ARAB SPRING: Fragile states
In Egypt, the trouble following the ousting of President Morsi is growing, while Tunisia, despite its IMF loan, struggles to keep economic stability
A year on from Zine al-Abidine Ben Alis hurried exit from Tunisia, a small group of engineers set out from Tunis to survey routes for a new power cable. They went down the eastern coastline, dodging the maniacal driving of Libyan oil smugglers, before bounding cross-country over the southern desert and heading back north, up the Algerian border. It was March, and the hopeful idealism that followed the presidents flight was evaporating.
The resorts were empty; the central squares of Tunis were still strung with barbed wire and watched over by armoured personnel carriers. In the south, ad hoc committees of former revolutionaries set up roadblocks. Scrap metal was not being collected because the Trabelsi family monopolies that used to do it were being dismantled. Construction equipment rusted by unfinished roads.
Dining in truck-stop motels gave the survey team a lot of time to talk about their countrys political transition, and highlighted in microcosm the divisions emerging in post-revolutionary Tunisia. One of the crew, Muhammad, was a self-declared Salafist. He wore a full beard and, while mostly a softly-spoken and thoughtful man, he became incensed when, underneath a television screen in a restaurant in Sfax, he watched two waiters with marks on their foreheads from regular prayer serve wine to a group of French tourists. How, Muhammad asked, pointing to their marks, could they justify the hypocrisy of observing the salah while still selling alcohol? These were some of the first customers they had had in weeks, the waiters argued back. There were no other jobs. What choice did they have?
This discussion encapsulates the longer struggle that followed the Arab Spring, in each of the countries that overthrew decades of autocratic, and broadly secularist, regimes. What drove those revolutions was more than ideology the streets exploded due to a complex mix of economic and political marginalization, social frustration and inequality that spanned social groups and beliefs. The governments that were elected after the fall were immediately expected to find ways of balancing the demands of conservative Islamism, populist street politics and economies ravaged by overspending and a collapse in the foreign direct investment that had once underpinned their growth.
Denied a political voice for so long, political Islam was bound to rise during the tense, chaotic transition towards democracy that followed the ousting of the autocrats. In Egypt and Tunisia the apparent incompatibility of the ultra-conservative Sunni Salafists vision and those of the protestors demanding liberal, inclusive democracies has led to continued instability.
AID FOR EGYPT
Representative government has not come easily. Egypts protestors called for bread, freedom and social justice. When they failed to get the final two, they returned to the streets, and the democratic process was reset by the army, which stepped in to remove Mohammed Morsi, leaving the security forces facing off uncertainly against the Muslim Brotherhood in an alarming echo of the Mubarak years. Several hundred are thought to have died in round after round of fighting between the army and the Brotherhood. In late September, a court in Egypt banned all the activities of the Muslim Brotherhood and ordered that its funds be seized. Since then, more than 50 people died in violent clashes between supporters of the Muslim Brotherhood and Egyptian security forces.
Economic stability has, consequently, been hard to come by. The government has all but abandoned talks with the International Monetary Fund over a $4.8 billion standby facility, which would have included conditionality relatively lax by IMF standards around reforming subsidies on food and fuel that remain a huge drain on the nations budget. The fiscal deficit has increased beyond 14% and shows no sign of reversing. At the same time, growth has stalled at around 2% in 2013, the unemployment rate is at 13%, and four out of every five of the countrys jobless are under 30.
Since the Egyptian army deposed Mohammed Morsi, money has flowed in from neighbouring states. The United Arab Emirates and Saudi Arabia between them made $5 billion in interest-free deposits in the central bank. Kuwait has agreed to make a further $2 billion available for five years, while Qatar, which has been a leading backer of the country since the rebellion that unseated Hosni Mubarak, will convert $2 billion in deposits into bonds.
Between Morsis removal in June and mid-September, Egypts foreign currency reserves rose from just under $15 billion to around $19 billion, thanks to aid from other Arab countries. The cash transfers have staved off a financial crisis, at least in the short term. The money is set to be spent on stimulus to try to restart the economy, rather than on the structural reforms that many analysts believe to be necessary.
