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Babylon & Beyond

Observations from Iraq, Iran,
Israel, the Arab world and beyond

Category: Economics

WEST BANK: Palestinian development plan looks at period after state creation

When Palestinian Authority Prime Minister Salam Fayyad met the donor coordination group for the Palestinian territory, the Ad Hoc Liaison Committee (AHLC), on April 13 in Brussels, he presented them with his new National Development Plan (NDP) 2011-2013, titled Establishing the State, Building our Future.

In the foreword of the report, Fayyad wrote: “We stand today on the verge of national readiness for the birth of the State of Palestine. … The journey has been long and arduous, but the end is now in sight –- we are now in the homestretch to freedom.”

Fayyad’s first two-year program, Palestine: Ending the Occupation, Establishing the State, was introduced in August 2009. It envisioned building the institutions for a viable state by August 2011 so that when the Palestinians go to the United Nations General Assembly in September 2011 to demand international recognition of an independent state in the West Bank and Gaza, they will be able to convince the international community of their readiness.

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IRAN: Cuts to energy subsidies hitting farmers hard, lawmaker says

Picture 20Iranians take great pride in the natural bounty of their land, but farmers have been struggling to keep up cultivation since the government slashed energy subsidies late last year.

Earlier this week, Ali Asgar Yousefnejad, a lawmaker from the Mazandaran province in northern Iran, spoke out against the soaring prices of electricity, fertilizers and fuel and their effect on farmers in his district.

"The farmers first change their rice paddies, which consume a lot of water, to orange grooves," Yousefnejad told Babylon & Beyond. "Then if the water needed for orange orchards or citrus fruits is too expensive, they convert to kiwi fruit and so on until they give up farming altogether and sell their agricultural land to the builders to build villas and destroy the forests."

The Mazandaran province, on the Caspian Sea, is a popular vacation destination for the well-to-do from Tehran and other major cities.

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TUNISIA: New poll shows concern about economy, division over religion


Tunisians are optimistic about the future of their country but remain concerned about the economy and deeply divided on the role religion should play in politics, a new poll finds.

The study, commissioned by the Washington-based International Republican Institute, claims to be the first independent opinion poll since the fall of former President Zine el Abidine ben Ali. It comes at a critical juncture for Tunisia.

On July 24, Tunisians are expected to vote for a national assembly that will be responsible for rewriting the constitution and determining crucial elements of the political system, such as the distribution of powers within the government and whether to legally separate matters of religion and state.

According to the poll, 79% of respondents said Tunisia is going in the right direction, despite the fact that 66% categorized the economy as somewhat or very bad. Job creation topped the list of priorities respondents said the interim government should be pursuing, followed by free and fair elections and stimulation of the economy.

However, respondents were sharply divided on the role religion should play in politics, with 48% saying they were in favor of a political system based on religion and 44% preferring a secular system. Among those, 27% said they felt the Tunisian political system should be "strongly" secular and 21% said it should be "strongly" based on religion. Urban respondents were more likely than their rural counterparts to support a secular system, as were younger respondents over older ones.

The poll's results appear to strengthen comparisons between Tunisia and Turkey, which has achieved mixed results with its attempts to blend a secular political system with the Islamic values shared by many Turks.

-- Meris Lutz in Beirut

Photo: A wave of popular protests driven partially by economic woes forced former President Zine el Abidine ben Ali from power earlier this year. Credit: AFP/Getty Images




SYRIA: Economic hardship feeds social unrest, says analyst Lahcen Achy


Editor’s note: The post is from an analyst with the Carnegie Middle East Center. Neither the Los Angeles Times nor Babylon & Beyond endorses the positions of the analysts, nor does Carnegie endorse the positions of The Times or its blog.

Syria's economic challenges are feeding the population's growing anger, which recently led to protests in the south and are creating a nationwide uprising.

Despite an impressive annual economic growth rate of 5% over the last five years, reforms to gradually shift from a state-led to a market-oriented economy, and a promising trade-diversification strategy, Syria faces critical economic and social challenges. Its poverty rate remains high, with one out of every three Syrians living below the poverty line, and social and regional inequalities are increasing.

