Arab Spring one year on: People yet to gain from pain

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In a scene iconic of the Arab Spring, hundreds of thousands of protesters flooded Tahrir Square in Cairo, Egypt. Photo - Mosa'ab Elshamy/Flickr

To many Arab entrepreneurs and businessmen, Arab Spring did to them what the credit crunch of mid-2008 early-2009 did not: squeeze businesses and push them into the red zone.

Thousands of companies from Tunisia, Egypt, Yemen, Libya, Syria, Bahrain and other Middle Eastern countries faced an unprecedented situation when the political uprising broke out in early January last year. Not only their profits melted, they lost a bulk of their business operations and forced to scale down their size in order to survive.

“The Arab Spring turned the company from profit to loss for the first time in almost 10 years,” Mazen Dajani, chief executive of Amman-based CTI Group, said while commenting on the effects of the upheaval in the Middle East.

He explained that his company, one of the world’s largest shippers of cement, faces a situation where shipments to Egypt are down since the uprising against Hosni Mubarak in January last year and are yet to recover. Business is down with Yemen and Libya due to the civil strife. CTI’s business is also down in the Gulf region which managed to escape relatively unscathed from the spoils of the uprisings.

Qatar, a wealthy Gulf emirate which is the world’s biggest liquefied natural gas exporter, also suffered some of the consequences of the Arab Spring. According to Dajani, last year Qatar had planned to use his company’s 400,000 tonnes of cement clinker, a material used to make cement.

The deal, which constituted almost a third of Qatar’s total cement import in 2011, did not materialise thanks to unrest in neighbouring Bahrain and Saudi Arabia, which cautioned Qatari businesses to realign their plans and slow them down if necessary.

Volatile conditions in the Middle East and North African region forced CTI to look for markets elsewhere – as far as Indonesia.

But Dajani is not really happy with losing home turf in favour of new pastures.

“The Arab world is our traditional market – it’s not Indonesia or anywhere else, because we are Arabs. Our traditional customers are here; we have been doing business here for 20 years. We hope for the better, but the turmoil has hit us,” Dajani explained.

arab spring violence

Dajani’s frustration is felt across the entire region – from the shores of Atlantic in Morocco to the banks of Tigris in Iraq. It’s been exactly a year since the ouster of Zine al-Abidine ben Ali, Tunisian autocrat who stayed in power for 23 years, which had a domino effect on other Arab states, triggering anti-dictatorship protests which transformed into full-blown violence in Libya, Syria, Bahrain and Yemen. As a result, tens of thousands of people lost their jobs while billions of dollars in investments were frozen and trades links damaged between the countries, besides the loss of thousands of people.

THE DAMAGE

According to the estimates released by the International Monetary Fund and analysed by Reuters, six Arab countries – Bahrain, Egypt, Libya, Syria, Tunisia and Yemen – lost around $50 billion in output last year, or 11% of their combined 2010 output. Egypt alone suffered a loss of some $10 billion whereas neighbouring oil rich republic of Libya saw its economic output reduced to $35 billion. Every single Arab economy in the MENA region suffered from the socio-political unrest.

tunisia food protest
A Tunisian protester holding bread confronts riot policemen during a demonstration in Tunis on 18 January last year. Rising food prices and joblessness continues to be the main problem despite the political change. Photo - Martin Bureau/AFP/Getty Images

Despite the tide of change, many things have gone from bad to worse. The new governments that were sworn in after the old regimes were deposed are grappling with the aftermath of the revolutions and facing a situation where problems like rising food prices, increasing energy costs, lower wages and high inflation have only exacerbated.

High youth unemployment and unequal distribution of wealth are the two biggest economic bombshells of the Arab world which triggered massive unrest in the society last year and continue to do so unabated.

According to a 2009 United Nations report, Arab countries would need to generate 51 million new jobs by 2020 to absorb the youth entering the job market. The International Labour Organisation says youth unemployment in the region – where more than 60 per cent of the 350 million population are under 25 – hovers around 23%.

Drawing parallels with the Soviet scenario that prevailed two decades ago, Erik Berglof, chief economist at the EBRD, believes the need to create massive new jobs in the Arab world is more difficult in some ways than the challenges facing the former Communist bloc in late 1980s.

“There was a more even distribution of wealth in Soviet economies and unemployment was not so high,” said Berglof while adding, that they never “faced such problems to the same degree”. The EBRD was set up to steer out ex-Soviet economies from politico-economic crises and help smoothen their transition from state-controlled to free market system. The institution is now extending its help to Arab states.

Both governmental and independent economic advisers and analysts believe there is a need for an “inclusive” model of economic growth that would create jobs and lead wealth to trickle down to the lower echelons of the society. This might translate into more investment in the ailing education transport and health care sectors, and more progressive tax systems. However, the EBRD chief economist warned it would be a daydream unless governments sincerely tried to bring back political and economic stability.

“Governments are trying to plug all the holes and somehow to stop the bleeding. It’s all about stabilisation right now.”

GLIMMER OF HOPE

But all is not doom and gloom for the region. Many Arab businessmen believe the uprising has the potential to unlock new opportunities for private enterprises and open new avenues for daring small and medium entrepreneurs.

According to Thomas Mirow, president of the European Bank for Reconstruction and Development (EBRD), the Arab Spring is quite similar to the fall of Communism that took place in the former Soviet bloc two decades ago. He believes it will help push North African economies into the global supply chain, ushering an era of unprecedented growth in the Middle East and North Africa (MENA) region.

“The Arab Spring accelerated a trend which was already happening: the levelling of the landscape in a very dramatic way,” says Mustafa Abdel-Wadood, chief executive of Dubai-based Abraaj Capital, the Middle East’s largest private equity firm with over $6 billion under management.

“It triggered a sense of accountability. People don’t accept the use of political influence as they used to.”

There is a broad consensus that things are bound to change for good in the near future if not immediately in the region.

Adnan Ahmed Yousif, chief executive of Manama-based Al Baraka Group, an Islamic banking conglomerate with operations across MENA, claims Arab Spring did not have a big impact on the firm’s earnings last year. Instead, he sees things in the Arab world with great optimism.

“I see it and feel the breeze of change when I talk to fellow bankers and businessmen,” Yousif, also chairman of the Beirut-based Union of Arab Banks, a regional association, said in an interview.

Yousif added that Al Baraka will have a total of 12 branches in Tunisia once it gets the approval to open two new branches in the country.

He says that the new elected government in Tunisia is spending to create jobs and direct fresh investment into the economy that has been stagnant for a long time thanks to its overwhelming control by Ben Ali’s plutocratic regime.

Positive signs are also emerging in countries across the region. Bankers are getting freer than ever before to lend money without coercion and political interference, Yousif revealed. He also added that post-Gaddafi Libya is moving towards relaxation from decades old curbs on private enterprises. Countries like Morocco and Oman are also giving opportunities to its Islamic banking sector to flourish under the changing socio-political situation.

“I expect the role of a private sector which was once stifled by governments to grow in the years to come, as change brings more competition and openness,” Yousif concluded.

Read more about the aftermath of the Arab Spring in our second feature on the anniversary of uprisings in Tunisia and Egyptto be published soon.

(By Moign Khawaja with input from Reuters)

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