that Iran “supports any measure to boost oil prices” but stopped short of committing Iran to capping its own output, which stands at 2.9 million barrels a day.

Iran Gains After Re-entering Oil Games

As expected, the lifting of the economic sanctions is most beneficial to Iran, where per capita welfare is expected to rise by almost 4 percent.

Since the sanctions on Iran were lifted post-Iran nuclear deal, Iran has re-entered the “Oil Games”.  The World Bank’s Middle East & North Africa Division estimated how much Iran and its neighboring oil-exporting countries would gain or lose with the re-emerging Iran player.  In a nutshell: Iran gains almost 4 percent in per capita welfare.  Furthermore, if Iran implements additional reforms to be more competitive, Iran gains an additional half percentage point “to upgrade their factories and import new technology.”  So Iran can continue to increase its economic gains as it becomes more integrated in other technology sectors.

From Iran’s point of view: all OPEC members playing their dominant strategy to cut oil, is at the expense of their opportunity to re-enter the oil market at their pre-embargo level of participation.  Perhaps Iran is going after the “most attractive” option and ready to risk lower oil prices just to get back into the oil game in the long-run.

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Managing Socio-#Econ|omic Expectations #IranElections #ImplementationDAy

“We intend to re-open trade with all our neighbors…. and begin cooperation.”~President of the Islamic Republic of Iran, Hassan Rouhani

Earlier this month, 78.4 million Iranians saw the economic sanctions lifted, which were imposed in 1979 after Iran underwent a revolution.  During this period, the infamous American Hostage Crisis occurred where a group of Iranians took over the American embassy to protest American intervention in Iran’s domestic affairs.  [Note: this recap does not do justice to all parties involved.]  At this point, the U.S., France, Britain led the majority of the advanced economies in cutting off diplomatic ties with Iran’s new regime by imposing US, United Nations and European Union sanctions, thus prohibiting Iran from selling its oil, much like the situation in Iraq during the Saddam Hussein era.  Both the U.S. and EU froze Iranian assets and refused to trade with Iran by implementing sanctions.  Over two decades later, Iran underwent further isolation and sanctioning after Iran developed a nuclear program to explore various technological uses–including peaceful purposes.

In the meantime, the International Monetary Fund served as the awkward “friend of a friend” who hosted a financial wonk/nerd potluck of 188 guests at semi-annual meetings, including Iran whose one-dish gift would be scrutinized. Same may apply to World Economic Forum meetings.  However, the World Economic Forum 2016 invited President Hassan Rouhani to articulate what he believed Iran’s agenda should be as Iran gets pulled into a more interconnected global network…of investment? or a pregnant pause to integrate politically for economic gains.

With the 2015 Iran nuclear deal, says it has access to $100 billion worth of frozen overseas assets after negotiating its nuclear deal with world powers.  On January 16th, the International Atomic Energy Association–agency that faced uncannily similar political pressure with Iraq in 2002– verified that Iran had met all the Iran nuclear deal commitments negotiated by the P5 +1 parties (China, Russia, US, France, Germany, and the UK–note the exclusion of Turkey, a NATO ally) in the Joint Comprehensive Plan for Action and signaled the next step of lifting economic sanctions.

We were too excited on #ImplementationDay, January 16th, to blog about this event.  Why? Well, for example, lifting economic sanctions represented a double win for science & technology and  : MRI machines allowed to treat cancer patients.  Furthermore, Iran is now able to buy new airplanes after three decades of aviation sanctions that led to dangerous flights and many civilian deaths. As such, it was no surprise that EU members jumped at the opportunity to meet this demand and sell hardware for oil.  For example, France sold 118 commercial planes to Iran.  Immediately before President Rouhani & France reconciled, Italian companies signed contracts estimated at $18.62 billion with Iran.

On the other hand, there are legal issues to consider for Americans and others who want to re-enter into business in Iran after the 37 year hiatus as noted by Managing Parnter Farhad Alavi of Akrivis Law Group.

…plus we wanted to see how American news stations would review and assess this situation from a distance.  Take a listen:

Lifting Economic Sanctions produces high expectations for Iran's economic growth.

Lifting Economic Sanctions produces high expectations for Iran’s economic growth.

  • National Public Radio (United States) program

Beyond Iranian Oil

By the end of 2016, “Iran will likely add around 400,000 barrels per day to the market,” forecasted oil markets specialist, Webster Drake, at the Atlantic Council based in Washington, DC.  Although the banking sector in Iran is a remote idea for the US and EU countries, 31 foreign banks have operated in Iran.  Two ironic twists in Iran’s banking story:

  1. Merrill Lynch and the Canada operate banks in Iran among the 31 foreign banks.
  2. Arab Gulf Cooperation Council members, Bahrain and Kuwait–sworn allies of Saudi Arabia, but whom harbor cold relations with Iran–also operate banks in Iran.

For all the Gulf Arab and Iran tension discussion noted in the U.S., the banking relations raises doubt about how negative the potential for increased relations really are.

In the last 6 months, economists and Iran watchers have focused on Iran’s second biggest industry, automobile production.

Iran Elections for Parliament: #IranElections2-16

On February 26th, Iran will holds its first election since #ImplementationDay–an historic day when the economic sanctions on Iran were lifted.  Iran has 290 seats in parliament.   The will drive Iran’s political economy further into the right or left hand turns.