Achy The social contract that prevailed in the 1980s and 1990s -- in which the state guaranteed jobs to college graduates and offered free public services and cheap food for its population -- no longer holds.

Five factors are of particular concern:

First, with a steady population growth of 2.5% per year, about 250,000 job-seekers enter the labor market annually. The public sector, which employs about 30% of the workforce, has created about 20,000 jobs per year since the mid-1990s. Although the private sector has created jobs at two to three times this rate, it also has not kept up with population growth. The official unemployment rate is around 10% but one of two jobs is of poor quality, with low pay and no social protection. On the other hand, youth unemployment exceeds 30%.

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YEMEN: Economic roots of social unrest in Yemen

Editor's note: Analysts at the Carnegie Endowment for International Peace are included among contributors to Babylon & Beyond. Carnegie is renowned for its political, economic and social analysis of the Middle East. The views represented are the author's own.

Social unrest is growing in Yemen as prominent tribal leaders and members of parliament join protesters in urging President Ali Abdullah Saleh to leave office. In response, Saleh — who has held office for 33 years — promised not to seek reelection in 2013 or hand over power to his son.

6a00d8341c630a53ef0147e2190b46970b-800wi The government also passed a series of economic measures to improve Yemenis’ livelihood. The package — expected to raise the 2011 budget deficit to $3.75 billion — includes a 25% increase in civil and military servants’ wages, a 50% cut in the national income tax and additional food subsidies. However, these measures fall short of expectations and fail to address the key structural issues behind the turmoil.

Yemen remains the poorest country in the Arab world, with a per-capita income of $1,300; almost half of the population lives on less than $2 a day. The country also holds the region’s worst human development records: a 54% literacy rate, a 62-year life expectancy, and high levels of maternal mortality and child malnutrition.

In addition, only four in 10 people have access to electricity and one in four people have clean drinking water. The situation may grow worse as Yemen’s population is expected to double to 40 million people by 2030.

A weak and oil-dependent economy aggravates the country’s poverty and demographic challenges. Petroleum accounts for roughly 25% of GDP, 70% of government revenue, and more than 90% of Yemen’s exports. While the government has implemented reforms recently to improve the investment climate — especially in the non-oil sector — Yemen represents a risky business environment given its political instability, weak rule of law, ineffective government and widespread corruption. The country ranked 146 of 178 on Transparency International’s 2010 corruption index.

Yemen’s high unemployment rate, which stands officially at 16.5% but is estimated to be much higher, is another challenge; almost half of youth are unemployed. Even those few people with university degrees lack the right skills to meet market demand. And leading job sectors — such as agriculture, the public sector and tourism — suffer from factors such as scarce water resources and political turmoil.

As a result, it’s not surprising that Yemen has failed to achieve political legitimacy and establish a productive economy. That’s why Yemen must begin developing a roadmap for the future now.

First, Yemenis must ensure a smooth political transition when Saleh leaves office and build strong institutions to enforce the law and fight corruption. Second, they must create sound economic policies to address poverty, unemployment, and mismanagement of public resources that are backed by institutions accountable to Yemenis. Otherwise, Yemen’s future may be severely constrained by reduced government revenue, weak state capacity and internal conflicts.

Finally, the regional Gulf Cooperation Council must identify ways to improve economic and employment prospects for Yemenis, including opening labor market access to job seekers and investing in Yemen. Each of these steps will help resolve the issues feeding Yemen’s unrest and ensure the country is more secure in the future.

--Lahcen Achy in Beirut

Lahcen Achy is a resident scholar at the Carnegie Middle Center in Beirut who specializes in the political economy of the Middle East.


ISRAEL: As turmoil in Libya is expected to raise gasoline prices, officials urge breaking the oil addiction

As troubled regimes continue to go down, oil prices are moving up everywhere. The violent turbulence in Libya is expected to raise gasoline prices in Israel within the coming days.

The regional upheavals and energy issues barged into an open door in Israel, as gasoline prices have been a matter of public concern in recent weeks. A taxation tweak resulted in a series of price hikes that brought the price of gasoline to new highs in recent weeks and sent Israelis into a rage, with Facebook campaigns as well as less advanced modes of protest, such as a horse-and-carriage in the streets of one city.

