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 🙂

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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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One bomb raises the cost of doing business like messed up legislation. #Cost_of_Doing_Biz

Two weeks ago, REBEL ECONOMY blogged about how one bomb in the Sinai adversely affects the Egyptian economy.

President Sisi has his eye on a mega $8-billion expansion of the canal that aims to double daily traffic by 2023 and increase annual revenues to more than $13 billion by 2023, from just over $5 billion in 2014. Yet, none of this is meaningful if the government continues to resist structural reform which has left the economy floundering for years. It is also resisting the simple fact that there was likely a bomb on flight.

Given the above, Egypt’s President Sisi has gained even more ground to justify a security state and target militants because attracting foreign direct investment is his duty.  He argues that no one wants to invest in a country with violent attacks that target tourists.  Note: we would add — or raise the counterpoint — that no one wants to invest in a country with violent attacks that targets its own country’s citizens.

As Egyptian businessmen, economists, and security forces sort out the conditions on the ground to attract FDI, neighboring countries also compete for FDI.  A few indicators track such conditions that are highlighted in the World Bank’s Doing Business Report 2016.  In a nutshell, business reforms have picked up in the Middle East & North Africa, despite conflict.  Eleven countries in the MENA region introduced a total of 21 reforms that ease the costs of doing business — a record in the last 5 years.

Morocco and the UAE continue to lead the region in reform activity as both economies undertook four reforms each during the past year. Morocco made Starting a Business easier by eliminating the need to file a declaration of business incorporation with the Ministry of Labor. The UAE was the only economy in the region that reformed in the area of Enforcing Contracts. As a result, commercial disputes in the UAE are now resolved in 495 days, which is less than the average of 538 days in the high-income Organization for Economic Cooperation and Development (OECD) economies.

For some reason, Arab countries that are not in political transition, lead in passing business reforms.  Does that mean that we can expect to see more growth in small and medium businesses in the next five years for the “non Arab Spring” countries than their “Arab Spring” counterparts?  If so, this implies that heavy-handed–dare we say authoritarian– leadership will pounce on these business growth numbers to continue justifying its political power hold.

However, just like how a bomb raises the cost of doing business, so does messed up legislation.   The costs of starting a business remain astronomical for the average citizen across MENA countries.  Specifically, in some MENA countries, it costs almost one-THIRD of income per capita for local entrepreneurs to start their business, compared to less than one-THIRTIETH in the OECD.

Here is how the MENA countries ranked within the 189 countries surveyed in this year’s Ease of Doing Business Report.  Areas of improvement noted in parenthesis.

  • United Arab Emirates – (Dealing with Construction Permits; Getting Electricity; Protecting Minority Investors; Enforcing Contracts)
  • Turkey – 55 (Dealing with Construction Permits)
  • Bahrain – 65
  • Qatar – 68 (Trading Across Borders)
  • Oman – 70 (Getting Electricity; Trading Across Borders)
  • Tunisia – 74 (Paying Taxes; Trading Across Borders)
  • Saudi Arabia -82 (Registering Property)
  • Kuwait – 101 (Starting a Business)
  • Jordan – 113
  • Iran – 118
  • Lebanon – 123
  • West Bank & Gaza (Dealing with Construction Permits; Getting Credit)
  • Egypt – 131 (Protecting Minority Investors)
  • Pakistan – 138
  • Sudan – 159
  • Iraq – 161
  • Algeria – 163 (Dealing with Construction Permits; Starting a Business)
  • Morocco – 175 (Starting a Business; Getting Electricity; Registering Property; Paying Taxes)
  • Syria – 175
  • Yemen -177
  • Afghanistan – 177 (Getting Credit)
  • Libya – 188

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This Disease Needs to be Fought with Good Education & Economy

The total terrorism in the region is the fruit of terrorism by authoritarian regimes [across the Middle East & North African region]~Sheikh Rachid Ghannouchi

On October 28th, Sheikh Rachid Ghannouchi of Tunisia offered his perspective to the U.S. Institute for Peace in Washington, DC.   Ghannouhi, who was exiled during the Ben Ali regime, remains a vital voice in political, cultural, and religious circles throughout North Africa.  After Tunisians removed Ben Ali from power in 2011, Ghannouchi’s movement, Nahda, led the first post-revolution government.  The Nahda party formed and coalition to write the country’s new, more democratic, constitution. It is now a coalition partner in the secularist government led by President Beji Caid Essebsi. Sheikh Ghannouchi delivered remarks on the challenges facing his homeland and its region.