Reformist factions said that out of the 3,000 candidates they had put forth, only 30 were approved.~BBC News

Now that economic sanctions against Iran have been lifted, it has been informative to see how Iran’s political elites–whether “hawks”, “doves”, “Conservatives” or “Reformists”– will frame what they believe are Iran’s top economic concerns.  How will they argue where Iran must posture itself in global affairs?   Meanwhile 88 of those must be screened by Guardian Council.  The screening process was called into question by former leaders, like Akber Hashemi Rafsanjani, who has ties to both “conservatives” and “reformists”.  Of the 12,000 candidates that applied for those 88 contested seats, the Guardian Council rejected 7,000 potential candidates.

One thing does unite Iranian politicians: Managing citizen’s socio-economic expectations as consumers after “Implementation Day”.  After that, political camps will diverge on this point depending on how much this agenda item can distract from managing civil society’s political expectations.

“The ingredients are all there,”  “Iran has an established history of elections that has put people in the habit of going to the polls. Iranians are used to hearing different opinions expressed in parliament and in the press. They turn out to vote in great numbers, and hold elected officials accountable for their actions.”~Barbara Slavin, recently a senior fellow at the United States Institute of Peace and author of Bitter Friends, Bosom Enemies: Iran, the U.S., and the Twisted Path to Confrontation.

 

 

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Food Crisis in Syria Triggers a Drop in Syria’s Human Development Index

Happy New Year PITA-consumers!

What are you all expecting for 2016 in business, intra-MENA trade, development goals, and political bargaining?  Whether you are an optimist, pessimist or cautiously optimistic, that list is probably long!  Before we ramble on and on about Saudi Aramco — the largest oil company in the world, and the first in the region to open itself up to privatization — we just want to share the latest development challenge in Syria since its Human Development Index continues to drop for the fourth year in a row.  In 1980, Syria boasted an HDI of .528, and ranked 69th in the world.  Now, 35 years later, Syria’s HDI of .598 has sunk Syria to 134th place, according to the World Bank.  Why?  How?  Well, check this video out explaining how the Syrian government in Damascus uses food as a weapon of control, or “tool of war”, during the siege.  For example, in the town of Madaya, 40,000 people have little access to food.

  In some areas, the price of food has skyrocketed so that a kilogramme of rice now costs $100.

 

Meanwhile, Saudi Arabia’s new Council of Economic and Development Affairs has finally heeded IMF’s call to move towards privatizing its primary sector, oil and petroleum.  (By the way: Prince Mohammed bin Salman is the Chief Economic Planner who leads the Council– as well as the one in charge of Saudi’s Defense Ministry.)  How big is oil in Saudi Arabia?  Well, they represent 15 percent of global oil reserves.  Saudi ranks as the 19th largest economy in the world.

If it [Saudi Aramco] went public, it could become the first listed company valued at $1 trillion or more, analysts estimate.

Finally, certain levels of Saudi leadership have either recognized the economic, social and political disadvantage of keeping Saudi Aramco out of the private sector…or they have felt their purse-strings tighten with the decreasing global oil prices.  Crude oil prices hover around $30. In 2014, financial analysts shouted worriedly when oil prices “crashed” to $70.  See the 60% drop within 2 years!

 

The food crisis in Syria, manufactured by Syria’s tyrant, Assad, still sounds worse than the oil crisis, manufactured by production players, in our humble opinion.  Both hurt societies, but one of these crises bears a humanitarian cost that can be solved by changing leadership. Let’s hope that 2016 is on the side of the citizens.

 

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How would you name a luxury good product to target Lebanese market?

Happy Holidays! PITAPOLICY is tracking product names in Lebanon and the Arab Gulf Countries.  Which brandnames experience the most success in the Lebanese marketplace?  Which brandnames experience the most success in Arab Gulf countries, like Kuwait?

Is product success in the Lebanese market tied to the origin of the brandname?  Is it true that European sounding names for products do better in Lebanon?  Or is this only true because European brand names invested more in drawing in Lebanese consumers?

Similarly, is it true that European sounding names for products do better in the Arab Gulf countries?  We would like to hear your thoughts and consumer experiences!

Non Sequitur: TAXES

Oil markets do not revolve around branding.  Regardless of brand names, oil consumers worry more about price than quality.  While oil (and pita) consumers enjoy low gas prices, oil suppliers in the Gulf Cooperation Council and Iran must adjust their spending and review their subsidies policies.

It is an alert, not an alarm, because all these countries, including Saudi Arabia, are starting from a position of strength where they have significant buffers accumulated over the last few years… But if countries do nothing and assuming the price of oil was to stay at the level where it is, then certainly reserves would be depleted promptly, and more promptly than one would imagine. ~Christine Lagarde, Managing Director of the International Monetary Fund

IMF Managing Director warns that if they do not consider the “sharp decline” in oil prices, countries like Saudi Arabia could run out of wiggle room in their oil reserve accounts to balance spending after five years.

How to deal with this: Impose taxes, argues Lagarde to Finance Ministers.  Last month she traveled to the Gulf to deliver this message in person.  Check out Lagarde’s interview as she discusses the impact for GCC countries.    http://www.aljazeera.com/programmes/talktojazeera/2015/11/lagarde-call-action-oil-taxes-gcc-challenges-151113094249193.html

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