It also put politicians on guard. After warnings that this could ultimately bring down the government, Prime Minister Benjamin Netanyahu announced a perk-package to the public to offset rising prices and stave off the threat of a general strike. Now it looks like gasoline prices will go back up and Israelis will have to blame another leader for it.

The recent unrest throughout the region has made energy the topic du jour. The pipeline supplying Israel with natural gas from Egypt was shut down after it was sabotaged. To compensate for Egyptian gas -- 40% of Israel's consumption -- the country has doubled pumping from its one operational natural gas field, approaching depletion. If Egypt doesn't renew the gas supply, Israel will have to switch to other sources for energy, which will raise the price of electricity.

Between Egypt's gas-out and the Libya effect on oil, Israelis may soon be feeling the pinch as the price of instability makes its way up the food chain to transportation prices, commodities, airfares and the tourism industry.

The government has already been giving energy diversity much thought, with a national plan to develop alternative sources to wean transportation from its dependence on oil. Unlike electricity, largely produced oil-free, transportation in Israel relies nearly exclusively on oil.

In addition, Israel has its sights on producing 10% of the country's energy from renewable sources by the end of the decade. Next stop is solar energy, a logical move for a country with more than 300 sunny days a year.

The Renewable Energy Conference held this week couldn't have been a more timely opportunity to tie it all together.

Every time we stop for gas and pull out our wallets, part of our money goes to terror organizations, said Minister of National Infrastructure Uzi Landau at the conference Wednesday. "The money goes to Al Qaeda, Hamas and Iran," said Landau, equating buying fuel with fueling the enemy. But if part of the Arab world is hooked on the money, others must kick the habit. Oil is a powerful weapon in the struggle for the democratic world's future, and the way to win this battle is to become energy-independent.

Other officials have made a similar connection between turmoil and oil in recent days. This week, Minister for Regional Development Silvan Shalom said the real battle being waged is over hegemony in the Middle East and who gets to be the "landlord." The world needs to unite to prevent Iran from turning the Middle East into a hostile region and "taking over the world's oil reserves for the next 150 years," he said on radio.


"We all want to see freedom and democracy flourish in the Arab world," said Netanyahu this week. "We do not want to see tyranny that will trample human rights, block democratic reforms and threaten peace. Nothing would make us happier than advancing democracy in our area; this is good for peace, prosperity and security," he said. Supporters of democracy everywhere needed to be strengthened, including in Iran, which -- the prime minister warned -- might exploit the earthquake shaking the entire region to destroy any chance of democratic reforms "and turn out the lights."


-- Batsheva Sobelman in Jerusalem.




IRAQ: Baghdad commuters turn to ancient tradition of ferries to avoid hazardous roads

Another workday draws to a close in Baghdad, and tired commuters gather on the banks of the Tigris to exchange small talk and wait for the ferryboats, a traditional way of traversing its silt-colored waters since Ottoman times.

"I inherited the job from my father, and now my sons are working with me," said Hamid Saleh, 58, who owns one of dozens of small boats that ferry travelers between Karkh, the western half of Baghdad, and Rusafa, its eastern side.

"After 2003, the job got better because people prefer to take the boat in order to avoid traffic jams," he said, "especially when an explosion happens, and there is also the danger of explosions at checkpoints." 

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EGYPT: Unrest poses short-term economic challenges, long-term opportunities

[Editor's note: Analysts at the Carnegie Endowment for International Peace are included among contributors to Babylon & Beyond. Carnegie is renowned for its political, economic and social analysis of the Middle East. The views represented are the author's own.]

Carnegie logo Egypt’s nationwide protests have come at a significant cost in the short term.

Economic growth is projected to decline, job losses and poverty to increase, inflation to heighten, and the budget deficit to expand. If mass protests continue, the economic damage may be considerable.

But if a smooth transition takes place quickly and the right reforms are implemented, Egypt’s economy will come back stronger.

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EGYPT: Stock exchange to resume trading Sunday

Egyptian financial officials say the country’s stock exchange will resume trading Sunday, a week after banks reopened.

The Associated Press reports that the delay appears to be part of attempts to cool investors’ fears and avoid a massive sell-off.