According to the U.S. Institute for Peace, Tunisia’s biggest challenges include the rise of extremism during its economic downturn, due to, in part, declining tourism.  Conversely, Tunisia’s declining tourism results from the violent extremist attacks.  Such violent attacks include the Bardo museum in 2014, the attack in Sousse earlier this year, and the three political assassinations since 2011.

However, one could argue that economic and socio-political unrest fomented during earlier authoritarian rule, and has finally come to a violent head.  As Sheikh Ghannouchi argued: political extremism in not just on the “right” but also on the “left”, and therefore, moderation tempered with “consensus” is the only way to govern inclusively.

We believe violence is a problem not a solution…Must focus on spread of dialogue and reconciliation.  Dialogue between secularists and Islamists is key to democracy in Middle Eas~Sheikh Rachid Ghannouchi

Nonetheless, U.S. interests remain keen on focusing on the national security elements in Tunisia.  In sum, the USIP stated:

Tunisia’s success or failure in building a peaceful democracy is central to U.S. and international interests in a stable North Africa, Middle East and Arab world—an importance recognized this month by the award of the 2015 Nobel Peace Prize to key mediators in the country’s political struggle. After two attacks by militant gunmen killed scores of people and crimped the country’s vital tourist economy this year, the government imposed a state of emergency—a step that raised fears among many Tunisians about a return to the country’s decades of authoritarian, police-enforced rule.

Ghannouchi explains high number of Tunisians joining Islamist politics in Iraq & Syria is result of years of oppression under Ben Ali. This mirrors the parallel trend of double digit unemployment that has persisted since 2000.   Tunisia “can’t fight terrorism without fighting the high level of unemployment,” says Sheikh Ghannouchi. 

  Sadly, Tunisia has inherited of the highest number of fighters who joined ISIS; 3000.

Disillusion among young Tunisians has made the country one of the biggest recruiting grounds for violent militant groups such as ISIS. As Tunisian youth circulate to battlefields in the Middle East—and as this nation of 11 million people hosts one million or more  refugees from the civil war in neighboring Libya—how can Tunisia manage its borders, improve its security, prevent violence, and also strengthen democratic politics?

Yet, in the most recent election, the lowest voter turnount was by the young with 30% unemployment.

A skeptic among the panel, Robin Wright, pushed back on Ghannouchi’s point that extremism increased in North Africa due to Tunisians political voice being suffocated in the Ben Ali ear.  She pointed out that it’s been 5 years since Tunisia’s revolution, so she finds it hard to believe that terrorism increased because of Ben Ali remnants & festering tension.  She specifically raises this contention in her new book “Rock the Casbah: Rage & Rebellion Across the Islamic World” and gives more weight narratives in Egypt & Tunisia (described as a weakness to frame context) and comments on the rise of ISIS from Tunisia to Iraq.  The lack of freedom, education, and under-development causes extremism, says Ghannouchi.  Also the political left’s denial of Islam as part of the social and cultural fabric contributes to internal unrest in Tunisa.  Ghannouchi brings up a relevant counterpoint, however, many could argue that the extremist elements within the political left have not, yet, resorted to violence.

Photo of Rachid Ghannouchi Presenting at U.S. Institute for Peace

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    Highlights from Ghannouchi Speech

    • Government cannot be ruled by simple majority of 51%…better to rule w/more consensus as seen with the Nida Tounis coalition formed in 2014.~Ghannouchi
    • Tunisia as a third way, beyond false binary between oppression (to get stability) or extremism (to get justice)

 Cooperation by way of moderate Islamists & moderate secularists is necessary for the success of democracy in our region.
    • We wanted democracy for all Tunisians, not just a majority.

    Ongoing Questions

  • Where are the redlines of the sacrifices made by ElNahda’s party when they join coalitions?
  • How can a “Marshall Plan” target sectors of development deemed as priority by Tunisians?