Its helped at a certain level, but the fact is that the Gulf countries do not have an unlimited supply of capital to help Egypt, says Angus Blair, president of the Signet Institute, a Cairo-based advisory firm. Im certain theyll receive more, and of course its not a solution for an economy that needs to grow by itself.
Creating jobs is not going to be easy outside of the public sector. The tourism industry is not recovering; foreign direct investment made a slight recovery in 2012, but sentiment internationally is likely to have been weakened by the fresh instability. Domestic sentiment is weak too, exacerbated by fuel shortages and power cuts.
[The government] has to change sentiment by cutting tax further, by fiscal incentives for investment. But the problem is right now we dont have 24-hour power... and the other issue is that you cant repatriate profits, Blair says.
Egypts economic struggle plays into the bigger challenges around the polarization of the countrys politics. The populism of the revolution was not followed by an improvement in living standards, or over the past few years, a considerable improvement in social justice and freedom. The victory of the Muslim Brotherhood and the subsequent undermining of the democratic system, followed by the counter-revolutionary coup, led by the army, have obscured the aims of the revolution to end the systems of patronage and provide jobs and political participation to the population.
With so much of the population unemployed, and a huge proportion of it around 40% still under the $2 per day poverty line, the subsidies are a lifeline for many. Inflation at more than 9% exacerbates the problems of maintaining standards of living, making government support more critical.
[The government] wont touch food, because its such a political hot potato, Blair says, noting that the price of fuel for industry and electricity tariffs for consumers have risen already. The issue is petrol for cars, and I think that will have to be tackled. They dont really seem to know how to do it, which I find surprising. The majority of Egyptians are poor; they dont have cars, so they wont be directly affected by a rise in petrol prices.
Tunisias transition has been relatively bloodless, and marked by little of the civil violence that has paralyzed Egypt. There have been brief flare-ups (two secularist opposition leaders have been assassinated by the same firearm), but the ruling Ennahda party has been able to bring some conservative elements into the political process.
I dont think weve seen significant widespread political violence in Tunisia. Theres been localized unrest in response to issues such as the assassinations. But the transition process itself has been relatively inclusive, Geoffrey Howard, Tunisia analyst at Control Risks, says. I think in some ways that has led to greater criticism of [the government], as some people have confused attempts to mediate with Salafist groups as appeasing these groups, but theyve attempted to strike a balance between various interest groups.
This has not been entirely successful, and the government agreed to resign and prepare the way for elections. However, the small amount of political space made by the relative security beforehand meant that the Ennadha-led coalition was able to take some of the harder measures, reducing unnecessary subsidies and, in June, agreed a $1.7 billion stand-by agreement with the IMF. Further loans from the European Bank for Reconstruction and Development and the Arab Development Bank have helped to shore up the countrys finances.
[Stability] allowed them to keep a slightly steadier hand on the economy. Thats not to say theyre not facing considerable additional problems, but their handling of the economy has been relatively stable so far, Howard says.
I think [Tunisia] has been more successful in dealing with economic problems than Egypt, certainly. I think thats partly because a lot of the technocrat civil servants who were in place before the regime fell essentially came back into work the day after the fall of Ben Ali. Theres been a lot of consistency there, and I think they have taken seriously the external advice for reforming the economy. I would say that the countrys economy is in a healthier place. Its less dependent on insecure external funding, and it has shown a higher degree of fiscal responsibility over the last year and a half.
The uncertainty created by another change of government, however, is threatening this progress; as are rising prices of food and basic goods, which are preventing any real improvement to social conditions and have undermined the credibility of the administration. Without job creation and a significant turnaround to the disparity between rising prices and falling incomes, even the technocratic interim government is likely to face serious challenges to its legitimacy from all quarters if it is unable to affect the day-to-day struggles of ordinary citizens.
The government hasnt been able to make any meaningful progress in improving socio-economic conditions, Howard says. The IMF is predicting a 4% growth rate this year... foreign investment into the country increased in the first quarter of this year. Its not a wholly negative outlook. But the current unrest is having a real impact on the governments ability to improve investor confidence and to do everything necessary to lift the country out of its economic constraints.