Those fears appeared to be well founded, the news agency said. The Egyptian pound hit a six-year low after banks reopened Sunday on an abbreviated schedule following a weeklong closure, dropping to about 5.95 to the dollar.

-- Alexandra Zavis


Egypt's new Cabinet meets as protests continue

White House sees signs of progress in Egypt

Around Cairo, some semblance of normality returns

Full coverage of Egypt uprising: News, photos, videos and more

ISRAEL: A controversial shale project and energy security

The suspension of Egyptian gas supply to Israel has lighted a fire under the feet of Israeli officials, businessmen and shareholders trying to assess how events in Egypt will affect Israel's energy economy.

Initial assessments that it is in Egypt's interests to keep the lucrative gas deals with Israel may prove right when the dust settles. But the shake-up in Egypt is a wake-up call for Israel, too.

Minister of National Infrastructures Uzi Landau urged hastened development of the Tamar gas field Sunday. Meanwhile, Israel can increase quantities from its southern reserve and may have to compensate for the loss of Egyptian gas by using more coal and oil-based fuels to produce electricity.

Israel was hoping to move away from such dirtier energy sources for various reasons, including a pledge to reduce greenhouse emissions. Recently the government approved a national plan to develop technologies to reduce global use of oil in transportation. Global dependence on oil and the countries that produce it is bad for both the environment and economic stability, Prime Minister Benjamin Netanyahu said.

But industries and economies still rely on fossil fuels. Increasing costs and depleting reserves are driving new technologies that, well, scrape the bottom of the barrel to produce energy.

And surprise (OK, maybe not to geologists) -- Israel is sitting on a potential fortune.

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ISRAEL: Egypt gas pipeline explosion raises energy concerns

Israel's quest for cleaner energy sources just got muddied, with the explosion in a pipeline supplying natural gas from Egypt. The explosion occured at a measuring station in Arish and damaged the line supplying Jordan. The line supplying Israel was shut down at first as a precaution. This proved wise as it turned out that the fire overheated the pipe and compromised the entire supply line. It will take several days to cool and for the supply to resume.

The Merhav group, the Israeli partner in the EMG consortium that exports Egyptian gas to Israel, said Saturday it could take up to a week. According to news reports, Israel buys about $10 million worth of gas a week from Egypt in many long-term deals. Meanwhile, it's been reported that Egyptian businessman Hussein Salem, who owns 28% of EMG, has fled to Dubai- with $500 million.

Israel produces about 45% of its electricity from natural gas that comes from two main sources: 60% domestically from a reserve off Israel's southern shore, and from 40% from Egypt. Israel was hoping to get about 70% of its electricity from gas by the end of the decade, for environmental reasons as well as economic. Its southern field has reserves thought to be enough to last until the end of 2013 but could be depleted a year sooner if Egyptian supply isn't resumed.

Prime Minister Benjamin Netanyahu held consultations Saturday morning with the ministries of national infrastructures and defense.  Israel is prepared for such a situation, Netanyahu said, and has the immediate possibility to switch to alternative energy and gas sources. National infrastructures minister Uzi Landau said that in coming days, the electric company could use gas, coal and even diesel if necessary to run its power plants. In the long run, extra costs could make their way down to the citizens, warn observers.

The Knesset's economics committee, the parliamentary body that oversees the issue, is scheduled to address related concerns Sunday. Committee chair Carmel Shama Hacohen told media Israel must take these scenarios into consideration, as well as possible terrorist threats to gas fields, exploration and energy facilities too. Security measures have been stepped up around all relevant facilities, now more clearly than ever a matter of strategic importance.

 Israel has large gas sources of its own — potentially, at least.

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LEBANON: Protesters denounce government for economic failures

Several hundred mostly Leftist activists marched through the capital on Sunday to protest the indifference of Lebanon's fractious ruling class to the economic and social woes of working people.

The protest in Beirut follows massive mobilization in Egypt against President Hosni Mubarak and a successful protest movement in Tunisia that ousted former President Zine el Abidine ben Ali.

"In Tunisia and Egypt, they had just one dictator," said Maytham Kassir, a 20-year-old student at the Lebanese University. "We have 15 or 16."

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