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Economic growth doesn’t translate as citizen growth. #GDP #Wellbeing

The World Bank’s Middle East & North Africa division released a report “Inequality, Uprisings, and Conflict in the Arab World” (included below along with the report link) that confirmed what many non-economists living in Tunisia, Syria, Yemen and Egypt suspected or could attest to personally.  Some Gallup polls related citizen’s dissatisfaction in many of these countries as well.  Despite consistently high growth rates in the Middle East & North Africa (pita-consuming) region, polling of populations “showed a precipitous decline in life satisfaction scores, especially for the middle class”.  In a nutshell, citizens living in Arab transition countries said “Enough/Bes” to the current social contract and the restrictions because they felt that — economy growth aside — THEY were not growing with the state.  Point taken as Qayyum @PITAPOLICY noted here on the World Bank’s Voices & Views site.

Key observations made in the report that SCREAMED at PITAPOLICY’s interest are the following:

  1. Economic inequality in Arab countries is relatively high — in particular in Egypt, where this contributed to the 2011 revolution.  [Note, economic inequality is pretty high in the United States too.]
  2. Poverty headcount is higher in the Arabworld than the overall MENA region. [Note that Yemen is the poorest country in the MENA region where 80 percent of Yemenis face a humanitarian and food crisis.]
  3.  The 20 or so largest companies in most Gulf States, Egypt, Lebanon, and Morocco are not listed on national or world stock exchanges. Instead, they are either firms privately owned by prominent families or state – owned firms. [See p. 29 of report.]
  4. The Iran nuclear deal raised its profile in its economic evaluation.  The final adoption and implementation of the JCPOA could lead to the lifting of sanctions on Iran by
    the first quarter of 2016 thereby improving Iran’s access to trade, technology and finance.

 

WASHINGTON, October 21, 2015 – A longtime reliance on economic indicators as a barometer of progress in Middle Eastern and North African countries masked the level of frustration and dissatisfaction in the region ahead of the ‘Arab Spring,’ according to a new World Bank report released today.

While many observers praised the region for its consistently high growth rates in the years leading to the Arab Spring, polling of populations at the same time showed a precipitous decline in life satisfaction scores, especially for the middle class, said the latest Middle East and North Africa Economic Monitor. The report attempts to resolve the apparent paradox presented by mass demonstrations in the face of improving economic conditions. In examining the causes of the Arab Spring, the report identifies sources of frustration that persist today, and run the risk of being aggravated by the current economic slowdown.

The latest MENA Economic Monitor finds that the Arab Spring revolutions were triggered by growing and broadly shared dissatisfaction with the quality of life. Ordinary people were frustrated by their deteriorating standards of living, reflected in a shortage of quality jobs in the formal sector, poor quality public services, and the lack of government accountability, the report said. The system of general subsidies could not compensate for these problems – subsidies mattered less for the wellbeing of the middle 40 percent of society than they did for the bottom 40 percent.

“On the eve of the Arab Spring, the Arab world was an unhappy place for a variety of reasons,” said Shanta Devarajan, World Bank Chief Economist of the Middle East and North Africa Region. “The old social contract of redistribution with limited voice had stopped working, especially for the middle class, prior to 2011. People wanted a say and real opportunities for economic advancement.”

According to the report, many countries in the region seemed primed to fall into disarray following the Arab Spring uprisings. Unless there are global efforts to end regional conflicts and help countries renew the social contract, a vicious circle of instability exacerbated by economic weakness could be the long term future for the MENA region.

Just a few weeks ago, the World Bank Group launched a new Middle East and North Africa strategy focused on addressing the causes of conflict to promote peace and stability. One of the primary goals of the new strategy is to rebuild the relationship between citizens and governments through improved service delivery and increased transparency and accountability.

“The situation has continued to deteriorate in the region as many of the factors that made people unhappy before the Arab Spring are still present today,” said Elena Ianchovichina, World Bank MENA Lead Economist and principal author of the report. “Though grievances alone do not lead to civil wars, grievance-motivated uprisings can grow into civil wars in societies polarized along ethnic or sectarian lines. High male youth unemployment rates and the abundance of natural resources increase the risk of conflict.”

The report also provides an economic outlook for the Middle East and North Africa, predicting that regional GDP growth will average 2.8 percent for 2015. Thanks to continued low oil prices, civil wars and conflicts, and a likely global economic slowdown, prospects for faster growth are slim.  Civil wars have severely harmed the economies of Libya, Yemen, Iraq and Syria, and have had spillover effects on the economies of Lebanon and Jordan.  MENA’s oil-importing countries have not grown rapidly in the wake of low oil prices because they have been hurt to different extents by terrorist attacks, spillovers from neighboring wars, slow growth in the Euro zone, and political uncertainty.

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